3 Companies That Got Their Innovation Process Wrong

Don't fear failure so much that you refuse to try new things.

Louis Boone should have included this pearl of wisdom in the university-level textbooks he wrote for marketing, business, and economics courses. His textbooks were the ones that educated many of the world's current CEOs, CFOs, and other executives. While some of these Boone-trained business leaders are making waves with their exciting innovations, others seem to be falling behind. There are a few large companies that, for the past few years, have consistently made Fortune's Least Admired and Least Innovative Companies list. And more often than not, a leading reason for this lack of innovation is the simple fact that they refused to implement an innovation process.

Dillard's

It's tough to pick on Dillard's because they're not closing storefronts, their stock isn't bombing, and they aren't filing for bankruptcy—yet. But the rumblings of analysts are beginning to grow. Few would suggest investing in the company and even fewer see a positive outlook for the high-end department store.

This doubt and discontent stem from the fact that Dillard's hasn't changed. They are the department store that clothed our mothers and grandmothers, but they aren't dressing many people under the age of 40 and it doesn't really feel like they have an interest in it.

The only change the company has made in the last three decades is the addition of new designers. They have kept their positioning as a department store that people really just stumble into when they're shopping for clothing at a mall. They rely too heavily on their brick and mortar locations, rather than e-commerce omnichannel options. They have clung to outdated forms of in-store checkout, instead of arming their employees with checkout tablets, utilizing digital displays or offering mobile payments.

While their competitors (i.e. Target, Kohl's, etc.) are developing innovation processes in an effort to find new and better ways to provide products and services, Dillard's has stood their ground in favor of “we'll keep doing what has always worked for us.”

The outcome of this refusal to implement an innovative process is that their customer base is shrinking. Millennials don't shop at Dillard's. They want to interact across all channels with the companies they do business with, and Dillard's doesn't offer this. While Dillard's may be surviving through their older, loyal customer base, their numbers aren't pretty. Since last year, their stock is down more than 50% and the future looks grim.

Organizations that cling to core values in the face of monumental change aren’t doing themselves any favors. For Dillard’s, this means relying on personal, in-store connections to gain loyal customers. That’s all well and good, but the lack of an innovation process means that the company’s admirable goal—personalized service—isn’t being brought into the 21st century. Might they be able to recreate the personalized shopping experience in an online setting in order to keep up with their competitors while maintaining their identity? Quite possibly, but they don’t seem very interested in trying.

Sears

Dillard's is not alone in the realm of department stores that lack innovation processes. But while Dillard's has managed to stay above water for the time being, Sears has been violently drowning for over two decades.

If any business analyst had predicted such a downfall for Sears 40 years ago, they would have been a laughingstock. What Amazon is to today's consumer, Sears was to the consumers of the majority of the twentieth century. Their catalogue was unparalleled. In fact, it was innovative. Their products still receive consistently high ratings from Consumer Reports. They have even kept up with all of the technological advancements (i.e., omnichannel retailing, big data analytics, etc.). So what went wrong?

One factor is that they chose to sign 99-year leases for a majority of their stores. Now, to be fair, the problem wasn't with the long leases. The problem was that the products that filled those leased stores started shrinking. Stereos got smaller. TVs got thinner. Suddenly, Sears didn't have inventory to fill their stores with. They've continued to grasp at filling stores with poorly received clothing lines, but many shelves remain empty even as stores remain open.

Additionally, the C-Suite at Sears has put shareholder value above all else, including innovation. There is no true innovation process at Sears because it simply isn’t a priority. Short-term thinking has blinded the company to the need for real change in its business structure, and some analysts predict that Sears will be officially dead within five years.

Circuit City

Circuit City filed for bankruptcy in 2008. While a tough economy definitely didn't help their situation, the real cause of this electronics retailer's fall from greatness was their reticence to maintain their innovation process.

In the ‘70s, ‘80s, and ‘90s, Circuit City certainly had an innovation process. They were the first to mass-market stereos, refrigerators, TVs, and even cars. But then in the late ‘90s, they lost their way. Maybe they got cold feet when competitors like Best Buy and Costco began to surface.

Instead of staying course with their process, they became reactive to what others were doing. They rushed their expansion, they let go of their most knowledgable staff, and they began to ignore the needs of their consumers.

Instead of progressing with an innovation process, Circuit City began regressing. They started to do away with all of the aspects that consumers loved about them (i.e., an equipped sales force and wide variety of appliances) in an effort to stay afloat. Instead of taking a hard look at their business model in the face of market change, they simply reacted to that change with survival tactics.

The Takeaway

Dillard's, Sears, and Circuit City were never fringe companies that almost made it. They were massive giants of their industry. They brought consumers refreshing takes on how shopping could be, and for a while, led their fields. But when the digital revolution came, they weren’t ready, because they didn’t have a process for continually meeting new challenges.

It’s a familiar story: businesses that cling too tightly to anything that made them successful in the past (see Nokia and Kodak) fail to see the big picture and predict what’s coming. In the absence of an innovation process—a process for anticipating change and being on the leading edge of it—these companies end up making incremental adjustments that only prolong their downfalls.

While you may not be at the head of a multi-billion dollar corporation, you are in no way exempt from the need for a process of innovation. Every company, big and small, needs to stay on their toes and continually be developing and executing new ideas. For help in developing an innovation process for your organization, contact me.