The iPad 2’s Innovation Surprise

Today Apple announced what new features we could expect in the iPad 2. Most of the improvements are fairly typical for technology these days:  a faster processor, a front and back camera and, a thinner body. The gyroscope is a nice addition but I believe the best feature is the self cleaning cover (video here). However low tech it may seem, it is surprisingly functional. It clips on easily, cleans and, then folds up to provide a stand for the iPad 2. Sometimes the best innovation involves the least amount of technology.

Too Busy to Innovate

Yesterday CIO UK published an article about an SAP survey that highlighted the current innovation deficit in IT companies. In the simplest terms the article boils down to this, innovation is the last priority to get funding or focus but yet it seen as a critical driver of corporate performance. Earlier I wrote about how public companies have a “quarterly focus” and it seems that private companies are suffering from a similar affliction.

What is interesting about this survey is that 48% of respondents cited the economic uncertainty as the primary reason for investing in technology.  That rational is remarkably short term.  After all, staying in business tomorrow entails offering more than you do today but yet there appears to be little attention given to long term efforts.  The only good news,  from a competition standpoint,  is that those which are focusing long term results will really accelerate “out of the turn” and those which currently spend their days chasing fires will undoubtedly be a distant second.

Too much innovation equals no innovation

Too many choices for innovation each with too many metrics, too many focus groups and too much market research, results in precisely one decision: that what’s needed is more metrics, more focus groups and more market research.

Being ignorant and being too well versed can result in the same problem – not moving forward.

The failing of fail fast

These days when you walk into building or a house with a dark room, most people will assume there is some wiring within the walls and search for a light switch. In other words, you assume the room has:

  1. a light
  2. that the light will generate a sufficient amount of lumens

In my experience, this is a safe assumption, after all, we have building codes, building permits, and buildings inspections all designed to ensure that a room has, among other things, a light.

How does this tie into fail fast? Fundamentally fail fast proposes that you get a product out there and then proceed to adapt the product and hunt for customers until you either find them or you fail fast onto the next business. This approach is very attract to entrepreneurs because they can just “do something”, which is the behavior they are the most comfortable with.

I hate this approach to a business and here’s why – did you, the entrepreneur, do your homework?  Did you find a real market or a market of 3.  Did you have a strategy? Did you design a business model OR are you wildly flailing at any niche which shows any promise.

Wait – it can get worse.  What if you do get some market traction?  That’s good right – well maybe not. The real question is whether or not it is “good” business. That is, we all know not all customers are created equal and not all business models are created equal. So is this a healthy customer segment? Are the margins outsized? Is it sustainable? Is it scalable?

The message of fail fast sells well since it is a very palatable idea though, there are some thorns on that rose. BTW, VC Mark Suster has more detailed argument here – it’s worth your time to read.

Note: fail fast is perfectly acceptable for a project or a product, though neither one should equate to your entire business.

The When of Innovation

When companies talk about innovation I tend to pry into the “when” part.  It seems to be a good indicator on how committed the company is to achieving the goal.  I’ll explain….

From my experience companies that are short term focused are not really looking to make a splash, in fact they aren’t really looking to do much besides exceed their internal revenue target by some insignificant amount. Usually this is a company which overwhelming focuses on operating efficiencies, and rather than leading their industry, they are content to not fall behind.

If however the company counts in years and not quarters then there is a real chance that this company is in it to win it. These are also the companies which find success in long term strategy which is not limited by their industry but rather by their own vision of the future. The When of innovation is a surprisingly insightful measure.

Patient Innovators – Do public markets hamper innovation?

Absolutely. The short term focus on quarter to quarter results creates an environment where accepting the inevitable decline of the established business model is difficult. And when the reality can’t be brushed aside anymore, the ability to transition is limited by investor patience. This makes for an artificially quick – and likely poor – transition to the new model. ie. everyone is looking for the blockbuster product rather than focusing on sustainable and scalable growth. However not all public companies suffer equally, Google has had tremendous leeway in developing and growing new innovations because their primary revenue stream is so robust.

With few exceptions, I believe that the the ability to be patient and focused on the long term is a key advantage for a private company. A leg to this stool is the capital structure of the private entity. In other words, a private company building on organic growth, rather than external funding, has even more latitude to experiment. Good examples of patient innovators are companies like W.L. Gore and SAS.

Innovation – Adapt or Perish

Failing to innovate is like standing still – the world will pass you by. In fact you don’t even need to to be standing still anymore, just move slower than everyone else. Innovate slower, change  slower, and experiment less, and you will  – quickly – become irrelevant. Moore’s law doesn’t just apply to technological progress anymore.