Do not blame Innovations

     I have just read a really interesting and useful article "The Problem with Product Proliferation" in HBR. It's especially useful if you work in a large enterprise. I fully agree with almost all of the conclusions, except for one, which blames innovations for the company failure. So let's argue a little bit.


 1. The situation

• "Royal Philips, the Netherlands’ most valuable brand, has long been a leader in product innovation. "
• "But in the first 10 years of the new millennium, the company’s revenue plunged 40%, profits for the decade were wiped out, and its market capitalization fell significantly."

2. The author's conclusion

    "The problem, it turned out, was excessive innovation."

3. Supporting evidence

• "In 2003, Philips was the top patent filer in Europe and among the top 10 in the United States. "
• "By 2011, Philips was active in more than 60 product categories."
• "Employees struggled to navigate the more than 10,000 IT applications, including 60 enterprise resource planning systems"

4. Recommendations

•   Focus on integration, not variety


• ... because "Our research shows that product integration, unlike product variety, is related to better performance and does not create challenges for customers and employees."
• ... but "Emphasizing product integration over product variety is a strategic choice—but it can mean walking away from new revenue in the short term. "
• "Integration-focused innovation demands more internal coordination than siloed approaches do, but when systems and processes are designed to ease customer difficulties, they usually benefit employees too."

• Eliminate the separation between your innovators and your complexity handlers
• "In most organizations, the people in charge of innovation are functionally separate from the people who eventually have to deal with the effects of it. ... This division of labor allows complexity to penetrate the business unchecked."
• so "companies should create cross- functional teams that break down the wall between the developers of products and the employees whose work is affected by them."
• and "Cross-functional teams also provide insights into end-to-end processes, which can greatly ease customer and employee difficulties."

• Commit to a vision to direct innovation
• "If a company embraces innovation but lacks a clear vision, it runs the risk of becoming addicted to innovation for its own sake"
• "Mission statements can also clarify the types of innovation that are not desirable and help to establish priorities. "

 


    So what's wrong with the conclusion "The problem, it turned out, was excessive innovation."?
From my point of view, the company

•  did not have clear vision
• was focusing on many products at the same time without proper financial controls (ROI, EBITA, ...)
• was de-centralizing IT and other functions, so the end result was many unrelated IT systems, uncoordinated processes, overlapping functionalities

All these resulted in a financial fiasco. 

So, if I may, I would use this conclusion 

                  "The problem, it turned out, was bad governance."

     COBIT 5, as a framework for management and governance for Enterprise IT, for example, has a dedicated principle "Separating Governance from Management". But that would be a good topic for the next article.