Competition, Recession, and Innovation

In another fascinating article on Bloomberg Business Week entitled “How to Make a Great Business Great,” Authors Mark Thompson and Brian Tracy share insights in the importance of investing in your company during times of recession, and how small companies are able to compete and even rival larger ones during economic downtimes. Mark Thompson says that the key is innovation.

From the article:

Mark Thompson: Most successful companies started small and took market share from larger competitors to succeed. Why should any small company be able to compete against big companies that have more money to spend on experienced people, better equipment, better distribution and service for customers, etc.? It shouldn’t be possible, but the one core competency that big companies avoid (and managers often sabotage, even while pretending to support it) is the one thing that makes little companies win. It’s innovation. All innovation requires experimentation and all experiments require failure. How many big companies tolerate failure? Would you like to be fired, demoted, or humiliated? Not likely. Managers in big companies avoid risk and failure. They think they can avoid it, but eventually it catches up with them. Small companies have no choice but to take risks that are relatively bigger (and [they] fail more often) than their larger competitors.

This is also true about individual people. According to our global research in 110 nations, successful people take risks and fail more often than unsuccessful people. Winners ultimately set themselves apart, innovate more, get smarter, more skilled over time, and get ahead because they make themselves vulnerable to risk. Ironically, unsuccessful people don’t worry enough about winning. They are more concerned about avoiding failure, which severely limits their ability to grow. (1)

Innovation takes risk, and risk takes failure. Just a few weeks ago, I wrote an article about Steve Jobs as an innovator and idea mover. There is an often told story—possibly apocryphal, but most likely not—that in the early days of Apple, Jobs was telling people that they weren’t failing enough! In other words, to come up with great ideas, you have to have failures, too.

Large companies can innovate too. We keep hearing good things from our Managing Innovation clients. With their permission, we’ll be sharing some of these successes with our readers.

1) “How to Make a Great Business Great” by Marshall Goldsmith, Bloomberg Business Week, November 19, 2010