Avoid the Managerial Trap by Fostering Innovation
We all know of companies that are successful in the start-up phase but do not endure in the long-term. Why does this happen? What is the difference between a company that achieves consistent long-term success and one that stagnates or even fails? The difference is that successful companies are effective at creating a culture that fosters innovation.
Companies that are not successful in the long-term often have fallen into what is known as the “managerial trap.” When a company is in the start-up phase, it is lean and scrappy. There is an entrepreneurial spirit because everyone is working to bring a new product or service to the market. As this start-up is successful, the company hires more employees. There is now a need for formal procedures, policies and managers to enforce them. The company is now a respectable and successful business venture. This is a very good thing, but there is a trap here as well. The entrepreneurial spirit that once drove every member of the organization is gone. The innovation of the start-up has been replaced by standardization and even stagnation.
This is a necessary part of the growth of a business. Standardization helps the business to scale its products and services to a wider audience. As long as nothing significant changes in the market environment, the company can operate successfully. If conditions in the market change, this kind of standardization can leave the company unprepared to cope with it. The organization will start to lose its customers to more scrappy competitors who can adapt. The way of doing business that has been enshrined in the procedures and policies is no longer working well. Simply doing things in the same way that they have always been done is not going to work. A real innovation is needed to survive. Traditional managers are not always good at perceiving this situation. Their response to the problem is to return to the procedures with more gusto. Thus, the managerial trap. Good management is not equipped to solve this problem, and the company stagnates as a result. The solution must be found elsewhere if the company is to survive.
How can a business organization keep its entrepreneurial spirit alive while implementing the necessary standardization to grow the business? If a corporation can answer this question, then it can survive and thrive in the long-term.
One way to foster innovation is to look for new and different ways to apply the product or service. For instance, a soy sauce company in Japan has adapted is fermentation process for pharmaceutical applications. By fostering this diversification, an organization continues to be flexible and maintains its ability to respond to market changes. The original product remains standardized but a development group continues to innovate. Since the company maintains some divisions that are entrepreneurial, it is better able to adjust to market changes for the original product.
Another way to foster innovation is to stay on the cutting edge of technology. Staying abreast of the latest technological advances and trying to exploit those to make better products creates a culture of innovation in the company. This will prevent the dangerous stagnation that can cause the downfall of a good company. For example, a baked goods company should not just keep offering the same products year after year. It needs to continue to treat its customers to new and innovative products to keep them coming back.
Finally, each member of the organization needs to take personal ownership in the company brand. The executives and managers should give every member of the organization permission to offer suggestions and innovations that can improve the way the company operates. When employees feel empowered to suggest improvements, they will take more ownership of the company and keep the entrepreneurial spirit alive.
The managerial trap can be devastating and in many ways is the worst kind of tragedy. Innovative people work hard to bring a new product and service to the market and are met with success. It is a shame to see this success tarnished by shortsighted management and stagnation. Business owners need to be aware of this trap and take steps to avoid it as their company grows.
These suggestions for fostering innovation will get business owners and entrepreneurs started on the path to continued success. This is just a beginning point for implementing good management practices. There is much more that can be done to develop a healthy managerial approach in a new company.
Reference:
Tushman, M.L. and O’Reilly, C.A. 1997. Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal. Boston: Harvard Business School Press.
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