Reinventing your business

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How many examples of successful innovation and reinvention can you name? Probably a few highly visible examples: Amazon.com, for its diversification from books to games, software, videos, music and electronics; stodgy IBM Corp., now a nimble, leading provider of e-commerce solutions; Hewlett-Packard Co., reinventing itself to recapture its founders' radical innovative spirit.

IT'S UNDENIABLE

The need to reinvent is undeniable. But extensive research and consulting across a wide range of industries illustrates few companies actually act on this imperative. Those that do are successful because they subscribe to a combination of the following principles.

* Be proactive. Most managers and companies are reluctant to reinvent or renew "what's worked in the past." But, to paraphrase actor Danny DeVito's character from the film "Other People's Money," most companies are already broke; they just haven't run out of cash yet.

Proactive leaders do not delay reinvention until performance declines to crisis levels. They seek constantly to reinvent themselves and their organizations before the consumer or competitors force their hand. It enables them to change on their terms, rather than have change dictated to them. But how many managers actually behave this way?

Bill Gates does. Microsoft Corp. remains the world's leading software manufacturer because Gates and his staff realized the future of Microsoft, and of the entire software industry, lay on the Internet. The Internet imperative became reality in May 1995, when Gates reorganized Microsoft to reflect the importance of this new opportunity. It is hard to count how often Gates has reinvented the organization and company since.

Jack Welch, another classic reinventor, transformed General Electric Co. from a product manufacturer to a leading service supplier. Driving every reinvention has been Mr. Welch's conviction that GE needs to keep "breaking" itself before it is hampered or broken by some outside force.

REINVENTION IS KEY

* Reinvent; don't repackage. Reinvention should not be confused with minor modifications of the status quo. Reinvention springs from a wholesale re-evaluation of what a company stands for, how and with what it is going to market, the context in which it is competing (which may need broadening or narrowing), and, in the end, how it is delivering value to its consumers. Generating news and expectations are not enough; reinvention demands substance and follow-through.

Consider Apple Computer. Steve Jobs put Apple on the map by reinventing the personal computer to be more "user friendly" (a term forever linked with this company's products). With the departure of Jobs and a string of poor decisions, Apple lost its way. It stopped acting like a counter-cultural revolutionary and started acting like yesterday's IBM.

The name Apple promised innovative and highly functional thinking, but the products did not deliver. Apple broke its promise with its consumer by not reinventing.

Apple's fortunes turned around when Steve Jobs returned to reinvent not competitive personal computers but, rather, Apple itself. Through the iMac and then the iBook, Jobs reincarnated and updated the alternative spirit that had brought the company to life.

LOOK BEYOND FAMILIAR

* Look beyond the present and familiar. What drives innovation is determining where the company needs to go, not where it is. Companies need to venture outside their walls for innovation cues.

In the early 1980s, Chrysler Corp. reinvented the station wagon to create the minivan, spawning a new automotive segment in the process. The minivan is still DaimlerChrysler's best-selling vehicle. (Keep in mind Chrysler did not have a station-wagon business to chain them to the past.) In the 1990s, Chrysler opened its Chrysler Technology Center, introduced cab-forward design, and switched to paperless design, which helped to cut both development costs and time.

GENERATING NEWS

* Use reinvention to generate news. There was a time when a good product was enough. But most companies could build a good product, so successful companies added a service component. Now product with service (or service with product) is not enough. In the future, the offering must also include a renewable experience. "Renewable" because today's consumers become bored quickly, and improving on the experience is a relatively easy way to generate news without violating the basic consumer promise.

One company that profitably harnessed consumers' desire for experience is Starbucks Coffee Co. They did this, of course, by reinventing the coffee shop -- by infusing experience into the mix.

Working with Walt Disney Co., creative-thinking guru Mike Vance developed the "sensination" concept. The idea was Disney (or any company) could create a superior consumer experience by simultaneously appealing to as many of the five senses as possible. Starbucks brews good joe, but consumers are not paying exorbitant prices just for full-bodied coffee. They are paying for the full-bodied Starbucks experience, a menagerie of sights, sounds, smells, tastes and touches. (Note what appears to be happening to Starbucks' same-store sales as it fails to renew and build on the experience.)

Recently, Eastman Kodak Co. announced a process to add scents to pictures. Imagine the experiences that might generate?

TAKE A RISK

* Be willing to risk. A defining difference between new-economy companies (the dot-coms) and old-economy companies is the willingness of the dot-coms to reinvent something because they have no vested interest in the status quo. This is the ultimate secret to successful reinvention: a willingness to depart from today's reality, even if it means discarding the approach that got you there.

This is more difficult for companies that perceive they have more to lose by changing, but every company can, and must, reinvent to continue growing.

Mr. Flatow is president, CoKnowledge, Southport, Conn., a consultancy specializing in the management of change.

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