Today's article is written by Matthew May and is from the HBR (article link) and it deals with the concept of less is more as a way to optimize innovation.
This article provided three ways to promote innovation, the first was elegance, the second was "loose reins", and the third was meditation. Of the three, elegance was the one that spoke to me most powerfully so I will focus on that, it is also the topic most strongly tied to entrepreneurship.
Elegance
Elegant has a few definitions but they all basically lead to a sort of refined excellence. This is close but not quite what the author means, as the author is using it more in line with how Mark Rosewater uses it in his seminal article on the topic (Article). The objective of elegance in design is in essence maximizing the impact while simplifying the delivery. This sounds simple and yet it can be extremely difficult to achieve, especially in an environment where inspiration leads to ideas leads to feature creep, bloat, and an eventual loss of clarity/purpose.
In an extremely competitive business landscape the temptation to add features and functionality seemingly ad nauseum in an effort to differentiate or maximize consumer perceived value is almost irresistible. Yet it is those who are able to resist this proverbial siren's call that actually get to market. Think of some of the biggest launches in recent history, how many of them are "elegant" versus "all-encompassing"? Instagram (mentioned in the article) does one thing and does it well, the iPad only performs certain computer functions but not others, the iPod originally only played mp3s, and so on. These services and devices did not attempt to be all things to all people, or to bombard the potential users with functionality. Sure you could conceivably add an email-like client to Instagram, perhaps add a real time instant messaging function, add video sharing support, and so on, but when you do so you dilute the product. The iPad does not come with productivity software, sure one could probably view documents and presentations but why would you want to do complex spreadsheet design or type out a 10 page paper on a tablet.
The Connection to Entrepreneurship
If entrepreneurship is about solving problems, then elegance is about making your solution focus on the problem you want to solve in a way that does not overwhelm customers. As the author states, elegance allows your value proposition to shine most clearly. If you continue to bury your value proposition under value adds that may or may not be germane to the problem you are solving, how will your customers find the value proposition? If your customers can not easily identify your value proposition, how do you convert them into patrons and users? Elegance is in the delivery, you want maximum punch with the optimal amount of leanness. Perceiving the problem is the first step, designing the solution is the second step, and delivering that solution in a succinct form that highlights your value proposition, that is elegance, and that is the crucial third step to entrepreneurial success.
Tuesday, October 23, 2012
Wednesday, October 3, 2012
Big Companies Can Totally Innovate!!!! (Article Analysis)
The last post dealt with an article that stated that big companies can not innovate. In my previous post I argued against this thesis along a few axes and this blog post adds some fuel to the argument. This article is also from the HBR and was written by Ron Ashkenas and can be found here (http://blogs.hbr.org/ashkenas/2012/10/kill-your-business-model-befor.html) the title of the article is "Kill Your Business Model Before it Kills You" or liberally translated as "innovate or die".
Innovate or Die?:
While the US Postal Service is a complex creature to analyze to support a thesis of "innovate or die", the article thankfully provides more examples of companies that missed the innovation boat and subsequently crashed and burned. Kodak is an excellent example of such an enterprise, rather than use their photography expertise to work with or take over digital camera and photo printing they stayed entrenched. Perhaps their shareholders did not want precious cash in hand being diverted to R&D and (ironically, like I said before) their short-sightedness may have cost them future share growth and dividends. This is contrasted with IBM, a colossal firm, that innovated in a big way (selling off its PC unit, switching to services) and ultimately succeeded in a big way, after what I am sure was a bit of a rocky period on the street. Had IBM stayed in its proverbial comfort zone it may have faltered or struggled like HP and Dell do today. The innovated and survived, Kodak did not innovate and have all but officially died.
Does Size Matter?:
IBM has been regarded as big almost as long as it has existed, yet it successfully innovated. CVS was big before it merged with Caremark (also big) and has successfully innovated and continues to do so. There are two simple examples of innovative big companies that have thrived as a result of their innovative endeavors. Apple was down to ~$50 per share when Steve Jobs returned and had several years of tremendous innovations (iPod, iTunes, iPhone, etc) and are now worth over $670 per share a mere 3-4 years later. That kind of growth is incredible, and has landed it a spot in the Fortune 20 for 2012. Staples innovated in its marketing strategies, using the internet and targeted catalogs to drive both top and bottom line growth, Staples is king of the hill while Office Max and Office Depot are but memories. All large companies, those that innovated grew and survived, those that were complacent died.
Tie in to Course Material:
An alternative way to read this article to see changing an established business plan/model as a pivot! Persevere, Pivot, and Perish do not have to be delegated to lean start ups, hypothesis driven management and strategy can be just as valuable to a blue chip multi-national as it is to a 2 man start up operating in someone's garage.
Bottom Line:
Innovate or die; if you do not innovate you do not move forward. A lack of progression is regression in an environment as competitive as business. This is the natural Darwinism of capitalism. Entrepreneurs' creations live and die by their innovation, the solutions to society's problems are born from innovation, after all if the solutions could be found without innovation they would exist already! Embrace innovation, embrace agile thinking and ideas can become solutions, solutions can become start ups, and start ups can becomes successful enterprises.
Innovate or Die?:
While the US Postal Service is a complex creature to analyze to support a thesis of "innovate or die", the article thankfully provides more examples of companies that missed the innovation boat and subsequently crashed and burned. Kodak is an excellent example of such an enterprise, rather than use their photography expertise to work with or take over digital camera and photo printing they stayed entrenched. Perhaps their shareholders did not want precious cash in hand being diverted to R&D and (ironically, like I said before) their short-sightedness may have cost them future share growth and dividends. This is contrasted with IBM, a colossal firm, that innovated in a big way (selling off its PC unit, switching to services) and ultimately succeeded in a big way, after what I am sure was a bit of a rocky period on the street. Had IBM stayed in its proverbial comfort zone it may have faltered or struggled like HP and Dell do today. The innovated and survived, Kodak did not innovate and have all but officially died.
Does Size Matter?:
IBM has been regarded as big almost as long as it has existed, yet it successfully innovated. CVS was big before it merged with Caremark (also big) and has successfully innovated and continues to do so. There are two simple examples of innovative big companies that have thrived as a result of their innovative endeavors. Apple was down to ~$50 per share when Steve Jobs returned and had several years of tremendous innovations (iPod, iTunes, iPhone, etc) and are now worth over $670 per share a mere 3-4 years later. That kind of growth is incredible, and has landed it a spot in the Fortune 20 for 2012. Staples innovated in its marketing strategies, using the internet and targeted catalogs to drive both top and bottom line growth, Staples is king of the hill while Office Max and Office Depot are but memories. All large companies, those that innovated grew and survived, those that were complacent died.
Tie in to Course Material:
An alternative way to read this article to see changing an established business plan/model as a pivot! Persevere, Pivot, and Perish do not have to be delegated to lean start ups, hypothesis driven management and strategy can be just as valuable to a blue chip multi-national as it is to a 2 man start up operating in someone's garage.
Bottom Line:
Innovate or die; if you do not innovate you do not move forward. A lack of progression is regression in an environment as competitive as business. This is the natural Darwinism of capitalism. Entrepreneurs' creations live and die by their innovation, the solutions to society's problems are born from innovation, after all if the solutions could be found without innovation they would exist already! Embrace innovation, embrace agile thinking and ideas can become solutions, solutions can become start ups, and start ups can becomes successful enterprises.
Why Big Companies Can't Innovate (Article Analysis)
Today's blog post grapples with Maxwell Wessel's HBR article "Why Big Companies Can't Innovate", available here (http://blogs.hbr.org/cs/2012/09/why_big_companies_cant_innovate.html).
The Irony:
When reading the article I had a few observations that could best be summed up as "ironic". A big company, due to its size should be in a superior position to innovate relative to a start up. What they lack in agility they most certainly can make up for with pure firepower. A large company would have more cash, more talent, more means of production, more distribution channels, more branding, more advertising, and all of the other things anyone could ever need to detect a problem, engineer a solution, and bring it to fruition. So they most certainly CAN innovate, they are just told not to, and this only compounds the irony. The shareholders and "the street" want large companies to stay safe, to grow revenue, protect/grow margins, and generate earnings per share. The reason this is ironic is that the population [uniquely] positioned to reap the biggest rewards from innovation are actually the shareholders who are discouraging it. This reinforces the argument made in a Whole Foods article that I analyzed earlier about customer focus. Whole Foods has gotten away from "shareholder focus" and embraced "stakeholder focus", with customers as a key stakeholders and the highest priority. If firms were less beholden to "the street" then they could conceivably usher in new growth opportunities once their investments start to yield returns. One of the tenants of American Capitalism is that it takes money to make money, and innovation usually takes money, so why not use the money to make more of it?
The Flawed Premise:
Part of the allure of the article's thesis is that it is extremely seductive to our intuition and dare I say to our naivete. There is a tremendous amount of appeal to the notion of a scrappy underdog overcoming the odds and growing into a powerhouse. Alternatively, one may view a start up as "untainted" by "the street" and able to perceive actual problems beyond the annual report to shareholders. Last but not least, also appealing is the intuitive notion that a young and small firm can be more adaptive and more experimental in its approach and as a result more innovative. All of these are valid reasons why a small firm or a start up may be innovative, but the most compelling reason is also the simplest; a start has to be innovative in order to survive and eventually thrive. Amazon, Apple, Google, Oracle, Microsoft, Facebook, and so many more companies that are inspirational to start ups and entrepreneurs were once small shops that perceived a problem and proposed a solution (the core of entrepreneurship). If you do not have the critical innovation necessary to entice venture capitalists and take your target market by storm how in the world does your business plan ever become a multi-national blue chip on the Fortune 500? Barring anomalous circumstances, a start up can not hope to compete (and win) based upon price so it must offer something that competitors can not, especially new entrants into established industries. That something that the competition does not have is the fruit of innovation.
So if small companies innovate because they must not because they can where does that leave big companies that want to innovate? Mr. Wessel used a single example (Gerber) to forge his axiom so I will use a single example to not only counter it but also demonstrate how a company can succeed if it surmounts the resistance generated by the irony explained above. My employer, CVS Caremark, is by most definitions a big company, and yet it is an innovative one. Back in 2007/2008 CVS Retail merged with Caremark a PBM to create the world's first retail pharmacy-pharmacy benefits management hybrid company. This was a grand experiment and until recently "the street" was no fond of the conglomerate and encouraged it to revert back into two distinct enterprises. The street was only concerned with financials and metrics, it was not interested in new pharmacy benefits and synergies like "Pharmacy Advisor", "90 Day At Retail", "Maintenance Choice", and so on. The street was transfixed on comparing CVS Caremark to Express Scripts or Walgreens, not realizing that neither comparison was valid, since CVS Caremark could do things that neither of those companies could hope to accomplish, as we like to say, "CVS Caremark is an industry of one". In short the street was more concerned with next quarter's cash flow instead of the long term prospects and ROI for this risky (innovative) venture. Now the shareholders are excited and now the street wants to see what we do next as we continue to innovate pharmacy and healthcare, as we continue to "help people on their path to better health". Tom Ryan (former CEO) once said in a speech that he eventually wanted people to look at CVS Caremark and say that "CVS 'gets' pharmacy, that CVS 'gets' healthcare", it's taken about 4 years but I think people are starting to finally say that.
CVS is currently in high gear for innovation. The entire company has been challenged by our current CEO, Larry Merlo to innovate. So here is CVS, 18th on the Fortune 500 with innovation not being considered a nice pet project, but an integral component of its multi-year strategy. That is just a single example, but there are more all the way up and down the Fortune 500 and beyond.
Gerber and the Entrepreneurial Lesson:
Gerber's innovation did not fail because Gerber is a huge company, Gerber's innovation failed because it did not innovate hard enough. You can not pour baby food into a larger jar and call it adult food, that is not even innovation that is laziness. Had Gerber attacked the adult food market with actual adult food it could have leveraged its massive resources to go toe to toe with Swanson in the pre-made dinners market. Gerber would have been known for wholesome and nutritious, after all who would feed their baby nutritionally void garbage right? If Gerber was good enough for your child it would certainly be good enough for you. Instead of making real adult food Gerber made bigger jars of baby food, completely missing the point of both products. Babies do not have refined palettes or teeth so they need liquified food, adults have teeth and refined palettes so they do not want mush, this is so obvious it is painful to type. I have no idea why the author decided to use this as the for why large companies can not innovate, this is a much better piece of evidence for do not innovate lazily.
While the author's point about bureaucracy, infrastructure, and "the street" can certainly add inertia and friction to innovation one example of one failure at one company does not an axiom make. I am going to take this thesis in a completely different direction and apply to entrepreneurism; go big or go home. Gerber is a warning about failed innovation not because Gerber was big but because Gerber was simply not innovative enough. Aspiring entrepreneurs try solve problems, successful entrepreneurs solve them with viable and desirable solutions. Gerber perceived the problem but delivered a terrible solution, so the axiom that I would extract from the Gerber story is to innovate thoroughly and deliver a desirable solution. Do not give the market more baby food and call it adult food; get out of your comfort zone, get outside of the box, shift those paradigms and solve problems the market has with solutions it actually wants! That is the axiom here; that is the lesson for entrepreneurs, the lesson is not that big companies can not innovate. Not only are they perfectly capable of doing so, but they are extremely well equipped to do so.
The Irony:
When reading the article I had a few observations that could best be summed up as "ironic". A big company, due to its size should be in a superior position to innovate relative to a start up. What they lack in agility they most certainly can make up for with pure firepower. A large company would have more cash, more talent, more means of production, more distribution channels, more branding, more advertising, and all of the other things anyone could ever need to detect a problem, engineer a solution, and bring it to fruition. So they most certainly CAN innovate, they are just told not to, and this only compounds the irony. The shareholders and "the street" want large companies to stay safe, to grow revenue, protect/grow margins, and generate earnings per share. The reason this is ironic is that the population [uniquely] positioned to reap the biggest rewards from innovation are actually the shareholders who are discouraging it. This reinforces the argument made in a Whole Foods article that I analyzed earlier about customer focus. Whole Foods has gotten away from "shareholder focus" and embraced "stakeholder focus", with customers as a key stakeholders and the highest priority. If firms were less beholden to "the street" then they could conceivably usher in new growth opportunities once their investments start to yield returns. One of the tenants of American Capitalism is that it takes money to make money, and innovation usually takes money, so why not use the money to make more of it?
The Flawed Premise:
Part of the allure of the article's thesis is that it is extremely seductive to our intuition and dare I say to our naivete. There is a tremendous amount of appeal to the notion of a scrappy underdog overcoming the odds and growing into a powerhouse. Alternatively, one may view a start up as "untainted" by "the street" and able to perceive actual problems beyond the annual report to shareholders. Last but not least, also appealing is the intuitive notion that a young and small firm can be more adaptive and more experimental in its approach and as a result more innovative. All of these are valid reasons why a small firm or a start up may be innovative, but the most compelling reason is also the simplest; a start has to be innovative in order to survive and eventually thrive. Amazon, Apple, Google, Oracle, Microsoft, Facebook, and so many more companies that are inspirational to start ups and entrepreneurs were once small shops that perceived a problem and proposed a solution (the core of entrepreneurship). If you do not have the critical innovation necessary to entice venture capitalists and take your target market by storm how in the world does your business plan ever become a multi-national blue chip on the Fortune 500? Barring anomalous circumstances, a start up can not hope to compete (and win) based upon price so it must offer something that competitors can not, especially new entrants into established industries. That something that the competition does not have is the fruit of innovation.
So if small companies innovate because they must not because they can where does that leave big companies that want to innovate? Mr. Wessel used a single example (Gerber) to forge his axiom so I will use a single example to not only counter it but also demonstrate how a company can succeed if it surmounts the resistance generated by the irony explained above. My employer, CVS Caremark, is by most definitions a big company, and yet it is an innovative one. Back in 2007/2008 CVS Retail merged with Caremark a PBM to create the world's first retail pharmacy-pharmacy benefits management hybrid company. This was a grand experiment and until recently "the street" was no fond of the conglomerate and encouraged it to revert back into two distinct enterprises. The street was only concerned with financials and metrics, it was not interested in new pharmacy benefits and synergies like "Pharmacy Advisor", "90 Day At Retail", "Maintenance Choice", and so on. The street was transfixed on comparing CVS Caremark to Express Scripts or Walgreens, not realizing that neither comparison was valid, since CVS Caremark could do things that neither of those companies could hope to accomplish, as we like to say, "CVS Caremark is an industry of one". In short the street was more concerned with next quarter's cash flow instead of the long term prospects and ROI for this risky (innovative) venture. Now the shareholders are excited and now the street wants to see what we do next as we continue to innovate pharmacy and healthcare, as we continue to "help people on their path to better health". Tom Ryan (former CEO) once said in a speech that he eventually wanted people to look at CVS Caremark and say that "CVS 'gets' pharmacy, that CVS 'gets' healthcare", it's taken about 4 years but I think people are starting to finally say that.
CVS is currently in high gear for innovation. The entire company has been challenged by our current CEO, Larry Merlo to innovate. So here is CVS, 18th on the Fortune 500 with innovation not being considered a nice pet project, but an integral component of its multi-year strategy. That is just a single example, but there are more all the way up and down the Fortune 500 and beyond.
Gerber and the Entrepreneurial Lesson:
Gerber's innovation did not fail because Gerber is a huge company, Gerber's innovation failed because it did not innovate hard enough. You can not pour baby food into a larger jar and call it adult food, that is not even innovation that is laziness. Had Gerber attacked the adult food market with actual adult food it could have leveraged its massive resources to go toe to toe with Swanson in the pre-made dinners market. Gerber would have been known for wholesome and nutritious, after all who would feed their baby nutritionally void garbage right? If Gerber was good enough for your child it would certainly be good enough for you. Instead of making real adult food Gerber made bigger jars of baby food, completely missing the point of both products. Babies do not have refined palettes or teeth so they need liquified food, adults have teeth and refined palettes so they do not want mush, this is so obvious it is painful to type. I have no idea why the author decided to use this as the for why large companies can not innovate, this is a much better piece of evidence for do not innovate lazily.
While the author's point about bureaucracy, infrastructure, and "the street" can certainly add inertia and friction to innovation one example of one failure at one company does not an axiom make. I am going to take this thesis in a completely different direction and apply to entrepreneurism; go big or go home. Gerber is a warning about failed innovation not because Gerber was big but because Gerber was simply not innovative enough. Aspiring entrepreneurs try solve problems, successful entrepreneurs solve them with viable and desirable solutions. Gerber perceived the problem but delivered a terrible solution, so the axiom that I would extract from the Gerber story is to innovate thoroughly and deliver a desirable solution. Do not give the market more baby food and call it adult food; get out of your comfort zone, get outside of the box, shift those paradigms and solve problems the market has with solutions it actually wants! That is the axiom here; that is the lesson for entrepreneurs, the lesson is not that big companies can not innovate. Not only are they perfectly capable of doing so, but they are extremely well equipped to do so.
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