Innovate or Die
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Authors
Authors: Pradip Sinha,
Associate Consultant,
ICMR (IBS Center for Management Research).
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Why Companies Fail to Retain their Position
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There are a few great names in today's business world, which are there in business but probably not in their favorite position. The story for them would have been entirely different; if they had not resisted change and more importantly had they not ignored the importance of innovation in business. The first in this list is Coca-Cola (one of the world's strongest brands) the more than 100 year old soft drink company first started as a patent medicine but later developed into a regular drink. Coca-Cola in its early days was a monopoly in soft drinks market. This resulted in complacency for the company. It failed to act on the changing taste of customers and seemed to have forgotten that to be the leader in this business it must innovate and not just deliver the same products year after year. Coca-Cola missed out the biggest opportunity to block Pepsi (or any other competitor at that point of time) by not introducing a second brand of a different (sweeter) taste. Though Coca-Cola later tried to come up with new versions, it was too late. And so it paid the price for its overconfidence and relaxed attitude by losing its monopoly. Its market share also reduced drastically. Though, it's true that Pepsi is still second to Coca-Cola, the important point here is that it is the closest competitor in this war. |
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Next is the story of Nike, one of the major companies in sports wear. In the late 1990s, Nike's sales jumped by 140%, net profits rose by 40% and the stock prices by 320%. All these would have been a dream for any company. But it's true, Nike achieved all this. But it failed to sustain its position because of its resistance to change! It failed to identify the changing trend in the teenagers' choice from traditional athletic shoes to the casual leather shoes. This attitude of Nike resulted in the dramatic fall of its market share in the medium and low priced shoes. It forgot that winners have to achieve both growth and efficiency at the same time. The late Sumantra Ghoshal of the London Business School had once said,
'Winners are like chefs, they must learn how to cook sweet and sour". Unfortunately, Nike didn't. Undoubtedly, it had the talent and capability to grow big very fast and bounce back to its classic standard, but it failed to do so again and again because of its resistance to innovate, self-attack and inability to learn from mistakes.
Another example of a company which failed to sustain its position is Revlon, a mega global brand in cosmetics which is in deep trouble nowadays, because of its inability to transform according to the changing taste of its customers. Regaining its prior market position will be tough as climbing back to the top is much harder than falling, because one has to improve performance on multiple dimensions simultaneously.
Attack or Get Attacked
Companies today must operate at a much faster pace (proactive) than their competitors in order to have a real competitive edge over them. They should be faster in developing and introducing products, implementing strategies and responding to the changing customer needs and wants. Companies like Gillette, Walt Disney, 3M or Hero Honda all survived because they evolved, innovated and attacked themselves from time to time, i.e., they transformed according to the changing priorities of their customers. They all have in them the ability to focus on the future rather than dwell in the past, which is so crucial for success in this global environment. Going back to the theory of Charles Darwin 'Survival of the fittest' in this context, "You have to evolve and transform according to the changing times. If you don't you won't survive". Just think how important and contextual this is for today's companies. The message is simple and loud the faster the companies evolve the better for them, if they don't there will be no tomorrow for them. The choice is theirs.