Empirical Rationalism and Other Oxymora
Innovation
Aberdeen Summit: Leadership in Product Development
Aug 10th
We are currently in the final planning stages for the annual Aberdeen Leadership in Product Development Summit (September 28-29 at Westin Copley in Boston). This year’s event will focus on “innovation strategies for a jobless recovery” (even though we already know that this isn’t a “jobless” recovery, but a “hireless” recovery). For those of you who have never been, our summits are a little different than some of the other events out there. For starters, we typically limit the attendees to 150-200 very senior delegates. We are not focused on high numbers of mid-level attendees; this is not a tradeshow, instead we are interested in fostering deep peer-to-peer conversations in a more intimate setting. Also, the event isn’t about the research or the sponsors – it’s about on-the-ground experience presented by those who have done something extraordinary. This year we have confirmed speakers from Fairchild Semiconductor, Ingersoll Rand Europe, The Nielsen Company, Pratt & Whitney Rocketdyne, Wachovia (BTW – I’ve seen Doug Powell from Wachovia speak before, he’s fantastic!).
We are also doing something a little different this time – we’ve set up a community website (powered by Brightidea WebStorm) for attendees to help shape the panel discussions as well as network with analysts and attendees prior before and after the event. Let me know what you think.
If anyone is interested, complimenatry passes are available for qualified professionals (email me at andrewdotboyd@aberdeendotcom or twitter @andrew_boyd). I hope to see you there.
Learn more about the event from Aberdeen VP/Group Director, Cindy Jutras:
A Hireless Recovery?
Jul 31st
Michael Schrage on HBR.org (commenting on an NYTimes article) argues “U”, “L”, “V”… it dosen’t matter the shape of the recession — this is not a “jobless” recovery, it is a “hireless” recovery. Instead of asking “where all the jobs have gone”, a better question might be “where did all the employers go?”
Executives and entrepreneurs aren’t asking “Who should we hire?” They’re asking, “Why should we hire?” World-class firms are still looking for world-class people. But when world-class people aren’t what’s needed, world-class firms will consider world-class alternatives. Most people looking for a job today aren’t competing against each other. They’re competing against alternative ways to getting that job done.
He rightly suggests that this is a structural, not a cyclical shift. Necessity is the mother of invention — as the recession lingers, companies are becoming more efficient at finding alternate methods of value creation and, as a result, these jobs are not likely to come back anytime soon..
For most organizations, people are a means and medium to an end. They’re not hiring employees, they’re hiring value creation. If they can get that value — or most of it — from contingency workers, outsourcing, automation, innovative processes or capital investment, why wouldn’t they? If tweaking a process or program empowers three people to do the work of five, then tweakonomics is the way to go.
Along these lines, Robert Reich on Business Insider talks about “The Great Decoupling of Corporate Profits from Jobs”.
Second-quarter earnings reports are coming in, and they’re making Wall Street smile. Corporate profits are up. And big American companies are sitting on a gigantic pile of money. The 500 largest non-financial firms held almost a trillion dollars in the second quarter, and that money pile is growing larger this quarter. Profits that plummeted in the recession have bounced back. Big businesses have recovered almost 90 percent of what they lost.
He suggests that hiring is not happening for three reasons: 1) profits are coming from overseas operations (so that is where investments are going) 2) companies are investing in labor saving technologies and 3) companies are using their money to pay dividends and buy back stock. According to Reich, this leaves us with huge paradox:
Big American companies may never rehire large numbers of workers. And they won’t even begin to think about hiring until they know American consumers will buy their products. The problem is, American consumers won’t start buying against until they know they have reliable paychecks.
So where does this leave the American worker, particularly the unemployed? What opportunities are out there for progressive companies?
Make Rypples, Not Waves
Jan 26th
I had the opportunity to speak with David Priemer (@dprimer) from Rypple’s product and community team earlier today. If you haven’t had the opportunity to check this product out yet, I’d highly recommend that you do. In a nutshell – it allows you to micro-survey (he told me they hate that word over at Rypple) an audience to get quick and anonymous feedback. I’ve used it a number of times to survey my team after big meetings and to generally check the pulse of the business. Over the past two months, I’ve found that the ability to get unfiltered and anonymous feedback has been an extermely valuable management tool. The product is still in public beta, but they’ve got a number of exciting things on the roadmap. According to David, they do weekly updates, so things are changing quickly.
Check it out and let me know what you think. Or, probably more importantly, let David know. I’m sure he’ll appreciate it.
The Innovation Paradox
Feb 26th
Pete, author of Share Tactics, sent me an article from the NYT suggesting that “The Magic is in the Tweaking” when it comes to developing new products and services. The premise of the article is that “companies reach success by discovering different uses for their original technology, changing their sales philosophy or repositioning a product, among other tacks”. According to the cited expert, “many entrepreneurs learn as they go along. With each lesson, they find out a little more about what new direction to take.”
In a separate article in today’s WSJ, a different expert asserts that:
In any business, innovation is at least as critical for old companies as for start-ups, and more complex. It requires two steps: “upgrading, leveraging and extending old and still-popular brands while also looking for new ideas,”
However, he goes on to suggest that “the biggest roadblock is risk-aversion.”
As companies become more and more comfortable in delivering incremental innovation, diverting funds and resources to risky new product development efforts becomes increasingly difficult. At a start-up, the product designers generally have a blank sheet of paper when starting out; that is, they are not constrained by the expectations and demands of an established customer-base looking for (often long-promised) features and product enhancements. Over time, as the company focuses on delivering incremental innovation to satisfy its customers (and deliver on modest, but achievable, budget goals), its new product development capabilities may begin to atrophy. Their customer-base gets what it wants, but the products begin to appeal to a narrower target audience as they become more and more tailored to the needs and demands of long-standing customers. Before long, the company is stuck with a maturing product set or a high market-share in a narrowly defined market. To sustain (or even achieve) growth targets, the company will will compelled to introduce new products. However, by now, they may no longer have the skills or competencies to develop a new product from scratch. As a result, they are generally left with a choice — source innovations externally (through either a partnership or acquisition) or to develop in-house new product development capabilities. Either way, there are usually some tough cultural battles that have to be fought and won before any of these approaches can work — overcoming “NIH” (not invented here), revamping compensation and reward structures and addressing the inevitable skills gap to name a few.
So, how does a company break this cycle? A few weeks ago, I suggested that you would need to put four things in place to Identify and Exploit Alternative Uses of Technology, including:
- A “sensing” mechanism that is attuned to the customer’s wants, needs and challenges.
- A way to capture and organize information so that it can be shared and re-used throughout the organization.
- An adaptable product platform.
- Robust business development capabilities that augment your development, production and marketing capabilities to rapidly pursue new opportunities
In the past few months, there has been a lot of discussion about how CRM needs to change to reflect the collaborative nature of customer relationships. Although there are a few companies out there that are building “CRM 2.0″ tools already (e.g. Communispace and Feedback 2.0), a CRM “1.0″ system can be modified to address the first two of the above requirements. Coupled with a robust business development function, this customer sensing mechanism will help the company spot and respond to new ideas and opportunities quickly. And, as discussed over the past few days, adaptable platforms gives the company (and its partners) the means to upgrade, leverage and extend those “old and still-popular brands” to satisfy the existing customer base.
More on Platforms and Open Product Acrhitectures
Feb 22nd
In 2006, the concept of platforms moved into the mainstream business conscience. The emergence of SalesForce.com’s AppExchange, Amazon’s e-commerce platform and Google’s APIs has stirred the imagination of industry pundits and entrepreneurs alike. Despite the recent hype, open product architectures are not a new concept. In 1993, the Harvard Business Review ran an article explaining “How Architecture Wins Technology Wars” (purchase required). Although many of the examples are dated, there are a few concepts in the article that are timeless. In introducing the concept of open systems, the authors (Charles Morris and Charles Ferguson) assert that:
In an “open-systems” era, proprietary architectural control is no longer possible, or even desirable. In fact, the exact opposite is true. In an open systems era, architectural coherence becomes even more necessary. While any single product is apt to become quickly outdated, a well-designed and open-ended architecture can evolve along with critical technologies, providing a fixed point of stability for customers and serving as a platform for radiating and long-lived product family. Proprietary architectures in open systems are not only possible but also indispensable to competitive success — and are also in the best interest of the consumer.
As far back as the early-nineties, the Morris and Ferguson suggested that “good products are not enough”. In their view, point-product vendors are at the mercy of the platform vendors and there is a significant risk when the architectural leader “changes the rules of the game”. In the beginning, “products distribute architectures”. However, over time, architectures become the become the distribution channel for additional products and services. Although a familiar story now, the authors suggest that this is how Microsoft beat Lotus in the spreadsheet wars. While Lotus was developing a “grab-bag” of applications, Microsoft focused on building out the platform (i.e. Windows). In the end, Microsoft was better able to leverage its own platform to push Excel and Word.
The above-mentioned article also contends that “successful architectures are proprietary, but open” because “closed architectures do not win broad franchises”. As discussed in the previous post, Apple has used a platform approach to the development of the iPod, but it is not an open product architecture. It does seem that they have won a broad franchise though — at least for the moment. However, the article points out that Apple made the same mistake in the early nineties by bundling the Mac OS too closely to its own hardware. If they are right, iTunes/iPod will ultimately end up with single-digit market share as well as customers and innovators migrate to more open options.
The authors go on to suggest that “general purpose architectures absorb special purpose solutions”. We see this all the time in the open source world where someone makes a cool modification that ultimately gets rolled into the core product. I think that this is going to be a real challenge for the open, but proprietary, platform vendors such Salesforce.com. It is only a matter of time before they begin to roll some of the functionality provided through AppExchange into the core product — it will be interesting to observe how the partners react and how they are compensated for their innovative efforts. Lastly, the article also suggests that “low-end systems swallow high-end systems”. Although they started out as a SMB application provider, over the past two years there has been plenty of evidence that Salesforce.com is heading up-market. And over the past couple of days, Google has announced that it is going to market its previously free individual productivity applications to SMBs. These low-end systems are definitely evolving to address previously higher-end needs.
In a future post, I’ll look at phases of architectural competition and strategies for platform dominance.
