Rodolfo sat relaxed on the sofa with a glass of wine, slowly inhaled his cigar that sometimes he liked to smoke and confessed to me: “We are at our best. The factory that I inherited from my father continues to sell like never before”. However, just 9 months later it filed for bankruptcy after a better product quality made with other cheaper technology flooded the market one day for the other.
Meanwhile, Nicolás, who had done four rounds of financing for developing the mobile application to revolutionize the world of online tourism, also explained in those same days to his investors that all the money had vanished. Another company had launched another application with more functionalities, at a very low cost and the vast majority of the tourist community had already adopted it.
There are two big reasons why companies fail:
O porque hacen más de lo mismo, o porque solo promueven lo nuevo.
For any company to grow healthily, the objective should be to achieve a perfect balance between two activities: maintenance and innovation. Both are necessary but in the right measure.
Let’s think of Facit who was a fantastic company. He was born in the middle of the forest Swedish and produced the best mechanical calculators in the world. All over the world, he had one of his calculators. And what did Facit do when the electronic calculator arrived? Kept doing exactly the same.
But innovation can also be a problem. The European bio- OncoSearch technology was exceptional. I had apps that promised to diagnose, even cure, certain forms of hematologic cancer.
Every day I created something new and extremely innovative, and the company’s mantra was: “We want it to be perfect.” The sad thing is that before becoming perfect, or even good enough, became obsolete. OncoSearch focused solely on innovation.
Innovation tries to imagine the new. It means search, discovery and new products. It’s about changing our borders. Our heroes are generally innovative: Madame Curie, Picasso, Neil Armstrong, Sir Edmund Hillary, Steve Jobs, etc.
But we all know that innovation is risky. We don’t have the answers and we do not know if we will find them. We know that the risks are many.
Maintenance is the opposite. Maintenance means taking the knowledge we have and improve it. Maintenance tries to make our planes and ships arrive on time, try to make good products faster and cheaper. Maintenance is not risky, at least in the short term. But Maintenance is very risky in the long run.
How many times have we not seen famous music bands that continue to sing the same songs over and over again until they ridicule themselves or even become Pathetic? That’s the maintenance risk.
Sports Authority has just announced in the USA the closing of all its huge stores because it could not stand the online competition when they were the ones who should have mastered that sales channel for everyone sports items. All those great brands and products that we remember today as anecdotes and funny things from our childhood are clear examples (and victims) of the lack of innovation.
If we have a long-term perspective, we innovate. In the short term, we maintain. Children innovate all day. For them, the day is synonymous with innovation. Tailored
As we age, we innovate less because we have more experience maintaining. The same goes for companies. By nature these become less innovative as they become more competent. And this, of course, worries a lot to the CEOs. Very often all kinds of questions: “How can I run a business and redefine it at the same time?” Or as I can be sure that our company can change before it returns obsolete or in crisis? “
Therefore, getting it right in one of these two directions is difficult. But it’s true art does maintenance and promotes innovation at the same time. Statistics show that only 2% of companies are capable of innovating and keeping effective at the same time and in parallel. But when they manage to do, the benefits are huge!
As examples we have Nestlé that developed Nespresso, Lego that is committed to animated films, Toyota for creating hybrids, Unilever for sustainability and so on several more.
But why is it so difficult to achieve that balance? Because there are two traps that they retain where we are. The first is the perpetual search trap.
We discovered something, but we don’t have the patience or determination to consolidate the idea and make it work. So instead of executing what we discovered or created, we went looking for something new. Then the same thing happens, and so we get caught in this vicious circle where actually, we have ideas, but we are frustrated. We don’t really give to every idea no chance. OncoSearch is a good example. Another famous example is Xerox.
The second trap is the success trap. Facit fell into this trap, also Blockbuster, Kodak and Blackberry They had the future assured, but they could not see it. They were basically so good at what they loved to do, that they rejected the change. And so it went… And we also act in the same way. When we know how to do something well, it is difficult to change. Bill Gates said, “Success is a lousy teacher. It makes us believe that We can not fail”.
But what can we learn from all this both on a personal level and at the level of our companies? The first lesson is: get out of the crisis. Any company capable of innovating is really capable of buying a safe for the future. Netflix, who could have been happy with the channels of distribution that he created when he crushed Blockbuster, he always bet on the next step. And today it is in a situation of absolute leadership in the distribution of digital content globally.
The second lesson is: think long term. If we look at any company that started to innovate for a period of one year, and we look at their billing, on average the innovation only covers approximately one 20% of it. That is, 80% continue to come from maintaining the above. So short term innovation is not really that important. However, in the long run (10 years) in the same company, innovation and the ability to renew represent on average 80% of turnover and only 20% of keeping what was coming of before.
The third lesson is: attract talent. I don’t think any of us can balance the maintenance and innovation for itself. That is a team game. The imprint of any company should be to stay open to the challenge and that of a good Board of Directors is to challenge it constructively.
The fourth and final lesson is: be skeptical of success. In the old marches triumphant of the Romans, the generals, after a great victory, were cheered. On entering Rome mounted on the chariot of triumph, they always went accompanied by someone who whispered in their ears:
“Remember that you are only a man.”
Balancing maintenance and innovation pays off hugely. But it is very difficult to achieve. So I want to ask you two questions. The first is refer to your own company:
In which areas do you see that the company is at risk of falling into the traps of success and to continue advancing by sheer inertia? What can be done to change that? The second question refers to your person: When was the last time you innovated with something new? Is there something you should do?
Whether you are an innovator by nature or you tend to keep what you already you know, do not forget that beauty is in balance! Winners never quit! Those who quit never win!