In my previous post I said that perfecting what we already know and do merely drives our industry to parity with thin margins.
Innovation is about doing something different to get the opposite result.
Right now we’re all seeing a whole new game where Google and Microsoft are slugging it out on each other’s respective turf. It has the makings of an interesting and long-running drama and the way things are going I’m glad I don’t hold Microsoft stock and I’d think about shorting Google too.
Google pioneered advanced algorithmic search then discovered a pot of gold at the end of the rainbow, called Paid Search.
Microsoft, never known for innovating, had built a very lucrative business on the Windows operating system, which OEMs pay for the privilege of loading onto machines they make and sell. The current incarnation of Windows, Vista, is a bloated, hackable, buggy colossus which chews up hardware resources and user patience. A lesser source of income for Microsoft has been Office. Apart from that pretty much everything Microsoft makes or even touches loses money.
Nobody at Microsoft seemed to pay much attention to Google Docs, essentially a cut-price online competitor to Office. Perhaps they were too busy trying to work out how to build a search engine and make money from it. They even seemed too busy to notice that Google launched their own browser, Chrome. Smart move by Google in case Microsoft does something Balmerian and fiddles with the functionality of Google in a forthcoming IE upgrade.
Bing launched to muted applause and when everyone in Redmond was able to have a look around and take in the recent developments, they suddenly noticed that Google had announced an operating system – Chrome OS – initially for the hottest, trendiest type of computer, the NetBook. Again, the strategic imperative of Google was clear. If Microsoft tweaks Windows 7 to benefit Bing and inhibit Google a long, drawn-out court process is not going to help Google in the short term. With Chrome OS it was suddenly all too clear that Google had started playing on Microsoft’s turf while Microsoft was trying to learn how to play on Google’s turf. The shock was powerful and the reaction dramatic.
Of course Microsoft is not the only one who should worry about Chrome. As Nitrozac and Snaggy put it so well in The Joy Of Tech, Apple’s OSX is under threat too. When elephants fight the ants get trampled.
Look at the different businesses those two companies have built from. Now consider the imperatives both are working with in going after the other’s territory. To make sense of it and to show you how you can approach innovation in your own business, I’m going to take you back to about the same time that Yahoo lost their way and made Google their search engine.
10 years ago W. Chan Kim and Renée Mauborgne published a superb article in the Harvard Business Review called “Creating New Market Space” which sums this up very well. From there they went on to write their 2004 break-out title “Blue Ocean Strategy”. I’ll leave the bestseller building idioms aside to focus on the insights from their foundation work and use those to show you how to approach innovation for your own organization.
Before I do I need to make one really important point. Innovation is not an individual event. It is very much a team sport and you need to work well with your best and brightest at all levels in your organization to be good at it. Innovation is not the product of an inspired genius in a garret, although Edison loved to paint himself as one while running a large innovation laboratory housing dozens of scientists.
Right, now here are the 6 main ways in which you can seek innovation to build market space for your business.
1. LOOK BEYOND YOUR DEFINED INDUSTRY.
Head to head competition focuses on your rivals within your defined industry. You will keep improving your profits, reducing your costs, trimming your price until you all land up producing pretty much the same thing at the same price. Look across to substitute industries for ways to develop new market space. Look for unoccupied space which represents a real breakthrough in value for your customers. You may find new markets this way or new methods for your current markets. Google Docs. Chrome. Chrome OS. Android too for that matter. To Google this is not tangential adventurism. It is all linked back to their core business – search and providing maximum information of the maximum quality to the maximum number people.
2. LOOK BEYOND YOUR STRATEGIC GROUP.
Most companies going Head to Head focus on their competitive position within their strategic group. A strategic group is made up of companies providing pretty much the same price and performance in what they produce. Look across the other strategic groups in your industry to go and compete with others or create a new strategic segment of your own.
The iPod didn’t merely compete with other MP3 players in taking business away from the Discman and Walkman. Together with iTunes it changed the way people buy music.
Google didn’t stick to competing with Yahoo and whoever was left flailing around in search and online email, they went into being an ASP in the office documents space and into operating systems. That’s quite aside from Google Earth, Picasa and the rest.
3. LOOK BEYOND YOUR CURRENT BUYER GROUP.
Head to Head focuses on providing better service to your current buyer group. Instead, redefine the buyer groups within your industry. Look along the entire chain of purchasers, users and influencers. Look to what each of those really values, then completely re-assess your distribution chain. Question every aspect of the prevailing wisdom in your industry about who can and should be the target customer.
Remember when search was the business every web-user needed and nobody in Yahoo, Alta-Vista, Excite etc could figure out how to make money from? OK, Google came up with paid search. They created buyers. Got the picture?
4. LOOK BEYOND THE ACCEPTED WISDOM OF PRODUCT AND SERVICE OFFERINGS IN YOUR INDUSTRY.
Head to Head focuses on maximizing the value of product and service offerings within the bounds of your industry. Look across to complimentary products and services that go beyond the bounds of your industry. To get there, pull back and look to the total solution that buyers are looking for around the needs your product or service addresses. This can be something needed which you add in or something undesireable which you engineer out.
Google email pioneered unlimited storage when attachment sizes were getting so big people were deleting old emails in Yahoo and Hotmail to receive new ones. Add Google search and “conversations” and who needs to waste time filing their emails?
5. LOOK BEYOND THE FUNCTIONAL EMOTIONAL-APPEAL FRAMEWORK OF YOUR INDUSTRY.
Head to Head focuses on improving price/performance in line with the functional-emotional orientation. Create new market space by rethinking the functional-emotional orientation of your industry by looking to add or remove emotional drivers or functionality. Think luxury and fashion with much higher margins. Think lower costs/ lower spec practical alternatives with a bigger volume potential.
OK, just for one example, Google Docs for a few bucks versus the buggy slow-loading, easily-crashing bloatware of Microsoft Office.
Going Head to Head focuses on adapting to external trends as they occur. Companies gradually adapt through incremental change. Innovating jumps a big step further. Look to the future and how current trends will play out in the price/performance offers and market structures that will benefit your customers in the future, then jump to that future stage now. Think of the recorded music industry. Think of the lighter, faster Google Chrome browser and the coming lighter, faster Chrome OS for NetBooks which are low on specs but big on convenience and fashion. Now think Microsoft Windows 7 and IE 8 and all the disasters they will entail for light-spec NetBooks.
It’s easy to make excuses. It’s harder to innovate and get results that put your company ahead of the competition. It’s your choice, but I’ll leave you with one last thought – what if your competition is already changing the game on you? What if you are proudly being Microsoft while somewhere in a garage out there, someone is about to pull a Google on you.