Staying afloat, riding the storm, and waiting for the economy to improve seems to be the doctrine of many struggling corporations today. Manufacturing efficiency initiatives, restructuring, cutting capital budgets, and canceling new product programs have bought some time but won't help these corporations avoid the inevitable.
I understand their reaction. As a CEO, last year I was forced to reduce costs at my company by around 40%, achieved mainly through headcount reduction. At the same time, however, I invested heavily in the new technologies necessary to drive our new product development, and I expanded our number of development projects. If our assumptions are correct, our investment in developing new products will propel us into an era of unprecedented earnings growth as those products roll out. That's our hope, and it's based on economic history.
In fact, the largest shifts in market share occur during economic depressions. Smart companies turn these situations to their advantage by reshaping existing markets and entering new markets while their competitors focus on the negatives.
Consider a few of today's winners. By early last year, Toyota had attained 90% global market share in hybrid vehicles. The same year, Hewlett-Packard successfully entered the end-to-end digital photo finishing market. Motorola introduced a new telecommunications technology and set a new industry standard in the middle of a slump in the telephony market. Dell Computer recently announced a new business offering point-of-sale solutions for retail stores. I could go on.
What gives these companies their edge? I'd say it's the courage to make the investments needed to deliver "innovation." Today's customers have more choice than ever before. While quality and, to a large extent, price, are givens, perceived innovation has become the overwhelming factor in purchasing.
Great companies know that they need great new products!
To develop exciting new products, companies must create a design methodology that both stimulates innovation and makes it a consistently repeatable process. Recognizing this, many companies invest heavily in knowledge capture and reuse tools, then wonder why they're still getting such poor results. The answer is usually that they neglect to provide for "people interaction." Most notably, they are not reaching beyond the engineering discipline for early input in the product development process.
Jim Collins, author of Good to Great, says a great company differs from its competitors partly by how it handles "technology accelerators," new technologies that help it excel at its existing strengths and drive its economic growth.
But sometimes we try to automate and formalize things we shouldn't—things like the creative process of the early design phase. The wrong technology or process can add layers of complexity that effectively stifle innovation.
The right technology removes barriers to cross-disciplinary communication, helping people work together, and it stimulates and facilitates innovation.
Playing it safe is not so safe, after all. Winning companies will grow by investing in the development of innovative new products.