Five mistaken beliefs business leaders have about innovation.

1. Five Mistaken Beliefs
Business Leaders Have
About Innovation
© Copyright 2012 London Business School

2. Innovation has been looked at
from every conceivable angle,
but we still repeat the same
mistakes, laments Freek
Vermeulen.
BUSINESS STRATEGY REVIEW 1

3. Mistake 1: Believing the
Numbers
One common mistake is to insist on “seeing the
numbers” too much too soon. “What is the size of the
market?”, “what is the Net Present Value calculation?”,
“payback time?”, and so on.
BUSINESS STRATEGY REVIEW 2

4. If a CEO insists on hard numbers before the
project is even started, it will by sheer
definition kill off any truly innovative ones,
simply because you cannot compute the size of
a market that does not exist yet.
BUSINESS STRATEGY REVIEW 3

5. Mistake 2: Believing Success Has
Been Attained
When an organisation becomes very good at something, top of
its industry, it usually starts to focus on the thing that made its
success, crowding out other options and points of view.
BUSINESS STRATEGY REVIEW 4

6. Mistake 3: Believing They
Know the Competition
If I ask a CEO “who is your main competitor?” they
always reply with the company that is most like
them. When it comes to innovation, this is slightly
delusional. The company that is most like you is
really the least important competitor, simply
because they are in the same boat as you are.
BUSINESS STRATEGY REVIEW 5

7. The most threatening competition often comes from a
completely different angle: an adjacent industry,
innovative start-up or substitute. This is a phenomenon
for all times: Sailing ship companies suffered from the
steam engine; Radial tire champion Firestone was
brought to its knees by the introduction of bias tires;
Newspapers are being squeezed by the internet.
BUSINESS STRATEGY REVIEW 6

8. Mistake 4: Believing That
Because Everybody Had
Always Done It This Way, it is
the Best Way of Doing Things
“Everybody does it this way, and everybody has always
been doing it this way; if it wasn’t the best way of doing
things, I am sure it would have disappeared by now.”
BUSINESS STRATEGY REVIEW 7

9. In many businesses, practices emerged with good reason, but
once the circumstances changed, firms carried on using them
for no reason whatsoever. Did newspapers have to be printed
for so long on ridiculously large (and expensive) sheets of
paper? Could low-cost airlines not have worked many years
earlier? Are buyback guarantees in book publishing (set up in
the Great Depression) really still needed?
That everybody does it this way is no reason not to challenge it.
The greatest innovations often come from challenging industry
convention.
BUSINESS STRATEGY REVIEW 8

10. Mistake 5: Believing the
Customer
The final error CEOs often make when it comes to innovation is to
ask their customers for their opinion. There are two problems with
this approach. Firstly, these people are already your customer and
secondly, even when a company is asking potential customers, it
is tricky. Consumer research is often useful but not for truly
innovative ideas and markets that do not exist yet.
BUSINESS STRATEGY REVIEW 9

11. As Farooq Chaudhry once put it to me: “Customers?
Forget about them.” If you want to be really
innovative, you have to be leading the customers;
not be led by them.
BUSINESS STRATEGY REVIEW 10

12. Freek Vermeulen is Associate Professor of Strategy
and Entrepreneurship at London Business School.
He is the author of Business Exposed (FT Prentice
Hall, 2010).
This report was part of Business Strategy Review,
Volume 22 Issue 4 - 2011
Visit the website www.london.edu/bsr
BUSINESS STRATEGY REVIEW 11