Investing in innovation inherits risk, because the chance of success or what new market (and it’s size) might arise from the innovation is largely unknown. The problem with asking a mainstream business to be more tolerant to this risk-taking with inherently higher probability of failure, is that they simply can’t tolerate any marketing or product flops.
The main business should only invest in sustaining technology, into existing markets made up of well-known customers with researchable needs. Getting it wrong the first time does not bode well with this well-known processes of careful planning and co-ordination.
Markets come and go – and companies need to transcend from one to another for a real shot at continued growth and longevity. But this needs to be supported by markets and customers that the core business can’t even afford to understand little own make money out of. So how can a company make inroads here?
1. Put a tiger team in a bubble
For established firms, spinning up an independent team to establish a strong market position in emerging technology is easier said then done. It proves difficult to do, you’re essentially re-allocating people and efforts away from the needs of the core customer base, who currently pay the bills. It’s been proven successful though – IBM’s PC Division, Hewlett Packard’s desk-jet initiative, Control Data’s 3.5 inch disk drive efforts are all examples of companies allowing independent teams, shielded from the overall organisational structure to go off and successfully build out new value for emerging markets.
In these examples independence and autonomy were created, talented staff were assigned to the initiatives and were completely protected from the constant business as usual distractions they would have encountered otherwise.
2. Make learning their objective
First up acknowledgements must be made – a realisation that small, largely undefined markets cannot solve the growth and profit problems of large corporations. Learning about what the market actually is must happen first. It may take multiple pivots in a teams direction before they strike gold. Listen to what the market is saying through metrics and feedback. If you see en-expected spikes in unassuming areas of a product – this could be a subtle clue to where you should focus next. Maybe you can forgo scope for a new type of application. The important thing is to observe and validate (or dis-prove) assumptions fast and pivot in the direction the market leads you – even if at first the indicators are small.
Take the story about Honda’s invasion on the US motorcycle industry for example. They researched the market and found that US riders loved riding long distance on the powerful machines. They attempted to build motorcycles to meet these needs and competed against the likes of Harley Davidson in this well established market. They failed dismally.
The interesting part of the story is that Honda’s Japanese executives working in the US were given Honda Super Cub bikes for commuting around LA, where they were based. One exec began to vent is frustrations on the dirt roads of LA’s surrounding hills. Over time he invited friends, who loved the experience. He had discovered a new application for the Super Cub. This was essentially the beginning of dirt bike riding in the US – a new market that Honda established (by accident) and then owned for decades to come.
3. Get pumped about the small wins
In the early years of a new business, income is likely to be denominated in the hundreds, not tens of thousands. If a start up is able to get a few early wins, they will be relatively small ones. Ina small independent organisation these small wins will energise a team with enthusiasm. However, in the mainstream business a small win will be met with scepticism. People will question whether there’s enough value generated for ongoing investment. As a manger the last thing you need to be doing is waisting time and energy defending the teams existence to the overarching efficiency analysts.
4. Be proactive in understanding potential new applications
As a company you need to be acutely aware of emerging new applications that can leverage the value of what you have to offer, the timing here is critical. Hewlett-Packard’s Kittyhawk Drive is a great example in this space. HP worked tirelessly on Kittyhawk, it’s emphasis was on a size, weight, power consumption, durability and ruggedness. It was intended to sustain the portable computer and PDA market. It’s development went to plan and it had the hefty price point that manufacturers like Apple could afford.
The PDA market never took off back then (Apple’s Newton flopped). And HP was left with a product that was over designed and over priced for the likes of other disruptive applications that really took off – think digital cameras, scanners and portable word processors. In this instance HP weren’t privy to these emerging applications and the huge new markets they would create. Even if HP could have afforded to re-design and re-position Kittyhawk for these needs, the window to enter the markets would have by then been shut.