In a ferocious marketplace, companies that maintain their industry lead are those that are able to anticipate the next iteration of their business. That’s the essence of innovation: an organization’s willingness to challenge its assumptions about how to efficiently and effectively create value for its customers and other stakeholders. To lead, therefore, innovation is mandatory—a challenge that can rest uneasily on the shoulders of those already on top and fearful of the inherent risk in tampering with the status quo.
The greater risk is not innovating, according to Dr. Peter Wilton, who teaches Strategy and Marketing and International Management at the Haas School of Business, University of California, Berkeley. For those who believe their firm’s existing core competencies and customer relationships will protect them, the marketplace is littered with case studies that prove nothing lasts forever—and that the failure to continuously reinvent the firm’s customer value strategy is the surest path to irrelevance.
Wilton’s mantra: forge ahead without fear, armed with a formula for an integrated innovation ecosystem and an abiding commitment to adhere to its principles. You needn’t be a visionary or a graduate of Hogwarts to conjure this corporate magic. The formula has been encoded from systematic observation of companies like Apple, Amazon, Starbucks and Tesla where relentless innovation is the driving modus operandi.
Reframing and Disruptive Innovation
As Wilton observes, there are two wholly distinct strains of innovation, both fundamental to success. Sustaining innovation creates continuous, incremental improvements to an existing product or service for the customers you have today. Disruptive innovation—what Wilton calls “reframing”—is an entirely new approach to creating value for your organization through something that does not currently exist to engage the customers you want tomorrow.
Of the two, reframing innovation appears initially to offer higher risk….but also the killer rewards. However, relying too much on sustaining innovation can pose an even greater risk: - the loss of market relevance. The goal of reframing is to anticipate and unearth overlooked customer problems and aspirations and provide differentiated solutions and customer experiences that address those aspirations. Reframing is daring and differentiating, creating the competitive advantage that engenders active loyalty and advocacy. Reframing also provides a powerful ancillary benefit: the ability to attract top talent to your organization because they can be part of something that is reimagining the future.
Since reframing is tabula rasa, it poses both vision risk (misreading the market) and implementation risk (execution shortfall). To balance risk, Wilton points to the need for a diversified portfolio of innovation. He advocates for separate but parallel tracks for sustaining and reframing led by different teams, with different cultures, running under different models. Each functions independently with its unique strategic intent, methodologies, timeframes and success factors; both are guided and monitored vigilantly by senior management.
Significantly, a truly global organization will have innovation centers in different parts of the world. Its leaders will choose specific locations based upon their ability to give the firm access to the most relevant, specialized innovation required to minimize risk.
With a balanced portfolio of sustaining and reframing initiatives as its cornerstones, the innovation formula is completed by a clearly focused differentiation plan and customer loyalty objective. As long as the firm’s leaders stick to this formula, Wilton maintains, the formula will produce results. Therein lies the real test of leadership, for today’s scarce resource is not time or money. It’s the attention span to focus on both the present and the future, with the courage and commitment to rebalance as opportunities emerge. Without that agility, an organization’s leaders may be tempted to take today’s success for granted, succumb to complacency, hesitate to innovate and miss the moment to reshape the future.
That would be a fatal leadership error, Wilton concludes. Because as history’s cautionary tales have shown us time and again, even disrupters can be disrupted.
Dr. Peter Wilton
has been recognized by BusinessWeek magazine as one of the country’s leading business instructors. His global clients include Cisco Systems, Sun Microsystems, Apple Computer, Johnson and Johnson, Merck, and Rockwell International. Wilton holds a Bachelor of Commerce, First Class Honors, from the University of New South Wales in Australia and a PhD in management from Purdue University in the United States.