Wednesday, July 11, 2012

How Steve Jobs Solved The Innovator's Dilemma or How ClaytonChristensen Got Apple Wrong



On page 408 of Walter Isaacson's "Steve Jobs" biography, Harvard innovation guru Clayton Christensen is quoted as saying in Wired "If Apple continues to rely on its proprietary architecture...the iPod will likely become a niche product."  Steve Jobs read Christensen's book "The Innovator's Dilemma" and solved the paradox that has brought down many a successful company. 

As one who has read Christensen and followed how he got Apple wrong, I think it is worth taking a blog to talk about why the highly regarded academic expert on innovation was outsmarted by Steve Jobs--a real innovator. 



Let's back up and define the innovator's dilemma. By doing what good companies are supposed to do--focus on pleasing their most profitable customers--industry leaders are paving the way for their own demise. How? By ignoring disruptive technologies--the new, cheaper innovations that initially target small customer segments but evolve to displace the reigning product.

From Dr. Christensen's website:


Disruptive innovation
describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors. 


An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.  Characteristics of disruptive businesses, at least in their initial stages, can include:  lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics. 

Because companies tend to innovate faster than their customers’ lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers.  By only pursuing “sustaining innovations” that perpetuate what has historically helped them succeed, companies unwittingly open the door to “disruptive innovations”.

In its simplest form,
the dilemma is management practices that allow companies to be leaders in mainstream markets sustaining and improving products they have innovated are the same practices that cause them to miss the opportunities offered by disruptive technologies.

In other words, well-managed companies fail because they are well managed.
Paul Smalera of Reuters puts it this way:


Christensen shows how well-managed, profitable companies can become abject failures in a breathtakingly short time by doing all the right things: They refine their existing products to be better and better. They cater to their best, biggest customers. And they try to grow their profit margins with every passing quarter. But it turns out the path they’re on is something like C.S. Lewis’s gently sloping road to Hell.

So when Christensen predicted the iPod would be cannibalized by disruptive technologies if Apple did not license its FairPlay digital rights management to other device makers or allow other online stores to sell songs for use on an iPod, he was wrong because Steve Jobs and his team solved the innovator's dilemma!

When Apple nearly closed after the John Sculley era they were three months away from a bankruptcy.  Jobs returned as iCEO and restored the passion that created Apple before profits. 

His philosophy was make great products that solve problems customers don't know they have with products they do not realize they need yet.  By not falling into the trap of sustaining profits to please investors with more profits, Apple innovated a solution to the innovator's paradox. 

Steve Denning of Forbes said in 2010 that Apple, Amazon, and others who have solved the dilemma have developed a: 


consistent ability to innovate and to disrupt their own businesses with innovation...
The stakes are high. Firms that opt not to change won’t survive. The choice for them is clear: delight your customers or die.Those nations that don’t change will not prosper. The choice for them is equally stark: promote continuous innovation or accept economic decline." 


The foundation of this blog is America is the leading creative power in the global world because we are still the leader in ideas, innovation, and entrepreneurship.  So once again, we learn that "innovate or die" is how Apple overcame the innovator's dilemma.  

The lesson: Do not make maximum profitability your company goal.  Focus on creating value for your customers with great products, and if that disrupts and cannibalizes your own products--you have solved the innovator's dilemma.

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Wednesday, July 4, 2012

Innovation DNA

Innovation changes people and the world.  We often say "people hate change," yet some people love change.  They are the innovators.   Walter Issacson's biography "Steve Jobs" has sparked a fascination with innovation.  When you dig into companies like Apple, 3M, HP and medical innovators such as Cleveland Clinic, you find similar DNA.

Do you have innovation DNA? Take a look and find out!


Innovator DNA (Dyer & Gregerson)

The DNA of Innovation (Innovation Excellence).


Innovator's DNA (Insead)


Innovation in Organizations (Innovation-Creativity) and a great article on barriers to innovation about half way down the page.





* This post edited due to being originally written on an iPhone app.  It needed formatting and revisions done 7/8/2012.

Tuesday, July 3, 2012

Free Podcasts on Thinking and Innovation

The folks over at the American Management Association have put out some great free podcasts on thinking and innovation.  I came across these while providing on-going training for our organization's managers and thought the "What's New America?" blogging community would appreciate them as well.  Enjoy!

Adam Gordon on Being Future Savvy

In order to succeed in their industries, decision-makers today need to anticipate the future outcomes not only in their own industry but also in society and technology as well. Futures analyst Adam Gordon has spent a lifetime deciphering changes and...

Alex Frankel on Working Undercover at America’s Top Companies
Curious to know just what happens behind the "employees only" doors of big companies, journalist Alex Frankel embarked on an undercover reporting project to find out how some of America's well-known companies win the hearts and minds of their retail...
Alexandra Levit on Harnessing the Next Generation Workforce
Alexandra Levit is the author of They Don't Teach Corporate in College, a practical guide that delivers the vital information junior corporate employees need to succeed in today's tough business climate. As the founder of the career consultancy...
Andy Sernovitz on successful word of mouth marketing
Andy Sernovitz is co-founder and former CEO of the Word of Mouth Marketing Association, an organization that uses the latest innovations in blogs and buzz to build a prosperous word of mouth marketing profession, based on best practices, measurable...
Annie McKee on Becoming a Resonant Leader
Exceptional leaders capture passion. They lead for real: from the heart, smart and focused on the future, and with a commitment to being their very best. A new book, Becoming a Resonant Leader, by Annie McKee, Richard Boyatzis and Frances Johnston...
Barry Libert on How "We" Are Smarter Than "Me"
Online Social Networking is a reality. The millions of people who have a Facebook or MySpace page, or anyone who uses Wikipedia or Google, knows this. But for today's companies, the question remains, how can we profit from the crowds who are swarming... 




Friday, June 29, 2012

Obamacare and Innovation

This is a re-post of an article on Obamacare written in March when the case was before The Supreme Court.  Now that we know the basis for the constitutionality, let's look at the new American health care system through the lens of innovation and entrepreneurship. 






No matter what side of the Obamacare debate you come down on, it is big news this week as The Supreme Court hears the arguments for the single payer mandate, commerce clause regulation, and whether the government in the future can make you buy a cell phone or broccoli! 


No matter how you slice it or dice it, we have a problem in American health care.  In our employer based system, many small entrepreneurial startups cannot lure in talent using the health care benefit because they cannot afford it.  This in turn stifles new business growth. 


In addition, the uninsured expect to be able to get health care at the hospital when they need it with no responsibility to pay.  Those costs are rolled into the fees charged the insured!  So, the argument goes, wanting privilege without responsibility needs to end by mandating that people get their own coverage.  This will increase the number of insured which helps health insurance companies. 


All of this sounds good, BUT.  What about the constitutional issues and the relationship between a government and its people, freedom, individual rights, and so forth?


I am not making this article partisan.  In my research, I found constitutionalists are writing much more on the issue of how Obamacare will effect innovation, so there are more articles here from that perspective.  I would appreciate it if anyone can provide more arguments for innovation from the pro-Obamacare point of view. 


No matter how this turns out, there is much room for innovation in the way we do health care in America. What do you think--will innovation be helped or hindered by Obamacare?


Before we go today.. I love books of lists!  I loved this and hope you do too!

Wednesday, June 13, 2012

Diffusion of Innovation

Diffusion of innovation is an idea that some groups within a market are more ready and willing to adopt a new product than others and that the product is diffused through a society in waves.  




One of the biggest threats to preventing diffusion of a great innovation can lurk within.  In your organization, who are the innovators, early adopters, early majority types, late majority types, and laggards?  One of the challenges most of us face where we work is selling an idea to people in our own organization. 

People who as consumers tend to be laggards or late majority should not be put in positions at work where they can prevent innovation--here's why. 

Your ability to compete is often hindered by the play-it-safe crowd.  Let's stay with our proven "same-old" products and services because they prefer the safety of the familiar. 

The lesson of Kodak is staying with film and not moving forward in their digital innovation gave competitors an the opportunity to kill Kodak with their own sword.  The Kodak "play it safe" in our familiar territory approach to business is at best dangerous, and at worst life ending. 
The four main elements in the diffusion of new ideas are:
(1) The innovation
(2) Communication channels
(3) Time
(4) The social system (context)


Why do new ideas get shut down before they can ever get an opportunity for wider diffusion into the market?  Many times, organizational leadership puts people in positions where they become gatekeepers of innovation.  So, your own company social system can be a threat to your company's success if people who are laggards as consumers are put in positions where their "lagging" personality shuts down communication of ideas, innovation, and entrepreneurship at work.

For example, if you have a person who tends to avoid risk, play it safe, does not want to rock the boat, is controlling and on a power trip, does not like change, does not have a smart phone or use email, or thinks tomorrow will always be the same as yesterday, then it is likely good ideas will be aborted before they ever get a chance to grow by people who are by nature resistant to new ideas. These people are innovation killers.

Laggers will never communicate good ideas coming from those working under them to people above them.  Having naysayers as gatekeepers can lead to competitors having first mover advantage, and taking over your place in the market--can anyone say "Research in Motion?"

A proper balance of taking successful products through their full life cycle, knowing when to cannibalize your own old products, having good research and development, and maintaining the same entrepreneurial spirit that brought you success in the first place are keys to success in your industry!









Friday, June 8, 2012

Youth Entrepreneurs and More Reads For Today


  • All Terrain Brain: Great site for 8-12 Year olds to discover the entrepreneurial spirit (Website)

    Read how kids have started their own businesses.  Then, follow the roadmap (great videos--follow the maze).
  • Startup Basics--From EIN to Workers Comp   (Business News Daily)
  • New Teaching and School Models (Kauffman Foundation)
  • The Founders Dilemmas.  Read author intro here.  Watch a sketch by Noam Wasserman here.  



Wednesday, June 6, 2012

Innovation Steps


The main idea I want you to think about today is this: What problems are people facing in a slow stagnating economy that you can turn into innovation opportunities?  What are people complaining about most?  What solutions are people searching for?  Now think through these innovation steps

Innovation Steps

1.
Problems people have are most often the driving force behind innovation.  Problems, in reality, are human needs.  New ideas and ventures start with a problem.  The root of innovation is people want something solved, thus human need is the breeding ground for innovation.

Make a list of problems people have in the present economy.
2.  In many cases, an "aha moment" is the spark that lights the fuse of idea dynamite--exploding creative ideas that are the seed of solutions to solving the problems people have.  


Look at your problem list and brainstorm solutions.  Write them down because you will forget them. 


 3. Ideas alone will not result in innovation.  Ideas go through trials, iterations, and a development process.

The innovation process takes the idea and first prototypes it out to people.  Then, based on feedback, ideas are refined over and over asking "Will this solve your dilemma?"  


Who will you want to show your proto-type solution to?  Are you willing to listen--I mean really listen to people?



An Old Example



Let's make the abstract concrete.  The old Miller Lite beer problem was we want something that tastes great, but is less filling. 

Many businesses face this same challenge today as Americans are thinking more about obesity and health. 

People want healthy food and beverage items that are good for you, and taste good.  The problem is people are feeling pressured by society, wellness programs, and peer pressure to get healthier. 

So, let's say you devise a great idea for a zero carb product.  You roll out your prototype and ask customers and potential customers over and over and over--Does it taste good?  Is it healthy enough to meet your health and taste concerns?  This is how the iteration step works.

4.  Your innovation iteration launches your marketing plan.  As you have people try your products or services, look for which segments of people are responding most positively.  It may not be who you expected. 

Exposing your innovative solution to future customers helps with customer analysis and targeted marketing should you go to market. 

In our company, we were targeting the weight loss segment with a new low calorie "light bread," and in the process discovered diabetics found our product meeting their nutritional needs.  We never thought of that segment till we were doing store event promotions and talked to people receiving our promotional products!


All of the innovation steps described above can take weeks, months, and even years.  If you have an idea that you and many others think is good, be persistent and one day it just may pay big dollars!

Keep innovating! It is what America does best, and is the key to a recovery banging on all cylinders.  Go out and win!


Thursday, May 3, 2012

Apple Bigger Than GDP of 160 Nations!

Innovation and entrepreneurship, disruptive and creative destruction.  Apple is what Joseph Schumpeter, Peter Drucker, and Clayton Christensen try to teach us. 

Click the graphic, then click again for large image.  It is worth it.



20 Largest Private Companies

I think this is the fruit of innovation and entrepreneurship!  What do you think?  I had the opportunity to work for Cox last year and family logistics prevented it.  Sigh...


Milken Conference: Innovation and Entrepreneurship Digest

One of my favorite conferences I plan to attend each year is the Milken Institute Global Conference.  Here is a video digest of this year's sessions on innovation and entrepreneurship.