For purposes of illustration, I’ve drawn clear lines between products and processes and between innovation and imitation. In practice, those lines are usually blurred. A new industrial chemical, for example, will often arise as much through process advances in the manufacturing plant as through product breakthroughs in the research and development lab.
Even the most amazing new products will often incorporate ideas and components filched from others. In creating the iPod, its latest hit, Apple borrowed the major components from outside suppliers — the basic circuitry from PortalPlayer, the tiny hard drive from Toshiba, the battery from Sony, the digital-to-analog converter from Wolfson. It concentrated its innovation in its core strengths of engineering, design, marketing, partnering, and, most important of all, the integration of hardware and software. It’s hard to think of another company that has the skill and business model required to tie together a handheld music player (iPod), an elegant PC application for playing and organizing music files (iTunes), and an online store filled with songs from all the major recording studios (iTunes Music Store).
The lesson is clear: Innovate passionately in those places where you can separate yourself from the competition. Where differentiation promises to be elusive or fleeting, be a cold-blooded imitator.
Creativity Kills Competence
Beyond the dubious economics, one of the biggest problems with unconstrained innovation is that it can end up devaluing competence. It says to employees, It’s not enough to do your job extremely well: You’re only truly valuable if you “think outside the box” or “push the envelope” or — pick your cliché. That can lead to distorted measurement and reward systems, misdirected activity, and ultimately the disenfranchisement of a company’s best workers.
A few years ago, a firm I’m familiar with got the innovation religion, and suffered mightily as a result. After nearly a decade of strong growth, the company’s sales had gone soft and its margins had narrowed. It realized, correctly, that it required an infusion of new thinking. But rather than concentrate its efforts in the two areas that might have made a real difference to its business — new product development and branding — it took an unfocused, more-is-more approach. It democratized innovation by putting it at the heart of its annual incentive-compensation program. To earn a decent bonus, each employee had to demonstrate some form of creativity in his or her work, and each business unit had to provide examples and measures of its innovativeness.
The company’s intentions were noble, but the program backfired. Dozens of piecemeal “innovation initiatives” were launched; even the IT help desk and the reception staff strove to reinvent their functions. The management and measurement of all these efforts required a cumbersome new bureaucracy and a small mountain of paperwork. Little thought was given to the actual business impact of the individual programs — creativity had become a good in its own right. Not surprisingly, employees and managers let their attention drift away from their day jobs, which suddenly seemed like secondary concerns, and the company’s core business suffered.
The effect of the effort on individual employees was particularly distressing. The least talented workers actually embraced the program with the greatest fervor; it provided them with a respite from what they saw as the drudgery of their regular work. They became fonts of new and largely useless ideas, meticulously documenting their every passing fancy. The most competent employees, in contrast, treated the whole project as a silly game. They went through the motions, all the while complaining to one another about the emptiness of the exercise. Believing the company was rewarding smart talk over real accomplishment, they were slowly drained of their morale and motivation, and many of them ended up heading for the exit. Creativity had trumped competence, and performance took a hit.