I recently finished a solid book called “The Innovator’s Solution ” co-authored by Harvard PhD Clayton Christiensen and Michael E. Raynor. It was a sequel to a previous book “The Innovator’s Dilemna” which I never read, but this one was self-contained enough to where I could appreciate its lessons without having read the prequel. Lemme first say that Clayton Christiensen is a _brilliant_ thinker and a persuasive public speaker and that (not having studied for an MBA myself) some of the ideas presented in this book sailed over my head. I like to think that “bidness” can ultimately be understood in terms of common sense once all relevant perspectives are identified though, and this book definitely appeals to that concept. The gist of the book was to examine different businesses across multiple industries and identify recurring “design patterns” or common tendencies with the hopes of offering strategies to up & coming startups for usurping an entrenched, incumbent competitor. Although it was dense reading material, the real-life case studies and examples helped to make the material more digestible and memorable. I’ll try and summarize the salient points that I took from the book and draw parallels to the web development industry:
- How to pick the right fights – In business (or in any situation for that matter) consider your opponent’s perspective and don’t pick fights where it’s in his/her best interest to stay and go head-to-head with you, but rather pick the fights where it makes more sense for your opponent to flee. The examples referenced in the book showed the tendency of corporations to move “up market” tackling products and services which yield higher returns and leaving the “low hanging fruit” to be commoditized and gobbled up by the newcommers.
In thinking more about this natural tendency and applying it to the field of software development, I realized he’s right- coding (to some extent) is the “brick-laying” of our industry. While the architecture of an application will always demand skillful consideration and experience, blueprints and prototypes can be created and handed over to a lesser-skilled worker to implement, provided they have suffiicient skills to implement the code according to the plan. To me this was a revolutionary breakthrough because, as an indy developer I had always seen myself as a “one man show” handling the process from initial requirements gathering through the architecture and planning all the way to “hanging the drywall” and code implementation. Borrowing validation from Christiensen’s book, I’ve already looked into farming out the actual coding of applications to a third-party to allow me to focus more on the business development and architecture portions (which I enjoy more anyways).
- “Hiring” a product to do a job – there was a really cool example early in the book that talked about this recurring tendency of managers in corporations to inappropriately conduct what he termed “attribute-based assesment” when attempting to improve an existing product or service. These assesments often led to perplexingly little or no measured improvement in sales or perceived value by the target market. With all the extensive research, how couldn’t this empirically-determined prescription for success given to us from our customers result in better sales?? The more effective paradigm for conducting the analysis he proposes is a “situational assesment” in which you think of the product or service as being “hired” by the customer to do a specific “job.” The example he used was the purchase of a milkshake at a fastfood restaurant. The attribute-based studies did things like taste tests to determine the most desirable viscosity of the shake, the optimum sugar content and the most popular flavors. But when all was said and done, the sales of the supposed “perfect milkshake” were not significantly better than the previous one (btw, this type of failure due to the aggregation of massive user feedback reminds me of Kathy Sierra’s “Keep the sharp edges” advice). When they conducted a situational-type study of their consumers to elicit buying trends they learned that there were two major segments that purchased milkshakes, the morning commuters and the evening parents. Both “hired” their milkshakes for completely different reasons though – the morning people wanted a quick breakfast that would give them energy, be relatively easy to consume in the car and give them something to keep them busy on the way to work. The evening parents just wanted a treat to give their kids so they wouldn’t feel guilty about having not bought them the toy they wanted or not letting them play as long as they wanted- the milkshake was a guilt-negating compromise. Attributes of the shakes were adjusted situationally according to the job for which they were being hired to do (ie, fruit chunks were added for the morning commuters to give them some interesting surprises on the way to work, smaller kid-sizes were created for the evening parents) and sales greatly improved.
My takeaway – how many times have you been tasked with a one-size-fits-all redesign of a web site and are given an”attribute-based” assesment on how it should look without having a full “situational-based” understanding of what the user is truly trying to achieve when they “hire” the site? This shift in thinking to me is HUGE because all the great CSS and Flash and aesthetic enhancements you make are useless if you don’t align everything with the intended “job” the site is being hired to do. We web application developers are in a unique realm in that we can dynamically change our “product” realtime to suit the role for which it is hired by the visitor using personalization techniques as they interact with the site – that’s powerful and often under-utilized. We can essentially serve the milkshake plain vanilla initially and once it’s in hand being consumed, switch to chocolate and add strawberries or even change the shape of the container to better fit the visitor’s intended use. I will be making an attempt to incorporate this type of strategy in my apps from now on.
- The concept of “The Law of Conservation of Modularity” – Basically, go after under-served markets or un-served markets and compete against non-consumption. All throughout the book he talks about this predictable cycle all businesses experience in which at first, the customers in a market are under-served. One example he used that sticks in mind (perhaps because I had the first one) is the Sony Walkman – when it came out it was a bulky, crappy-sounding portable radio and yet kids had never had the ability to listen to their own music in their parents’ house yet OUT OF EARSHOT of their parents. This feature was mind-blowingly cool because it offered an experience previously out of reach and kids were happy to put up with a crappy product because it was competeing with non-consumption- they’d never had this capability before. I can remember getting my teeth pulled and getting the Walkman as a present and forgetting all about the miserable pain being engrossed in this musical experience with these things called “headphones.” Eventually though, enough competitors will arrive onscene and drive the quality of a product up to the point where the customer base becomes “over-served.” Basically this means that they are being delivered a product with more functionality, more performance or more ***fill-in-the-blank*** than they need. It’s not that the customer doesn’t appreciate the better product, but just that they would be perfectly happy with less. At this point, the law of Conservation of Modularity kicks in and this magical threshold is crossed in which the game flips 180deg: whereas the initial climate of under-served-ness rewarded proprietary architectures and was entirely focused on eeking out maximum performance, the new charge is for open standards, modular architectures, interoperability and convenience, speed of delivery and customizability of the product. The classic example of the shift was in Apple’s early dominance of the PC market with their proprietary systems and then the subsequent coup by makers of the PC’s. The key is when the “low-hanging fruit” gets commoditized, profits do not evaporate into some black hole like people might think (–gasp– outsourcing, sending all our profits overseas?! no.) but rather gets flipped to a different layer. Christiensen repeatedly brings up ex-hockey player Wayne Gretzky and his intuitive ability to skate not to where the puck is but where it will be- businesses must learn to do the same and it takes a confident CEO to assess the current market and go against the grain striking out in a different direction than the pack is headed towards a niche where he/she knows the money will be.
My takeaway – the parallel here can be easily drawn to any of the big players like Google, Yahoo, Ebay, Amazon- they began with proprietary systems competing against others on the axis of performance but eventually it all shifted and now they are comitted to open API’s and using agreed-upon standards for getting more and more stuff dependent on using their systems and consequently entrenching their position. It’s like a well-digger’s mad dash to first burrow deep vertically to the best water source and then immediately shift the focus to extending his/her pipelines horizontally in every direction to maximize distribution and entrenchment in the marketplace.
- Business units with disruptive goals must be separated from traditional ones and motivations of your distribution channels must be aligned with your own – this idea made a great deal of sense for me: ask a salesperson to sell a product with 1/3rd the profit potential of a product they currently sell and realistically, they’ll tell you to f*** off. “Market disruption” is the term Christiensen gives to a new product or service that wildly upsets an existing landscape by shattering some kind of preconceived barrier. Think of the angioplasty procedure coming onto the medical scene in an environment where the incumbent technology was expensive bypass procedures performed only by heart surgeons. Originally, the proprietors of the angioplasty procedure tried to sell surgeons on the benefits of performing this procedure over traditional bypass surgery. After all, it was safer, had a quicker recovery time for the patient and was an order of magnitude cheaper- do you think the heart surgeon’s embraced it though? Hellz no- it would have taken the place of their lucrative surgeries they had trained all their lives to perform and shrank a valuable stream of revenue for them. Angioplasty sellers were bummed by the surgeon’s failure to embrace this radically-better technology but after rethinking the situations with respect to the motivations of the intended distributors, they found that they could market their procedure to the smaller clinics that didn’t have high-dollar heart surgeons on staff and therefore had never had the capability to serve this market. By choosing a channel that was filled with motivated distributors, the makers of the angioplasty procedure were able to work with folks whose interests were aligned with their own and secured a foothold in the industry and eventually disrupted the incumbent bypass procedure, but ONLY after they had failed first by trying to recruit the wrong salespeople to replace an existing lucrative service with a less lucrative one.
My takeaway – This lesson has great relevance to a project I’m currently setting up called Grid7. I’m creating a network of application developers to help execute some business ideas I’ve been tinkering with that now need coding muscle to bring them to fruition. Each project will need to be segmented into a separate business unit because each will have different revenue potential and motivational factors such that if we were to lump them all under one cross-functional umbrella development company, “all the weight would slide to one end of the boat” and development would occur very assymetrically (sales efforts would be even be more skewed). By isolating the business units and structuring the incentives in such a way that motivations are appropriately aligned within each unit, everyone is happy and we can still leverage certain services/assets across all units to best capitalize on what we have.
There are plenty more valuable lessons in this book, but these are the main points that really resonated with me- all highly-relevant to the web development industry and specifically to startup ventures. I’m looking forward to establishing the Grid7 incubator in the coming months- if you are an application developer and have interest in being involved, be sure to get in touch with me so I know who you are and where your skills/interests lie.
Â© 2005 Lights Out Production – All Rights Reserved Worldwide