The strategy behind Proctor & Gamble’s innovation strategy has had my brain cycling about the future of specialization companies.
I think P&Gs strategy makes so much sense in our changing world that we’re going to see a number of other large companies start to follow. I think this means that we’re going to see a lot of specialization companies.
In the past companies have specialized along market, product, and competitive advantage pathways. Soon we’ll see a significant number of companies specializing along business stage/process pathways.
Innovation companies. Commercialization companies. Scale companies. Etc. etc.
Current solutions have focused on leveraging capabilities through markets:
“The next frontier is to tap the quiet genius that exists outside organizations â€” to attract innovations from people who are prepared to work with a company, even if they don’t work for it. An intriguing case in point is InnoCentive, a virtual research and development lab through which major corporations invite scientists and engineers worldwide to contribute ideas and solve problems they haven’t been able to crack themselves.”
Once the markets develop a little further it will provide easy access for these specialization companies to enter the market. That’s when they’ll grow in number. And that’s when things will get interesting.
This weeks cover story in Newsweek is on Web 2.0 and lots of people share input.
While the content won’t be new to anyone who following Web 2.0, it’s great that the concept is getting introduced to the market. The article doesn’t mean that David’s grandmother will be able to use and get value from the services, but at least it’s introducing concepts and terms.
The following paragraph made the story worth the read:
But that’s not why Yahoo bought it for an estimated $35 million. “With less than 10 people on the payroll, they had millions of users generating content, millions of users organizing that content for them, tens of thousands of users distributing that across the Internet, and thousands of people not on the payroll actually building the thing,” says Yahoo exec Bradley Horowitz.
For $35 million Yahoo bought access to a science experiment. They were able to look under the hood, study notebooks, listen to the retelling of stories, and even have a sandbox of a sort to help try to get a grasp of how to leverage the user generated content model across their current network.
Horowitz sums it up nicely, “If we could do that same thing with Yahoo, and take our half-billion user base and achieve the same kind of effect, we knew we were on to something.”
Today I ran Hamilton’s Around the Bay race which has been a goal of mine since I was about 8. Woohoo! My friend Jimmy set up shop with his camera at the 27th km marker, 3km from the finish and right at the top of a brutal hill. I was pumped to say the least.
Congrats to Greg, Caroline, Terri, and everyone else who ran.
A properly crafted value proposition is critical for successfully commercializing innovation. However, a great innovation can be doomed for failure when paired with a poorly positioned value proposition.
Geoffrey Moore posted the other day that innovating to be best in class is a waste. Moore’s research showed that there where three key sources to attractive returns – differentiation, neutralization, and productivity – and that best in class falls between differentiation and neautralization.
“It is not sufficiently differentiated to be unique, and thus it does not create bargaining power. But it goes well beyond the minimum acceptable standard, which means you have spent a bunch of resources beyond what you had to and achieved no economic return for so doing! Thatâ€™s why â€œbest in classâ€ is a sucker bet. In essence, best-in-class projects should be classified as waste.”
Moore’s post complimented a good article in this months HBR on “Customer Value Propositions in Business Markets“. The article outlines the way to craft a resonating focus value statement that answers the question “what is most worthwhile for our firm to keep in mind about your offering?â€. The author argues that the best value propositions consist of the one or two points of difference, and possibly a point of parity, whose improvement delivers the greatest value to the customer.
The conclusions of the articles are similar. The best innovations (value propositions) consist of a few key differences between your offering and the competition and aim to neatralize select other points (points of parity). When you aim to be best in class your level of differentiation is not enough to “create the bargaining power with customers that leads to higher revenues and margins”. When you structure your value proposition to highlight your best in class-ness, you end up diluting the differential points that are valuable.
If an innovation avoids the pitfalls of being best in class, and offers a sustained competitive advantage, a poorly articulated value proposition will present the product as, at best, best in class, erroding potential differences between products and possibly positioning the innovation for failure.
Brent Edwards has a post on his Innovation Science about Moore’s post and argues that in the medical devices field “an increase in efficacy of a new treatment over current solutions can in large product success without requiring any of the three strategies that Moore defined“. I don’t think success is as easy as Brent makes it sound – to simply be better than the alternative. I believe the product would need to be different/better/unique enough from current offerings with respect to a valuable feature to justify an increase in price/change in product and that the difference needs to be articulated properly. Being better in all categories may not induce the desired result.
In his amazing book, The End of Poverty, Jeffrey Sachs makes a great case that development economics needs to learn from modern clinical medicine and its approach to diagnosing and solving problems.
The discussion generated by my post, How Not to Adapt, made me realize that new media problems should be approached using practices that can be learned from four of the five main lessons of clinical medicine:
1) The human body is a complex system, divided into a large number of interconnected systems, that interact in complex ways.
2) Complexity requires a differential diagnosis. A proper treatment requires the doctor to identify the true underlying cause of the symptom.
3) All medicine is family medicine. It’s important to understand the social setting.
4) Monitoring and evaluation are essential to successful treatment.
Now I don’t believe that if we simply think through new media problems (such as the challenges facing theatres) using a clinical approach that we’ll reach a happy solution, but I think we’ll have a better understanding of the problems.
What are some of the problems?
- Disruptions (cellphones, talking)
- The quality of movies being produced
- The rise of the home theatre
Of course there are many others. Do any instantly come to mind?