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Bringing Tech to Market: The Rules of Innovation
Everyone knows that best-quality plus first-to-market doesn't always equal success. A Harvard prof who specializes in this stuff has a great article in Technology Review that digs a lot deeper, called
The Rules of Innovation.
It's a look at why some technologies are marketplace success stories and some are forgotten failures -- and more, an attempt at rules which predict which will be which. There are lessons here for the entrenched companies (e.g. Sony) as well as for the disruptive upstarts (e.g. Sony 50 years ago). You have to understand the battlefield to win the war.
i think the biggest factor boils down to luck...
In computers, it's the SoundBlaster principle. If you're first, you win. Even if your technology sucks. Creative Labs was putting out the crappiest soundcards out there for a LONG time - and took the market. Same with Microsoft, and 3dfx... 3dfx managed to blow it, but for the most part, in the computer market, if you don't blow your lead... first wins.
.COM
That's why all the VC's went nuts trying to stake out
Rules of Marketing? The best quality product to market first IS the most innovative, but that doesn't mean it will sell.
"And we have seen and do testify that the Father sent the Son to be the Savior of the World"
1 John 4:14
This is something that's irked me for a while, since I switched over to the Dvorak keyboard layout (see sig for link to more info). The Dvorak layout is more efficient for typing English text than the standard Qwerty layout, but never succeeded due to market inertia.
Read my keyboard review.
Best quality + first to market almost never means success. Inferior but good enough, introduced when people are used to the idea almost always wins.
The strongest insight in the article - and the best supported - is that well-managed companies that take care of their existing customers well are often not innovative, because processes and methods that are profitable are unlikely to be challenged, and because truly outre and novel ideas are too disruptive to be welcomed. The notion that innovation occurs in the context of and also creates disruption is a reasonable one. The rest of the article is questionable: his observations that lean projects are more adaptive than ones that have deep pockets which let them stick with a 'a bad strategy' begs the question of what a bad strategy is. It's the Right Thing To Say in a post-boom age (profits now! no vapor!) - but it omits the many successes that came of plodding along after initial disappointments. And, as soon as he used the word "leveraging" I know his article had run out of ideas.
Microsoft tends to solve problems by throwing money at them, but if this article is correct, that is a flawed strategy. The excess cash allows them to keep a flawed product on the shelves (e.g. XBox) long past the point where a poorer company would be focusing on improving the product to make it match the customers needs.
Food for thought, anyway.
--
I have taken more out of alcohol than alcohol has taken out of me - Churchill
This is the concept Christensen is famous for (and there is a book titled after it which you should all read) Here's my 10 second synopsis of Innovator's Dilemma:
Your old customers are demanding you spend all your resources on your old technology (eg. 5 1/4 inch disk drives) But there are new potential customers who want to buy new technology you haven't developed yet (eg. 3 1/2 inch disk drives) There are more potential new customers than old customers, and thus more profits in devoting your resources to new technology. But you already have your old customers, and you're supposed to *listen to your customers* So there's the dilemma.
Solution to the dilemma? Sometimes it doesn't pay to listen to your customers. And that's a tough pill for an established company to swallow, since that's how they made money in the first place.
Websurfing done right! StumbleUpon
1. You do not talk about Innovation
2. If you do talk about Innovation you must be Microsoft.
3. If you are not Microsoft you DO NOT INNOVATE
4. Bring lawyers too.
But I must quibble with a few points. I suppose he knows more about it than I, but does all innovation in a given field necessarily take place on the low end? What about new products that may or may not be higher-end than existing products? (Example: The runaway popularity of SUVs, which are certainly NOT low-end impulse purchases, and newer models of SUVs seem to subscribe to the Micro$oft bloatware model: more, more, more [useless] features and a higher and higher price tag. But people sure buy 'em.)
Secondly, I'm not sure his hypothesis works for all his examples. I'm pretty sure, for instance, that Wal-Mart got where it is by a combination of unscrupulous business tactics and leverage, NOT just by providing the lowest cost per item. I've heard that Wal-Mart pressures its suppliers into giving it the lowest possible price, and generally creates "race to the bottom" conditions wherever it goes.
Third and least important quibble: Fergodssakes, man, if you've got something to say, write it so it's actually readable! "Creative creation"?! I've heard MUCH better phrases for that concept (including "wealth creation"), that DON'T leave one wishing one's office had a shower cubicle. "Leveraging"?! Pleeeease... Is it just me, or are all biz-school types these days just far too in love with the euphony of buzzwordiness?
Nevertheless, I'm going to forward this one on to my entrepreneurial boss. Let him take the advice...and the shower.
?!
I'm not a geek, I'm just a clever script.
If the transition costs you impose on your customers is too high they'll run for the door screaming. It doesn't matter how wonderful your technology is. That's why DIVX and HDTV are dead or dyeing for example. You can't make it so hard to use or purchase or install that only primary adopters use it.
cough cough hack linux cough bsd
That's the lesson of desktop linux - it doesn't matter HOW BAD MS is - what matters is HOW HARD the transition to something else is.
He seems to have figured it all out. But can anyone point to a resource that describes the author's own success in developing an innovative product/company? And I'd like to see something more substantial than an unknown consulting company or similar.
There's the academic world, then the real world...
A well written article. His main point is that contrary to the VC's thinking, you can analyze and predict success. However, he gives a powerful counterpoint aswell:
What drove Sony's shift from a disruptive to a sustaining innovation strategy? Prior to 1980, all new product launch decisions were made by cofounder Akio Morita and a trusted team of associates. They never did market research, believing that if markets did not exist they could not be analyzed. Their process for assessing new opportunities relied on personal intuition.
Dvorak failed because the mechanism it was designed for could not function properly.
/. aint really worth the effort.
The original type writer started with dvorak keyboards, actualy started with a lot of layouts, but the dvorak method caught on. But then they found out that people could type too fast, and the keys would get stuck. this would kill in aded efficience they were getting for switching to type write, which where very expensive, and there users required training.(sound familiar?)
so someone came up with the qwerty method bacause it slowed people down.
none of this applies to todays market, but training momentum has kept it going. what may finally begin qwerty's decent is the fact that I can change they layout of my keyboard through software.
The first CEO that demands there people learn Dvorak lay out will get a nice bonus from the increased productivity.
I would rather see people learn the dvorak method, then most coding 'techniques' that are implimented to imnprove code speed release, and usually don't
yes I know its probably Ironic that I typw something like this, and it will no doubt have typos, but
The Kruger Dunning explains most post on
Not that I think the there is a problem with the concept of helping students Cram for exams.
But the url www.cramming.com forwards you over to a pornographic website.
I don't think that this is the type of cramming he had in mind.
Open Source Identity Management: FreeIPA.org
A few years back, I worked for a small company that was developing a cell phone localization technology. We had a patent on one of the primary means of locating an unmodified phone (worked rather well too). The problem was that while we were developing the technology, we had to beat people over the head at the same time to make them see how valuable the idea was.
:)
Nowdays, the FCC and all the carriers are still trudging towards the goal of fully implementing E911 and we ended up having to sell out to a competitor having spent too many resources building the market. sigh.
Don't anthropomorphize computers, they don't like it.
...most notably Amazon. They're still the leader in user-friendliness among ecommerce sites, and always have been, right from the beginning. Not to mention other quality issues. And they were the first major ecommerce player.
IANAET (evolutionary theorist) so take these comments with care.
One element of the theory of punctuated evolution says that new species arise not by direct competition against their parent species, but by finding an isolated and protected niche where they can develop.
Say a new species of horse is to develop. A subpopulation becomes isolated and has a chance to develop new characteristics and to become reproductively distinct (no longer interbreeds with the parent species).
Then, when the geographical isolation ends, the new and parent species come into contact and competition. The new species spreads rapidly, having had a chance to strengthen in isolation.
This theory is designed in part to explain gaps in the fossil record. The small, original populaiton of the new species leaves few fossils - we only see them after explosive growth - so some intermediate forms are lost.
That sounds like the article's model of innovation succeeding by finding a niche market before improving the product to compete head on head in the general marketplace.
Wonder what other analogies exist with evolutionary theory and this article.
Why do you assume he's not doing it? Someone once asked the economics professor at my school "If you know so much about starting companies, why aren't you a millionaire?" He answered "I am."
After reading the article, the one thing I want to do is hear from Akio Morita about why his intuitions were so often correct at Sony. Doesn't that put a lot of MBAs out of jobs?
Too bad cramming.com is already taken!
--Dave
Take his criteria for a successful disruptive technology. I can't help but observe that the light bulb, a successful innovation if ever there was one, satisfies neither. The answer to 1 is negative because neither the poor nor the wealthy were capable of lighting their homes with electricity at the time. Likewise the answer to 2 because there was no existing market. Yet this technology was undeniably disruptive; just ask the manufacturers of candles, oil lamps and gaslights.
Later on in discussing (as far as I could tell) allocation of resources, he says, "Processes, however--the central element in our second question--are typically inflexible. Their purpose is not to adapt quickly but to get the same job done reliably, again and again." He must be completely unfamiliar with the Software CMM (and now the CMMI for other disciplines) where to attain the highest rating and organization's processes must be flexible. Continuous improvement of processes is one of the more important lessons from the quality movement Prof. Christensen discusses in the opening of his article, so I'm a little surprised he chooses to ignore it here.
This leads me to suspect that some of his other examples are flawed too, but I don't know enough about all of them to detect it. I don't trust his conclusions, in any event.
And the brethren went away edified.
You know.. /. headline for the article. Spent about 5 minutes reading various replies and comments about the article and I still had no real interest in actually reading the article. Then I read your comment which sparked my interest and I went and looked.
/. too much..
I read the
Now I know I have nolife and hang out on
Bad boys rape our young girls but Violet gives willingly.
This is drifting off-topic, but what the heck.
The first CEO that demands there people learn Dvorak lay out will get a nice bonus from the increased productivity.
Assuming you're talking about a software company, I could not disagree more. I think any difference in productivity would be small and it would be next to impossible to establish faster typing as the reason. (If you're not talking about a software firm, then you might possibly be right, and I have nothing to say.)
I think there are other things that contribute to software development productivity. Good and open communications between developers and a quick bug catching process that gets bugs fixed before they become panic-mode fixes... these two things by themselves would completely dwarf any productivity increases due to better typing.
The one place where I do believe that a mechanical skill would help productivity in a software firm is a twofold skill: touch-typing (either QWERTY or Dvorak), along with deep familiarity of a text editor. When I see some people poking away at their keyboards, it leads me to believe that my skill in the above two areas really does increase my productivity.
When I have sudden "what if?" flashes, it means I can bang out a quick test twice as fast as someone else, which means I can try twice as many different options. It also means that I don't mind taking the extra time required to format my code nicely, or even document it (gasp!), because for me, it's not that much extra time.
In the end, I believe it means I can produce either twice as much code, or in the same amount of time, I can produce code that's twice as good in quality.
Just MHO. Mostly off-topic. Moderate at will.
Accountability on the heads of the powerful.
Power in the hands of the accountable.
Your old customers are demanding you spend all your resources on your old technology (eg. 5 1/4 inch disk drives) But there are new potential customers who want to buy new technology you haven't developed yet (eg. 3 1/2 inch disk drives) There are more potential new customers than old customers, and thus more profits in devoting your resources to new technology. But you already have your old customers, and you're supposed to *listen to your customers* So there's the dilemma.
Sounds like Jobs must read Christensen, since he's all about dumping old technology for the new (e.g. floppy disk drives). He must just do s/distruptive new market/Next Big Thing/g... it does seem like Apple has become pretty good at keeping its existing markets safe while disrupting its competitors.
There are 10 types of people in this world, those who can count in binary and those who can't.
That aside, I think you summed up the business model that he's talking about pretty well. It's a good parallel.
Any sufficiently simple magic can be passed off as mere advanced technology.
Well, there was incremental innovation in the whole SUV market that has changed what people drive. They used to be work trucks. Luxury SUVs are a relatively new thing, as are Mini-SUVs. (built on a car unibody chassis) People who would have bought a station wagon back in the 70's are now buying some sort of SUV's. The fact that a company like Land Rover was an early leader, but that the market is now dominated by the Big 3 sort of proves his point about how hard it is for a new or small company to break into a market using sustaining innovation.
Don't moderate flamebait as Troll. Know the difference or you will be Meta-moderated.
disrupting competitors, not customers
Okay, so what is the best way to disrupt your competitor? What, you say, build a better product? NO!!! Dammit! Hire lawyers! Lots of 'em for frivolous lawsuits. Why? It slows down the competition so a) you can keep a weak product on the market longer b) if you are damn lucky, you can kill their product.
I have worked for a lot of companies and have been surprised at the number of frivolous lawsuits that do PRECISELY that. I really don't consider that "competing" (which is what "competition" is about, right?). Isn't the point to build better products? Last I looked, lawyers really weren't considered to be a part of economic theory (but, hey, economic theory says monopolies provide the lowest priced goods - guess there are flaws in everything, eh?).
So, if we look at Microsoft, in essence they did EXACTLY what this guy says is successful. The question is, was it ethical or moral? And my grandfather could have made children work in coal mines for slave wages while he got rich, but noooooo, he had this damn ethical streak!!! So now instead of a billionaire, I'm a working stiff. Doesn't seem fair in the end does it?
Expect more folks to be following the Microsoft model [sigh]...
IANAL, but I've seen actors play them on TV
How does this apply to the rest of the world (Europe to be more exact)? I have a theory that the American market will always prefer crap over quality if it is cheaper. Has anybody done a study on the cost of this "cheapness"? A WallMart chopper will buy a $10 toaster over a $25 one just because it is cheaper. That toaster will be "toast" within a year. Then they must go out and buy another one. And another... When is cheaper really cheaper? That's saying nothing about dealing with the costs of producing volumes and volumes of these cheap goods, dealing with the waste they generate, etc. It is costing YOU a buck or so in tax money to deal with the waste generated by each of this proverbial crappy toasters.
A "disruptive" technology is good in the sense it forces the established forces to adapt. On the other hand, it also creates goods and services that are not necessarily good enough and with it, the necessity to buy these things constantly. It's a chicken and the egg scenario. Is the "disruptive" technology answering the desires of new consumers or is it creating new consumers from nothing?
... about Dvorak vs. Qwerty, but have no idea if they're true:
- Dvorak is significantly better than Qwerty. But there are a number of other "improved" keyboards that are about the same amount better than Qwerty. So if you're an executive looking into paying to retrain, you look into the merits and find there is no clear choice.
(We hear a lot about Dvorak because it's the one that gets better press, and has some support in the computer community, more for historical reasons than its merits relative to other improved keyboard layouts. That, combined with the relative ease of remapping a computer keyboard {compared to a mechanical typewriter} might get it over this hump. A trivial graphic config tool in Gnome and Kde would give it a BIG push.)
- Qwerty wasn't deliberately designed to be slow. It was just the first layout that was built by that group of engineers. The deficiencies were quickly discoverd and they came up with a better layout. And management nixed it because of the retraining costs - the first such decision.
At the time there were less than ten trained typists.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
...but I'd be quite interested to see a writeup on whether these dynamics applied equally to the usage of various pieces of Free Software. Any ideas? I'm not sure it applies as well... for instance, I've seen some small and great text editors sprout up in the last few years, but I know quite a few people who love and will never give up GNU Emacs. =)
Paranoid
Bwaahahahahaa.
The USA is awfully good at many things, but sometimes I think it's too good. As research into disruptive marketing improves, the big companies learn more and more about maintaining their control.
David Korten, in his book "When Corporations Rule the World" has pointed out that big corporations have made the feedback loop between innovation and corporate-control extremely small. In the old days, kids could get into a new style of music and it would be a genuine rebellion against the system. But MTV and all the big corporations can now take this subculture and re-market it to the population within months, and this time will shorten as time goes on. There is no chance for a genuine counter-culture anymore.
What's the underlying problem with a "formula for innovation"?
It's that the culture itself gets stuck inside of a Local Maxima. It takes genuine innovation - revolution, if you will - to prevent cultural stagnation.
I've lived in the USA for two years now, and I fear for this country's culture. This is why.
Well said, I'm quoting you in full in case your post stays at zero. Opposition to society seems to have become a building block of our society. Chances to vocally criticize our society get sucked up into a harmless image of "rebellion". Think of what has happened to the meaning of the word "radical" in pop culture - it seems to have become an out of date slang superlative.
A mentor of mine, Herbert Br:un used to tell a story of a man who sat in a cafe and drummed a rhythem on the table, while another, who understood morse code, argued with the staments he thought the finger tapper was making. Br:un called this phenomenon, when "I listen to what you say, but hear what I mean", drummage. The criticism of the culture we live in becomes heard through drummage as a support of our culture's false rebellions.
The one nit I will pick with you is your statement that there is no possibility for a genuine counter-culture anymore. A counter-culture is possible iff (if and only if) it is radicly (at its root) incompatible with "over-the-counter-culture", if it can in no way be bought or sold, but can still gain mindshare.
...and this lie crawls out of its mouth: 'I, the state, am the people.'
Isn't it safe to say, and to bet your business, that some people (ever over 35) want to be disrupted? And does Christensen actually know any of the students at MIT?
___
"with their freedom lost all virtue lose" - Milton
Previously I've attempted a description of the success of an Open Source product, Ant, in terms of the Innovator's Dilemma. I think the fit is very good, provided you recognize how the rewards and costs should be measured in the OSS environment. If you are interested it can be found at Ant as an Example of the Innovator's Dilemma. Now I'll have to go back and see how Ant matches against the guidelines in the article, so far it's looking pretty good.
development.lombardi.com
It cannot be known or concluded a priori that this new population will displace the other population.
If the environment changes in such a way that the subpopulation is better adapted...
The major point is actually not that you need to stop listening to your customers, it's that companies engaged in sustaining technologies cannot, if properly managed (!!), also engage in disruptive technologies. The solution is to not try to do both, but rather to spin-off the disruptive technology and let it find its path apart from the demands of the mother ship.
The one really notable exception to this rule was HP's LaserJet and InkJet businesses. The former was sustaining, the latter disruptive. The book says that HP nearly came apart trying to do both, but succeeded in spite of the odds. Certainly the exception that proves the rule.
The Innovator's Dilemma is highly worth a read!
If you read the story of building arsdigita, you will see the same, they went to market which MS would not even dare to touch - more profitable ventures, now they replicate ideas arsdigita has planted - application server, database web applications, enterprise level. Many others do too. There were reasons they could not grow geometrically - they were partly support company and hiring people that know what to do, was hard in those times, especially with brand new technology, that was deemed not too current, or cool, sort of grey technology, that has technical value, but now WOW value at the time.
...
2c.
I'm afraid I don't buy that theory. It seems to say that evolutionary innovation only occurs in small, isolated groups. The fact is, the innovations the isolated group develop would be more likely to occur in the larger group where they would be quickly quashed by the vast majority.
Almost all changes will be debilitating instead of strengthening. The odds of making enough changes to go through a valley to a different peak are likely much better in a small isolated group, struggling to find an identity as which it can survive. In parallel, the large group will develop a pool of mostly recessive characteristics which may allow some of its members to survive an evolutionary crisis. In any event, you would most likely miss evolution in progress even if you were looking right at it.
Lady luck may help you win a lottery ticket, but she does not have the time to help you make your business a success.
IBM is successful not because of LUCK, but SAVVY MARKETING.
EXXON is successful not because of LUCK, but the KNOWING OF HOW THE OIL MARKET WORKS.
The airline industry is in trouble, not because they are LUCKLESS, but because the airline industry has remained STATIC for decades. In other words, the airline industry is failing because THEY CAN'T CATCH UP WITH THE WORLD.
America is successful not because of LUCK alone. America is successful because of the attitude of the American people - the people who will never take "No" for answer !
Luck may make a person PROUD, and pride begat failure.
In a sense, LUCK actually brings FAILURE.
Muchas Gracias, Señor Edward Snowden !
i didnt see any one post a link to purchase the book, Innovator's Dilemma. anyways, this is a great book and well worth the time spent to read.
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[insert funny
The SUV marketplace validates the "don't listen to your [current] customers" thesis rather well, really.
Go back 20 or 30 years. Instead of SUV, think "vehicle capable of handling rough terrain and bad weather." I was the typical customer for this kind of vehicle. I wanted it simple, sturdy, and easy to fix. I did not want an automatic transmission, power windows, power steering, or any other gewgaw that would add complexity or might break when I was out in the boonies. I didn't care about a smooth ride or plush seats, and I drove with the windows open (or top down) most of the time, so I didn't need air conditioning, and I wasn't picky about heat. I didn't need a lot of power as long as the gearing was right, so I didn't need a fire-breathing motor. In a 60s/70s context, I was happy with a ~200 CID straight six or a big 4 cylinder engine.
A Willys Jeep was just fine with me. An International Harvester Scout did the job. My younger brother, a photographer, often hauled a lot of gear (and he was a really big guy) so he got into the habit of buying used Suburbans or Carryalls from the (Arizona) highway department.
In other words, these 4X4 vehicles were sold, for the most part, either as working tools to ranchers and the highway department or to camping-type people like me. We got them because we often needed or wanted to go where there were no roads or drive through snow and ice. We wanted trucks. We liked trucks. We didn't care much about paint because it was going to get scraped off anyway.
There was also a racing/performance offroad subculture that spent megamoney on 4X4 vehicles. Again, no attention to luxury.
Fast forward. Jeep sold Wagoneers with car-style amenities, but the hard-cores didn't buy them. Subaru sold 4X4 little cars and station wagons, but only a limited number of them. Broncos and Blazers came a little closer to mass appeal, but were still trucks at heart, not all that different from your old Scout or CJ although they tended to have car-style (plastic) dashboards instead of real he-man ones.
If you had listened to the people who bought the old-style 4X4s, you would not have SUVs. It took a major market perception shift to bring the idea, "Hey, you can have the capability of a 4X4 in a car you usually only drive on the highway and sit in air conditioned, padded comfort even in crappy weather -- and you can now drop into 4 wheel drive without getting out and setting front hubs," onto dealer showroom floors.
I own a middle-aged Jeep Cherokee. It's not a hard-core old-style 4X4 truck, but still has no power windows and crappy air conditioning (in Florida), and I'm okay with that. I like my Cherokee, and that's a problem for the car makers. I am not a good SUV customer, because one important piece of the old 4X4 truck guy ethos is that old trucks are better than new ones, and once you get one you like you only get rid of it if you can't get parts for it any more or some moron runs into it and totals it.
There's an old guy near me who has a late 50s Willys pickup for himself, and a CJ for his wife. They're not restored, just maintained well. Not show condition -- blanket instead of seat cover in the pickup -- but decent.
Hell, listen to that guy and you'd never make an SUV with a stereo (those who wanted stereos would install their own) or any other kind of amenity, and "soccer moms" would not be running around in those grossly huge Ford Expeditions, let alone something as silly (by old truck guy standards) as a 4X4 Cadillac or Lincoln.
- Robin
Think CAFE: Corporate Average Fuel Economy.
Basically, the car manufacturers realized they couldn't keep producing full-size station wagons and still meet CAFE standards. But since "light trucks" not only have a less stringent standard, but also are counted separately from their cars, they could replace full-size wagons in their lines with SUV's and mini-vans instead.
Nope, no sig
1) "Prioritize" is not a word.
2) He's a Rhodes schollar but hasn't ever heard of Cliff Notes?
Interesting concepts presented though.
"God is dead." - Frederik Nietzsche
Hmm, Merriam Webster seems to think it is...
http://www.m-w.com/
Would you tell us why you think it isn't?
Any sufficiently simple magic can be passed off as mere advanced technology.
Certainly. Its appearance in an unabridged dictionary means that some people are starting to use it. It does not mean it is correct.
It is jargon invented by people trying to verb a noun. (See, doesn't that sound silly?)
Things can have their own priority. You can list things in order of their priority.
To then take a noun and try to make it a verb is just wrong. It is usually a tactic of an idiot trying to sound smart by making up their own word.
As far as www.m-w.com is concerned, I presume they added it after it appeared once too often in the satirical cartoon Dilbert.
"God is dead." - Frederik Nietzsche
Language changes. Get used to it. Or else we would continue to use the same set of grunts to communicate the basic handful of needs (sleep, food, sex).