Innovation is not something you do at will. Innovation is often associated with the light bulb that is switched on suddenly to energize a business and jump start growth. To the contrary, innovation describes a company culture, a philosophy. Innovation is not something you turn on when profits are dropping, products are not selling or you don’t know what else to do. For the slow change-risk adverse business, innovation can’t and won’t start with the flick of the switch.
Southwest Airlines didn’t just decide one day to change the way passengers fly. At the heart of Southwest’s success is its business model and culture. “What a stupid idea” is what I’m sure executives at now defunct airlines TWA, Pan Am, and a slew of others thought when they first heard about Southwest Airlines. Look who’s laughing now!
Imagine yourself being the executive selected to tell your board of directors for the first time the plan to force passengers to become their own travel agent. “That will never work” must have been going through the board room at American, Delta, Northwest, US Airways and the like after they heard about it. But Southwest embraced the concept and decided to have passengers make reservations online and entice them with Internet only fares.
You then explain to the directors that first come, first serve for a ticket doesn’t reserve a seat. “We’re going to make them go back to our website 24 hours before departure time to retrieve their boarding pass,” you tell the directors. Finally you remind them that the boarding pass still doesn’t reserve the best seat. Initially Southwest required passengers to get to the airport early to stand in front of their respective A, B, or C “cattle line.” A few years later, they required customers to check in exactly 24 hours before take-off. But passengers still don’t get to reserve a seat…just a place in line to select a seat after they board. Crazy idea when you think about it, isn’t it?
But who could have imagined that forcing people to be their own travel agent and board plane in cattle lines would not only be accepted but change the way people traveled. Southwest Airlines not only altered how people flew but has been the only profitable airline for over twenty-five years.
Another name synonymous with innovation has to be Apple, Inc., the company formerly known as Apple Computer. The name change represents who Apple really is: a culture of continuous innovation. Starting with the Mac, then the iPOD, and now the much iPAD and iPhone, Apple is always seeking the next new thing. Apple’s business is not products, it is innovation.
Dell, on the other hand, changed the way people bought and ordered computers and led the industry for years. But over time, all innovation gets commoditized. Dell stopped innovation – or at least it stopped innovating fast enough to stay ahead of the competition. Competitors copied the Dell model and Dell lost its edge. It failed to reinvent the exceptional customer experience it created.
Like Dell, core businesses are being disrupted by globalization, technology shifts, and new competitors. Business model innovation is essential to retaining a competitive position but that is simpler said than done. The scope of changing business models is larger and execution more complex.
Business model innovation is a perpetual quest for renewal. Complacency is a business killer. Harvard Business School Professor John Kotter in his book, A Sense of Urgency, why urgency is the antithesis of complacency. Urgency is becoming an organization’s most important asset.
Kotter describes urgency as the combination of thoughts, feelings (gut level determination) and actual behavior (hyper-alertness to what’s going on). Urgent people come to work each and every day with a commitment to make something important happen. They emote a sense to other people that you’ve got to get going.
Absolutely essential for innovation are leaders who have both an innovative mind-set and sense of urgency. We’re finding a lot of leaders don’t have it. When they do, many of their managers don’t. The implications are enormous.
How does your management team stack up? Do your managers have what it takes to innovate and keep pace?