Tuesday, July 03, 2012

Successful Innovations and Business Failures



Innovators usually make bad businessmen. They get enamored by the product that they may ignore the ecosystem. The product that works wonderfully in sterile conditions of a lab has to be transposed on to the rugged rough and tumble of everyday life and unless one can simulate the innovation in the open, it will be a difficult business proposition. This is a stereotypical view about innovations. So, are good businessmen are usually bad innovators? Not necessarily. They could be great innovators, introducing new products and moving the frontiers of the business. But why do great innovations fail?

Welcome to the different world of highly competitive business corporations, identifying a niche customer need, investing in research, developing a scalable product and then failing in the market. What could businesses learn from failures? Is it okay not to be a pioneer? Ron Adner’s book The Wide Lens is a refreshingly different business book. It builds a theory from successful innovations and [mostly] failed businesses. The essential argument that Adner provides is that if we are in the business, we are in an ecosystem and not working in isolation. It is not just about carrying out research on Run-Flat tyres developed my Michelin. The product was developed, it was technically superior and possibly a game changer in the market place. Michelin protected itself with a fortress of patents, but unless there was an entire ecosystem of service stations that could service such a concept, automobile manufacturers who saw merit in the concept and customers willing to experiment with it, it was never going to succeed.

Adner discusses and argues for a Wide Lens approach for innovation. It is an approach fraught with risks because innovations are usually shrouded in secrecy. Bit if the business does not take the ecosystem into consideration, if the external environment is not equipped to support the product, it will fail. Therefore one needs to look at co-innovation, understanding the adopton chain risk and looking at the internal and external ecosystem.

The entire book is written in a delightful style. Adner uses several examples to talk about how innovation should be aligned with the understanding of the final customer experience. How does one overcome the innovators’ blind spot? Nokia saw the opportunity to grow in the mobile phone market and the next big thing was 3G. The first challenge was to build the product; next was to get component suppliers to co-create the product. But what is the use of launching a Ferrari in a place that has no roads? Adner asks this question aptly. When Nokia launched a 3G phone, were the telcos ready to launch the service with adequate spectrum? And were the apps that make a 3G phone a delight ready? Did it provide a superior customer experience? In unpeeling this aspect, we that the success of an innovative product hinges upon so many others also rising up to the situation and delivering in their respective niche areas.

Usually books on innovation talk about the process of nurturing ideas, getting innovation into the DNA of a business [as in 3M] and how some companies keep launching new killer products. When we talk innovation in this age, it is difficult to ignore Apple and Steve Jobs. Adner analyses Apple and its products extensively and provides an explanation to its success using the wide lens framework.

Adner explains how Apple mostly got its timing right, whether it was i-Pod which came in much after many MP3 players, or iPhone which also was a late smart phone to be launched. Both these products represented a timing that was smart and features that the ecosystem allowed the consumer to use. The setting up of iTunes provided easy content for iPod and iPhone was more of moving the loyal iPod customers into the mobile phone market by providing additional features. While Apple did unconventional things like tightly controlling the apps as well as locking the phone with a single service provider, Adner sees a greater pattern in that strategy of differentiation, targeted voice and data plans and uniqueness that the carrier could provide exclusively for Apple owners.

While Adner talks about a series of failures because the companies did not see the ecosystem [Sony’s e-reader, Philips HDTV, the current 3DTVs, Insulin inhalers etc] he also provides a dissection of Apple neatly fitted into his wide lens framework. The most impressive chapters in the book is the wide lens framework for an Electric Vehicle [EV]. He does a complete analysis of the ecosystem and breaks it up into neat parts that need to be fixed. He then provides a framework of how Better Place in Israel is addressing these issues in launching the EV. This is instructive, and only time will tell whether Adner’s framework had captured all the elements of success or whether there were some elements that were left out. It is one thing to analyse failures, but quite another to predict success.

Hope Adner’s book is not ahead of its time [the usual reason provided for commercial failures of business innovations] and does well.



The Wide Lens
A New Strategy for Innovation
Ron Adner
Portfolio/Penguin
pp.278.



  

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