I recently listened to a great presentation on innovation by Bill Burnett, partner at Launchpad Partners.  I recommend you download the slides to his presentation, "The CEO's Role in Innovation," in order to understand just how important innovation is to profitability as well as the CEOs role in creating the right culture.  I also hand it to Bill that he not only lays out the CEO's role, but discusses what it takes organizationally to implement innovation – including getting the right people involved to go beyond just coming up with good ideas.

Markets shift.  Sometimes there are long periods in which the market is reasonably the same (like newspapers).  And sometimes it seems like new changes are happening rapidly (like computers).  How long between shifts is impossible to predict.  But it is certain that all markets shift.  Some new technology, or a new form of solution, or a new way of pricing, or a new competitor will enter the market and change things such that the profitability of previous solutions declines.  And it is the role of CEOs to create an open culture in which the management team feels it must keep its eyes peeled for market shifts, bring them to the company for discussion, and propose innovations which can increase the longevity of company sales and profits by addressing the market shifts.

Take for example the current shift in the sports market.  This is important, because a throng of businesses advertise in the sports market.  Everything from TV or radio ads during games, to ads inside event brochures, to putting logos on equipment and uniforms, to paying athletes as endorsers.  Being aligned with the right sports, the right teams and the right athletes is worth a lot of money.  You can legitimately ask, would Nike be Nike if they hadn't been the first company to sign up Michael Jordan – and later Tiger Woods?  So the money is very large (billions of dollars) making mistakes very expensive.  But getting it right can be worth billions in returns.

So catching a recent MediaPost.com blog "The Allure of Action Sports" is important.  While most of us think of basketball, baseball, American football and possibly NASCAR – for GEN Y (young folks) sports is taking on an entirely new meaning.  These are sports with almost no rules – just technique.  They pack the stands at events such as the Dew Tour and X Games. Active participants include almost 12 million skateboarders, 7 million snowboarders and 3 million BMX riders.  Not only do people watch these sports, but the most popular performers have their own cable TV shows – like "Viva La Bam.Just like football and basketball overtook our fathers' love of baseball as America's pastime – young competitors are shifting to watch and practice action sportsFor people in consumer goods and many retailers, it becomes critical that the CEO provide an environment where the company can Disrupt its old marketing practices and create White Space to explore how to link with these new markets.  The winners will rake in millions of higher profits.  The laggards will see the value of their sports market spending decline.

Have you recognized this shift in the sports market?  Are you prepared to take advantage of this shift?  Are you considering sponsoring a local skateboard competition – for example – to promote a restaurant, quick stop, or T-Shirt store?  You can react faster than Wal-Mart, Coke or GM – are you considering the options to grab loyal customers when they are still "McDonald's targets"?

A great example of the right kind of CEO has been Jeff Bezos of Amazon.  As I reported in this blog back in January, book sales declined about 10% in 2008.  You would think this would spell a huge problem for the world's largest bookseller.  But SeattlePI.com recently reported "Amazon Profits Jump Despite Recession."  CEO Bezos recognized long ago that book readership was jeapardized by changing lifestyles.  Fewer people have the willingness to buy printed books, carry them around and take time to read them.  So he Disrupted his retail Success Formula and implemented White Space to develop something new.  This led to Kindle, a product which is small, light, can hold hundreds of books, can be read "on the go", accepts downloads of journals (magazines and newspapers) and can even read the book to you (Kindle has an audio feature.)  And that's just product rev 2 – who knows where this will be in 3 years.  By focusing on the future he could see the market for reading shifting – and he created an environment in which new innovation could be developed to keep Amazon growing even when the traditional products (and business) started declining.  Kindle is now outselling everyone's expectations. 

Innovation is the lifeblood of businessesWithout innovation Defend & Extend management leads to declining returns as competitors create market shifts.  So it is crucial leaders, from managers to the CEO, keep their eyes on the future to spot market challenges and obsess about competitor actions that are changing market requirements.  Then be willing to Disrupt the old Success Formula by attacking Lock-ins, and use White Space to test and implement new innovations which can lead to a new Success Formula keeping the business evergreen.