Should you reduce costs or innovate?

Companies often mistakenly believe that the best way to strengthen their competitiveness is by lowering operating costs and the prices of their products. However, if a company really wants to differentiate themselves from the competition, which should be the goal of all strategies, it must strive for innovation.

If you want to learn how much your company promotes innovation, start with the volume of investments in research and development.

Then look at the following areas companies often focus on when creating their strategies, but end up reducing innovation in the end.

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According to the Harvard Business Review website, CEOs should stop stubbornly focusing on these four areas.

1. Reducing costs

Do you want to stand out? Stop focusing on cutting costs, focus on increasing revenues. There is a a significant difference between efficiency and innovation.

2. Listening to customers

If you ask customers what they want, the most frequent answer will be the cheapest possible products. However, remember Steve Jobs, who promoted the idea that customers can't know in advance what exactly they want. It's your responsibility for what the leading products are in your field, not your customers'.

3. Incremental steps

Small gradual steps can help you achieve business success only in the short term. In the long term, you need radical innovation.

4. Acquisitions

The less a company innovates, the more it has to invest in acquisitions of other companies. Examples of successful companies, however, clearly show that it pays off more to invest in your own talents.

If you want your company to be more successful, invest in research and development, look for market segments with a higher value for new products and areas of interest, and strive for global expansion.

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Article source Harvard Business Review - flagship magazine of Harvard Business School
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