20 Often-Fatal Assumptions

I am often asked by corporations to give some illustrations of assumptions that have caused  more trouble than they had any right to in the development of new business plans.  Here, for your edification and amusement, are twenty of the ones that have popped up frequently and which have often led otherwise sensible new ventures astray:

1. Other divisions in the company will be glad to help
2. All we need is 5% market share!
3. The firm will surely support the best strategy for our unit
4. We will have no trouble attracting the right people to work on the project
5. Competitors will roll over and play dead - or hey, maybe they won't notice your taking market share away from them
6. Competitors are too...dumb, insignificant, small, unproven, badly capitalized or un-interesting...to worry about
7. We can use the same key performance indicators in new markets that we use in existing markets (ditto for funding strategies, planning processes, reward systems...)
8. Customers will buy it because it has these neat features!
9. Customers won't feel that buying from us is risky
10. Customers won't mind switching suppliers and will be happy to take on whatever work is involved
11. We can create a compelling first-mover advantage (corollary:  we have to spend a lot to get in first and obtain significant market share so that we can protect our position)
12. We can develop what we need on time and on budget
13. It will sell itself!
14. We will be able to hold our prices and gain market share
15. There is no real competition for what we offer
16. Joint venture and alliance partners, and our own suppliers, share our objectives
17. We won't need to engage in training for suppliers, distributors or customers
18. The technically superior product will triumph
19. We can create new markets where there is no competition, quickly
20. Our projections will be accurate

Have a look at your business plans for a new project and see if any of these little bombshells are lurking there - forewarned is forearmed!

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• Posted Rita McGrath on July 12, 2010

Paying attention to unconventional “links” in a customers’ consumption chain

I've often encouraged executives to pay attention to the customers' complete consumption chain rather than focusing just on what they do, sell or make.  One of my colleagues forwarded me a fascinating article from the New York Times describing how retailers are doing this by helping customers get loans, provide financing or otherwise solve the problem that many of their customers just don't have the money to do business.  Good food for thought - to think through what barriers to doing business are, and how they might be addressed. 

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• Posted Rita McGrath on July 12, 2010

Why a walled garden can out perform a free-for-all

I ran across this interesting post from Bob Cooper's blog over at the Kellogg site.  In it, he reprints some observations from pundits that calls into question the conventional wisdom that an open platform such as the original World Wide Web encourages more innovation.  I've actually never really bought that argument.  Instead, I believe that a 'walled garden' will always triumph over situations in which individual players try to put their own individual best feet forward, but the user has to create a complete experience themselves.  You can think about it this way:

In the beginning, stage one, companies thrive on product advantages or individual components, but users have to do their own integration of these into complete experiences.  Think of pharmaceuticals today - you win on the molecule, but the whole experience of having your illness treated is a fragmented mess.  Everything from the search for solution to the payment streams are not integrated and often quite dissatisfying.  You can think of open platforms on the Web in the same way - I might buy a piece of software, but the expeirence is not necessarily rich or useful to me.

In stage two, which is where Apple is being really clever, some player comes along who can address the gaps and deficiencies of the user experience by controlling and integrating it.  Vertically integrated players, who control all the user interfaces, can do much more for us than the scattershot approach of Phase I.  IBM in Mainframes, Nokia in many types of mobile phones, and the move by firms such as Oracle and HP to offer complete solutions reflect this sensibility.  We'll pay a LOT of money for a satisfying, bug and hassle free user experience.

Things don't stay the same, of course - in stage three, the interfaces get standardized and advantage goes to players who can dominate a horizontal layer - like Microsoft in operating systems or Intel in microprocessors. 

So we shouldn't be surprised that people are happy to innovate around a secure, well designed platform where a responsible adult is making sure we have a great experience.  This also explains why Apple and Adobe are at each others' throats - Apple doesn't want Adobe horizontalizing its platform space.  Smart strategy. 

"For about a decade now, ever since it became clear that the jungle of the World Wide Web would triumph over the walled gardens of CompuServe, AOL and MSN, a general consensus has solidified......
....That unifying creed is this: Open platforms promote innovation and diversity more effectively than proprietary ones.

In the words of one of the Web’s brightest theorists, Jonathan Zittrain of Harvard, the Web displays the “generative” power of a platform where you don’t have to ask permission to create and share new ideas. If you want democratic media, where small, innovative start-ups can compete with giant multinationals, open platforms are the way to go.....

....Over the last two years, however, that story has grown far more complicated, thanks to the runaway success of the iPhone (and now iPad ) developers platform — known as the App Store to consumers.

The App Store must rank among the most carefully policed software platforms in history. Every single application has to be approved by Apple before it can be offered to consumers, and all software purchases are routed through Apple’s cash register. Most of the development tools are created inside Apple, in conditions of C.I.A. -level secrecy. Next to the iPhone platform, Microsoft’s Windows platform looks like a Berkeley commune from the late 60s.

And yet, by just about any measure, the iPhone software platform has been, out of the gate, the most innovative in the history of computing.....
.....Perhaps more impressively, the iPhone has been a boon for small developers. As of now, more than half the top-grossing iPad apps were created by small shops.
Those of us who have championed open platforms cannot ignore these facts. It’s conceivable that, had Apple loosened the restrictions surrounding the App Store, the iPhone ecosystem would have been even more innovative, even more democratic. But I suspect that this view is too simplistic. The more complicated reality is that the closed architecture of the iPhone platform has contributed to its generativity in important ways.

The decision to route all purchases through a single payment mechanism makes great sense for Apple, which takes 30 percent of all sales, but it has also helped nurture the ecosystem by making it easier for consumers to buy small apps impulsively with one-click ordering. People don’t want to thumb-type credit card information into their phones each time they download a game to distract the kids during a long drive in the car. One-click purchase also supports lightweight, inexpensive apps, the revenue from which can support small software teams.
Consumers are also willing to experiment with new apps because they know that they have been screened for viruses, malware and other stability problems as part of the App Store’s approval process.

The fact that the iPhone platform runs exclusively on Apple hardware helps developers innovate, because it means they have a finite number of hardware configurations to surmount.....
.....But whatever Apple chooses to do with its platform in the coming years, it has made one thing clear: sometimes, if you get the conditions right, a walled garden can turn into a rain forest."

--
Posted By Bob Cooper to Driving Organic Growth and Innovation at 6/14/2010 08:00:00 AM

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• Posted Rita McGrath on June 14, 2010

Six Sigma is Deadly for Innovation - But then I’ve said that before!

Every so often, doubtless in a doomed bid to make the whole process of growth and innovation more predictable, some bright spark comes up with the idea of trying to apply six-sigma quality controls to the innovation process. They seem to think that if only innovation could be made more orderly, a more predictable result would ensue. I've said it before, and will say again, six sigma is not the appropriate tool to try to find new things. It's very helpful for optimizing things that already exist, but the parameters that allow it to work properly are totally different in an uncertain and unpredictable world. I was first made aware of the difficulties of using six sigma in this way back when I was doing a fair amount of senior-level executive development at 3M. A new CEO was trying to bring some order into what had become a rather chaotic corporate process, and six sigma was one tool that was being used - as it later turned out - inappropriately, for innovation. I had said it wasn't a good idea at the time. And I guess the company has now caught up. In a recent Wall Street Journal article, CEO George Buckley was quoted as saying: ...it isn't a process. The quality improvement process Six Sigma's worked wonderfully in our factories, but we tried it in our labs and it doesn't work. It's obvious why. The creative process is a discontinuous process. You can't say if I put more money in it I am going to get more out." Well, Bravo for that! Ready to take on stage/gate anyone?

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• Posted Rita McGrath on March 29, 2010

Top 30 Innovations of the last 30 years

In this fascinating article, a roundup of the most important innovations of the last 30 years is presented.  I was struck by the article’s opening premise - that if one were sitting around in 1979 and thinking about what innovations would change our lives, we would not have been able to anticipate many that were on the list (compiled by the Wharton School in conjunction with National Public Radio).  It is truly remarkable how many of the innovations that we take completely for granted today simply didn’t exist - and it’s hard to imagine a world without them.  Here’s their list:

1.Internet, broadband, WWW (browser and html)
2.PC/laptop computers
3.Mobile phones
4.E-mail
5.DNA testing and sequencing/Human genome mapping
6.Magnetic Resonance Imaging (MRI)
7.Microprocessors
8.Fiber optics
9.Office software (spreadsheets, word processors)
10.Non-invasive laser/robotic surgery (laparoscopy)
11.Open source software and services (e.g., Linux, Wikipedia)
12.Light emitting diodes
13.Liquid crystal display (LCD)
14.GPS systems
15.Online shopping/ecommerce/auctions (e.g., eBay)
16.Media file compression (jpeg, mpeg, mp3)
17.Microfinance
18.Photovoltaic Solar Energy
19.Large scale wind turbines
20.Social networking via the Internet
21.Graphic user interface (GUI)
22.Digital photography/videography
23.RFID and applications (e.g., EZ Pass)
24.Genetically modified plants
25.Bio fuels
26.Bar codes and scanners
27.ATMs
28.Stents
29.SRAM flash memory
30.Anti retroviral treatment for AIDS

A few things strike me about the list.  Firstly, that companies at the leading edge of some of these innovations became huge drivers of growth and economic development (think Intel or Microsoft or Google), while companies that are displaced in value by these innovations disappeared (think IBM Selectric Typewriters or Polaroid).  Not that that is such an unusual observation - what is harder to grasp is just how unpredictable these innovations are.  Even Intel didn’t grasp the significance of its microprocessor innovation and had to repurchase the license for it from the company it invented it for.

A second and perhaps more interesting observation is that huge swaths of people do not live in the same technological world that those benefitting from these innovations do.  Take the many elderly people who can’t relate to a mobile phone, let alone a personal computer.  It’s as if they have been cut off from the evolutionary flow of things.  Or consider people without a lot of resources—when you are worrying about getting food on the table, messing about with Twitter is probably not a priority.  Should this concern us? 

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• Posted Rita McGrath on January 03, 2010