"The most dangerous decision-making fallacy is that informed decision-makers will naturally make better, more objective decisions. Making consistently timely, effective, informed decisions takes hard work. Trust me – it’s worth it. Effective decision-making is the essential common ingredient behind every successful step, initiative and strategy that people, organizations and national governments undertake."Ozzie Paez
The proverb “He who rides the tiger is afraid to dismount” captures the difficulties of changing strategic direction after a course of action is set. It also drives home that the only safe place on a tiger is on its back, difficult as it may be keep your mount. These old metaphors reflect today’s global market realities, where change (the tiger) threatens to devour competitors who fail to mount him and those who fall off his back. This entry focuses on product and service innovations defined as new offerings or major upgrades to existing ones. More specifically, I will discuss the implications of innovation for decision-makers and decision-making, and offer some insights for improving the odds of success.
Let us start with the personification of cool cutting edge tech, Steve Jobs. His innovative spirit and uncompromising commitment to design excellence reflected in the IPhone and IPad transformed Apple into the best-in-class company of its space. Yet Jobs was not always successful, as illustrated by the Lisa, Apple III, Next and PowerMac G4 computers, and Apple’s ill-conceived involvement with Motorola’s ROKR phones. What is surprising about Jobs is not that his products have failed more often than they have succeeded, but that they have succeeded so often. Why? Because, on average, more than three out of every four new product introductions fail .
James Surowiecki put it this way in his book The Wisdom of Crowds: “The steam-powered car, the picturephone, the Edsel, the Betamax, pen computing: companies place huge bets on losers all the time. What makes a system successful is its ability to recognize losers and kill them quickly. Or, rather, what makes a system successful is its ability to generate lots of losers and then to recognize them as such and kill them off. Sometimes the messiest approach is the wisest. ” The free-market works by doing precisely that, getting players to create many products and services, most of which will either die before reaching the market or will be killed by consumer choices.
An article by the American Quality Society summarized research into what it takes to “consistently produce profitable new products” by pointing out that “Results from 257 organizations show that top performers with a higher percentage of commercially successful new products also cancel, or kill, a higher percentage of potential new products prior to launch. ” Thus, the process of weaning failures at highly innovative companies starts even before products and services are taken to market. In a strategy of numbers, where success depends on generating many options, judicious termination of ill conceived and poor performing new products and services is as important as committing to those that achieve market traction.
The tiger of innovation has a big bite, but companies today cannot remain viable for long without innovating. Price Waterhouse Coopers’ 2011 CEO survey reported that “Innovation is high on the agenda in virtually every industrial sector, including metals, chemicals and manufacturing. ” Six years later (2017) they reported that “CEOs are looking for uniquely human capabilities…” and 77% are struggling to “find the creativity and innovation skills they need. ”
Innovation is cool, exciting and necessary, but, to be innovative is to accept many failures for each success and to be ready to pull the plug as soon as the market renders its judgment. These are the critical cross-roads of information, awareness, decision-making and leadership. Innovative companies have to sustain a string of new offerings and thus cannot waste their resources on those that fail or are likely to fail in the market. Leaders have to re-engage their teams when new products and services fail, learn lessons and refocus on other innovative ideas. At the same time, when new products or services succeed, the organization needs to quickly maximize their returns by driving them into the market and putting in place programs to keep them viable and profitable as long as possible.
Can the Tiger be tamed? Not entirely, but it can be made profitable without suffering a fatal bite. There are strategies with proven records in different industries. Development programs that quickly prototype, pilot and validate ideas offer great opportunities to minimize the costs of failure, while generating more potential successes to test in the market. A few companies have evolved highly integrated, aware and responsive business models that get inside market trends to deliver products in line with evolving preferences, thus reducing the risks of gaging future consumer tastes. In these cases, product and service innovations are inseparable from design to production to distribution innovations that deliver integrated advantages over competitors. In all cases, however, innovation is not a program with a destination, but an approach, philosophy and core competitive strategy.
Arguably the most important component of innovation is culture, as reflected in leaders, managers and decision-makers across innovative organizations. Successful innovation requires informed, aware, decisive decision-making to reduce the impacts of failures, maximize the returns of successes and promote creativity, vision and reasoned risk-taking. These in turn require innovative processes, methods and systems that deliver timely awareness, sustain creativity, drive successful initiatives and quickly dispose of those that fail. These are some of the tools that can make riding the tiger exciting and profitable, though not entirely safe, in our highly dynamic, competitive markets.
NOTE: This updated post was initially published in 2011 in Decisions to Lead.