Bringing Tech to Market: The Rules of Innovation

Everyone knows that best-quality plus first-to-market doesn't always equal success. A Harvard prof who specializes in this stuff has a great article in Technology Review that digs a lot deeper, called The Rules of Innovation. It's a look at why some technologies are marketplace success stories and some are forgotten failures -- and more, an attempt at rules which predict which will be which. There are lessons here for the entrenched companies (e.g. Sony) as well as for the disruptive upstarts (e.g. Sony 50 years ago). You have to understand the battlefield to win the war.

what?

[cmmwhodi]

i think the biggest factor boils down to luck...

Dvorak Keyboard A Good Example

[SlipJig]

This is something that's irked me for a while, since I switched over to the Dvorak keyboard layout (see sig for link to more info). The Dvorak layout is more efficient for typing English text than the standard Qwerty layout, but never succeeded due to market inertia.

It's worse than that

[epepke]

Best quality + first to market almost never means success. Inferior but good enough, introduced when people are used to the idea almost always wins.

A Lesson for Microsoft

[yoyoyo]

There's some interesting stuff in this paper. He says The first [misconception] is that deep corporate pockets are an advantage when growing new businesses. They are not. Too much cash allows those running a new venture to follow a flawed strategy for too long. Having barely enough money forces the venture's managers to adapt to the desires of actual customers, rather than those of the corporate treasury, when looking for ways to get money

Microsoft tends to solve problems by throwing money at them, but if this article is correct, that is a flawed strategy. The excess cash allows them to keep a flawed product on the shelves (e.g. XBox) long past the point where a poorer company would be focusing on improving the product to make it match the customers needs.

Food for thought, anyway.

Point 4 is the only significant factor

[gelfling]

If the transition costs you impose on your customers is too high they'll run for the door screaming. It doesn't matter how wonderful your technology is. That's why DIVX and HDTV are dead or dyeing for example. You can't make it so hard to use or purchase or install that only primary adopters use it.

cough cough hack linux cough bsd

That's the lesson of desktop linux - it doesn't matter HOW BAD MS is - what matters is HOW HARD the transition to something else is.

Re:Point 4 is the only significant factor

[Beryllium Sphere(tm)]

There's also more than one transition that has to be made. You have to move a product from pioneers to early adopters, then to early majority, then to mass market, and so on.

A related book is "Crossing the Chasm", http://shop.barnesandnoble.com/booksearch/isbnInqu iry.asp?userid=18DNABCSR0&mscssid=UW03MK30SS548PM5 DG7XDX17J0AJD5X5&isbn=0066620023. It argues that there's a discontinuity between early adopters and early majorities which has to be addressed by focusing maximum effort on a narrow niche to get a beachhead, and by making the technology nondisruptive.

Amusingly, CtC starts with a gedankenexperiment asking whether the reader would buy an electric car if it worked like a normal car. Amusing, because I drive a Toyota Prius gas-electric hybrid, which was carefully engineered to fit into the put-in-gas-and-put-it-in-Drive market.

Re:A Lesson for Microsoft

[abigor]

And furthermore, it can make them vulnerable when consumers start to associate a company with just that one product. MS has many, many software products, but none are market leaders except Windows, Office, and, on the back end, Exchange. That's it. Office alone accounts for 1/3 of their income. In the minds of consumers, the first two products ARE Microsoft, period.

So throwing money at inferior offerings can harm companies in more ways than just wasting cash: it can cement their image in the eyes of consumers.

Re:What about the SoundBlaster principle?

[GlassHeart]

If you're first, you win.

VisiCalc was the first electronic spreadsheet. Lotus 1-2-3 destroyed it, and became so successful in the market that at least three competitors (including Excel) supported 1-2-3 keystrokes for compatibility. Excel now dominates.

WordStar, at one point, was the only viable word processor. Word now dominates.

Netscape Navigator, at one time, had over 70% of the web browser market share. Internet Explorer now dominates.

It's not that simple.

Re:It's worse than that

[scott1853]

The trick to selling an inferior product is repeatedly saying "it's the best, it's the best" until you believe it as do all the cattle. That way they don't think it's an inferior product, they think the other solutions are just way overpriced.

There are plenty of exceptions...

[aquarian]

...most notably Amazon. They're still the leader in user-friendliness among ecommerce sites, and always have been, right from the beginning. Not to mention other quality issues. And they were the first major ecommerce player.

Re:A Lesson for Microsoft

[binaryDigit]

Microsoft tends to solve problems by throwing money at them, but if this article is correct, that is a flawed strategy. The excess cash allows them to keep a flawed product on the shelves (e.g. XBox) long past the point where a poorer company would be focusing on improving the product to make it match the customers needs.

Well yes and no. Was the original version of IE vastly superior or "disruptive" technology, well NO. But they were able to use their deeeep financial resources (and desktop monopoly) to keep plugging away until they are now #1. So that tact can be made to work, given enough resources and the right set of circumstances.

Plus, I'm not sure if your example of the xbox is good, since many people do recognize that as a game machine, it has many strengths over it's competition. So in some ways it is the superiour product. Also, because of the lack of sales, they are in a position where they _have_ to innovate at a faster rate than Sony to make up the deficit (again, look at the browser wars, IE sucked at first but they were able to quickly, once they put their minds to it, start adding features to improve it, so much so that Netscape couldn't really effectively keep up).

I Don't Believe Him

[CaptainCarrot]

It's not uncommon that I encounter articles such as this one where I know very little about the subject being discussed, but I do know a bit about some of his examples, and they are sometimes faulty.

Take his criteria for a successful disruptive technology. I can't help but observe that the light bulb, a successful innovation if ever there was one, satisfies neither. The answer to 1 is negative because neither the poor nor the wealthy were capable of lighting their homes with electricity at the time. Likewise the answer to 2 because there was no existing market. Yet this technology was undeniably disruptive; just ask the manufacturers of candles, oil lamps and gaslights.

Later on in discussing (as far as I could tell) allocation of resources, he says, "Processes, however--the central element in our second question--are typically inflexible. Their purpose is not to adapt quickly but to get the same job done reliably, again and again." He must be completely unfamiliar with the Software CMM (and now the CMMI for other disciplines) where to attain the highest rating and organization's processes must be flexible. Continuous improvement of processes is one of the more important lessons from the quality movement Prof. Christensen discusses in the opening of his article, so I'm a little surprised he chooses to ignore it here.

This leads me to suspect that some of his other examples are flawed too, but I don't know enough about all of them to detect it. I don't trust his conclusions, in any event.

Re:Innovator's Dilemma

[Restil]

You don't give up on your old customers, you just "encourage" them to upgrade, but not in a way that actually hurts them.

5 1/4 users have large quantities of 5 1/4 disks. They're not going to want to replace all of those with 3 1/2 even though they can store twice, 4x, or 8x (depending on the drive and media) the amount of data. They want you to continue supporting them, and they will continue to buy products, even though they're inferior to a better product at the same price.

And that's where you get them. Keep selling the old products, but market your new products at a lower price. Encorage your customers to see that in the long run, it would be cheaper if they upgraded, or at least started migrating. It only makes sense. If they want to stay behind the times, then you'll still be there to support them, but by the time you finally close the door on your own manufaturing process, if you've marketed your products well, that old company will either have converted, or gone belly up.

If they decide not to upgrade, even after you've long since quit supporting them, there IS always that market of old working, but useless junk that nobody wants anymore and will pay people to take away. This company will just have to seek out those sources.

-Restil

Re:I Don't Believe Him

[rabidcow]

The market was not "light bulbs." The market was illumination. Have you ever worked for a rail road company by any chance?

The first criteria for disruptive products is a little flawed, it should probably be: "Does the innovation allow customers to do things that were previously too expensive or required too high skill?"

There, now light bulbs fit both.

Re:I Don't Believe Him

[Darby]

The market, my good Captain, is for sources of light.

The competition to provide such sources has been going on for a long time.
The earliest recorded providers were Sol, commonly referred to as "the Sun" and Luna AKA "the moon".

Now during the day, Sol does an amazing job. Always on time, generally plenty of light for most needs.
At night, Luna takes over. Technically Luna just retransmits the power,
(This would be a great place for an Enron/ California electricity comparison, but I can't even understand that whole fiasco well enough to do it right ;-)

but the effect is the same.

Anyhow, due to the reduced usefullness of the moon during the night, and the increasing numbers of people inside: caves, office buildings, whatever, a demand was created for more reliable sources of light (and heat). This was met by fire initially. This was good, but had distinct disadvantages. You could burn down your house, or office. Caves were generally immune to burning down, but the disadvantages vs houses is best left for another thread lest I go offtopic.
Now, there is room for safety improvement in the artificial light market. Also, candles were rather expensive, so there was room for a cheaper alternative as well. Sure the initial investment in electricity is high, but the advantages are many.

I believe the light bulb was the "killer app" for electricity. So by introducing a new product into an *existing* market and partnering it with an emerging technology (which incidently the lightbulb company was heavily involved in), Edison had a sure-fire winner here.