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The Innovation Mindset: Who's Getting it Right, and Who Isn't

During my childhood in the late 80’s and early 90’s, Friday nights usually consisted of getting a takeout pizza, and renting a movie on VHS. I grew up in a suburb outside of Atlanta and conveniently, we had a neighborhood Little Caesar’s right next door to Curtis Mathes, a now ‘vintage’ electronics store that also rented movies. And other than occasionally going to the theater, that was my childhood movie experience… until Blockbuster came along. It caught on quickly, mostly due to the fact that Blockbuster carried over 3 times the number of rental tapes of any other store, and was family friendly.

I remember pacing the back wall that held rows and rows of the newest releases and sifting through the return bin to see if the movie I wanted had come in. For me it was a family affair: my parents would choose their movie, my brother would typically get a video game, and I would pick whatever recent teen drama or romantic comedy was new and noteworthy. Everyone I know had a Blockbuster membership card in their wallet. In the late 90’s and early 2000’s, Blockbuster’s business was booming, at its peak valued at $5 billion1.

But the business model was flawed. Late fees were a significant portion of their revenue. In 2000, they took in a whopping $800 million in late fees2, roughly 16% of the company’s overall revenue. They viewed their customer’s experience really only as ‘in store’, failing to look beyond that and realize the value they delivered was the ‘at-home movie viewing experience.’

Meanwhile, a Silicon Valley veteran by the name of Reed Hastings founded Netflix. The irony of the story is that he did so partly out of frustration after being fined $40 by Blockbuster when he returned “Apollo 13” six weeks late. But as we all know now, it was Blockbuster who paid the ultimate fee. Companies like Netflix and Redbox came along, disrupting the industry by making it easier, cheaper, and more convenient to watch movies at home. Blockbuster failed to pivot fast enough, fearful that changing their business model would impact their late fee revenue stream.

I recently had the opportunity to share this story on stage at Digital Summit Dallas as part of a talk on the Innovation Mindset. The talk was focused on the premise that innovation is imperative, and for organizations to survive, they must respond to change. The Innovation Mindset provides a sustainable method of introducing innovation across an enterprise while embracing divergent thinking.

But innovation is hard. It’s difficult to measure and quantify and often fails. The 2015 State of Global Innovation study3 surveyed mid- and large-sized organizations to understand their innovation capabilities. Results yielded the top 5 reasons as to why innovation commonly fails:

  • Problems with organizational culture or mindset
  • Lack of follow-through
  • Insufficient resources
  • Lack of time and focus
  • Poor executive support
  • Interestingly, corporate culture, bureaucracy, and internal politics were found to be the biggest forces thwarting the progress of innovation efforts, stating that “culture eats innovation for breakfast.”

The talk further explored how to assess corporate culture and the impact it has on innovation efforts. Netflix served as an excellent case study to reference. In contrast to Blockbuster, Netflix is a great success story, now estimated as a $41B company4, and in 2015, ranked #15 on Forbes list of most innovative companies5. Netflix is watched more than any other cable network, and accounts for nearly one-third of internet traffic during peak evening hours. They are continuously innovating. In fact, just recently they announced6 that all content will be available for download to better improve the customer experience for viewing movies and TV shows when internet access is limited or unavailable.

Their success at innovation is fueled by their commitment to culture7. As Reed Hastings, CEO of Netflix summarized, “At Netflix, we think you have to build a sense of responsibility where people care about the enterprise. Hard work, like long hours at the office, doesn’t matter as much to us. We care about great work.”

Companies that begin as highly creative and innovative often introduce process as a means to manage the chaos that inevitably comes with scale. This seems to work at first, until the market shifts, and the organization is unable to adapt to the change because of the structure they have put in place. Netflix combats this approach by growing a team of high performers faster than the rate at which complexity increases, which enables them to stay ahead by giving them the freedom they need to successfully manage chaos.

In addition to exploring culture, I provided attendees with 3 big ideas:

  • Innovation can come from anywhere in the organization.
  • Companies must break down the silos that limit innovation.
  • Failure is an option: an accelerated failure cycle is critical to the success of innovation. Playing it safe may be the biggest risk an organization can take.

Only those who dare to fail greatly can ever achieve greatly. - Robert Kennedy
The Innovation Mindset is one of 8 mindsets that when combined and realized, serve as a map for organizations struggling to achieve an ideal digital state of engagement with their customers and employees. We have developed and documented a these mindsets and a combination of best practices, approaches and frameworks we call The Digital Continuum, which we’ll be releasing in early 2017.