Organizational Innovation

Part
01
of three
Part
01

Case Studies: Organizational Innovation (Part 1)

Kodak, Blockbuster, and Nokia went bankrupt because they failed to adapt to changing market trends, technological advancements, and consumer preferences. While Kodak leaned into the digital photography trend, it remained focused on selling analog film and cameras. Blockbuster also made attempts to migrate to an online rental model, but resistance from investors and franchisees obstructed this change. Nokia, on the other hand, focused more on meeting its short-term goals instead of dedicating resources and time to innovation.

Kodak

  • After being founded in the late 1880s, Kodak became a leader in the global photography industry in the 1970s. For almost a century, Kodak remained at the forefront of the photography industry with dozens of inventions and innovations. However, this company became bankrupt in 2012.
  • The first disruption that affected Kodak's stronghold in the market was the advent of digital photography in the 1980s. Kodak then invented the digital camera and leaned into digital trends. While Kodak had joined the digital bandwagon as a late adopter, the company remained focused on selling analog film and cameras.
  • Soon after the shift to digital photography, another disruption occurred. Smartphones were introduced and "people went from printing pictures to storing them on digital devices or sharing them online on social media platforms."
  • In 2001, Kodak responded to this trend by acquiring a photo-sharing site known as Ofoto. Unfortunately, rather than fully embracing the photo-sharing model of companies like Instagram, Kodak remained focused on using Ofoto to get more people to print digital images.
  • Kodak took the right steps in creating a digital camera and investing in the technology; the company even understood that pictures would be shared online. However, it failed to realize that "online photo sharing was the new business, not just a way to expand the printing business." This led to its collapse in 2012.

Blockbuster

  • As of 1989, a new "Blockbuster store was being opened every 17 hours." The company experienced rapid growth and had more than 9,000 outlets by 2004. However, by the end of the 2000s, Blockbuster outlets were being closed at the same rate.
  • Netflix was the major disruptor that finally pushed Blockbuster out of the video rental market. Founded in 1997, the company started by offering "a monthly subscription model with actual DVDs". In 2007, Netflix migrated and focused on providing streaming services.
  • According to John Antioco — the former CEO of Blockbuster, they had initially refused to recognize Netflix as a niche player. However, his team soon realized that Netflix was a threat and quickly discontinued the practice of charging late fees. They also invested heavily in an online platform.
  • Blockbuster created Total Access, a platform that allowed its "customers to rent videos online and return them in stores." Through this strategy, Blockbuster started adding more subscribers than Netflix. However, investors resented the costs associated with the Total Access program (nearly $400 million). Also, franchisees feared that this model was a direct threat to their businesses.
  • Internal disagreements led to Antioco being fired in 2007. Jim Keyes, the newly appointed CEO, then reversed Antioco's strategy and focused on their original retail business model.
  • While the movie rental industry was shifting to online streaming and services, Blockbuster did not adapt. The company maintained its usual business model. This eventually led to Blockbuster's bankruptcy three years later.

Nokia

  • Nokia went from being the best mobile phone company in the world to a failed business in 2013. Within six years, Nokia's market value declined by nearly 90%.
  • In 2007, Apple had introduced the iPhone which had superior technology compared to Nokia's Symbian operating system. However, top executives at Nokia were afraid of losing investors, customers, and suppliers if they acknowledged that their technology was inferior to that of Apple.
  • Middle management staff were scared of being fired for telling the truth, while top managers were worried about meeting their quarterly targets.
  • Instead of allocating resources to achieve long-term goals like developing a new operating system, the management staff at Nokia focused on developing new phone devices to meet short-term market demands.
  • When Nokia was experiencing rapid growth, managers at its main development centers were subjected to more performance pressure to meet short-term goals. This made these managers unable to dedicate resources and time to innovation.
  • A lack of vision, as well as the organizational fear that plagued the company, led to Nokia's failure.
Part
02
of three
Part
02

Case Studies: Organizational Innovation (Part 2)

Case studies for Nike, IBM, and for Toyota have been provided below. Each case study provide insights surrounding how each of these companies have approached innovation to stay ahead of their competition in their respective industries, and have achieved success by doing so.

Nike

  • Nike rolled out a program called Consumer Direct Offense in 2017, which was implemented in order to drive growth well into the next decade for them. This initiative was launched to ramp up its innovation pipeline, by accelerating innovation and product creation, moving even closer to the consumer through key cities, and deepening one-to-one connections.
  • According to Mark Parker, Nike's CEO, “The future of sport will be decided by the company that obsesses the needs of the evolving consumer.” He continues by stating that “through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
  • Two examples of Nike innovative consumer connections are SNKRS Stash and Shock Drop. SNKRS Stash unlocks access to exclusive Nike and Jordan product using mobile geo-locations, and Shock Drops are instant surprise alerts for sneakers that allow consumers to buy immediately through the app or at their nearest Nike or wholesale store.
  • While the majority of large international companies like to play it safe by simply sticking with the tried and true based on what made them successful in the first place, Nike is bold and innovative and goes on the offense in a “disrupt yourself” way to propel the company faster and further into the future.
  • Nike pays close attention to its competitors, which drives their innovative nature. Competitors such as Underarmour and Fitbit are always threatening disruption, but Nike has managed to stay "above the fray" while still keeping a close eye on its competitors.
  • Nike was one the first sports brand companies to utilize social media, which can be seen on slide 26 on this presentation.
  • Nike’s innovation focus is driven by its business strategy. To fully understand the consumer’s taste and what the fashions trends are going to be, Nike invests heavily in research and development. Because of this, they have enjoyed a large market share and consumer popularity.
  • At the end of the day, it is Nike’s financial performance that clearly shows that investment in innovation will help strengthen a brand. Thanks to its innovative makeup and non-stop investment in technology, Nike has moved from being just a sports company to a tech-focused company, generating more than $34 billion in 2017 alone.

IBM

Toyota

Part
03
of three
Part
03

Innovation Practices: Reasons for Success and Failure

Companies' attempts to launch innovative practices do not always succeed. Some major reasons behind their successful attempts are culture, structure, the engagement of stakeholders and a "need seeker" mentality. The main reasons behind the failure of their innovation initiatives are a lack of engagement of employees and customers, a lack of cultural support, and a lack of top leadership support.

Top Reasons for Success of Innovation Practices

1. Culture
  • The creation a culture that favors creativity is an essential reason behind the success of any innovation program.
  • A successful case of a company that developed a systemic approach to foster an innovative culture is CSAA Insurance Group, a company with over 4000 employees and millions of clients.
  • Companies that embraced a pro-innovation culture, have been found to experience 30% higher growth of their corporate value than their peers who did not.
2. Structure
  • The structural aspect was mentioned the most in a review of all publicly available studies that dealt with innovation success factors. This includes methods and processes.
  • It is important to set up a whole new dedicated team to handle innovation processes.
  • The role of this new team would be to create an innovation strategy and framework, but also to define the notion of success.
  • This dedicated lean innovation structure would also handle communication and promotion of innovation within the company.
  • The organization should also be ambidextrous to succeed in innovation processes, with an HBS study finding that 90% of such organizations succeed compare to only 25% of those who have a different type of organizational structure.
3. Engaging Stakeholders
  • The engagement of stakeholders is a crucial factor behind innovation success.
  • A successful example is Datalabs at Experian, which was a successful innovation program thanks to the focus of its design on customers.
  • This initiative program engaged with customers directly with the aim of solving issues that were important for them.
  • It is crucial for an innovation program to succeed to build collaborations within the company as this type of initiative can cause resentment.
4. Need Seeker Mentality
  • A study has found that 60% of the top 10 innovators were "Need Seekers", meaning that they concentrated on being the first in the market to satisfy a customer's need, through engagement.
  • Companies that experience innovation success do usually have a "can do" attitude.
  • The study also found that most companies that had a "Need Seeker" mentality also had a pro-innovation culture and aligned business and innovation strategies.

Top Reasons for Failure of Innovation Initiatives

1. Not engaging customers and employees
  • It is essential for companies to build support for their innovation programs with their key stakeholders inside and outside the company.
  • Employee engagement is crucial for innovation programs success and cannot be discarded.
  • A lack of alignment between management and employees has been found by 55% of executives respondents to a survey as a reason why innovation fails.
  • It is essential for innovation programs to succeed to engage employees and customers with real actions rather than just empty communication.
2. Lack of cultural support
  • A BCG study found that culture was amongst the top 6 obstacles for innovation success.
  • Companies that have a risk averse culture will struggle to boost innovation practices and programs.
  • A study from McKinsey also found that organizational culture represented one of the main obstacles to digital innovation through digital transformation.
  • A survey found that 45% respondents mentioned cultural issues as a factor in innovation failure.
  • This is due to the risk involved in changing a model that has worked effectively.
  • Employees and managers tend to remember why historical innovation attempts did not work and are not keen to try again.
  • A culture of bureaucracy can also be one the biggest obstacle to innovation.
3. Lack of top leadership support
  • According to a Deloitte study, a major cause for the failure of innovation programs is due to the leadership.
  • An innovation program cannot be successful with a strong drive from the top management.
  • It is crucial for all top managers to be aligned in driving innovation projects to avoid failure.
  • Top managers have to define a strategy to engage stakeholders and often communicate and effectively to make sure innovation is a success.






Sources
Sources

From Part 02