Other parts of this series:
When it comes to innovation and disruption, we always seem to roll out the usual suspects: Apple, Uber, sometimes Amazon and Facebook.
I read some fascinating research from Accenture recently, and it reminded of my own experience with innovating and launching something new.
Before I joined Accenture, a business partner and I launched a platform business.
We made some mistakes that didn’t feel like mistakes at the time. Needless to say, I’m older and I hope I’ve learned a few lessons.
There are two main approaches to innovation. The first, which is Uber’s approach, is to be a “whale.”
They bought market share by launching in many cities at once and then scaling as quickly as they could.
Uber launched in August 2009. Ten years later, in 2019, they reported a net loss of $8,6 billion. In just that one year. That’s billion with a B. For the last 11 years, the company has not once turned a profit. The pandemic prevented the company from reaching it’s goal of being profitable by the end of 2020. In fact, the company lost another billion dollars.
My partner and I didn’t have anywhere near that kind of capital or that kind of time. We took a different approach. We developed the platform. We thought it was pretty good. Then we shopped it to a potential customer, who bought it. Encouraged by the success, we added another customer.
The trouble with new projects is that you never really know which will turn out to be the right one. History is littered with projects that looked great on paper but were rejected by the market. Backing the wrong horse is expensive and embarrassing, but ultimately also necessary. Because one day, the horse you back will turn out the be the winning one.
We wanted the market to validate our approach. Unlike Uber, we didn’t swamp the whole market at once with our new offering. We went to one customer at a time.
Our platform started doing well. We were competing successfully, in South Africa at least, with a large competitor. We spoke at conferences in London and San Francisco. We patented the platform. Did we get complacent? Maybe. We certainly believed we were early on the road to producing a market-leading offering.
We were approached by a Canadian organization, who said they would get us in to Silicon Valley. We turned them down. Why give away equity to somebody when we could probably go to Silicon Valley ourselves? That was our thinking.
Then the unthinkable happened.
A huge multinational spotted our platform, and they simply replicated it. They ignored any legal protection we may have had. And what were we going to do? They could bury us in legal fees for the next 40 years if they wanted to. And anyway, they were certainly smart enough to change their offering enough to be on the right side of the patent battle. They had more marketing resources, more development resources and more customers than we could dream of having.
I wish I had the benefit of Accenture’s recent research into how innovation works for the 1,090 companies we surveyed. Across the board, companies are increasing their innovation investment by 25% in the next five years.
And it turns out the “secret sauce” of innovation is unexpected. It’s governance.
The research classifies organizations into Emerging, Growth and Legacy businesses, and maps it to Disruptive, Breakthrough and Incremental innovation approaches. It sketches a roadmap for any business to manage their innovation portfolio successfully, to unlock the value trapped in the system.
If you’d like to read the research for yourself, please see the full report here.
In the next few weeks I’d like to dive into what we learned at Accenture, and what that might mean for you when you’re confronting a tough make-or-break decision.