Innovation Zen

What factors of the capitalism system enable companies and individuals to generate huge profits? Market imperfections? If the market was perfectly competitive (i.e. no monopolies, no asymmetry of information and so on) would it still be possible for someone to get rich? Those are some interesting questions to think about, I will write an article […]

Sometime ago I already wrote about Starbucks, outlining my theory about why the giant coffee house is not present in Italy (click here to read). Looks like Starbucks it not passing a good moment after an internal memo leaked into the blogosphere (click here to read the memo). Basically the memo outlines Howard Schultz’ fears […]

Michael Raynor is a consultant and and a very insightful author. He is the co-author of The Innovator’s Dilemma, which was written with Clayton Christensen as a follow-up to The Innovator’s Dilemma. Recently he published a new book called The Strategy Paradox where he tries to some companies fail despite crafting intelligent strategies and committing the necessary resources.

All those factors certainly helped JVC, but there is arguably another one, more obscure, that influenced the final result: the porn industry went with the VHS format. The early home video rental stores were responsible for part of Betamax’s decline, and those stores carried a lot of pornographic content.

Considering all the buzz that the iPhone generated we can assume that it will disrupt the mobile phone industry and make Apple hit the jackpot again, can’t we? Well, I would not be so secure about that. While I admire Steve Jobs’ initiative to invade a challenging business such as the mobile phone one, I think that Apple’s strategy has some flaws, and below I will outline each of them…

Most organizations identify their customers as one single entity. If a certain company is producing miniatures of racing cars its customer is going to be boys aged between 3 and 12 years right? Well, it is right, but only to a certain extent. Those young boys are certainly the “users” of the product, but they are not the only people involved in the buying process. Apart from the “users” you will also have the “purchasers”, who in this case will probably be the parents and the “influencers” who could be the close friends or family.

Many people argue that companies are able to use innovation to create needs within customers. The iPod is a classic example, people defend that the world never needed such fashionable device before Apple created it. In my opinion, however, it is not possible to create needs within customers.

Until the early 1990s the video game industry was dominated by Nintendo and to a lesser extent by Sega. Sony introduced its PlatStation in 1994 and within a couple of years it managed to displace competitors becoming the undiscussed leader for video game consoles.

The reasoning behind that argument states that Wal-Mart would be paying low wages to its employees, destroying jobs in competitor retailers, and concentrating its wealth in the hands of few people.

There is a lot of theoretical evidence supporting the model, but does this evidence emerge empirically as well? Not quite. Consider the markets for safety razors, disposable diapers, photographic film, laser printers, game consoles, VCRs, energy drinks, personal computers, internet browsers, operating systems, search engines, online bookstores, online auctions, VoIP services, and the list goes on.

In emerging and innovative markets, however, a completely different managerial mindset is required. Competing in those markets, contrary to what most people believe, is not about having a superior technology.

What do daycare teachers and managers have in common? Both should learn storytelling. Stories represent a powerful tool to illustrate ideas, convince people and generate commitment. Below you will find the story of the cash register machine and NCR, the undiscussed leader in the manufacturing of mechanical cash registers during the 1960s.

Stories like the above one, even if not as dramatic, are not uncommon. Consider the lists Fortune 500, Forbes 100, Global 1000, S&P 500 and so on, they collect the largest and, supposedly, the best managed companies in the world. If we take a closer look, however, practically all of those large organizations underperform the market in the long term, a rather counter-intuitive fact.

There are many costumers who would be willing to drive an all-electric car, despite the reduced performance, because the alternative would be not driving at all. Consider parents who are worried about how far and how fast their kids might drive. An electric car could be the perfect choice.