The Cost of Failing to Innovate

The Cost of Failing to Innovate

The history of business is littered with companies that stagnate and lose their ability to innovate. Unwilling to recognize threats to their existing business models, some pay the ultimate price of bankruptcy. Once a multi-billion dollar company, Blockbuster’s executive team realized too late that streaming films over the Internet was the future of their video rental business. This capability was even offered on a silver platter – in 2000, they were pitched the opportunity to purchase Netflix for $50 million but passed on the deal. Today, Blockbuster has vanished and Netflix’s market capitalization is a little over $28 billion.

MakerBot started off in 2009 as a project to produce an affordable 3D printer using open source hardware designs and expired patents. Founders Adam Mayer, Zach Smith and Bre Pettis wanted an alternative to the hugely expensive 3D printers offered by the leading manufacturers, Stratasys and 3D Systems –costing in the hundreds of thousands of dollars. Both companies had the knowledge and capabilities to produce a low-cost 3D printer but chose to ignore this market for too long. Four years later, it cost Stratasys more than $400 million to acquire MakerBot and enter a growing consumer 3D printer market. It would have cost a lot less than that if they had had the vision and will to execute it themselves.

The lesson from these two stories is that companies who lose their ability to innovate often pay a very heavy price. Failing to invest in your innovation capabilities is a short-sighted strategy and can destroy everything you have built.

Nature, the world’s ultimate innovation engine, teaches us that all organisms require two things. First, a stable structure that allows for basic survival. Second, some constant ‘mutation’ that allows for evolutionary growth. Both stability and evolutionary capabilities are necessary. If you don’t have both, you won’t survive as a species. The same is true for business.

In today’s technology-driven world with barriers to entry dropping, the cost of inaction on innovation is higher than most think. Companies who don’t wish to become prey to nimble startups need to create an internal culture where a ‘mutation space’ in the form of new ideas and experimentation can thrive and survive. After all, just as in nature, if you’re not prepared to be wrong, you’ll never come up with anything new.

Have you created a ‘mutation space’ in your business where new ideas can be explored? If you need help, then please contact us.

Founder, International Institute for Innovation

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