Tuesday, 9 July 2013

The Closing Innovation Gap or "Why Apple won't be innovative in 5 years time"

This is more innovative...

Innovation has always meant different things depending on who’s doing the innovating. Apple’s iPhone, Facebook and a myriad of electronics companies creating ever clearer screens are all considered ‘innovative’ in their own context. However, landing on the moon, the ISS, mapping the human genome and finding evidence of the Higgs Boson are as well, but NASA, CERN and others aren’t going to be front of mind when you ask a consumer to name the most innovative groups they can think of. This is because the scale at which we judge ‘innovation’ has historically always
Than this....right?
depended on who was delivering it. The bigger the organization, the bigger the innovation they can deliver and the bigger the requirement for it to be considered ‘innovative’ by the wider public.

In addition, the bigger the scale of an innovation, the bigger the possibility a normal person on the street won’t see it as relevant to their daily lives. Mapping the human genome may have required going through 3.3 million base pairs (and classifies as a mega project), but the iPhone in a consumer’s hand has changed the way they behaved in the last 5 years.
I’d wager which comes to mind first if asked to describe innovation. The discrepancy between the innovation in the private sector and the wider public sector delivers isn’t necessarily a bad thing for anyone involved (unless you’re NASA asking for more funding) as it has shaped the way both brands behave and consumers choose for quite some time, especially within sectors such as consumer electronics. In short, the gap has caused consumer focused companies to solve ‘smaller’ problems with innovation and the public sector to solve ‘big’ ones through larger resource expenditure.

This relationship can be described as a scale: on one side, you have companies such as Apple, Samsung, IBM, Google and Microsoft, which deliver varying levels of small to midsized innovation relevant to consumers on a regular basis. These companies iterate technological development sometimes and leap ahead others, disrupting both the market and their competition for a time when they do so. On the other side of this scale, you have governments, large research organizations and others delivering large scale innovation at a pace that is slower and less relative to consumers than ‘innovative’ companies. In between these two groups is a gap, which, at least so far in the age of computing, has separated these segments as a nearly impassable barrier.

This ‘innovation gap’ kept companies from going too far away from the consumer; as resource, business risk and time frames meant that feasibility tied a private company’s ‘innovation’ to the consumer and what the market would 'bear’. If a company goes just far enough from the market at the right time to disrupt with innovation, you have Apple making the iPhone; go too far and you have the Newton (apologies to the folk(s) still using these) or the 3DO (feel free to swap with the Atari Jaguar). Companies aim to place products as close to the 'gap' as possible, using communications to maneuver slightly and outpace the market in both product and perception. Alternatively, the public sector, to varying degrees, operates on a mission to only solve the ‘big problems’ on the other side of the gap, mostly because no one else is  seen to be able to innovate on that scale.

In recent years however, technology, government funding and changes in the culture of organizations
Let's see how many people doubt the moon landing
when you can go to low earth orbit on a consumer flight...
have seen this ‘innovation gap’ being closed. One only needs to look to SpaceX as an example of a tech company going out to solve problems that 10-15 years ago would have been clearly across the gap. While this may be a confluence of government bringing these organizations across and technology making new possibilities more accessible, such as in the case of Virgin Galactic, companies squarely associated with the consumer market are raising the bar on innovation across the gap.

The example of consumer opportunities around space travel begs the question, “How innovative is being a smart phone maker, when Virgin can shoot you into orbit and SpaceX is edging towards the Moon and Mars?” Space travel by Virgin is much more relevant to the consumer than it was when NASA did it and illustrates the risk and opportunity facing many tech brands today. Brands are doing bigger and bigger things, closing the innovation gap each time stories of their successes get out. Spacetravel, wearable computing and others are being driven by the private sector and will continue to up the ante on ‘innovation’ that is not only relevant to the consumer, but delivering the future they’ve long expected.

So why is a bridging perception of ‘innovation’ dangerous to consumer brands? The halo of being an ‘innovative’ company can be the lifeblood of a competitive advantage outside of the product itself, especially for tech companies. Competing on features alone is costly and dangerous, meaning brand is a vital tool to build. No one wants to buy old technology and buying from an ‘innovative’ brand speaks to the consumer’s perception that they will get a reasonable amount of time before obsolescence from the product and thus value for a premium.

Never bring an iPhone to a "balloon powered internet" fight...
The earlier space travel example may not illustrate a direct threat to Apple or Samsung’s dominance of the mobile phone market for example, but it does speak to the ethos of similar organizations that could be. Google [x], producers of the self-driving car, glass and more recently, project Loon are part of a direct competitor to Apple and while Google’s phones themselves don’t bear much resemblance to the tech featured in many moon shot projects, they do help to build the company as a brand that is innovative in a way that is bigger than competitors. This combination model of reality focused tech provider and future facing tech leader speaks to the way brands can build a perception of ‘innovation’ in years to come. Keeping one eye on ‘reality’ (as well as iterating current products at the pace of the market) can work in concert with doing ‘bigger things’ as a brand to speak to an organization’s thirst for innovation. Together this set-up uses a big vision, substantiated by long term projects featuring  less consumer relevance, as a sort of ‘halo’ product, speaking to the quality of more tangible, but less innovative, iterative products currently available.

Its advances like this that support the claim that a company like Apple won’t be seen as  ‘innovative’, at least in its current format, in 5 years time. Apple represents one of the best examples of how tech companies currently do business and why this will have to change as the innovation gap closes. Apple’s model is largely built on iteration after the initial launch of a product, as seen with the iPhone. While the phone itself initially laid out a clear consumer shift towards smart phones, the following models have had relatively incremental upgrades. Features such as Siri, Retina Display and the App Store were, for their respective launches, ‘innovative’ by today’s market’s standards. However, when we hold them against what companies with larger ambitions are doing, these features begin to seem much less ‘innovative’. The growth of competitor market share in Android and to a lesser extent Windows Phone also highlights how iteration alone begins to erode an ‘innovative’ perception over time. As shown similarly with the iPad, an initial dominance of a segment, in this case tablets, has been eroded by competitors entering and replicating iterative feature releases. One can wonder how minor improvements on a product yearly will stack up against a competitor that makes a similar phone and has taught a car to drive.

It is this competitive pressure, coupled with the increasing bar for ‘innovation’ that will force companies such as Apple to change if they wish to maintain an ‘innovative’ perception or shift to  succeed completely on other merits. While these brands can handle the more ‘realistic’ side of the business well, using various levels of iteration, they must work on using the organization and communications to tell a bigger story about where the brand is going. These two factors together, smaller tangible innovation and long term ‘big’ brand innovation will begin to bridge closer, but can combine to provide a competitive perception in both the short and long term.

To do this however, especially in consumer electronics, companies must change the way they tell stories to consumers about their R&D and products. Long term roadmaps shouldn’t be hidden as competitive advantage, but instead celebrated as ‘moon shots’ in where the company states their role in moving technology forward over the next 10 years. Brands that have the capability to start to develop the ‘big innovations’ that position them as ‘thought leaders’ for the future should, safe in the knowledge that the risk of revealing these ideas and experimenting openly will be the cost of business going forward.  In our Apple example, one can only wonder what the brand’s story could be about the future if it took a similar approach to more publicly developing it and going forward, this may be the required case. To reiterate from earlier, its not that Apple won't be making great things in 5 years, but given the changes in consumer perception, the company's culture of secrecy around a roadmap will have to change to maintain their brand image. The developer's conferences of old which served as reveals to the world of new found products and brand direction must give way to becoming continuous points in a journey of innovation, not discrete surprises.

Finally, while every brand isn't Apple, this theory works for any that get by on the perception of 'innovation'. Not every brand has to promise to put someone on the moon in 20 years time, but they  should strive to make the same equivalent claim for their product sector if they want to keep up with the rising tide of ‘innovation’. Most every brand can tell a big story about doing big things if they want to, the challenge is doing it in a way where people will listen.