Every company states that “innovation” is extremely critical for them. Then why don’t most of them never act on it?
If you pay attention to any company’s vision/ mission statement, chances are that they claim to treat ‘Innovation’ with their highest priority. However, if you have worked within these companies, you might know the reality behind how much focus are the companies actually able to provide to innovation.
So is everyone lying?
I personally believe that the intent is there, but realistically, it’s easy to get stuck in the cycle of finishing the next item in your portfolio as quickly as possible. In the fast-paced world of ever-approaching deadlines and stakeholder expectations, you will be busy putting fires out while ensuring development is treading along. It’s essential to set an environment in your product life cycle that will allow you to constantly innovate. This part of the book focuses on practical approaches you can take to embed innovation into your everyday processes.
We have countless examples of the largest companies in the world ruling the market, then just ceasing to exist in a short matter of time. Nokia and Kodak, who at one point in time had the largest market shares in their fields, completely disappeared. Their entire industries changed around them — Nokia with the advent of smartphones and Kodak with the introduction of digital cameras. But perhaps these companies were not fast enough to adopt the changing landscape by identifying the right innovation to work on.
In today’s digital age, everything is changing at an accelerated rate. The way you communicate with customers is much faster, the way they provide feedback is much easier, and your competitors have the same tools as you when it comes to leveraging technology, go-to-market tools, and advertising tools. Whether you are a start-up or a large, multinational corporation working on the latest product, you will leverage social media for your marketing. Old marketing advantages previously reserved for large companies are a thing of the past. Gone are the days when the fastest way of marketing your product was through a very expensive TV ad. Today, you can start marketing your product on Facebook, Instagram, or TikTok in a matter of days. These channels are already being used by your competitors, so the need to stand out is all the more critical. The only shot you have at creating a competitive edge is to innovate — and innovate constantly.
Another big change brought to us by the digital age is how rapidly customer insights lose value. In other words, the insights that you gather about your product have a shorter shelf life than they would have years back. Your customers’ experiences and opinions will be changing constantly. Within a B2C setting, your customer can go from liking a feature to hating the same feature in a matter of months. Given the immense number of options and information they have, the needs of customers are in constant flux. The life cycle of any growing product is shown in th the chart below:
The life cycle of a growing product today.
So, you start with a product, something that the customer touches and feels. Then, as you add more customers, there will be a growing need for services. Imagine a travel e-commerce website that lists all the flights you can book. As the customer base grows, there will be a need to ensure that there is a good customer support service added. Maybe several customers will start looking for recommendations or need help with insuring their trips. Then, those customer needs will be transformed into experiences. I was part of one of the largest airlines in the world, and they had strong products (airplanes for transportation) and services (e-commerce and support websites), but the customer was looking for experiences. That is why the airlines introduced A380s, the latest and most innovative commercial aircraft, to provide a new experience for the customer.
After experiences, the next step a customer is looking for is trust. A customer needs to know they can trust a brand or product they’re using. A customer trusts that Apple will provide high-quality products, no matter what they build. Your product will need to instill the same kind of trust in what your company does.
A common trend today is personalization. Think of Netflix recommendations, Amazon wish lists, or when you go to a Starbucks and they already know your name.
In all these steps, there needs to be a constant focus on how to provide a unique experience to your customer. That is the only way they will form long-term relationships with your company and products. Remember, every day, a new company or start-up emerges that offers the same product as you.
To ensure that you are constantly growing through implementing relevant features, you must be clear on how to balance the next set of features with improving your current product offering. You will need to have a steady stream of new ideas and ways to innovate.
This will allow both start-ups and corporations to grow. If you work in a corporation, an added advantage is that it will definitely get you brownie points. There is nothing that will please your manager more than being able to boast that his team is working on something that’s trending in the industry.
Innovation has been my biggest motivating factor in building products. Keeping aware of upcoming trends and applying them to solve a problem is something that really motivates me. Constantly innovating will keep you engaged and refreshed as you work on the next problem. However, making time to innovate every day and then experimenting with and learning from these new ideas can be difficult.
Iterate and innovate constantly
If you are an early-stage start-up, the good news is that you’re already innovating every day. You are hungry for the next thing that will click, work, and hopefully go viral one day. However, as you scale or are in a corporate setting, being able to work on innovating is hard. As Steven Fahrenholtz puts it “Innovating is hard because the very things that make a company thrive are exactly the same things that make it difficult for them to embrace the new.”
The environment is often not set in a way that allows for untested ideas or those that are not associated with a specific business value. As things scale, you may constantly be short-staffed and only able to complete the work for the given funding cycle. Adding work on top of that is a tough sell, but you can do it with the right strategy.
Let’s consider World War Ⅰ for example. J. F. C. Fuller, Chief Staff Officer of the British Tank Corps, devised a strategy to use new British tanks to roll over the German trenches and strike a decisive blow that would end the war. He proposed to amass 5,000 heavy and medium British tanks, 3,000 of which would be used to penetrate German defenses along a ninety-mile front with air support. Eight hundred faster-moving medium tanks would then proceed to attack the German army’s string of headquarters miles behind the trenches to disrupt the command structures. A further 1,200 medium tanks — supported by artillery, airpower, cavalry, and truck-mounted infantry — would then move to penetrate far behind enemy lines.
His plan was revolutionary. Until then, tanks had only been used to open gaps in enemy trenches, which would then enable the infantry to advance on. Fuller was proposing something that had never been done before. He wrote, “Tactical success in war is generally gained by pitting an organized force against a disorganized one.”
However, this plan was never used by British forces. Not only was this strategy not accepted by multiple nations at the time, but they also went to great lengths to stop the publication of Fuller’s book until several years later, when Heinz Guderian was able to get a copy.
Fuller’s strategy went on to be studied by the Germans and implemented to devastating results many years later. In fact, Fuller had essentially proposed the Blitzkrieg strategy before the Germans ever put it into practice.
This is the same thing organizations do when they look at the new through the lens of the old and ignore truly transformational ideas and concepts. This can be true even if those concepts originated inside their own organizations, like Xerox PARC’s personal computer with mouse and graphical user interface, Steven Sasson’s first digital camera for Kodak, Sony’s Memory Stick Walkman, and the IBM Simon, the first touchscreen phone.
Joshua Gans, author of The Disruption Dilemma and economist at the Rotman School of Management, said, “Disruption describes what happens when firms fail because they keep making the kinds of choices that made them successful.”
By no means am I suggesting that the executives are the bad guys here. In fact, according to McKinsey & Company, only 6% of executives are satisfied with their innovation performance. It is not a set of individuals, but the structures that are responsible for not allowing new ideas to come to the forefront.
At the end of the day, an executive reaches their position on the corporate ladder by being more aligned with strategic initiatives. This also means that they are constantly making logical decisions and mitigating risks for the organization. At the end of the day, everyone wants to save themselves, whether they’re an executive or on the team below them.
Companies that become more risk-averse than others face something called the innovator’s dilemma. In his book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Clayton Christensen demonstrates how successful, outstanding companies can do everything “right” and still lose their market leadership — or even fail — as new, unexpected competitors rise up and take over the market. He identifies the two main factors:
· The value to innovation is an S-curve. Improving a product takes time and many iterations. The first of these iterations, or MVPs, provides minimal value to the customer but the base is created in time and the value increases exponentially.
· Incumbent-sized deals. The incumbent has the luxury of a huge customer set but high expectations of yearly sales. New entry products find niches away from the incumbent customer set to build the new product. The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture. For this reason, the next-generation product is not being built for the incumbent’s customer set and this large customer set is not interested in the new innovation so keeps demanding more innovation with the incumbent product. This is where the new entrants see an opportunity to provide additional value to the customers with new added products and services.
Innovations can be broadly classified as disruptive and sustaining.
Disruptive innovation means to reinvent a technology or business model, or create a new one altogether. There are many great examples of disruptive innovation, such as Waze, Airbnb, and Uber. Disruptive innovation generates new markets and values in order to disrupt existing ones.
Disruptive innovators significantly alter a product or service in ways that the market did not expect. They do this, first, by discovering new categories of customers, and second, by lowering costs and enhancing quality in the existing market. They do this partly by harnessing new technologies, but also by developing new business models and exploiting old technologies in new ways.
Unlike disruptive innovation, sustaining innovation seeks to improve existing products. This means it does not create new markets or values but develops existing ones.
If an innovation is truly disruptive, executing it will not make any sense on paper. When a disruptive idea is being evaluated, there often isn’t a detailed market study or much information on customer behavior, and likely no successful use cases to refer to. For instance, when Uber started, they did not have reference points from other ridesharing services to convince investors. On paper, of course, it makes more sense to improve what is already working.
The above diagram showcases a typical path for different kinds of innovations and how different customers experience them. If you were to create a scale between the most demanding customer, or someone who uses your product often, and the least demanding customer, you can see how their experiences differ when it deals with innovation. An avid user of your product will expect better experiences and services as you mature your product. This means you will focus your innovation on enabling better quality for your most demanding customers. However, the rate of innovation eventually decreases as you are catering to the needs of the more demanding customers. On the other hand, when you focus on disruptive innovation, your rate of innovation is hard to gauge at the start, since acceptance of disruptive features requires time, but the rate of innovation picks up eventually.
Product improvement takes a lot of time and requires multiple iterations. At this point, the value for the customer is minimal, at the bottom of the S-curve, in the chart above. While disruptive innovation initially caters only to a small and not-so-profitable customer base, established organizations are focused on serving more demanding, high-end customers that use their existing value channels.
Think about it. If you go and ask your upper management to invest in a potential idea that won’t furnish results for a while but has a slight chance of gaining exponential growth, will your management support you? Even if they do, would your internal team structures and peers support this success? If you have followed the practices in this book, then the answer should almost always be a yes. However, that is not usually the case.
That is why there is a need to create a source of incoming ideas that are a good mix of disruptive and sustaining innovation ideas and implement a structure that will enable high risk-taking capabilities.
I will cover how to in source innovation ideas in the next blog.
 Encyclopaedia Britannica, “J. F. C. Fuller”
 Gans, The Disruption Dilemma