The beginning & end of innovation
Posted by Grant Brewer on 01 May 2006
The narrator of the Academy Award® winning film Seabiscuit makes an interesting statement at the start of the film when commenting on the invention of mass production and the motor car by Henry Ford. He says "it was the beginning and end of innovation – all at the same time". That the development of factory lines mass producing standardised cars could be seen as both the epitome of the division of labour and efficiency described by the famous economist Adam Smith, and also seen as the end of an era of innovative and highly skilled individual craftsmen raises some interesting parallels into the modern economy.
Today, organisations thrive on business process efficiency that enables them to drive down costs whilst still offering mass customisation to their customers. The phrase "mass customisation" refers to organisations that are still implementing the mass production factory lines that Henry Ford pioneered, but that are doing so whilst building in some personalisation for the customer. The idea that you can order a personalised BMW from your local dealer leaves you with the sense that the car is custom made for you. Probably 90% or more of the car is standardised and you, the customer, only get the chance to change fairly minor aspects such as the colour or the gearbox. The way these cars are built has changed over time, and it is common to see smaller teams working on the complete end to end manufacturing cycle rather than long factory lines where each worker completes a repetitive activity.
The idea behind this customisation is that customers perceive the choices made available to them as adding value to their purchase. This might have been true in the last few decades, but we might be at an inflection point where many companies might be wise to start challenging their conventional wisdom. If the growing number of choices on the shelves of supermarkets is anything to go by, most organisations seem to be thinking that successful innovation is simply adding more product features or product versions.
There is an increasing sense that we are starting to see the end of feature–creep innovation that tends toward evolutionary product enhancement, and see the beginning of innovation that focuses again on new product classes where products or services are entirely rethought. This is not to say that there has been no new product innovation over the last two or three decades – there have been many real product innovations such as the fax, the Walkman® and video recorders – but rather to step back from the detail and to notice that relatively few organisations are consistently producing new innovative products or services.
The trouble with deep innovation and real customisation is that it is often expensive. In a competitive marketplace where margins are difficult to hang onto it is a real challenge to make a commitment to completely new product or service ideas. However, the internet economy is leading the way in demonstrating that it can be done without breaking the bank. The internet lowers the barriers to entry to services that can be delivered over the web, usually embracing some kind of self service. The current thinking on the internet also highlights simplicity, focus and function over complexity and choice – you're more likely to see a company offer a single product or service rather than a fully integrated range of offerings. Part of the reason is lack of investment capital, but a large part of the reason is the understanding that simple is better. We explore both the idea of simplicity in strategy and the arrival of Web 2.0 companies in previous Strategym columns.
Apple Computer, Inc was recently rated in Fortune Magazine as the innovative company today. Whilst their strategy and their products might have many flaws, they demonstrate a few characteristics of leading innovative organisations.
They out innovate themselves. Notice that Apple frequently produces new products themselves before their competitors have been able to match the previous generation – the target keeps moving for their competitors. The rate of new product launches in their iPod shows this ability to keep moving ahead of their rivals – and new iPods are usually redesigned new generation products rather than the previous model with one or two additional features.
They focus on making their products very simple to use. Whilst there are some people that believe that iPods need more features, the majority of Apple's customers don't seem to agree.
They understand what their business purpose is & they focus. A previous Strategym column outlined the need to include product or service design in the boardroom strategy conversation – Apple are one of the best examples of this. They understand what makes an Apple product and they make sure that is designed into everything they do. The result of a strong business purpose is frequently a clear strategy that is itself simple, easy to understand although no necessarily easy to implement.
They do not need to be the first to the market. Apple didn't invent MP3 players. They invented the simplicity and the fashion–style that has become synonymous with iPods.
Dell has been a contrarian thinking organisation since its inception. They have also always seemed to focus (in their case it is going direct in everything they do) and to make things simple (Dell's innovation around onsite technicians, and their decisions to keep their product line relatively simple). Dell also demonstrate the characteristic of out–innovating themselves: they were the first to introduce an effective direct model and before others had caught up they introduced onsite technicians, then they introduced internet based sales and customisation. At each level they have reinvented their products and extended new products beyond the thinking of their competitors before their competitors have caught up.
Another organisation demonstrating these characteristics is the open-source Ubuntu community led by Mark Shuttleworth. Ubuntu has rapidly become one of the most downloaded Linux distributions. Amongst other reasons, it has made Linux simpler, continued to innovate in an organised way ahead of other communities.
So where does this leave you as a leader in South Africa? You should be challenging your conventional thinking about adding product features or enhancements – how about redesigning the whole product in a simpler way, that is easier to use and makes more sense to the customer. It takes courage to innovate and even more courage to simplify because it often seems that complexity will keep the barriers to entry high. Take courage; rethink your innovation and keep the goal posts moving for your competitors.
The beginning & end of innovation was published as Strategym #37 in May 2006.
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