Around 80% of companies put innovation among their top priorities, believing it to be the force that would drive business process transformation, increase profits, and improve adaptability. However, before executives succeed at making a company more responsive to changes, they need to ensure they are ready to accept and manage change. The latter is not as simple as it seems. Preparedness for innovation goes deeper than making a few decisions or investing in technology. It's about creating and incorporating a mindset into the company's practices, workflows, and internal networks. In other words, healthy and successful innovation adoption is achieved by enabling an innovation culture across the entire organization.
In this article, we'll examine three stories of three different brands that faced the same challenge of incorporating innovation into their strategy.
Case # 1. JCPenney
Formerly a shopping giant, JCPenney (JCP) filed for bankruptcy in May 2020 with around $5 billion in debt.
It's commonly believed that the company was unable to deal with the financial damage caused by the pandemic and global supply chain crisis, but in reality, these complications dealt a finishing blow to the already unstable strategy.
The retail sector has always been highly competitive. Although JCPenney managed to survive and expand throughout the Great Depression, it wasn't safe from its rivals—Walmart, Target, and Amazon—gaining the upper hand. As digitization started taking root across industries and niches, Walmart actively harnessed the potential behind e-commerce, investing in online platforms, data analytics, and supply chain upgrades. These steps allowed the corporation to meet customer demand faster, engage new audiences, and inject more personalization into its offerings.
In 2011, JCPenney set a course for rebranding to keep up with the change. After appointing Ron Johnson, who used to work at Apple as retail chief and executed a brilliant strategy for Apple stores, JCPenney hoped to achieve stellar transformation and reinvent its brand.
However, mistakes were made.
- Lack of previous testing
New leadership brought many changes to the JCPenney network—from logos and advertising to shopping models and pricing. But many of these changes haven't been tested in advance—both on JCPenney's target buyers and new audiences Johnson hoped to engage. Therefore, the company expected a positive response rather than estimated it after surveying loyal customers and potential buyers—and it was unprepared for mixed to negative reactions.
- Disconnect from loyal audiences
In his strategy, Johnson focused on attracting new customer groups. He was interested in younger, wealthier audiences, so he wanted to transform JCP stores into places that appealed to their tastes. He adjusted store layouts and implemented interactive displays, removing sales and promotions, essentially making the brand unrecognizable to JCP's older, less tech-savvy audiences that relied on sales seasons. As a result, loyal JCP customers found themselves abandoned by their vendors, while new audiences were nowhere to be seen.
It's normal to expand and engage new audiences. But it doesn't mean you should leave your loyal customers behind. They are the reason you hit all your previous milestones—and they can help you achieve more if you don't push them away. All businesses change and transform, but if they communicate the change and keep providing value to their core audiences, they can get the best of both worlds.
- Identity crisis
The pursuit of new clients revealed yet another issue—JCPenney had nothing unique to offer. E-commerce audiences preferred Amazon and had no intention of switching to JCP, while more traditional buyer groups had no incentive to purchase at JCPenney. As a result, where there was supposed to be a brand reborn, there was a brand without a "face" and mission, uncertain who it was to engage. That uncertainty was followed by a plunge in sales and investors withdrawing.
- Late reversal
After brand reinvention failed, JCPenney brought back their former CEO, Ullman, who reversed all of the changes done by Johnson and reinstated previous sales models. Ullman spoke negatively of the innovation attempt and concentrated on re-engaging loyal customers, preferring hiring employees over digitization. The issue with this strategy was that it was too late for the reversal—while Ullman managed to stabilize the sales, JCPenney still struggled and needed new solutions rather than going back to old routines.
There is always a probability of change not working as intended, so any innovation needs to be executed in a controlled environment, with a clear Plan B in mind and an opportunity to slow down and take a step back if necessary. However, if too many new things have already been implemented, it's nearly impossible to come back. Reversing all the changes means falling even farther behind your competitors, which is never a good story.
Following this sequence of unsuccessful leadership tactics and transformations that lacked purpose, the pandemic was the straw that broke the camel's back, leading to JCPenney closing more stores and ultimately going bankrupt.
Key takeaways
Investing in innovation wasn't a mistake on JCPenney's part. Keeping up with digitization and introducing new solutions and ways of interacting with customers keeps businesses, particularly retail, afloat. However, in their pursuit of change, JCPenney leaned too much into the "out with the old, in with the new" approach, which led to them losing their core clients, who no longer felt welcome and supported by their preferred vendor.
- Prioritize research
When preparing for the change, JCP skipped over two important moments: how their core audiences would respond to innovation and how the new target audiences perceive JCPenney. This made their transition less controllable and prevented them from being ready for the backlash from loyal clients and a lack of new buyers.
One of the first things that should be innovated is analytics and research. The more data you can glean, the more factors you can dissect, and the more understanding you have of your potential trajectory and areas of opportunity. Without expanding your vision and gaining insights into the top-of-mind needs of your current audiences and target markets, you invite pitfalls to your strategy.
- Reward customer loyalty
Attracting new customers should never be done at the expense of the core audience's comfort. Therefore, executives need to respect the key needs of their loyal customers, staying connected to their pain points. Finding a balance between keeping offerings attractive to one group and appealing to new audiences isn't easy, but staying true to core values injects more certainty into the journey ahead.
Sometimes, you don't want to chase new audiences immediately, especially if they differ greatly from your core customers. Instead, you can benefit from using modern technologies to improve the experience of your loyal audiences, removing unnecessary steps and friction from their interactions with your products and services.”
- Don’t look for silver bullets
What worked for one business may not work for another. Hiring a visionary is not enough in the era of personalization, human-centric services, and diverse approaches. While Jonson succeeded at developing a strategy for the Apple store, he lacked perspective and understanding of JCP audiences. Instead, he targeted groups he believed to be more profitable, but he didn't consider that these groups still associated JCP with the place favored by the elderly.
Good strategies and change management are rooted in experience and the ability to wield that experience. The trick is every experience is unique. So, you must consider it when planning innovation adoption and exploring your strongest and weakest points. You can't repeat anyone else's success story—but you can learn from it.
Case # 2. BlackBerry
With a rich history of successful achievements and failures, BlackBerry had a strong start and a great journey as a pioneer of handheld devices. Having brought email services to mobile phones, BlackBerry products became a status symbol for business leaders, capturing a wealthy market and seemingly securing the brand's position as a leading smartphone developer.
However, this sense of security ended up sabotaging the company's success. When Apple introduced the first iPhone in 2007, BlackBerry didn't take action. With its stock price soaring and the record of selling 50 million devices annually, the company was confident about its product and didn't see the iPhone as a threat to its market, believing it to be an entertaining device for younger groups.
So, when Apple products rapidly gained popularity and started entering BlackBerry's market—business leaders and corporate workers—BlackBerry found itself transitioning from a leader to a follower. Previously setting trends, Blackberry was now following them as it designed its own touchscreen phone to keep up with Apple. The result was less than satisfactory, as the device lacked performance, and investors started seeing the red flags.
Despite such an outcome, BlackBerry continued its attempts to reclaim its leadership status by developing tablets and touchpad devices. These attempts were largely unsuccessful, as users complained about BlackBerry products' high prices, limited features, and poor performance.
That resulted in BlackBerry's US market share dropping to 7.3% in 2012, while Apple and Google occupied 53.7% and 35% of the market, respectively. Due to its successful global expansion, BlackBerry retained its strong position in the global market, but this led to increased stock volatility.
In Q1 of 2014, BlackBerry lost around $84 million in earnings, further accelerating the company's decline. Since 2016, BlackBerry has stopped manufacturing phones and discontinued its service for classic smartphones in January 2022.
It's worth noting that this is not the end of BlackBerry's story.
Having quit as a smartphone developer, BlackBerry is now focused on two powerful markets: cybersecurity and IoT. This shift was made after a change in leadership in 2013 when John Chen became the company's new CEO and decided to let go of smartphone competition and turn BlackBerry into a software company.
This step enabled BlackBerry’s resurgence, with the company reporting 25% revenue growth in its full fiscal year results for 2024.
Key takeaways
Despite making back after significant losses and stabilizing its income, BlackBerry has to reinvent itself more until it fully distances itself from the title of a former smartphone giant toppled by a faster and more agile competitor. It is going to be a long journey, but with the resilience and leadership demonstrated by the company, there is a high probability of BlackBerry resurfacing in other niches and delivering impact. So far, there are several lessons executives can learn from this case:
- Never overestimate yourself
Overconfidence often does a disservice to executives and business leaders, making them blind to budding issues and disconnecting them from key buyers. For that reason, executives should always monitor their performance and explore ways to deliver a greater customer experience. A strong business position should inspire executives to experiment and explore new concepts before their rivals.
No matter how good you're performing or how large your market share is, everything can change in a snap. You should always look at your enterprise critically and gather feedback to identify potential improvements and new angles. Such an approach is important for keeping your feet on the ground and staying in touch with your target audience.
- Never underestimate the competition
BlackBerry's fatal mistake was not to take Apple seriously and, therefore, not consider the probability of the iPhone making it past the consumer market. They didn't associate the light and sleek design of Apple products with business and couldn't imagine them being used for business purposes. However, the Blackberry core audience had other thoughts and greatly appreciated new smartphones' features and overall functionality.
For that reason, executives and leaders need to pay close attention to budding disruptions and do their research—even if the new product is nothing more than marketing hype, it's better to verify it in advance.
The technology sector is highly competitive. Everyone wants to make the next breakthrough—so, as an executive, you should monitor your surroundings and keep an eye on the offerings of your potential competitors. What may seem like not that big of a deal at first can redefine an entire industry later.
- Be ready to change course
While abandoning smartphone development was a very unpleasant experience for BlackBerry, it was also the decision that saved the company. By redirecting its expertise to software for cybersecurity and IoT, BlackBerry stayed in business and has the potential to open a new chapter in its history—this is what matters most in business. Such resilience is particularly important in the current competitive and intense landscape. Executives need to accept that they will have to change their stripes if they cannot gain competitive differentiation in their target market. Exploring other niches and identifying ways to drive unique value should be part of the leadership strategy.
It takes great courage to say "Yes, this is not working out for us" and move in another direction. Often, changes for the best or necessary adjustments are held back by fear—but nothing good comes from standing in one place or trying to win the race where your rivals have already moved several steps ahead. Instead, you should look at your resources and strongest aspects and see how to apply them. Resilience is all about accepting your falls and gaining knowledge for rising back up.
Case # 3. Xerox
The story of Xerox is well-known to many business leaders. The company that inspired Steve Jobs and invested in the future Apple empire found itself at the edge of bankruptcy in 2001. The most common explanation one can find is failure to keep up with the rapid advancement of the digital age when Xerox started steadily losing demand for their main products and found itself unable to provide any modern alternatives.
However, this statement would be incorrect. Quite the opposite, Xerox's main issue was that it came up with innovative concepts ahead of its time—long before there was an evident business value in developing them further.
The investment in Palo Alto Research Center (PARC) opened the door to reinventing the office's future. In years of its work, PARC delivered the inventions now integral to office work and computing worldwide—Ethernet, WIMP systems, GUI, built-in screens, and even a computer mouse. However, back then, Xerox was mostly focused on innovating copiers as its main revenue-driving product, choosing not to explore any of these opportunities.
As a result, when digitization accelerated on a global scale, Xerox started falling behind as the need for copiers was declining and they couldn’t adapt to the rapid change. By 2001, Xerox's debt was over $17 billion as multiple analytical media anticipated the company’s imminent bankruptcy.
Yet, in the end, Xerox didn't go bankrupt because it leveraged laser printer technology developed by the company's engineer, Gary Starkweather.
It's worth noting that executives and managers initially didn't approve of Starkweather investing his time in laser and optics research instead of chemistry as they believed it wasn't something Xerox needed. Nevertheless, Starkweather didn't back down, and Xerox VP sent him to PARC, allowing him to work on the project further. This decision saved Xerox in its most challenging time.
Currently, Xerox continues to adjust its products and services to meet the needs of hybrid workplaces and keep pace with ongoing office trends.
Key takeaways
The case of Xerox is nuanced and can't be characterized as "the company that failed to innovate."
As a dedicated investor in innovative concepts since the late 1960s, Xerox was willing to let bright minds experiment, research, and present outstanding product concepts—which is not something an innovation-averse company would have done. What is more important is to understand the lessons learned from the brand's story:
- Avoid overreliance
For a while, Xerox was dominating the copier niche and executives were perfectly satisfied with that, offering new iterations and polishing their features. Even though PARC was created in response to the nascent computer era, it was hard to predict how this era would look.
While Xerox was prepared to explore new concepts, it wasn't prepared to commit to productizing them fully—which led to the company losing initiative and opportunity to preserve relevance.
This moment shows the importance of critically looking at a company's main products and services and evaluating how they are holding up. It's also essential to remember no service offering is forever. Many tools and technologies are one discovery away from losing relevance, which is why executives need to be prepared to make the switch. - Identify opportunities in advance
Xerox is sometimes criticized and treated as a cautionary tale for not capitalizing on the projects delivered by PARC. However, it's important to understand that the initial concepts PARC introduced to Xerox didn't look exactly like today's personal computing technologies. Henry Chesborough's book Open Innovation: The New Imperative for Creating and Profiting from Technology states that these prototypes were ugly ducklings, not swans.
While it's normal for the initial concept to look underwhelming and undercooked, Xerox, with its powerful sales culture and great customer relationships, didn't see the need to delve deeper into these projects. Albeit it wasn't a wrong decision, it backfired with Xerox not having an alternative offering during its critical phase. To avoid similar scenarios, executives should dedicate some time and resources to identifying the most lucrative new directions for their company to build resilience and engage markets that can become supporting pillars.
It's seemingly obvious where Xerox went wrong: they didn't use innovation opportunities when they could. However, this is our current perspective, when we know the full story. The truth of managing a business is that you can't pursue all opportunities—you must choose your focus and priorities. Without clearly understanding how some of the PARC prototypes would drive value, Xerox had no guarantee of new directions paying off.
Nobody can tell the future—therefore, Xerox had no way of predicting that their main product would lose demand that fast because nobody back then had an idea of what the next industrial revolution was going to look like. However, as an executive, you need to ask yourself, "What else can we do?" review your opportunities for new service offerings and choose the best balance between expenses and value.
- Encourage experimentation
The story of Gary Starkweather is the most illustrative example of how supporting employees' initiative and creativity can save the entire company.
From a traditional business point of view, Gary was an inconvenient employee because he explored technologies he was interested in, not the technologies that fit the company's business objectives. He was driven to create something new and believed Xerox could benefit from that. Instead of punishing his determination or deciding he didn't belong in the company, Xerox allowed Gary to continue his research in PARC, which ended with him contributing majorly to inventing laser printer technology. Gary Starkweather did build something new—and it helped Xerox immensely.
At your company, people are your greatest asset. So, if they have thoughts, suggestions, or ideas on how to expand your offerings arsenal or help you make a competitive differentiation, you should hear them out. If they say “I can do more. I want to try something new at this company”, you need to provide them such an opportunity and let them try. Their background and perspective may reveal new areas of value and possibilities—and your entire enterprise will win from that.
Understanding human potential, respecting talent, and rewarding initiative is integral to establishing an innovation-friendly approach. When a company punishes professionals for wanting to make improvements and go beyond current routines, it encourages them to take their passion and ideas to other enterprises—this is the scenario executives should avoid at all costs.
Getting innovation right: transforming business through culture
According to McKinsey, around 95% of organizations are undergoing digital transformation. However, the success of this transformation will depend on how well organizations synergize technological changes and their vector with business objectives.
This task is much harder than it seems, as executives need to understand their business processes and flows, gather employee feedback, and get an overview of their competitive environment.
Leaders need to implement a set of change-driven norms, behaviors, and mindsets to build a system that encompasses all these elements and enables consistent enterprise upgrades. In other words, they should build a strong innovation culture.
Innovation culture covers more than just technology. It's about how you respond to changes and unforeseen developments as a leader and decision-maker. It's about your readiness to consistently deliver improvements for your employees and clients. And also it's about the courage to experiment, try new vectors, admit failures, and keep moving on. Such a culture requires some nurturing and lots of coordinated effort from all managers, teams, and executives—and it is very rewarding to live by.
However, what are the main principles of innovation culture and how can executives succeed at implementing it?
- Exploration-friendly outlook
An innovative company is open to experimentation and research. It encourages employees to leverage their knowledge and professional skills to make a greater difference for the organization and, potentially, the industry. It rewards initiative and passion, allowing workers to test their ideas and work on projects. - Customer-centric approach
Innovation culture is committed to driving personalization and human experience. Its goal is to ensure that every change is a positive one. Leaders and executives should practice this when adapting their enterprise to a new digital reality. Whether they plan to introduce new service offerings or expand their target audience through brand reinvention, they should communicate this transformation to their key customers and pay attention to their feedback. The true goal of innovation is to improve everyone's quality of life—not just for those who can keep up. - Flexible mindset
There is an outdated assumption that if a company has to change its stripes by switching to other products or specialization, it's bad news. Such a belief is rooted in a rather traditional approach to business where stability is valued above everything else.
However, the fast-paced world of today has normalized the process of adapting and branching out. Constant exploration of options and niches is part of innovation culture—the one that provides much-needed resilience for enterprises.
Therefore, executives should always remember that there will likely be no straight roads in their company's journey, and they should be prepared to change course if it makes more sense for their company.
It's important to understand that none of the abovementioned cases show an example of innovation culture being done wrong. They illustrate that building an innovation culture is not easy. Xerox, BlackBerry, and JCP are experienced companies that went through multiple challenges and aren't strangers to the change. However, each of them came across individual pitfalls due to gaps and blindspots in their strategy. At the same time, Xerox and BlackBerry managed to bounce back because of what they did right. Aside from taking valuable lessons from their journey, we should also be inspired by their resilience.”
If you’re interested in learning more about innovation adoption, let’s chat! Our vetted teams and consultants will provide you with the most relevant insights and implement best practices to turn your transformation journey into a success story.
