Innovation is an increasingly imperative part of any successful enterprise, but it takes savvy executives to develop a workplace culture built around innovation. Innovation gives companies an edge over their competitors, but lack of innovation in business can cause failure. Research indicates that in the past 21 years, 52% of Fortune 500 companies have gone bankrupt, been acquired, or ceased to exist due to digital disruption. While companies fail for many reasons, a lack of innovation is certainly a primary factor.
Let’s look closer at the causes of innovation failure and what happens when companies fail to innovate.
Why Do Companies Fail to Innovate?
If innovation is such an imperative business function, why are not all firms innovative? A lack of innovation often comes down to culture. And while leaders increasingly recognize the need for a culture of innovation in the workforce, there are significant gaps in understanding. According to a recent study by Ernst & Young LLP, 79% of C-Suite executives say their organization is tolerant of failure. Yet only 25% of entry-level employees agree. Here are ten barriers to building an innovative workplace.
Fear of failure
Innovation stems from failure. Harvard Business School professor Clayton Christensen famously estimated that 95% of new products fail. Others have put the innovation failure rate of new products around 70 to 80%. While these seem like astronomically high numbers, companies should celebrate smart failure—and learn everything they can from it. Failure is an opportunity for growth, not a death sentence.
Lack of leadership
Lack of innovation in the workplace often comes from the top. If a company’s leadership doesn’t provide a safe place for innovation to occur, how can employees be expected to take risks? Innovative companies—and the leaders who run them—embrace change. For companies hoping to adopt this approach, understand that it takes time. Building a culture of innovation won’t happen overnight, but the outcome is crucial.
Short-term thinking
There is a saying that says “short-term solutions lead to long-term problems.” While solving short-term problems is, of course, a necessity, organizations should consider each solution through a long-term lens by beginning with the end in mind. Challenge decisions that are made exclusively out of short-term thinking.
Lack of resources
With an estimated 69% of American workers reporting they would leave their current position for a role at a company considered an innovation leader, developing a culture of innovation could be the difference between losing or retaining top talent. Focus on your employee’s individual talents and be open to ideas that seem initially “impossible.”
Lack of collaboration
Collaboration leads directly to innovation and change. Creating a learning environment where teams can learn from one another will lead to different viewpoints and angles, encouraging employees to continuously offer ideas for improvement. Create a space for employees to be personally invested and share what they do with one another.
No time
Almost everyone, from business executives to entry-level employees, regularly faces time crunches, so it can be easy to lose track of time that should be dedicated to innovating. Leaders and employees need to be intentional with their time and rank their to-do lists, with innovation practices landing high on the list.
Lack of focus
Setting goals and tracking key performance indicators are common business practices. But how often are these goals aligned with long-term solutions and innovation? Create SMART goals around innovation—that’s Specific, Measurable, Attainable, Relevant, and Timely. That’s not to say innovation targets should be easy or obvious, but this provides a target or measure to aim for.
No delivery to market
So often, businesses fail to align their external market with their internal thinking. The market you’re serving now may well be different from the market you served five year ago. Know what problem your company solves now, and look ahead to what problem you may be solving in the future. View change as an opportunity, not something to fear. After all, according to Nielsen, the majority of consumers like when manufacturers offer new products.
No clear process
Using the same, age-old processes likely won’t lead to innovation. And yet, having no process is a problem, too. Businesses must find better ways to externalize their ideas to find new approaches to problems. A useful process likely includes allowing for internal and external collaboration, with a clear path to present new ideas.
Lack of urgency
According to Nolan Bush, the American businessman who established Atari, “The true entrepreneur is a doer, not a dreamer.” A company who lacks urgency will likely get left behind by their competitors. Innovative companies are lean and fast-moving, but they also recognize the need to act in proportion to the level of urgency. There’s no need to raise alarm bells every day.
How Does Lack of Innovation Affect Business?
To be blunt, a complete lack of innovation in business will likely kill a company. It won’t happen overnight, but companies that fail to adopt innovative practices and adapt to new consumer demands will get left behind. In 2015, an estimated 84% of consumers reported that it is somewhat or very important that the company they buy from is innovative. Savvy executives will consider this growing consumer need for innovation in their business model.
Recent lack of innovation examples are all around us. Companies like Blockbuster fell by the wayside to streaming services like Netflix. Toys R Us failed to compete with the growing emergence of internet sales and marketplaces like Amazon. Other companies, like Coca-Cola, are regularly releasing new, innovative products, even though many eventually fail. The ones that do stand the test of time have the potential to drive major revenue increases, so innovation is always worth the risk.
Craft Innovation with NEXT Studios
NEXT Studios is a venture studio of experienced entrepreneurs who are dedicated to helping other leaders and thinkers shape and grow their ideas through innovative practices. With programs for intrapreneurs and entrepreneurs, NEXT Studios offers a suite of services for corporations and lean services to optimize their chances of success. If you’re ready to learn more about how NEXT Studios can help you innovate, connect with us today.