Part of the Turnaround Management Society research program
Dr. Christoph Lymbersky
The Turnaround Management Society Creativity Matrix is part of the research activities undertaken at the Turnaround Management Society. Other products of the study are the Social Workplace Model and suggestions about increasing creativity and innovation in line with productivity in order to stay competitive. The purpose of the study was to find out what companies can do to stay ahead in the war for talent and to adapt to lower market-entry barriers and shorter cycles of technological change and innovation.
In the coming decades corporations will need to develop new products and services faster and in shorter cycles. The time between major innovations decreases every year, lifecycles are shortening, and the possibility of creating new companies and conquering markets is becoming easier and less expensive. Today, a small three-person startup like whatsapp can cost big telecommunications companies around the world millions within a few months. Not even worldwide corporations are safe from companies born in someone’s garage.
Anyone with a great idea can take on Google, eBay, AT&T, or Deutsche Telekom, so a constant eye to competitiveness is essential. The basis for competitiveness is creativity; if Apple wants to remain the most valuable company in the world, tomorrow’s most innovative and popular phone will need to come from Apple. Tomorrow’s competition may be sitting behind a dusty workbench in his grandma’s garage, so everyone is a potential competitor. The only way to keep up is to provide employees with the best possible environment in which to be both productive and creative.
Companies need this dual focus on productivity and creativity in order to survive in the long term. The level of productivity, creativity, and innovation must be continuously higher than the competition’s level of productivity, creativity, and innovation. If a company fails to innovate, its products become old and reach the end of their life cycles. Only continuous Innovation can ensure that the company will stay ahead of its competition.
Companies can be divided into four broad categories in the creativity matrix, based on their approach to creativity and innovation. Firms that can keep up by continuously developing and marketing successful products are called Survivors. These companies have established a culture that ensures constant idea generation by their employees while remaining highly efficient and productive. Companies that are creative for only a short time, that develop a great product and sell it successfully but fail to continue to develop products, are called One-Hit Wonders. Other companies that are not able to market their products well but that produce them efficiently at a competitive price are stuck in the Start-up Syndrome quadrant. The name derives from the many start-ups that are unable to capture a sufficient market share because, while the founders may be are highly creative and have great ideas and products, they are not able to grow the company. The No-Goes are companies that are not very productive and that have failed to come up with new, successful products. It is easy for companies in this group to slip into insolvency if management does not take dramatic measures to increase creativity, innovate, and optimize their sales, distribution, and production processes.
The matrix is a living model in that companies usually don’t stay permanently in one quadrant or another. Survivors can become One-Hit Wonders, and vice versa. When companies are about to die, they have a tendency to move toward the No-Goes section. Depending on how strong the tendency is and where their position in the other quadrants was, it can take years to enter the No-Goes quadrant, but a slide toward it should indicate the need for change. One exception to this rule is the Start-up Syndrome quadrant: our study has not found companies that moved from the Survivors or One-Hit Wonders to the Start-Up Syndrome quadrant. Therefore, no company that was once productive ends up not being productive at all. However, no company is immune to the tendency to slide toward that sector.
One-Hit Wonders are found in the upper left quadrant of the TMS Creativity Matrix. Companies like mySpace that fall into this quadrant were once highly creative and gained a big market share, but they did not keep evolving and eventually slipped down to the No-Goes sector. Deutsche Telekom and Nokia are also in that quadrant because both companies are under pressure to adapt to a changing market. Deutsche Telekom is less likely to slip into the No-Goes because it has a reliable source of income and is successfully diversifying into more markets and heavily investing in innovative ideas. Nokia, on the other hand, has not come up with very innovative products, so it has a tendency to enter the No-Goes sector. Similarly, RIM has had a great product and an extremely high level of productivity, but it has failed to come up with truly innovative products in the last five years, which is an eternity in the headset industry.
Google and Apple have become very big because they have had many highly innovative products and great sales strategies and a lot of funds at their disposal. However, Survivors are not only market leaders; they can also be smaller companies that have found a niche market and successfully defended their position.
Apple is probably the best known of the Survivor companies, even though if was in the Start-Up Syndrome quadrant for a long time when it was highly innovative but too expensive for the mass market. During the last four years it has been in the far upper corner of the Survivors quadrant, but more recently it has failed to surprise its customers or live up to expectations. Google, on the other hand, continues to grow and innovate, which is why Google is a prime example in the TMS Creativity Matrix.
Companies that fail to market or produce their products successfully are found in the Start-Up Syndrome quarter. It is unusual for a company to move into this quadrant from another quadrant, but many companies start out here. As with Simple, a start-up that wants to get rid of bank fees and become new mobile bank, or Spotify, a legal way to access and listen to unlimited music, a company’s innovative products must be accepted by the market if the company is to become a Survivor. Even though a Survivor might not become unproductive as it comes up with great innovative products, firms can have the tendency to lower productivity as creativity increases.
Unlike the Start-Up Syndrome sector, companies rarely starting out in the No-Go sector, but they move toward this sector at the end of their corporate lives if they are neither innovative nor productive. MySpace, the former Facebook competitor is a good example of a company that once had a great product (hence, it is a former One-Hit Wonder) but did not adapt to changes in the market environment, especially the competition. Companies that are or have a tendency toward this section often have a culture that does not support innovation from within. The Creativity@HR study outlines possible ways to increase creativity and productivity at the same time.
A company that has reached the Survivor quadrant has a strong correlation between creativity and productivity. As in the Apple example, companies’ productivity decreases as their creativity decreases. Google, on the other hand, continues to develop products like the Nexus 4, 7, and 10, and has gained market share with its Android system while also reaching higher levels of productivity.
The Turnaround Management Society Creativity Matrix can be used to implement specific counter-measures to company failure, such as the social workplace theory. New thinking to encourage employees to innovate is necessary to remain competitive; however, the challenge of implementing changes seems to be harder for older companies, while relatively young, dynamic companies like Google seem to be more open to innovate in areas like flexible work hours, autonomy, and flexible office places that encourage creativity and innovation.
Ten years ago, big companies had research departments that spent millions on new developments, but the expertise of the sales and marketing people who deal with customer needs were often disregarded, leading millions spent on the wrong products. Today both can work together from a very early stage on. In the future, the research departments of today will no longer exist, as future research teams work to extract the knowledge, ideas, and creativity of its employees to develop products together, rather than in a vacuum. In this way, every employee will be a developer, and management’s role will be to orchestrate both creativity and productivity.
Dr. Christoph Lymbersky is director of the Turnaround Management Society and senior management consultant at DETECON International.