Everyone talks about innovation. Many organizations spend fortunes to innovate – to develop new businesses, products, services, etc. that can create wealth and jobs. But the real money in new products and emerging industries has been made by billion-dollar entrepreneurs, such as Gates, Jobs, Dell, Page-Brin, and Zuckerberg. They have become among the world’s richest individuals by innovating with new capabilities and making new markets.
For example, successful entrepreneurs focused on innovative business strategies that takes advantage of products or services developed by others. They “improve” the product, or they focus on a customer segment that offers a long-term edge over competitors. They don’t start with a blank sheet to come up with a “Eureka” product. They improve on other people’s innovations. Then they find a trend that will help them grow and dominate an emerging industry.
Sam Walton imitated the big-box trend along with Target and K-Mart, but decided to grow in small towns where he had to beat small retailers, while the other giants focused on urban areas. Then he expanded to urban America and beat Kmart and Target to become the largest. They believed, until it was too late, that they could not make a profit in small towns.
Mark Zuckerberg copied Myspace to develop a linking site. However, he innovated in the business strategy and focused his efforts on college students. University students were in the vanguard of using the Internet for social reasons, and Zuckerberg helped them along.
Google did not invent the search engine, but improved it based on the needs of web users looking for a rational method to get search results. This gave Google an edge to dominate search for the last two decades.
Uber succeeded by developing a better business strategy, leveraging the sharing economy, and using newer technology (especially the smartphone) – to redefine ride-haling services. While initially Uber provided an app to help people get limo / taxi rides, business exploded when the company switched their business model to make it possible for any driver to give a ride to any passenger. As we are witnessing, this new business model is changing the world of transportation.
Business strategies are also innovating rapidly in various industries where companies are in danger of losing out to ventures that know how to succeed in the new trends:
• Large banks, such as JP Morgan and Goldman Sachs, are developing new business models by forming alliances with online lenders for small-business loans (Economist, 12/5/2015, page 74) whereby small banks could lose a very profitable segment of their business.
• Kiko, an Italian company, is bringing fast-fashion business models used by Zara and H&M to the cosmetics industry (Economist, 12/5/2015, page 65). This will affect all fashion retailers.
• Smart cars are an emerging market segment with Tesla, Google, Apple, etc. working on autonomous, self-driving cars. From this, major car manufacturers such as Ford, GM, Toyota, Honda, etc. are investing heavily in the Connected Car projects and hiring thousands of software engineers to also increase vehicle intelligence, reduce our dependency on fossil fuels, be player in the sharing economy, etc.
• Blockbuster went broke because they didn’t see the change coming with video streaming as popularized by Netflix – even when Blockbuster had multiple opportunities to buy Netflix (for $50M) because they see the changes coming in how people would be consuming video !
• With changes in retailing from big box stores to online, Amazon is having a huge impact how we purchase goods. Despite investing heavily on ecommerce over many years, Walmart is now being impacted by Amazon Prime Days !
From these observations and other examples of how innovation along with new needs and opportunities are impacting markets, it appears Sam Walton’s mantra ” To succeed, stay in front of change ” every organization needs to adapt since it is becoming clear no company or industry is exempt from change.
Because of this, there is increasing need for organizations to ” Innovate for Impact ” to –
A. drive change, versus being a victim of change
B. extend their innovation capabilities with “Incremental, Sustainable and Disruptive Innovation” – to expand revenue streams and business opportunities
C. thrive (not just survive)
Sept 16, 2017 – CAIL – Innovation Industry Commentary