Innovate or Die: A 5 Percent Improvement Just Won’t Cut It

I had an opportunity to meet with Anne Mulcahy, who was the fantastic CEO of Xerox and led a turnaround from near bankruptcy to a really fantastic company.  She talked about how the hardest part of that transformation was not the billions of dollars of costs they needed to take out — difficult though that was.  It was taking a huge portion of the R&D away from the traditional black and white copier — which was where all the money in Xerox had been made — and shifting it toward advanced digital products, color products and so forth.

This was at a time before everybody saw this was coming. It was especially hard given that everybody’s heritage had been built around one product line, and then to move it to a different product line seemed riskier and less certain. And yet, that move was critical to developing the next generation of products to be able to win in the marketplace.

That’s a tough iconic sort of move that people see.  It’s very visible within.  It may not be visible to the outside world.  It’s very visible within the organization what’s happening and it’s a real statement about the belief in the future.  In the recent past I’ve worked in other R&D settings and R&D in today’s world has gotten so challenging.  The bar on innovation is just enormous between the rising expectations that customers have, pricing pressures, and in some industries regulatory pressures.  

The organizations that I’ve seen trying to wrestle with that realize that simply 5% improvements of the existing model with the existing spending just doesn’t cut it and you have to be willing to redeploy investments, shut down parts of the R&D pipeline that have a lot of history and heritage and may be critical for the current pipeline but aren’t the next generation.

To empower the organization you need to take out layers, shift budget controls, do things that are very visible inside the organization and a real statement about how we’ll innovate in the future versus how we have innovated in the past.