PRODUCT AND INNOVATION
Do you understand the ways in which innovation sticks at the micro level and the macro-level ecologies in which that happens?
The ecology makes certain product characteristics stickier than others and favors some innovation channels over others.
Do you understand the ways in which innovation sticks at the micro level and the macro-level ecologies in which that happens?
The ecology makes certain product characteristics stickier than others and favors some innovation channels over others.
There are two major macro-level models of innovation – disruption, which is most clearly expressed in the US, and incrementing, which is the innovation model in Japan and Germany.
Since you will ask: innovation in China is a Wild West mix of these three models.
Since you will ask: innovation in China is a Wild West mix of these three models.
Disruptive innovation works through the obsolescence of existing companies, products & modes of competition, their decline & disappearance.
The US tech sector is the prime example. In the archetypal story, a garage-based company comes out of nowhere to disrupt entire markets.
The US tech sector is the prime example. In the archetypal story, a garage-based company comes out of nowhere to disrupt entire markets.
$GOOG & $AAPL disrupted $MSFT in operating systems not by competing directly in PCs, but by dominating a new market – mobile.
Mobile had new revenue models as well. $MSFT charged license fees for Windose. $GOOG cashes in on search, $AAPL on hardware & both on app store sales.
Mobile had new revenue models as well. $MSFT charged license fees for Windose. $GOOG cashes in on search, $AAPL on hardware & both on app store sales.
Kodak dominated the US market for photo equipment and supplies, yet went bankrupt when digital photography was bundled into mobile devices.
It wasn’t just late to building competitive digital cameras – it didn’t adapt to the new platforms and modes of use (mobile & social).
It wasn’t just late to building competitive digital cameras – it didn’t adapt to the new platforms and modes of use (mobile & social).
Japan’s product ecology is based on top-down “strategic” innovation by corporations & incremental improvement at the design & production levels within the firm (kaizen).
Kaizen in product quality & cost was key to Japan’s dominance of consumer electronics in the 1980s & 1990s.
Kaizen in product quality & cost was key to Japan’s dominance of consumer electronics in the 1980s & 1990s.
None of these models is close to what an ideal antifragile product ecology would look like.
Such an ecology would have to incorporate the right mix of kaizen (preserving beneficial features and practices) and disruption (the radically new).
Such an ecology would have to incorporate the right mix of kaizen (preserving beneficial features and practices) and disruption (the radically new).
The spectacular failure of $TSLA is a great example of the tricky balance between experience and vision.
The company created the first electric car people actually wanted to drive (disruption), but lacked the mass-production expertise of "legacy" manufacturers.
The company created the first electric car people actually wanted to drive (disruption), but lacked the mass-production expertise of "legacy" manufacturers.
When do product “innovations” catch on and survive?
They have to do at least one of the following:
- Rely on a monopoly
- Create a want
- Address a need
- Create a new market
- Become a new product platform
- Solve a problem
They have to do at least one of the following:
- Rely on a monopoly
- Create a want
- Address a need
- Create a new market
- Become a new product platform
- Solve a problem
1. Create a new market
Hardware makers sell printers cheap, sometimes even give them away, which creates a market for ink cartridges.
Software companies often give away the product and sell servicing: support and updates.
Hardware makers sell printers cheap, sometimes even give them away, which creates a market for ink cartridges.
Software companies often give away the product and sell servicing: support and updates.
2. Become a platform
Operating systems and social networks are like this. Windows for software. Amazon for merchandise and Faecebook for mobile/social games.
You can make money on licensing, sales margins or third-party advertising.
Operating systems and social networks are like this. Windows for software. Amazon for merchandise and Faecebook for mobile/social games.
You can make money on licensing, sales margins or third-party advertising.
3. Solve a problem
My company has to maintain a supply chain all the way from China and Tanzania. You just invented a production line that saves me 70% of labor costs, so I can build a parts factory right next to my assembly plant in North Carolina. You solved my problem.
My company has to maintain a supply chain all the way from China and Tanzania. You just invented a production line that saves me 70% of labor costs, so I can build a parts factory right next to my assembly plant in North Carolina. You solved my problem.
4. Address a need
Needs are different from problems because they are all-or-nothing. You need food to survive, no room for negotiation.
Your sustainable farm addresses people's need for healthy food (NOT chemically treated food products). Because can't be healthy on fake food.
Needs are different from problems because they are all-or-nothing. You need food to survive, no room for negotiation.
Your sustainable farm addresses people's need for healthy food (NOT chemically treated food products). Because can't be healthy on fake food.
5. Create a want
This is what most mobile "technology" is like. The productive uses of mobile are calls and messaging. But mobile sales aren't driven by utility. They are about status, the desire to have the latest gadget with "best" tech specs, aesthetics (my sin) and so on.
This is what most mobile "technology" is like. The productive uses of mobile are calls and messaging. But mobile sales aren't driven by utility. They are about status, the desire to have the latest gadget with "best" tech specs, aesthetics (my sin) and so on.
Steve Jobs saved Apple not by making something radically new, but by making people want to feel special.
When Jobs returned to the company, Apple survived on making barely functioning Macs, not on the iPod which took time to produce and market.
When Jobs returned to the company, Apple survived on making barely functioning Macs, not on the iPod which took time to produce and market.
6. Create a monopoly
The Holy Grail for any business and every entrepreneur. Most of us know instinctively that if we corner the market we can print money.
Monopoly is the natural endpoint of market competition, contrary to what klueless economists and ideologues will tell you.
The Holy Grail for any business and every entrepreneur. Most of us know instinctively that if we corner the market we can print money.
Monopoly is the natural endpoint of market competition, contrary to what klueless economists and ideologues will tell you.
Most businesses compete first and foremost for sales or market share – not for profits, innovations or anything else. Because market share = market power & political power.
When you have the upper hand, you can charge whatever and even pick your customers. Why deal with losers?
When you have the upper hand, you can charge whatever and even pick your customers. Why deal with losers?
