The swell of Innovation waves

The swell of Innovation waves

Ignore innovation at your own risk or peril. Highly successful companies have the unique ability to continually leverage the innovation band wagon, irrespective of whether they have created the discontinuity or not.

The tsunami caused by delay, avoidance or ignorance of innovation is so powerful that it does not care whether companies are big or small – it engulfs them all. The ability to foresee emerging trends is key and, in many cases, becomes the survival issue for companies. Blockbuster was a very successful video / DVD rental company that had earlier prevailed against its competitors such as Hollywood Video.  It neither anticipated the impact of internet on the movie rental business, nor built a viable and strong online channel to ride the wave. Blockbuster’s failure to fundamentally innovate and change its business in time was also evident with its catch up endeavors which failed to deliver new, unique benefits or better experience. Despite a huge customer base and once valued at $8.4 billion in 1994, Blockbuster filed for Chapter 11 bankruptcy in 2010 and was sold in April 2011, ultimately succumbing to Netflix.

Netflix, on the other hand, created a business model thru DVD rental by mail – a  clever innovation compared to the then walk-in and pick-up store. Later in 2007, they implemented new emerging technology to deliver streaming online video with a clear intent to eventually completely stop their mail-in DVD business. Practicing as is famously said, “Eat your own lunch before someone else does,” Netflix has demonstrated leadership in two successive innovation trends: in business model or technology adoption, and by creating new paradigms. Started in 1999, Netflix celebrated its billionth DVD delivery in Feb. 2007, its second billionth DVD delivery in Apr. 2009 and surpassed 25 million online subscribers in 2011, with more and more customers moving from mailed DVDs to online streaming.  No wonder its market cap has increased 6-fold in the last 24 months and its Founder CEO, Reed Hastings was the Fortune 2010 Businessperson of the Year.

Borders, once a prominent book store,  similarly faced this challenge and has now finally succumbed to the onslaught of e-book readers.  Like Blockbuster, Borders also missed the pervasive trend of digital content and continued to invest in the traditional business model of physical stores: the workforce was made redundant as it partnered with in 2001 to manage its online business.  At its peak in 2003, Border had over 1200 stores across US but is finally closing its remaining 399 stores as of July 2011. It had made losses in each of the last 5 years.

Amazon started its business at the onset of the internet by creating an online book store, and in 2007 launched its own e-book reader, the Kindle – taking advantage of both technology and business model. Last quarter (AMJ-11), Amazon sold more e-books online thru’ Kindle than it shipped physical books. Enabled by technology, e-book reading is reaching new heights: 17.5 million Kindle and 310 million e-books are expected to be sold during 2011. Amazon’s early realization of customers looking for digital options led to the strategy of creating Kindle apps for other (and many a times, competing) platforms, and is starting to pay off as well.

In spite of colossal failures, i.e. Blockbuster and Borders among others, on account of missing the innovation wave and being beached,  it’s amazing how many companies even today still live in the hope that their business and technology models will survive longer or forever without change.  The rate of change in new and emerging technologies is so high and intense, that if ignored, won’t provide enough time to even the largest of companies.

Mega-trends such as Cloud, Mobility, Social, Convergence, etc.  have created huge opportunities for disruptive innovation to drive mega-impacts for traditional as well as new businesses.

Smart, fast-moving and fast-thinking companies – both new and old – take advantage of the technology disruption and create new markets (e.g.,  LinkedIn, Twitter, Zynga, Groupon, Airbnb, Square, etc.) or significantly impact an existing market with highly innovative products and services (e.g. Apple, Facebook, Google, etc.)  It’s not that these companies have not had their shares of learning and failures, but it’s their ability to quickly learn, adapt and move with new innovation that differentiates them.  The key is to continuously innovate and be persistently paranoid. 

Miss innovation at your own risk or peril…

1 Comment on “The swell of Innovation waves

  1. Agree. Without caveats. Avoid noticing this post at the risk of extinction!

    However innovation – especially when disruptive – is often a maverick’s wonder child. Most of the examples in Sandeep’s post testify this. Almost, if not all. The examples of Blockbuster and Borders folding up from a seemingly invincible high are learnings etched on the wall. However, people still care not to heed. Organizations place cautious bets on innovation. That seems to be well justified – often, if not always. The risks weigh down innovations: they always did, and that’s not going to change ever. However Apple wouldn’t be the pioneer, it is today, had Steve Jobs yielded to shareholder criticism. He took the call and faced off the risk. And rest is history. Same goes for Google, LinkedIn etc.

    Individuals (or, Organizations) – of the fair share I am familiar – would typically lend a cold shoulder to innovation. This isn’t of a specific class of organizations – but yes, based on my experience apply generally to the services organizations. Incidentally, the organizations, finding mention in Sandeep’s post, which adored innovation, are all ‘product’ organizations. By the way, it’s not a coincidence. That’s not to say all services organizations are weary of innovation; broadly they are. May be that is deemed fit, and accorded of appropriate priority.

    Intriguing: while organizations realize benefits of innovation – why are they averse to innovation? Why are the examples numbered? Structured organizations become less innovation (a.k.a. investment) savvy as they grow. Or, is the subject somewhat soft? Does this have anything to do with the socio-political-cultural attributes?

    How often have we not heard of social networking, cloud, and mobility as hallmarks of change in a corporate presentation? How often has their ability to translate this to solutions awed you?

    Let us look at a few examples. The power of eCommerce (both B2B as well as B2C) is ubiquitous: has this been unleashed in emerging geographies – where it can deliver best value, and makes best business sense? The potential of mobility hasn’t been tried across automobile, retail, public distribution or banking segments – constituting almost half of India’s GDP. Did you imagine what all you can do with the reach of mobile phones in India?

    While I see the latent power of innovation, unfortunately not many in the organization’s brass have embraced it. Even if it’s at the risk of extinction.