-- by Tina Miteko, founder, Marketing For Tech
In an interview that was published on The Motley Fool in 2008, Jim Keyes, a former CEO of Blockbuster, a provider of home movie and video game rental services via a chain of retail stores, talked about the company's reluctance to invest in the digital content delivery market at the time because he did not want to risk shareholder money in a market that was a few years away from it being commercial. Mr. Keyes also thought at the time that up-and-coming companies such as Netflix and Redbox, that were operating under different business models, were not on Blockbuster's "radar screen in terms of competition."
Netflix's initial business model was focused on the DVD rental-by-mail market, whereas Redbox specialized in DVD movie and game rentals via automated kiosks that were deployed in grocery stores, pharmacies and other places across the U.S.
Netflix's initial business model was focused on the DVD rental-by-mail market, whereas Redbox specialized in DVD movie and game rentals via automated kiosks that were deployed in grocery stores, pharmacies and other places across the U.S.
Looking ahead at how the industry evolved, one can understand that Blockbuster shot itself in the foot. The company was hurt by a significant technology shift, the advent of DVD, that enabled Netflix and its video by mail service to take hold. Blockbuster also made a strategic mistake. The company's lack of foresight and continued focus on bringing customers to its retail stores rather than focusing on the growing online market contributed to its demise and gave Netflix the path to stream movies to consumer homes, and to become today the 10th-largest Internet company by revenue in the world. By the time Blockbuster tried to get in the game by offering DVD-by-Mail, streaming and video-on-demand services, it was too late. The company eventually filed for bankruptcy in 2010 and was acquired by DISH in 2011.
Mr. Keyes’ statement in the Motley Fool interview sums up the reasons why many big companies are having a hard time innovating. One reason is that corporations often prefer predictability over change. Innovation is risky and this means that corporations have to function outside of their comfort zone. Another reason is that corporations may fall in the trap of believing that past success is a predictor of what they should do in the future as we saw in the case of Blockbuster where the focus remained on bringing traffic to the retail stores instead of investing early in the digital content delivery market.
Mr. Keyes’ statement in the Motley Fool interview sums up the reasons why many big companies are having a hard time innovating. One reason is that corporations often prefer predictability over change. Innovation is risky and this means that corporations have to function outside of their comfort zone. Another reason is that corporations may fall in the trap of believing that past success is a predictor of what they should do in the future as we saw in the case of Blockbuster where the focus remained on bringing traffic to the retail stores instead of investing early in the digital content delivery market.
Why corporations can't act like startups.
| A corporation was once a startup. A startup functions as an agile organism, testing business models and marketing tactics while searching for a product-market fit. An early-stage startup demonstrates success by showing growth and market traction that is often required to be able to raise the next round of funding from investors that is needed to further scale the business. | Corporations prefer predictability over change. |
A corporation, on the other hand, is a mature organization. It has a proven business model and its sole focus is on execution and operational efficiency. A corporation has a large number of employees and processes in place which make it move slower. Contrary to a startup, which is seeking user growth and a scalable business model, a corporation exists to make money. A corporation's measure of success is to keep shareholder's happy and to show profit.
How innovation impacts customers.
Most people when they think about Innovation, they think about product innovation. A company introduces a new product that disrupts a sector such as when Apple introduced the iPhone which drastically changed how people use their mobile phones. Innovation, however, does not stop at the product. Corporations can also innovate in other areas such as Operations, Business Model and Customer Experience.
Operational Innovation. Corporations can innovate in operations to improve existing processes and maximize efficiency. An example of operational innovation and supply chain management is the cross-docking that Walmart made popular in the retail sector.
Operational Innovation. Corporations can innovate in operations to improve existing processes and maximize efficiency. An example of operational innovation and supply chain management is the cross-docking that Walmart made popular in the retail sector.
| Cross-docking is a method that enables the quick distribution of products. It helps a company reduce its warehousing costs while the products reach customers faster. With more than 11,000 stores worldwide and millions of products to handle, naturally inventory management is a big headache for the world’s largest retailer. With cross-docking new products brought by inbound trucks to Walmart’s distribution centers are loaded to outbound trucks that are heading to the stores. This results in efficiency in Walmart's operations and reduced inventory costs for the company. |  |
Business Model Innovation. When we think of Pepsi-Cola, our minds go to the popular soft drink. The company may have started in the beverage business but altered its existing business model to include a complementary category when it realized that there is a high coincidence of purchase between sodas and snacks. According to IRI, a market research company, 54% of US consumers who buy salty snacks also buy a beverage. Pepsi-Cola made the leap to the snacks category by merging with Frito-Lays to become PepsiCo. It’s no surprise that placing Frito-Lay snacks along with carbonated Pepsi drinks in stores can contribute to higher sales for the company.
Customer Experience Innovation. Corporations can innovate in Customer Experience by offering better ways to serve the needs of their customers. McDonald’s recently announced its plan to introduce its “experience of the future” concept by deploying digital ordering kiosks to all of its US locations by the end of 2020. The new self-order kiosks allow customers to order at touch-screens, get a digital number and have their food served to their table. People go to fast food restaurants because they want fast service and the new kiosks aim to speed up the ordering process while giving customers the ability to customize their food.
Top corporate innovation challenges.
The late Peter Drucker, one of the best known writers in management theory, originated the phrase that “corporate culture eats strategy for breakfast” meaning that the existing culture of an organization can either break or make any effort to implement a strategy.
According to the results in the "Corporate Innovation Imperative, 2017 Report by Crowd Companies" that surveyed individuals responsible for innovation in their organizations, fostering an internal culture of experimentation and innovation was listed as the top challenge in their corporations. Fear of conflicting with existing revenue streams, resistance to change by middle-management, deferred commitment and delays in action were also listed as other innovation challenges.
According to the results in the "Corporate Innovation Imperative, 2017 Report by Crowd Companies" that surveyed individuals responsible for innovation in their organizations, fostering an internal culture of experimentation and innovation was listed as the top challenge in their corporations. Fear of conflicting with existing revenue streams, resistance to change by middle-management, deferred commitment and delays in action were also listed as other innovation challenges.
Innovation requires a corporate culture that welcomes failure. Basketball superstar Michael Jordan once said that "I've failed over and over again and that is why I succeed." And that couldn’t be truer for corporations as well. Should the possibility of failing hold corporations back from taking the chance? It didn't hold back some of the world's most well-known brands.
Coca-Cola introduced Coca-Cola BlāK, a short-lived beverage inspired by coffee which was targeting the premium coffee market. It was discontinued after two years in the market. Remember when Bic, the ball-point pen manufacturer, introduced the "Bic for Her" line, the pens made for women? The company was hoping to tap into the women's market by introducing a pen that fit better a woman's hand, along with an elegant design, and a choice of pastel colors. The new pens received some hilarious reviews by women across the world.
Google is a great example of a corporation championing a culture of innovation. It encourages its employees to spend 20% of their work time on projects that they think will be most beneficial for the company. This encourages employee creativity and cultivates an innovative mindset. Products like Google News, Gmail and Adsense came to life because employees were allowed to think and implement their ideas beyond their day-to-day jobs. Take a look at the Google Glass. It was exciting when it first appeared but it never made it to the mainstream due to privacy issues. In 2017, Google Glass is making a come back. The second iteration of it, dubbed as Google Glass Enterprise Edition, is for use in factories by companies such as Boeing, DHL and GE. Google is ok with failing and failing often.
And, so is Amazon. In a recent article published in Business Insider, Paul Misener, Amazon's innovation chief talked about Amazon's willingness to fail and work toward getting things right that led the company to a "very beneficial way of doing business." They believe that failure will help drive Amazon forward.
Companies can be better at learning from failures so they too can push their business forward. Corporations have the resources to fuel innovation and innovation after all is what keeps them ahead of their competition.
Coca-Cola introduced Coca-Cola BlāK, a short-lived beverage inspired by coffee which was targeting the premium coffee market. It was discontinued after two years in the market. Remember when Bic, the ball-point pen manufacturer, introduced the "Bic for Her" line, the pens made for women? The company was hoping to tap into the women's market by introducing a pen that fit better a woman's hand, along with an elegant design, and a choice of pastel colors. The new pens received some hilarious reviews by women across the world.
Google is a great example of a corporation championing a culture of innovation. It encourages its employees to spend 20% of their work time on projects that they think will be most beneficial for the company. This encourages employee creativity and cultivates an innovative mindset. Products like Google News, Gmail and Adsense came to life because employees were allowed to think and implement their ideas beyond their day-to-day jobs. Take a look at the Google Glass. It was exciting when it first appeared but it never made it to the mainstream due to privacy issues. In 2017, Google Glass is making a come back. The second iteration of it, dubbed as Google Glass Enterprise Edition, is for use in factories by companies such as Boeing, DHL and GE. Google is ok with failing and failing often.
And, so is Amazon. In a recent article published in Business Insider, Paul Misener, Amazon's innovation chief talked about Amazon's willingness to fail and work toward getting things right that led the company to a "very beneficial way of doing business." They believe that failure will help drive Amazon forward.
Companies can be better at learning from failures so they too can push their business forward. Corporations have the resources to fuel innovation and innovation after all is what keeps them ahead of their competition.
About the Author
Tina Miteko is the founder of Marketing For Tech, a technology marketing firm which helps companies with their marketing strategy & execution. Prior to Marketing For Tech she worked for Keynote Systems (acquired by Dynatrace) and InQuira (acquired by Oracle) in senior marketing management roles. Throughout her career, Tina observed that technology companies heavily focus on innovation but do not always do an effective job in marketing. She founded Marketing For Tech with the vision to help companies bridge this gap. For more information, go to MarketingForTech.com.