To begin the innovation process in your company, consider these common barriers to innovation:

1. Lock-in. “Lock-in” describes an organization’s dogged commitment to business models, products, behaviors, processes and perceived benefits. Lock-in is beneficial because its standard operating procedures create efficiency within a company and drives growth as long as the success formula is working. However, when the market changes, rigid adherence to lock-in will stifle innovation and sink a company.
2. Defend and extend management. This is a practice of defending core values, procedures, services, products and customers, and seeking incremental opportunities to grow by extending those cores.  Practitioners of defend and extend management view innovations as threats and are often late to adapt to market changes.

Successful innovation requires that your company promote and adapt to those things the marketplace rewards. Here’s a four-step strategy to drive innovation within your company and industry:

1. Stop defend and extend strategies. Instead of focusing on core products, core services, core markets, core business practices and core technologies, which seems the natural thing to do, focus on future scenarios. Scenario planning can identify innovations and their future value.
2. Attack competitors’ lock-in. Focusing on competitors’ lock-in shows how to put them at risk, and it also surfaces your own lock-in situation and how to manage it. You can find new innovations and the incentive to develop them by attacking your competitors’ lock-in.  Nothing helps to motivate your team like attacking an arch-nemesis with a new plan.
3. Create Disruptions. When launching an innovation, it’s critical to create internal disruptions which overturn old lock-ins. Disruptions are not problems caused by market changes. Disruptions are internally generated decisions to attack lock-in and reassess the status quo.
4. Create and maintain “white space.” Innovators must have their own place/space and mandate to develop new success formulas, aligned with new market requirements.  They must have permission to operate outside of and even violate corporate lock-ins.  And they need sufficient resources of manpower and money, even if this means taking some of the budget from the traditional business.

All companies can adapt to today’s changing markets.  Although in tough times the gut reaction may be to “protect the core,” it is innovation which leads to long-term sales growth and higher profits.  Those who move quickly to adopt innovation, becoming part of the market shift, will come out stronger and more successful.

Vistage speaker Bob Prosen, developer of “The Five Attributes of Highly Profitable Companies” and CEO of The Prosen Center for Business Advancement, believes CEOs who pay attention to their companies’ leadership, sales, operations, finances and customer base can still profit in today’s down economy.

Prosen addressed Vistage members in a recent members-only Webinar, Increase Performance and Profit Regardless of Economic Conditions. During the Webinar, Prosen outlined these five attributes of highly profitable companies

Superior Leadership– Managers should ensure each of their direct reports achieves the objectives set out for them that year. By making sure everyone understands company objectives and creating a culture of accountability senior-level managers can produce success.

“Don’t allow direct reports to come to you with questions they don’t have answers for,” said Prosen. “Force them to do the research before they come to you so that they have some suggestions for options. If the answer is not clear-cut, help guide them along the right path, but don’t allow the responsibility to be passed from them to you.”

By tying rewards to results rather than workload, managers automatically create a culture of accountability. For 2009, CEOs should have their top three-to-five quantifiable objectives written out and published so workers and managers are all
aligned.

Sales Effectiveness– The five keys to sales effectiveness are: 1) create new customers, 2) increase your share of existing customers, 3) meet all quotas and productivity, 4) know the role of marketing and 5) reward high-volume achievement.

You can’t live off your existing customer base. Customers will inevitably leave for one reason or another. You must prepare for the outflow by increasing your share of existing customers and constantly seeking out new customers. Take a detailed look at what products your current customers are using. Could you sell them another product or service that you previously haven’t sold them? Could another product or service supplement one they already have?

You cannot afford to have unproductive sales resources on your team, whether that be your marketing department or an individual salesperson. If you have a solid marketing team, don’t cut them back in a bad economy. Look for other places to cut to keep the momentum going. Reward high-performers and set them up for success even if it means rearranging territories or letting less-effective salespeople go.

Operational Excellence– Understand the cost of doing business so you know your required margins to operate effectively. Once you understand your required margins, you can determine how efficient and effective you want each part of your organization to be. If revenue declines, you’ll know how much cost you can take out to keep your margins intact. If cuts are necessary, you’ll already know your productivity and efficiency measures, and you’ll be able to cut in the appropriate areas rather than across-the-board.

Financial Management– Understanding the power, authority and responsibility placed in your bookkeeper’s hands is vital. He or she needs to coordinate planning and drive accountability while providing information rather than just data points. Your CFO should have as good an understanding of the business as the CEO or COO so that they can correctly form the budgets and conduct analysis.

“Your internal financial manager, whether that be a CFO or just an accountant, is not responsible for explaining deviations from plan,” said Prosen. “Each department head is responsible to stay on budget and explain any deviations. Your CFO’s job is to make the budget information available and accurate for the department heads while making clear what assumptions need to be in place to meet budget.”

Customer Loyalty– Do whatever it takes to keep your loyal customers for life. Don’t surprise customers with bad news. Be honest and forthright with them in explaining what happened, why it happened, how and when it will be fixed and why it will never happen again. Provide exceptional service by under-promising and over-delivering.

Prosen recommends that CEOs and department heads set quantifiable goals with workers for the year. Each person on the team should be responsible and accountable for a certain goal with the results linked directly to their year-end review and bonus.