Why do some firms manage to remain consistently successful over long stretches of time, while many others fail?

The relationship between success and innovation is commonly accepted, yet it is more problematic than most people think. Most firms innovate, every now and then, incrementally; few succeed systematically, over a long stretch of time. Why? There are a few ‘must haves’ that one can pinpoint. First, forget the ‘lone hero’ stories. Do you remember Doc Brown from Back to The Future and his time machine? He envisaged the flux capacitator, which makes time travel possible, banging his head while fixing something in his bathroom. This is a nice story, and it does capture something important about individual creativity. Yet, innovation is more than creativity: it is about transforming bright ideas into viable products and services. Hence, innovation is a collective, cumulative endeavor. It requires organization and persistence. Once you frame the innovation story in these terms, a few patterns emerge, looking at the historical record of those few firms that innovate persistently over time, or those few start-ups that grow big and endure.

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1. Proximity to science and technology.

Since the Industrial Revolution, science and technology have generated incredible opportunities. We would not have the microelectronics industry without solid-state physics.[1] We would not have the modern pharmaceutical industry without molecular biology.[2] Not all companies can, nor should, have large and expensive R&D labs of course. Proximity means just that: proximity. Be close to the university system, be open toward other companies. Scout the world of science. Ideas are out there but they need to be found.

2. Listen to customers and users.

Science might give you ideas about what can be done, but not all ideas have the potential to become products and services that someone needs (or that someone is willing to pay for). For that, you need to know your market, your customers, your users.[3] This is where you get ideas about what is worth developing. And if you do not have a large R&D lab (see above), users’ needs could give you a clear direction to explore those fields in science and technology that may hold the solution to your customers’ needs.

3. Fail, yes, but in an organized manner.

The rhetoric of failure is strong. Fail fast, fail forward etc. Well, yes. Fail small too. Even better, fail precisely. Most of all, fail before you hit the market. Fail at home. Set up sand boxes where people can try out new things on a small scale. Setup little experiments designed to learn from mistakes. Learning from failure is not automatic. You need to get organized for it. You need to be prepared to learn, to understand what went wrong. In other words, do not try something and see how it goes. Try something after developing an expectation about what should happen.[4] So that, if (when!) it does not, you can focus your learning effort in a precise way. Then, repeat.

4. Be persistent.

Good things come to those who wait. It sounds obvious, but that does not make it any less true. Few people are persistent and the same applies to organizations. What is urgent wins over what is important. Persistent innovators (those who keep trying) are those who really benefit from innovation.[5] It takes time to develop the capabilities necessary to learn from one’s own mistakes. Failure can be frustrating. One has to learn to be patient, and try again. Managing individual and organizational attention, over long stretches of time, is a super important innovation skill.[6] Keep your eye on the ball!

5. Better get lucky.

Yep, it does not hurt. In fact, it helps a lot.[7] Good news: chance does favor the prepared mind, as Pasteur said, and the prepared organization too! Fleming accidentally discovered the antibiotic in 1928 (he found mold in his petri dish after coming back from a vacation). He did not throw it away, but sat down, analyzed it, tested different ways of producing it, involved colleagues, published his work and made it available to even more people. That is what turned a smelly mold in a life-saving medicine: the hard, coordinated work of a large number of people.  

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Conclusion

All of the above requires time, effort and resources. Yet, support is out there. Over the past few years, the EdTech space has grown in strength and numbers. There is a lot of experimentation available. Digital technologies, new tools and newer methods can be leveraged to help organizations connect more effectively with their users. Universities are increasingly open to collaborating with industry. Prototyping and experimentation methodologies can be learnt. Managing one’s own attention is more complex, but again new learning models are emerging to help organizations become systematic about this. Luck, well, requires luck, but preparedness demands effort. As Edison said: ‘Opportunity is missed by most people because it is dressed in overalls and looks like work’. Most of all, one needs to have a strategy (not necessarily a plan!), a sense of how these different things fit together, and why.

[1] Langlois, R., & Steinmueller, E. (1999). The evolution of competitive advantage in the worldwide semiconductor industry. Sources of industrial leadership. Cambridge UniversityPress, Cambridge, UK. https://doi.org/10.1017/CBO9781139175128

[2] Malerba, F., & Orsenigo, L.(2015). The evolution of the pharmaceutical industry. Business History, 57(5),664-687. https://doi.org/10.1080/00076791.2014.975119

[3] Gambardella, A., Raasch, C., & von Hippel, E. (2017). The user innovation paradigm: impacts on markets and welfare. ManagementScience, 63(5), 1450-1468.  https://doi.org/10.1287/mnsc.2015.2393

[4] Camuffo, A., Cordova, A., Gambardella, A., & Spina, C. (2020). A scientific approach to entrepreneurial decision making: Evidence from a randomized control trial. Management Science, 66(2), 564-586. https://doi.org/10.1287/mnsc.2018.3249

[5] Cefis, E. (2003). Is there persistence in innovative activities? International Journal of industrial organization, 21(4), 489-515. https://doi.org/10.1016/S0167-7187(02)00090-5

[6] Laureiro‐Martínez, D., Brusoni, S., Canessa, N., & Zollo, M. (2015). Understanding the exploration–exploitation dilemma: An fMRI study of attention control and decision‐making performance. Strategic management journal, 36(3), 319-338. https://doi.org/10.1002/smj.2774 Watch video summary: https://www.youtube.com/watch?v=hp_R7JdkoyQ

[7] Denrell, J. (2013). ‘Experts’ who beat the odds are probably just lucky. Harvard business review, April. https://hbr.org/2013/04/experts-who-beat-the-odds-are-probably-just-lucky . Denrell, J., & Liu, C.(2012). Top performers are not the most impressive when extreme performance indicates unreliability. Proceedings of the National Academy of Sciences,109(24), 9331-9336. https://doi.org/10.1073/pnas.1116048109

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