Shared Secrets – Entry #1: Historic Convergence

This is the first in a series on managing collaborative innovation:

Today’s dual imperatives for business model change and external collaboration have leaders seeking better ways to share their business intentions without tipping their hand.

In the 1940s, a company called Haloid took a gamble on a new line of business based on a technology it did not invent. Today it is easy to look back on the introduction of the first xerography machine and credit it with the success of the company which Haloid became – Xerox. But this would be a mistake. Far from being the technology-driven company of its reputation, Haloid focused on the real source of its early success: its business model. In the 1940s and 50s, the idea of an expensive machine that made lots of copies didn’t make sense to a lot of people. So rather than build a business selling machines, Xerox practically gave away the machines and sold metered services. This reduced the risk for early adopters and allowed customers to get addicted to the copying experience one page at a time.

It was an innovative and wildly successful but straightforward move. Xerox hired the skills it needed to execute the strategy and was able to keep its intentions to itself until it made its play.

Thirty years later, two employees from Xerox’s Palo Alto Research Institute, Charles Geschke and John Warnock, left to start a company based on a computer language for displaying graphics and text called PostScript. They initially thought the business would be selling turnkey computer hardware and printers. But by 1983, that business model was not looking good. That’s when they connected with the CEO of another emerging business, Apple Computer’s Steve Jobs. Jobs convinced them to focus on making libraries of typeface fonts and licensing them to computer manufacturers like Apple. Adobe font technology went into the revolutionary Apple LaserWriter, and the computer graphics industry that followed made Adobe’s value about equal to Xerox by 2001. Like Xerox, Adobe’s success is more about business model innovation than the technical inventions alone. The difference between the Xerox and Adobe stories is that Xerox developed and launched its business model essentially on its own, but Adobe’s was born out of collaboration. The business Adobe became was inconceivable until it was combined with the emerging intentions of Apple (and ultimately the personal computer industry) to embrace a novel licensing scheme providing a common standard for how computers display and print.

But that was over twenty years ago. What is happening today makes stories like these just a warm-up act for the main event.

[Click here for Entry #2]

Early Retirement for ThreePercenters

I retired at 40…sorta.

Two years ago, I hit that point where, if I never made more than 30k/year USD for the rest of my life, I’d be able to live the life I want – bit of travel, modest house in the country, lots of gadgets, time for writing books.

I believe that this is the kind of formula ThreePercenters should strive for in retirement. Think of all the fun things you can do for the rest of your awesome life if you only had to earn the equivalent of what a part-time theater director or kindergarten teacher makes. Think of how much more fun earning that money would be if you knew that you didn’t need to keep that job to live comfortably. Teach kindergarten and still be able to laugh at the principal if he tries to give you grief.

You could restore boats and sell them, not worrying too much about not making money for a year as you learned the craft. The possibilities are endless. And these semi-employed earning opportunities sound far better than traditional retirement (unless golf is your preferred avocation, in which case you need 30k a year plus greens fees) …and far more likely to be significantly more lucrative over time than a nine-to-five job.

But anyone who has known me for the last two years is aware that I have been doing a lot more than sitting in the country teaching kindergarten…though there are days I wonder why not.

So here’s the corollary to the $30k retirement: Retirement is being able to do only what it pleases you to do for the rest of your life. Most days lately, I get that right.

Misfits, Failures and Outcasts

“The difficult and risky task of meeting and mastering the new – whether it be the settlement of
new lands or the initiation of new ways of life- is not undertaken by the vanguard of society but by its
rear.    It is the misfits, failures, fugitives, outcasts and their like who are among the first to grapple with
the new.”

-Eric Hoffer

(Thanks, Richard.  Terrific quote.)

My Father Would Cringe

We are in the age of quick and dirty.

Learning to get small, cheap, and fast is a major breakthrough for large, established companies that learn this wisdom. Firms that spend many months or years studying big opportunities are getting beaten consistently by teams that try tiny things fast, then learn, rinse-and-repeat, and learn some more. The investment community is starting to get this idea too. According to the NCET, investing small money in portfolios of very early stage projects generates 6.8% better annual returns over 20 years than late stage investing, 12.4% better than the S&P.

But when it comes to big company innovation, the quick and dirty approach has a dark side.

Companies, particularly large ones, are filled with well-intentioned people who are really too busy with bone-crushing immediate crises to pay much attention to small things. And by definition, doing things cheap and dirty – and inevitably poorly at first – is “the small stuff” they can’t afford to sweat. The rapid innovation project spends most of its time inside large companies largely unnoticed – in plain sight.

Then one day the first, malformed, impoverished, diseased results of your first iterations come to light. And here is where things get dicey. They say old companies learn lessons too well. And the lessons companies learned for the last 30 years are all about operational excellence.

As my father used to say, “Never do something you can’t do right, Son.” He was a 30 year veteran of big pharma, where that idea really means something. A little pill can kill, if you didn’t make it right. (He also believes in reading the user manual cover-to-cover before taking the gizmo he just bought out of the box.)

Operational excellence abhors a poorly made thing. The practitioners of excellence see poor results as a breach of faith, a mark against trust – or at the very least something for which you must apologize. Often the very people who originally supported the idea of rapid innovation will unconsciously return to their ‘ops excellence’ roots when they see how poorly you executed your first attempt. They will forget that you deliberately did it wrong, and that the idea is to do it wrong again…and probably at least once more after that.

When someone in a big company says, “Oh, yeah – we totally support the idea of innovating quickly, and we understand not to expect too much from the first batch – it’s a journey.” It is best simply to smile, realize it is not their fault, but absolutely not to believe them.

So when the company you work for agrees to give you minuscule amounts of time, attention, money, resources, and priority to try your crazy idea…go for it! But remember, the day you first deliver what they paid for – very little for almost nothing – you are probably going to have a bad day. (There is nothing so like an asylum as the inside of a big company…each individual convinced he is the sane one in a crowd of madmen.)

But take heart. If you can weather that storm, and the next one, and the next one…eventually you get to be the one demanding operational excellence.