Innovation - KeynesYouDigIt/Knowledge GitHub Wiki

(via https://github.com/KeynesYouDigIt/Knowledge/wiki/Business#strategy)

Innovation isn't over

As long as there's Moore's law or something like Moore's law, it isn't over. New businesses and new ideas are going to be important and interesting. (paraphrase from Mark Andreessen)

Why big companies can't innovate

  • Incumbent's internal systems (metrics, resource allocation, incentives, recruitment, investment, and promotion) are always set up to support the old model. (see the innovator's dilemma).
    • Even if an incumbent can overcome their internal challenges, can their supply chain keep up?
  • New innovations require tight control over the value chain and partners who can adapt with you. Mature products can modularize and operate in isolation.
  • Modern models depend on understanding every customer's life and offering a custom experience. You don't need big data, you need small data to personalize the experience.
  • IT used to help enterprises become more efficient. Now, it helps newcomers scale up and have closer relationships with customers.

Spontaneous private deregulation = Platforms ignoring laws (eg. Uber, AirBnb). Incumbents are at risk if:

  • The consumers are unnecessarily being protected
  • Your business practices can be codified or computer assisted

You can create temporary organizations staffed with consultants and contractors so you don't have to lay people off if it doesn't work

Transformative Business Models

how to actually make money via innovation

  • Just because the technology makes sense for my product standpoint doesn't mean the technology from a technical standpoint is actually ready, see the Nintendo 64 and Mark Andreessen's second job

Original article Over time, a single business model (how a company creates and captures value) starts to dominate an industry. Transformative business models either displace incumbents or force competitors to adopt them. They are usually spurred by a new technology.

Keys to creating a transformative business model:

  1. A more personalized product or service
  2. A closed-loop process (instead of make/use/dispose, more recycling)
  3. Asset-sharing (sharing costly assets, eg. Uber and AirBnb)
  4. Usage-based pricing (instead of purchasing)
  5. More collaborative ecosystem (allows for risks to be shared easier)
  6. Agile and adaptive organizations

These all link a tech trend with a market need. To be successful, a business model should hit at least 3 of the 6 features.