Greatest risk is to play always safe

Let us imagine a company that has reached a status of market leadership through its innovative products and services. The road to the leading position may well have been a tough fight against thecompetition. Innovation work has been successful, and a great deal of the new stuff has been radical: Many products have been something completely new to the market. Through successful development and commercialization, our example company have now reached its goals as #1 in the market, with an overwhelming market share against the competition. Everybody are looking up to the company, and executives go to seminars to give keynote talks about how they made the success happen.

What is interesting, what happens in these most entrepreneurial companies after they have reached their market leader position? What will the executives most probably set as targets for the coming years? Yes, maintain the leadership position. Preserve the status quo in the marketplace. Keep milking the cow. The strategy seems to work, since money keeps pouring in. Executives keep talking in innovativeness seminars with applause.

What just happened here? The key is to understand that our example company just turned its thinking from entrepreneurial to conservative – and not even realizing it (remember, due their continuous success, they still may enjoy the reputation of Innovation Gurus of the industry, and believing it themselves;). What this means in everyday development in the company? Indeed, the development activities also reflect the new strategy of maintaining the status quo. In practice, the R&D and business development targets become increasingly more incremental in nature. Many of the development projects deal with the issues with the existing product and aim at improving it. The new proposals are screened against a tight stage-gate process in endless committee meetings. The pace of change in the company is maintained with continuous internal reorganizations with little relevance to the customer benefit. The over-organized R&D process essentially kills everything other than the ‘safe’ ideas. Radical ideation or proposals of new ways of doing business is seen as rocking the boat.

What then happens around the company? A handful of new (still) truly entrepreneurial companies develop their fresh ideas and commercialize them. One or two probably develop a new blockbuster solution to the market. Our market leader is caught with their pants down. Overnight, we have new keynote speakers.

We all can think of examples of these companies. Then, what are the lessons learned? Certainly, when you are the challenger, the only way to climb the ladder is the fresh and sometimes risky innovation. No news here. But how the market leader would have avoided its faith? How could they have maintained true entrepreneurial attitude?

The other day I heard a great quote saying “Greatest risk is to play always safe”. This applies also after you have reached your targets. Any more thoughts how our imaginary company would have avoided their defeat? Please comment!