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Why Innovation Counts

October 08, 2013
Daniel F. Muzyka

President and Chief Executive Officer
The Conference Board of Canada

The dust is yet to settle on the deal begun recently by the Fairfax group to privatize BlackBerry. We still await the verdict of due diligence, and we may never know all the factors that led to Blackberry’s current predicament. However, reflections on the situation do remind us of some common high-tech management challenges.

Lesson 1: Missing a Beat Has Consequences

High-innovation areas like consumer and business electronics are relentless arenas of competition in the global village. Firms have to innovate constantly to create value for the customer, or someone else will.

This lesson has been driven home over and over again in the past 30 years. We all remember the names of companies, such as Digital Equipment Corporation, Wang, etc., that have all failed to keep up with the pace of innovation in their product lines.

Lesson 2: Nature Abhors a Vacuum

Existing companies often ignore new opportunities to deliver value by failing to understand or keep pace with evolving customer needs or opportunities presented by new technologies. Firms become fixated for too long on the specific product or service offering that made them successful. If you aren’t prepared to make your existing products—or even your business—obsolete, someone will do it for you.

Lesson 3: Have an Evolutionary Path

The history of product development in long-term, successful high-tech firms shows that it is important to have a commonly shared sense of the evolutionary product path. This understanding must include a shared sense of what are distinctive core features and how firms will evolve them, plus a sense of which customer segments are being pursued. It also means being prepared to alter course quickly if new information indicates a need to steer in a different direction.

Lesson 4: It’s Not Always the Next Big Thing

There is a tendency for management in high-tech firms that are losing ground to rely on some revolutionary new leap forward for their future success. There is much that can be done by evolutionary moves to slow competitive decline. History has shown that incremental features to existing products and services can help make up for the absence of a big product release. They can keep you ahead of your competitors longer or help you play catch up more quickly. They can also serve to appease loyal customers.

Lesson 5: Boards Need to Exercise Dynamic Oversight and Coaching

Boards of companies in high-innovation industries need to be very attentive, constantly inquisitive, and more proactive in helping management to steward the company in a high-risk, high-reward environment. Timely dialogue with management is required in order to help shape and realize product development and evolution. For boards of high- tech companies, the key asset is less the balance sheet and more the unrealized future opportunity—with a focus on innovation and getting a product to a diversified market.

Auditing, risk management, and governance are all important functions of a board. In high tech, the board must also have true insight into the evolution and management of the underlying technology.

Joseph Schumpeter, the Austrian-born economist of the last century, spoke quite openly about the process of “creative destruction” (otherwise referred to as “Schumpeter’s Gale”). A key benefit of this process was the release of resources to enable the next success, learning being one of those assets. We should all seek to learn together.

 

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