Wednesday, September 16, 2009

Three Traps of Innovation

Famed management guru Peter Drucker, in one of his last books Management Challenges for the 21st Century (1999) discusses the three traps to avoid which change leaders fall again and again:
  1. "The first trap is an innovation opportunity that is not in tune with the strategic realities discussed . . . [these strategic realities are referred to Drucker as the five certainties - (1.) The collapsing birthrate in the developing world, (2.) Shifts in the distribution of disposable income, (3.) Defining performance, (4.) Global competitiveness, and (5.) The growing incongruence between economic globalization and political splintering]. It is most unlikely to work. The only innovation likely to succeed is one that fits these major realities - of demographics, of changes in the distribution of income, of the way the institution itself and its customers define "performance," of global competitiveness or of political and economic realities. But the "misfit" opportunity often looks very tempting - precisely because it looks truly "innovative." But even if not resulting in failure - as it usually does - it always requires extraordinarily wasteful amounts of effort, money, and time.
  2. The second trap is to confuse "novelty" with "innovation." The test of innovation is that it creates value. A novelty only creates amusement. Yet, again and again, managements decide to innovate for no other reason than they are bored doing the same thing or making the same product day in and day out. The test of an innovation - as is also the test of "quality" - is not: "Do we like it?" It is: "Do customers want it and will they pay for it?"
  3. And the third trap: confusing motion with action. Typically when a product, service, or process no longer produces results and should be abandoned or changed radically, management "reorganizes." To to sure, reorganization is often needed. But it comes after the action, that is, after the "what" and the "how" have been faced up to. By itself reorganization is just "motion" and no substitute for action."

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