“Gaining from sustainable competitive advantage? Don’t be afraid to fail!”

Innovation is for organization key to gaining sustainable competitive advantage, but what is the right key? According to researcher Bart van Lieshout, organizations must above all have the guts to invest in exploitative (commercial) innovation in addition to explorative innovation. "The biggest mistake organizations make is that they don't exploit opportunities. They’re afraid to fail." Van Lieshout will obtain his doctorate from Nyenrode Business Universiteit on May 30.

Van Lieshout's doctoral research shows that organizations that score high in terms of innovation in relation to ambidexterity (ability to use both hands) have an advantage. Van Lieshout explains: "Many organizations have a strategy in terms of exploitative innovation, also known as incremental innovation. This means they focus on reducing costs and improving profit margins by investing in current production lines in market segments known to the organization. However, if you really want to gain a sustainable competitive advantage as an organization and stand head and shoulders above the others, then you must also invest in exploratory, or radical, innovation. In other words, you must at the same time work on developing new products with which you can tap into new segments."

Social value

Van Lieshout's doctoral research also shows that you strengthen your competitive position even more if your innovation has social value as well as financial value. He gives an example from his own employer ASML: "We are market leader when it comes to making lithography machines, but by chance, we found a way to create radioactive medical isotopes. This means that cancer patients no longer have to depend on production by nuclear power plants alone for their treatment. I’m proud that ASML didn’t leave this discovery on the shelf because it didn’t fit our business’ scope."

Showing guts

Leaving that on the shelf is the biggest mistake organizations make, according to Van Lieshout. If they’re only exploiting an innovation, they miss out on opportunities. Van Lieshout's doctoral research consists of various studies that also looked into what is needed to make sure these opportunities are indeed seized. "Management and directors still too often think 'cobbler stick to your last'," Van Lieshout explains. "Because of this conservative and cautious attitude, it regularly happens that nothing is done with innovations because companies don’t see any application for them within their own market. They’re too afraid to take the risk; they’re too afraid to fail. A missed opportunity, and such a shame, especially if these innovations also have social value. I believe management and the board of directors should show more courage."

The right people

By showing courage, Van Lieshout also means that organizations should take a good look at whether they have the right combination of people and organizational competencies in-house working innovatively. Exploratory innovation requires entrepreneurial, creative people who aren’t afraid to take risks in a free environment. "My research shows that the combination of management and organizational competencies largely determine whether innovation is designed exploitatively or exploratively. Usually you see that managers know everything about a certain product and are exploitative, and do it well, but that doesn't mean that they are on the right track if you make them managers of the exploratory innovation branch," says Van Lieshout. "So invest, not only in operational and exploratory innovation but also in the right people for the right place. Only then will you achieve sustainable competitive advantage. "