Companies Should Not Innovate

The Innovation Charade

Several companies launch new products for incorrect reasons, such as -but not limited to- "bringing news to the brand”, reactively responding to competitors, jumping into the new fad, or filling in a burning gap in the year's financial objectives. It is my personal belief, that these are the wrong motivations.

Innovation isn’t a short-term band-aid, it demands a long-term perspective and commitment. After all, a successful innovation program hinges on strategic decisions about consumers, markets and products.

Poorly conceived innovations quite often cannibalize existing products, merely transferring revenue from one pocket to another. There's no net gain, just a reshuffling that tends to leave organizations heavily frustrated and burned out teams.

The Reactive Trap

Reacting to competitors blindly, as so many companies do, only showcases a lack of strategic guidance and foresight. You cede control of your destiny to your competition, becoming a follower rather than a market leader. Instead of setting the agenda, you give the impression that you are scrambling to just keep up.

This not only takes a toll on a brand’s image (unless being a copycat is its signature!) and the employee’s engagement (let’s face it, following what your competition does isn’t necessarily exciting), but comes with a high opportunity cost; skewing away from your strategy, your building blocks, your roadmap for growth and your must-win battles.

The Right Reasons to Innovate

I think companies should only innovate if their approach meets these two criteria:

1. Creates an Additional Income Stream: This entails either increasing sales to existing customers (frequency) or attracting new customers (penetration).

2. Builds Brand Equity: Strengthening your brand's image, positioning & stature.

Yes. That’s it. Anything else is a distraction, an attention & resource-dilutive activity and a danger to your company’s and/or brand’s performance.

Next are a few examples of companies that have mindfully, intentionally and intelligently designed their innovations to acquire new consumers, sell more to existent ones and strengthen their brands.

Expanding User Base: Nike EasyOn

Nike has long been known for athletic footwear, but with their Nike EasyOn line, they are expanding to serve a broader range of customers, driving penetration. The EasyOn line focuses on shoes that are easier to put on and take off, designed with insights from parents, kids, and the disability community. Knocking down this important barrier, expands NIKE’s user base by addressing the needs of a segment that finds traditional athletic shoes difficult to use.

Amplifying Availability: Starbucks' ready-to-drink coffee

Starbucks, traditionally known for its coffee shops, has successfully expanded its reach through ready-to-drink coffee products. By offering bottled and canned versions of their popular beverages in grocery stores and other retail outlets, Starbucks has driven frequency from their consumers at times when there are no coffee shops nearby or they happen to be short on time.

BMW's Electric Charge Towards Brand Equity

BMW's i3 wasn't just an electric vehicle; it was a strategic surge toward reinforcing brand equity. Unlike simply adding an EV to their lineup, BMW made a statement with the i3's distinct design, sustainable materials and future-forward tech. This bold move communicated a commitment to innovation and environmental responsibility, solidifying their position as a leader in the evolving automotive landscape.

Commitment to Innovation

Launching a product is only but the initial step. Sustained commitment is crucial for turning an innovative idea into a successful product or service. Many companies falter because they fail to provide their innovations with sufficient resources, focus, and long-term dedication. They may lack the willingness to endure short-term setbacks in pursuit of long-term success, or in some dynamic markets, chase after the next shiny thing.

The Nespresso Story: A Lesson in Commitment

Nespresso provides a powerful example of structural innovation, backed up through long-term commitment. Nestlé's incursion into single-serve coffee capsules was far from an instant success in 1986. It took nearly two decades for Nespresso to become profitable, having to invest heavily in developing the machine technology, creating a dedicated supply chain for coffee capsules, and building a direct-to-consumer distribution model. Despite initial losses, Nestlé persisted, recognizing the potential of Nespresso to revolutionize the coffee market.

Today, Nespresso is a multi-billion dollar business that has created a totally incremental revenue stream for Nestlé. The company succeeded by the thorough application of a strategy that, through perfect alignment and persistence, allowed the company to reach a unique market position.

Conclusion: Innovation with Intent

Innovation should not be a reflexive reaction or a superficial attempt to "stay relevant". It should be a strategic, long-term endeavor, driven by a clear objective: generating additional value for your existent consumers, attracting more consumers and/or reinforcing your brand’s promise. Otherwise, don’t get distracted; you're better off focusing on your core competencies.