Why successful businesses innovate often and fail fast
Richard Blanford founded Fordway in 1991 and has built it into one of the UK’s most respected managed cloud and IT infrastructure transformation companies. In this article he draws on his 28 years’ experience to advise organisations on why innovation is vital for continued business success.
Getting the balance right between innovation and the status quo is a constant challenge. SMEs in particular tend to achieve their early growth through innovation, either offering radically new products or reinventing the provision of existing services.
However, what was initially a market-leading idea soon becomes the norm, expected by customers and copied and adapted by competitors. A business may have been built on innovation, but markets evolve, customer needs change and demand can quickly drop away. This can suddenly leave a once profitable organisations in need of a new idea or, in extreme cases, a new business model.
Innovation can be difficult, particularly in a well-established business, but is essential to continued success. There are two important principles for successful innovation – think big and fail fast.
A good idea can be transformative
We tend to think of innovation on a relatively small scale – a new product, a step change in customer service – and this is clearly important. Every business should refresh its offer frequently in line with changing customer needs. However, something on a much larger scale may be needed if the market has changed significantly or the company is struggling.
If the rest of the business is sound, sometimes all a company needs to transform itself is a really good idea. The trick to doing this effectively is to really understand what you are good at and then work out how you can apply it differently to build a profitable and sustainable business stream to take the place of one which may be shrinking. Thinking laterally has enabled organisations in all sectors to transfer their core skills successfully to new markets.
We’ve done it ourselves, where budget cuts following the 2008 recession meant that fewer companies were implementing major infrastructure upgrades or kicking off new projects. We decided to reinvent the company as a cloud service provider, using our existing skills in a different way to generate recurring, rather than project, revenue. It required significant investment in infrastructure and staff training, plus a complete rethink of our core business processes, but was a logical development of our existing business while offering potential for higher margins.
IT also has tremendous potential to transform business. From introducing new applications and ways of working to using business data to provide transformational insights, it can radically change the way you run an organisation. However, many companies are still reluctant to take the plunge, creating a huge gap between the most IT-savvy firms and the IT laggards.
Harvard Business School professor Kristina Steffenson points out that to achieve the benefits from IT, organisations must be willing to engage in radical change, bringing together processes, people, organisational structures and supply chain partners.
Existing suppliers may not be best placed to do this. Instead, consider benchmarking against leading organisations, both in your own sector and elsewhere, studying analyst recommendations and talking to companies who have a track record in delivering IT changes in order to benefit from their experience. We’ve all heard about hospitals learning from Formula One teams – what expertise could be applied in your own sector? A fresh perspective could take your organisation in a new and ultimately productive direction.
Recognise when something is not working
The second principle of successful innovation is to be able to identify when something is not working. Companies such as Amazon are masters of this – frequently described as “experiment often and fail fast”. We need to be brave enough to try new things but smart enough to understand when it’s time to move on.
This does not come easily. Our educational system and most work environments have taught us that good performance means avoiding failure, not making mistakes. Academic Edward D. Hess points out that this can limit our ability to innovate because innovation requires a willingness to fail and to learn from it. However, as Matthew Syed points out in his book Black Box Thinking, failure is actually the best way to learn. Being smart means knowing what you don’t know, prioritising what you need to know, and being very good at finding the best evidence-based answers.
Few business decisions are black and white. Due to time pressures and business need, you often have to make them based on incomplete information. The key is to make the decision but then to check regularly on progress. If it is obvious that a product or service is struggling, or commercial demand is not there, make the decision to stop and focus your efforts on the next idea. It’s also possible that the idea may be good, but the timing is wrong for large scale acceptance – so consider keeping it in reserve should the market change.
Change is vital for a sustainable, long term future, but it is always risky. However, if your business isn’t working, don’t sit back and wait for things to get better. When things get tough, doing nothing is not an option. Understand how you can apply what you are good at differently, change your game and do it quickly, even if this means cannibalising your existing business. By asking the right questions, researching the options and learning from the best, we can gain the confidence to do what is best for our organisation.