Category: Innovation

Yahoo!’s new CEO, Marissa Mayer, is making decisions that highlight the difference between satisfying short term financial investors and building a business.

In her announcements to and conversations with staff, she emphasizes product.

In her public presentations and in the company’s public filings, she emphasizes product.

In her musings about what to do with Yahoo!’s money (the $4B anticipated cash infusion from selling Alibaba comes to mind), she emphasizes product.

Yahoo! is just one of many companies that have, over the centuries, faded into nothing because they took a casual approach to product.  That thinking is dangerous enough if a company makes nuts and bolts or other basic goods, industries in which the products may not change dramatically, but customers might and competition from lower cost producers are certain to do so.  In high tech, especially in consumer high tech, however, sitting still and taking the gradual approach is not very different from tying concrete blocks to your investment dollars and tossing them into the nearest lake.

Kodak is a great example.  RIM and Yahoo! are better examples.

Ok.  Yes.  Investing a company’s money in building the business is risky.  Lots of companies have made bad decisions.  Microsoft, as recent write-offs have illustrated, has been less than brilliant.  HP screwed up with Palm, Compaq, and EDS.

But if you’re risk averse you shouldn’t be investing in tech stocks.

So the analysts who are downgrading Yahoo!’s stock based on Ms. Mayer’s decisions and direction are speaking to an investor community that shouldn’t buy any tech stock, let alone Yahoo!’s.  If you’re not risk averse and you’re willing to invest in tech companies, look closely at Ms. Mayer and Yahoo!.  It’s too early to predict success, but at least there’s a chance of it.

Yahoo!’s Board of Directors has brought in a stream of CEOs (five since Jerry Yang gave up the post in 2009).  In choosing Marissa Mayer, they clearly were not looking for someone who would turn the company into a cash cow.  If Yahoo!’s investors, current or potential, are not happy with the choice of CEO, they need to dump the Board and find a new strategy.  Ms. Mayer is close to ideal for the direction the company should take, and her focus on product is right on the money (pun intended).

The big question is: Can Marissa Mayer bring the company with her.  Yahoo! is, after all, made up of people even more than it is made up of money.  Money is relatively easy to move; people are harder.  Money creates the opportunity for innovation, but people are the actual innovators.

“How many first person shooters can we create per year?  How many can we play per year?”

In an interview published on July 5, 2012 in GameIndustry International, David Cage, author of Quantic Dream’s Heavy Rain, has called for more innovation in the games industry.  Cage believes the game industry will die “if it doesn’t try to be innovative.”

Cage is wrong in one respect.  The game industry will not die if it stays in its rut of big-boobed, muscle bound, blood-and-guts games.  Hollywood certainly has done well in the genre, why shouldn’t games?

Cage, however, is onto something in the games he develops.  Starting with Heavy Rain and continuing through Beyond, which is still in production, Cage’s games emphasize story line and depth of character.

Most games have some sort of back story.  For example, Blizzard’s World of Warcraft has a rich, carefully developed lore that some gamers study carefully and discuss at great lengths in online forums.  WoW’s lore heavily influences the visual, aural, and play-action content of the WoW universe.  Other games, such as Call of Duty, have a minimalist back story barely sufficient to support the play-action in the games.

Even in WoW, however, the characters, tellingly referred to as “toons,” have no identity independent of the player.  Races within WoW have traits that distinguish them from each other (Blood Elves, for example, are haughty and vane; Draenei are proud and spiritual) and these racial distinctions are manifest principally in the jokes that a player can get his toon to say.  Unfortunately, all Blood Elves tell exactly the same jokes, as do all Draenei.

Some movies, such as Terminator or Die Hard, can be the same way; they have a simple veneer of story to provide a vehicle for action or sex or both, and the characters tend to be simple and stereotypic.  Other movies, however, have complex story lines with characters who can elicit powerful emotions from the audience: sympathy, hate, or even simple curiosity.  The pregnant high school girl in Juno, for example, is as real as a classmate (or, in my case, a daughter – or at least a neighbor’s daughter).

Cage has enough regard for the characters in his games that he casts the actors who do the play-action and voices for his characters like a movie director, looking for expressiveness in voice, face, and body movement that fit the characters he wants to portray.  No one would call the people who populate his games “toons.”

When Cage calls for more innovation in gaming, he’s not simply talking about better controllers or more interactivity.  Undoubtedly, he would like better graphics to enhance his ability to communicate subtle emotions, but for now he is content with PS3 graphics.  He is not looking for technology innovation.  Cage wants more depth to the content.  He wants to shift the emphasis from male gaze and violence to plot and personality.  The testosterone filled shoot-em-up games will not go away, but if Cage has his way, perhaps the day will come when shoot-em-ups, instead of defining the medium, will simply be one of the many genres within the medium.

Don’t expect movies and movie theaters to go away either.  The couch potato will always want something he can sit down and watch without extending any more effort than it takes to reach for the dip.  You can, however, expect movies/games that have multiple story lines and multiple possible outcomes.  And game producers will demand that the players of their games, like readers of thoughtfully written books, understand the characters in the game and play them accordingly.  Imagine that: playing a character in a movie….

Adding to the diversity of genres available within the medium will attract more participants.  Think of it: GameStop will have to learn to service middle-aged men and women, and games, because successful play no longer depends on twitch reflexes, will move to tablets and e-book readers because those are the platforms used by the new generation of movie goers and book readers to consume – and interact with – their content.

Without variety innovation cannot take root.

Innovation has many, if you will, fertilizers.  Money helps.  Spare time helps.  An environment receptive to change is, of course, essential.  But variety is the seed from which innovation sprouts.

Variety can come from many sources:

1. Place
2. Culture
3. Perspective
4. Time
5. Experience
6. Training
7. Language
8. Process
9. Expectation

Change any of the above and you have the opportunity for innovation.  Mental alertness rises and the ideas for further change and (hopefully) improvement can be expected.

For example, simply having more than one place to work helps with concentration.  Research has shown that, contrary to the popular conception that having a fixed place to work is good for intellectual productivity, students learn better if they switch it up a bit and study in different places.  It helps, for example, if they sometimes study in their rooms, sometimes in the library, and sometimes in the kitchen.  The same applies to study times.  The increased focus (or the reduction of boredom) helps the students absorb their chemistry, language, music, and English literature lessons better.  (See the research of Dr. Robert Bjork of UCLA.)

The same applies to innovation.  Changing the work place, the work schedule, the content of the work itself, or any of the other variables listed above is a valuable stimulus to interest levels and will result in the introduction of fresh ideas.  Sometimes the “fresh ideas” are simply transfers of a practice that was picked up in a different context.  Sometimes the “fresh ideas” are true “ah ha!” moments in which the worker, with his mental alertness stimulated by the different context or content, has a breakthrough and comes up with a truly new and unique approach to a task or a problem.

Either way, innovation has sprouted and with a little encouragement can become part of the routine.

The Wall Street Journal has posted an article on off-the-wall business ideas (mostly apps) that are taken seriously and, in some cases, have a modicum of commercial success.  The premis is simple: A developer has a crazy idea (for a smartphone or iPad app, for example) that he or she thinks is a joke.  Other people, including investors, think the idea has merit, it gets built, and consumers buy it.

Take, for example, iPoo.  iPoo allows smartphone users sitting on toilets to chat with each other.  Sound like a joke?  It started off as one, but according to the Wall Street Journal, more than 200,000 people have downloaded it at $1.oo a pop.  That’s $200,000 in revenues for a project that probably took a few days to create.  Of the 25 reviews on iTunes, the sentiment is extraordinarily positive.  The poopooers mostly object on the grounds of inappropriateness, which probably means they shouldn’t be using it in the first place.  Thank goodness Apple let CellingNow sell it.

Of course, not all ideas are an immediate success.  TacoCopter will have to overcome FAA regulations to launch its home delivery service using remote control mini helicopters.  It will also have to overcome technical problems that caused its test copter to crash moments after its initial payload was loaded.  But it’s biggest problem is PR.  Steven Colbert (ab)used the concept in one of his routines and Wired.com said the business is “completely fake.”

But isn’t this where great ideas come from?  Crazy, off-the-wall ideas get refined and become real products.  iPoo has made a tidy profit for its creators (and given most of us a chuckle).  And who among us hasn’t dreamt of low altitude highways for consumers; why not for consumer products?

The best line in this particular article comes from Eric Kerr of Columbus, Ohio, who bears partial responsibility for spoof site Itsthisforthat.  Eric says, “Even if it sounds silly from the beginning, nobody knows what will work and what won’t work.  The best approach is to try it and see what happens.”

For those who want to read the original WSJ article, here’s the link.

One of the toughest balancing acts for a leader in an innovation driven organization is choosing what to keep and what to change.

On the one hand, change is at the heart of innovation and letting go of familiar and comfortable characteristics (style, function, or process) is an inevitable part of change.  On the other hand, customers, investors, and employees have expectations; stray too far from those expectations and you risk losing them.

The key lies in understanding what the customer really wants and improving on that.  Your product is not defined by what it does or how it works or what it looks like.  Your product is defined by what your customers expect to get from it.

The restaurant industry serves as a great example.  Any restaurant that considers itself in any way gourmet has to offer its own versions of the dishes on the menu.  Tomato soup that comes straight out of a tin can just won’t hack it with customers (or employees), and simply copying a recipe from another restaurant won’t do either.  The menu has to change several times per year, usually seasonally, and new items must mix the familiar with something unique.  Employees get bored (and sloppy) and customers get bored (and go elsewhere) if the dishes are always the same.

The better restaurants, therefore, must constantly innovate, finding new ways to prepare good food.

On the other hand, fast-food restaurants have to be perfectly consistent.  The menu in a McDonald’s restaurant is not very different today than it was 15 years ago, and it’s pretty much the same in New York as it is in Los Angeles.  Adding salads to the McDonald’s menu was such a big change, the company launched a massive advertising campaign to assure its success.

Gourmet customers are buying change and variety; they expect something different to be available each time they visit a restaurant and they expect it to taste very good.  Pleasant surprises are prized.  Fast food customers, on the other hand, are buying convenience and predictability. Surprises are generally avoided and good taste is a secondary concern.

Kodak (remember them?) assumed it was operating in a McDonald’s style market in which customers wanted predictability and reliability.  When the competitive market changed around it, Kodak waited too long to let go of its established products.  Ignoring the trend towards the handiness of digital cameras, including cameras built into cell phones, Kodak clung to its traditional film, chemicals, and paper businesses, assuming that digital photography would not catch up in the quality-cost-convenience mix.  After all, what could be easier than shooting your pictures, dropping off the film at the drug store, and getting beautiful prints back in a few days?

Undoubtedly, there are purists in the photography world who do not accept digital photography, like the purists in the audio world who prefer vinyl or tape over digital, but all amateur photographers and most professionals have switched to digital photography.

Why?  Kodak failed to recognize the implications of internet photo sharing services and home color printing.  Most importantly, they also misunderstood their customer base, which is more interested in fun and convenience than predictability and reliability.  The quality may not be quite as good as with film, but what is more fun and convenient than shooting a picture with your phone and instantly sharing it with a few hundred friends and acquaintances on the internet?  Even professionals, valuing the convenience of digital photography for editing and sharing with customers, have made the switch, compelling the manufacturers to improve quality quickly.  Kodak has yet to recover.

Blizzard Entertainment has been similarly inept in choosing what to keep and what to give up.  As Blizzard released a steady flow of updates to their popular game World of Warcraft, they lost subscribers.  Looking only at hard core gamers, Blizzard gave up the leveling experience and the opportunities to meet and develop new friends that had been inherent in the original game design.  As a result, many casual gamers have cut back on their WoW time.

Facebook, in an effort to innovate its way into a revenue model, has stumbled repeatedly, and predictably, over consumer privacy issues.  Some people abandoned Facebook altogether.  Others changed the way they use the service.  Almost everyone mistrusts Facebook’s updates to service and user agreements.

Neither of Blizzard nor Facebook has made as fatal a mistake as Kodak.  In the case of Blizzard’s World of Warcraft, brand loyalty and a considerable sunk investment of time will keep players coming back, so Blizzard has an opportunity to reprieve itself.  Facebook has severely damaged its brand and is vulnerable to a competitor who can make it easy and attractive to change, but Facebook users, like World of Warcraft players, have a considerable sunk investment.   The photos, posts, and connections built up on Facebook are hard to transfer to another service without violating Facebook’s IP.

Choosing what to keep and what to let go must, ultimately, be driven by what the customer expects and what alternatives are available.  Innovative product development should focus on enhancing customer satisfaction.  By all means, make the product faster or sexier or healthier or cheaper to manufacture.  Innovate as much and as fast as you can for competitive advantage and ROI.  But make sure you stay on top of what your customers expect from your product and innovate there first.  Sometimes that means letting go.

You know how to identify old people?  It’s simple:  They are the ones with the answers.

Ask a question about the future of anything.  The people who rattle off the answer because they “know.”  Those are the the old people.  It doesn’t matter if they are 15 years old or 95.  If they think they know the answers, they are old.  If they are willing to keep figuring it out, they’re young.

Old people may have lots of data to back up their point of view.  But mostly they have confidence that there’s nothing new to add to the discussion.

How many teenagers do you know who think they have all the answers?  I have two self-confident, intelligent teenage kids, and one thing they know for sure: They’re still figuring it out.

So am I.

So is Tavi Gavinson.  I hate to say it, but Tavi, a sophomore in high school somewhere out there, who wears too much make up and is editor-in-chief of RookieMag.com (a web site targeted at teen girls like herself), has a pretty good handle on what it means to be young and innovative and “still figuring it out” than a room full of innovation experts in last year’s black mock turtlenecks or this year’s florid ties.  In a recent TED talk, she laid it all out.

In my mind, “still figuring it out” means asking questions.  Or, more to the point, being open to more than one answer.  Completely different answers.  And trying them.  Reread that, please.  “And trying them.”

I was in a meeting earlier this week in which a bunch of us (middle aged, male, white business people) were confronting a business problem.  It wasn’t anything earth shattering, but it was a business problem.  The guy in charge was at a loss what to do.  I was astounded by the simple fact that the person who posed the problem felt that he had the answer, which was to keep doing things the way he had been doing them.  He was convinced that he had the right answer and he was doing everything right, but it just wasn’t working.  Several people around the table had good questions and observations – mostly new people who were trying to get a handle on the situation, but this couldn’t probe any of their points.  When they asked a question, instead of seeing it as a possible opening to a new approach that might fix the problem, he handed them an answer.

“Here’s the question.”

“Here’s the answer.”

The guy who most needed outside advice was oblivious to the alternative perspectives and solutions that were being put forward.  He had experience, and as a good business person he had reams of data describing the problem and showing how much work he’d done.  He “knew” the answer, even though the problem had persisted for months and his solutions weren’t working.

From his point of view, the lack of results wasn’t a function of flaws in his solutions.

The rest of the world was flawed.  Because it wouldn’t respond to his solutions.

He was old.

He needs to grow down.  He needs to stop relying so much on his experience and doing things the same way.  He needs to start figuring it out all over again.  He needs to try different ideas.  To see how doing something different fits to the problem.  To ask himself if he’s asking the right questions.  What’s wrong with a little innovation?

If you’re answers are right and the problem persists, then the questions are wrong.  Or.  Your answers aren’t as right as you think they are.  Because answers are not permanent.  What was “right” when you were young may not be “right” today.  Questions outlast answers.  Keep asking them.  Innovate.  Change.  Be prepared to keep figuring it out.

Many of us grow up with an image in our minds of inventors tinkering away in their garages coming up with the next great product or innovation.  We can hold up examples of great men and women who have succeeded this way: Ruth Wakefield with her Toll House cookies and Bill Gates and Steve Jobs with the home computer come to mind.

But the truth of the matter is that the vast majority of innovations, and arguably the greatest innovations, are the result of team work.  The Walkman, produced by Sony in the late 1970’s, was designed by a team of engineers.  Apple’s iPod, iPhone, and iPad product lines, each praised as major innovations in its own category or as a category creator in its own right, were developed not merely through the vision of one man, but by combining deep funding from one of the world’s greatest companies and the talent of a large, diverse, and creative development team.

Blizzard Entertainment’s World of Warcraft, a product that utterly dominated its category for four years through the innovative and creative use of existing graphic and web technologies, could only have been produced through the close collaboration of graphic artists and developers specializing in database and client-server programming.  Amazon.com is a business based on idea sharing between software engineers who created and maintain the platform on the one hand and, on the other hand, supply chain managers who conceive of the operational paradigms that increase profit margins.  The heroes in these success stories include, in addition to the many hard working code slingers and graphic designers, the management teams that hire them, coordinate them, and get them to work together.

Bill Gates and Paul Allen started out as inventors-in-the-garage business people, and they are to be admired for what they accomplished at that stage in their careers.  They should, however, be even more admired for making the transition to being leaders of large teams because it was the large teams that continued the process of innovation that kept their various enterprises ahead of the competition.

From the earliest stages in its existence, the innovation that sets one business apart from other businesses must be more than just a new technology or a new process.  The innovation must fit within the operational, distribution, and financial contexts of the business and within the purchasing paradigm of its customers.  Technology driven enterprises often lose track of context, and the success of companies like Microsoft and Apple derives not purely from technological innovation itself but from the way that innovation is implemented as a business.  The best leaders of innovative technology companies are able to gradually give up the control they exercised over technology development yet retain the business smarts and direction that allowed them to turn early technology innovations into successful businesses.

The modern inventor-in-the-garage has no choice but to team with business people, including operations, production, finance, and sales & marketing professionals, if she wants to see broad acceptance and financial return from her innovations.