By Prof. Vicente Falconi, FALCONI’s Founding Partner
Innovating is not necessarily adopting new technologies.
Innovating is continuously adapting to the market.
Statistics show that few companies remain alive for a very long time. Most end up dying or weakening, being bought or merging with others. Why does it happen?
Organizations are established to meet market needs (as the market is made up of people, this means “people’s needs”) through their products. As it turns out, these needs change over time, other products, which are better and cheaper, are created to meet the same needs, customs change, new raw materials are developed providing lower prices, new manufacturing technologies enable better product quality and lower cost, new management technologies allow unlimited productivity gains, new government regulations are drawn etc.
The external environment changes constantly and it would be reasonable that the internal environment of the organizations were very dynamic to adapt and not die. This is not always true.
We create organizations (companies or departments) for certain purposes. Many times the purpose becomes unnecessary and the organizations remain. Other times, the organizations are structured without the knowledge on the value creation processes. Vertical hierarchies are created fragmenting the work and inhibiting initiatives with a consequent loss of efficiency and agility in the decision making process.
Innovation Management consists of systems, organizations, processes, operations, methods and techniques to design products and its processes depending on people’s needs (quality, price and availability). One of the means to innovate is to develop a new product (and a new process) for some market niche that is still not fulfilled. Innovation Management is also the constant questioning of existing products (external and internal) and their respective processes within the company.
In this case, when one wishes to innovate, the first question to ask should be, is the product still necessary? This product can be a training, an invoice, a financial report or cleaning a room.
If the product is unnecessary, the product and its process should be eliminated!
If the product is still necessary, you can redesign the process in view of the new technologies and new knowledge, with substantial gains. I have seen in some companies whole departments being simply eliminated.
The innovation process depends largely on the sensitivity regarding market needs and on being willing to constantly change your process to meet those changing needs. An excellent product today (high profitability) can be commodity (low profitability) or an unnecessary product tomorrow. In my experience, most organizations do not even know their internal and external products! I have seen companies that maintained a whole line of products that presented loss for years, with nothing being noticed.
It is not possible to innovate a product or process without feeling the market. Certain institutions maintained by the state do not innovate or take a long time to innovate because their survival does not depend on the market. Similarly, political regimes that are disassociated from the market economy are doomed to failure by the absence of the motivating factor for innovation at the organizations: people’s preference!
Innovating is not necessarily adopting new technologies. To innovate is to adapt continuously to the market producing a product (good or service), in conditions of quality, price and availability that surpasses competitors in the preference of people. However, the rise of new technologies may cause chain innovations. That is, for example, the case of the Internet and the various possibilities that are open to trade between companies and between them and their clients.
FALCONI Consultants for Results has done, along with some companies, an Innovation Management work, which is aligned to what is done in a modern way in the world. The savings for the companies have been in the order of 40% of their cost! This Innovation Management begins by questioning the mission of the company, the strategy, the values, the internal processes and the market needs.
Change should be constant within an organization. A competitive position today may be the death condition tomorrow. Without constant change, there is no survival.
On the other hand, despite the existing and available knowledge, organizations languish and die because we, human beings, are deep rooted to routine and we are very conservative (sometimes disguised by seemingly modern words and behaviors). In addition, many of us are strongly afraid of changes that might threaten our personal and emotional stability. Given that business consultants are essentially agents of change, we feel in our hands, in our day-to-day work, the pathological reaction of rejection from some people who are emotionally unprepared for the world today and, through their behavior, bring great damage to their company and to their country.
Change is very difficult and the presence of a leader is of the highest importance for this to happen. The leader provides to those resistant people the necessary safety in the difficult process of change. We have seen companies, and even countries, worsening by the lack of a leader. The thing is that here, once again, the human factor variability comes to play. There are several types of leaders; some are not always positive ones. I know some who are clinging to power to the point that they spend most of their time plotting conditions to strengthen it. However, I know others, true strategic diplomats, exercising the power with an eye on the market and in the future, enlisting exceptional people, developing their team and taking the necessary actions for their company survival.
Trying to summarize everything I have learned in my life, in practice, on a daily basis with companies, I know that there are three factors that are vital to the survival of an organization. Managerial knowledge (systems, organizations, processes, operations, goals, methods and analysis tools), technical knowledge (knowledge of their work, science and technology) and leadership (everything that is related to the human being in the organization). However, the latter is a limiting condition because the others will not even be absorbed without strong leadership. The true leader is precious like a diamond. The organization’s survival depends on constant innovation of business systems headed by these rare and precious stones. And how hard it is to find them!
Published on April 18, 2016, on LinkedIn Pulse.