Five reasons companies fail to pursue innovation

In 2009, Michael Mandel, a chief economist for Business Week, wrote a cover story that

smart industry iot iiot industrial internet of things digital transformation

Twisthink's Bob Niemiec

included a statistic that would haunt U.S. industry for a decade. His research during a three-year, pre-recession period (2006-2008) revealed that only nine percent of public and private companies were engaged in either product or service innovation of any kind.

Nine percent.

A decade later, we haven’t sufficiently moved the needle. Imagine if that nine percent statistic was improved six times over. Phenomenal, right? But consider that nearly 50 percent of companies would still be disengaged when it comes to innovation. 

So what’s wrong? Why aren’t more companies innovating?

The answers are unique and nuanced for each individual company, often pointing to multiple reasons for inaction. That said, five issues continually come into play on why leaders, especially those in the industrial-manufacturing space, fail to pursue innovation despite knowing that their businesses need it.

1. Gap in specialized talent. Manufacturing companies have always sought to employ skilled labor on their product lines. What they lack is a new breed of talent to drive human-centered design methodologies that lead to innovation. Recruiting this talent to legacy industrial manufacturers that are unaccustomed to this work presents real challenges, especially if there isn’t a team of people with whom to collaborate, understand, or champion the work. Things become further exacerbated when manufacturing facilities are located outside of innovation hubs and smart cities, which are more attractive to this talent pool.

2. Resource constraints. Accenture’s 2015 U.S. Innovation Survey suggested “74 percent of our respondents have now established formal processes. It also notes a nine-percentage-point gain in hiring chief innovation officers since 2009. Despite these gains, manufacturing still lags in recognizing innovation as critical to business growth and worthy of sustained investment. From an allocation standpoint, legacy investments continue to thwart investments in the future.

3. Not understanding how to get into the “jet stream” of technology. Manufacturing companies want to compete in new spaces and with new technologies (such as IoT). Yet the pathways to getting there—which involves strategy, front-end innovation, creativity and problem solving, design, validation and refinement—are foreign to most. And that knowledge gap isn’t just a hindrance. For leaders who aren’t visionary, it becomes an immovable roadblock and a path that doesn’t get traveled. 

4. Fear of change. Thirty-plus years after lean manufacturing became commonplace in industrial-manufacturing operations, the idea of learning how to innovate is often met with resistance. Worse, it can seem incongruent with an efficiency-driven, just-in-time delivery routine pre-programmed into the culture. Change becomes more difficult without the aforementioned talent, resources or completely understanding the process of innovation.

5. Fear of failure & risk aversion. Perhaps by nature, manufacturers are some of the best order-takers in business. Routinely delivering on long-held needs is manufacturing’s safe place, where the belief is that good work begets more of the same work. However, it’s the inability to take calculated and needed risks that can lead to eventual irrelevance.

The paradox of innovation is in the word itself. As a noun, innovation is an abstraction, conjuring up possibilities free of consequence, whereas the verb form actively invites change, alteration, upheaval and transformation. The latter makes it less palatable and leads manufacturers to resist taking action.

In The War of Art, Steven Pressfield writes about how resistance is a powerful force, yet has no real power of its own. We feed resistance power and, in turn, become paralyzed with fear. But there is hope. Pressfield writes, “If you’re paralyzed with fear, it’s a good sign. It shows you what you have to do.”   

Staying on the sidelines as innovation plays out isn’t realistic for manufacturers that desire accelerated growth and seek to compete for years to come. The good news is that getting there—either by building innovative processes from within or partnering with outside partners—is in every manufacturer’s control.

Bob Niemiec is manager partner with Twisthink.  

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