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When efficiency hinders innovation, carmakers must learn to "just say no"


The Next Idea

At the heart of every great innovation is a great compromise: In order to start something new, we have to stop something old. Think of it as a deal you make with yourself — the things you’ll give up in order to make room for future growth.

Imagine someone’s garage so full of old scrap that there’s no room for the new car. How can businesses better incentivize taking out the trash?

For example, Michigan has lots of heavy manufacturing that relies on efficiency and quality. Unfortunately, these industries tend to eliminate the deviation and diversification required to innovate. They squeeze out creativity.

We need to be willing to stop things, to give up on some old ways to make room for the new.

Occasional reminiscence is good for the mind and soul, but too much backward-looking prevents progress. Excess nostalgia can turn into hoarding — when the past pushes out the future.

This is almost always unintentional. There are tons of organizations that inadvertently stifle innovation by fixating on the past, placing too much emphasis on classics and standards.

Consider, for example, the crisis surrounding symphonies around the country. Symphony attendance by those under age 40 has plummeted over the past decade. Yet endowments by patrons over 40 have remained relatively steadfast over the same period. This support keeps an increasingly aged audience in seats at the expense of developing programming that will attract the next generation of symphony goers. So the very people who hope to perpetuate the love of symphonic music are actually unwittingly creating a barrier to that possibility.

The worst of all innovation strategies is to have an increasing share of a decreasing market. The best newspapers, timeshares, and bowling alleys will be the last to go, but they will still go. The entrepreneurs who re-imagine their industry — who anticipate and feel their way towards the future — will be the ones who survive and thrive in new environments.

Have the audacity to turn down clients, customers, and patrons who support your legacy but not your future. There will always be people who want to give you money to be like you used to be.

Here are three things you can do to stop relying on old ways and become a forward-thinker in an ever-changing world:

Change some of the guard. Create an innovation advisory board — a group that represents the new. Where a board of directors keeps things on track, an innovation advisory board deliberately disrupts that track to promote innovative thinking. Seek out the voices of those who have little to protect, who have little stake in tradition — the younger, more vibrant individuals in your organization. We need to keep our leaders and talent pool youthful, bright, and fresh. What is the average age of an automotive design engineer? Compare that number to the same demographic in other industries like software development, biotech, and aerospace. For decades now, our next-generation product developers have been leaving for the coasts because there is little opportunity for them to move up in old hierarchies. Let’s start breaking down those hierarchies and welcome in the new.

Leave room for the new. Run many experiments to see what works and what doesn’t work. Be patient with your experiments: adjust and tinker with them until they get traction. Actively make available the tools that will stimulate innovation. This requires leaving both time and money open. Set aside a pool of funds solely devoted to the development of creative ideas. This doesn’t need to involve turning all of your resources towards research and development. The car company Tesla, for example, looked outward. Rather than developing its own new technologies, the organization capitalized on the innovations of others and then implemented changes in its own design, marketing, and business models. In this way, all of the company’s innovation happened outside of the organization. Why haven’t we seen this kind of growth in Michigan yet? The answer is simple: We haven’t been willing to take the risk.

Just say no. Have the audacity to turn down clients, customers, and patrons who support your legacy but not your future. There will always be people who want to give you money to be like you used to be. If you turn their support down, you’ll open up the opportunity for new sectors of growth. Substitute a new program, project, or service for a more expensive traditional option. Establish a second brand or a second track that will attract a new audience. For example, mixers with wine and cheese and jazz quartets have brought more young people into the symphony community. By trying something different, symphonies are finally attracting an audience for the future.

All of these are lessons that the automotive industry needs to learn.

After the Great Recession, carmakers proved that they could effectively diversify. But as things picked up, most of them went right back to business as usual. As gas prices fell, they even reverted to product mixes that resembled those of the last decade: SUVs, trucks, and other fuel-guzzlers. Now, they’re still actively fighting emerging emissions requirements. They can’t say no to the old ways. It’s like an addiction. You can’t say "yes" to a new way of doing things until you say "no" to the old.

Innovation isn’t just a matter of ingenuity and resourcefulness — it’s also a matter of capacity and courage. We’re always going to have too many things to do in a day. We’ll always be too busy to start that novel or open that business. So if we want the room to pursue our innovation project, something’s got to give. It turns out that something is you. The only person with the power to free up your life for creativity is you.

What are you willing to give up to make room for innovation?

Jeff DeGraff is a clinical professor of management and organizations at the Ross School of Business at the University of Michigan. 

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