Interestingly 37% see their organizations as “fast followers” who quickly adopt new innovations. Fascinatingly, the sum of those two groups leaves only 22% of CEOs who would be classified as anything other than a significant leading or fast following innovator. Are the risk averse majority now the minority?
To fully grasp this, take into account a normal technology adoption curve. Despite its purpose at looking at technology adoption, not innovation, it’s a pretty good benchmark of who should be an early innovator and the masses of companies that follow. A normal distribution of technology innovators should be small, like innovation adopters, at 2.5%. Fast followers, comparable to early adopters, is 13.5%. The rest, which include early majority, late majority, and laggards, should be the rest of the 84%.
Are there really that many early innovative companies out there? Hardly. But with all the focus on digital business today, we seem to all think we’ve moved close to the bleeding edge. Here’s a good explanation why:
“With innovative information technology…executives sometimes lose their rational decision approaches. Certainly, it’s true that in times of radical technological change there’s a lot of figuring out to do. Executives have to understand what new technologies can do, and understand their impact on markets, products/services, and distribution channels. These decisions are inevitably influenced by hype from vendors and the media, expensive consultants offering “thought leadership” insights, many high-profile experiments, and a few exciting success stories that keep people wanting more. A charismatic CIO or chief digital officer may make it even harder to be level-headed in those heady times.”
These actions we take of going through the pain of transformation and technology innovation proscribe positive feelings towards those action. Just the act of embarking on a transformation project may create a bandwagon effect, a cognitive bias that reinforces leaderships’ overall positive assessment of their organization and their actions, just because they have committed to organizational transformation, even if it ultimately fails to achieve positive transformative outcomes.
How do we overcome this cognitive bias? Here are two prescriptions.
First, take the simple VRIO test. With every innovation you are pursuing, ask yourself:
- Value: Is it valuable? Does it produce a better or different outcome for our customer? Does it help our organization increase customer value or lower value loss?
- Rare: Is it rare? Am I really the only or one of a few organizations that could do this?
- Inimitable: Is it inimitable? Is it very difficult to copy, imitate, or substitute?
- Organization: Is it organizational? Can our company organize itself to take advantage of it?
By these standards, few of today’s transformation efforts would pass the test for adding long-term sustainable value to an organization. Drop or deprioritize those that don’t.
Second, spend more time thinking about innovation away from the product or service and specifically around business model innovation. Think about the majority of innovations you’ve seen in the market—most have been accompanied by a business model innovation.
A review of innovation in top performing companies by McKinsey indicated that only 27% of top quartile performers felt that they were getting their business model right—that’s of the top performing companies. The second quartile performers were significantly worse: only 10% of second quartile performers said they were good at business model innovation. Business model innovation is hard, but it’s an indication that you are doing something right, valuable, and differentiable.
Netflix, Amazon, Apple, Dollar Shave Club, Costco, and more have succeeded because they have fundamentally changed the way they provide customer outcomes and the way they make money. A little more time focused on choosing the right innovations and enhancing it with a better business model innovation will go a long way.
#innovation #transformation #digitaltransformation #netflix #Apple #Amazon #Costco #transformative #technology
 2018 CEO Survey: CIOs Should Guide Business Leaders Toward Deep-Discipline Digital Business." Gartner, 6 April 2018
 Why So Many High-Profile Digital Transformations Fail, Thomas H. Davenport and George Westerman, Harvard Business Review, March 2018
 The eight essentials of innovation, McKinsey Quarterly, April 2015.