Wednesday, May 19, 2021

Burning Platforms and Business Models - Innovation lessons from COVID

Now that the COVID outbreak is increasingly in the rear view mirror, at least in the US, I thought it might be time to consider what innovation lessons the outbreak has for us.  Over the next few weeks I'll work up a couple of blog posts about what I think the outbreak, our reaction and the aftermath of COVID can tell us about innovation, creativity, new product development and more.

Today, I want to focus on the concept of first to market versus first to scale, and why most companies are placing far too much emphasis on innovating products when they should be focused on innovating processes or business models.  I'm also going to address briefly the need for burning platforms as an impetus for innovation.

What the US does well

Where health care and government provision of health care is concerned, the US does a few things well and a lot of things at best mediocre.  Our healthcare system is a mish mash of private, federal, state, military and other programs pieced together, which satisfies few people and costs more than necessary.

As you'd expect, we are probably the world leaders in developing and deploying new technology and pharmaceuticals to address first world issues, but these technologies are exceptionally expensive.  We aren't necessarily very good at day to day health care and health maintenance, and many people in the US lack even basic health care due to affordability issues.

This is what the US healthcare system looked like when we headed into the pandemic.  Not to mention the fact that the population suffers from first world problems like obesity and a lack of regular exercise, leading to more health care issues, and we have a rapidly aging population which consumes perhaps more than its fair share of the health care expenditures.

Covid and the reaction to COVID

When COVID first hit the US, we reacted to the virus in much the same way many people react to any new threat.  At first we ignored it, thinking it was an issue in China.  Then we downplayed the issue as more people in the US became ill, thinking that our first rate health care system would address the issue.  Then we panicked and did what we probably should have done initially - clamped down on interactions and travel and got serious about wearing masks.

It was about the time we got serious about COVID that another thing happened.  We in the US did something that our businesses, government and philosophies allow us to do very well - move quickly and effectively to find a solution, that is, once we all agree there is a serious problem.

Learning #1 - Never let a crisis go to waste

And it is this one idea that I want to focus on today - that whether we are talking about political problems, healthcare problems or more mundane problems like how to create a new product for a customer, every organization must recognize and agree that a problem exists, and determine that a concerted effort to create a new product or service is the only way to address it.  These are the bare minimum thresholds for innovation to gain the support it needs.

In the business world, we call this a "burning platform" - a problem so important and dire that it gets everyone's attention, and all of the normal hemming and hawing about whether or not to address it goes out the window.  In fact, the problem becomes so important and urgent that solutions that would normally be laughed out of the building become viable.  If you want to succeed in really interesting disruptive innovation in most organizations, you need to manufacture a crisis, or use a crisis to your advantage.

Learning #2 - Having a capability to organize and scale is most important

The US was terribly slow to react to COVID, but its business economy has a wonderful ability to move quickly when it needs to, so the government and major pharmaceutical companies combined to clear barriers, accelerate research and conduct meaningful trials of vaccines in record time.  Again, it's amazing what can get done in a crisis.

But here's the second important idea.  We were the laughingstock of the world, due to our "advanced" healthcare system but very high COVID infection rates.  In short order we went from a terrible healthcare criss to one of the world leaders in immunization.

The reason is NOT that we have the best ideas.  Vaccines were developed in many countries simultaneously.  Good ideas are like oxygen - they are everywhere.  And, it's not that our ideas are better than other countries' or scientists' ideas.  There are only so many ways to make a vaccine.

So, if ideas are relatively free, and if product ideas are ubiquitous, what wins?

Except in very specific niches or highly patented and protected spaces (which pharmaceuticals is normally one), what wins is the ability to scale an idea and get it to market.

What the US has, and what our businesses have, is an amazing ability to scale when we put our mind to it.  And this is the second learning for me from the pandemic.  Whether we are talking about governments or businesses or health care or any other organization, a significant amount of our focus should be to constantly innovate our ability to scale.  If good ideas are ubiquitous and relatively inexpensive, then it will be the companies that identify the best ideas and get them to an interested market at the right time that will win.

This means that the focus for innovation should be on how to develop and scale the best ideas quickly, which is really a focus on process and business model innovation.  The focus on process innovation should be obvious, but the business model innovation focus may not be quite so obvious.  Here's why I think business model innovation may become far more important.

Innovating the business model

The business models of most companies are relatively inflexible.  Once a company reaches a certain size, its ability to operate is relatively fixed within certain constraints, and changing those constraints may mean changing long held beliefs and deep investments in channels, people or technology.  This is the flexibility-efficiency tradeoff.  So far, it's been difficult to be both highly efficient AND highly flexible.  I think that in the future we may see more flexibility built into organizations so that they can adjust more readily to more rapidly emerging market conditions and consumer demands.

If these ideas hold merit, it will mean a greater focus on flexibility and adaptability to market needs and consumer demands, and the ability to adjust to sudden shifts such as COVID.  I think these factors are increasing and we'll see continued shocks to markets and economies, forcing companies to constantly rethink and readjust their business models.

Which means there needs to be a greater focus on how, when, and why to innovate a business model.


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posted by Jeffrey Phillips at 8:22 AM


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