Hello, and welcome to a free edition of my newsletter. I’m Shweta, and each week I write about EdTech, Startups, and Products. Feel free to reach out to me on any of these areas, I’ll humbly offer actionable real-talk advice. 🤜🤛
I am intrigued by how lack of Innovation in business by successful incumbents, leads to them losing momentum and sometimes their very existence.
Successful incumbents have the knowledge and resources to lead, but they don’t take action.
So why do the incumbents don’t see the problems as they emerge?
In a brilliant new book, Unrelenting Innovation: How to Build a Culture for Market Dominance, Gerry Tellis explains why this is.
Compilation of thoughts from the book, and some my own.
1. Refusal to Cannibalize Previously Successful Products
Kodak had many of the patents that were the basis for digital photography, but they were protective of its film business.
Microsoft had a model for paid search before Google but was afraid it will kill the banner ad business of MSN.
Sony came out with an MP3 player two years before Apple, but Sony Music was petrified that a successful MP3 player might foster music piracy.
Compare these examples with Gillette’s willingness to, again and again, obsolete successful products.
Now, MOOCs like Coursera, Edx have been facing the disengagement problem for so long. Their refusal to cannibalize existing async certification-based programs with more in sync and engaging, live community learning courses could play out against them.
2. Reluctance to Take Risks
Failure is endemic to innovation, with rates ranging from 50% to 90% at various stages of development and commercialization.
Home movie and video game rental services giant, Blockbuster Video, was founded in 1985 and arguably one of the most iconic brands in the video rental space. At its peak in 2004, Blockbuster employed 84,300 people worldwide and had 9,094 stores. Unable to transition towards a digital model, Blockbuster filed for bankruptcy in 2010.
In 2000, Netflix approached Blockbuster with an offer to sell their company to Blockbuster for US$50 million. The Blockbuster CEO, was not interested in the offer because he thought it was a "very small niche, risky business" and it was losing money at the time.
3. Inability to Focus on the Future
In the late 1990s and early 2000s, Nokia was the global leader in mobile phones.
With the arrival of the Internet, other mobile companies started understanding how data, not voice, was the future of communication. Nokia didn’t grasp the concept of software and kept focusing on hardware because the management feared alienating current users if they changed too much.
Nokia’s mistake was the fact that they didn’t want to lead the drastic change in user experience. This caused Nokia to develop a mess of an operating system with a bad user experience that just wasn’t a fit on the market.
The company overestimated the strength of its brand and believed they could arrive late in the smartphone game and succeed. In 2007 Steve Jobs launched the iPhone, a phone without a keyboard, which was revolutionary at the time. In 2008 Nokia finally made the decision to compete with Android, but it was too late. Their products weren’t competitive enough.
Even today, there are people who claim that if Nokia had stuck with its own operating systems, instead of embracing the Windows Phone in 2011, it could have succeeded.
4. Lacking Internal Competition for Innovative Ideas
As a result, innovation is stifled.
Silicon Valley is successful in part because of the frenzy of competition for ideas and people. The firms that keep coming up with “big” innovations have found ways to create such energy inside a firm.
For over a decade, HP supported inkjet and laser technologies with competing printing divisions within the company. Each division worked hard to outdo the other, and innovation was the beneficiary.
Any other examples you’d like to share?
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