Dr. Rick Franza, Professor of Management at the Hull College of Business, discusses a different, timely business topic each Monday in this column. This week, he talks about the reasons why a business must always keep innovating to stay successful. The interview has been edited for clarity and impact.
ABD: There’s a quote about innovation, attributed in some form to several people, that says, “If you stop growing, you start dying.” Why is innovation so important?
Rick: The analogy I always use is if you’re going the speed limit on I-75, everyone is going past you. If you’re not innovating in business, you get passed by your competitors. Lots of things are changing – the business environment, your customers’ tastes, your competitors – and you have to change with it. Innovation is necessary because of the amount of change in the marketplace.
If you’re not adapting, you’ll just fall behind in the marketplace. It’s never a question of if, it’s a question of when.
ABD: What does innovation consist of?
Rick: Most people think of it in terms of a product, but it could be in the way you make the product or the way you deliver it. For example, at my alma mater of Notre Dame, I learned that they now have little vehicles to deliver food to the students. They didn’t change the product but how they deliver it.
The definition of innovation is the creation of something new. So it can be a product, how you make or deliver the product, a service, or even marketing.
Sometimes you’re forced to innovate because of new regulations or legislation or for cultural reasons, like electric vehicles right now. Legislation is almost forcing it to be the product.
ABD: In cultural terms, COVID certainly provided opportunities for innovation.
Rick: COVID forced a lot of innovations because it made an immediate change in the business environment. The good thing about COVID is it made us re-evaluate our business models because the things we did before we couldn’t do anymore. Post-COVID, we’ve found that some of those innovations were better, but some things were better before.
ABD: When talking about things being better, are all innovations necessarily better?
Rick: I use the term value all the time. Ask, does the customer value it? What value are you providing to the customer? You have to make sure who your target market is and what they value. Sometimes the customer doesn’t understand the innovation or there’s something about it that they can’t get over the hurdle in accepting.
A big challenge that Steve Jobs had when the iPhone first came out is that people didn’t understand the value of it. We generally have bad imaginations, but sometimes there’s something that’s stopping the customer from making the commitment to buy the new product.
I heard an example of a company that made sofas that you could design to your specifications online. But the company found that often people would work through the design process without completing the order. They did some research and found the reason people didn’t complete the transaction is because they didn’t know what they’d do with their old sofa. So the company began removing the old sofa whenever they sold a new sofa.
Part of the value proposition is educating your customers why this new thing is better than what’s out there. The value to the customer can be emotional.
ABD: One old adage is that it’s better to be the second to market than the first. Is that true?
Rick: It’s a mixed bag. The data is mixed. The fast follower is often more successful than the first to market. The second one often has the opportunity to work the bugs out. In the life cycle of any product, customer adoption is very slow at the beginning. So you don’t have to be first to capture the big wave.
ABD: So how do you decide when the best time is to innovate?
Rick: There’s always the tension of market pull vs. company push, but the market pull always has to be there.
Talk to some of your customers. You’ve got to ensure that they will value your innovation. Are they willing to pay more for it? Do surveillance of the marketplace. What are your competitors doing? And make sure you have the supply chain available that you’ll need.