What leaders get wrong about innovation

Most people overestimate the value of ideas. They think they just need to come up with a good business idea to be successful. The reality is ideas are free. They’re everywhere.

Ideas aren’t the problem. You don’t necessarily need to get better at coming up with them. What you really need to get good at is testing your ideas.

Part of this involves a mindset shift. You need the humility to admit that:

  • your idea is probably terrible
  • customers probably don’t care about it
  • the business model probably isn’t going to work

And that’s ok because the idea, by itself, isn’t enough anyway.

The part you want to focus more proactively on is the process of testing and refining the idea.

This process is going to help you to adapt your idea:

  • until it gets better
  • until customers care
  • until you find the right business model

This is what the profession of entrepreneurship and innovation is about. It’s different to management in the traditional sense.

If you only focus on innovation, you won’t survive in the short term. If you only focus on managing your existing business you won’t make it over the medium to long term.

Most leaders know how to manage their existing business. But they’re not good at inventing new businesses. Modern organizations need to do both.

We call these two aspects Explore and Exploit. You exploit your existing business and you explore new business opportunities. You need to run your business and make money right now. You also need to reinvent yourself moving forward. You can’t do one without the other. You need both all the time.

There are more and more competitors looking to destroy your existing business model.

For example, in the finance industry, you have all these new digital banks like Monzo, Revolut and Starling popping up. They’re offering customers free products and services. Traditional banks are having to reinvent themselves to survive. This isn’t anything new. Skype killed the standard telecommunications business model as it used to be. Telecom companies used to charge high fees for lots of their products and services that are now free. So it’s just history repeating itself.

Your business can’t live for a long time anymore with the same business model. If you don’t constantly reinvent yourself, you’re going to disappear. That’s just a fact of life. As a business leader, you need to get comfortable with it.