5 Stories of Innovation and 5 Stories of Dis-integration


It’s a widely covered topic, but innovation truly is the lifeblood of any business. Stagnation can lead to disaster: while a company could appear strong on the surface, as a dominant force within a particular sector, it might crumble in a few years if they are unable to adapt to changing markets, let alone lead the market in innovation.

To put this in perspective, we’ve identified some of the greatest innovators of recent times and given a brief analysis of what has allowed them to be so successful. As a comparison, there also some companies that were once market leaders, but their failure to adapt and innovate has led to significant drops in value and status.

Domination through Innovation

It’s no coincidence that some of the biggest companies in the world are also the biggest innovators. Below are some companies that not only adapted to changing markets, but have in fact led the charge in innovating and transforming our lives.

Google

We’ve discussed previously how innovative Google can be, but it’s worth another look at this famously dynamic company. The search engine and its fantastically adaptive algorithms have helped define the way the vast majority of the world uses the internet. However, the true innovations for Google often happen behind closed doors, as the company constantly refines and optimises processes many users take for granted. This innovation is frequently in the form of developing and adapting machine learning programs, encapsulated under the name “Google Brain”. For example, in the past the process of transcribing addresses captured by Google’s street cameras to be usable in Google Maps was done by human engineers, who would spend hours pouring over countless images and deciding whether what was captured was an address or not. A team of google engineers were able to train their machines to handle this duty. The process has been streamlined to an almost ridiculous degree: all of the addresses captured in France could be transcribed in about one hour. Google Brain and machine learning has become the lynchpin for many of the company’s innovations beyond the realm of search engines: autonomous cars, advertising, voice recognition (in fact Google reports that machine learning reduced the error rate of their voice recognition software by 25% in only a year), and Google Translate, to name but a few. All of it is built around discovering innovative applications for their machine learning software. Rather than reinventing the wheel, Google are taking their seemingly simple tools and applying them in exciting new ways. By freeing up their staff from menial tasks, Google is allowing employees more freedom to develop exciting and innovative ideas.

Tesla

It would be almost impossible to discuss innovative companies without discussing Tesla and its founder, Elon Musk.  Tesla and Musk have become bywords for innovation in recent years due to their revolutionary and innovative contributions to a broad range of fields. The results speak for themselves: the Tesla Model S car is widely considered one of the best cars currently available and has been for 2 years in a row according to Consumer Reports. Tesla currently operates at a loss (although they are poised to instantly become market leaders as the auto-industry shifts towards electric), and yet investors continue to sink increasingly large sums into the business, which is a testament to the faith that people have in the innovative capability and vision of both Tesla and Musk. As we’ve discussed previously, focussing purely on profits can be one of the biggest counters to innovation in a company, and it’s amazing to see Musk and Tesla defy this philosophy.

So what makes Tesla successful?  Innovation is built into the DNA of Tesla. Hiring policies are based on prospective employees’ ability to adapt and problem solve, rather than experience in relevant fields. Promotions and bonuses are innovation driven, with top-end category bonuses only available as a result of employee innovation at every level. Musk’s vision extends beyond cars. With his SpaceX project and developments into efficient public transport, Musk, and by extension Tesla, are poised to become some of the defining innovators of the 21st century.

Apple

Apple is known for being an innovator, and yet oddly enough the company has rarely been a true pioneer. The MacBook wasn’t the first laptop, the iPod wasn’t the first MP3 player, the iPhone wasn’t the first smart phone.  And yet their products have become market leaders and dominated their respective industries.

Their key innovations come from the features of their products. Take, for example, the Apple iPod. When it launched in 2001, it faced stiff competition from established brands, such as the Sony Walkman. But the innovative features the iPod offered gave it the boost it needed to become the symbol of the digital revolution: the ability to create playlists, shuffle songs and the integrated iTunes software were all revolutionary at the time and have now become staples of any kind of MP3 compatible device. The successes of the innovative services offered by Apple are key to the “halo effect” (a good product makes consumers more likely to trust other products from the same company) that has pushed customers to utilize Apple products across a broad range of devices: it’s not uncommon for a customer to utilize Apple devices for every electronic device they use.

You can pretty much create a timeline for this halo effect business model the progression:

Apple’s iMac created consumer trust for Apple devices > iPod created consumer trust for Apple’s portable devices > iPhone created the trust for Apple’s hand held computer and communication devices > the iPad launches and pretty much kick-starts the tablet market.

Once again, for most of these products, Apple was by no means the pioneering force. However through innovative solutions and applications, Apple continues to be a market leader and a force to be reckoned with.

IBM

IBM has been a giant in tech and computing since the industry’s infancy.  A key factor in IBM’s longevity has been its ability to adapt and evolve over time, a process that embraces innovation and abhors stagnation. Its current focus is Watson, its famous quiz show winning adaptive intelligence program. We’ve covered some of the innovative applications for Watson in the past, but the applications for the program are limited only by imagination. IBM shows how the development of an innovative and adaptive product can kick-start innovation for other companies, across a broad range of sectors.

Amazon

Once a humble online bookseller, Amazon has grown to become a dominant force in the tech industry, offering services that are revolutionizing almost every aspect of our lives. This can be seemingly little things: 1-Click and next-day delivery have transformed consumer expectations for online retail. It can be big things: getting in on the ground floor for commercially available cloud services has allowed Amazon to become one of the market leaders in the cloud industry. In a similar way to Apple, Amazon frequently relies on the halo effect to expand its influence across various sectors. The trust built up by the efficiency of its online retail platform has granted its licence to be adventurous and ground-breaking in its projects. Any other company that promised drone-deliverywould likely get laughed out of the building, but Amazon’s status and reputation as a cutting edge innovator grant it a unique position to drive and transform entire industries.

 

Honorary Mentions

  • Netflix
  • Facebook
  • Uber

 

The mighty have fallen 

It’s a fact of business that just as there are victors, there must be losers. Below are some of the largest falls-from-grace as a result of a lack adaptation and innovation.

Blockbuster

Although we didn’t go into detail on Netflix’s innovations, the implications of the company are quite clear:  from humble origins as a DVD-by-mail subscription service to the most popular TV network in America. But this rise has left many of its competitors in the dust, most notably Blockbuster. Once a byword for video-rental and a standard part of an average family’s routine, Blockbuster’s failure to change its business model, relying solely on its established brand name, led to its downfall. Customers expect ease of access from the comfort of their own home, something that Netflix quite famously offers, without the peril of Blockbuster’s infamous late fees. To add insult to injury, Blockbuster passed on the opportunity to acquire Netflix for a mere $50 million in 2000.

Blackberry

Once the device of choice for professionals, Blackberry failed to adapt to a changing market and customer demands. Actively rejecting the touch-screen popularized by smartphones such as the iPhone, Blackberry was left behind. As consumers enjoyed the freedom and ease-of-use offered by touch-screen in their personal lives, a shift in workplace policy arose and BYOD (Bring Your Own Device) became standard. In a similar manner to Blockbuster, Blackberry failed to address shifts in consumer demands which allowed them to be overtaken by their rivals and left playing catch-up.

Polaroid & Kodak

Both companies were once giants of the photography industry. Kodak dominated the affordable camera industry, while Polaroid was a household name for its near-instant available photographs. However, the rise of digital photography in the 90s left them reeling. The initial cost of the technology meant that Kodak was unwilling to invest (also, much of their profits came from the photograph film, rather than the camera devices), meaning that by the time digital cameras became more ubiquitous as cheaper models appeared, there were already established and trusted digital camera brands in the market which Kodak simply couldn’t compete with. Polaroid’s unique selling point of quickly viewable photographs was eclipsed by digital’s even faster ability, a feature enhanced by producing higher quality images than Polaroid could.  As the 2000s rolled around, both companies were in dire straits with Polaroid filing for bankruptcy in 2001, while Kodak kept going until 2012.

To add more salt to their wounds, it was actually Kodak researchers who developed the technology for digital cameras back in the 1970s, but the board decided against moving forward with a commercial model. Kodak did make billions from the technology patent, but that ran out in 2007 (which perhaps explains why they were able to hold on so much longer than Polaroid).

Yahoo

Yahoo’s glory days have long faded. In the early 00s, they were the kings of the internet, commanding roughly 20% of online advertising. Now they struggle to keep up with the top competitors such as Google, Facebook, and Microsoft. The reasons for this are quite extensive, but the most obvious one was their inability to rapidly invest in innovation. A quick glance at some of their missed opportunities can create an almost audible groan of frustration:

  • In 2002, Yahoo had the opportunity to acquire Google for $5 billion. Yahoo’s board balked at the sum (which in retrospect is an absolute steal) and rejected them. As of 2016, Google is worth over $500 billion.
  • In the late 90s and early 00s Doubleclick were the dominant force in internet display ads. In 2007 they were acquired by Google for $3.1 billion, an acquisition that has supported Google’s ascension to the undisputed champions of internet advertising. Yahoo missed its chance to acquire Doubleclick, and as such it has fallen well behind Google in terms of advertising.
  • In 2006, Mark Zuckerburg turned down a $1 billion acquisition offer for Facebook from Yahoo. Rumour has that if they’d offered slightly more, Zuckerburg would have been forced to acquiesce, and Yahoo would now own a company that, as of 2016, is valued at $328 billion.

It’s not to bold a claim to state that if these deals had gone through, Yahoo could be a very different beast entirely. Perhaps I would have been yahooing examples for this article.

(Dis)Honourable Mentions

  • Borders Group
  • Nokia

 

What we can learn

The examples I’ve given above are all from big companies, but we can draw some advice from them that can be integrated into any level of business.

DO let your imagination off the reins. Both IBM and Google have shown that creative applications of simple tools can lead to enormous success and innovation.

DON’T be overconfident in your current strengths. All of the examples of failing businesses we gave can be traced back to one root cause: overconfidence that their services or products will always be in demand.

DO branch out. In contrast to the above, all of the successful businesses have used their strong core business as a platform to expand into a large variety of different fields.

DON’T ignore the competition. Failing to pay attention to competitors and how consumers are responding to their products can lead to disaster. If a competitor is offering something that you do not, and there is a positive response to it, it might be worth investigating adapting something similar into your own business. As Apple shows, it’s not necessarily about being a pioneer, it’s about doing it better than anyone else.

DO encourage innovation in the workplace. Tesla and Google both invest resources directly into encouraging their employees’ innovation. Remember, just because you can’t see a way to improve something, doesn’t mean other people can’t.

DON’T be overly cautious over costs. When it comes right down to it, innovation can be risky, and an expensive risk at that. However being too timid can lead to massive missed opportunities, as with Kodak and Yahoo, while being willing to take the plunge has left Tesla poised to dominate the auto-industry in forthcoming years.

Image attribution

Image provided courtesy of Boegh

Further Reading

eWeek: 10 ways Amazon keeps pushing the innovation envelope

Fast Company: The Most Innovative Companies of 2016

Forbes: The World’s Most Innovative Companies

Investopedia: Companies that went bankrupt from innovation lag

Telegraph: Apple’s greatest innovations in pictures

Vocoli: 10 Companies that failed to innovate and what happened to them.

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