Innovation Isn’t The Goal

True disruption is rare, specifically because it means creating a simple solution for an unserved market at a lower cost. So I was delighted to start reading Jim McKelvey’s book The Innovation Stack. Jim is the co-founder of Square, the payments company, along with Jack Dorsey, co-founder of Twitter. In the book he uses the story of Square to shine a light on how innovation happens when you create a solution for an unserved market; classic disruption.

While payment processing existed when Square was founded, there was a market of people who were excluded from existing solutions. This is where Square came in to save the day. But they couldn’t just copy and paste what existing payment processing companies were doing, they were forced to create a new solution; one that challenged the status quo and proved to be better.

What Jim calls the Innovation Stack is what they had to create, over many years, to be able to succeed. Their Innovation Stack is a collection of inventions that together give strength to their business model.

Jim mentions in the book that they never set out to innovate. Rather, they had to because it was the only way to create Square. There were no answers to new questions when they started, so they had to explore and invent them; otherwise Square wouldn’t exist.

And this is the point: So often companies try to innovate by making innovation the goal. But the resulting “innovation” becomes an incremental improvement and is quickly copied by the rest of the industry. This is what innovation looks like most of the time, it’s not that risky and quite predictable.

The type of innovation that Square created is disruptive. They created something where existing industry rules didn’t apply and had to innovate their way through every problem they encountered; copying wasn’t an option because those options wouldn’t work for their customers.

Incumbents rarely put themselves in situations where innovation is the only alternative. It’s why disruption never comes from within, it comes from an outsider. So when we talk about disrupting yourself, what it means is you’re creating answers for questions that have no answers.

Bottom line: Innovation isn’t the goal, it’s about creating better options.