Ten commandments of business innovation

Why "best practices" are actually harming businesses in Hong Kong and hindering innovation.

About the author

Freek Vermeulen

Freek Vermeulen, Associate Professor of Strategy and Entrepreneurship at London Business School, is the author of the new book Breaking Bad Habits: Defy Industry Norms and Reinvigorate Your Business

The recent Policy Address saw the Hong Kong Government pledging to review existing regulations to remove outdated provisions that impede the development of innovation. This is good news for Hong Kong’s growing innovation community.

But we have a long way to go. The business community as a whole has a role to play in innovation. Indeed, organisations are harming themselves by the continued use of so-called “best practices” which have outlived their usefulness.

Those looking to create new opportunities in existing businesses need to identify bad practices, eliminate them from their organisation, and then create new sources of innovation and growth by out-thinking competitors.

We all know of longstanding processes and strategies which have grown up to help businesses operate more competitively and efficiently, but as time goes on, these practices often present limitations that hinder innovation. Organisations should rethink long-held beliefs about industry norms and turn to reinvigorate businesses by breaking out of the status quo.

Take a look at norm-defying organisations across a range of industries: Alibaba’s Jack Ma built his empire after predicting that the integration of online, offline, logistics and data would transform traditional retail business; Elon Musk started Tesla with a vision to help the world transition towards sustainable energy sources and minimise the reliance on fossil fuels.

These and many other examples testify that leaders who purposefully identify and eradicate old practices can turn what’s learned into a profitable source of renewal and innovation.

In that light, here are Ten Commandments of Business Innovation to enable thoughtful assessment of timeworn practices and encourage renewal and create new opportunities in any organisation:

1. Cut out the benchmarking. The herd mentality creates and perpetuates bad practices.

2. Reverse benchmark instead. Look for a practice that your top competitors are using and the reason behind this norm. There’s a good chance this one way of doing things is an antiquated relic and, therefore, a disruptive innovation is waiting to happen.

3. Experiment if you can. Understand the elements that are changing the company’s performance and experiment by changing one element at a time to identify the most influential factor.

4. Monitor entrants and companies in distress. Companies with less to lose may be undertaking bold experiments. Emboldened by lower risks, they are more likely to abolish a practice and experiment with something new.

5. Ask insiders for concerns. Sometimes the best vantage point is from ground level.

6. Ask outsiders for suspicions. Organisations should solicit the suspicions of newcomers and encourage them to speak up and question the existing practices.

7. Create bundles of practices. Practices together form a new business model and a more sustainable advantage over competitors.

8. Take aim at a chunk of the market. The same practices are unlikely to be optimal in all corners of a market. Targeting a customer base that has been under-served may be beneficial for businesses.

9. Just stop the practice. Innovation is often as simple as stopping a practice that doesn’t work. If an organisation is “over-optimising” a particular variable too much for too long, it should stop and focus on what’s really important.

10. Watch out for ‘that’s the way we do things round here’. “Bad habits” spread like viruses and persist unchecked because managers don’t question their purpose or measure their effectiveness. It is an instant clue that you’ve found a bad habit that needs to stop!

Organisations should embrace change for change’s sake and strike a balance between activities that exploit your current competitive advantage, and those that foster new ones. Deliberately including challenging products, customers, or markets in your portfolio off activities would offer a wonderful source of learning. It is essential to create a climate of innovation, but be ready to cull all but the best ideas.

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