Sustaining Innovation

A week or so ago I sat in the audience and listened as the CEO of a company with an undisputed No. 1 position in the marketplace explained to senior managers and customers why the organization must focus on innovation if it is to sustain market-beating levels of performance. As I watched those around me, most sat in stunned silence. This clearly wasn't the message they had expected from the CEO of a company that has experienced year-over-year double-digit increases in sales and significant growth in market share.

There was among the audience members a bit of confusion. They had expected - they wanted - the CEO to deliver a speech celebrating the company’s successes. Everybody had worked hard, made the extra call, delivered step-beyond service and now was in a mood to celebrate. While all watched intently and listened politely, their body language said, "Why is this guy standing at the podium telling us about change?"

I didn’t envy this man and the message he had to deliver that day. Had he been talking to managers in the battered manufacturing or electronic sector, the message of innovation, of change, at least would have been expected. However, among companies in all segments of the residential construction industry, it's hard to imagine a need for change when we're in the midst of a decade-long expansion. Mortgage rates remain at record lows, new home prices continue to rise, and yet the value equation for buyers appreciates even faster. Real estate is the investment of choice for more and more Americans.

What's more, economists, statisticians and most every think tank say no end to the good times is in sight.

Demographics support growth in the new home market for at least another decade. Aging baby boomers will dominate the new home market for years to come as the number of 53-year-olds increases by 22% during the next eight years.

Balancing this continuing market force is an ethnically diverse group of entry-level and first-time home buyers.

With all this optimism on the horizon, why all the talk of change? Growth, after all, doesn't have to be the result of change. As one attendee whispered to another in colorful terms that are cleaned up here for the retelling: "We're not selling what we have well enough to all the people who need it or we'd have even more customers. Why not concentrate on that rather than on new stuff?"

There is no easy answer to that question, but for guidance we have no choice but to look at the value equation every business offers its customers. This CEO knew his company delivered its buyers a superior product today and yet tomorrow the definition of a superior product could be very different. Planning the products and/or services to meet that new definition can't wait until tomorrow. If it did, someone else already would have the answer and be in the process of replacing today's No. 1 company.

It's the same reason builders and architects forever seek new ways to use space within a home; to deliver that storage solution, networking niche or private space that shoppers didn't even know they wanted until they saw it. It's the impetus for land planners and developers to learn new and better techniques for creating communities that foster a connection among residents, between the new and the old, the commercial and residential. It's the reason columnists such as Scott Sedam never stop needling builders, suppliers and trades to find a better way to work together to build businesses and not just houses.

It is also the reason that CEO stood in front of a less-than-receptive audience and talked about innovation, about change. It's not about becoming a market leader. The work is about sustaining it.