All posts in “Mistakes”

The Five Simple Secrets For Big Company Innovation… Beware: Hungry StartUps Already Know About These. Are They Your Real Competition?

If your company is a Fortune 1,000 or even a wannabe Fortune 1,000 then you probably know the best way to grow your top line revenues is with real product/service innovation. Something completely new addressing customer pain points that can be sold through your current distribution channels.

In fast moving markets this innovation may mean the survival of the company.  Ask anyone from Xerox, Blockbuster Video, Toys-R-Us, Borders Books, Tower Records, or Kodak. All former business titans that are gone now because they could not innovate.

Maybe they just did not know the five simple secrets to big company innovation…

New product/service innovation is great since it leverages the whole big company set of processes and procedures and pumps more revenue into the formula. Lot’s more if it is done right.

Hunger for innovation is also what drives many, if not all, large acquisitions. Think about how Coke has been on a buying spree since 1960 when it acquired Minute Made Juices.  Leveraging the same delivery system just more product going through the pipeline. Pepsi has been a hungry acquirer also. Who do you think owns the Naked Juice company?

Acquisitions are always expensive and many fizzle out after a few years so even though these type of acquisitions can appear riskless they are full of risks that may not be apparent during a frenzied bidding war and short due diligence period.

So why don’t big companies dedicate more time, money and talent to building new products and services on their own instead of paying billions for someone else’s used products/services?

Maybe because it’s really hard and risky to innovate. Let me illustrate this with a real- life business horror story…

There was a huge multinational telecom company that was feeling the pain of competition, changing markets, evolving customer needs, and worst of all… margin pressures.

So they decided they needed some type of innovation program. Can you just order up innovation like a Domino’s Pizza? Hot and fresh in less than thirty minutes.

This telecom was one of the big guys. Making billions of dollars for now. So they found someone from silicon valley complete with a hipster haircut, torn jeans, athletic shoes, and a hoodie.

He would be the answer to their innovation problem, right?

They setup this Silicon Valley Savior in one of their sleek office buildings with a new hip loft-like design and reached out to their hundreds of thousands of employees to entice them to join this innovation initiative for three months. They received hundreds of applications and accepted fifty people into the program.

Well… The three months went by, there was an exciting PowerPoint filled demo day for top management then all the teams went back to their former jobs. No innovation happened. Nothing resulted. It was a waste of time, talent, and money. I’m not dsure what happened to Mr. Hipster Haircut.

What could have possibly went wrong?

Maybe it takes more than good intentions and a Silicon Valley Savior to make innovation happen and really stick.  From what I could see this smart multinational telecom behemoth missed these five essential secrets to innovation:

1. Separate your innovators from the company – Yes your innovation teams need to interact with potential suppliers, partners, and current managers in the company. But true out-of-the-box creativity and innovation will be stifled if every day your teams walk into a building that has a sign out front saying: “BIG MULTINATIONAL COMPANY”.

People need to feel truly independent to do their best work. They need to feel they are outside the shadow of big brother. This is how Steve Jobs worked with his team to create the first MacIntosh computer. Hidden away miles from Apple corporate headquarters.

Since this innovation process will be very intense and time consuming consider sending the teams as far away as possible.

Think about this… If you were sitting in your office one day and your boss gave you two sticks and asked, “can you make a fire with these.” What would you say?  But if you were in the middle of the woods and a cold breeze was starting to blow and someone gave you two sticks the urgency would be totally different. You would figure out how to make fire with some real conviction.

Find a place away form the main office but where the teams can still interreact, when needed, with key stakeholders and target users. Then put a big sign out front that says something like, “INNOVATION STATION – Only Innovators allowed”. People will feel totally different every day.

2. Follow the Design Thinking process – Maybe some innovation happens by mistake. Think about the penicillin story. But luck is not a solid strategy to use when it comes to new product/service development.

By using a Design Thinking approach your probability of success will vastly increase. You will most likely create an innovative product/service that will serve a real user need. There are many books and other resources on Design Thinking but basically it boils down to four things:

(1) Listen to your customers/stake holders.

(2) Brainstorm ways to relieve their Pain Points or address their Passion Points.

(3) Identify the key assumption for your product/service to work then test those key assumption. Be ready to try a lot of things.

(4) Quickly/cheaply prototype ideas and test them on your target users.

3. Bring in a catalyst – This seems to be a key missing piece in unsuccessful innovation projects. They go through the Design Thinking process or something similar and the outputs (prototypes) just don’t wow the target users.

The problem is that everyone on the team is afraid to ask the hard questions. They have too much at stake to threaten the status quo and possibly ruin the fun of creation.

Enter the catalyst… This person is ready to upset the apple cart by asking the hard questions. Better known as “the questions that will not be asked.” It is the set of really scary questions that can instantly sink a project and send the team back to the drawing board. Team members usually dance around questions like… “Why does anybody care about this product/service?”, “How will we get people to use our product/service instead of what they are using now?”, or “Why yellow?”.

An innovation initiative without the occasional visit and input from a catalyst is destined to create a product/service that will look great inside the bubble created by the team but pop when it tries to scale up and actually work in the marketplace.

4. Include mentors from inside and outside the company – No innovation team can possibly have the depth and breath of skills, talents, and abilities to create effective innovations. There will always be blind-spots or gaps in expertise or experience. A panel of mentors needs to be recruited to help the team for a few hours a week.

For example… If the team does not have experience in physical product design, find an expert and bring them in for consultation.  If no one on the team can create a budget then bring someone in to assist.

The Mentor should not do the work. That actually needs to be produced by the team. But the mentor can guide the team to a better solution faster and keep them from making mistakes.

5. Top Management Buy-in – This one should probably be number one on this list. Innovation is not a diversion for a company. It is the life-blood and only way for long term survival. If top management is not totally committed to the innovation initiative just cancel the program.

Once the big demo day comes it is too late. A committed top manager just can’t appear for the final dog and pony show and expect to make people feel like this is important to the company.

How many ways can Top Managers really show they are committed to an innovation initiative? Weekly visits, a significant innovation budget, putting other top people on innovation teams as participants or mentors. And, these are just the tip of the iceberg.

Innovation is never simple. There is no clear formula to create the next big thing that could power significant top line revenues. But any company that follows these five items will significant lower the risk of wasting time, talent, and resources on pointless innovation strategies.

Any big company CEO that is too complacent with current innovation initiatives should think about Blockbuster video. They had the market. They had millions of members. Then they let Netflix use the US Postal system to take their market away. Netflix simply relieved Blockbuster Customer pain points. Either you innovate or someone else will. Then you are gone.

Small, lean, flexible, and productive startup teams know and use these five secrets. At least the survivors do.

What Important Lessons Can Startups Learn From Sears, J.C. Penney, and Radio Shack?

searsForty years ago I remember hearing about how one of my neighbors had just become a millionaire. That was back in the 1970’s when being a millionaire really meant something. How did he make his million?

This guy didn’t win the lottery and he wasn’t some kind of engineering wizard who just came up with some world changing technology.  He sold shoes for a company called Sears. He wasn’t the CEO or anywhere near the top of the organization. He spent his day on the selling floor helping people find the right pair of shoes at one of the one thousand Sears stores. He was just a regular worker bee. The guy was at Sears for over twenty-five years and was regularly investing in the employee stock purchase program. One day he looked at his stock balance and it was over a million dollars.

To put this into perspective that would be almost $6 Million in today’s dollars. These days with all the money being generated by hot technology startups a $6 million dollar pay day for a worker bee may be an every week occurrence. The magic formula back in the 1970’s was to work for a company like Sears.  This concept seems quaint now.

If you weren’t around back in the 1970’s buy your dad a beer one night and ask him to tell you about who the captains of business were back then. Sears was the retail leader with J.C. Penney close behind. Radio Shack was the hot technology retailer of the day with more store fronts than Sears and they had an electronics hungry free-spending army of customers.

PenneyBut what’s going on with Sears, J.C. Penney, and Radio Shack today?

In 2014 Sears is on life support as current management has tried a variety of strategies and financial engineering to keep the company afloat. Sears is not alone. J.C. Penny seems to be on a downward slide also. And Radio Shack may not make it past this Holiday season without a significant change to their entire business model including a drastic reduction of personnel and store fronts.

Forty years ago all these companies were leaders in their segments. Minting millionaires and appearing to be unstoppable.  They were the Googles, UBers and Amazons of their day. Like today’s leading companies they had huge product hungry customer bases,they were flush with cash, they had the best management teams, and the world was theirs… Until it wasn’t!

So what can today’s startups learn from these former big business darlings?

 LESSON 1: Never stop innovating.

So you worked real hard getting your first product out to the market. You are probably feeling pretty good. Like you climbed Mount Everest. Well take the afternoon off then get right back to work on your next product. The innovation never stops. And if you don’t have a “head of innovation” then you are not innovating. Your “head of innovation” should have only one job… Making the next generation product for you company before someone else makes it.

radioshack1LESSON 2: Always be ready to obsolete your own business. 

What usually happens when a company goes on the decline is that another competitor has entered the market with a disruptive product, service or distribution strategy. And that competitor is on its way to obsoleting your company. You should always look for ways to obsolete your company yourself before someone else does. If you do it before the competition then you will still be in business instead of just talking about the good old days. Think about how Netflix obsoleted Blockbuster Video. and how Apple’s iPod obsoleted the other pile of MP3 players on the market. The auto industry dealer network may be living through the early stages of being obsoleted right now. I’m sorry to say that all those plaid jacketed car salesmen will probably not be around in a few years. Maybe they can go keep the travel agents and bank tellers company.

LESSON 3: Customers really do come first. 

A good early warning is when your customer numbers start to drop. When your customers stop coming back you need to figure out where they are going and how to get them back. Keep an eye on your customer numbers what ever that metric is for your company. Fixing your customer numbers is no black science. Just talk to your customers and take the time to really listen to what they are saying. You don’t need to go very far to see a great example of this rule being broken. According to QuantCast  over the last year the number of active users for Zynga’s games has dropped from around 1.6 Million to around 860,000. A 46% drop! What do you think Zynga should do? Maybe listening to their customers would be a good start.

LESSON 4: Last decade’s (or last year’s) management team is probably not the right team for this decade (or year).

Markets change. Products change. Technology changes. And… Companies must change and grow to survive. An unfortunate fact of life is that the management team that got you to where you are may not be the one to get you to where you want to go. The Sears management team that guided the company through its most successful period would probably be lost in today’s multi-channel highly-competitive retail environment. The same goes for a startup company. That awesome team that brought the first product to market is probably not the right team to take the company from ten employees to five hundred warm bodies. Be a part of that management change. Don’t resists it or your company may disappear overnight.

Zynga Active User Numbers Drop 46%

Zynga Active User Numbers Drop 46%

LESSON 5: Always be hungry. Never stop thinking like a startup.

What would Sears look like today if they had not lost the “startup” spirit? What if they had not forgot that hunger for success that their founders most certainly had? If you ever find yourself sitting in your office looking out at all you command and thinking “I have arrived”… You should call down for some empty boxes because that is the beginning of the end. If you look closely at most any of the fallen company giants, at the core you will find a management team that lost its hunger. Work became a 9 to 5 thing you showed up for instead of the reason to live. Those fallen giants forgot what made them great. What set them apart and what got them to the top of the mountain. That first mountain is just a place to look around and find the next mountain to climb.