Can bad surprises be a good thing in business? How should you take advantage of the unexpected?
Innovation often comes wrapped in unexpected packages, such as unforeseen successes or failures. Companies must be ready to respond to these unanticipated events, as they can offer valuable insights into potential growth opportunities.
Find out how to inspire innovation out of good and bad surprises.
Surprise Success and Failure
Both good and bad surprises have their advantages. Surprise successes present a challenge because they often undermine a business’s basic assumptions or else go completely unnoticed. Surprise failures are similarly disruptive, as they sometimes necessitate organizational changes, a shift in resources, or new business assumptions altogether.
Peter F. Drucker writes that the clearest sign of a potential innovation is unexpected business success. However, capitalizing on a surprise triumph can be a challenge for a business that’s deeply entrenched in its traditional ways of operating. This is especially true if the success undermines the core product or service upon which the company has built its identity. For instance, if a prestige winery makes an unexpectedly large number of sales through a discount liquor chain, this might shatter its self-image as a business that caters to high-end, luxury tastes. However, if a business can embrace an open and humble perspective, it can transform surprise success into a catalyst for unlocking new avenues for growth.
(Shortform note: Despite signaling opportunities for innovation, a runaway success can actually be dangerous, especially for startups. Rapid growth can cause financial strain by increasing a business’s operating costs and the size of the workforce it needs, both of which can trigger a cash flow crisis. Unsustainable growth can lead to employee burnout and lower levels of customer satisfaction, thereby undermining the company’s reputation. Therefore, if you follow Drucker’s advice to analyze your success for innovative opportunities, don’t lose track of what your company needs to ensure its long-term survival.)
Surprise successes slip under the radar when organizations aren’t actively looking. Drucker warns that shifts in customer behavior and emerging market trends can go unnoticed if they fall outside the company’s established reporting mechanisms, which can prove disastrous if competitors take advantage of these opportunities first. To avoid missing out, leaders must continuously watch for signs of unanticipated success. When surprises occur, management must honestly assess what organizational changes may need to happen to nurture and expand on these wins, allocating top talent and resources if needed.
(Shortform note: One tool for detecting hidden patterns in customer behavior that wasn’t available in Drucker’s time is artificial intelligence (AI). Businesses can use AI to spot emerging market trends and to detect anomalous sales patterns that human analysts may otherwise miss. Using modern machine learning techniques, AI can process massive amounts of data and spot unexpected patterns in real time, such as unusual fluctuations in customer purchasing habits. As of yet, AI can’t make business decisions, but it can help entrepreneurs gain a deeper understanding of their consumers and their business’s market dynamics.)
Tell-Tale Mistakes
On the other hand, surprise business failures also serve as signposts to opportunities. Drucker says this is particularly true for endeavors that were thoroughly planned and executed, yet still failed to succeed. Such instances suggest that there are flaws in your assumptions, providing clues about aspects of your business that might be ripe for improvement if you can understand what led to the setback. Furthermore, businesses should remain attuned to their competitors’ failures as well as their own, as others’ unexpected struggles or successes may reveal opportunities to disrupt the current market. A willingness to adapt and retool in response to unforeseen circumstances can transform shocks to the system into catalysts for innovation.
(Shortform note: The flawed assumptions that lead to business failures—and that Drucker highlights as doors to innovation—could be more common and deeper than you think. In Alchemy, Rory Sutherland argues that all contemporary economic theories are flawed when they hinge on reason to predict human behavior. For instance, much of market research—such as a standard customer survey—rests on the assumption that people know the reasons behind their decisions, while their true motivations may be irrational and unconscious. According to Sutherland, the key to innovation is to identify consumers’ unconscious drives and use them to claim a novel stake in the market.)
