When successful products prevent strategic innovation

Design Management Journal, Spring 2002 by Jones, Peter

Strategy

As startups become large mainstream corporations, many lose the intense "breakthrough" mentality

that characterizes their initial achievements. The willingness to take risks is replaced by a focus on growth and market share. Rather than moving on to the next threshold, satisfying customers becomes the priority. Peter Jones examines this fascinating shift in values and evaluates strategies designed to maintain a company's innovative spirit.

When ingenious product design delights customers and creates new markets, we find industry leaders claiming innovation as their success strategy. In some cases-such as the inspired whole-system design in current automobiles or home productsthe claims resonate with our experience. Too often, these same market leaders later abandon their innovation culture as they strive to capture the very markets they've created. That's why, in the software world, with its constant churning of new technology and efficient distribution, we expect and find start-ups and smaller firms responsible for much of the innovation. As computing platforms have stabilized over the decade, even while the Internet exploded, software products in both consumer and professional markets also stabilized-to the point of stagnation. User interfaces and the whole-product design of desktop and enterprise software applications have not kept up with the march of computing power; their standard and common interfaces are functional, but dull. Excepting Apple's continuing push toward better whole-product design, computers for most of us remain quite utilitarian, with the same set of features and interfaces seen five to seven years ago-a lifetime, in hardware years. Where's the proof

of innovation?

We forget that even Microsoft was once a small upstart with a genuine drive to innovate. We may also forget that there were hundreds of software companies producing software packages with incredible interface variety, not only for Windows but also for Macintosh and other platforms available in the late 1980s and 1990s. If we look back only a few years, preWeb, we find a dynamic invention of new packages and user interfaces. Although the Web energized wide-ranging innovation (of content and interactive design), it only minimally influenced the software functions and design of office-productivity tools, operating systems, databases, even email.

The software industry embraces changeevery few years we are forced by technology or paradigm to shift our platforms, design, programming, and thinking. Given the market success of Microsoft, Adobe, and Lotus, we might expect large software companies to lead the development of innovative products, or at least promote an engaging user experience. But instead, especially now that the Web browser has overtaken the desktop, the features and interface design of packaged software remain in plateau.

Looking at professional and industrial software, we find similar patterns of growth evolving to a stabilized product line, with major players delivering few breakthrough products. As successful product lines consume a company's focus, true strategic innovations-breakthrough ideas and new products generated from core competencies and designers' capabilities-never make it to the starting lineup.

What might the software situation teach us about better innovation management? First, let's define innovation-a misused concept assigned to a range of meanings, from "creativity" to "making new versions of the same product." I express innovation as significant invention with the capacity for transformation. Strategic innovation sustains business strategy through significant invention, designing new or breakthrough products to fulfill strategic intent. And not all innovations are successful. Market success also requires fulfilling user intent; innovations must map to known user needs or emerging user desires. And eventually, inventions must fulfill strategy through revenue and market growth.

From here, let's focus on how the successful can learn from the start-up about energizing their innovation culture. Let's start with the notion that start-ups are forced to innovate, but established, well-capitalized product companies can afford not to innovate. With a captured customer base, dominant product lines, standard project and management processes, and hierarchical organizations, risking investment on discontinuous product innovation becomes a difficult proposition.

Innovators that don't innovate

Looking closely at leading software product firms, we find organizations that advertise and talk about innovation, but have stopped innovating.

Microsoft serves our discussion again. With sheer growth to a level of success that epitomizes both the startup's ideal and the modern monopoly, its example highlights basic points.

Although

Microsoft's products run nearly every PC worldwide, its grip on future successes is less certain. Ironically, Microsoft's legal defense in its monopoly case hinged on its "right to innovate.' But from a product perspective, what true innovations, or breakthrough products, has the Redmond colossus produced recently? After having captured the desktop software markets, the firm has moved into services (MSN, .Net initiative) and even consumer games (Xbox platform). Yes, these moves leverage the brand, core competencies, and existing customers. But for a software company, is this product innovation or product-line expansion?