The curse of success and how it curbs innovation

Innovation centers sprout around the world, however, there is no doubt that Silicon Valley will continue to be a place where bright people and expert money meet smart opportunities and come together to create outstanding products.

At the Silicon Valley Innovation Summit (SVIS2013) last week in Mountain View, CA, Professor of Marketing, USC Business School, Gerard Tellis, Director of Center for Global Innovation, talked about the curse of success and what corporations needs to do to overcome stalling and aim to stave off failure.

The SVIS2013 is organized by Always On Media, is a premier annual gathering of the leading innovators and top entrepreneurs, investors, and corporate players in the Global Silicon Valley. SVIS also presented the selected AlwaysOn Global 250 Top Private Companies, in several categories, recognizing the AO Global 250 CEOs, founders and star players.

Often, successful companies stumble and fail at their peak. Tellis recently published a book titled “Unrelenting Innovation – How to build a culture for market dominance”.

Tellis surveyed 770 companies and examined 90 success stories. He shared several points of his research and findings: Market leaders often stumble or decline, and it is a phenomenon that companies fail at peak of success. Tellis talked about the incumbency curse, where success leads to commonplaceness, arrogance, and stifled innovation.

He gave several examples: Intel Corporation that at the peak of its domination of the personal computer global markets didn't see the danger signs in mobile and has been struggling in this expanding domain. Another example is of Nokia, which dominated the mobile global phone markets for several years, but hasn’t innovated fast enough and is no longer a major player.

Tellis found the company’s culture as the key differentiator between being successful and business/product failure. His answer is easily stated than done: Create a culture of unrelenting innovation. But he also provides the guidelines to cultivate the culture for innovation.

These are the major traits:

- Cannibalize successful products.

Most corporations nurture and maintain profitable products, where innovations, applied to the same product or completely new ones, are considered as threats. Often, new ideas are viewed as costly and too long of a distance to be marketable or profitable.

For example, Sony's Walkman, marketed in the late 1970’s and on as a portable audio cassette, was considered a technological breakthrough. However, in the early 2000’s it went downhill with the introduction of the iPod, an Apple Inc, portable media player. Although Sony had all the necessary technology to develop a media player for playing music, videos, audiobooks, and more, they didn't want to develop the iPod-like device because it threatened their strong Sony music business.

To avoid such mistakes, Tellis talked about Brand Cannibalization, i.e. retire a successful brand at its peak and introduce a new one.

- Focus on future mass markets - Companies tend to focus strtegically on current markets. Kodak, the inventor of cameras and films, didn't see the opportunity in digital photography and ended in bankruptcy.

Businesses that have a broader view, which includes future markets (better yet – mass or worldwide markets), will stimulate employess to come up with creative new ideas.

- Embrace risk - Innovations have a high failure rate. The risk in supporting innovation is inheritly due to failures. Realizing that failure is a component of success and planning to embrace it are imperative steps on the path to find the ‘one success’.

HP had a tablet developed in 2005, which has been about five years before the iPad was introduced. In spite of having many breathroughs and patents generated at HP Labs, the corporation had a difficult time in moving toward commercialization of new products. Tellis noted that several of HP Labs innovations have never materialized.

Enterprises keep bleeding talent into the marketplace. Frustrated employees leave and go to other environments where they can work on their ideas. Giving employees the freedom to innovate and providing them with the resources to support ideas are fundamental. Such culture will help retain talent, as innovations often emerge from deep down in the organization.

How can a company change its culture? Changing the culture is easy said than done and takes many years to transition.

Based on his research, Tellis recommends the following key aspects in incentivizing and encouraging innovation:

In most enterprises, incentives are for seniority, age, etc. There are strong rewards for success, but failure is associated with shame and is associated with penalties. Such model stimulates employee loyalty, but it also suppresses innovation.

A different way to approach creativity is to make ‘trial and error’ acceptable. For example, enterprises should inspire internal competition to encourage employees to push the envelope and not be focused on job security. Innovators love adventure and organizations can provide such atmosphere through team competitions, prototypes, etc. Tellis suggests to allow spinoffs or crownfund ideas as some of the ways corporations can implement.

Empowering innovation champions within the corporation and retaining the talent can move a company toward the desired creative culture. Furthermore, innovative culture enables business sustainability and resiliency..

ADDITIONAL INFORMATION

1. Read more about Gerard Tellis work, presentations, and book: gtellis.net.

2. The SVIS2013 is organized by Always On Media, is a premier annual gathering of the leading innovators and top entrepreneurs, investors, and corporate players in the Global Silicon Valley. Through a series of keynote speeches, expert panel discussions, and innovators’ pitches, the event discusses and presents the top trends and opportunities in the flourishing digital media, entertainment, on-demand and cloud computing sectors.

Click here for Always On Media Global 250 CEOs, founders and star players.

3. Can you teach entrepreneurship?

Tim Draper, Founder of Draper University of Heroes, San Mateo, California, presented at SVIS2013. The program is geared toward students 18-24 years old and is dedicated to encouraging proactive entrepreneurship and educating the global entrepreneur to inspire a free world.

For more information, check: http://draperuniversity.com/disrupters/