Effective innovation can boost stock price
Beyond competitive advantage, there is still evidence that innovation can
boost stock price. An article in a 2001 issue of Harvard Business Review
(Bemick, 2001) demonstrates how Alberto-Culver Company profited greatly
when president and CEO, Howard Bernick, and vice-chairman and president
of consumer products worldwide unit, Carol Bernick, made changing
company culture a top priority. Today, innovation is a way of doing business
for Alberto-Culver. Innovation is top of mind for everyone in the
organization, and maintaining an innovation culture is part of everyone's
responsibilities. Employees are measured and rewarded for enforcing and
stimulating a positive culture within the organization. As a result, between
1994 and 2001, Alberto-Culver gained approximately 83 per cent in sales
and 336 per cent in pretax profits while cutting employee turnover in half.
Is not the primary goal of every CEO to increase shareholder wealth and
generate higher returns to the owners of the company? You bet it is. One of
the fastest ways to achieve stock price appreciation is to launch a steady
stream of competitive successful new products and services. The key here, of
course, is successful new innovations. The introduction of failures or new
and improved line extensions would not yield increased quarterly dividends
or attract new investors, but effective innovations will.
Whether it is a steady stream of new products, a new innovative company, or
even a big-hit new product success, shareholders are getting smarter. Theydo understand the power of innovation. It is time for CEOs to mirror their
insight. It is time for senior managers to put innovation at the very top of
their ``to-do'' lists. Companies that place new products at the central core of
their business strategies, work at innovation, are committed to it, and enjoy
consistent financial rewards from it.
CEO, David Neeleman, understood this when he started JetBlue ± a low fare
airline committed to high-quality customer service ± in 2000. JetBlue set out
to ``bring humanity back to air travel'', with new planes, leather seats, up to
24 channels of DIRECTV programming for every customer, and friendly
service. The airline has kept prices and costs down by always using
electronic tickets and choosing to fly to less congested airports near major
cities. While other airlines have been crippled by economic conditions,
JetBlue's stock split three for two in December 2002 and is currently trading
in the 30s. Through consistent and controlled growth, as of 31 December
2002, JetBlue operated 168 flights a day to 20 USA locations and Puerto
Rico.