Maintaining the Innovative Edge

12 02 2015

Exploding Innovation

I was having coffee at Dana Point Harbor in California with a friend and a former colleague of mine, Gary Wallace, who is a VP at Sirius Connected Car.   We were talking about business and the Feb 1, 2015 issue of Fortune magazine with a Unicorn on the cover.  The unicorn symbolizes start-ups that have cracked the $1 billion valuation mark, notwithstanding any sustainable revenue to support that valuation.  (Can you say Dotcom bubble?)

As we talked about these companies we focused on the concept of innovation.  Why were these companies successful in coming up with an idea and just as importantly, what happened to the high flyers, the innovators in the past that have gone “subterranean” and in many cases have died on the vine.   Since this is a blog and not a research tome, let’s look at some of the companies that were stars at one time but have lost their luster.  My goal in this blog is to provoke thought on how to be an innovator and to ensure that complacency doesn’t reign in the future.

Since Gary and I come from the technology world of networking, wireless, and computers, it was easy to find examples of these lost innovators.   And because I am an angel investor with TechCoastAngels in Southern California and lead mentor to start-ups through the Center for Entrepreneurship at Chapman University, I have a good perspective on innovation and what it takes to be successful. Gary, in turn, is a very successful tech executive and was one of the executives who helped build ATX/Agero into a telematics powerhouse.  He is very smart businessman with a tremendous breadth of knowledge.

We pondered if it was an issue of focus, execution, leadership, or a combination of things?  We talked about a few companies:  Nokia, Motorola, Blackberry, Northern Telecom, Jawbone.   I know the first four of them having dealt with them as an executive at telecom/wireless companies.  I know Jawbone because I was a huge fan of their headsets and Bluetooth speakers and the recent article in Fortune (same issue with the Unicorn) made me remember their previously fantastic products.

Nokia was a classic company that started in the rubber industry and through bold leadership became a telecom powerhouse and the darling of the wireless industry in the 90’s and early 2000’s with its Nokia 1100 and then the Nokia 3000 series phones.  Heck, I bought a bunch for my family.   Fast forward to 2013 and Nokia sold off its wireless phones to Microsoft.   Note from the graphic below courtesy of CNET the market shares today based on the operating systems.  And the subsequent chart on Global Smartphone market share tells a powerful story.

Smartphone platforms

Similarly, Blackberry which use to rule the “smart phone” world with its business oriented devices. Unfortunately, has lost its way and while it still produces phones it is focusing on applications and recently introduced the Blackberry Classic, harkening back to the glory days of the late 2000s.   Many people I know still like that classic design because all they do is email and text from the device.

Motorola in a sense invented cellular service.  Martin Cooper made the first private handheld call in 1973.   They came out with a brilliant design for a small clamshell phone called the Startac in 1996.  Great phone that was a must have.   In 2011 Motorola sold off its mobility division (cellular service) to Google and subsequently Google sold the division, sans its patent portfolio, to Lenovo.

Smartphone market share

Similarly Nortel, formerly Northern Telecom, once a power house in telecom infrastructure with nearly 100000 employees and a huge market cap on the Toronto Exchange, filed for bankruptcy in 2009.  They had great product and when I was an engineer I highly admired their technology.

Jawbone is a little different in that they still have a great technology and a superb well thought of CEO in Hosain Rahman.  They introduced several products that made the market but then other competitors came in to take share.  Currently they are pivoting to focus in part on the wireless fitness craze in competition with companies such as Fitbit (a relatively new Unicorn established in 2007).

When Gary and I talked we thought about our experiences with these companies and ruminated what they could have done differently.  Now this is not a scientific study by any means but here is what we thought resulted in the downfall.  And for context, remember Andy Grove’s cautionary words: Only the Paranoid Survive.

Could these companies have survived and changed?  I don’t have the answer but it is an interesting discussion.  By looking at what we believe were their failings, Gary and I posited that these four areas could have been changed.

  • This is the opposite of arrogance.  These companies relied on their past successes and thought that their view was the right view.  They became insular and lost touch with the customer.  From personal experience these companies except for Jawbone would not accommodate unique requirements.
  • Customer perspective. While these companies focused on their products they did not really listen to their customer wants and needs and did not accommodate their needs. Other competitors eager to take share were more accommodating.  Companies need to have a direct pipeline to their customers.  Engineers should visit customers.  Customer panels and advisory boards need to be implemented.  Lead users, i.e., innovators and early adopters, need to be identified and used in early product trials.
  • The telecom companies grew fast with introduction of new products and excellent technology.  But the leadership seemed to lose focus on execution.   I give credit to Nokia and Motorola for spinning off their mobility groups to Microsoft and Google to give those entities a better chance of survival.  Regardless of anything else the basic notion is that P=R-C where P is profit. Execution needs to be de rigeur for all companies through a solid business battle rhythm of managing the business, and tools such as balanced scorecards to help guide the way.
  • All the companies I mentioned and certainly those in the Fortune article achieved success through innovation.  Innovation takes place on several fronts and all characterized as “new.”  Newness and the pursuit of newness on several vectors give companies an advantage.  You can have a new product(Fitbit), new application in a market(think baking soda in toothpaste), new pricing ( Solar leasing, ATT’s Digital One Rate), new technology offering new benefits (drones, Space X, First Solar), new processes (Amazon, Tom’s shoes), new support systems, new branding, new partnerships, new eco-systems.  And the list goes on.

Achieving sustained success is very difficult.  Companies need to develop the right strategic imperatives, the right innovation centers, the right product development processes, the right customer interface processes.  Many companies can do this on their own but also many companies are so focused on today and execution they may need help from an outsider, sort of an alter ego, to help with guidance, advice and tools.    Feel free to comment on this blog or contact me to chat about your business needs.  My contact info is dfriedman@prodigy.net.

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