Wednesday, January 17, 2007

Time for a new VC pitch: This is not a Pipe!

The modern version of this painting is "This is not a computer" by Apple.

"This is not a Computer"

For far too long, budding entrepreneurs have been asked to explain their ideas in the context and vocabulary of existing success stories- "YouTube is FlickR for videos", "RFID is barcodes without line of sight", etc. Even though I am the first to admit that it aids in communicating the idea to a novice, but it also hampers original thinking and ideas. You just have to look to Enterprise 2.0 (Web2.0 for the Enterprise) to see how the simplicity of the communication does not always map to a real product or service.

EBay was not simply Sotheby's on the internet. And Yahoo! was not just Yellow Pages on the internet. In order to create revolutionary new products, you sometimes have to think from scratch and not be limited by existing vocabulary or memes.

Several technology giants today are struggling with slowing earnings and revenue growth- they can all do well to learn the lessons of iPod (and Motorola RazR):
  1. Invest in bold new ideas: Releasing yet another incrementally improved version of an OS is not breakthrough innovation.
  2. Be willing to let go what it means to be a "computer company": IBM learned this the hard way in 1980s. You want to be the innovation company, the ideas company, the good customer service company and not necessarily be tied down to a particular product or manner of delivery.
  3. Small teams: Only small teams with a passionate few people can come up with new products and services. As a rule of thumb, any team that cannot fit in your corner office is too big.
  4. Big companies can innovate: It is easier as you grow to be a large company with billions of dollars in revenue to fall into the Innovator's Dilemma- what is right for the most profitable businesses can lead to the wrong long term consequences. Adopt one of many solutions to this well studied problem- new DNA, acquisitions, intrapreneurship, spin-in structures- to foster innovation.
What do you think? Are the large companies doomed to follow rather than lead? Have you or anyone you know tried to innovate within a large company?

Update: Sharad has posted an excellent response to this on his blog at Lack of Innovation... and suggested two alternate paths to innovation.
I believe that a big company can foster innovation one of two ways. It can either emulate an entrepreneurial company much like what Apple has done in recent years. Or it can leverage its size to follow the Toyota and Honda’s Kaizen method of breakthrough innovation. Right now, unfortunately, most IT companies are doing neither.
How do you see it?

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