Confusing the ends and the means
First, let's get our thinking straight, because clarity and consistency matter. In descending order of importance, executives want profitability, cost control, revenue growth and product differentiation. Many are very good at cost control and will accept profitability achieved by decreasing costs in the face of flat revenues. A real win increases revenues while holding costs flat. Revenue and corresponding profit growth typically come from gaining more business from existing and new customers from existing products, or introducing new products and services to new and existing customers. It's in this latter case (new products and services to new and existing customers) where we typically think of "innovation". But note what executives and shareholders "want" - growing revenues and profits. They are willing to get more profit by holding revenue flat and decreasing costs, but the real rewards come from growing revenues and profits.
Now that we've established relatively obvious base principles, let's ask the next important question: how do we discover and create new products and services that existing customers and unserved customers want? And here's where innovation becomes important, once we accept that only through creating interesting and valuable new products and services can a corporation drive new revenue and profits from new and existing customers. Innovation is a means to an end, not an end to itself. And this is what so many corporations and executives fail to understand.
When these corporations and executives ask their teams for innovation, the executives assume that their people know what innovation is supposed to do for the company, and how to create interesting new products and services that customers want. There are at least three false assumptions in the previous sentence:
- Mistaken assumption: Employees know what innovation is supposed to do or the benefits it is supposed to create
- Mistaken assumption: Employees know how to create interesting new products and services
- Mistaken assumption: Employees understand customers unmet and unspoken needs and understand how to fill them