Learning from an innovation failure

Over at Digital Tonto, Greg Satell has an interesting analysis of why the streaming service Quibi failed. He points out four major flaws: too much money; no hair-on-fire use; no addressing the key bottlenecks; and, not having an adaptable strategy.

I won’t address the “too much money” issue – one that says you need to keep the company lean. I will accept his argument that “limiting the amount of money you have around forces people to face up to problems and solve them,” although my experience has been seeing undercapitalization as the problem.

The other three I think fall into the cardinal principles of innovation: experiment, expand, adapt. The three work together. What Satell calls the “hair-on-fire use case” is having a must use. Rather than identify the largest addressable market, you look for a problem with an immediate need. You use this market to refine and further develop the innovation and follow a flexible strategy to take advance of what you learn (including new opportunities).

This is a variation of what we used to call the “thin opening wedge.”

The process of learning and adapting based on real-time market information is key to success. It is almost axiomatic in innovation research that the first iterations of a new technology are inferior to the existing technology – except in one crucial characteristic. In the case of semiconductors, their advantage over vacuum tubes was in weight and power requirements. The need for low weight and energy in space and defense uses overcame the higher cost. These early markets provided not only a source of funding for further development of the technology (both product and process). They also provided a beta test function that generated important information.

Expanding and adapting is the other key. For example, look at Apple. The iPod was a cute device for music lovers (especially teenagers). It replaced the Walkman with much easier to use technology (digital rather than audio tape) both for play back (no need to carry and change tapes) and for song acquisition (via download). That was the thin opening wedge to a much more powerful platform: the iPhone. Once the iPod was married to a cell phone, the possibilities exploded. Not only was it a voice communications tool (the phone), it was a digital communications device and a digital interconnection device (email, web browsing, GPS, and all those apps).

Remember that Airbnb started out as a means to people to identify places to crash for the night. Uber was an on-demand sedan service. Amazon was a book seller based on the arbitrage between publishers’ prices and the retail bookstore prices. Each of these expanded by using the infrastructure (physical and organizational) created to service that first market.

Tied into this process of experimenting, expanding and adapting is making sure you are focusing on the right questions. Satell notes that successful innovations address the hard problems first. These are the bottlenecks that will cause the innovation to be an also-ran in a crowded field. The example he uses is Tesla and battery technology. Electric vehicles have been around since the dawn of the automobile age. In a more recent (relatively speaking) case, in the late 70’s / early 80’s I worked on a technology assessment of electric vehicles for Detroit Edison (and was licensed to drive their test vehicles – modified VW Rabbits with a ton of batteries in the back). Our conclusion was not surprising: limitations of battery technology would keep EVs in niche markets such local delivery vehicles with limited range, limited speed and the ability to recharge overnight. But even in that market, there was no great advantage for EVs over gasoline powered vehicles. Satell notes that Tesla’s breakthrough was to combine an improved, good-enough batter technology with a niche market of affluent consumers who would pay for the cache of an eco-friendly car.

In conclusion, let me just note that each of these examples of successes illustrate the principles of experiment, expand, adapt. Satell’s analysis of the failure of Quibi provided a useful counterpart to the success stories. Since the mantra of innovation includes learning from failure, I hope would-be entrepreneurs will take the lessons Satell provides to heart.

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