Innovation is not about being smart and fast

Philippe MEDA -

There is this ongoing fallacy about innovation. Innovation should be about being smart and being fast. Or at least smarter and faster than competitors. Seeing the next big thing, catching the next wave, seizing the white space, finding the blue ocean… These narratives are all about a promised Eden, hidden from the masses of companies that are not smart enough to read the market or the technology.

If we unpack this mindset, we get the following familiar reasoning:

  1. There will be an optimal way to go ahead and outcompete everyone else;
  2. We are then at point A in time and need to go to B (the future optimum);
  3. Investment is needed, and we’ll have ROI when at B;
  4. Going from A to B shall then be as fast as possible;
  5. Knowing where B is, requires intuition if we’re looking into it too early;
  6. If we are too late (others are already getting to B), we’ll need to spend more money and, as followers, get less ROI.
  7. We obviously need to be smart to be just in time to run for B.
  8. Rinse and repeat.

This has been taught in every innovation class of every business school, university, and tech entrepreneurship class since 1962, when Everett ROGERS modeled his diffusion of innovation theory.

Let me make the case that it’s actually a terrible (terrible) reasoning.

1. There is no optimal pre-determined solution to unmask

Consider how the GAFAMs are going after us, consumers, and our attention span. This is their market, there is nothing else for them, and it has become one of the biggest markets worldwide. Given their resources and considerable investment power, innovation would be converging dramatically by now if innovation were about finding an optimal solution. And yet, Apple hasn’t become a search engine; Facebook is not selling e-books, nor does Amazon allow you to share family pictures.

There are some obvious overlaps in their innovations but no real common track given their size. No optimal solution.

Consider Accor and AirBnB: where’s the ideal solution? Should Accor sell off its real estate and fire its staff to be better at welcoming guests? Airbnb is probably going the extra mile and will own a piece of the travel industry in the next years. Should KLM or Airbus compete with them now? Take a rock-star company like Nike. What are they, and where should they innovate? In retail, running technology, shoe manufacturing, and digital technologies? The answer is ‘yes.’ To all that.

Smart city, mobility, O2O retail, connected devices, etc. These are all fuzzy buzzwords and open questions to which there is no good answer to find.

2. No A and B is defining a curve, a pipeline, or a pathway

But if there is no optimal solution to seek, then there is no pipeline either. There is no single road off the beaten path to uncover and venture on to get to this perfect place. On the contrary, they are many potentially interesting roads to explore simultaneously. Why pick only one?

Instead of thinking of your company as a team roped together to can climb to the top of a mountain efficiently and faster than everyone else, change the picture in your mind. It’s more like you’re lost for now in the middle of a jungle. You have no cell phones, maybe no tools even, and you need to survive together. What are your options? Camp on the spot and start agriculture? Develop hunters and gatherers strategies? Send scouts in every direction to find a way out, or climb on the tallest trees you see…?

Again the answer to all that is ‘yes.’

If different companies have different combinations of strategies, sticking to a unique dogmatic approach is mathematically the worst possible idea.

3. Investment is needed to explore and mitigate the chaotic outcomes

So yes, sure, this is not going to happen without resources. You do need to allocate money to innovation. But, how much money do you spend? If we agree that spending all your budget on a one-shot big idea is dumb, how much do you spread out? How much can you afford to explore?

Let’s turn the question around:

How difficult is your market getting? How many new entrants are now cloning your trusty cash cow? How many are potentially disruptive technologies taking shape right now? These questions will help you decide how involved you should be in exploring your way out of the jungle growing around your business and suffocating it.

Then no, there is no precise answer to that, except “as much as possible.” The most educated companies on innovation do spend as much as possible as they can afford it, which is usually when they are the most successful at making money. Complacent companies cash in (pay dividends) and enjoy the moment without dealing with the market's future.

4. Exploration doesn’t have to be fast; it’s an ongoing process

If you get the image of the jungle (vs. climbing a mountain), let’s push it a notch:

As soon as you find a way out, in a less hostile environment, and you settle back in ‘business as usual' mode, then the jungle starts to grow again around you. Making your supply chain management more difficult, hiding your recurring customers from you, and allowing new predators to appear around you. In that sense, innovation is not about going to the next opportunity and the next, and the next. It’s about sustaining an ongoing process of exploring and sometimes going back to an old ‘jungle’ that you moved out of years ago.

In that sense, innovation is pretty much an ecological discipline. Settle in a hospitable zone, build, grow, sustain, move out before depletion. But importantly, during all that time, keep people scouting around, assessing threats and opportunities so that if you have to leave in a hurry, you have options.

This never was about being fast and smart now and then.

5. 6. and 7. There is no “2030” plan

All this leads you to not betting on a single outcome every 5 to 10 years. There is no single-minded “2030 plan” with massive (catastrophic) investments on one “good” bet. Since you are feeding an ongoing exploration process, your bets are more granular. Many long-term bets do not involve huge investments yet, many medium-term ones that do require some level of investment, and a few short-term options that trickled down and that will require serious funding.

Said in financial terms: your core innovation strategy is all about hedging your business against future uncertainties by sustaining a portfolio of investments with good optionality.

And when I say investment, it ranges from developing new technology to just “looking into something” as a long-term option. You’re in a major retailer in Europe? How often do you go to China to understand how this market is evolving on mobile and what it could mean for your local market? This time spent is an investment. And in that regard, what is the ROI?

What are the KPIs of this exploration for you?

8. Sustaining antifragility

Understanding that innovation is about dealing with market and tech uncertainties (the ones that appear unexpectedly and the ones you create yourself as an innovator) leads to building this antifragile culture.

In 2012, Nicolas TALEB introduced the idea of antifragility in a follow-up to his famous 2007 Black Swan book.

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.

By opposition, fragility stems from businesses that bet their future on a single “smart” option. If they are wrong — let me rephrase: when they are wrong– there is no plan B, and even less C, D, F, G, and H. While, designing your innovation process as a portfolio strategy immediately builds antifragility for your company.

Just like a living organism reinforcing its immune response by being in contact with pathogens, your innovation process is the immune system of your business. The more you explore, the more potential opportunities you detect and the more resilient you become at rapid and unexpected shifts in the market.

Following this idea, I’d like to encourage you to consider all the current warnings we have about a huge worldwide recession looming on us this year. Whatever your region or your business, we are entering a very different market from the post-2008-crisis-free-money we’ve been living in for the last ten years. Who’s prepared for that?

No one.

Some are prepared to read uncertainties, deal with them and adapt faster.

Or in the words of Muhammad ALI (born Cassius CLAY):

The fight is won or lost far away from witnesses – behind the lines, in the gym and out there on the road, long before I dance under those lights.