Does Innovation Require Desperation?
What do you do when your close competitors start slashing prices? Retailers claim that quality matters more than ever, but that presumes your business is offering a product or service of markedly higher quality than your cheaper competitor.
Customers "seldom" want to pay the difference, reckons London Business School strategy professor Freek Vermeulen. So if you don't want to begin a price war, your only option as a business is to innovate like crazy.
The good news, he says, is that innovative drive comes from the same place as the urge to slash costs -- that is, desperation.
It was desperation (he argues) that pushed The Independent newspaper to abandon its broadsheet -- read, 'quality' -- format for the more populist tabloid size favoured by the likes of the Sun. It was a big gamble, but one that paid off. Where The Indy led, The Times later followed.
What drove The Indy to risk losing its already dwindling readership was the fact that it was nearly broke -- its back was against the wall and its ownerse knew that in a tough market, it would likely be the first of the major newspapers to fold. Its vulnerability became an asset. It turned its small 'stature' -- in terms of circulation and revenue -- into a differentiating point.
(This works for overcoming personal limitations, too: it's what actor Michael Caine once described as "using the difficulty", or Zen Habits' describes as 'turning your weaknesses into strengths'.)
High-risk, game-changing innovation of the type Vermeulen describes is rare, though -- you'd need to be very close to disaster to 'take the plunge' the way The Independent or South West Airlines did.
Businesses in less dire straits need to balance that pro-risk, 'heads up' attitude to grasping market opportunities with a 'heads down' approach to the core business and cost-cutting -- without diluting the impact of their big, bold moves. The idea is not to reach the middle ground, but to run both strategies in parallel.
What's clear is that businesses that sit still may sink without a trace. 'Innovate or die' now means exactly that to businesses.
(...except at Walkers. Cajun squirrel-flavoured crisps? That's innovation overkill.)