When we are operating on a mature industry with long tradition of certain products, services, ways of doing business and other industry conventions - especially when business is good, we tend to like things the way they are.
If it's not broken, why fix it, right?
To fend of competitors, we keep on improving our products especially on those aspects our customers value the most, which in turn drives efficiency and pricing. Any new feature or improvement brings competitive edge, right up until it doesn't - the point when competition catches up. This, quite literally, is the life of thousands and thousands of innovative product engineers in the world.
In our focus on "Catch me if you can" game on product efficiency we overlook all other aspects of innovation. Coming from the once promised land of mobile phones, the story of Nokia makes an astounding example. The story of the mobile phone giant and how they lost their incumbent position in smart phones is one that maybe only Kodak can beat in their ignorance of digital camera technology. These stories have much more in common than they have differences.
For innovators, there is few key lessons to be learnt from these stories, both you need to be aware of and to take advantage of, if you play the game right.
The definition of performance keeps changing
Let's start with Kodak since it must be the most recounted story of digital disruption in our time. Did you know that the first digital camera was actually invented by Kodak R&D engineer already as early as 1975? Seriously. They were very well aware of this technology being developed by Sony, Panasonic and other players throughout the ensuing decades but considered the technology many ways inferior to their own film products.
The performance metric that Kodak was assessing its rivals against, was high quality so it makes sense that early versions of digital camera could have not compared with traditional film on any level. What Kodak failed to consider was that maybe their competition saw the customer needs differently.
Sony set out to meet customer needs with a different bet - good enough quality, immediate feedback and ease of sharing. Turns out that people were actually willing to settle for less quality in exchange for being able to see the pictures immediately and being able to share them with their family and friends with a few clicks.
If we keep testing new ideas with old metrics, we are set up for failure.
This changing pattern of performance metric is something every innovator needs to be aware of.
Disruptors play with a different set of rules
For Nokia and other mobile phone vendors for example, the early measurements for excellence besides physical design were very much feature driven, such as battery duration, messaging, camera but also how reliable the phone model was related to connectivity and endurance. All categories in which Nokia was indisputable leader (proven with its > 40% market share).
But then came smart phones that were not feature driven but operating systems driven with integration to email, maps, music, apps and where simplicity of use became one of key performance metrics. Nokia's own smart phone operating system Symbian S60 was a maze compared to iOS (and later Google's Android) which made it both very expensive to maintain but also not lucrative for third party app developers to create content on the platform.
Competitiveness in the digital age relies in three areas, namely content, customer experience and platforms. Apple had already a platform in iTunes and integrating it with iPhone turned out to be a great (and very much planned) strategic move.
So, it was never really a competition between product or technology excellence, it was a competition in customer experience which Nokia failed to understand. It was a completely different game with different performance metrics all along, the other one playing for technology excellence, the other one playing for content, customer experience and platform. For a long time, Nokia didn't take iPhone as serious competition because it was measured against old set of performance metrics. Meanwhile, they failed to see the shift in customer expectations, the changing definition of customer needs.
Instead of watching the competition (too much), you should be watching the market. Following competition is competing in the traditional way. What you want to be thinking about is how to redefine the whole definition of performance and creating your own market space.
Redefining performance starts by understanding users and their needs, and the problems they are trying to solve. But there's a catch.
The market, if left to itself, is always on the lookout for something better, faster and cheaper but not necessarily something new. This is why it is just as important to show the audience the new things we have invented - and to create the need.
So the question becomes: What is the new basis of performance and can we drive this change?
Picking up weak signals
So how do we know? What will be the new definition of performance for electric cars? Personal computers? Storage capacity? Social media platforms? Different value elements are underlined in different times. For example, it's not hard to pick up a fast-growing trend on #sustainability which will after the latest IPCC report shift into a new gear. Inspirational and individual values are in higher demand as machines are taking over many of the productivity value elements.
Different times, different elements, different scenarios. In his book, Transforming Nokia, Risto Siilasmaa advocates strongly for scenario working and playing out different outlooks for a company's future. I agree that in this fast-paced digital landscape it’s best not to limit your options too much.
One of my favorite warning signs is if someone says that something can't be done (or it's too expensive). Because damn if somebody out there isn't already trying to figure it out.
So little paranoia might indeed play in your favor.
For an in-depth account of Nokia's disruption and transformation story, a must read for every transformation leader, I recommend the book by Risto Siilasmaa: Transforming Nokia - The Power of Paranoid Optimism to Lead Through Colossal Change.
For additional reading on different value elements, I recommend HBR article from March-April 2018: The B2B Elements of Value, How to measure - and deliver - what business customers want.