The innovator's solution... and problem

After reading the first chapter of “The Innovator's Solution: Creating and Sustaining Successful Growth” by Clayton M. Christensen, I have a bit more respect for the execs walking through the halls of my job.  Clayton explains that the only way to increase share value is to exceed market expectations, simple enough of a concept.  Shari gives us a homework assignment with an expectation of our deliverable and a better grade would be awarded for exceeding that expectation…. Nothing new.  Clayton then explains that the expectations of innovation and growth in the technological world only increases with time, it does not become stabile or decline.  Now that’s a wrench in the works of things.

So in order to increase market value a company must exceed expectations, and then exceed the newly elevated expectations of the share holders.  This isn’t so fair.  Using the classroom example above, this concept would be the equivalent of handing in our book report, receiving an A as a grade and having to exceed Shari’s new expectation of you on the next paper to receive another A.  Handing in a paper equivalent to the first would yield a lower grade.

Sitting stagnant in the market and not surprising share holders (or your professor) with new innovations and creativity could ultimately decrease your value (or grade).   So how does one sustain exceeding expectations when the expectation is to exceed the exceeded expectation (if that makes any sense)? One doesn’t, it’s an impossibility over a long enough period of time.

 If you’re a company like UTC with so many subsidiaries, the solution becomes slightly more (only slightly) realistic.  UTC only needs maybe 1 solid innovation a year to boost share value (my observation), with 5 large subsidiaries that would mean only each company would only need 1 large innovation every 5 years.  Seems like a reasonable pace.

At the end of it all, share holders and Wall Street expect return and that’s all.  As technology advances, the more tools we have to advance technology further.  As an engineer, challenge accepted Wall Street.  

Back to the Drawing Board

Before this class I figured any intelligent idea can be spring boarded into a venture.  After time, thought and the teachings of the class, I realized I could not be more wrong.  I am by all means not discouraged by the requirements needed to successfully launch a venture, I feel much better equipped to handle the process.

I’d consider myself creative and coupled with my engineering degree, I could generally come up with a solution to most problems (marginal solutions but solutions none the less).  For a while I thought about taking a few gems to the next level but never put in as much thought as I have needed.  There have been two concepts that seem so trivial now that never had the right amount of thought before, initial investment/funding and return.  

With generally small inventions/solutions, I have always assumed I would invest the money myself instead of angels or venture capital but after analyzing the financials for the Gibal Tech project that my initial investments could be much greater than expected without return for quite some time.  On the other hand, none of my ideas can generate the amount of return quick enough to support the idea of venture capital or an angel.  Like I said earlier, they are small inventions and they generally have, at best, medium margins for profit….. I really wish one of the ideas was a snuggie 10 years ago (talk about low start up cost and huge margins).

So what if I got the capital needed to start one of these ideas? Out of probably 50 ideas I had walking into the first class, 2 have survived.   The rest have fallen to the rules of IP, potential customer base but mostly investment return and profitability.  Most ideas fell to the question, after 5 years of selling this, would it be relevant or would it be history?

Jon wrote in his blog that the idea generation is the hardest part of the venture process which I agree and disagree with. Coming up with an idea is easy, as I said, before this class I had handfuls of them.  Coming up with an idea that will survive the rules and guidance we learned in the class is difficult but without a cursory understanding of the concepts brought up in class the uncertainty will be too great.  

Positive and Negative Branding

Branding in marketing is a concept everyone is familiar with (whether they know it or not).  If I say "Mercedes Benz", thoughts like "expensive", "quality" or "high end", immediately entered your mind.  Let's face it, we are all susceptible to marketers and company branding but it does not always come from the company itself.

But I don't feel like a sheep herded by clever marketing ploys because branding (or stigma) can be contributed by third party media as well.  I research my purchases (most of the time a little too in depth) and each review or news article I read leads me to my own branding of a company or product.

Let's take the easy example.... Apple..... I know, maybe too easy but it will prove my point.  When I say Apple, you probably think of dominant products like the iPod, iPhone, iMac, etc.  Apples branding is so strong that even if an iMac is 4 times the cost of a comparable computer made by Dell, we are still buying them.  Apple does it's job of making their brand stick in our minds but third party media can dwindle the branding to those willing to research.

Is an iPhone the best product out there for you?  My computer engineer “nerd” type friends won’t touch Mac products.  I’ve even heard from them “Apple is evil” on more than a few occasions.  Even in class things seemed to get slightly heated when iPhone vs. Android was touched upon.  I know they have done their research and thought out their purchase.  What percentage of iPhone users even thought about other products before buying Apple? Apple’s branding is so dominant that only a minority of consumers are willing to question it.  (For the record, I have an iPhone and don’t think it is the best phone out there but is the best phone for me)

What about an example of branding that was over taken by third party media? If I say “Audi”, you think _________.  I bet that blank wasn’t filled with dangerous? About 20 years ago Audi nearly went under from cars mysteriously accelerating when the brake pedal was used.  Long story short the cause was Audi moving the gas pedal 1 inch closer the brake pedal which lead to a few instances of drivers hitting both pedals by accident.  Unsafe car? Not at all, but for months the media created a stigma of the Audi being unsafe.  The company’s typical branding was changed from safe cars to death traps.  It took over a decade of 5 star crash test ratings for Audi to regain the consumer’s trust. To this day, Audi consistently scores the highest in safety.

As a consumer we can read reviews, personally test products or blindly follow a company we trust….. Is there a right answer? I honestly don’t think so.  That’s the beauty of it all; we can buy for our own reasons and brand a company based on  whatever we believe.

The useful SWOT analysis

This question came up when my younger brother, now in a marketing class, was asked to construct a SWOT analysis on himself, as a person.  He knew I had recently used this tool in my studies and asked for help..... Embarrassingly, I couldn't offer much.  In my eyes, my brother's assignment was flawed.  A SWOT analysis needs a direction to work but his arbitrary SWOT yourself assignment had none.  In class we used SWOT for business and venture decisions so the strengths, weaknesses, opportunities and threats all revolved around that framework. Without the necessary direction, my brother's SWOT of himself became a giant list of words, it was not a tool, it was busy work. 

I'm not sure if my brother's professor meant the assignment as busy work or a self reflection assignment but to me, it really tested my understanding of a SWOT and made me realize it can be applied to virtually anything but the greater the lack of direction, the least this tool is helpful.
   

Gibal Tech Mark Size

Market size depends on four factors; demand, addressable market, realistic opportunities vs competition, targeted selection of "winnable" market opportunities.  For Gibal Tech, the market is expressed below.

Demand- Having 3 of our 4 group members in Pratt and me in Sikorsky, we daily see parts worth more money than an average sized house.  Worst part is, they are transported in cardboard, wood and plastic containers.  Not only are the containers garbage after one or two uses, they cost way to much.  The demand within Sikorsky and Pratt exists and that demand is strong enough to at least pursue the idea.  Our research showed no better solution on the market for large expensive aerospace components so it is likely all aerospace companies could use our solution.

Addressable market- The only benefit to having a very very limited market is that you can concentrate directly on the potential customers.  Few companies will benefit from a high end box that can support a 100'' turbine fan.

Realistic opportunities vs competition- Like mentioned earlier, the competition is cardboard and plastic.  I know the containers break easily, have damaged their contents and are thrown away regularly.  I am just surprised no one has identified the current container solutions as weak competition in both technology and financial respects.  

Targeted selection of "winnable" market opportunities-  Having a small market with weak solutions currently in use, the amount of winnable opportunities is actually a high percentage. 

Ventures within the 9-5

Promoting innovation from employees is ideal but possibly too ideal.  Any manager would love his employees to find improvements or new solutions to problems, big or small, but is it truly possible?

First and foremost, if the employee doesn't feel motivated by reward would they really put the effort in?  I know in my line of work, we are constantly asked to improve our everyday lives and products, but see little reward for substantal contributions.   What seems to happen over time is the motivation to improve anything beyond your own work day is almost entirely lost.

If the reward is present, is the time and money?  It takes resources to develope even the most simple innovations.  My experiences have shown, corporate capital is impossible to obtain to fund even the most brilliant ideas and even if it was available, man hours would have to be dedicated.  Man hours are seemingly easier to come by than capital.

I may sound pessimistic but this is what I see everyday.  The challange a company needs to overcome to truely promote internal innovation is simply invest in your talent.  Your employees know the product, processes and possible improvements better than anyone else.  Give free time to develope ideas and give real rewards for innovation (if an innovation saves the company 3 million a year and costs $10,000, a framed certificate is NOT a reward).... soon the investment will be well worth it.

Googles Next Venture

Google Goggles…sounds funny but could be a game changing prodcut.  Google is working on augmented reality goggles that will could display information right on the glass’ lens.  Resturant ratings,emails and directions can be conveyed without the user ever taking their eyes off what they are doing. Sounds great to me as I’m usually glued to my iPhone, sometimes at inappropraite times like driving or walking through a crowded area.

Rumors surfaced that the glasses would run on an android OS and ability to connect to a wireless provider, which brought up my first question… without a keypad on the glasses it would have to have the android equivelant of apples “siri” so the user could ask questions or direct inquiries? That would be pretty neat until the people around you see you talking to your glasses but I distinctly recall odd looks directed towards me while using the iphone headphones to make calls while in college (it looks like you’re talking to yourelf while walking down the street).  If the glasses can connect to a wireless network AND have a feature like “siri” wouldn’t the glasses also be able to make phone calls if they had a dedicated ear piece?

“Goggles…. Call the closest pizza place from my current location”

The rumored cost is about as much as an iPhone without a contract, 500-600 dollars.  For that much they better look good too.

Could these “goggles” disrupt the technological trend smart phones have been following or just become a substitute?  I personally think if the goggles include wireless voice service and can make calls, they can become the next big item.

“Goggles….. show me the directions to my pizza and it’s reviews”

“Goggles….. sell my iphone”