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Innovate or Die

Optimize Blog - February 9, 2011 - 0 comments

Nokia, one of the giants in mobile technology is facing a crisis or, as Stephen Elop the Finnish company’s CEO puts it, “we are standing on a ‘burning platform’ surrounded by innovative competitors who are grabbing our market share”.
Despite the success of the iPhone and Google’s Android operating system, Nokia still has no viable competitive product and has seen its market share eroded from 38% in 2009 to 28% by the end of 2010 according to research firm IDC. Furthermore, cheaper and rapidly fabricated Chinese handsets have had a significant impact on the lower end, non smart-phone, handset market.
A leaked internal memo from Mr. Elop to Nokia staff suggests that things are far from well and since the iPhone surfaced in 2007 it is easy to share in his disappointment that Nokia is still not in a position to compete over 3 years later.
Nokia’s situation is another case which supports the ‘innovate or die’ cliché. All too often we come across companies that have innovation as a core value and yet we see little in the way of practical, tangible efforts to innovate.
It’s clear that companies must exploit their innovative capabilities to develop new businesses if they are to successfully confront the effects of emerging technologies, empowered customers, new market entrants, shorter product life cycles, geopolitical instability and market globalization. Indeed, the development of innovative capabilities is the only means by which companies can sustain a strategic competitive advantage.
In an effort to maintain a leadership position, companies that can’t innovate must buy innovation off the shelf. For example, as the carbonated drinks market has evolved Coca-Cola acquired makers of alternative beverages such as bottled waters, juices and energy drinks. Though sometimes effective in the short term, this strategy of innovation through acquisition often fails because the acquiring corporation overestimates the value of synergies and underestimates the post-merger integration difficulties. In any case, innovation by acquisition is always at substantial cost. Shareholders see far higher returns when companies successfully innovate organically.
In every industry the leading companies are invariably innovators but innovation per se is a rather nebulous term and the challenge is to determine how we measure it as a critical performance indicator within our business?
As Nokia struggles with its strategy and makes plans to react to the changing market place, innovation will be key. As you look at your own business, consider how you drive innovation and the metrics you use to measure innovation in your organization? Here are a few to get you started:
• Percentage of capital that is invested in innovation activities
• Percentage of workforce time that is currently dedicated to innovation projects
• Number of new products, services, and businesses launched in the past year
• Percentage of revenue from products or services introduced in the past three years
• Percentage of employees for whom innovation is a key performance goal
• Number of new competencies introduced in the past 12 months
• Percentage of executives’ time spent on strategic innovation rather than day-to-day operations
• Percentage of managers with training in the concepts and tools of innovation
• Number of ideas submitted by employees in the past three, six, and twelve months
Nokia will be explaining its strategy at a media event this Friday. Undoubtedly some tough choices will have to be made…

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