the innovation master plan introduction - Innovation Management

the innovation master plan: the CEO’s guide to innovation by Langdon Morrisspecial edition for InnovationManagement.comintroduction5Why are the others not so good?This is the topic we’ll explore in this section.In our experience, there are two enormous problems that hinder the companiesthat lag at innovation. The first is the nature of today’s change, the brutal pace thathas put so many organizations on the defensive as they struggle to adapt toeverything that’s coming at them.And the second is the mindset that their top managers bring to the problems ofinnovation.Let me explain.The first issue, about change, is that it’s occurring differently today than in thepast. Twenty or thirty years ago most large companies were buffered from outsideimpacts by their size, and they could withstand many strategic challenges just byusing their sheer bulk to block new entrants from accessing the market. Theyoutspent newcomers on marketing, followed their competitors’ successfulinnovations with their own copies, tied up distributors with exclusivity agreements,slashed prices below cost, and used economies of scale to out-muscle theircompetitors.But many of these tactics don’t work as well as they used to, and consequentlythe strategic vulnerabilities of all firms, large and small, is increasing.Why don’t they work? Because the nature of marketplace competition isdifferent today than it was in the past. An example, and one of the big lessons fromthe meltdown of the financial sector in the fall of 2008, was the fact that the changesdevastated well established organizations and institutions just like it did to smallones. Huge banks and brokerages failed, which triggered a chain reaction thatimmediately affected automakers, airlines, consumer goods makers, and retailers.Within a month the consequences spread across the entire economy, leading to theworst recession in 75 years. This tells us that not only is competition different, but sois the marketplace itself. The scale of and interconnections between the institutionsthat compose the economy are unprecedented, and as a result its complexity is alsounprecedented.The challenges of increasing complexity and accelerating change bring us to thesecond issue, the problem of mindset. When the role of management is understoodto be “managing the business,” then 99% (or more) of the effort goes to the here andnow, to sustaining market share. This is not a trivial job, and to keep a largeorganization functioning smoothly and continuing to crank out the profits thatlubricate the entire system of business growth (and of executive compensation), isenormously difficult. This is not only because of the sheer enormity and complexityof today’s organizations, but also because the markets in which they compete todayare, as I noted, changing so fast, and they’re so brutally competitive.However, while the sense of urgency and the feeling of time compression causedby accelerating change is certainly real, the underlying dynamics of the competitivemarketplace are not new. Seventy years ago economist Joseph Schumpeter describedthe overall capitalist process as “creative destruction,” and he pointed out that thenatural behavior of capitalist systems brings revolution not as the result of undefinedwww.innovationmanagement.se