Only Dead Fish

This Week's Favourite Fraggl Links

Here's my favourite links, curated by Fraggl:

• The 2014 Gartner Hype Cycle is out - notable how Internet of Things is right at the top of the hype curve, wearable UIs and 3D printing on their way down...
• The Napa earthquake woke up 93% of locals and more than half of San Francisco according to Jawbone
• The 5 core skills of disruptive, visual-thinking innovators from the Stanford School of Business
• Adapting gadgets to our needs is the secret pivot on which technology turns, it seems

And of-course you can sign up to Fraggl here.

Emergent and Deliberate Strategy

Christensen defines organisational strategy as being the right combination of that which is fixed and ‘deliberate’, and that which is more flexible, or emergent. Strategy, he says, is ‘not a discrete analytical event’ or something decided using best known numbers at the time in a meeting of senior managers. Instead, it is a ‘continuous, diverse, and unruly process’ that constantly evolves. So the art of managing this is not to dismiss anything that deviates from the original plan but to continually identify better options and then manage resources flexibly to nourish them. This might sound obvious, but rigid planning processes often mitigate against this and (particularly in large organisations) challenging the original plan could mean entering a morale-killing world of pain.

The example Christensen uses to illustrate the advantages of flexibility is the way in which Honda broke into America. The company’s strategy was based entirely around big motorbikes (since that is what US consumers seemed to favour), bringing them into competition with manufacturers like Harley. Some Honda employees started to use a few of the much smaller Supercub models to do a bit of weekend dirt biking in the hills around LA, a Sears buyer sees the interest this generates, decides to stock them in the outdoor equipment department, and a new opportunity for Honda, an innovative distribution strategy, and a whole new genre of biking, is born. Honda refocused their strategy on the Supercub which went on to become the best selling two-wheeler on the planet, in no small part due to their ability to break into the North American market.

In The Origin and Evolution of New Business, Professor Amar Bhide was able to show that 93% of all companies that ultimately become successful had to abandon their original strategy. And there’s a lesson in that for all of us.

Planting Saplings

As a (kind of) addendum to yesterday's post on marginal thinking, I really liked this analogy Christensen had for the all-too-frequent slow organisational response to the need for innovation:  

'If a company has ignored investing in new businesses until it needs those new sources of revenue and profits, it’s already too late. It’s like planting saplings when you decide you need more shade. It’s just not possible for those trees to grow large enough to create shade overnight. It takes years of patient nurturing to have any chance of the trees growing tall enough to provide it.'

I think there are not only companies but possibly entire industries that have been guilty of this.

Photo Credit: scragz

Marginal Thinking

'The safest road to Hell is the gradual one—the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts.' C. S. Lewis

I've been reading some Clay Christensen stuff recently. Revisiting some old stuff, digesting some new things. One of the latter was How Will You Measure Your Life, a very personal take on how to lead a fulfilling life that was written after he experienced a heart attack, advanced-stage cancer and a stroke in three successive years. The book incorporates thinking from a whole range of business theories and looks for the personal (as well as the business) application. Good theory, says Clay, is important since it helps us categorize, explain, and perhaps most importantly, to predict. Whilst reading it I made a lot of highlights on my Kindle so I thought it might be good to capture some of my key takeouts in a short series of posts over the next week or so.

Let's start with marginal thinking, on which I thought he had a good take. An executive in an established company, he says, will have two alternatives when making an investment decision - either to incur the full cost of setting up something completely new, or to leverage what already exists so that you only need to incur the marginal cost and revenue. The marginal-cost argument will almost always outweigh the full cost one. But for a new entrant in the market the only choice is the full cost alternative ('Because they are new to the scene, in fact, the full cost is the marginal cost').

The problem with marginal thinking however, is that it typically comes with lots of baggage. The established company is basing the investment decision based on the perspective of its existing operations and may decide not to invest if the marginal upside is not worth the marginal cost of doing it. The trap with this however, is that whilst it is easy to see immediate costs of investing, it is much harder to accurately see the costs of not investing. Whilst the company still has a perfectly acceptable existing product, the upside of investment may well be considered too small, but this assumes things will remain as they are and fails to take into account a future in which someone else brings the new product to market. This can lead to a series of relatively minor investment decisions, the consequences of which may not become apparent for some time but which ultimately and in totality may doom the company to failure.

Photo Credit: CarbonNYC

Consider Facebook

'Consider Facebook. It wasn’t preordained that Facebook was to be created by a student in his dorm room. When I ask audiences who could have created Facebook, they typically respond with technology companies like Microsoft, Google, Amazon, or Yahoo! These are valid answers. But I push the audience members by asking them why people use Facebook. One core reason is a simple way to share memories and images. What other company has historically helped people share memories and images? Kodak. Here’s the interesting thing. The film giant had its fingers on Facebook as early as 2001. At the time, the company had purchased a company called Ofoto, one of the leading online album providers. How hard would it have been for Kodak to say, “You know, our tagline is ‘Share memories, share lives.’ Why don’t we let people simply share album pictures? While we are at it, we can create a feature that allows people to share news items as well.”'

From The Little Black Book of Innovation