Recently, the social networking phenom Facebook ousted Google as the most popular website in the United States. Should Google start to worry? Absolutely, says innovation expert Scott Anthony, managing director of Innosight Ventures. He should know, having written three books on innovation, the latest being The Silver Lining: An Innovation Playbook for Uncertain Times. “Remember 15 years ago when everyone said Microsoft was unstoppable? People talk about Google in the same way today, even as Facebook has relatively quietly built this massive audience with the potential to drive very disruptive models that tie into social networking. I think there’s a real chance that we might see a flip in power in the online world over the next 3-5 years from Google to Facebook,” he said in an interview with DNA. Excerpts:
What exactly do you mean by innovation?
I have a pretty simple definition of innovation — something different that has impact. The impact part of that definition is critical. Innovation is different from invention. It’s not just the creation of something new, it is the application of something new. That impact can be in the market, or it can be internal (like a new process). Now, what does innovation require? It has three parts. The first is the inspiration or insight that there is an opportunity to do something different. The second is an idea or plan to capitalise on that insight. And the third is turning a plan on paper into a real product, service, process or business. For example, a couple of years ago, Godrej had an inspiration - how can we reach the 90% of Indian homes that don’t have refrigerators? It developed a plan to create a low-cost, top-loading refrigerator. It launched that product — called Chotukool — last year.
As organisations become bigger, do they become less innovative?
It depends what you mean by innovative, of course. Large organisations can do some phenomenally innovative things. IBM is a massive organisation but it is constantly improving its current offerings and creating new ones. Apple now is the fourth-largest company in the world (based on market capitalisation) but it’s no less innovative than it was 20 years ago. And the Tata Group has sextupled its revenues over the past decade but continues to find innovative ways to enter markets. Large companies in particular thrive at what we call “sustaining” innovation. That is, taking what exists and making it better. For example, Sony has been a great sustaining innovator in its television business, mastering new technologies like HD, and now 3-D. Where large companies tend to struggle is in what we call “disruptive” innovations. That is the innovations that transform existing markets and create new ones. Sony has missed disruptive changes in the portable music, gaming, and handheld video recorder space, creating space for Apple, Nintendo, and Pure Digital.
In your new book, The Silver Lining, you talk about breaking down innovation into smaller chunks and not betting on a single roll of the dice...
There are two related thoughts here. The first is that anytime a large organisation’s future is riding on a single idea, I get very nervous. There are just too many unknowns ‘to bet the farm’ on a single idea. Any large company that is serious about innovation has a well-developed portfolio, because they know some of their efforts won’t succeed. The second thought is to have the same discipline about individual ideas. The research shows that no matter how smart you are, your first idea is going to be wrong in some kind of meaningful way. That’sfine, as long as you don’t spend too much time or money figuring out how you are wrong.
For example, in 2008, we scripted a business plan to create a laundry services business in India. We called it ‘Village Laundry Service’.The theory was that there is a ‘missing middle’ in the laundry sector between the dhobis and families that can afford high-end washing machines. We thought we could develop a business model that provided close-to-high-end quality at close-to-low-end prices. But we didn’t know if the market wanted this kind of idea. So we did a quick in-market test using a very rudimental delivery mechanism. There were enough positive signs that we decided to invest a bit more to figure out if we could actually develop a viable laundry ‘kiosk’.
After we did that we started running a few retail locations. The business model has twisted and turned through the way, as we expected. The key is that we’ve learned in market, as opposed to a conference room. Today we have more than 20 kiosks in Bangalore, Mysore and Mumbai, with plans to scale the business throughout India over the next two years.
A famous innovation story is about Bank of America, which mandated that 30% of ideas had to fail. Google also had a similar working line with 20% of the employee time being spent on side projects. What’s your take on such strategising?
Those are actually two different strategies, and generally I like the Bank of America one more. That metric tells people that it is acceptable to take some amount of risk. If you never tolerate failure what you eventually get are very close to the core, incremental ideas. Those are fine, but won’t produce blockbuster results.
The Google approach, which 3M has done for a long period of time, works well in particular cultures. But it works less well in organisations that are still getting their innovation legs. All things being equal I would rather have three people spending all of their time on innovation than 100 people spending 10% of their time on innovation.
Part of the issue with replicating Google’s ‘20%’ system is there aren’t many people who have an end to end approach to innovation that is like Google’s. And if you copy one piece without the surrounding elements, it just won’t work.
Comments