My goals are to help CEOs recognize business innovation opportunities, take calculated risks, and navigate their company to new products via new technologies, new business models, and new strategies.
Among the greatest preoccupations of CEOs of many small and successful companies with established products is how to keep from being pushed aside by newer and cheaper products that will, over time, get better and become a serious threat. Even the best-managed companies, in spite of their attention to customers and continual investment in new technology, are susceptible to failure no matter what the industry. These failures are often not the results of new disruptive technologies, but rather the result of disruptive innovation – the strategy or business model enabled by a new technology, that creates the disruptive impact.
Starting a new line of business is an inherently difficult proposition to the company rank and file, but ideally not to the company CEO. Many small companies have built-in internal barriers towards disruptive innovation to make sure the existing and profitable line of business is not hurt. However such internal forces and teams assembled around specific products, services, and technologies will typically prevent the company from seeing and acting on the “next big thing”.
The CEO on the other hand, is often times aware of the dynamic nature of the market, and realizes the importance of introducing new products and services that utilizes technologies, business models, and markets that are different from existing, revenue generating models. Many of these efforts, in spite of a CEO’s backing and leadership, fail, for several reasons:
- Resistance from the current, established business. As pointed out by Christansen in the Innovator’s Dilemma, existing business tends to force the companies’ direction forward, but only incrementally. There is inertia against stepping into new, uncharted territories. As a company’s culture matures, its tendency to embrace risk drops. In addition current customers force the company in the direction of sustaining its existing model. |
- Incentives in the company, especially in business and sales groups are usually short term and reward riskaverse behavior; therefore, even more resistance develops there over time toward novel, unaccustomed, business models.
These are especially correct in a weak economy, when even product/engineering groups, which were originally assembled to help the company explore original, are frequently taken down or re-appropriated for the core business of the company.
To assuage this dilemma, larger companies, such as AT&T and Microsoft, have an independent research and development unit that works on futuristic projects and lines of business. Here, after a prototype or proof of concept is built by the R&D group, engineering teams take over the project. At this stage, it becomes much easier to convince the business units to adopt the products. When there is a convincing proof of concept (both technically and business-wise), people can sense the validity of the new business easier, and come along. Other companies, such as Google, have implemented a business culture from scratch where the engineers are researchers. Here, there is no transition, since the researchers who look for new ideas are working very closely with engineers who implement them; in some cases they are the same person. These approaches are both very costly and nearly impossible to implement for smaller companies that have an existing product and culture. Often reassigning some of their engineers to research new ideas and implement new prototypes fails because the rest of the engineering team is not in coherence with the folks that are in charge of the new products and concepts.
I am proposing a solution to this problem for smaller companies that want to reduce their risks, and rejuvenate their technology, products, and services, without jeopardizing their existing business. My solution to this problem is an independent research group that is detached from a company’s main business and is not restrained by limitations and cultural restrictions of the company. What I have done in these situations – which has proved successful – is to build a very small team, either chosen from the company’s technical staff, or hired separately. I have then worked with this team within a separate environment to research new possibilities and to come up with prototypes, ready for the company’s main business group to take ownership of.