Mistaken Beliefs About Innovation - London Business School BSR

Five Mistaken BeliefsBusiness Leaders Have

About Innovation© Copyright 2012 London Business School

BUSINESS STRATEGY REVIEW 1

Innovation has been looked atfrom every conceivable angle,but we still repeat the samemistakes, laments FreekVermeulen.


Mistake 1: Believing theNumbers

One common mistake is to insist on “seeing thenumbers” too much too soon. “What is the size of themarket?”, “what is the Net Present Value calculation?”,

“payback time?”, and so on.


If a CEO insists on hard numbers before theproject is even started, it will by sheer

definition kill off any truly innovative ones,simply because you cannot compute the size of

a market that does not exist yet.


Mistake 2: Believing Success HasBeen Attained

When an organisation becomes very good at something, top ofits industry, it usually starts to focus on the thing that made its

success, crowding out other options and points of view.


Mistake 3: Believing TheyKnow the Competition

If I ask a CEO “who is your main competitor?” theyalways reply with the company that is most likethem. When it comes to innovation, this is slightlydelusional. The company that is most like you isreally the least important competitor, simplybecause they are in the same boat as you are.


The most threatening competition often comes from acompletely different angle: an adjacent industry,

innovative start-up or substitute. This is a phenomenonfor all times: Sailing ship companies suffered from thesteam engine; Radial tire champion Firestone wasbrought to its knees by the introduction of bias tires;Newspapers are being squeezed by the internet.


Mistake 4: Believing ThatBecause Everybody Had

Always Done It This Way, it isthe Best Way of Doing Things“Everybody does it this way, and everybody has alwaysbeen doing it this way; if it wasn’t the best way of doingthings, I am sure it would have disappeared by now.”


In many businesses, practices emerged with good reason, butonce the circumstances changed, firms carried on using themfor no reason whatsoever. Did newspapers have to be printedfor so long on ridiculously large (and expensive) sheets ofpaper? Could low-cost airlines not have worked many yearsearlier? Are buyback guarantees in book publishing (set up in

the Great Depression) really still needed?

That everybody does it this way is no reason not to challenge it.The greatest innovations often come from challenging industry

convention.


Mistake 5: Believing theCustomer

The final error CEOs often make when it comes to innovation is toask their customers for their opinion. There are two problems withthis approach. Firstly, these people are already your customer andsecondly, even when a company is asking potential customers, itis tricky. Consumer research is often useful but not for truly

innovative ideas and markets that do not exist yet.


As Farooq Chaudhry once put it to me: “Customers?Forget about them.” If you want to be really

innovative, you have to be leading the customers;not be led by them.


Freek Vermeulen is Associate Professor of Strategyand Entrepreneurship at London Business School.He is the author of Business Exposed (FT PrenticeHall, 2010).

This report was part of Business Strategy Review,Volume 22 Issue 4 - 2011

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