Much has been written about the competitive and social importance of
business innovation, but a close look at the companies credited as
being America's most innovative would indicate there's more talk about
innovation than action. This article suggests there are five reasons
for that.
Take a look at the 'most
admired' companies lists of business magazines (you'll need a
prescription -- these magazines aren't very innovative online) and
you'll see yesterday's news, and precious little innovation. The
definition of 'most admired' is supposed to embrace innovation and
social responsibility, so I expected to see companies on these lists
I'd really want to work for. Fortune's top ten are Wal-Mart, Southwest
Airlines, Berkshire Hathaway, Dell Computer, GE, J&J, Microsoft,
FedEx, Starbucks and P&G. These are companies known more for
production efficiency, slashing costs and investment acumen than
innovation. The reason they head up the Fortune list? Only CEO's, Directors and securities
analysts get to vote. No wonder. I guess it never occurred to
Fortune to ask any customers who they
admired.
Next stop in the search was Forbes. They define 'best' as synonymous
with fastest-growing. Whether you get there by exporting jobs, slave
labour, shoddy products or marketing sleaze doesn't matter. Their top
profile? A factory that does nothing but breed animals for a life of
torture in laboratories. Uh, yeah, OK.
After finding the archives of Business 2.0 impervious to
non-subscribers, I finally found what I wanted, where I should have
looked first, in Fast Company.
Ironically the only magazine I currently subscribe to is the only one I
don't have to. There's a message there, perhaps.
On its Business
At Its Best page, Fast Company keeps kind of a running tabulation
of the world's leading innovators. It currently lists these fifteen:
- GPS - The
satellite system that cost $9B to develop, and which underlies a host
of innovations in just about every industry on Earth. Who paid for it
and (so far still) owns it? You do.
And it's absolutely free for anyone to use. The money came entirely
from American taxpayers. It's a true, courageous, awesome innovation,
done completely by the public sector. Don't
let Bush privatize it.
- Pottery Barn
- The company that made 'brand' something more than a swish.
- World Wide Pants
- Letterman's comedy production company.
- Google - No
surprise here.
- Washington Mutual
- The company that bought 30 banks and then refocused them exclusively
on the neglected lower/middle income market. However: They offer
free chequing but gouge users $30 for NSF cheques, and a lot of their customers bounce
cheques.
- Amoeba Music
- Huge stores that carry and support the independents.
- Wal-Mart's Next
Stage - Expansion into service stations, groceries, reno stores,
car dealerships, anything retail. All using Sam's one true innovation:
Get out of the business of selling stuff to customers, and into the
business of leasing shelf space and display space to vendors. The
ultimate middleman. Brilliant. Barren. Scary.
- ESPN -
Extreme Games brings sports back to the people.
- Take Good Care
- Health Superstores for aging boomers.
- The Container Store
- Three strategies: Partner with vendors, Give customers hands-on,
informed service, and Keep your offerings very flexible as demand
changes.
- Electronic Arts
- Four strategies: Disciplined creativity, Continuous improvement for
core customers, Expand the market to new gamers (they developed the
SIMS, the first game played mostly by females), Exploit the genius of
cheap Canadian software developers.
- Wipro - The
Indian firm that outsources the world's technology R&D. Innovation
at the cost of American jobs. Hmmm.
- BMW - For
design innovation.
- TIVO - The
cautionary tale that everyone thinks is the innovation of the decade,
but still isn't out of the red, or the courts. Video on demand, freed
from its commercial shackles. We'll see. Fingers crossed.
- Parkland Memorial
Hospital - At last, maternity and neo-natal care that's safe
and affordable even if you aren't rich.
Well. Definitely better. But lots of question marks, and hardly a
mother lode of revolutionary business genius benefiting consumers. Why
aren't there more, and more exciting, innovations, especially among
America's largest corporations, the ones that can actually afford to invest in innovation?
Five reasons, present in almost every large organization:
- Shareholders
- Large public companies are slaves to shareholder demands for steady,
uninterrupted growth in profits. No risks please. Spend your money
buying your competitors and your congressmen, not investing in unproven
ideas.
- Intellectual
Property Laws - Bush has allowed what can be patented and
trademarked to expand to ridiculous, anti-innovative, and
anti-competitive extremes. He's allowing big corporations to patent or
trademark ideas (as general as e-mail), broad processes, symbols and
representations (cartoonists may soon have to pay license fees to
caricature celebrities). Huge armies of corporate intellectual property
lawyers snuff out new innovations as competitive threats. These laws
will kill innovation, and put our most creative minds out of work, in
bankruptcy, or in jail.
- Customer Antipathy
- The new mantra of business is "we'd have a good company if it weren't
for the damn customers". Most visible in the entertainment
industry, but increasingly true everywhere.
It's us versus them. Not clear yet who has the most power, but with new
laws preventing customers from suing suppliers, the tide is turning
away from us, and that's bad news for innovation. Trust no one. When
they ask you what you want, they're just trying to figure out how to
make you want what they've got.
- Size &
Concentration - Large corporations are like oil tankers. They
move slowly and can't change direction in less than a generation. Not
only does corporate concentration reduce the motivation for innovation
(and as the economy turns around, get ready for lots more
consolidation), it also makes it harder to do even when the motivation
is there. Size is the enemy of agility.
- The Race to the
Bottom - The incessant drive for cost-efficiency without any
consideration for its human, social and environmental cost is leading
corporations to outsource and
export jobs, automate processes, and disintermediate services (i.e.
'serve yourself'). The consequence is lower product quality,
commoditization, loss of employee continuity, creativity and loyalty,
and even less money for investment in innovation. If it's cheap enough,
it's easier to throw it out than make it better.
There are solutions, ways of overcoming these enemies of innovation,
and I've developed a prescription
for them. But without structural and cultural changes to address the
five problems above, innovation is going to get more and more difficult
for business to foster, and less and less palatable. In the mindless
pursuit of profit at any cost, we are digging ourselves into a big hole.
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