The economic crisis has sent shock waves through companies around the world. In order to survive, businesses are laying off employees by the thousands, adjusting their forecasts downward, and scaling back plans for expansion. While such drastic measures may help companies ride out the turmoil, they are short-term fixes—at best. Smart leaders of all kinds are simultaneously grappling with the most important question facing business today: Once things stop getting worse, how will we grow?
It's become fashionable in the last decade to prescribe innovation as the cure for every ill facing business. If companies could only start creating compelling products and services on a regular basis, they would never need to worry about next year's growth figures. While that might be true, such talk tends to focus on design or even flashy marketing. In the process, a critical factor gets left out of the conversation: empathy, the ability to see the world through the eyes of another person. Unless new products or services connect with the lives of real people, design or marketing can't do much to make them succeed.
When organizations develop a shared and intuitive vibe for what's going on in the world, they're able to see new opportunities faster than their competitors, and long before the rest of us read about them on the Internet. They have the courage of their convictions to take a risk on something new. And they have the passion to stick with it even if it doesn't turn out right the first time. Despite years of hype, the problem with business today isn't a lack of innovation; it's a lack of empathy.Microsoft Scores with Xbox
The benefits of empathy in business—and what happens if you don't have it—can best be seen in the tales of two major product launches from the same company: the Xbox and Zune from Microsoft (MSFT).
By early 1999, the video game console business had become far too big for Microsoft to keep ignoring. Company executives had watched as pioneers like Atari and then Nintendo developed the fledgling industry, built a fan base, and made it financially viable for both console manufacturers and game developers alike. But then, in the mid-1990s, Sony (SNE) took the business to a whole new level. Sony had leveraged its vast technical capabilities to make PlayStation a worldwide success.
Now, Sony was readying the launch of PlayStation 2. The PS2 was much more than the toys that had come before it. The console was a high-powered entertainment engine capable of playing DVD movies, importing digital video, and connecting to the Internet. And it did it all without using a single line of Microsoft programming code. Having successfully fought off rivals like IBM (IBM), Apple (AAPL), and Netscape, Microsoft now faced the prospect of irrelevance as younger people came to spend more time on their video game consoles and less time on their PCs. Microsoft had no choice but to act and formed an internal hardware team to develop a console of its own.
A little more than two years later, Microsoft launched Xbox, a brawny game system that featured Halo, an adrenaline-fueled shooting game that was beloved by hard-core players. Xbox was an overnight sensation in the U.S. Halo alone sold more than 5 million copies, making it the top-selling title of its generation.