Are you taking note of the many ways that you’re killing innovation in your business? It’s easy, a true innovative business has certain characteristics that make it innovative over the long-term; does your business have them?
If your business doesn’t have those characteristics, start by eliminating what’s blocking innovation. Here’s another clue…
Last week I wrote about the deadly innovation sin of believing that a set process will save you from the risk that comes from pursuing innovation. Another sin established companies make is that of never taking the initiative; rather preferring to be a fast follower.
Let me explain…
First move advantage is mostly a myth, a true innovator is the first one to get the business model right
There is huge difference between being first and being right. Being first means aiming to get a first mover advantage and supposedly control the market. Unfortunately, though there are anomalies like Twitter, first-mover advantage doesn’t exist.
Examples of companies that were not first but got it right are everywhere: Apple, Google, Amazon, Tesla, Nike, Pixar, etc..
You don't have to do it first, you just have to do it right.
— Jack (@jack) May 1, 2012
If you study ideas that failed to get adopted you will notice that they failed to scale; this is a timing challenge.
Getting it right means scaling the idea; Tim Kastelle wrote a great post on this:
Often when people have an idea for a great new product or service, they rush to be first to market with it. We keep hearing about first-mover advantage and how you need it. The only problem with first-move advantage is that it doesn’t seem to exist. The academic research on the topic shows that there is no such thing.
The first definitive work on this was done by David Teece in 1986 (pdf version of the paper here). He found that innovators capture about 20% of the profits generated by their new ideas. Followers and imitators capture slightly more. Suppliers get some of the benefit, but the big winners are customers, who get about 40% of the benefit of new ideas.
The study was done 25 years ago, but subsequent work has consistently found similar results.
Part of this is because innovations diffuse across an S-Curve – and this usually takes longer than we expect it to.
How can innovators try to capture more of the profits generated by their great ideas? It’s not by being first to market. In his excellent new book Sidestep & Twist: How to create hit products and services that people will queue up to buy, James Gardner suggests that one way to address this problem is use network effects to accelerate the S-Curve – to be the first to scale.
In other words, being the first to get the business model right.
That’s what Google did:
Google was the 21st search engine to enter the market, 1998.
Know your competition, but don’t copy it. pic.twitter.com/KLCf1LSaO5
— Vala Afshar (@ValaAfshar) January 27, 2015
Google, like other innovative businesses, have mastered sustainable and disruptive innovation that give it both an evolutionary and revolutionary advantage:
- Strengthen the core business model;
- Build and extend on the core business model;
- Explore and pioneer other models unrelated to the core business model.
On the last point, having a sustainable innovation that delivers tons of cash is great because it affords you the opportunity to place big bets on the future; it’s something which attracts top talent and develops the mindset of an innovator.
Taking risks on bold ideas is like oxygen; everyone wants to be a part of something that has the potential to change the world. So it’s about wanting to be first on something; but also on wanting to get it right.
Anyway, how do you get the models right? Speed. It’s a startup’s advantage over established businesses. Startups move faster because they experiment; which is the shortest path to innovation.
Bottom line: It’s not about being first, it’s about being right; and you only have to be right one time.