How important is innovation?

Here's one way to answer that question: Go back in time to April, 2006
Do a quick Google search for Circuit City earnings at that time and you can find the following article:
Circuit City Stores Inc., the second-largest U.S. electronics retailer, said fourth-quarter profit jumped 65 percent on holiday sales of flat-panel televisions, notebook computers and MP3 players. Net income increased to $141.1 million, or 80 cents a share, on a 13 percent gain in revenue to $3.9 billion, the Virginia-based company said. Sales at stores open at least a year climbed 12 percent. Circuit City limited markdowns in the quarter and had lower expenses after closing fewer stores. The company expects demand for advanced televisions to continue, and forecast a revenue gain of up to 11 percent for the fiscal year.
April 2006 was an exciting time for Circuit City, but if you come back to the present, a very different picture emerges. As of October of 2008, Circuit City was merely a penny stock.
Why did that happen? They were a very good retail company, with a fantastic network of stores, good products and a growing net income. They were selling goods and services the way successful retailers had been selling for decades. That didn't change in two years.
What did?
Did the buyers change? Was it because of consumers like me?
I built a new PC recently and upgraded my home networking. Unlike a few years ago, the Electronics buying experience has changed fundamentally. I conduct price comparison using Google Products, look for deals at FatWallet.com, and get cash-back from Microsoft Live. I don't go to stores anymore. Even when there are good stores. I buy on-line.
Imagine again that we could go back in time to April 2006
What would have happened if instead of the release above, the CEO told the analysts that despite a reasonable, quarter they planned to reduce stores by half and redefine themselves as an online e-tailer. Would Wall Street favor such a move?
If that had happened, could Circuit City have had results similar to Amazon.com in 2008.
(they beat Wall St. expectations during one of the worst recessions since the 1930's).
So if we extrapolate to the future...
We can feel pretty certain that companies will not survive just because of their size or their current earnings. The time has come when companies can not stop innovating and redefining themselves. In 2006, it was not a secret that more and more customers were moving to on-line purchases. Companies must be willing to change, and Wall Street needs to understand the imperatives to change. Otherwise, large successful companies like Circuit City will have shorter and shorter lives before they are put out of business.
Innovation is more than a corporate initiative, it's a survival imperative.