The corporate world and their innovation challenge.
Though, innovation is the key to sustainable competitive advantage, succeeding at it remains very challenging for large organisations. Without innovation, it ́s almost impossible to increase revenue and profits every quarter, which is why innovation is often considered the holy grail of most companies with global ambitions. In contrast to smaller companies (e.g. start-ups) innovation in mature corporations presents a more significant challenge, since they tend to be more financially driven and less tolerant of risk. Fraught with uncertain liabilities, the commitment to innovation implies an underlying anxiety to fail and to be unable to recover. Typically, large organisations are naturally designed to execute on profitable delivery — not engage in creative exploration. In contrast, most of the processes that are vital for those types of companies drive toward a profitable, efficient operation. However, it it is apparent that operational efficiency and profitability are creating pressure that runs opposite to the pursuit of innovation.
No room for experimentation.
“The information technology industry is advancing at a whirlwind pace; with product cycles and time-to-market periods shortening, and demands for continued innovation and productivity growing with each passing day. What we will offer next year has not been invented today. In this environment, you either get the right worker who can do the job and keep you ahead of the rest or you can call it a day.”
Today’s rapid product lifecycle are forcing the development of products at the speed of innovation, making time-to-market performance progressively important. In order to stay relevant, organisations need to keep up with the constantly rising consumer needs, launching the right products and getting them to the right market at the right time for an appropriate price. The consensus view is that innovation, and the enterprise processes that regulate it, need to be optimised and incorporated across every step of the value chain. Clearly, the underlying argument is the fact, that large organisations face the internal pressure to operate efficiently, to deliver growth, satisfy existing customers, and to do all that without threatening existing net income levels; while at the same time, leaving no room for creative experimentation. In contrast to a startup ́s deeply rooted expectation to bring innovation to the market, the innate measure of success for a matured organisation is completely different: it ́s profit. Hence, it is no wonder executives guide their organisational structures, processes and personnel from pursuing the art of exploration and towards engaging in the science of efficient delivery. This scenario accentuates the realisation that employees of the corporate world are taught to seek efficiencies, raise existing assets and distribution channels, and listen to their most profitable customers. Accordingly, such guidelines and policies guarantee that executives can deliver significant earnings and soothe shareholders, while reducing the potential of innovation that can be achieved successfully.
Naturally, companies obtain access to innovation through internal R&D activities. However, according to Lippincott, while R&D spending rose to 5,8% in 2013, revenue for the same companies increased less than 1%. The basic premise is that nowadays organisations realise that growth generated from innovation is often incremental, narrow and fleeting — and the return unreliable. Additionally, conforming to Lippincott, “global competition and technology diffusion” enable competitors to “quickly match the most (performant) improvements.” Furthermore, the radical transparency of digital and social media stimulates consumers to “switch allegiance with each new alluring offer with a clear conscience. Motivated by this scenario, the underlying and highly fundamental question is: “What is driving differentiation and growth eventually?”. According to Markides, the answer is simple: growth and differentiation is best to be achieved with “[…] disruptive, intentional experience(s).” This realisation accentuates a fundamental change in the business approach. Experience innovation gives companies the opportunity to consider wide range of ideas, “from category evolution to disruption — to maintain vitality and differentiation, as you redefine the ecosystem or restage your brand and drive new growth.” Evidently, future business models will challenge designers to think holistically, to consider every part of the company, implicating a need for personnel with a diverse set of skill. The future is challenging designers to create innovation while operating in different fields, and connecting different dots. According to Jared Spool, “it ́s a great time to be a [experience] designer.”