This is the fourth part of a six-part series on making open innovation work for you. It’s a summary of approaches developed by Mike Docherty and Luda Kopeikina as a workshop, from our experiences as entrepreneurs and corporate executives.
Strategy #3: Know When to Make Your Move
“By trying to be ambidextrous, established companies risk being stuck in the middle...
... What they need to do is focus on the area where they have an advantage – and that is in consolidating good new ideas drawn from niche markets into new and valuable mass markets”
Excerpt from “The Two Cultures of Corporate Strategy”
Markides and Geroski of London Business School put it well when they emphasize the importance of established companies focusing on scaling up ideas and businesses from start-ups and/or niche markets. It’s at this inflection point between initial market acceptance and high volume growth where larger companies have the best opportunity to exploit innovation in the market.
In the previous post, we discussed the challenge of developing a strong ‘feeder network’ of innovations and technologies. It’s even harder to identify how and when to move beyond monitoring and supporting these efforts and into embracing and growing them.
The history of Computervision and Parametric Technologies provides an excellent example of the importance of understanding this inflection point and the dangers of letting it pass you by. You can read a more detailed history at http://www.cadazz.com/cad-software-history.htm.
In the early and mid 1980’s, Computervision was the market leader for CAD (computer-aided design) software. In 1985, a small group of developers had created a game-changing approach to CAD systems by parameterizing designs – and a new company was launched called Parametric Technologies. Computervision and others dismissed the technology as irrelevant, immature and unstable and refused to embrace the new paradigm. A decade later, the new CAD market leader Parametric Technologies acquired a much smaller and weaker Computervision.
So it’s clear that not only must you monitor and track emerging technologies, but also know when to make your move. We’ve identified and labeled five stages of ‘new market creation’ that we’ll share with you now at a high level:
Stage 1: Market visible, but uncertain. A haphazard development of a new technology or innovative approach.
Stage 2: Many new entrants. Slow customer uptake (think early MP3 market).
Stage 3: Establishment of a dominant design. An explosion of customer interest (think iPod).
Stage 4: The death of early entrants and their products (think about the decline of Real Networks with the dominance of Apple iTunes Music Store).
So when’s the right time to enter a new market or acquire an emerging technology? When a dominant design is about to be established. A difficult task, but one made easier if instead of developing all of your own technology, you’re leveraging a ‘feeder network’ to stay abreast, experiment, and nurture potential partnerships or acquisitions. I would point to the current market for RF-enabled devices as one that’s entering Stage 3. Certainly BlueTooth has created a foothold as a dominant technology in mobile devices. However, a competing (or complementary) technology is emerging for specific applications requiring a lower cost solution in static networks with lots of nodes and small data packets (like smart-home devices). Zigbee may soon emerge in a major way as an enabling technology to broaden the market for wireless-enabled everyday household products… so stay tuned.
In the next post, we’ll discuss Strategy #4: Know Your Execution Roadmap.