Innovation In Technology

How does innovation happen? Not just in technology, but in general. I think that the question can be answered easily with the next three statements:

  • Necessity is the mother of all inventions. We create it because there is a need.
  • Build a better mouse trap. Paraphrasing Einstein: “I stand on the shoulders of giants”
  • This is such a great idea! Somebody comes up with a completely novel idea, and as such, with a complete new problem to solve.

These statements however, deal with concepts in the abstract, and while some form of these happen in real life — we see them all the time: the internet, flip cap toothpaste tops and velcro — they do not directly deal with how to grow market share and revenue through innovation.

At some point in their life, companies experience a plateau in innovation. The idea mill dries up and nothing new comes out. This is not readily apparent as companies may be putting out new products, most of which will be leveraging existing ones, but not “creating” new ones. While I think this is not only a smart approach to “new” product development, but a MUST, regardless of the innovation problem, this approach has a limited life. You can not repurpose existing products forever without the introduction of new ones. It is similar to inbreeding. The reason I support repurposing existing products by morphing them, or combining a few of them together, is because this not only extends the shelf life of each product with the positive financial ramifications that the extension mean, but also, because it extends an ecosystem which users are familiar with and provides a launching board for new products that either extend the existing products, further complements them or completely changes them.

If the idea mill is dry, it needs to be wetted again. There are different ways to “wet” the idea mill and all include getting new blood. Probably the fastest is to acquire new companies, start-ups in particular, as they present either brand new technologies or better mouse traps. And yes, in some cases even new ideas altogether. The advantage of acquiring another company is that the “new” idea and the “new” product are developed, have some level of market traction and by it, an apparent lower barrier to entry. What remains is integrating into the existing product suite. This is easier said than done.

In some cases, a company is acquired not for the product, but for the people. The idea in general may not have much weight in the market, but the employees bring a tremendous potential and this is also a smart move, a possible good investment.

Another way to bring new blood is to hire new people. Yes, companies hire as a matter of course, but it is to increase throughput in existing projects or to alleviate resource constraints. The regular hiring process is not intended to rock the boat, but rather to steady the boat. This practice, in a way, contributes to the idea mill drying up. So, in the case of hiring new blood, some hand-picked hires MUST be chartered with rocking the boat and shaking things up. However, if you hire somebody in that capacity too soon, you risk tearing the organization apart. I have seen it happened and it is not pretty.

There are two cases I would like to explore: Google and Yahoo! (we could also look at Amazon, Microsoft, Apple and others, but for the sake of clarity let’s just look at these two.) Both companies have had a similar start and in a way, have had the same corporate development path. Before I go into it, I just want to also say that the following words are based on my observations as an outsider to both companies and as such are just my opinion (I wanted to say something else, but I am hardly self defacing 😉 )

It is not clear to me if Google is in a situation where the idea mill has dried up. On the one hand the indicators are there: acquiring companies and (based on rumors) copying other companies. On the other, acquiring these companies may be just part of expanding market share and protecting itself – the YouTube acquisition comes to mind – and for all we know, the gPhone and opening up the API set were part of the plan all along. More specifically about opening up the API set: Although the timing makes it seem as a response to Facebook, I have more faith in Google than that. I suspect the plan might have been accelerated due to Facebook. Furthermore, other rumors point to the fact that Google’s strategy is wider than we think, creating a great deal of fuel to power the idea mill. Now the question rests in execution and wheather Google is over extending itself.

In the case of Yahoo! I think the idea mill has been dried up for a while. Like Google, Yahoo! has been buying companies but has not been able to catch up to Google and the perception is that it is loosing ground to Facebook. It even seems to be falling behind new comers such as Facebook and MySpace. It is not that Yahoo! executives are not smart or intelligent, they are, but it may be that the culture of innovation might be dried as well and not just the idea mill. In this case, all the acquisitions will not be positively leveraged and/or integrated and instead of breathing new life, the new blood is creating more drag.

The following is an image I found on the web. It showcases the current M&A landscape which, in a way, also showcases how in the last few years companies not only have transformed themselves but also have gone about getting new blood and keeping the idea mill fresh:

Who Owns What


Filed under Business, Thoughts

8 responses to “Innovation In Technology

  1. Happened to notice that Microsoft’s purchase of Groove Networks (March 10, 2005) isn’t listed. Groove is a peer-to-peer collaborative application that would come with applications such as PTC’s Pro/ENGINEER (not sure if it still does).

    From my POV, MS’s acquisition of Groove puts them in eventual competition with the traditional PLM providers as well as newer (potential) players such as Qwaq.

  2. Sven:

    I did not produce the chart. A company called Web Media Group did. There are probably other companies missing as well. The point of the chart is to provide a high level overview of who is looking into what. MS and News Corp seem a little behind, so I just can assume that they are well stocked with internal developers and plenty of blood for the idea mill.

  3. Was aware you didn’t produce the chart. What I was getting at is that an acquisition might *also* be part of a larger idea/effort (“Google’s strategy is wider”) which requires software components more than either ideas or “new blood”.

    Groove is, imo, an important component in a wider strategy of which PLM is a key part. It’s omission not only potentially skews the “higher level overview” of what MS may be doing, but destroys the context which may explain Google’s rush to acquire components if their strategy is the same as MS’s, which I believe it is.

    You read my post postulating the future of e-commerce, yes? Ask yourself: whose virtual world/browser were the consumer *and* the business using?

  4. I am not so sure Microsoft and Google share the same strategy. Microsoft keeps on focusing on the desktop, albeit a lot of their purchases in the online arena, while Google’s focus on the desktop is small and on particular areas. Although Microsoft pretend focus on the desktop may be a means to milk the desktop market until the end while powering up on online.

    We will have to wait and see. And by the time we see, they will be moving in other directions.

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  7. Hi there

    Can I link to this post please?

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