What triggers change? Does impending disaster spark innovation? Or does a disruptive idea prompt fundamental change?
Automotive News PACE Awards judges are often asked what creates innovation. After 22 years of evaluating business models, judges know innovation can be either effect or cause.
Suppliers and retailers must create an internal culture in good times that can sustain innovation during downturns. Suppliers face potential lower gross profits as automakers consolidate. Regulated finance and insurance departments will cut dealer profits.
Rapidly changing consumer behavior and evolving definitions of personal transportation challenge how companies traditionally created value. Suppliers can't just build parts as specified. Dealerships can't merely transact business efficiently. Everyone must learn to create value based upon changing customer demands.
Company leaders must anticipate change and champion innovation cultures. "Innovation is not sliced like salami," one supplier CEO told me. "You must have the conditions to allow it to happen."
Here's a checklist of attributes drawn from companies that successfully anticipate change and innovate. The more of these an executive can spot or create within a company, the more likely that individual employees can create new solutions.
- Customer focus comes first. Keeping employees thinking about customers' needs is an essential part of an innovation culture. Top to bottom, everybody should think about creating value that customers will pay for.
- Clear corporate financial goals to boost earnings and update fading products and processes. This keeps employees focused on how profit uncertainty affects them personally. Department planning teams should project how much they can increase profitability by introducing innovative processes or products. Thinking into the future can help spot customer technical gaps or emerging market needs.
- A can-do attitude about experimenting and discovery. Job descriptions should focus on creating value. Companies should be willing to allow "fast failures" without punishment. And debriefings about changes that either work or fail start discussions about a company's possible future form.
- Teamwork. Selecting the right ideas to present to customers takes cross-function teams and someone willing to champion the idea with customers. Prioritizing new ideas should be done by a team assessing both risk and a company's current capability.
- Building on success. Companies with innovation cultures can repeat successes by leveraging good ideas with customers who appreciate earlier initiatives. Employees part of one success can build another with more ideas. Learning from internal successes and those of competitors differentiates innovative companies from those simply repeating transactions.
- Collaboration with other teams. Increasingly, innovation means collaborating with another forward-looking party, such as a system provider, university or subsupplier. Innovators often learn faster than competitors and are more open to disruptive ideas.
- Speed to market. Innovation cultures have good project management skills focused on creating customer value quickly. Good innovators recognize market success and aim high to fill future profit streams with new products and processes.
It's easier to create a company culture to support innovation in good times because it takes time and practice.
Waiting until a crisis arrives can be too late. Winners have employees who are not just efficient but also innovative.