- This topic has 0 replies, 1 voice, and was last updated 9 years, 9 months ago by
.
-
Posts
-
Big Companies Can’t Innovate Halfway
No company ever dazzled the world by lackadaisically going after a market. Executives never reach the pinnacle of their industry by consistently taking timid action. So why, despite all the evidence to the contrary, do we see so many corporations dip their toes into the pool of innovation instead of diving in? Corporate innovation is already a difficult proposition; why doom it to failure by pursuing it half-heartedly?
Apple, DuPont and IBM are all wonderful examples of companies that have completely redefined their businesses through the pursuit of transformative endeavors. However, while capturing the benefit of breakthrough innovation isn’t impossible, it’s certainly not easy.
In the first part of this series, I argued that the reason most mature businesses can’t innovate is because they’re not designed to innovate. Instead, they’ve been carefully organized to execute. Processes, organizational cultures, and resources emerge inside companies, creating pressure that runs opposite to the pursuit of innovation. In the second, I offered four pieces of advice every executive should take into account if he or she wants to pursue transformational innovation. With the right approach, innovation at a big company is realistic.
In this final part, I’d like to offer one meaningful piece of advice: If you’re going to take the innovation plunge, commit — and not just to an idea. Xerox’s failure to conquer the personal computing market — this despite developing revolutionary technology — demonstrates the importance of aligning all segments of your organization in the pursuit of innovation.
In 1984, Apple Inc. released the now-famous Macintosh. It was the first computer to bring a graphical user interface (GUI) to market, meaning that people with no knowledge of text based-operating commands could finally navigate the world of personal computing.
Today, the GUI is ubiquitous. However, despite the fact that Apple brought it to the general public, the company didn’t pioneer the technology. That feat was achieved at Xerox’s Palo Alto Research Center (PARC).
Throughout the ’70s, Xerox leadership empowered a group of scientists and engineers to develop products for the coming information era. Charles McColough, Xerox’s co-founder and then-CEO, knew that the future looked very different than they did in the ’60s. He refused to sit idly by and let Xerox miss its rise.
McColough also recognized that building information technology products wasn’t a task for Xerox’s existing research staff. This staff, focused on making copiers more efficiently with marginally better features, was not likely to be adept in personal computing. It was with this in mind that McColough funded PARC, establishing operations on the opposite side of the country as Xerox’s Rochester headquarters. He hired the best talent, seeded them with patient capital, and let them go to work tackling enormous problems.
In just seven years, PARC developed some of the most impressive technology of our time: the personal computer, the GUI, the computer mouse, Ethernet, simple word processing software and the laser printer. The reason the average American doesn’t know this? Xerox never successfully commercialized its inventions.
When PARC was established, times were good for Xerox. Investors trusted McColough and that empowered him to create his autonomous unit and source the best talent. However, by the time PARC had successfully designed the PC, corporate conditions at Xerox were not so amenable to innovation. Entrants including Canon and Ricoh had entered the copier market, placing huge pressure on Xerox’s margins. The investor base became restless. They demanded growth, so management turned towards PARC. With the weight of the world falling on management’s shoulders, Xerox decided it was time for a large-scale commercialization effort.
But instead of determining the right customer base and sales techniques through thoughtful experimentation, management decided to push the PC through its existing sales channel. It was the fastest way to turn potential dollars into real ones, after all. Discovery had been abandoned; delivery was the new mantra.
Leveraging the established system got Xerox’s invention to market faster and cheaper than developing a whole new approach. But it didn’t fit; the company’s sales force was designed and trained to sell expensive back office products to a very different customer base than would purchase the new PARC products. It was a strategy destined for failure. And failure is exactly what it achieved.
Xerox ultimately scaled back its operations at PARC and abandoned the Alto, its personal computer. Today, Xerox PARC spinoffs, led mostly by employees who truly saw and believed in the potential of the technology, are worth far more than Xerox itself. Its successes include technology titans like Adobe and Level 3.
Innovation is the confluence of product development and a business model that can deliver those products to customers at a profit. It can result from a unique competitive position — but holding that position does not make innovation inevitable. At the time PARC was created, Xerox was the only company in the world that could have drawn the technical talent required to build the personal computer. It was one of the only companies with strong enough cash flows to shield such an expensive operation from the rampant short-termism that plagues the business world.
Xerox did everything right at the beginning. But when push came to shove, the organization reverted. The company unlocked the future and captured almost none of its value.
Could the Xerox personal computer have been a success? Quite possibly, if the company had allowed its business development team the same innovation infrastructure and autonomy it gave its technology team. PARC also needed the incentives to commercialize profitably I discussed in the second part of this series, like a lean approach to experimentation that would allow them to fly under the radar of investors. In PARC, Xerox had assembled a few pieces of the innovation puzzle, but still lacked others.
To benefit from transformational growth, executives must create the right conditions for new endeavors to discover their own avenues to profitable growth. They must be patient and committed. Committing partway, or only committing to certain conditions, is just not good enough.
- You must be logged in to reply to this topic.