How Continuous Innovation Drives Sustainable Revenue and Profit Growth
What makes a company rise to number one in its industry? Why have some companies grabbed and sustained a market leadership position, while others flounder and fail?
There was a season in my life when I tried to read everything Peter Drucker ever wrote. What a brilliant man! His writings helped establish the foundations of the modern corporation. Forbes called him “the father of business consulting.”
“Because the purpose of business is to create a customer,” said Drucker, “the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
Jack Trout, the pioneer of positioning theory in marketing, made the observation that when top management was surveyed on the key business priorities of their organizations, their priorities in order were: finance, sales, production, management, legal, and human resources. Did you notice what was missing? Marketing and innovation.
No One Becomes a Market Leader by Focusing on Operations
I have been an avid Apple fan since October 1984, when it introduced the Macintosh 512K. Steve Jobs built everything on marketing and innovation. Under his leadership, Apple attracted a cult-like following in the marketplace. Since his death, however, Tim Cook took the reigns and shifted the focus at Apple from marketing and innovation to marketing and operations. I don’t pretend to be a business prophet, but I think Apple is moving into a long and protracted season of decline of market share, as people like me scan the horizon for an emerging market leader who relentlessly focuses, like Steve Jobs did, on innovation.
Sustain Organic Revenue and Profit Growth by Continuous Innovation
I’m reading The Game-Changer by A.G. Lafley, former chairman and CEO of Procter & Gamble, and Ram Charan. A great book, by the way. The book explores how you can increase and sustain organic revenue and profit growth by becoming a leader in innovation.
When Lafley took the helm of Procter & Gamble, their stocks were down 50 percent and the pundits were saying it was a heartbeat away from life support. Over the next seven years, he led Procter & Gamble to tripled profits and 12 percent growth year-over-year in earnings per share. How?
Lafley created new customers, new products, and new services that generated revenue growth and profits. He did it by integrating innovation into everything P&G did, saying that the best way to win in business is through innovation.
Great Companies Have One Thing in Common: Innovation
The fruits of innovation are sustained and ever-improving organic revenue growth and profits. Innovation has to be the fundamental way to run your business if you want to build a great company. It’s interesting to note why only a few companies adopt innovation as their primary business growth strategy, while most others fail to make the leap.
Last week I took a few days to explore how we could adopt Craig Terrell and Arthur Middlebrooks advice and orient our entire organization toward delivering new, unique benefits, by putting processes in place to sustain market leadership through innovation, and making a commitment to incrementally innovate our core business and services from now on.
To me, innovation is a leap of faith. It’s risky. And it will take tremendous courage to make it happen. But the alternative is more risky. Because the day we stop continuous innovation, is the day we stop gaining and sustaining a leadership position in the marketplace.