Customers demand more choices and functionality faster, while they are no longer satisfied with products and services that only partially meet their expectations. At the same time, shareholders demand double digit percentage earnings growth per share.
Only 12.2% of companies listed on the Fortune 500 in 1955 still appeared on the list in 20151. This implies that nine out of every ten companies listed on the Fortune 500 in 1955 either closed down, have been sold to a competitor, or slipped off the list. In South Africa, ABSA reported that 63% of small businesses fail within “the first two years of trading”2 while Standard Bank reported that on average “50% of all start-up businesses fail within 24 months”3 . In 2023, more than 1,600 businesses closed their doors in South Africa alone. The failure of start-up as well as small and medium-sized businesses has serious implications on the economic growth and employment rate of the country. Business analysts and reporters list the lack of innovation, skills, experience, finance, new market development, planning as well as the inability to implement innovative ideas as some of the key contributors to business failure in South Africa.
No matter the industry, in a changing world, markets and its supporting artefacts will become redundant and disappear. For this reason, companies and their functional business units need to create new markets. Survival in the 21st century demands that companies embark on a journey where they continuously reengineer themselves to remain competitive, relevant, and commercially self-sustainable. They are forced to innovate and invest in new product and service development, while replacing and decommissioning redundant products and services.
Adopting innovation as a strategy calls for organisational change management to realign the company’s culture and strategy, as well as developing a workforce with higher levels of emotional intelligence (EI). Higher levels of EI enables the organisation to manage the behaviour of all stakeholders (employees, clients and service providers), while developing new skills to innovate, develop, implement and maintain products and services that are cost-effective and offer improved value to their consumers.
However, South African companies are having trouble aligning their business processes to adopt innovation as a strategy and to determine the exact point when to switch from the old business process to the new business process when implementing innovation. In his book The innovator’s dilemma: when new technologies cause great firms to fail, Clayton4 Christensen argues that the success of the new business model is greater when switched at the point where the old and new business processes interject (Figure 1).
As a business owner you might be asking yourself, ‘how do we implement innovation’ or ‘how do we unlock emerging markets’. Start by reviewing your service catalogue and business process. Identify an area within your business model that is most likely to attract new clients or unlock an emerging market. Collaborate with you partner network and get them involved. Initiate the process of proofing and testing the proposed concept with real customers – remember to keep it small and simple. Amend your balanced scorecard to provide for innovation as a strategic business objective. Initiate the organisational change management process to adopt innovation as an organisational objective. Finally, celebrate small successes.
