Tuesday, May 07, 2013

Innovation Voices: Attackers and Defenders

If you missed reading the interview with Steve Case on Sunday in the New York Times, you should take a minute and read it.  Go ahead, I'll wait.  Pay special attention to the last question and his response about attackers and defenders.

I initially skipped over the article, because I held Case in high esteem for many years when he was running AOL, and lost a lot of respect for his leadership during the merger with Time Warner.  But the concept of attackers and defenders caught my eye.  Case is absolutely right about this point:

And I realized the world of business really separates into these two groups. The attackers are the entrepreneurs who are disrupting the status quo, trying to change the world, take the hill, anything is possible, and have nothing to lose in most cases. They’re driven by passion and the idea and intensity. Large organizations — and it’s true of Fortune 500s and it’s also true of governments and other large organizations — are defenders. These guys aren’t trying to pursue the art of the possible, how to maximize opportunity. They actually are trying to minimize the downside, and hedge risk. They’re trying to de-risk situations.

 Case is pointing out an age old conundrum:  innovators have an attacking mindset.  They want to disrupt the status quo, change something, create something.  As Jobs said, put a dent in the universe.
Change, disruption and universe dents are a bit more problematic for many larger corporations, and this is why they struggle to innovate.  Once a firm reaches a certain size, has a significant customer base or market share, that firm risks everything by disrupting or attacking.  Larger firms have more to lose.  They can lose in three ways:
  1.  ignoring their base, 
  2. attempting to enter a new market or create a completely new product and failing to do so, and
  3. finally, by being blindsided by new entrants or other smaller firms that seek to put a dent in their universe. 
 No wonder Andy Grove spoke about paranoia, and you'll notice Case does too.  When you are the CEO of a large corporation, every change is fraught with danger.
So, when large firms start to innovate, what do they do?  Look back at the list of potential losses.  The first edict is almost always:  first, do no harm.  Protect our existing customer franchise and market share.  Don't distract, don't disrupt.  Almost all innovation in the existing market space is incremental, leading customers along to the next iteration of products and services they already enjoy.  Next edict:  find a market outside of the one we dominate to disrupt.  So the firm places its biggest bets on entering a market it doesn't know well, with a completely new product or service.  This isn't "de-risking", as Case called it, this is compounding risk.  Ever wonder why innovation seems to produce only very incremental solutions or failed projects that focused on disrupting another market?

Finally, the last bit of effort is given to assessing what competitors or new entrants may be planning to disrupt the existing customer base with new offerings.  Firms are almost always blindsided by market shifts, technical introductions and substitutes for their existing customer base.  That's because they've become defensive minded, thinking that their existing customers "belong" to them in some way, and they've spent the majority of their very limited innovation currency sustaining the core and disrupting some other market.

There's a balance that's needed in larger firms between protecting and defending the core, and innovating and disrupting the core.  Every firm that protects and defends a customer base ends up patronizing that customer base, thinking that only it can deliver what those customers want and need. Often firms believe they understand needs in a market better than customers or consumers do.  But few customers today are that servile or loyal.  They are constantly on the march for the latest offering, the best product, the best value, the newest thing.  Only by retaining the mind of the attacker can a large firm sustain its core business and innovate there as well as elsewhere.

Who has the loudest "voice" in your company - executives who are responsible for maintaining and protecting the core, or executives who want to create disruptive new products and services?  In the vast majority of businesses, there is no contest.  We have entire choirs of executives singing from the defensive hymnal, satisfied with defending the status quo.  This choir is confronted by an occasional solo from one executive who seeks to innovate.  Too much affinity, too much reliance on your existing base is dangerous, because there are many forces at work trying to pry those customers away.  Is the voice of the innovator or attacker as compelling as the voice of the defender in your organization?  Is the voice of the attacker as loud, as consistent and as well funded?  What is the appropriate balance between an attacking, disrupting mindset and a protective, defensive mindset?  Can your organization hold both concepts simultaneously?
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posted by Jeffrey Phillips at 6:50 AM


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