Monday, November 04, 2013

Birth, Innovate, Defend, Ossify, Die

When I was younger, one of my favorite songs was entitled "Birth, School, Work, Death".  Those were the days when I was influenced by English punk bands.  I was thinking about the GodFathers, who performed this song, while I was reading Megan McArdle's article about government and the Affordable Care Act.  I like McArdle's take on politics, society and business.  Unlike a lot of journalists, she's had business experience and has an outsider's take on many topics I find refreshing.  But she fell into a trap recently about innovation.

That's where Birth, School, Work, Death comes in.  The Godfathers were arguing that all of life could be summed up in four significant activities, and that the path was predestined.  It was all a bit fatalistic.  You are born, go to school, you work and you die.  Megan, in her article linked above, was applying a corollary to businesses.  A business is borne, is innovative and interesting for a short spurt, matures and ossifies, and then dies.  That's a rather fatalistic viewpoint on business, but one I must admit seems rather true.  A sort of Birth, Innovate, Defend, Ossify, Die mantra for business.

What businesses face

It's true that many businesses proceed through this cycle.  In the past, the pattern and phases were almost predictable.  A business was born, grew slowly through many years, created a number of interesting products and services, and settled into a long maturity and eventual obsolescence.  Firms would proceed through this trajectory over a course of 30-50 years or more.  That timeframe and evolutionary speed seems almost impossible today.  Currently, and certainly into the future, firms are born in a flash, scale as quickly as possible, innovate for a very brief period and try to lock into a large and stable customer base to defend for as long as possible.  There are several problems with this theory:
  1. The innovation cycle isn't discrete but continuous.  You can't innovate once and hope to succeed
  2. The idea of defending a customer base is obsolete.  There are too many competitors and too much change to allow you to defend. You must play offense.
  3. You don't own the customer.  You win the customer by having solutions that are more valuable and more appealing than your ever increasing competition
  4. The environment is constantly changing.  When the US was the dominant colossus of an economy, we could move slowly through each phase and have a long obsolescence.  Today, the economic forces won't allow that.
Today, the birth to death cycle will be measured in years, certainly not decades or half-centuries.  The demand for new products and services, and the advent of new technologies doesn't allow for a long convalescent period on the brink of doom.  Just ask any of the "big box" retailers what that long obsolescence looks like.

Where Megan (may) have gone wrong

In her article, Megan asserts that the government, like many large, older businesses, has become ossified and unwilling to change.  The government, however, doesn't have external competitors so it has less need to adjust and change.  Further, the government won't be displaced by another government, the way a company can be acquired or put out of business.  Ossification and sclerotic operations are what we may be stuck with in government.

But I digress.  The real point I wanted to make about Megan's article was that she assumes that the old Birth, Innovate, Defend, Ossify, Die methodology is going to continue to dominate business thinking.  I think that mentality has to change, and in fact is beginning to change.

While most businesses have grown quickly with the plan to dominate a market or customer segment, and in doing so have locked in so much structure that eventually becomes a prison, I think many new and emerging firms are going to be much more nimble and adaptable.  They will innovate and grow, but use innovation not just as a way to create new products, but also to create new channels, new business models and new versions of the firm.  They will become consistent innovators, which will keep their organizations from becoming defensive and resistant to change.  They'll use innovation to reach new customers and constantly adjust their operations and business models.

There is a path that many businesses follow.  Let's call it birth, innovate, defend, ossify, and die.  I think that the changes in competition, in consumer demand, in technology and in access to data will force one of two options on many companies.  One, continue on the existing path, but move through it in an accelerated fashion or two, use innovation constantly to avoid the ossification, cycling through a process of innovate and defend, then a shift to a new channel, new business model or new structure to innovate and defend again.

Birth, innovate, defend, ossify and die is a choice.  It is not predestined.  The most important activity isn't DEFEND, it is INNOVATE.  Innovation is what gives you the right to exist.  Defending is reactive and unimaginary, locked into past successes, holding on, waiting to die. Innovation is proactive and imaginary, betting on future successes, competing for the future, hoping to grow.  Traditionally, we've just placed too much emphasis on the wrong phases.  Rather than focus on defense, we need to learn to focus on innovation as a constant state.

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posted by Jeffrey Phillips at 6:35 AM


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