Thursday, October 02, 2008

Three Steps to Innovating in Struggling Industries
Posted by Scott Anthony on September 10, 2008 9:51 AM

The issues discussed here are consistent with what we have been talking about all along. It is particularly important to: lower the cost of innovation; tap into the full breadth of talent and ideas; and, resource critical projects sufficiently to win. I know these are very challenging times and thinking 2 to 3 years out is not on everyone’s agenda when you and/or your customers are having trouble financing inventories. However, we must work to avoid hitting the “Stall Point ”,i.e., when growth approaches zero for an extended period since all the data suggests it is VERY difficult to return to growth once this tipping point is reached either for your company or industry.

Innovation is tough in the best of times. What do you do when times are tough and your industry's very survival is in question? (Don’t wait until you are near the end)

A newspaper executive asked me that question during a discussion this past Monday. While just about every organization is feeling some economic pinch these days, few have it as tough as newspaper companies. Print circulation continues to slide. Advertisers are fleeing to the Internet, where newspapers continue to lose ground to Google, Yahoo!, and countless others.
Newspaper companies are experimenting with new approaches to disseminating content, but those ventures aren't getting big enough quickly enough to offset declines in the core business.
To their credit, most newspaper executives with whom I've spoken recognize that they have to keep pushing. They know they have little hope of maintaining their relevance if they don't innovate. Yet, the pressure to staunch the bleeding in the core business makes it incredibly difficult to do things differently, to commit to innovating.

It's a tough challenge, and it highlights for other businesses that maybe aren't in the dire situation that newspapers are just how important it is to start innovation efforts when times are good, when you have the time and resources to allow your efforts to reach escape velocity. Had the newspaper industry really pushed the innovation agenda in the mid 1990s, we would be having a very different conversation today.

Telling people they should have done something a decade ago isn't particularly helpful, of course. So I provided the newspaper executive with the following pieces of advice:

1. Lower the cost of testing. (“Manage the cost, not the rate of failure”) Chapter 8 of our new book, The Innovator's Guide to Growth, suggested that companies should "invest a little to learn a lot" about key assumptions. When resources get scarce, you have to be even more creative about how to test critical assumptions. Fortunately, it has never been easier to develop and test an idea quickly and cheaply, using tools such as employee focus groups, low-resolution mock-ups, simulations, and "good enough" beta tests.

2. Creatively tap into outside resources. (Open innovation) A lack of financial resources makes innovation difficult, but a lack of human resources to work on ideas makes innovation impossible. Resource-constrained companies need to develop creative ways to find bodies to work on innovation efforts. Newspaper companies can think about tapping into readers, family members, and even retired employees to help push ideas forward. Also, instead of feeling the need to create every new business themselves, newspapers can tag along with concepts pioneered by other companies, like they have done with real estate provider Zillow.

3. Ruthlessly prune the portfolio.(tough portfolio analyses are critical to enable resourcing these critical growth initiative to win while meeting the shorter term goal) Most companies that claim to have no resources actually have plenty of resources--those resources are just tied up in the wrong activities. When times are tough, companies have to be ruthless about weeding the innovation portfolio. They have to shut down the least promising ideas early so they can really focus on the ideas with the most potential (I wrote about the innovation portfolio in more depth on Even though there's a risk that you might prematurely kill a great idea, better to kill one great idea early than to lose an entire innovation program because of lack of progress.

Unfortunately, I think things are going to stay ugly in the newspaper industry for some time to come. Companies that creatively push the innovation envelope have the greatest chance of emerging from today's troubling times as viable competitors. Those that don't will have marginally better fortunes over the next 12-18 months, but will lose the long-term ability to compete. (probably trues for any company in any industry)

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