The Idea Monkey Takes Wall Street
When you start hearing the word innovation referencing things like the Snuggie®, you may think that the word has run its course, right? Wrong.
Ultimately, the reason people in general, and market-driven companies in particular, are interested in innovation is because of the money involved. And the smart money knows that relevant new products, services and business models are incredibly valuable for three key reasons. They:
- Expand your customer base by attracting new clients.
- Allow you to get a greater share of your customers’ wallets. (The more products you offer that meet their needs, the more they will buy from you.)
- Help retain existing customers. (They show you are actively listening to them by offering new things that meet their changing circumstances.)
Not surprisingly, then, all these factors have an impact on the company and its share price.
Here is the way Gail McGovern, David Court, John Quelch and Blair Crawford put it in a Harvard Business Review article:
The presumption of organic growth is baked into companies’ stock value. If you decompose the stock prices of the leading consumer product companies, you’ll see that future growth accounts for as much as 54% of the stocks total value.
That’s an important point. When people discuss a company’s share price, they love to talk about alliances and acquisitions as ways to get the stock price up. Both of those things are glamorous, but each is notoriously poor at generating greater shareholder value.
What does cause the share price to increase is a hot original product. Think about what happens to Apple’s shares every time it announces something new. (Can you say iPod and iPhone5?) Is it any wonder, then, that Wall Street believes innovation is the leading indicator of future growth and profitability? There’s even an index fund that just invests in what it thinks are the country’s 20 most innovative companies.
And who makes all this innovation possible? Idea Monkeys: people who can produce a string of new thoughts, concepts or ideas virtually on demand.
They are very valuable critters. Just ask the folks on Wall Street and their cousins, those who work in venture capital and private equity. Recently, they, too, have discovered the power of the Idea Monkey.
In the past, these companies followed the formula of:
Acquisition + forced efficiency = profit.
Professional investors would find companies that could benefit from operational expertise and put in their people to streamline everything. The combination of great management and cost cutting meant higher profits. But that strategy only works well if you are hoping to sell the company you acquired as soon as you wrung out every bit of excess you can find.
If you want to grow the firm, you need a different strategy. Enter the Idea Monkey. Today, many VCs are actively looking for companies that have unique intellectual property that can be deployed in new, profitable ways. Professional money is now hiring Chief Marketing Officers to invent new possibilities and launch new products and services based on the newly acquired IP. Why? Because they have learned that is the way to make a lot more money. While the cost-cutting savings are a one-time thing, the revenue created by Idea Monkeys can continue for a very long time.
Says Dustin Cohn, who has held positions like head of innovation for Gatorade, CMO of Jockey AND CMO of Optimer Brands, a performance textile company, “At Optimer, we actively pursued inventive marketers to help us reposition, reinvent and reinvigorate companies that we acquired. Ten years ago, my position didn’t even exist in that industry. Today it is a critical component of investment success.”
I completely understand his point.
At our company, we believe that innovation is the ONLY real source of ongoing competitive advantage.
After delivering billions in new revenue through innovation, we can tell you that we absolutely agree with the folks on Wall Street: Launching new products consistently is the domain of the Idea Monkey. When it comes to innovation, it really is a jungle out there. (Sorry.)
So if you want to consistently dominate your industry, you need to know how to innovate. More specifically, you need to be able to release your inner Idea Monkey and manage the Idea Monkeys on your team to help them become better innovators. And when you do, please, please find some good (Ring)leaders to focus them on what matters most.