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Failing to invest in innovation when times are good

Yet another great company (in this case, Dell) has fallen victim to a failure to engage in business model innovation when times are good. We see this all the time – hugely successful corporations get so wrapped up in exploiting their own business models that they fail to invest in the innovations that will help create their future success. Then, when things start to go wrong, they go on an all-out quest to find new sources of growth FAST, condemning their growth leaders to rushed, desperate and usually failed innovation efforts.

About three years ago, I was having a conversation with two CEO’s of major computer manufacturers who observed that Dell’s strategy was simply piggybacking off their R&D and other investments in innovation in the computer industry. They feared then that Dell would stunt the growth of the entire PC category be rendering innovation un-economic. Looks as though the model has actually come back to hurt Dell – its competitors have innovated not only in their products but in their production prowess. Moreover, turns out that many customers actually like to interact with a real salesperson when purchasing complex or new equipment. So advantage to HP, Best Buy, and other retails, disadvantage to folks like Dell.

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