Monday, August 13, 2007

Innovation as One of the Two Strategies of Market Leaders

The McKinsey Quarterly recently published an interview with Richard Rumelt on corporate strategy.

Rumelt argued that companies become successful either through innovation, or through finding an emerging trend in the market and exploiting it earlier and more successfully than others. In Rumelt's view, there are only two paths to strategic success, and neither of them are simply resource management plans:
There are only two ways . . . One, you can invent your way to success. Unfortunately, you can’t count on that. The second path is to exploit some change in your environment—in technology, consumer tastes, laws, resource prices, or competitive behavior—and ride that change with quickness and skill. This second path is how most successful companies make it. Changes, however, don’t come along in nice annual packages, so the need for strategy work is episodic, not necessarily annual.
I disagree with Rumelt on the first point - companies can innovate consistently and successfully, and many do. The heart of that success is managing innovation effectively. And the successful management of innovation typically requires, in some form or another, an Idea Management System.

And, if the objective is to identify emerging trends and take an effective position on them quickly, then an Idea Management System - plugged in to the ideas and insights of frontline workers - couldn't hurt the cause either.

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