Although regularly developing and implementing new ideas might seem like a good approach for businesses, it doesn't always bring the value that's anticipated, new research finds.
This is a lesson businesses can learn from Formula One racing, according to a study recently published in the journal Organization Science. The study's authors discovered that the racing teams that innovated the most weren't usually the most successful on race day.
Jaideep Anand, co-author of the study and professor of strategy at The Ohio State University's Fisher College of Business, said Formula One racing is a good venue to study the value of innovation in business. That's because it's an innovation-intensive industry with teams of engineers, drivers and sponsors who all have to work together to succeed, he said.
In addition, there is an independent governing body for Formula One that enforces changes to racing teams' environments by releasing a new set of rules each year. This resembles the changes in the regulatory and business environment that businesses face.
"The conventional wisdom, that companies need to embrace change, is often wrong," Anand said in a statement. "We found that it wasn't always good to be the aggressive innovator."
For the study, researchers analyzed the extent to which racing teams developed and implemented new ideas each year. The researchers found that while a small amount of innovation was generally good, at some point, teams tended to perform worse when they changed too much. [Understanding Innovation: How Businesses Adopt New Technology ]
"Teams sometimes believed that the more the rules changed, the more they had to change along with them," Anand said. "But we found that small, incremental improvements were often better than big changes."
The study's authors said this occurs because, like many businesses, auto racing is a complex, interconnected system, and if you change one aspect, you risk altering other parts you want to stay the same.
"There's a risk when you make some kinds of changes that you won't be able to make the whole system work together again," Anand said.
Like auto racers, business leaders are better off making changes on the margins, where they can gain some efficiency without disturbing all the other parts of the system, he said.
The researchers said businesses can learn a lot from this study. Businesses too often believe that if they can develop new ideas quickly, they have a better chance of protecting their position in the marketplace, Anand said.
"But if you have a firm that has grown and prospered, you have traded innovation and constant change for efficiency and reliability," he said. "Those can be real advantages, too."
The study's authors warn that the research doesn't rule out times when developing new ideas, even radical ones, will bring tremendous value.
"But we're pushing back at the conventional wisdom that innovation is always good, and is always the right choice for business," Anand said. "Sometimes there is value in going slow."
The study was co-authored by Luiz Mesquita of Arizona State University, Alessandro Marin of LUISS University in Italy and Paolo Aversa of City University in London.