In May I visited the Front End of Innovation Event in Boston where Jim Collins spoke about his book "how the mighty fall". During his lecture he made an interesting point about how much an organization should innovate. To his opinion, every industry has a baseline of innovation which a company needs to surpass to be able to compete in that industry. Also, during his study he discovered, when comparing "Great" companies with "mediocre" companies that innovation above the baseline did not make the difference, it did not separate the good from the great. What separated the good from the great, was a certain search for continious improvement, cost disciple and a certain "paranoia" about what the future might bring. Companies that stayed with their core values, did not become too arrogant (we can do anything or nobody can touch us) and are continuosly worried that they might fail, are the ones that survive. As one of his interviewees said: I predicted the last 11 out of 3 recessions.
I can nothing but agree with Jim Collin´s arguments for strong management skills, focus and discipline, especially in companies in mature industries . But to my opinion there are certainly two exceptions to his theory about the innovation baseline, and they are related. First of all, his argument does not fit that well in nascent and immature industries, especially when talking about radical innovations. In these industries, speed to market, differentiation and new busisness models are a disctinctive advantage, especially for the newcomers. Clayton Christianson shows this argument in his various books, where incumbents have a higher possibility of success when innovations are breakthrough. This argument also stands when complete new business models are introduced that create new markets (example Apple with I-tunes or IBM with Global Services). Here, competitors might be taking off guard and although competitors might not be blown away, they will feel the hit for quite some time.
It is my opinion that strong management skills and a focus on exploiting and improving current business to the utmost need to go hand in hand with a never ending search for innovation. Or as Jim says, a productive tension between continuity and change. But the question stands: how much should one innovate?