The business of innovation (part 2)
Sustained innovation in a business is a rare thing. When large corporations such as IBM and AT&T were virtual monopolies, they could lavishly fund innovation at places like “Yorktown Heights” or “Bell Labs” which did not contribute to immediate profitability. When push comes to shove in tough economic times, that funding is the first to go. In a smaller business, a culture of innovation can be the result of the influence of the founding entrepreneur whose passion for innovation becomes the corporate culture. Or it can be the rare manager who sees the long term value in innovation and has the power within the company to create an environment for it.
My former company, Texwipe, was one of those rare companies where constant innovation was not only our culture, but was the key to our success. Texwipe’s culture of innovation came from its founder, Edward Paley. Innovation was in his DNA so to speak; it was never a conscious, rational or planned decision to be “innovative”. It was just the way he was. This is true with many entrepreneurs. Their success is a product of their innate desire and ability to create something new. The trick is to keep this going as the company matures. Texwipe was an innovative company from its beginnings in 1963 to its sale in 2001. That was a span of 38 years. How did we do it? Looking back, here are some of my thoughts:
It was who we were. Well, what can I say: We didn’t know any better. Innovation was the way we thought and worked. It was as if the business was solely a platform that enabled us to create.
We controlled the company. We had complete say in what the company did. After all, we were the owners. There were no outsiders to insist that we stay within standard business orthodoxies.
The marketplace. We served the high tech marketplace as it was rapidly developing during the 1970s through the end of the century. The need for better products was a constant.
We didn’t focus on profitability. This is a key idea. Profit is the result of creating something that someone sees value in and will therefore pay sufficient money to have. It should be an output, a result – not an input. In other words, we did not run our business to make a profit per se; we ran our business to create significant value in the mind of our customers. As a result, we made a profit. If, on the other hand, a business focuses solely on profit; it can readily be achieved in the short term, but often at the sacrifice of the longer term health of the company. You can cut cost to the bone or even past that until the company just disappears.
We did not have rigid time horizons for product development. To be truly innovative (or inventive) you often don’t know where you are going or what you are doing. There is no clear-cut path to go down; you have to feel your way. This is usually the case for great leaps forward. You get there when you get there. The upside to this is that once you get there, what you have created is usually something great.
We built our reputation as the industry leader in technology and innovation. We had a reputation as the industry leader for innovative new products. The marketplace expected this from us and it was closely identified with our brand. This, of course, is a chicken and egg problem. We simply did what we liked best, and it became an expectation in the marketplace. This in turn drove further innovation.
With a nod to Tolstoy, “Innovative companies are all innovative in their own way”. But what they share in common is a culture that enables them to continuously venture into uncharted territory. They are driven by a compulsion to create.