It seems like every business discussion today is just counting the seconds before the term “platform” comes up. Books and articles are written, pundits swoon and conference audiences nod and exchange glances in knowing agreement. Everyone, it seems, wants to transform their business into a platform. Yet take the argument to its logical conclusion and the message becomes problematic. Platforms, as many have observed, function as multi-sided markets and therefore must connect value to value. So if everybody becomes a platform, who actually creates the value to make a vibrant marketplace? Continue reading “The Platform Fallacy”
We’ve all heard of the Innovator’s Dilemma. Should a business give customers what they think they want, or take a leap of faith and introduce new products or services? Even if the new product or service is of groundbreaking quality, deviating from what consumers are used to can be risky…
Recently, I tried out a new talk at La Victoria Lab’s innovation festival in Lima where I covered an experiment we have been engaging in, somewhat by chance, at The New York Times: working on our culture like it was software. I’m not sure how the talk went over, but personally, I think we are onto something good and novel at The Times.
The story I told at the FEST was about how my team and I have gone about trying to impact the tech culture at The New York Times. It should be obvious to my readers why we want to work on the culture: we want to be better — better environment, better capability, better talent, better decisions and better results. Focusing on the team is the leverage point for all of those things, and culture is the leverage point on the team. As I put it in my talk, the benevolent laziness of the software engineer led us straight to culture. Continue reading “Develop Your Culture Like Software”
One of the things that startup guru Steve Blank likes to say is that no business plan survives first contact with a customer. What he means that every idea is wrong. Sometimes it’s off by a little and sometimes it’s off by a lot, but it’s always wrong and the sooner we find its flaws the sooner we can start making it work.
This holds true even when an idea is revolutionary, like electricity or the personal computer. There is always a gap between an idea and it’s impact. In fact, on average takes about 30 years to go from an initial discovery to a significant effect on our lives. That means that the “next big thing” is usually about 29 years old!
So there is no lack of fertile ideas, but still most organizations fail to innovate. The problem is not a lack of intelligence or ambition — any enterprise that is able to stay in business for any length of time obviously has both — but that innovating successfully is profoundly different than running operations, which leads managers to make four fatal innovation mistakes.
1. Seeking Only Large Addressable Markets
Every business plan starts with assumptions. You need to estimate costs, sales and growth for years in advance. Obviously, the more favorable your assumptions are, the better your business plan looks and the more likely it is to attract investment, so you want to build a case for high sales, rapid growth and low costs.
Of course, to be earn support, a business plan also needs to look realistic. Costs need to reflect market rates. Revenues need to be based on actual spending trends. There needs to be an analysis rooted in tangible benchmarks, you can’t just pull stuff out of thin air and expect to convince anybody that your plan is viable.
One solution to the problem is to target the largest addressable market you can find. In a multi-billion dollar market, capturing just a few points of market share can seem like a very reasonable assumption and, all of a sudden, your numbers start to work. From a small foothold, you can show years of steady growth.
Unfortunately, the world is not an Excel spreadsheet. No matter how big the market, somebody has to want to buy what you’re selling. So if your product is truly new and different, you need to build for the few, not the many and that means identifying a “hair on fire” use case — a customer who needs your product so badly that they will overlook early glitches.
2. Getting Trapped In Your P&L
The reason that executives feel pressure to identify large addressable markets is that it’s good operational practice. When you want to grow your business, it makes sense to look for more customers. However, there is a fundamental difference between innovation and optimizationthat leaders too often ignore.
When you are working to improve an existing business, you have a lot of information to work with. You already have customers and should have a good understanding of how they use your product or service. So identifying a large swath of new customers that have similar needs is an entirely sensible way to grow.
However, when you seek to create something that’s truly new and different, you have no way of knowing what the demand will be. The truth is that the next big thing always starts looking like nothing at all. So if you limit yourself to only the opportunities that you can quantify, you’re never going to achieve anything more than an incremental improvement.
One thing that I noticed in researching my book Mapping Innovation is that the best innovators always invest in uncertainty. Although they remain disciplined about resources and manage risk effectively, they make sure they are devoting resources to explore new areas with no idea about what the return will be. Ironically, this was the closest thing I found to a sure bet.
3. Failing To Look Beyond Internal Capabilities
A basic tenet of good management is that you want to leverage your capabilities over as large a footprint as possible. For example, once Amazon learned how to sell books online better than anyone else, it leveraged those same capabilities into other product categories and achieved similar success in the expanded markets.
So, not surprisingly, the first thing most companies look for is a proprietary asset or capability they can apply to a new market. That’s generally very sensible, but it’s also very limiting, because it ignores an enormous range of capabilities and assets among customers, partners, vendors and open platforms.
Sun Microsystems Cofounder Bill Joy once famously said, “no matter who you are, most of the smartest people work for someone else.” That’s very true, but it doesn’t go nearly far enough. The best of almost everything resides somewhere else, so by limiting yourself to what you have internally, you’re putting yourself at a real disadvantage.
Competitive advantage is not something you start with, but something you build over time. So focus less on the assets and capabilities you control and more on those you can access. By using the whole innovation ecosystem, you can greatly extend your ability to innovate.
4. Looking For A Great Idea Instead Of A Good Problem
At any given time, there are far more ideas buzzing around an organization than it can pursue. Rapid changes in technology, market trends and consumer behavior only fuel the fire. With everything that’s going on it seems that the potential for innovation is endless and, in a sense, it is. Every year countless new startups are funded and new products are launched.
Most fail. Just because you have an idea doesn’t mean it’s viable or that you can make it work. The truth is that innovation isn’t about idea, it’s about solving problems. The truth is that nobody cares about your ideas, they care about meaningful problems you can solve for them and that’s where you need to focus you energy.
While writing Mapping Innovation, I came across dozens of stories from every conceivable industry and field and it always started with someone who came across a problem they wanted to solve. Sometimes, it happened by chance, but in most cases I found that great innovators were actively looking for problems that interested them.
That’s why the firms that are able to innovate consistently — not one-hit wonders but those who make it happen year after year and decade after decade — have a systematic and disciplined process for identifying new problems. How they do that varies widely, but the core concept remains the same.
So forget about the hype and the myths. It’s the ability to identify and solve important problems that transforms disruption into opportunity.
An earlier version of this article first appeared in Inc.com
And how you can use design thinking to burn through the bad ideas that lead to good ones.
Growing up, we’re all taught to follow the rules. Wait your turn in line. Fill in the bubble of the right answer. Eat your dessert last. Tie your shoes and tuck your shirt in. Don’t ask stupid questions. We’re rewarded for caution and deliberation, punished for coloring outside the lines.
Over time, we’re shuffled into groups based on test results and pursue careers based on our credentials and degrees. We eventually file into offices where we are required to dress a certain way, talk a certain way; behave a certain way. At some point along this journey, the world designates you as “creative” or “non-creative” with most people falling into the latter category.
And yet, we know that creative thinking is necessary for success. It has enabled the rise and sustainable success of companies like Airbnb, Facebook and Uber; completely transforming industries like hospitality, advertising and transportation. In fact, an IBM study of 1,500 CEOs found that creativity was considered the most essential feature of their organization, more than integrity or even vision. According to the CEOs, creativity enables companies to navigate today’s increasingly complex business environment.
The secret to creativity, according to science: persistence.
There are many reasons why we, as a society, abandon creative thinking as we enter adulthood. For one, creativity is messy and uncertain; it goes against everything we learn along the way in formal education and through socialization. Creative thinking can be scary because it makes us vulnerable to judgment and can sometimes feel like we’re giving up control. That’s why many people reassign themselves to the non-creative category — they repress their creative potential in exchange for structure, conformity and comfort.
The notion that individuals are inherently “creative” or “non-creative” is a dangerous one. It implies that only certain people are gifted with creativity, which has been disproved by loads of research, including one study from Northwestern University.
The research suggests we give up too easily when confronted with a problem that requires creative thinking. What’s more, the research finds the most creative ideas tend to arise after many others have been considered and discarded, proving that the key to creative thought is to just keep at it.
Bad ideas are building blocks to great ones.
There are two reasons why embracing bad ideas is necessary for great ones:
- Ideas that solve a problem in a unique way are usually a combination of existing ideas, many of which may seem bad at first.
- Accepting that most of your ideas will be bad will help you move on to new ideas faster and more easily.
Ultimately, like most things, creative thought is a trial-and-error process that requires failure. And while bad ideas can be building blocks to creative thought, sometimes they are in fact actually good ideas — just ones that nobody else understands yet.
Ideas that were once ridiculed have led to some of the greatest inventions in history, such as like human flight or electricity.
Design Thinking is a great technique to boost creativity.
At it’s core, Design Thinking boils down to defining a problem and creating as many solutions as possible in a limited period of time. It is a technique that’s highly conducive for creativity because, like creative thought, it’s also a trial-and-error process; it’s rooted in generating a high-volume of ideas.
To give you a better idea of how you can leverage Design Thinking to create a new offering or improve upon existing ones, here is a 7-step crash course you can use immediately:
Step 1. Listen to your customers. First and foremost, get out of the office and talk to your users or customers, observe everyday tendencies of what they do, how they think, and what they want outside of the context of your company. The goal is to gather enough observations that you can start to write down problem statements such as “Samantha dreads scheduling doctor’s appointments. How might we help her schedule appointments more easily?”
Step 2. Create visual representations of wild ideas using comic strips. Really. Using the problem statement in Step 1, describe possible solutions using illustrated narratives like comic book strips. Use stick figures to describe the scene in which Samantha would schedule doctor’s appointments in a new way. Sketch out 8 comic strips in 5 minutes, then spend 5 minutes sketching out one big comic strip idea, with each strip containing a different idea. Take a break and do it again.
Step 3. Imagine your new offering in the headlines. This will help you articulate new value propositions. Sketch out your favorite business magazine covers and draw cover images and headlines of what everyone will say about your new offering. For example, based on your comic strips you imagined booking an appointment using Siri, the headline in Inc Magazine might read “How This Company Helps You Book a Doctor’s Appointment In Just a Few Words.” Try to draw 10 copies in 10 minutes, take a break and repeat the 10 minute cycle. You can also feel free to describe ideas that you didn’t sketch in Step 2.
Step 4. Eliminate the impossible (not the bad). Once you’ve gone through all the ideas on the table, talk through ideas that you think would would be valuable and eliminate ideas that can’t be pursued immediately, like your doctor visiting your home via holograms. You should be able to combine ideas and narrow them down to 3 new ideas. This usually takes anywhere from a few hours to a full day.
Step 5. Make something you can touch and feel. The goal here is to evaluate an idea, not launch it. Be as resourceful as you can and try to limit yourself to only an hour to make a physical or digital prototype. A good starting point for simulating physical products is glue and popsicle stick, and tools like InVision or light code for digital ones. As long as you can touch it, anything goes.
Step 6. Then put it in the hands of your customers. Your customers are likely more imaginative than you think. Get a focus group together, show them what you made and get some knee-jerk reactions. The rule of thumb is to talk to 5–7 people to get the most insight in as little time as possible.
Step 7. Go back to the drawing board. Remember, the purpose of all the work you’ve put in to this point is to generate new ideas. If you think your customers are excited about your prototypes, start putting a plan together to execute on what you’ve created. If not, take the new learnings and go back to Step 1.
The beauty of this approach is you can do it in one week or over the course of 6 months, with most of the variability being in how much time you spend making your prototypes. It can be used by any department or role in the company to to unlock the creative potential across your entire organization.
This article originally appeared on Inc.com.
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Lessons learned from Google
I recently read a book called “How Google Works” by the founders of Google, Eric Schmidit and Jonathan Rosenberg. It was an amazing read, filled with numerous insights to the basic values Google was built on and their reasons to how they became so successful, from hiring top talent to centering their products around their users (with great stories to support their reasoning!)
Using Google as a reference to look at any top tech company’s success, how can we apply their advice to our design work? I compiled insights from the book that really resonated with me and how they connect to thinking about the design process and leveraging that to create a successful product or service.
They put their users first, always
The reason why a product or platform is so good is because their emphasis is on their users, not the product itself. This means fulfilling a need or problem users never realized was a problem to begin with until they provide a solution that transcends current product offerings.
Remember when Google released their search engine and that search engine became the best engine everyone uses today? This is because their primary goal was to provide the best experience for users to look up publicly accessible information which wasn’t something people would have thought of changing, given the existing search engines at the time. The existing search engines would provide users information when they typed something but they would often get poor results. It was like if you typed in a specific title of a car, but instead the first link would be to an art show with the name of the car included in the link description.
Serving our end users is at the heart of what we do and remains our number one priority (214)
When Google or any company says their “end users”, they mean users who have been enlightened as the result of their products. The product doesn’t just address their needs but provides a new perspective; a new way of doing things.
Google believed they could create a better product than what existed at the time, with one purpose: to create a search engine that had the single goal of surfacing accessible information in the context of what a user needs. With the rise of web pages and digital information, how could Google facilitate a seamless connection that would provide users what they were looking for and ultimately a solution that would address the unknown pain point of finding relevant information in one search? They started with their algorithm, PageRank, which would rank web pages based on what the user typed. Now with a plethora of data which exists now and the amount of users who use the internet, Google search has become an necessity when searching up any information, given the refinement of the algorithm and additional features added to make Search as diverse and valuable for users in need of quick, accessible information.
They value technical insights over market research
When Google Search launched, they differentiated themselves in that they placed emphasis on credible sources such as academic websites. This came from the insight in that the quality of a web page and how well it a user’s search would be based on the number of pages that led to a page (The more referrals to a web page = the higher the content)
Since then, most of Google’s successful products have been made with technical insights in mind, while the least successful ones have not.
Technical insights build great products. People will know a good product regardless of how it is marketed. Bad marketing can’t save a mediocre product.
In the book, it lists some of Google’s most successful products with the technical insights they are based upon:
AdWords– Ads could be ranked and placed on a page based on their value as information to users, rather than just by who was willing to pay more
Google News– Stories could be algorithmically grouped by topic, not source.
Google Chrome– Browsers needed to be reengineered for speed as websites grew more complex and powerful.
The point is that any successful product uses technical insights to find new ways of developing technology. This can be “driving down the cost or increase the function and usability of the product by a significant factor” (71).
Giving the customer what he wants is less important than giving him what he doesn’t yet know he wants (73)
Technical insights are different in market research in that marketing research only tells you what already exists. It does not give you insight to user behavior or how to do something new. In fact, marketing research narrows down your scope to thinking about the future, making you focus on solving existing problems or instead not telling you how to solve problems which users think don’t exist. As Henry Ford said, don’t look for faster horses.
Technical insights are based on the concept called “combinatorial innovation”. This is combining or recombining what already exists to create something new.
One way of developing technical insights is to use some of these accessible technologies and data and apply them in an industry to solve an existing problem in a new way (75)
Components that are currently driving the wave of new inventions include (digital) information, connectivity and computing. We have the opportunity to use copious amounts of the world’s information, computer power, open source software, and APIs, which can provide access to information platforms with vast amounts of data such as weather, economic transactions and even human genetics. These tools can be used to develop powerful insights and drive change in an industry.
They care about growth first
When building up their product, companies like Google and Amazon prioritized scale over what was considered “growth” in companies. For companies, this meant that they became big by first creating a product, achieving success (locally or regionally) and then grow the company by building sales, distribution and service channels, also ramping up manufacturing capability to match the progress. In order to get to the point of success, it would often be slow and time consuming. This won’t bode well in the internet world where you have competitors doing things quicker and more effectively. You need to have a “grow big fast” strategy.
Tech giants re-invented the meaning of what growth could become
Successful companies scaled their product, focusing on how fast they could release products to their consumers, growing their company very quickly and eventually globally. With a platform, it is easier to scale and reach a broader audience vs a product which doesn’t provide much room for connection. They understood how to create and quickly grow platforms which connected a wide range of users and providers to cater to multi-sided markets.
By building a platform, you can support a network that can connect millions of people and provide value for everyone in a short period of time. An example is YouTube which is a platform that lets you create videos and share them with a global audience. By adding videos and joining the community, you are adding more value and contributing to the growth of what the platform can offer in the future. For users, it is quality content and new information, for Google, it is more investment and for investors, it is ROI.
Platforms, not products
On the verge of being bought out, Google and Facebook decided to focus on building a platform first vs profiting on their “product” in the short term; it became “more valuable, attracted more investment and helped improve the products and services the platform supports”. When you monetize your product too soon, you are sacrificing your brand as well as your user experience (ads over product functionality is a big no no)
They encourage relationship building with other companies and themselves
When your platform is open, it tends to scale more quickly. The internet is a good example of an open platform in that so many people have contributed to it, allowing for connection and communication with a wide range of networks. It may seem counter intuitive to share your intellectual property with other people in fear of losing your competitive advantage but you are sacrificing control for scale and innovation. With open networks, you drive innovation into the product ecosystem while lowering the cost to build. This leads to more value for users (users can have ownership of the products they want to keep on using) and more growth for the ecosystem.
Google utilized the talent of thousands of users to help them innovate on their products, such as Google Translate which gets help from users all around the world to constantly improve the translation quality of different languages. Another example is their mobile system, Android, which grew immensely due to the growing need for smart phones and can be seen in a wide range of different phones due to its optimization for other products.
But not all successful platforms are open. Apple is a closed system for understandable reasons. They didn’t want to sacrifice the quality of their products and wanted to have full control in providing the best products for their users (establishing themselves as the only company who created products in a different way). Steve Jobs believed that the only way to do this was to provide a controlled and predictable environment in which Apple products were to be used.
They don’t follow the pack, they lead
When we focus too much on our competition, it causes us to fall into mediocrity. We spend too much looking at what our competitors are doing and when we want to try something new, we often don’t take big risks which lead us to developing incremental, low impact changes. In other words, by focusing too much on competition, you will never deliver anything truly innovation. Successful companies allows competition to keep them sharp and then diverge to create something different, something better.
When Microsoft released Bing in 2009, Google saw the need to diversify their search engine. With that in mind, they created new features such as Google Instant which provides search results while you are typing and Image Search which allows you to drag an image in the search box and find that image. This created a distinction between the two search engines.
How exciting is it come to work if the best you can do is trounce some other company that does roughly the same thing? (91)
The best companies do their best not to follow the competition, but instead using their competition as a way to be better. Instead of fighting with their competitors, they continue to improve their products and expand their platform to stay on top of the game. They always think ahead and think about what they can do in the future, instead of now.
How did the companies we know and love today become so successful to begin with? Simple. They weren’t afraid to make a difference even if it meant starting from nothing because they could find new ideas from what already exists and innovate upon them.
You will never disrupt an industry or transform your business, and you’ll never get the best smart creatives on board, if your strategy is narrowly based on leveraging your competitive advantage to attack related markets
Disruption and innovation go hand in hand in that disruption allows for innovation to happen which is the result of incremental change and the opportunity for everyone to innovate. This is what creates products that are “new, surprising and radically useful”
They also aren’t afraid of failure. Successful companies have constantly outputted products and failed numerous times to get to where they are now. They still continue to do this in order to stay on the top of the internet space.
Focus on the user and all else will follow
When creating products, a company’s goal should be to produce as much as possible and invest as little as possible until they are able to validate their ideas and know for sure that their product will satisfy users. This is an important step to take become scaling their platform and growing their product ecosystem. This can be said for not just Google, but for Amazon, Apple, Facebook, etc.
If you have questions or just want to chat, feel free to connect and message me on Linkedin 🙂
If you liked my post, please recommend it!
Links to some other cool reads:
- Prepping for Design Interviews (My Microsoft Onsite Experience)
- Most UX portfolios suck
- What I learned as a designer in the past 2–3 years
- The Types of Design Research every Designer should know NOW
- When did Design become so Easy?
Probably the hardest thing in business is to innovate consistently, year after year and decade after decade. Take a look at any industry at any point in time and you’ll find one company that seems to have hit on a secret formula only to find that ten years later that things have gone awry.
Consider the technology industry. If you looked at the 1990’s, the “Wintel” companies like Microsoft, Intel and Compaq seemed invulnerable. A decade later though, Apple and Google reigned supreme, Microsoft had hit hard times and Compaq ceased to exist as an independent company.
That’s why business gurus often undertake studies to identify the “one true path” to success, evaluating successful firms to see what makes them tick and analyzing the mistakes of others to figure out where they went wrong. The problem is that when applied to the real world, their advice doesn’t apply as cleanly as they promise and they often contradict each other.
You Don’t Focus Enough On Your Customers Or You Focus Too Much
Peter Drucker once said that “the purpose of a business is to create a customer.” Sam Walton, the legendary founder of Walmart, put it even more emphatically when he said, “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Yet in The Innovator’s Dilemma, Harvard professor Clayton Christensen found almost exactly the opposite. His research indicated that successful companies that fail often listen to their customers too much. When a new, disruptive technology arises, it often appeals to light or non-consumers that aren’t yet profitable for a big company.
His newest book, Competing Against Luck, seems to put the focus back on customers though, although it recommends focusing on “jobs customers want done,” rather than the customers themselves. However, it’s not quite clear which customers he’s talking about — the ones that currently pay for a product or the new disruptive kind that does not?
It’s confusing to be sure. Weren’t Coca-Cola executives focusing on their customers when research indicated that they preferred a new formula? Would a “jobs to be done” approach helped them to avoid the New Coke debacle?
You Don’t Stick To What You Do Best Or You Stick With It Too Long
Another business thinker well known for his exhaustive research is Jim Collins. In his bestselling book, Good to Great, which analyzed over two dozen companies, he introduced to hedgehog concept and suggested that outperforming companies find one thing that they can be the best in the world at, are passionate about and drives their “economic engine.
Longtime Bain consultants Chris Zook and James Allen gave similar advice in Profit from the Core, in which they argue that firms that focus on their core business significantly outperform those who stray. They also point out that there can be great growth opportunities in areas that are “adjacent to the core.”
Again, this seems like sound advice until you start thinking about contrary examples. Wasn’t Kodak applying the hedgehog concept by maintaining its focus on photographic film, an area in which it was a global leader and which drove its economic engine? Didn’t Steve Jobs stray from his company’s core when he moved Apple into music players and smartphones.
Zook and Allen praised Enron’s ability to “shift the core to drive into new horizons,” before it came crashing down, but questioned the viability of Amazon’s move to sell products other than books. Enron is now bankrupt and a cautionary tale while Amazon is thriving. Simple rules always get more complicated when you try to apply them to the real world.
You Have An Innovation Division Or You Don’t
It’s not just gurus and consultants that offer advice about innovation. In a Businessweek interview, Apple CEO Tim Cook had this to say.
A lot of companies have innovation departments, and this is always a sign that something is wrong when you have a VP of innovation or something. You know, put a for-sale sign on the door.
Everybody in our company is responsible to be innovative, whether they’re doing operational work or product work or customer service work.
Again, it seems like sound advice until you start looking for contrary examples. IBM’s Research division has powered the company for decades, through multiple technology cycles. Experian Datalabs identifies new product lines through solving its customers problems. Google’s X division pursues moonshots to find the next great business opportunity.
Clearly, Apple has been incredibly successful since Steve Jobs returned to the company, but it doesn’t seem like IBM, Google or Experian are likely to put a “for-sale sign” on the door anytime soon. Also, while these companies seem to be be breaking new ground in areas like data and artificial intelligence, Apple hasn’t introduced a hit product since 2007.
So who has the right model? It’s hard to say. Simple rules rarely apply to a messy world.
The One Thing That Really Separates Great Innovators From The Rest
When I began researching my upcoming book, Mapping Innovation, I studied a wide variety of innovators, from major corporations to world class labs to exciting startups and found a wide ranging set of philosophies and practices. In fact, they seemed to have little in common besides the fact that they were great innovators.
Some invested heavily in research, some did not. Some focused on their core businesses, while others created completely new models that led them into uncharted waters. Some focused on their customers, while others pursued other goals, such as curing diseases or solving difficult technical problems. No simple rules applied.
Yet as time went on one common theme began to emerge. Great innovators constantly seek to identify new problems. The manner in which they did that took on a myriad number of forms: talking to customers, engaging with the scientific community, identifying new markets for existing technology or whatever, but that single theme stayed constant.
So if you want to make your organization more innovative or become more innovative yourself, the best place to start is to look for a problem worth solving, then go figure out what solution fits it best. Revolutions don’t begin with a slogan. They begin with a cause.
An earlier version of this article first appeared in Inc.com