Ron Adner: Reconfiguring Ecoystems To Make Good Ideas HappenMarch 13, 2012
Have a good idea? If there’s not a network around it, it’s probably going to fail — no matter how brilliant the idea is. In this segment, author Ron Adner and Dylan discuss how connecting networks of people and organizations around us is critical to the success of innovative solutions.
Adner is author of The Wide Lens: A New Strategy for Innovation. You can learn more about his book at TheWideLensBook.com Adner is a professor of strategy at the Tuck School of Business at Dartmouth. His writing has appeared in Forbes, The Wall Street Journal, Financial Times, and the Harvard Business Review.
Why did it take decades for the lifesaving innovation of electronic health records to finally take off? Why are GM’s Volt and Nissan’s Leaf both doomed to failure? How did sales of Amazon’s Kindle skyrocket past Sony’s e-reader, even though Sony was first to market and reviewers agreed it had a superior device?
Because as our world becomes ever more interdependent, commercial success depends not only on our own innovations, but also on the success of the partners within our innovation ecosystems–suppliers, complementors, distributors, retailers and others.
“More and more, ideas don’t stand alone,” says Adner. “And we’re not just talking about ideas, we’re talking about innovations. Innovations depend on partnerships to deliver their value to the market.”
He uses Thomas Edison as a historic example of this. “What made Edison a genius was not that he invented the lightbulb — because he didn’t — and it’s not that he made a better lightbulb than anybody else. When he looked at the lightbulb, he knew he needed to set up power generation and power distribution and bring it together that he was so successful,” says Adner.
Networks themselves can also be a key to innovation — he compares it to aligning puzzle pieces together.
“What’s even more fundamental than this is that having come up with a great innovation, if you haven’t figured out how to reconfigure the system around it, it’s still going to fail,” says Adner. “The one that wins the prize is the one who is the first to put the full system together… Nothing happens until the complete puzzle is in place. Unless you see the whole puzzle, if all you’re playing is your one piece, you’re setting yourself up to fail,” says Adner.
Here’s Ron Adner’s conversation on The Dylan Ratigan Show.
He’re an excerpt of Ron Adner’s book, The Wide Lens:
This book is about the difference between great innovations that succeed and great innovations that fail. It is about the blind spots that undermine great managers in great companies even if they identify real customer needs, deliver great products, and beat their competition to market. It is about why, with ever greater frequency, your success depends not just on your ability to execute your own promises but also on whether a host of partners—some visible, some hidden—deliver on their promises too.
The innovation blind spot is everybody’s problem: whether you are a CEO or project team member; in a large multinational or an emergent start-up; in the corporate sector or at a nonprofit; contributing to a collaborative effort or investing in one. No matter your situation, your success depends not just on your own efforts but also on the ability, willingness, and likelihood that the partners that make up your innovation ecosystem succeed as well.
This book offers a new perspective—a wide lens—with which to assess your strategy. It introduces a new set of tools and frameworks that will expose your hidden sources of dependence. It will help you make better choices, take more effective actions, and multiply your odds of success.
Execution focus—developing customer insight, building core competencies, and beating the competition—has become the touchstone of business strategy. In myriad books, lectures, meetings, and workshops, the message to managers is to focus on linking their strategy and their operations, on aligning their teams, on monitoring their competitive environment, and on revitalizing their value propositions. This, they are told, is critical for success.
Yes. Great execution is critical—it is a necessary condition for success. But it is not enough. While this execution focus draws attention to unquestionably important parts of a company’s environment—its management, employees, owners, customers, and competitors—it creates a blind spot that hides key dependencies that are equally important in determining success and failure.
Philips Electronics fell victim to this blind spot when it spent a fortune to pioneer high-definition television (HDTV) sets in the mid-1980s. The company’s executives drove a development effort that succeeded in creating numerous breakthroughs in television technology, offering picture quality that customers loved and that the competition, at the time, could not match. Yet, despite sterling execution and rave reviews, Philips’s high-definition TV flopped. Even the most brilliant innovation cannot succeed when its value creation depends on other innovations—in this case the high-definition cameras and transmission standards necessary to make high-definition TV work—that fail to arrive on time. Philips was left with a $2.5 billion write-down and little to show for its pioneering efforts by the time HDTV finally took off twenty years later.
Sony suffered from a similar blind spot, winning a pyrrhic victory as it raced to bring its e-reader to market before its rivals, only to discover that even a great e-reader cannot succeed in a market where customers have no easy access to e-books. And Johnson Controls, which developed a new generation of electrical switches and sensors that could dramatically reduce energy waste in buildings and deliver substantial savings to occupants, discovered that unless and until architects, electricians, and a host of other actors adjusted their own routines and updated their own capabilities, the value of its innovations would never be realized.
In all these cases, smart companies and talented managers invested, implemented, and succeeded in bringing genuinely brilliant innovations to market. But after the innovations launched, they failed. The companies understood how their success depends on meeting the needs of their end customers, delivering great innovation, and beating the competition. But all three fell victim to the innovator’s blind spot: failing to see how their success also depended on partners who themselves would need to innovate and agree to adapt in order for their efforts to succeed.
Welcome to the world of innovation ecosystems—a world in which the success of a value proposition depends on creating an alignment of partners who must work together in order to transform a winning idea to a market success. A world in which failing to expand your focus to include your entire ecosystem will set you up for failure. Avoidable failure.
Every year, the calls for new innovation to safeguard economic growth, technological progress, and general prosperity grow louder. Every year, vast amounts of money, time, attention, and effort are spent to introduce productive change. From new products and services, to new technologies and business models, to new personnel assessment systems and incentive programs, to new government policies, new education initiatives, and new reporting procedures, innovation initiatives blanket our lives and organizations.
How can we increase profitable growth? Innovate! How can we be come more efficient and reduce waste? Innovate! How can we improve loyalty and increase customer satisfaction? Innovate! Innovation is a problem for everyone because it is held up as the solution for everything.
But, despite the excitement, energy, and hype, successful innovation remains the exception rather than the rule. According to surveys by the Product Development and Management Association (PDMA), approximately one out of four new product development efforts ever reach the stage of commercial launch. And even within this highly screened group, 45 percent fail to meet their profit objectives.
Despite these odds, innovation remains imperative. In a world of aggressive competition and easily bored customers, innovation is not a choice but a necessity. A 2010 study by the Boston Consulting Group (BCG) found that 72 percent of senior executives cited innovation-led growth as one of their top three strategic priorities. And if you listen to government leaders and nonprofit heads, you know that their chorus of calls for innovation is deafening. The challenge, then, is to understand the causes of innovation failure and to find ways of increasing effectiveness and safeguarding success.