We have met the enemy of innovation: He is us
I had a great conversation with several of the folks at Xiameter, and learned a lot about their goal to radically change the business model within their industry. Traditionally, Dow Corning has provided silicone to a range of clients, but wrapped that product in a lot of information, service and support. It became evident to individuals within Dow Corning that a large segment of the potential customer base didn't want or need anything except the silicone product itself, so Xiameter was launched to offer a radically different business model and distribution of the product to those customers who didn't want, or need, the service or support associated with the sales and distribution by Dow Corning. Xiameter learned a couple of valuable lessons by implementing the new business model with a new value proposition.
First, there was far less cannibalization than executives had initially feared. Less than 10% of the existing client base switched from Dow Corning's brand to Xiameter. Second, Xiameter "expanded the pond" by acquiring many prospective customers who wanted the product but needed a different interaction model which unbundled the service from the product. In fact this experience is true in many instances, where firms fear cannibalization they actually discover opportunities to enlarge their markets.
Xiameter successfully packaged a specialty product based on a B2B model and "sells" it as if it's a commodity B2C product. What I found most interesting, and the reason for the Pogo reference at the top of the blog, was what the Xiameter folks said about making the change and creating the new business model. The hard work, they said, wasn't in setting up the new distribution system or attracting customers. The hard part in changing the model wasn't in the external efforts, but in the internal workings of Dow Corning.
If you think deeply about this activity - changing a business model - that may come as a surprise. Frequently I think we in industry assume that a business model is dictated to us by the market, and to participate in the market we must accept what the players in the market have decided about how the market works. Changing a business model means enticing the firms in the market to adapt to the new model you are introducing. It would seem far easier to change a model internally than to change a market or industry externally. But there are several factors at play here. First, Xiameter was introducing a business model to serve unserved or underserved customers who had chosen not to interact with the existing business model, so they were additive to the customer base. Second, Xiameter is more than willing to co-exist with a high-touch, high service business model that Dow Corning provides. In this case, and I suspect in many cases, business model innovation expands the pie and attracts new customers. It does not have to be a zero sum game.
So, what's revealed by the great success at Xiameter, and in every innovation effort that I've been a part of, is that the existing "way" of doing business, the deep knowledge of how it gets done, the comfort with that approach and the inertia that builds up around the existing approach within a business is far more resistant to change and innovation than the market, prospects and customers that make up the likely customer base. The reason for this resistance is fairly simple. Innovation introduces change, change introduces risk and uncertainty, and few firms enjoy any of those experiences. Far safer, far more comfortable, to stay the course rather than introduce a lot of uncertain risk and change.
It turns out Newton was right. Objects at rest tend to stay at rest. In fact, they come to prefer to remain at rest and actively resist movement and change. It's not our customers or our markets that will resist innovation. In fact they often want and need new products and services. No, the biggest enemy of innovation is us - the compendium of existing expectations, processes, knowledge and experience. We've met the enemy, we see the face in the mirror every day, corporately speaking.