iv. Lecture 4 -
What Makes Organizations Innovative? (9/29)
v. Lecture 5 -
Demystifying Innovation (10/6)
vi. Design
Thinking (10/20-11/3)
1.
Empathy
2.
Define + Brainstorm
3.
Prototype + Demo
b. Special Sessions
i. Milton Hershey
(9/7)
ii. Cirque du
Soliel (9/16-9/17)
iii. Challenge
Course (9/29)
iv. BJ Levin
(10/20)
4.
Improving my Creative Confidence 5.
The Necessity of Strangers 6.
Improving my Discovery Skills 7.
Improving my Networking 8.
How "The Start-Up of You" Shaped my Career Planning 9.
Assessment Center Results 10.
REFLECT Results 11.
Lessons from Steve Jobs 12.
World Changers Book 13.
Outside Class Events
a. Marc Greenberg (10/7)
b. NYC Trip (10/23-10/24)
c. Walter Isaacson (11/10) 14.
My Transformation - How I've Changed and What I've Learned
15.
Synthesis of the Course
Coming into Dr. Wellman’s BMGT289 class, I was the most lost I had ever been.
First of all, I wasn’t a business major like most of the other BSE scholars
students, I was in letters & sciences as an undecided major. The reason why
I decided to make my major as undecided was because in high school I had no
idea what I wanted and I didn’t take much action to find out what I would have
liked to do. This already made me feel like I was an outsider because I wasn’t
in the business school and class had barely even begun yet. Furthermore, I
didn’t even know the first thing about business itself. The only reason why I
even chose to be in the Business, Society, and the Economy scholars program was
because I saw that the students go on lots of field trips. I was quite literally going
into the class blind. Despite this, I was strangely excited to see what the
class had in store and hoped that it would cause some sort of self-improvement.
Coming into this class I had always thought that a company’s success was
measured by how much money they make, not by how innovative they are or what
processes they use to create ideas. I later found this was much more
important.
What I hoped to get out of this class was a deeper
understanding about the business world as well as what it means to be
innovative. After talking to second-year BSE students on the annual first day
of school College Park Scholars service day, I gathered that Dr. Wellman was a
difficult yet amazing teacher. I liked that there were interesting books in the
syllabus as part of our education. It was really refreshing to have a number of
different insightful books to learn material from instead of a traditional drab
textbook like every other class. I read the Steve Jobs book over the summer
and it really fascinated me, so I imagined that the other books would have a
similar effect and it got me excited to see what we had in store for us.
I
looked forward to this class because it seemed very reflective and I recognized
the urgency to develop internally if I ever wanted to decide on a major here.
As far as choosing a major, I knew what I didn’t want to do (science, English,
history), but there was so much that I didn’t know, leaving me feeling very
uncertain about what road to take. Completing the PCR turned out to be more
beneficial than I would have ever imagined. I’m hoping my blog gives an accurate
portrayal of who I am as a student and how much I have learned from this class.
In order to challenge myself and push boundaries, I made my PCR into the form
of an online blog. I’ve always enjoyed the art of blogging but never gotten
into it myself until this project. I realized how easy it actually is, and
additionally I realized I had learned a new skill that I could market and put
on my resume.
What We Did: What
exactly is innovation? Coming into this class I honestly couldn’t tell you. But
this knowledge deficiency quickly changed. Our first BMGT289 class was spent
talking about innovation and what it truly was. Innovation is the process of
having original ideas and insights with value, then implementing them so that
they are accepted and used by many. I learned that this is truly the basis of
all competition that takes place in today’s society, particularly in the U.S.
Our lecture concentrated a lot on the concept of creativity,
which is what leads to innovation. Expertise and creative thinking are an
individual’s raw materials. Motivation is what puts these raw materials to
work. Creativity CAN be taught, learned and practiced. Creativity comes from play,
passion and purpose. Additionally, I was introduced to the Innovator’s DNA. The major steps involved
in the innovation process are association, questioning, observing, networking,
and experimenting.
Key Takeaways and
Future Applications: This first lecture served as a really good
introduction to the idea of innovation and how important it really is for my
future. It opened my eyes to the urgency for my generation to think ahead. In
today’s age of technology, so many jobs are being automated. Therefore, we
can’t keep doing what we have been in the past – its time to think outside the
box.
Our country depends on innovation to have a successful
economy – it drives us to the next level and allows us to remain globally
competitive. Older markets are under tremendous pressure, so we need an entire
generation of innovators to remain globally competitive. The first company that
comes to mind when I think of U.S. innovation is Apple. Apple is able to
“disrupt” the marketplace simply because of its experimentation, curiosity, and
its willingness to take risks. Of course, Apple employees don’t always succeed
right away; it took repeated failure and the motivation to keep trying to get
them where they are today. I really admire Apple and Steve Jobs especially for being
able to fail so many times but still keep trying. Fear of failure is definitely
something I struggle with. At times I feel like it’s really hard for me to be
positive when thinking about the future. I tend to always expect the worst
possible outcome in a lot of situations. I think this is because I don’t have a
set plan that I follow in life. Right now I’m just taking things day by day and
that creates anxiety, because the future is so uncertain. I know that failure
is inevitable somewhere down the road, and a lot of times it can be a good
thing. So I’m hoping this class can help me get over this stigma of failure, or
at least help me combat it in new ways.
I applied the lessons from this lecture to think differently
about business. I couldn’t help but wonder what life would be without the
products we accept as commonplace today. Without such brilliant minds at Apple,
I wouldn’t be here typing this paper today because I would be without my
precious MacBook laptop. With this observation I asked myself – what if Apple
had never created the MacBook? I have a lot of trouble even imagining one day
without my cherished laptop. However, if it had never been created, I would have
no idea what I was missing. I think that’s the point of innovation – creating
things we didn’t even know we needed, and then not knowing what we would do
without them.
I was also pretty pleased when I learned that creativity
actually could be taught. As of now I don’t consider myself a super creative
person. I feel like I have random thoughts of brilliance, but if I was asked to
come up with an inventive idea on the spot, I would have nothing. Today’s class
made me optimistic because I now know that my creativity isn’t gone forever, it
can be practiced, relearned and aimed toward new endeavors.
What We Did:
Today’s class focused on the wise insights from several experts that were
referred to as “masters of innovation”, as well as the idea of growth mindset
and creative potential. A growth mindset believes that it’s possible to learn
and grow because your skills and capabilities are not set in stone. Creative
potential is the limitless capacity to be creative. This involves self-efficacy
and guided mastery.
We first talked about
disruptive innovation, an idea coined by Clayton Christensen that explains how
even top companies can be overthrown by new opponents. The belief is that
disruptive firms will initially offer a product with lower performance compared
to traditional market standards, but with new performance features that cause
it to flourish in a different market. As the product improves, it eventually
displaces the former technology. Disruptive innovations are so problematic to
existing firms because at first, they aren’t seen as a threat due to the fact that
they don’t supply the current market demand. They’re profitable as time goes on
because they offer new technologies at lower costs, leaving behind the large
companies who did not invest soon enough.
The camera and film company Kodak (represented in the graph as the blue arrow),
illustrates this theory. When digital cameras started being produced, they had
horrible quality and unfavorable zoom features (this is the yellow arrow, which
shows how the first digital cameras were a downgrade from Kodak ones). However,
when digital cameras started to improve (green arrow representing new
performance trajectory), their success in the market grew at a much faster rate
than Kodak’s, and eventually surpassed it.
The
second innovation model we discussed was reverse innovation. This is
when companies produce inexpensive goods to meet the needs of the poor, then
marketing the same good to a large enough demographic of the rich. As Vijay
Govindarajan explains in a TED talk, it is “a rich man wanting a poor man’s product.”
Developing economies are the bulk of the consuming business (China, India,
etc…) Creating a product for the worst case scenario can then cause it to be
marketable anywhere. Glocalization is the opposite of reverse innovation –
companies develop products at home in rich companies, and then distribute a
stripped down version of it worldwide.
The third model we
looked at was blue ocean strategy. Red oceans are
industries with boundaries that are defined and accepted. Here, companies
simply compete head-to-head by trying to outperform one another within the same
business and market constraints. Blue oceans
are untapped markets with little to no demand yet – basically all industries
not in existence today. Demand is created rather than fought over. A company
will alter its boundaries and strive to make the competition irrelevant using a
completely new and unimaginable product. We can determine if a business is
employing the blue ocean strategy by arranging it into a four actions framework
grid, which highlights factors that are created, reduced, raised and
eliminated.
The final
innovation model we learned about was the company IDEO, which is one of the
original design firms out there thanks to their signature design thinking
process called the “deep dive”. The deep dive is the process of designing a
better product with a group of diverse team members to get the job done. Ideas
pour out for hours, and everyone builds on each other’s ideas. People are
actually encouraged to be absurd. David Kelley, founder of IDEO, feels that is
everyone suggested the same old “appropriate” ideas, nothing new would come of
it and there wouldn’t be anything to narrow in on. He also believes that
approaching challenges from a human perspective yields some of the richest
opportunities for change. The three factors to balance in every innovation
program are
1. Human factors (desirability)
2. Business factors (viability)
3. Technical factors (feasibility)
IDEO consults other firms on business management strategy,
and enforces a process of inspiration, ideation, and implementation. Above is a
video that shows just one (of many) examples of an IDEO design team improving
an existing product under a very strict time constraint.
Key Takeaways and
Future Applications: Today’s lecture gave me a plethora of new information
that made my mind race. For example, it took me a very long time to wrap my
head around the idea of blue ocean strategy. Until today, I had never even
considered the fact that market space could just be created out of nowhere.
It’s difficult for me to imagine this because “market space” is merely a social
construct, and not an actual physical reality. Therefore, I needed an actual
example of this idea to help me understand it. I had been to a Cirque du Soleil
show a few years ago, so I knew firsthand that the shows were unlike anything
else I had ever experienced. I didn’t know how innovative they really were
until I thought about it. Cirque du Soleil disrupted the circus industry by
being more artistic and appealing to an older and more mature audience. The
shows incorporate music and theater with acrobatics and dancing. Additionally,
every show has a different theme, encouraging people to come again. Traditional
circuses, however, are all more or less the same. I also thought it was really
interesting how the company invented their own made up language called
“cirquish” which was what all the performers spoke. This allowed the company to
be successful on a global scale because there were no language barriers to
prevent success in different places.
I really enjoyed learning about disruptive innovation and
asking myself: Why existing firms fail? Clayton Christensen’s answer is because
they listened to their customers. This reminds me of the Steve Jobs biography
that I read over the summer. At one point, people at Apple tossed around the
idea of doing market research to make their personal computers meet the demands
of consumers. Jobs wholeheartedly rejected this notion. He said that customers
don’t know what they want; they need to be shown what they want. When companies
only meet the demands of the consumers, they aren’t innovating. They see no
financial logic in entering the next generation of technology, and this is when
newer firms surpass them. I agree with
In my opinion, society needs to prioritize reverse
innovation if we want to bridge the gaps in social class. Innovations for the
poor will transform the rich and rebuild infrastructure of countries like the
U.S. Some countries think, “a small sales revenue in India is okay,” but India
is growing and on its way to becoming a major market, and companies ignoring
countries like this will miss out on major success in the future. We must
innovate to capture growth. Glocalization worked fine when rich companies made
up most of the market and others offered little opportunity, but those days are
now over. Reverse innovation is the practice of the future.
Ultimately I would have to say that the most valuable thing
I learned today was design thinking. It’s a concept that I can use everyday,
especially when I start my career. I hope to be a marketing executive in the
future; so coming up with good ideas for products is crucial.
I
decided to give the process a try using my most common daily annoyance: my UMD
student ID card. This is the “inspiration” step of design thinking. I hate the
inconvenience of having to swipe my card to get into any building. It’s such a
pain getting my card out of my bag or pocket wherever I go, and it’s especially
annoying doing this in the rain or freezing cold. I’ve also noticed that this
is difficult to do when students have a lot in their hands. I can recall plenty
of times (and I’m not the only one!) coming back from the diner while holding
my drink and cell phone in one hand, my to-go box in the other, and trying to
balance a banana on top of my box. Then, when I finally get back to my dorm, I
have to put all my food down on the ground, get my ID card from inside my
backpack, and let myself in. The worst part is, I have to make two trips
because I can’t carry all my food inside and swipe myself in through the two
barriers on the way to my room at the same time. So while I’m making my first
trip inside, my remaining food is sitting outside unsupervised and getting
cold.
Using all of these observations, I tried to think of a
solution. This is the “ideation” step of design thinking. Through brainstorming
I came up with many ideas, but a lot of them weren’t economically viable. For
example, UMD will probably never be able to afford the technology for retina
scanning recognition to get into a building. Therefore, I had to think
realistically. My idea was an electronic ID card that would use near field
communication to automatically unlock building doors when I came within a small
range. Now, as long as I have the card on my person (in my pocket, in my bag,
etc.), I don’t need to physically swipe it to go to my room.
Of course, I can’t really attempt the third step of design
thinking (implementation) because I don’t have the means to create such a
product. However, I would like to see this actually become a prototype someday
because I find it to be a good solution to an existing problem. If this kind of
solution can form from one person using design thinking, I can’t even imagine
what would be generated with an entire design team. To achieve my goal of being
more innovative, I plan on employing this process to as many daily situations
as I can, as I’m a firm believer that practice makes perfect.
What We Did: In
class today we discussed the psychology of innovation and the
idea that innovators aren’t born, they’re made. Innovators and entrepreneurs behave
differently than the rest of us in that: they challenge the status quo and they’re
willing to take risks and view their failures as lessons. We learned about the
“regret minimization framework,” which basically says to do what you won’t
regret when you look back at life.
“The people who are
crazy enough to think
they can change the
world, are the ones who do.”
One
of the best ways to behave more like an innovator is to follow the Innovator’s
DNA. It says that the five key steps to being innovative are associating,
questioning, observing, networking, and experimenting. Part of the class
discussion was fitting Steve Jobs into this model. He associated by using his
knowledge of calligraphy from a college class to influence the typography on
his company’s Mac computers later on. He questioned by challenging the idea
that a computer needed a fan. He observed when he noticed that the average
person didn’t want to have to put all their computer’s components together on
their own, and thus he came up with the idea for the personal computer. He
networked when teaming up with the brilliant and tech-savvy Steve Wozniak.
Lastly, he experimented by building his own “blue box” and selling it.
We talked about the similarities between Steve Jobs and Elon
Musk, two of the greatest entrepreneurs who exhibit the Innovator’s DNA
perfectly. Both Jobs and Musk are serial disrupters; they’re not afraid to
rattle their own industry to achieve something greater. The interesting thing
is that both of these men aren’t necessarily inventors – they had other people
to do that part. They were just excellent at connecting the parts and moving
forward with a good idea. While typical executives simply focus on the numbers,
these innovative entrepreneurs focused on customers. Their unique brand of
genius is system-level design thinking and extraordinary conviction. Because of
their unparalleled passion for their ideas, they were able to achieve amazing
things. Steve Jobs was able to revolutionize the personal computer, as well as
the portable music industry with the iPod and iTunes, while Musk conceived
Space X, PayPal, and Tesla motors.
Key Takeaways and
Future Applications: Before today, I always sort of had the notion that people
were either born to do greatness or they weren’t. Sometimes I felt like I fell
into the latter category, despite having an abundance of creativity when I was
a little kid. I remember asking questions about everything and coming up with
the most imaginative games that all my friends wanted to play. My parents like
to tell a funny story about how they lost me one time in an airport. They ended
up finding me with a family of Lithuanians who didn’t speak a word of English,
and apparently I was introducing myself and had already become best friends
with another little girl my age. I often wonder what happened to this curiosity
and why I didn’t harvest it, but if there’s one thing I’ll take away from this
class, it’s knowing that I still have creative potential. We learn to conform to social norms as
we get older, but this is the very cause of the unoriginality in today’s
society. It never occurred to me that someone could be taught creativity or
innovation skills, but the Innovator’s DNA made this seem possible. Contrary to
popular belief, it requires a unique mindset, not an innate gift, to achieve innovative
greatness.
I reflected
on the five skills and my current performance in all of them. I would say my
associating skills are relatively weak because I have a horrible memory. This
makes it hard for me to dig deep into my brain to recall information and relate
it to newer things. What I should start doing to improve association is write
things down more often so that I don’t forget as much. I am not as good at
questioning as I used to be. I remember specifically in 9th grade I
was in a math class with all kids older than me. They used to make fun of me
for being dumb because I would raise my hand and ask at least 5 questions per
class. However, I got almost all A’s on my test. That proves that questioning
gets you more knowledge, it doesn’t mean you’re dumb. I regret listening to
those bullies in 9th grade because I think they caused me to
subconsciously stop asking as many questions. From now on I’m just going to
stop caring what others think of me. Asking questions only makes you smarter. I
think observing is my best skill out of the five. I have always been an attentive
person, and often notice things that others don’t. I especially enjoy people
watching and learning things from the actions of others. Networking and
experimenting are my weakest skills. However, thanks to this class I am
learning a lot about how to network, and I will start to improve that by
creating a Linkedin account. To get better at experimenting I think I will
learn to not be as scared of failure and just live in the moment.
One
company that really values failure is IDEO. One of their mottos is “fail often
to succeed sooner.” Not only do IDEO offices have their successful inventions
on display, they also exhibit their failed ones. Because I consider myself a
perfectionist, the idea that a company could be satisfied when they have failed
is so taboo to me. I figured the only way I could understand this theory would
be to try it out myself. After class I went through my papers and found a very
unfortunate math exam from the beginning of this semester. Similar to how my
mom used to hang up my good work on the fridge, I hung my math exam on the mini
fridge in my dorm. What I did was the complete opposite of the typical practice.
Let’s just say this wasn’t exactly a grade that I was proud of. By hanging up
my failure, it was a constant reminder of what I did badly and provided me with
daily motivation to do better next time.
I am now a believer in embracing failure, that way we are more equipped to deal
with it when it inevitably hits. When I become a marketing executive in the
future (hopefully), I plan on applying this concept. I will take something that
is usually assumed to be successful, and instead say that it will likely fail. If
my company expects a brand to succeed right off the bat and it doesn’t, this can
be discouraging and hinder our recovery from setbacks. If we plan to fail
however, the company can build a support structure for the worst-case scenario,
and an overall failure-tolerant environment that is able to bounce back into
progress sooner.
What We Did: We
often wonder: how do big companies build the code for innovation? It seems like
a difficult task when there are so many people at one company. Sometimes just
the process of experimenting is most important. Companies like Amazon support
constant experimentation and beg to ask the question, “why not?” For example,
Amazon’s Jeff Bezos employs a “two pizza team” rule, meaning each design team
should be small enough to be adequately fed by 2 pizzas. This allows each
employee to feel empowered and responsible for innovating. Not everybody can be
good at both discovery AND delivery, which is why innovation occurs best in a
team.
Dr. Wellman emphasized the importance of design teams in the
workplace. People don’t feel personally responsible for innovations; they only
feel responsible for “facilitating the process.” Companies need to generate
ideas as well as execute them, and not everyone can be able to do both. Hence
why innovation is best in a team.
The “innovation framework” is the 3P framework, which stands
for people, processes, and philosophies. Every factor relies on each other. Innovation
directly depends on the people who work at a company. If top executives want
innovation they need to first look at themselves. They need to improve
discovery skills, understand how innovation works, and sharpen their ability to
foster others’ imagination. High discovery-quotient people should be in every
stage of the innovation process. According to the 3P framework, processes
explicitly encourage employees to associate, question, observe, network and
experiment. They are also designed to hire, train, reward, and promote discover
driven people. There are four philosophies of innovation; innovation is
everyone’s job, not just R&D; disruption is part of our innovation
portfolio; deploy small, properly organized innovation project teams; take
smart risks in pursuit of innovation.
A
major successful business is Virgin Group, founded by Richard Branson, who is a
very unique and influential leader. The company focuses on transportation,
aviation, telecommunications, financial services, leisure and hospitality, and
music to name just a few. The purpose of Virgin is to question “business as
usual.” Branson’s philosophy is to have Virgin be an irresistible brand that
shakes things up and delivers service and experience that redefines the market.
Branson gives helpful insights about creating a brand and the process of his
innovation.
Pick on a big guy
Be a nonconformist
Negotiate everything
Have fun
Baby your brand
There's no such thing as bad publicity
Small companies create big success
· Another example we looked at in class was IDEO. Their
philosophy is seeing failure as impossible to avoid and a natural part of the
innovation process. They focus on creating products that reach the “sweet spot”
in between desirability, viability, and feasibility. They feel that the best
ideas come from fun places. Another philosophy is not having an executive
pyramid. When there’s a scary boss in charge, employees won’t get half as much
done. The boss won’t always have the best ideas, which is why a flat team of
equal individuals gives IDEO the most success. They believe innovation teams
should have complimentary discovery and delivery skills. The teams should be
multidisciplinary, meaning comprised of individuals with deep expertise in
different disciplines. This allows teams to get a better look at a problem from
different angles. IDEO believes in creating diverse teams of people who are
“T-shaped,” or deep in one area of expertise with shallow expertise in multiple
other areas of knowledge.
Key Takeaways and
Future Applications: I think that learning the 3P innovation model is
extremely important for my future because it helps me understand that it’s okay
if I am weak in a certain area of knowledge. Nobody is expected to know
everything about everything and it’s refreshing to hear that knowledge is best
when shared. I definitely agree that it’s best to know a lot about a little
rather than a little about a lot. Apple also shares these views. I applied the
3P framework to Apple and gained a lot of insight for my own personal benefit
that I could relate to. The lecture today put into perspective how important a
company’s people, processes and philosophies are to their innovation.
People: The first
person that comes to mind when one thinks of Apple is, obviously, Steve Jobs. As
a perfectionist, Jobs had a very high standard of excellence that others have
difficulty imitating. This is the reason why Apple products have transformed
the user experience tenfold. Jobs used design to create products that “surprise
and delight” users. His vision was joining performance, function, and beauty
through design. The Apple period without Jobs (1985-1998) saw innovation
premium drop to -30% because the company was lacking Jobs’ discovery-driven
capacity. Thus, Apple stopped innovating and investors lost confidence in its
ability to grow. From the unique people at Apple, Steve Jobs in particular, the
main thing I took away was that it is adamant to have passion for your company.
When new management took over Apple, the company failed because it didn’t have
the same emotion behind it. It’s clear to me that a company’s success shouldn’t
have to rely on R&D. It’s not about the money, it’s about the people you
have and how you’re led.
Processes: Apple is successful because
they mix technology and liberal arts. Employees are from all different walks of
life with complimentary discovery and delivery skills, but also different
expertise and diversity. For example, the Macintosh was so successful because
the people working on it were musicians, poets, artists, historians, etc.
Another process that Apple is known for is the element of secrecy. When other
companies strive for transparency, Apple tries to keep everything under wraps.
Employees are not encouraged to broaden their scope. Instead, they’re assigned
to narrow bands of responsibility where they follow orders and nothing more.
All new employees go to a training session where their jobs are threatened should
they disclose any secret information. I now see the importance of a company’s
processes in order to have success. It is essential to do things differently
from others so that you stand out from the rest.
Philosophy: The
central philosophy of Apple is “think different.” Instead of buying competing
companies and expanding its product line, Apple focuses on doing only a few
things extraordinarily well. When Jobs became CEO again in 1999, he reduced the
number of products to only a few. This way, those few that remained would be
the absolute best. Apple had a major focus on simplicity: making life easier by
taking away what we don’t need. This is a valuable lesson that I can apply to
my future endeavors. I shouldn’t spread myself too thin by trying to get involved
in everything. There are so many opportunities and clubs in college that it can
become overwhelming. The Apple philosophy teaches me that if I don’t need to be
amazing at everything. If I focus on a few things to really excel at, I can
fill the remaining gaps by networking and associating with other people.
What We Did: Our fifth BMGT lecture was
spent exploring why some firms fail to innovate and why others succeed. I
learned that there are several hindrances to innovation that lead to the
failures of incumbent firms.
ÞCosts & margins – might not make enough
financial sense to take risk
ÞThresholds – firms have revenue benchmarks that
aren’t always immediately reached
ÞWait and see attitude – large, successful firms
afraid to try new things
ÞAcquisition – firms think they can buy small competitors’ innovations before
they take off (ex: Facebook)
We also
talked about the three traits of a culture of innovation.
1.A willingness to cannibalize their existing
products
·“If you don’t cannibalize yourself, someone else
will” – Steve Jobs
·Most established firms refuse to kill their cash
cows for various economic and organizational factors. This is suffering from
the “incumbent’s curse” – a
self-destructive culture that results from prior success.
·Example: Apple releasing the iPhone
ultimately led to the demise of their iPod market because now people just keep
all their music on their phone in one place. Apple wasn’t afraid to cannibalize
itself when its product was already doing well, and as a result, they became
exponentially more successful following the iPhone’s release. They took a risk
that paid off.
2.A corporate environment that embraces risk
·Incumbents view risk differently from start-ups,
as they have less to gain and more to lose.
·They don’t want to suffer from the “hot stove
effect” (once bitten, twice shy)
·Example: Facebook had dozens of offers to
buy the company within the first year, but Zuckerberg declined them all knowing
that he had so much more to do and banking on it all working out. He took risks
in order to achieve his vision of worldwide connection
3.An ability to focus on the future
·With overwhelming evidence supporting failure,
incumbents are normally less excited about future uncertain markets
·Example: Kodak ruled film photography until
digital cameras took off. They failed to recognize that the digital world was
coming because they were too busy enjoying the finite success of their film
industry.
The biggest risk a company faces is the failure to adopt
unrelenting innovation. Many companies don’t do this because they are too
afraid of self-cannibalization or might decide it’s too expensive. Firms can
also suffer from the reflection effect
(not wanting to take risks when already profiting from innovation) or the expectation effect (if no profit is made
within a certain time frame, the firm may prematurely discontinue the product
before it takes off. i.e. the HP tablet before the Kindle).
Our class also touched on the importance of company culture
in shaping the attitudes and behaviors of employees. “Organizational culture”
is defined as the shared social knowledge within organizations. There is a
direct correlation between companies with established cultures and being top
innovators. For example, Facebook is a unique company embracing a “hacker
culture” or trying new things, as well as a philosophy that says “done is
better than perfect”. The company asks questions like “What would you do if you
weren’t afraid?” CEO Mark Zuckerberg strongly believes in human connections
making an impact and telling a story. An interesting part of the Facebook
culture is that its employees are very young; the average age is 26. This goes
without saying that there are plenty of young and bright minds at the company,
making it arguably the world’s most innovative company.
Key Takeaways and
Future Applications: Large companies are their own worst enemies. This
leads me to think about the advantages this gives to economic newcomers. In
contrast, smaller and newer firms have less market to lose, giving them an incentive
to take more innovative risks. Risk grows as companies do. I believe this is
how new firms end up surpassing established ones. Technologies today are
advancing very rapidly, meaning that the current position of any company is
never certain. Leading firms in their markets are actually the most vulnerable.
This is because the strong position they have at the time can mislead them into
thinking they face no competition. After today’s class, I now know this is not
the case.
From today’s lecture and the readings I did the night
before, I actually started to get scared for the future. I never realized how
many forces are working against incumbents looking to innovate. A successful
firm will also have a clearly communicated culture based on missions and values.
Because I eventually want to work in marketing, I figured I’d better start
researching what successful firms I should mimic if I want to prosper as well.
I first
studied Gillette, a leading brand of innovating champ Procter & Gamble. The
reason why Gillette is able to maintain a roughly 70% share of the global men’s
razor market is because it introduces new brands even when previous ones are at
the top. This self-cannibalization causes them to always be on top and never
fall behind, as well as making it nearly impossible for a new competitor to
emerge. The introduction of new disruptive brands is a major risk because it
could ruin Gillette’s older brands without the guarantee of a higher profit
margin. However, it is clearly a practice that I can learn from, because
Gillette has managed to remain on top.
“If you don’t
cannibalize yourself,
someone else will.” – Steve Jobs
I next
decided to study Amazon.com, which was launched in the late 1990’s to be the
world’s largest selection of everything from books to kitchen appliances. From
the very beginning, Amazon offered low prices, speedy delivery and emphasized
customer satisfaction. In order to maintain a culture of remarkable customer
service and mutual trust between company and customer, the very approachable
CEO Jeff Bezos puts his personal email online. Amazon’s earliest innovation was
one-click buying. The company then enabled book-readers to publish reviews
online for others to see. This created a pioneering online community for book
commentary. However, I discovered that Amazon’s most radical and admirable
innovation of all was the introduction of its own product in 2007 – the Kindle.
Years before, HP had developed an e-book reader in the mid 2000’s but didn’t
think there was a market for it. Only until Amazon released their Kindle did HP
take the market seriously, and by then it was too late. This situation is a
perfect portrayal of what Clayton Christensen explained in his book, The Innovator’s Dilemma.
“When established firms wait until a new technology has
become commercially
mature in its new applications and launch their own
version of the technology only in response to an attack on their home markets,
the fear of cannibalization
can become a self-fulfilling prophecy.” – Clayton
Christensen
HP committed one of the cardinal crimes of self-destruction:
too much concentration on the present and failure to focus on the future. This
is a mistake I will not make in the future. I now understand that if I’m not
one step ahead, I am already behind.
.JPG)
