STRATEGIC INNOVATION IN ESTABLISHED COMPANIES

Compared to new companies or niche players, established companies find it difficult to innovate strategically - to reconceptualize what the business is ail about and, as a result, to play the game in an existin g business in a dramatically different way. Drawing on examples of hig hly profitable companies in diverse industries, the author explains ho w long-time players can overcome the four chief obstacles to strategic innovation. 1. Inertia of success. Strategic innovators monitor their strategic health for early signals of trouble and are willing, if nec essary, to abandon the status clue for the uncertainty of change. Thes e companies also work to convince employees that current performance i s good but not good enough. They develop a new challenge to galvanize the organization into active thinking, and they expend significant lim e and effort selling the challenge to everyone. 2. Uncertainty about w hat to change into. Strategic innovators challenge their dominant way of thinking and shift emphasis away from determining Row they need to compete toward questioning who their customers are and what they reall y want. They institutionalize a questioning altitude and find ways io shake up the system every few years. 3. Uncertainty surrounding new st rategic positions. Ar a given time, a company does not know which idea will succeed and which core competencies will be essential. Successfu l strategic innovators follow the model of capitalism: they create int ernal variety, even at the expense of efficiency, and allow the outsid e market to decide the winners and losers. 4. The challenges of implem entation. Successful companies set UP a Separate organizational unit t o support a new strategic innovation find create a context that suppor ts integration between different units within the company. in managing the transition from the old to the new, they let the two systems coex ist but gradually allocate resources to the new so that it grows at th e expense of the old. For established companies, the challenge of stra tegic innovation is organizational: developing a culture that question s current success while promoting experimentation. mentation. Strong l eadership is essential in creating that culture. Only those companies that: strive for self-renewal, the author argues, will succeed in the long term.