Business leaders are fairly confident they know the cost of “business as usual.” They’re good at asking, “what will it cost to innovate,” “what’s the ROI on innovation activity, or its payback period or break-even point?” Most often they are considering these metrics within the context of what they mistakenly believe to be a stable, static environment—based on the faulty assumption that competitors and potential new market entrants are standing still. When they are not.
What these executives are missing is the most critical cost to compare to, because they don’t have an easy way to measure it. Executives rarely ask, “what’s the cost of not innovating?” While it’s imperative to consider the short-term risks and costs of innovation, is equally important to consider the longer term risks and costs of not innovating or of innovating ineffectively.
The cost of not innovating—or of innovating poorly—is the estimated value of what you could have gained or the additional costs you do incur because of your organization’s delay in or refusal to make the necessary additional investments, assume a reasonable level of risk, create or adopt new ideas, or abandon outdated or obsolete process and products. The longer your organization’s delay to act effectively in these fast-moving times the higher the cost.
The costs of not innovating can also include, for example, the costs of playing catch up—the costs of being forced to react to your competitor’s great idea rather than forcing them to react to yours. And the additional costs for recruiting and retaining top talent.
An unwillingness to innovate–or a failure to innovate effectively and in a timely manner–means missing out on new customers, new markets, new revenues streams and new profits. And, most important, new sources of competitive advantage.
But, ultimately, the biggest cost, the biggest risk your organizations faces by not innovating—by not adapting and evolving to satisfy your customers’ needs, wants and desires—is becoming irrelevant to your customers because what you offer and how you deliver it no longer meet customers’ needs and expectations.
Innovation is as much about how much you lose when you ignore it or do it poorly as it is about how much you save or earn when you apply it.
Here are 14 indications that your ineffective or non-existent innovation process is costing you—maybe more than you realize.
- You have too few quality ideas for new products, services, approaches or solutions.
- You get too little buy-in for the great ideas you’ve identified or developed.
- Your attempts at innovation fail to meet business objectives.
- A competitor is offering new solutions that you had the capability to create, but failed to do so.
- A competitor found a way to streamline or reinvent a process that you’re still struggle with.
- A competitor found a way to bring new offerings to the market faster than you.
- A competitor is earning higher sales margins than you.
- A competitor has higher operating margins than you—because of your antiquated processes or operations.
- A competitor is gaining market share at your expense.
- Your margins are eroding—probably because you’re competing on price against other undifferentiated offerings.
- Your customers are showing interest in a completely new solution to a well-known irritation because of their continuing frustrations with inadequate existing solutions.
- You’re experiencing low-to-no sales growth and, ultimately, sales decline and customer defection.
- Your most creative people leave.
- A new entrant is operating under a new business model that is placing your organization at a higher risk or greater disadvantage than in the past.
In this article we’ve examined only the superficial aspects and symptoms of an ineffective or non-existent innovation process. These are only signs that something’s wrong with your innovation process; they are not the actual things wrong. They are the effects, not the causes.
The causes of innovation failure are as varied as the organizations experiencing them. Please connect with me to discuss how to determine the root causes of your innovation failures, and how to resolve them.
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