By Alejandro Ruelas-Gossi
Too often CEO’s find themselves stuck in what I call an innovation plateau—a chronic sameness of approach. I’ve identified four symptoms:
- Obsession with cost reductions. Lean is powerful, but having the “exact” number of people for today’s work jeopardizes the future by not leaving “extra” people to think about what’s next. Efficiency isn’t innovation. At Deere & Co. founded almost two centuries ago and consistently a leading American manufacturer, a team of employees is dedicated exclusively to “imagining” the future.
- Price focus. Customers want their products to be as inexpensive as possible. But great CEOs understand that the responsibility for defining the future is the firm’s, not the customer’s. As Steve Jobs famously said, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
- The benefits of compounded marginal gains can be substantial. But when asked about the future, CEOs tend to talk about their current portfolios. Radical innovation—such as a new design that ushers in a dramatic change in a company’s fortunes — is often absent in their agendas.
- Overreliance on acquisitions. The more innovative a firm is, the fewer acquisitions it makes. Innovators develop talent inside the company and focus on a few promising things. Jobs invested $150 million in developing the iPhone. His Apple successor Tim Cook has invested almost seven times as much in the Chinese car-hailing app Didi Chuxing.
How do you get beyond the innovation plateau? Firms are finding that customers don’t always shop on the basis of price. In Brazil the cosmetics-maker Natura produced a mother-baby product line that undercut Johnson & Johnson’s leading position there by linking Natura with the Shantala method, a popular technique for infant massage.
Alejandro Ruelas-Gossi is a professor of strategy at the University of Miami.