The graveyard of technology innovation is riddled with failed products – Apple Newton, Microsoft’s Zune, Google Glasses, Amazon’s Fire Phone. Yet in Silicon Valley failing fast is heralded as a virtue. Sometimes failing slowly can have unforeseeable benefits, innovative cutting-edge products may die an embarrassing death, but they often also lay the groundwork for better, more well-timed ideas that flourish later on.
Like an experiment gone awry, they can still teach us something about technology and how people want to use it, here are three examples:
Napster Napster popularised online file sharing, its meteoric rise as the world’s de facto peer-to-peer Internet client hastened the shift away from CDs to digital tunes. The notion that your entire music collection might fit on a hard drive was unimaginable before Napster. The story of its pugnacious young founder, Shawn Fanning, undoubtedly influenced the careers of a host of startup founders who followed. Napster’s greatest strength was the unfettered exchange of anything, including copyright-infringing songs and albums, eventually proved its Achilles heel, forcing it to shift to a subscription-based model that ultimately drove it to bankruptcy.
Blackberry Before the iPhone, the BlackBerry was many users’ first smartphones, connecting to the Internet, with email and chat over the BlackBerry Messenger service. And they were everywhere: Research in Motion, as BlackBerry was then called, sold more than 50m devices in 2011. But that proved to be their high-water mark. RIM failed to keep up with the times, stubbornly sticking with its trademark physical keyboard rather than adopting an iPhone-like full touchscreen. By 2016, BlackBerry was selling only 4m devices, but the company’s devices paved the way for the super-powered smartphones we carry around today.
AOL It’s hard to look at what America Online was and not wonder what it could have been. The first Internet service provider, AOL’s Instant Messenger platform was a precursor to every messaging app currently in operation and the first popular social network. But eventually the company was both clotheslined by subscribers departing for faster ISPs and undercut by free Internet services like Hotmail and Gmail.
So, there’s a graveyard of failed technology products for the coterie of current startups working on high impact and daring ideas to reflect upon. For a startup to survive, innovation is an imperative, developing a value proposition and business model to provide unique value to customers. But choosing which innovative idea to pursue is often serendipity or a lightbulb moment like Archimedes had relaxing in a bath before Eureka! Came to his mind as he fumbled for the soap.
Let’s face it, as shown above,even newbusiness models are less durable than they used to be. Every industry is built around long-standing beliefs about how to connect with customers, value creation and to make profit. These governing, dominant beliefs reflect widely shared notions about customer preferences, the role of technology, regulation, cost drivers, and the basis of competition and differentiation. They are often considered unshakeable, until someone comes along to rip them up them up. But it’s a hard thing to do.
In today’s digital world, companies don’t have to own the hard assets – Uber and AWS shows you that. Open Table is the world’s largest dining service and doesn’t own a single restaurant. Airbnb has the most ‘rooms’ for rent but doesn’t own a hotel. The examples are numerous and familiar, but what’s less familiar is how, new entrants achieve their disruptive power. What enables them to exploit unseen possibilities?
For market incumbents, this kind of innovation is notoriously hard to create and respond too, faced with current challenges and balance sheets they struggle to recognise possibilities or shrink from cannibalising existing profit streams. Some tinker and tweak, but the reality is innovation requires you to reframe your mindset, put aside the prevailing reality and underlying ‘rules of the game’ which requires bold, long-term, and brave thinking.
Startup innovation can be a ‘new thing’ but it can also emerge by examining each core element of incumbents’ business models. Within each of these elements, various business-model innovations are possible. Here are some examples which can help make your moonshot less of a longshot:
1. Innovating in customer relationships: from loyalty to empowerment Customer loyalty is a key business goal, but the pursuit of loyalty has become more complicated in the digital market. The cost of acquiring new customers has fallen, whilst customers often self-select buying options. Innovative startups embrace the paradox that goes with this – the best way to retain customers is to set them free – free trials or paid pilots that transfer to pay-as-you-go are attractive pricing strategies to gain early customer traction.
2. Innovating in activities: from efficient to intelligent Here the focus is to spend less time on optimising processes and instead build flexibility and embedded intelligence directly into them to help improve and personalise the customer experience, to go beyond efficiency and create learning systems that work harder and smarter. We look for more than convenience, simplicity, and speed, from a platform, seeking to raise the click-through rate. There is also the AI learning aspect here too, tracking individual customers preferences and behaviours.
3. Innovating in resources: from ownership to access As referred to earlier, established businesses use to compete by owning the assets that matter most to their strategy, and at scale. Banks are the best examples of this but are scrambling to manage redundant assets and overheads in terms of their branch networks with digital solutions increasing serving a new customer segment who have never visited a branch and what accessibility on their terms. As with all the business model innovation, putting the customer at the heart of the business model is the fundamental paradigm shift.
4. Innovating in costs: from low cost to no cost What’s driving innovation in digital models is the reframe that multiple customers can simultaneously use digital goods, which can be scaled and replicated at zero marginal cost.Consider the old telecoms business model, where the dominant belief was that value is best captured through economies of scale – the more telephone minutes sold, the lower the unit cost.
Now the economic model focuses on data usage, data networks and storage capacity. We’ve seen tariffs split between handset and service supply, and pricing menu options to suit the individual consumer. We have the bundling model of products and services, where ‘free’ is an option and consumers pay for additional, premium services. This has been hugely disruptive.
5. Innovation in networks: connect with others to create value Collaborative networks enable startups to leverage other companies’ brands, processes, offerings, and channels through strategic partnering. This network innovation means firms can capitalise on their own strengths and share risk, while harnessing the capabilities and assets of others, develop new offers and ventures. Amazon is the best example of network innovation, which ensures its growth is driven by customer insight and intelligence gathered by network effects.
6. Innovation in process: how you use processes to do your work differently Process innovations requires fresh thinking around ‘business as usual’ to provide a different customer engagement and cost model. Process innovations often form the core competency of a startup, are sustainable and scale, and become the ‘special sauce’ that competitors simply can’t replicate. Amazon Prime shows the power of process innovation.
7. Innovation in service: how you support and amplify the value of your offer Service innovations ensure and enhance the utility, performance, and value of an offering. They make a product easier to use and highlight features and functionality customers might otherwise overlook. They also fix problems and smooth rough patches in the customer journey and bad customer experience in the current product.
Done well, they elevate products into compelling experiences that customers come back for again and again. Uber’s application of technology is a great example of this, which fundamentally changed the taxi-passenger experience, yet still provided the identical core transportation offering.
8. Innovation in channel: how you deliver your offerings to customers Channel innovations encompass all the ways you connect with your customers. While e-commerce has emerged as a dominant force, traditional channels such as physical stores are still important in creating immersive experiences and vital customer touchpoints.
Skilled innovators find multiple, complementary ways to bring their products and services to customers. Their goal is to ensure that users can buy what they want, when and how they want it, with minimal friction and maximum delight. Apple’s Genius Bar is a great Channel Innovation. After Dell had educated the PC buying market to buy online and direct, Apple reinvented the in-store experience and took it to another level, reinforcing the brand values and consumer experience.
9. Innovation with a sense of reality: attach to the market, not your idea Passion is an inner phenomenon, but a successful start-up is rooted outside the founder, in the marketplace. To turn your passion into a sustainable, high growth business, emphasise the addressable market, always connect your business to your customer’s experience and perception of value.
Passionate entrepreneurs tend to develop rose-coloured worldviews, over-estimating sales, and underestimating costs. To convert your passion into tangible business value, emphasise a business strategy that makes financial sense based on a compelling story, covering how the elements of your business will come together in a way that is cashflow positive over time. You also need to say ‘no’ more, recognise and kill a pet project. If the market interest isn’t there, you can only push again so many times.
10. Innovation with a sense of timing: be an agile thinker and jog fleet footingly No amount of planning can anticipate the unexpected twists and turns of reality whilst practicing innovation. To succeed, innovation needs both iteration and agility. Establish an ongoing process for translating ideas into actions and results, followed by evaluation. Test and adapt your concept as early as possible. Work on continually improving the fit between your big idea and the marketplace.
Startup life is all about polarity and probability, making a choice between things that are not within your control versus the things that you feel are within your control, and those things that just happen. Waiting for the right moment to take a decision, and holding off until then, often makes the difference between success and failure. A farmer knows when to sow and when to harvest.
Summary
When we all think alike, nobody is thinking. Capital isn’t so important in business, neither is experience, you can get both these things, what is important is new ideas. You need to see what everybody has seen and think what nobody has thought, and don’t live your life in the rear-view mirror – it tells you where you’ve been, not where you can go looking forward. Work hard on reimagining and reengineering your startup business model, put customers at the centre of your thinking, and give your startup an unfair advantage.
The world isn’t waiting for you to get inspired, you have to inspire it, and at the same time don’t let your doubts sabotage your thinking – there are far better things ahead than any we leave behind. We are all confined by the mental walls we build around ourselves, sometimes innovation starts with a critical decision to reinvent yourself and kick-start your business 2.0 – a moment of truth, flash of brilliance or the end result of a bout of determined reflection to make a difference. But whatever the trigger, take a leaf from Einstein’s play book: logic will get you from A to B, imagination will get you everywhere.
