Weekend rant on Innovation , Industrialization & Watching Your Back


I missed watching Seth Godin’s keynote in person couple of weeks ago in Orlando, and ended up watching the recording later. http://www.asugonline.com/asug-annual-conference/videos/keynote-persentation/?catid=asug-annual-conference-keynotes&slg=2013-asug-annual-conference-keynote

I don’t read his blog regularly, but every time someone I follow on twitter tweets out one of his posts – I tend to check it out hoping that it is something I can relate to and learn from. Unfortunately, the keynote replay did not exactly excite me – I tuned out along the way, around the time he explained what a Fermata is to his audience. I am not an expert in western music theory, but I had a very different idea of what a Fermata is compared to what Godin said..But I digress…

There is a part of the keynote that made sense to me – the need to be very good at what you do, to market effectively and so on. But the rest of it generally didn’t sound relevant to me in the context of my work in enterprise software.

I am as big a fan of innovation as the next guy – but I firmly believe that we have enough examples around us to indicate that not everyone can or should innovate. Enterprise Software business is largely made up of fast followers and a minority of innovators ( or inventors) . However, industry wide we spend a lot of time trying to democratize innovation – although with limited success. Shouldn’t we know better by now?

Innovation is a high risk and high reward game most of the time – with characteristics like failure, chaos, disruption etc to go with it. And for a company (especially a big company) to afford innovation, they need to be masters of industrialization . Although not an exact statement – a company that can afford to put 20% of time and effort on innovation, needs the other 80% to be an efficiency machine to innovate on a sustaining basis.

Startup companies are usually in an “all in” mode – since there is no cushion from a portfolio of offerings when you are in a new business. On the plus side, everyone is motivated and will do their best. On the flip side, vast majority of start ups fold without making a tangible impact. However, VCs etc who take a portfolio approach and invest in many startups (usually with opposing risk characteristics) generally have better chance of surviving and thriving.

Big companies typically follow some version of the 80-20 rule. 80 percent runs at high efficiency and pays the bills for the 20% of innovation experiments. And depending on cushion available – as soon as innovations look viable, they try to industrialize partly or fully. And if it is not panning out as planned, they can move out and focus on next big idea without going bust.

I think this model is what we will continue to see for a while – enterprise customers love innovation, but they can’t usually stand an over dose of disruption and chaos. So in my opinion , the vendor part of the ecosystem will need to constantly up their games and compete harder to remain relevant. And that won’t happen by everyone innovating – it will only happen by a minority innovating, and a majority industrializing in a fast follower model. Otherwise the amount of chaos, the cost of innovation etc will make sure the so called innovation will die without adoption.

This also means the leaders in the industry have to constantly watch their backs – when fast followers get their act right, the leader will find it harder and harder to keep their lead. Enterprise software only needs to look at consumer electronics companies to know what that means.

It is time that our industry recognized its unsung heroes who make sure that their counterparts have the cushion/opportunity to innovate. Stop looking down on them – appreciate them – A LOT.

 

 

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10 thoughts on “Weekend rant on Innovation , Industrialization & Watching Your Back

  1. Hi Vijay,

    though-provoking post again!

    For one… I liked Seth’s presentation a lot, because for one it was entertaining and inspiring. Maybe it was lacking the enterprise context, but that mattered little for me while I was listening. Maybe it’s that in my new role I also try to learn from great presenters and here I truly watched one of the masters in the domain. Content-wise it boiled down to the @gapingvoid mantra: “Don’t be the best at what you do, be the only one who does it!”

    I think that holds true in an enterprise context – usually it’s called unique selling proposition or key differentiator.

    In regards to your key message – I’m with you: the famous 80/20 rule sounds appropriate for established businesses, yet the techie within me sometimes wished that we would get away from short-term stock prices and shareholder value as it would free larger enterprises to invest more into long term strategies w/o having to fear the oath of the short-sighted market. But that is clearly wishful thinking on my side and hence it boils down to how-to spend the remaining 20%. For larger enterprises that are active in many segments it may needs to be spread across a bigger portfolio. At the end of the day it may not be enough to compete with the real innovators in a particular domain, especially if they are much more focused on specific markets. Tough nut to crack…

    Cheers,
    Matthias

    • Thanks for chiming in mate

      I am glad you enjoyed the keynote – he surely is a great speaker from who we can all learn a lot about the art of speaking

      Being the the only one at what you do best – it is probably a good goal for enterprises as the entity we refer to. It is a good thing for people in enterprise to aim to for a short period in time too – probably helps career progression in short term . But in long term, enterprises benefit more from redundancy of skills than only person who can do it very well . My mentor in IBM used to tell me that my value as a leader is obvious only if I have multiple people in the company who can take over from me , or help me scale – without missing a beat .

      It is a delicate balance – needs a lot of self confidence and the ability to learn all the time and keep moving forward .

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  3. Hi Vijay,

    Good thoughts. Here are some of my random comments on this.

    To me it seems the process of innovation and getting it to the market was pioneered at Bell Labs. “The Idea Factory: Bell Labs and the Great Age of American Innovation” is a really nice book that describes it in great detail. AT&T was as corporate as it can get even during those days and yet they the innovation engine like Bell Labs. If you read the book you would see that they had the ideas starting in the pure research group. If validated they would move on to the folks who would help make those ideas possible using an industrialized mass production mode. From there in they move on to go to market and implementation folks etc.

    You would notice the resemblance of this with modern practice. But we are talking 20s here. Regarding your comments about innovation and 80-20 rule. I think we can learn a bit from startup world. You have the 0-1 (disruption) solvers and you have 1-N (incremental improvements) solvers. Corporations are typically good at 1-N. But 0-1 are the big ones and have the potential of sweeping big markets. A portfolio approach to 0-1 is the one adopted by VCs and might be the solution. So 80-20 is a good rule here. But the question is for that 20 should we focus all of it on a single area or diversify it with a portfolio.

    • That is an interesting question on whether 20% should focus on 0-1 or 1-N . I am never a fan of 0-1 , and in same token – I don’t like a large value of N in any one company for fear of dilution. Of course a company like IBM with $6B research budget can have a larger value for N , but even there an extremely large value might be counter productive.

      There is also the question of length of time before judging feasibility and viability of productizing . What are your thoughts ?

  4. Interesting piece. Maybe, some functions of innovation can move to treasury/ investments where part of surplus is allotted to inventions/ high risk investment and is aligned with business sector.

    I think Ideaspace was good initiative but it needs much greater financial backing than is currently available for serious business to emerge.

    I think startup world is largely ignored by established enterprise software vendors. Perhaps it makes more sense to buy outright the successful ones.

    • Anand, that’s precisely what enterprise software vendors often do (acquire innovative startups) – my company, Lighthammer Software, was acquired by SAP in 2005, and SAP and the other enterprise software companies do a number of similar types of “fill-in” acquisitions each year, in addition to the “blockbuster” acquisitions such as Sybase, Business Objects, and Success Factors.

      The challenge with “intrapreneuring” or internal innovation within most large companies, in my experience, is not one of money or budgeting. Rather, it is the inability of most large organizations to deal with the fact that early stage innovation (organic or via an acquisitions) requires fundamentally different processes in all aspects of value delivery versus mature products. This includes different development and QA/QC processes, documentation processes, technology standards, marketing approaches, licensing models, and just as importantly, go-to-market/sales models. Unfortunately, all too many large enterprise software companies try to “mainstream” innovations into their standard processes *far* too early. Again, this tends to be the same challenge whether the innovation was created internally or acquired from outside.

      Best,

      Rick

    • Successful ones do get bought out – like Rick’s example of him selling his company to SAP .

      In general , I do agree that start ups and established companies need a better model to work together

  5. Hi, Vijay.

    I totally agree with your fundamental premise that the innovation dynamics are quite different for an enterprise software (EnSW) company than a startup (particular a social media/consumer startup). Where I do differ dramatically from your perspective is in the role of EnSW companies in the context of innovation. While there is some core innovation that can be done (e.g. HANA), in my view the real opportunity (and responsibility) of EnSW companies is to *enable others to innovate around their core*. In this area, sadly, most of the companies in the space, including SAP, have done a rather poor job in this area.

    The starting point is APIs and documentation. SAP and others carry a ton of legacy around, and anyone that has tried to look at a BAPI or RFC and attempt to figure out what it does (including their SOAP and REST derivatives) usually ends up thoroughly confused. Worse, the documentation for those APIs is sparse at best, and in many cases is locked up behind the EnSW equivalent of paywalls. Don’t get me wrong, there have been some good efforts within SAP, Oracle, and others to re-wrap these APIS in more understandable business semantics, but on balance, they’re just too friggin hard to use for the average non-SAP expert and too bound to the legacy APIs rather than recast in a componentized way that better facilitates external integration.

    The other big gaps that I’ve seen over the years relate to the relative “static” nature of the APIs that wrap enterprise business processes. They tend to be traditional request/response stuff (execute a transaction to close a work order, get a list of department codes, etc.) but sorely lacking are a broad range of event-driven APIs to facilitate creation of responsive, innovative integration of these processes with other systems, people, and devices. For example, why can’t a manufacturing plant be easily notified when an order changes or an expected part arrival is delayed? Or when a change to a bill of material occurs? It can be done today, of course (anything is possible with lots of time and money), but it should be “built-in”.

    Similarly, building alternative UIs for SAP applications/processes (or often hybrid processes that integrate with other applications) should be very easy to do, and should not require SAP tools necessarily. Again, it can be done, but it’s a ton harder than it needs to be.

    If SAP wants to amplify and multiply its investments in “innovation” in ways that translate into new customer value, a refocus on enabling an expanded ecosystem to innovate would pay substantial dividends.

    Cheers,

    Rick

    • Hi Rick

      All good points – agreed on ecosystem, API etc .

      However , in my mind – getting ecosystem to do more with core innovation was part of the 80% industrialization . But of course it can be viewed as I notation itself I guess

      Cheers
      Vijay

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