The Dark Side of Innovation

Finance heads have become addicted to innovation. Many companies are in a hurry to be the first to market the newest product or catch up to the competition. This focus tends to blind companies to the potential downside of adding a new product, like costs and added complexity. Excess innovation like this leads to little value being added to the company and eventually a downward spiral of profits. An example of this when the Netherlands based company, Royal Philips’, revenue decreased 40% in a span of 10 years. This happened because executives at the company expanded the company’s product portfolio so quickly that they could not handle the business complexity and the expenses that came along with it.

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