The Actions That Are Holding Back Business Innovation
I spent over 40 years in the business environment working for large businesses. We spend up to 10-15% of discretionary income looking for new business innovation. And quite honestly we never had tremendous success or discovered what was holding back business innovation.
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Before I elaborate more on these personal experiences, let me tell you a story from the industry where I spent the bulk of my career.
On December 9th, 1968, a research project funded by the US Department of Defense launched a revolution. The focus was not a Cold War adversary or even a resource rich banana republic, but rather to “augment human intellect” and the man driving it was not a general, but a mild-mannered engineer named Douglas Engelbart.
His presentation that day would be so consequential that it is now called The Mother of All Demos. Two of those in attendance, Bob Taylor and Alan Kay would go on to develop Engelbart’s ideas into the Alto, the first truly personal computer. Later, Steve Jobs would take many elements of the Alto to create the Macintosh.
So what is holding back business innovation from success like this? There are many for sure. But here are the ones I will discuss today.
Forgetting innovation is never a single event
Don’t fall into this huge trap. Alexander Fleming discovered penicillin in 1928, but it wasn’t until 15 years later, in 1943, that the miracle drug came into widespread use.
We tend to think of innovation as arising from a single brilliant flash of insight, but the truth is that it is a drawn out process involving the discovery of insight, the engineering a solution and then the transformation of an industry or field. That’s almost never achieved by one person or even within one organization.
Holding back business innovation … not letting go of the cash cow
Many people think of innovation as discarding the old to make room for the new, but as Bain & Co.’s Chris Zook points out in Profit From The Core, smart companies realize that the bulk of their profits will come from current lines of business.
Take Smith Corona as an excellent example. Smith Corona was the best typewriter company for … well, a long time leading to the late 1980’s and the development of the personal computer. From then to the mid-1990’s, they became a leader in technologies related to typewriters, such as:
Laptop word processor
So they had a strong foothold in personal computer word processing just as personal computers and word processing were in their infancy.
They were in a perfect position to transition from the typewriter market (which were soon to be digitally disrupted) to the word processing market.
But they didn’t pull the trigger. Why may you be thinking?
My view and takeaways:
They viewed the personal computer market as a rival technology and market.
They believed they could win the competition by continued improvements in typewriter technology.
They found too difficult to give up their ‘cash cow’ market position for a new market (Even if you suspect the long term forecast is pointing to your competition).
They were locked into one frame of reference and refused to consider alternative situational views.
It is all about the timing of decisions, the culture of change, and the ability to take risks. If you want to have any chance of avoiding digital disruption, you need to be able to make changes and do so before you have to.
Don’t forget innovation depends on many skills
Let’s go back to the story of Fleming and Penicillin. The reason that Fleming was unable to bring Penicillin to market was that, as a biologist, he lacked many of the requisite skills. It wasn’t until a decade later that two chemists, Howard Florey and Ernst Boris Chain, picked up the problem and were able to synthesize penicillin.
Even then, it took people with additional expertise in fermentation and manufacturing to turn it into the miracle cure we know today.
Here is an interesting fact. From Dan Pink’s Blog, we found the following facts on innovation that we would like to share with you:
A study of the top 50 game-changing innovations over a 100 year period showed that nearly 80% of those innovations were sparked by someone whose primary expertise was outside the field in which the innovation breakthrough took place.
Wow! 80% created by someone outside the field where innovation occurred!
This isn’t the exception, but the norm. Darwin’s theory of natural selection borrowed ideas from Thomas Malthus, an economist, and Charles Lyell, a geologist. Watson and Crick’s discovery of DNA was not achieved by simply plowing away at the lab, but by incorporating discoveries in biology, chemistry and x-ray diffraction to inform their model building.
Not defining the problem correctly
We must make sure we are asking the right questions. They are often more important than the solution.
Too often, we treat innovation as a monolith, as if every problem was the same, but that’s clearly not the case. In laboratories and factory floors, universities and coffee shops, or even over a beer after work, people are checking out better ways to do things. There is no monopoly on creative thought.
But that leads us to a problem: How should we go about innovation? Should we hand it over to the guys with white lab coats? An external partner? A specialist in the field? Crowdsource it? What we need is a clear framework for problem-solving.
The best way to start is by asking the right questions: (1) How well is the problem defined? and (2) How well is the domain defined? Once you’ve asked those framing questions, you can start defining a sensible way to approach the problem.
Clearly, no one method can suffice. Look at any great innovator, whether it is Apple, Tesla or Google, and you’ll find a portfolio of strategies. So the first step toward solving a difficult problem is asking the questions you need to define your approach. To paraphrase Voltaire, if you need to solve a problem, first define your terms.
Assuming size and innovation are related
When most people think about innovation, they think about startups. And certainly, new firms like Uber, Airbnb, and Space X can transform markets.
But others such as IBM, Procter and Gamble, Amazon, and 3M have managed to stay on top for decades in some instances, even as competitors rise to challenge them. Then, when markets shift, these competitors disappear just as quickly into oblivion.
While it’s true that small, agile firms can move fast, larger enterprises have the luxury of going slow. They have loyal customers and an abundance of resources. They can see past the next hot trend and invest for the long term.
Remember, there’s a big difference between hitting on the next big thing and developing it consistently, generation after generation.
Not leveraging open innovation
When Microsoft launched Kinect for the Xbox in 2010, it quickly became the hottest consumer device ever, selling 8 million units in just the first two months. Almost immediately, hackers began altering its capabilities to do things that Microsoft never intended.
Instead of asking them to stop, it embraced the hackers, quickly releasing a software development kit to help them along.
Like Microsoft, many firms today are embracing open innovation to expand capabilities. Cisco outfoxed Lucent not by developing technology itself, but by smartly acquiring startups.
As was the case with Alexander Fleming and penicillin, most firms will find that solving their most important problems will require skills and expertise they don’t have. That means that, at some point, they will need to utilize partners and platforms to go beyond their internal capabilities of technology and talent.
Ignoring business model innovation
When Chester Carlson perfected his invention in 1938, he tried to market it to more than 20 companies but had no takers. It was simply far too expensive for the market. Finally, in 1946, Joe Wilson, President of the Haloid Company, came up with the idea of leasing the machines instead of selling them outright. The idea was a rousing success, and in 1948 the firm changed its name to Xerox.
The tricky thing about disruptive innovations is that they rarely fit into existing business models and so the value they create isn’t immediately clear.
Kodak made money by selling the film, so was slow to adopt the digital cameras that the company had itself invented. Yahoo’s business was focused on keeping users on its site, so passed on the chance to acquire Google.
Take a Lego business model experiment as an example. The business model is simple: any user can submit a product design, which other users will be able to vote for.
When a submission racks up 10,000 votes it gets a formal stage-gate review and – unless legal flaws or other showstoppers are identified – it moves into production.
The idea creator receives a 1% royalty on the net revenue. It is too early to say how many voted for submissions will fail the internal stage-gate review, but if Lego manages to provide clear feedback about submissions that fail, it will maintain the transparency of the scheme, which is essential to keeping the user base engaged.
It’s not just products that we have to innovate, but business models as well
Ignoring collaboration as a competitive advantage
When we look back to the great innovations of the past, it hard not to wonder how it could’ve gone differently. What if chemists had picked up on Fleming’s discovery of penicillin in weeks rather than years?
How many lives could have been saved? Was there no one who could have helped develop Engelbart’s vision of the personal computer outside of Northern California?
And now, the problems we seek to solve are significantly more complex than in earlier generations. That’s one reason why the journal Nature recently noted that the average scientific paper today has four times as many authors as one did in 1950.
At the same time, knowledge has been democratized. A teenager with a smartphone today has more access to information than a highly trained specialist a generation ago.
That’s why now collaboration itself is becoming a competitive advantage.
The bottom line
Take a slightly broader view, and it becomes clear that business innovation today goes far beyond research labs, Silicon Valley pitch meetings, and large corporate initiatives.
We all have something to offer and can add to the world’s knowledge in a way that may differ in degree, but not in kind, to the giants of the past. We all need to seize the initiative.
Need some help in improving the innovation process for you and your staff? Innovative ideas to help the differentiation with your toughest competitors? Or maybe ways to innovate new products and services?
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Do you have a lesson about making your innovation learning better you can share with this community? Have any questions or comments to add in the section below?
Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he blogs on topics that relate to improving the performance of business. Find him on G+, Twitter, and LinkedIn.
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