The Opportunity Cost Of Not Innovating

It seems to be ingrained in businesses to ask, “what’s the cost?” when considering a new innovation, but rarely do they ask, “what’s the size of the opportunity we miss if we don’t do this?”. 

Business history is unfortunately plagued with examples of companies that have paid a high price for not innovating. Such as AT&T missing the mobile phone, Kodak missing the digital camera, Yell was disrupted by Google; Borders by Amazon; Blockbuster Video (and now even our traditional TV channels) by Netflix … the list goes on. Once household names have vanished or had their rock solid leadership eroded. Why? Because they stayed still, acknowledging the changing world around them, but refusing to act… or act quickly enough.

The endemic and universal problem

Businesses too often overlook or deliberately choose to walk away from an opportunity because they’re bound up in their current processes and not really geared to doing something different, for whatever reason.

Yell got digital wrong because the inherent wisdom of the management at the time is that they ‘had’ to protect their print business first and foremost. Rumour has it that the employees on the digital side of the business had the vision and knew what needed to be done. They also had the skills & competencies to make it happen. But the acceptance and pace of change was unacceptably slow, so new enterprises took their business away – almost within the blink of an eye.

So, what questions should you be asking yourself to avoid missing out?

Firstly, it’s imperative to consider not only the short-term costs of innovation, but also the longer term implications if you don’t innovate. 

  • What is the cost of not innovating? 
  • What if a competitor launches a product or service before you do? 
  • What are the costs of being forced to respond, rather than forcing your competitors to respond to your great ideas?

Unfortunately, these are quite tricky questions to answer… or are they?

We would recommend that you go through the exercise of costing up the investment in idea generation and researching and building the business case for an innovation (and often the development of it too) versus the potential revenues missed by not launching it. Basically, how much money is wasted on innovations that never make it to market?

Learning the hard way

image source: Dollar Photo Club

Unfortunately, I can speak about this from personal experience. We led a project with a large multinational to understand the consumer opportunity and how to seize it for a new product feature. This feature was (at the time) new and revolutionary to their category, and one which they spent years and millions developing, and patenting.

We knew the product was extremely appealing to consumers because we conducted rigorous testing in the marketplace. Yet when we made a strong consumer and business case for them to launch the product, the client got cold feet. They were uncomfortable with the risks involved and too focussed on short term concerns. Over the coming years, competitors created products that were similar or virtually identical, and our client was forced to play “catch up”. We know what the costs of playing catch up were, and the facts are that the first mover commanded more margin and won more consumers than our client. So, it is possible to get an accurate account of the missed opportunities – albeit after the fact.

The harsh reality of missing an opportunity

image source: Shutterstock

Great ideas seldom occur in isolation. If someone in your company has come up with a fantastic idea that consumers love, sooner or later, a bright spark employed by one of your competitors will dream up a similar idea

  • If your competitor launches your idea and the product is an incredible success, they will earn hundreds of millions (if not billions), and those sales will come at your expense. You lose sales, market share and your reputation falls from being a leader to a follower until you desperately try to bring your now “me too” innovation to market

Some practical solutions to de-risk your innovation launch

  • Rather than commit to the launch lock, stock and barrel, could you conduct an in-market test in one country, or a region within a country, or with one retail partner for example?
  • Could you engage a retail partner to share the risk with you? (e.g. reduced margins, marketing investment contribution)
  • Could you scale back your launch to fewer products rather than commit to a full range?
  • If it’s an upgrade to a current product, could you implement it on a lower performing line?
  • Find a new route to market that gives you more flexibility and freedom


So next time you calculate the cost of implementing an innovation idea, but sure to also calculate the cost of NOT implementing the idea. Sometimes that cost can be far, far greater than doing nothing.

I’ll leave you with this final thought… Why be a follower when you could be a leader?


Talk to us about the risk of NOT innovating and how you can de-risk your launch.