Anshu Sharma has a nice post on breakthrough innovation that is inspired by Apple’s iPhone. He rightly points out that…
Several technology giants today are struggling with slowing earnings and revenue growth - they can all do well to learn the lessons of iPod (and Motorola RazR):
Invest in bold new ideas: Releasing yet another incrementally improved version of an OS is not breakthrough innovation.
Be willing to let go what it means to be a “computer company”: IBM learned this the hard way in 1980s. You want to be the innovation company, the ideas company, the good customer service company and not necessarily be tied down to a particular product or manner of delivery.
Small teams: Only small teams with a passionate few people can come up with new products and services. As a rule of thumb, any team that cannot fit in your corner office is too big.
He then suggests that big companies can innovate despite the tug of the “innovator’s dilemma”. His advice:
Adopt one of many solutions to this well studied problem - new DNA, acquisitions, intrapreneurship, spin-in structures - to foster innovation.
Finally he asks: Are the large companies doomed to follow rather than lead?
I have two reactions. The first one is a quibble. I wouldn’t put Razr in the breakthrough innovation category. I liken Razr to Saturn Aura (which won awards last week). Saturn Aura is a good product; Toyota Prius is a breakthrough product. Maybe iPhone will be a breakthrough product (time will tell).
Now to the meat of the issue…can big companies really innovate? My answer is also a yes but for different reasons.
The starting point for my thought process is a simple premise that discontinuities and innovation are hand-maidens. I feel that there are at least two ways in which this process plays out. In some cases, an entrepreneur’s garage has an advantage. When there are hundreds or thousands of potential paths that might succeed, the best way to find out which will succeed is to allow each brave or disgruntled genius to try out his own approach. Many fail, but a few will succeed. This is the essence of the Silicon Valley (or even Hollywood) model.
The second way is the Kaizen way of relentless continuous incremental innovation. In this model, an established company enters a new field and makes a product knowing well that the initial product will fall far short of expectations. But it’s in the market for the long haul. It learns, iterates, and keeps improving the product. The initial version of Toyota’s Prius wasn’t that great but its third generation is pretty good. Much as what Toyota has done with Prius, Honda is doing with ASIMO, a humanoid robot. Here again, a long-term iterative innovation process is visible. Eventually a useable breakthrough product will be created but it will be born from a series of baby steps.
An established company is often better suited for this Kaizen method of breakthrough innovation. Not only can it offer its innovators a patient source of investment capital, but it also has links to users, and can use their feedback quickly to improve the next generation of what it is making.
In conclusion, I believe that a big company can foster innovation one of two ways. It can either emulate an entrepreneurial company much like what Apple has done in recent years. Or it can leverage its size to follow the Toyota and Honda’s Kaizen method of breakthrough innovation. Right now, unfortunately, most IT companies are doing neither.
Sharad- Very insightful. I agree that both incremental innovation and breakthrough (or radical) innovation are valid business strategies for growth. For example, I am impressed by the efforts Intuit is making in the the SaaS space.