September 2011

It’s hard for the incumbent to move to new, faster model.

Google chairman Schmidt opined like this about Microsoft in an interview with CEO Benioff. I thought that was so true. I could think of several such examples – itself is a good example of leveraging this advantage against “not so nimble” giants that occupied the CRM market. Google with the internet, facebook with social network, makemytrip/monster over traditional facilitators are all few case-in-points.

I had read many cases during my MBA about how IBM which stood the test of PC still lost some ground to newer players who leveraged offshoring like Infosys; How GM, Ford lost ground to Honda, Toyota; The point is that as companies age, they develop processes that fit the existing model. The people selection and development and other systems also comply with the incumbent business model. These processes become the huge ship that can’t turn quickly when they spot the iceberg (assuming they do spot it!). With time, when a new need emerges, a new entrant leverages a new model to effectively satisfy the new need. The incumbent then is unable to swiftly change their model to stay relevant. The people, processes and systems not only create friction to change but also groupthink makes company happy with status-quo. I have to note here the concept called “Theory of Business” – the idea is to stay relevant to the market i.e. to spot the iceberg. But that does not address how a company stays nimble with its people, processes and systems.

But then is it really true? Does a company become less agile as it ages? I wondered. Well, tell Steve Jobs that “It’s hard for the incumbent to move to new, faster model.” Following responses are possible: Smirk, Slap or rolling on the floor laughing out loud. :) From an existing company he kept giving new products that, as someone put it in TechCrunch, were not just hits after hits but were home-runs after home-runs. First the iPod that took good care of the “incumbent” Sony. You could argue that iPod and iPhone are in fact the case stated by Schmidt. Just that it’s an existing company that entered a new market. But take PC market. First with Mac, Apple defined the edge of computing, usability and even form factor with iMac. With iPad they are defining the next evolution of personal computer. After I come back from work when I hop onto fb, twitter, linkedin, google reader, youtube and my internet reading list why would I switch on my laptop again? To call a desktop a personal computer is so stone-age Microsoft! Let’s think for a moment. Why couldn’t a new entrant come up with a tablet and surprise the PC market incumbents, to name a few – Apple and Microsoft? Not with Apple, because Apple defines the evolution and not the new entrant!

This is what leaders do – they don’t just have market-share, they define the market. Now what does it make Apple so successful in staying nimble even as it ages??? Certainly, it’s a worthy topic for a research paper. Let me speculate on this a little bit and please share your thoughts:

  1. Have being nimble as part of the strategy itself – then your people, process and systems or more comprehensively the 7S of McKinsey will be designed towards nimbleness – huh…It’s so easy to lay down these terms know. That is why MBA is easy but businesses are not!
  2. Keep the radar on – to check if the assumptions of the business (theory of business) are relevant for the current changes in the society, markets, customers, products and technology.
  3. Depending on the industry and the company strategy keep a portion (more for say hi-tech, pharma as against say construction) of the company focused on innovation. Focus on the five tenets of innovation development: read this article I wrote.

Obviously the list is not complete. Let me know what you think your company is doing to stay nimble. Or is it really hard for the incumbent to move to new, faster models?


Three Professors from HBS, INSEAD and Brigham Young University spent years researching innovative companies and leaders and wrote the book Innovator’s DNA. They conclude there are some basic skills that differentiate business innovators like Steve Jobs from ordinary managers.

They sound pretty logical and hence un-innovative! Nevertheless, logically thinking :), it’s clear why these skills will help in being innovative!

So here’s the list. Master them and you will give yourself a good chance of being innovative.

The three profs call them the five skills of disruptive innovators:

  1. Questioning allows innovators to challenge the status quo and consider new possibilities; Example: the interface with computers for humans is through body organs – eye, ear and hands. Then is mouse natural? Why not gestures and voice recognition?
  2. Observing helps innovators detect small details—in the activities of customers, suppliers and other companies—that suggest new ways of doing things. Example: College kids spend most time socializing but emails are not good enough then why not build a new product?
  3. Networking permits innovators to gain radically different perspectives from individuals with diverse backgrounds; Example: (If true) Aamir’s suggestion to picket MP’s residences to force an opinion on Lokpal proved a masterstroke. If not Aamir, someone in the network came up with this right!
  4. Experimenting prompts innovators to relentlessly try out new experiences, take things apart and test new ideas; I guess this is the most intuitive one – so no examples.
  5. Associational thinking — drawing connections among questions, problems or ideas from unrelated fields helps to create innovative solutions. This is triggered by questioning, observing, networking and experimenting and is the catalyst for creative ideas. Example: If offshoring works for IT why not for knowledge processes and core operations? The book Corporate Chanakya is another example.

There you go: The mantra to be innovative is “Questioning, observing, networking, experimenting and associational thinking”

Now if you are a leader of a group that needs to innovate – here’s another framework – 3P framework for people, processes and philosophies. Fundamental change within senior managers (some mastery of the five discovery skills); changes in how their innovation project teams work (processes that support innovation); and changes in philosophies that foster the belief that innovation really is everyone’s job.