Thursday, June 23, 2016

Being a good innovator is not enough

I think there are few firms that were more innovative than Intel.  Notice that I'm using the past tense.  Intel, lead by an excellent leader in Andy Grove, had a passion for being the best.  Grove's focus - "only the paranoid survive" kept Intel as an industry leader and innovator.  When I was younger, working for Texas Instruments, Intel seemed to constantly reinvent the computing industry.  Many of us in the semiconductor space could only look on with awe.

But now, the innovator has lost its chops.  Not so much because they cannot innovate, but because they failed to notice the shifting markets and demands.  Intel and Microsoft bet big on the PC, a specific platform, a specific user experience.  And while that platform dominated the industry, they could stay one step ahead of the competition.  But when the platform was no longer the dominant platform, they had fewer answers.  When the smartphone came along, Intel was far behind, because it had excellent computing processors but no one is trying to crank through enormous numbers or expects an incredible visual display on their smart phones and small devices.  Most people are really happy with just good enough, and Intel's bet on the larger platform is now costing them dearly.

Intel didn't lose the ability to innovate, although their innovation capabilities have slowed a bit.  Unlike other seemingly obsolescent innovators, Intel still retains a lot of intellectual property and claims to a significant share of the computing platform.  It's just that the audience is turning to other platforms where Intel has very little to offer, and is well behind the curve.  In this case the industry and consumers shifted in ways that should not have been surprising for Intel, but either their hubris or their innovation engines simply could not keep up.  Now, a company that still has good innovation capabilities is on the outside, looking in, at a market that has emerged rapidly but predictably. 

Modern media - TV, movies, etc - have projected for years the importance of small, handheld devices.  Dick Tracy had the high tech radio/watch thingy, Star Trek imagined the handheld communicator and health diagnostic device.  Nokia invented the concept of the smart phone and Apple entered the smart phone market in the late 1990s, yet Intel did not do enough to innovate in this space, because of its dominance in the PC market and the associated profits.  Perhaps they had some thresholds for revenue or profit that kept them from entering the market, or perhaps they simply overlooked the possibilities of a different platform.  Time and the history books will tell us.

Here's what we need to learn from this - even good innovators need to pay attention to emerging trends and be ready to shift platforms and business models as necessary.  Just as Apple took the music distribution business from Tower Records and others, then watched as Pandora and Spotify did the same to them, smart people at Intel should have (and probably did) see the emergence of the smart phone, e-readers, tablets and so forth, yet they did too little to gain traction in these devices.  It's not enough to lock up an existing market, you also have to understand how the market and customer demands and platforms are shifting, and move quickly to win those new markets and customers.  This can be hard to do when you are a leader in one market or platform and a new one emerges, but as Intel and others demonstrate, being flexible and identifying adjacencies is vital.

This lesson is especially true as the pace of change increases - this is the point that many executives know in their hearts but refuse to acknowledge in their heads.  The pace of change is increasing, which means the life span of platforms, markets and customer segments is likely to shrink.  You've got to be able to innovate, create a position and keep innovating beyond the original platform or market to stay viable.  Intel is a very capable innovator, but currently locked into an increasingly unattractive platform.  This is like having the best boat in a very small pond.  Intel should have been moving to new bodies of water long ago.

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posted by Jeffrey Phillips at 9:14 AM


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