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The New Age of Innovation

A business never dies – if it evolves. The most innovative companies show you how.

By Victoria Dwek

In December, 1975, Brooklyn-born Steven J. Sasson had a groundbreaking piece of technology to show to an audience of Eastman Kodak executives. The 25-year-old electrical engineer had been assigned the task of developing an electrical camera, and had spent the past year in research and development at Eastman Kodak’s Elmgrove Plant in Rochester, New York. Now, the portable contraption was complete and functioning. Sasson’s camera sported a Super 8 movie camera lens borrowed from the used parts bin downstairs from his little lab, on the second floor which housed the movie camera production line. A portable digital cassette recorder was shoehorned on the side. Sixteen batteries and dozens of digital and analog circuits were all wired together to form the first digital camera. 

The camera was the first that didn’t need film to capture images. A CCD imager digitized the captured scene in 50 milliseconds and stored it on a crude memory card, and then transferred the information onto the more familiar cassette tape—it took 23 seconds to transfer each image to the tape. Later, the images could be viewed by inserting the cassette tape into a custom playback device which was connected to a television. When deciding on how many photos each cassette tape could store, Sasson picked an even 30—it was halfway between the 24 and 36 exposures consumers were accustomed to when they purchased rolls of film.

Throughout 1976, Sasson led different Kodak personnel through the demonstration titled “Filmless Photography.”

The response of executives? “That’s cute—but don’t tell anyone about it.”

They asked Sasson how long it would take before such technology could reach the general consumer. He was spot-on when he estimated 15 to 20 years. At the time, Kodak made the decision to bide their time and bury the technology until they absolutely had to deal with it.

A report on the camera introduced the device as, “a first attempt demonstrating a photographic system which may, with improvements in technology, substantially impact the way pictures will be taken in the future.”

So why didn’t they do anything about it? Although they developed the technology, Kodak held back from marketing it because they feared it would hurt their lucrative film business. By the time they did enter the digital market, they had already lost market share. It was too late to recover.

This past January, Kodak filed for Chapter 11 bankruptcy protection.

In the last quarter of 2011, Apple reported $13 billion profit. During that time, iPod sales were down precipitously. Apple didn’t care. The modern Apple has been willing to cannibalize its own products for the sake of innovation. The iPhone has virtually replaced the iPod. The iPad could have impacted Mac sales (although it hasn’t). New, updated versions of products are introduced quickly, before the previous generation of products have completed their life span. That willingness to evolve and continuously offer the customer newer and better—despite the impact it might have on a current product line—has been one of the catapults of Apple’s success.

Jim Stengel, former Global Marketing Officer at Proctor & Gamble and author of the newly-released book, Grow: How Ideals Power Growth and Profit at the World’s Greatest Companies, espouses the theory that successful companies ask, “What business are we in? What is our purpose?” rather than “How do we sell more products?”

“Great brands do more than make great products or services,” said Stengel at February 10th appearance at Toronto’s Rotman School of Management. “Great brands change peoples’ lives. Your technological advances will be short term. Your new product advantages will be short term. The only thing that remains is your culture…every brand can change a life.”

Stengel explains that high growth brands ask, “What is the benefit we give to the world? What is our higher order?” It’s not social responsibility or altruism—it’s the reason a business exists.

For Zappos, it’s delivering happiness. It’s written on their boxes, all over their offices, and on the t-shirts employees wear, Stengel tells us. For Louis Vuitton—it’s to luxuriously accentuate the journey of life. Red Bull uplifts the mind and body and “gives you wings.” Pampers Diapers is dedicated to caring for happy, healthy development of babies.

When a company is driven by a purpose—rather than a product—it opens the door for innovation.

Forbes marketing contributor Avi Dan offered examples, “Had early 20th Century railroad executives seen themselves as being in the transportation business rather than the railroad business, or had Hollywood moguls in the 1940s understood that they are in the entertainment business, not just the movie business, their industries wouldn’t have been decimated by air travel and TV shows, respectively.”

Kodak wanted to sell as much film as they could before digital took over. Film had a profit margin of 70%.

If Kodak executives had asked themselves, “What business are we in? What is our purpose?” the answer would have been, “Story-telling.” The “story-telling” ideal was one they had sold to consumers for a century. The laws of innovation would have told them that it’s time to make story-telling more efficient and convenient for the consumer. They pushed their ideal aside for the short-term interests of selling more film.

“Companies have to adapt to the requirements of the market, even if that means competing with themselves,” continued Dan. “Technology has the potential to be disruptive of markets and companies, at the same time that it is benefiting consumers… In this environment, marketers should strive for entrepreneurial greatness and innovation.”

So while big profit margins on hot products might determine short term success—in the long term, companies need to remain relevant to a customer’s needs. And serving the customer rather than squeezing our profit margin is not contrary to success—rather, it’s the impetus for it. “Businesses that are driven by a higher ideal outperform competition and deliver great returns for shareholders,” Stengel found. The 50 companies Stengel profiles in his book have outperformed the S & P 500 by 400% over the past 10 years.

Innovation isn’t only for large corporations. Any business, in any industry—whether they have 2 employees or 20,000—should define their purpose, reassess their customer’s needs, and innovate to adapt to the changing marketplace.

In the past quarter, both Jim Stengel and Fast Company magazine released their list of innovative companies. They are very different lists—Apple is the only company they have in common. Stengel’s list is based on a 10-year period from 2001 to 2011, and includes older, established companies which have best evolved and adapted to their customers’ needs—profit was a natural byproduct. Fast Company’s list of innovators focuses on those who have shaken up business and introduced new concepts and fresh ways of doing business to the marketplace. How do today’s companies, large and small, innovate? Read on to learn more.

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