“For many companies, there is often a huge difference between what’s in their business plans and the market’s expectations for growth. This growth gap comes from the fact that companies are still pouring money into what made their success in the past, namely developing technology breakthrough in their R&D labs, instead of working to understand what the customer wants and then using that understanding to drive innovation.”
I pulled this quote from the Linkedin Pulse article by Stefan Lindegaard (@lindegaard) you will be guided to in the Twitter post below. The article mentions an upcoming presentation of Jean-Claude Junqua from Panasonic at this year’s Chief Innovation Officer Summit in San Francisco. The quote itself is pulled from the description for the upcoming talk.
— Matthias Reinholz (@LiveMatt) 15. April 2015
Meet a company trapped by success.
When I was younger, I was addicted to McDonald’s. Back then, nothing could replace the taste of a mouth-watering Big Mac together with some delicious fries (that had been so much better than those from Burger King) and a fresh Coke. Today, over a decade later, I’m reading articles on the problems faced by McDonald’s and its economic decline. It appears their fries include ingredients of all but potatoes. In response millennials seem to avoid the restaurant in preference of healthier and more sustainable alternatives. Various strategies on how McDonald’s could innovate its business to succeed again (e.g. hiking wages) are also appearing in the press. Sounds as if there was a lot of disturbance in the fairway of the former star company. The need for a transition is presaged and not everybody involved is happy about it.
But what has happened these past years? Why did the traditional model of McDonald’s operations that lifted it to top rankings in the world’s most successful companies lose its traction? The answer is change, and humans, by habit, face change with incremental (smaller degree of novelty) innovation first. McDonald’s has always been a fast food restaurant. Fast food, by definition, means fast and cheap. Previously, these two attributes have been positively connected with economic progress. In the past, “fast and cheap” has been translated with “instantly more” by large parts of the society, and that marked something “good”. Today, “fast and cheap” is likely to be translated with “low quality crap”, and that marks something “bad”. The former strengths of McDonald’s, its core values, and unique selling proposition as a fast food restaurant, are no strengths anymore, but weaknesses. For a company of this size, and with such a strong brand value, it’s not possible to suddenly switch strategy, once the rising need for a change is recognized. McDonald’s got trapped by its own success.
Can you get trapped?
Just think about yourself. Image you are a medical scientist specialized in AIDS research. You spent your entire life collecting knowledge in this special field of expertise and became a well-known and respected expert. One day, someone invents the perfect anti-AIDS cure. And the best part of the story: this cure is instantly available worldwide and it’s free as it works with a super-high-tech tonal sound method that can be downloaded via the internet. In just one day, you lost both your personal assignment and your daily duty. No one needs you anymore. Maybe you previously earned enough money and have the freedom to live a great life, but nobody likes to be obsolete. We’re all in pursuit of a mission and are motivated by the need to earn money.
Sounds like a crazy story, but it isn’t. This kind of change happens every single day. Sometimes in smaller dimensions and sometimes in a disruptive way. Think of names like MySpace, AOL or Lycos. Think of the milkman and McDonald’s. Read about the example of Frederic Tudor and the ice trade industry. In all these examples, workers’ skills became obsolete, economic flows changed, and a former winner had to move away for some kind of successor. If you are working in the digital economy, you may have your own story about established dedicated skills in an area that later became obsolete (if so, I’d be glad read about it in the comments or by mail!). If you are not able to adequately face change in these moments, release former behaviors, and start to build new skills, you will no longer be compatible with the value-creating mechanisms of your environment. Soon enough, you will be out of business.
Hammer your Holy Grail!
A paradox in this context of innovation is marked by the factor that your previously attained skills may be the reason for your failure to execute change effectively. If you experience success with a method, a product, or anything you do, you will likely stick to this in times of change. Psychologist Abraham Maslow described this situation with the so-called Maslow’s Hammer: “If you are a hammer for you everything looks like a nail.” (paraphrased)
“If you are a hammer for you everything looks like a nail.” (Maslow)
Additionally, the larger your success, the bigger the chance you are going to fail in an upcoming change. The bigger and more beautiful your hammer has been, the more you will lose the ability to solve problems with totally different tools. What has previously been your personal Holy Grail cannot be that wrong, can it? It can. If you operated the fastest and cheapest restaurant twenty years ago, you might have owned a very successful business. Today, the same restaurant probably struggles to draw competitive profits.
Even in other fields of management theory and outside innovation literature, we find similar indications. For instance, in the context of leadership, Michael D. Watkins (@watkinsmichael) states in his bestseller The First 90 Days that one of the biggest challenges entering a new job lies in avoiding the assumption that what made you successful in the past will continue to work in the future.
How can we access this problem? How can we find out if our knowledge, skills and previous successes are making us stick to something harmful? Being able to answer these questions might depict one of the future’s most important core competences every company needs to develop. If we were able to investigate and rate previously adapted behaviors, skills, and knowledge in a reliable way, we might have already developed a powerful tool for innovation.
In upcoming articles I’m going to discuss how this kind of investigation can be done and how the toolset of business model innovation might facilitate exploitable findings. Without innovation, every organization, no matter how competitive and dominant today, might be challenged by new companies in the future. This gets us to the point where Startups, and the people building them, the entrepreneurs, come in. Maybe the way Startups think and approach innovation, helps us to understand, how to avoid the trap.