There is
in the present day a mania for innovation, with firms desperately trying to demonstrate
that they are constantly delivering new ideas to the market for fear of being
seen as stagnant and decaying by their investors. But at the same time, there is the fact that
new products and new companies fail the majority of the time. The actual rate is hotly debated (the Pareto
assumption of 80% is the most commonly cited term by those who have done no
actual research, but even the most generous sources typically suggest a success
rate of less than 50%).
Putting
the two together, this indicates that businesses are very excited about
innovating, but are not particularly good at evaluating whether a novel idea is
actually any good. In spite of this,
there remains the general assumption that innovation is always a good thing,
and even when an innovative idea fails, “what’s the harm in trying?”
The harm
in trying is that failure weakens the reputation of a company and its
brands. Customers who were loyal to the
brand are embarrassed by its failure and lose faith in its products in
general. Prospects whose first exposure
to the brand is a poor idea are disappointed by their encounter and become doubtful
of the brand’s established products. In
all, people have more confidence in a company that seems stagnant than one that
seems desperate and incompetent.
The harm
in trying is that even success can weaken the integrity of a company and its brand,
particularly when new products are incongruous with the market’s conception of
the brand it can cause dissonance and a loss of the brand’s strong association
with its areas of core competence, to the point that the market becomes
confused about what the brand means.
Even brand loyalists become doubtful when the meaning of a brand is
diluted by new products that suggest the company is moving in a new direction,
and the future of its traditional product lines is uncertain.
The harm
in trying is a great deal of wasted capital in pursuit of wild ideas. It is often pointed out that companies have
become exponentially more efficient in their operations, which should result in
greater revenues for the same level of expense. But where is this additional capital being
used? Product prices are not declining
at a corresponding rate to efficiency.
Wages certainly have not increased to reward workers for this additional
productivity. Investment earnings have
not changed significantly in over fifty years.
There seems to be a pit between the top-line revenues and bottom-line
profits of a firm into which the windfall of productivity is falling, and it
may well be the cost of chasing new ideas that end up wasting a great deal of
capital.
I don’t
mean to come off as a Luddite here, or to suggest that all innovation is bad
and that we ought to collectively stop trying to evolve – but merely to point
out that innovation for innovation’s sake is a bad idea. The collective “we” must pause for a moment
to be clear on the goals we are trying to achieve – because while a successful
innovation can deliver to the market, the workforce, and investors, not all innovation
is successful, and a majority of innovations fail in a harmful way. Perhaps we need a better method of screening
new ideas rather than rushing them to market?
This seems the most likely culprit.
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