Publications
Partners
Professor Ron Adner had developed a very practical model that explains the following odd fact: Some great innovations succeed and some great innovations fail.
No, the difference is not explained by poor execution or by poor customer take-up. The difference lies in having too narrow a view of what it takes to make a great innovation succeed.
Three case studies presented by Adner explain the problem and the solution.
Michelin invented the radial tyre in 1946 and revolutionized the industry. In 1992 they came up with the next big innovation, a tyre you can ride on flat for 200 kilometres at 88 kph! The benefits to the customer would be huge. The danger caused by a blow-out would be eliminated as you could drive as if nothing has happened. You will not need to stop to change a flat tire on a dark road late at night. You would not need to carry a spare and tools, which would provide more boot space.
Technologically brilliant it met all the problems that had plagued previous efforts to achieve a ride-flat tyre. To support adoption by the industry, Michelin co-opted competitors to this new technology by licensing the technology to them.
They co-opted garage owners who were enthusiastic about repairing run-flat tyres.
So, twenty year later, where is it?
The answer is that it failed despite Michelin doing everything right. Consumers were prepared to pay a small premium to avoid danger and the inconvenience of a flat, but they were not prepared to pay hundreds of dollars to replace the whole mechanism. They were forced to replace the whole mechanism because there were not enough garages that could do the repair.
The garages were never a factor in new tyre launches, but that would not be the case with this run-flat tyre. Their staff would have to be retrained and new equipment would have to be purchased. They were not prepared to do this until there was a large enough demand, and there couldn’t be a large enough demand until they retrained their staff and equipped their workshops.
For an innovation to work in a deeply sophisticated, integrated economy requires more than just managing your innovation. Now innovations require the management of the innovation ecology, a view that requires the “wide lens” of the book’s title.
Two types of risks to innovation are identified by Adner: Co-innovation risk and Adoption Chain risk.
When Motorola came out with the DynaTAC 8000x in 1983, it was the world’s first handheld, cellular phone. It required 10 hours of charging to support 30 minutes of talking and talking was all you could do. It was bulky and expensive, and based on an analogue network.
The second generation, 2G was based on a digital signal and was capable of transmitting voice as well as small amounts of data – Short Message Services (SMS). Most importantly it was affordable, sparking the world-wide explosion of the cell-phone industry. Nokia needed some innovation to spark the next world-wide explosion because the market for 2G was not too far from saturation.
Their solution was 3G which extended the phone into a portable Internet device capable of keeping you constantly connected. You would be able to do the basics, such as emailing, but also the more complex – viewing video, receiving TV broadcasts, and a host of other exotic services.
When the first 3G phones came onto the market, they had the capacity to do all this, but consumers simply experienced them as a more expensive 2G phone. The problem was that the partners required to supply the content were not there yet!
When an innovation is dependent on the innovation of others, the success question changes from “Can they do it?” to “When can they do it?” The co-invention risk is a function of the risk each external contributor has of not completing their portion. If each co-inventor has an 85% chance of successfully delivering their portion and there are four of these co-inventors on which you depend, the probability of all succeeding is not 85%, but a terrifying 52%.
The challenge for the innovator is to identify this co-innovation risk and to manage it. Deploying resources to mitigate their risk might well be a better investment than reinforcing your part of the innovation.
This last point was critical to mitigation of the second risk, the adoption chain risk, in the case study used as an example of this risk by the author, Adner.
The movie industry in the ‘90’s was distributing their wares in analogue format – canisters of film that had to be copied, shipped and then shipped back. The format was not only inferior to digital, but many, many times more expensive.
The distributor could reproduce the movies in digital format. The first commercial digital projectors were available. The studios could convert film into digital format. The format would allow the viewers to have a better cinema experience and opened up the possibility of 3D movies. It was all positive, but despite this by 2006 only 4% of US cinema screens were showing digital movies.
The problem lay in the adoption chain. The movie makers would benefit. The distributors would benefit. The digital projectors makers would benefit. The cinema patrons would benefit. However, the cinema owners would not. They would have to make a hefty investment in this new technology with no chance of deriving more revenue to off-set it.
When any part of the adoption chain stands to lose, not gain, from an innovation, the chances of success are at great risk.
To the industry’s credit they formulated a mechanism whereby the cinema owner would be assisted in buying the new digital projectors out of a portion of the savings that would accrue from the distribution of the movies in digital format. Four years later 40% of cinemas were screening digital movies.
This book is not a disguised form of advanced project management. It is a long overdue insight into why great innovations fail and the formulation of a method to address it. The basis of the method is “the wide lens,” a view of innovation that encompasses the whole innovation ecology. The value of the book lies in the many tools it offers to address the two risks described above through the 3G and digital movie cases.
This book is well worth a read because it applies to internal innovation as obviously as it does to innovation beyond the company walls.
Readability Light --+-- Serious
Insights High -+--- Low
Practical High -+--- Low
-Fin24
*Ian Mann of Gateways consults internationally on leadership and strategy
