Tag Archives: mitch cohen

Innovation: a Need for ‘Patient Urgency’

In corporate innovation, little else matters if your timing is wrong.

Moving too fast killed Ron Johnson’s attempts to turn around J.C. Penney. Johnson plunged too quickly into a wholesale remake of the century-old chain’s stores. He didn’t take time to test alternative possibilities—even though, as the developer of the Apple stores, he experimented with every little detail for months in a mock-up before going to market. Johnson also threw out Penney’s long-standing sales strategy. He got rid of discounts—and alienated tons of existing customers—before validating that his new approach would attract enough new customers.

Moving too slowly killed Blockbuster. It ignored Netflix’s subscription-based, DVDs-by-mail model for years. Then, afraid that it was too late, it bet big on its own version even though it had dire economic and operational implications.

Precise timing, however, is a fool’s errand. Disruptive innovations, by definition, deal with future scenarios that are hard to read and where neither the right strategy nor timing is clear. How can you project customer interest for a product that customers haven’t yet seen? How can you deliver detailed timelines and budgets when new products depend on technology breakthroughs?  The strategy has to emerge over time. The timing has to be opportunistic.

To deal with the vagaries of innovation, leaders at Blockbuster, Penney and hundreds of other large-company innovation failures that I’ve studied would have benefited from a strong dose of “patient urgency.”

See Also: Does Your Culture Embrace Innovation?

Patient urgency is one of the distinguishing traits that John Sviokla and Mitch Cohen identified in their study of 120 self-made billionaires, as reported in their excellent book “The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value.” Patient urgency is the combination of foresight to prepare for a big idea, willingness to wait for the right market conditions and agility to act straight away when conditions ripen.

Sviokla and Cohen found that their subjects were no better prognosticators than other people—“they cannot predict the exact right time to make an investment or to bring a product to market.” They did not, however, sit back and wait. Neither did they just jump in and hope for the best. They learned about the market, made early investments and deals, tested ideas in the market and actively made improvements and adjustments. When the market became ripe, they were ready.

The Sviokla and Cohen finding squares with my research and experience.

Reed Hastings of Netflix, for example, knew from Day One that people would eventually stream their movies over the Internet. He experimented with different versions of streaming video for more than a decade. He repeatedly killed ventures when he saw they would not quite work. When the conditions were right, he moved quickly to transform Netflix into a huge streaming business.

Google’s driverless car program is another great example of patient urgency. As I’ve discussed, driverless cars have the potential to save millions of lives and throw trillions of dollars in existing revenue up for grabs while sending a tsunami of business disruption across multiple industries. Google has methodically developed potentially differentiated technology in this fertile arena while keeping its options open on how to capture the resulting business value.

The problem for most large companies, however, is that neither “we’ll figure it as we go” nor “we’ll launch when the market is right” fit with traditional planning mindsets. Operating budgets hate uncertainty. They demand detailed, time-lined projections of human resources, costs and revenue—even when those demands just yield guesses disguised as numbers. This severely limits experimentation, adaption and risk taking.

To break the organizational tendencies that dampen corporate innovation, here are three ways to encourage patient urgency:

1. Think big. Focus on big ideas that have the potential to build massive value. Develop vivid alternative future scenarios to illuminate how existing businesses might get crushed or, in a kinder world, be transformed because of disruptive innovations. Getting everyone on the same page about the stakes involved will help the organization start earlier and bide its time longer.

2. Structure early investments like financial options rather than full-fledged go-to-market plans. Ideas that could turn into multibillion-dollar businesses do not deserve billions in investments right away. Invest millions, or even tens of thousands, to test and elaborate them. Each stage of funding should focus on clarifying key questions like whether the product can be built, whether it meets real customer needs, whether it can beat the competition and whether it makes strategic sense. The goal is to invest a little at a time to develop the idea while preserving the right but not making the commitment to launch the innovation.

3. Budget for innovation as a portfolio of options. Rather than force detailed projections for individual options, plan and budget at the portfolio level. As I’ve previously discussed, the overall allocation and prioritization of the innovation portfolio should depend on a company’s investment capabilities and competitive circumstances. This limits the overall risk while allowing flexibility to shift investments between individual initiatives based on experimental results and shifting market conditions. The portfolio approach also demands that multiple (potentially competing) options be tested—thereby short-circuiting the tendency to focus on one all-or-nothing bet.

See Also: Innovation Trends in 2016

Patient urgency avoids the large-company tendency to swing from complacency to panic. It loosens the constraints of shortsightedness and inappropriate planning models that lull large companies into thinking incrementally for too long, as Blockbuster did. It also lessens the chances of being late to the game and having to risk everything on a single desperate idea, like Penney, only to have it not pan out.

Lessons From Self-Made Billionaires

Conventional wisdom is that blockbuster innovations are most likely found in new product categories. Business celebrities like Steve JobsBill Gates and Mark Zuckerberg — three college dropouts who made billions with stunning innovations that ignited whole new industries — reinforce this perception.

This conventional wisdom is even codified in business theory. In the multimillion-copy bestseller, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant,” two business school professors argue that “lasting success comes not from battling competitors but from creating ‘blue oceans’– untapped new market spaces ripe for growth.” Businesses are encouraged to avoid “bloody ‘red oceans’ of rivals fighting over a shrinking profit pool.”

One of the insights from an excellent new book by John Sviokla and Mitch Cohen is that the vast majority of today’s wealthiest persons made their billions by ignoring this notion. The book also offers important guidance on how both entrepreneurs and established companies should innovate.

In The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value, Sviokla and Cohen found that 80% of the self-made billionaires that they studied made their fortunes in contested market spaces.

Their research sample consisted of 120 self-made billionaires (as opposed to those with inherited wealth) operating in relatively transparent and competitive markets. These 120 were randomly selected from self-made billionaires on Forbes’ Billionaire List, adjusted to mirror the larger list’s geographic and industry distribution.

Sir James Dyson, for example, did not stop reimagining the vacuum cleaner just because Hoover got there first and the market was crowded. Instead, Dyson went through 5,127 iterations to develop a production-ready design of his dual cyclone vacuum.

Sir James Dyson with his Dyson Vacuum

If the term had existed, the board of Dyson’s company at that time might have labeled Dyson’s effort an ill-conceived “red ocean” strategy. It rejected his request for funding to produce the vacuum — even though Dyson owned a third of the company. Dyson was told:

If there really was a better type of vacuum cleaner, then surely one of the big manufacturers would be making it.

Undeterred, Dyson had to set up a new company to manufacture the G-Force Dual Cyclone vacuum cleaner. It would go on to capture immense market share — as high as 50% in the UK — and generate billions in sales.

Svioka and Cohen offer numerous other case studies of self-made billionaires who succeeded in markets that “would by any measure be considered ‘red.’”

Here is a partial list from their thoroughly researched book.

  • John Paul DeJoria, a haircare products salesman, and celebrity stylist Paul Mitchell successfully launchedJohn Paul Mitchell Systems into the populated market of high-end hair care.
  • Bharti Enterprises founder Sunil Mittal got his start importing known, legacy technologies such as portable generators and telephone handsets into India.
  • Sara Blakely’s Spanx shapewear prospered in a hosiery market dominated by L’eggs and Hanes.
  • Eli Broad built affordable starter homes without basements in part because he saw others doing it successfully.
  • Glen Talyor grew a mom-and-pop local printing shop into one of the largest custom printing companies in the U.S. by, at first, focusing on the immensely competitive and fragmented industry for wedding stationery and related accessories.

Sviokla and Cohen are not arguing for red oceans over blue ones. Their research shows that self-made billionaires ignore the distinction. To them, all oceans are purple — a blending of available opportunity within established practice. The vast majority of self-made billionaires operate in markets “that are a blending of new approaches within old modes that reveal ways to re-create the space.”

This is an important lesson for both entrepreneurs and innovators in established companies. The opportunities are there — all the time — to create a blockbuster product within an existing market. No market is owned solely by a single product or idea. Those who can take advantage of the constant change are the ones most likely to win.