Bold Innovation: A Path to U.S. Competitiveness
Insights to fuel product and marketing innovation.
In March, the Harvard Business Review focused on the challenge of U.S. economic competitiveness. This challenge is, indeed, complex -- as it intersects the economy, society, culture, globalization, politics and education. That said, historically, the USA is most successful when it has a central mission or purpose. So what now is the nations’ central purpose? Personally, I think it’s the pursuit of profit.
As a nation, we've been hard-wired to make money and make it in bundles. To make money, you must make a profit. Profit comes through selling goods/or services at a price greater than the cost to manufacture and distribute them. Profitable new goods and services come through innovation.
In other words, successful innovation is the key to achieving profit. Ironic, then, that in the pursuit of profit, many U.S. companies are in fact killing innovation. One of the world's foremost business thinkers, Clayton Christensen, dissects this issue here.
Here's my take. In the USA, the corporate mantra has been to achieve short-term profit gains (to please shareholders) without an equal focus on value creation. So we squeeze every nickel from corporate coffers, make that next financial statement look good by outsourcing and downsizing first this function, and then that function. The problem with this is that when you outsource core competencies (including production) you are, in effect, outsourcing competitive advantage. Over the past several decades, this has happened in drips and drops. But the cumulative effect has been monstrous. When firms are separated from the goods they sell, they reduce their capacity to innovate and drive new value into the economy.
Ultimately, profit comes from the creation of real, meaningful value. New value creation is driven through product/service innovation. Yet U.S. companies have, by and large, lost the ability to drive bold innovation. Instead, innovation has become the science of risk minimization. Minimizing risk, according to Peter Drucker, leads to rigidity. Rigid innovation is not a good thing. Yet, this is the status quo.
In turn, most mature markets are characterized by "me too" feature soup, commoditized choice and bewildered customers. Companies have lost hold of the fact that innovation should not be about minimizing risk but taking the right risk. This is a subtle shift in perspective -- but dramatically changes how firms address both innovation and the market. Apple is the "poster child" of innovation success and for good reason. It pursues the right risks.
To regain competitiveness, companies -- especially those in mature consumer markets -- need to re-master the art of bold innovation. This holds true for all firms, regardless if they are headquartered in the USA or not.
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