How Can Your Business Be More Innovative?
If we compare the Fortune 500 companies from 1955 with those of 2020, we can see that only 51 companies appear in both lists.
Why did some of these previously successful companies fail and others continue to succeed?
It’s due in part to Schumpeterian creative destruction, according to Mark J. Perry, professor of economics and finance at the University of Michigan’s Flint campus, and creator and editor of the popular economics blog, Carpe Diem. “At the current churn rate, about half of today’s S&P 500 firms will be replaced over the next 10 years as “we enter a period of heightened volatility for leading companies across a range of industries, with the next ten years shaping up to be the most potentially turbulent in modern history” according to Innosight,” Perry writes.
What is Schumpeterian creative destruction?
Joseph Schumpeter coined the term in 1942, in the years following the Great Depression. In his seminal text, ‘Capitalism, Socialism and Democracy,‘ Schumpeter wrote, “Capitalism…is by nature a form or method of economic change and not only never is but never can be stationary… The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.”
What does all that mean? That “the disappearance of old firms and even entire industries…creates space for new, innovative successors to fill the void.” Just think of Uber, Netflix, and even the internet itself. Each entered the market to fill a void and in so doing, disrupted an entire industry.
Creating a culture of innovation
Incorporating innovation into your business strategy is crucial for navigating changes in the marketplace. Right now, due to Covid19, the world is changing rapidly. This unforeseen event has impacted businesses worldwide, the economy, and daily life, in entirely unexpected ways.
By fostering a culture of innovation, you allow space for creativity and forward-thinking, which can help your business to weather uncertainty and change. You can also improve your processes to be more efficient, which can result in better productivity and performance.
Innovation doesn’t have to mean dramatic change. In fact, the majority of growth comes from small improvements and steadily incremental innovation, according to Chicago Booth.
So, what can you do to encourage innovation?
Thomas Powell, Professor of Strategy at Oxford University’s, Saïd Business School says, “Many companies underinvest in innovation because they’re afraid to do anything that jeopardizes existing operations or customer relationships.
If that’s the case in your business, take a lesson from Covid-19: quarantine an innovation! Put a small project team in lockdown and keep it away from business as usual. Charge them to come up with an experiment or two, and then run these experiments in a protected environment.
And remember this: It isn’t true that all innovations are about delivering new products or services. Some of the most powerful innovations are those that improve internal processes, communications and organization culture.”
To go from idea to successful innovation requires a great deal of support and collaboration. When people are surrounded by constant communication and encouragement, they can find the courage to try, fail, redo, and try again.”
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