ANALYST CORNER

When Innovation Misfires

Innovation is not always good — it can backfire. Good innovation helps to grow a brand in the marketplace and results in more customer love. Bad innovation does the opposite. Companies would be better off doing nothing than innovating badly.

Many public companies innovate on a regular basis because they think they have to. After all, they must keep their investors happy. That means they must increase sales and revenue, year after year. That’s a pressure all public companies share, and it often results in a shorter-term view of the world.

Private companies don’t face that same pressure. They often are happy with the regular ups and downs of business, keeping their eye on the long term. Smaller companies would like to grow on a regular basis, but that growth is not expected or needed, since they have no pressure from investors.

The Fickleness of Investors

There are many companies that don’t innovate on a regular basis, yet they remain strong competitors in their space. A look at their catalog each year often shows the same items. They tweak here and there, but they keep their winners in place.

Public companies seem to think they need to reinvent and radically change and improve every year in order to continue to attract investors. The problem is that it’s very difficult to do — and when they screw up, they lose customers and market share.

The pressure to innovate comes from the investors. Without constant growth, they will simply invest their money elsewhere for greater return. This is what keeps public companies thinking short-term instead of engaging in good, solid, long-term thinking.

Resisting the impulse to innovate for its own sake and innovating well when the circumstances are right are key to long-term success.

Poor Innovation Examples

There are generally three types of innovation: good, bad, and a little of both.

Bad innovation caused Lands’ End to lose customers — I’m one example. I loved Lands’ End belts. Every spring I would buy several different colors. However, this year the belts changed. They are thinner and stretch too much and no longer hold things up. So even though I loved Lands’ End yesterday, I no longer buy its belts. Poor innovation resulted in the loss of my business.

Grundig is another company that lost my business, even though it makes great shortwave radios. My Uncle Arthur turned me on to listening to shortwave when I was a teenager. While I was never as big a fan as he, I still do have lots of different shortwave radios around the house. However, Grundig introduced a disappointing innovation. Its radios still work fine, but the rubber-like coating on the outside has become sticky over time, so I no longer use them. Now I am looking at competitors’ products.

Apple’s iPhone innovations have been both good and bad. Take screen size, for example. Apple determined that customers wanted a larger screen. It now offers large-screen and very large-screen iPhones. The problem is there are many customers who still prefer a smaller screen so they can use one hand. Those customers are out of luck. Every customer base is like a pie with lots of different slices. However, Apple cut out one slice. Not smart.

Samsonite makes great luggage, but it too made a recent bad innovation decision. Years ago, it made a four-wheeler with rear wheels that popped out. It was perfect, because you could simply push the suitcase with a finger rather than having to lug the beast around. Then it stopped making that product. It recently came out with a similar version, but it screwed up the design. Now the handle has a button in the middle, right where you place your hand to push. The result is that when you push the handle, you’re likely to depress the button — and the handle collapses. How could Samsonite goof on something so basic?

Innovation Is Not Always Improvement

The word “innovation” implies better or stronger — but that’s not always the case. Companies mistakenly think they constantly need to innovate — but that’s not true. It’s better to keep a solid customer base with no innovation than to screw up with bad innovation and weaken your base.

The secret to innovation — for both public and private companies — is that if it doesn’t result in an improvement, it should be scrapped. Period. It’s that simple. The perceived need to innovate can ruin a product line, and the costs due to lost brand loyalty can be ruinous.

Everything a company does either builds or tears down its brand. As in the medical field, first do no harm. Don’t innovate just to innovate.

E-Commerce Times columnist Jeff Kagan is a wireless analyst, telecom analyst, industry analyst, consultant and speaker who has been sharing his colorful perspectives on the changing industry for 25 years. Email him at [email protected].

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Related Stories

Will Elon Musk ultimately purchase Twitter?
Loading ... Loading ...

LinuxInsider Channels