So much has been written about business innovation this past year. Those walking the talk are on Fast Company’s list of the World’s 50 Most Innovative Companies. These are the businesses whose products and services are having an impact across their industries and our culture. Ninety percent of these organizations have yet to experience a mid-life crisis; they are still under the age of 40. Are we to deduce that innovation is the domain of new economy and early-stage life cycle businesses? Seems that way – but this isn’t necessarily the case.
Fast Company’s list (http://www.fastcompany.com/most-innovative-companies/2012/full-list) includes three old economy companies – Siemens AG (founded 1847), Southern New Hampshire University (founded 1932), and UPS (founded 1907). These organizations have reinvented themselves, and are proof that it can be done. In the most prosperous new economy companies, innovation is at the core of entrepreneurial success. Starbucks and Apple, who are nearing their 40th birthdays, have become poster boys for perpetuating the innovative cultures that created two multi-billion dollar corporations. I’m on record criticizing big companies for being slow, risk-averse, and boring. Starbucks, Amazon, Google and Apple prove me wrong. Size need not matter. These innovators love playing rocket man.
What constrains innovation at old economy companies?
Most problems in business begin with leadership. Old school CEOs either don’t know how to innovate, fear innovation or simply fail to comprehend the true definition of the word. Within these institutions, innovation is likely as overused and as meaningless a word as strategy. Ironically, innovation is the catalyst of organic growth.
What should be done?
As an influential shareholder, I’d begin, not by mandating my CEO to change, but by changing my CEO. Leaders who have thrived within innovative environments hold the key. Incremental improvement isn’t an option; these leaders demand transformation. Last year, J.C. Penny instilled Ron Johnson as their new CEO. Johnson had launched Apple’s retail strategy and was the man behind the aggressive store expansion a decade ago. Right away, he replaced the chief operating officer, chief marketing officer, chief technology officer and chief talent officer. Sure, the jury is out as to whether Johnson can bring profit back to Penny before investors and analysts lose patience – the latest quarter’s $163 million loss didn’t help. (note: here’s an August 2012 update on Johnson’s progess – http://www.businessweek.com/articles/2012-08-09/ron-johnson-on-the-progress-of-his-j-dot-c-dot-penney-remake )
The sense of urgency that drives ‘new economy’ rocket men is the cultural factor that shakes old-school passengers from the withered branches of the ‘old economy’s’ corporate inertia. Their landing can be awfully hard.