Young Adult: The Product Competes to Grow
The emphasis at this stage shifts dramatically from the genius of the individual or the inventor team to systems — process skills, social skills and networking skills, writes Gopalakrishnan
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This is the young-adulthood phase of the innovation. At this point, a concept has been articulated as an idea and a prototype has been developed to demonstrate this idea. Several alternative models of the prototype have been tested as best as possible and specific models have been productionized for the market. The product as well as the business model (its target customers, how those customers will be reached, the pricing, delivery of after-sales service) have been designed and are ready for implementation. In biological terms, it corresponds to the young adult, who is ready to start on a career with all the education, grooming and preparation of the past several years. The emphasis at this stage shifts dramatically from the genius of the individual or the inventor team to systems—process skills, social skills and networking skills.
The product that has been designed must be repeatable in quality and must be delivered to the customer in a reliable way. An American food company has demonstrated how a relatively ‘simple’ innovation could be industrially engineered and processes perfected, so that these become competitive advantages: McDonald’s.
McDonald’s is among the largest food companies in the world today, serving 70 million customers every day in 120 countries. The business began in 1940, opened by the two McDonald brothers. It was a drive-in restaurant where consumers could quickly pick up a hamburger and a milkshake for consumption in the car. They used known assembly-line production techniques to deliver tasty hamburgers of a good quality on a consistent basis.
The company soon transformed into a global company (almost joining Coca-Cola as representing Americanism during the Cold War years). I visited and spent a fair amount of time with one franchisee in the mid-1980s.
The big innovation and breakthrough came with the business model. The company had a process manual for every minute operation so that repeatability and consistency were assured. How could a hamburger be delivered, hot and tasty, in a target time from the placement of the order? How could the decor and look of a store be standardized, irrespective of whether the store was in the American Midwest or Beijing? How would the brooms be applied to the floors, how would the cash counters complete their task efficiently, how would the restrooms look clean and practical? Every aspect was industrially engineered and converted into a process manual, and every franchise employee had to attend training programmes at what the company called the Hamburger University!
The company’s growth and profitability was evidence of how an apparently simple product could be innovated through its business model, giving the company years of competitive advantage.
Two start-ups: A contrast
I had direct involvement with two start-ups during the latter part of my career. Each one of us dreams of being Steve Jobs or Elon Musk (with their attendant foibles), but most innovators end up with the weaknesses, not the results, of these great innovators. I have observed and been involved at close range with two start-ups: let’s call them MCo and ACo. Neither has so far turned out to be of the ‘change the world’ variety, but the behaviour and performance of its leaders were different. MCo and ACo had similarities: both were ten years old, attracted similar amount of equity capital, were research-based start-ups and hence were facing the challenge of timing. MCo achieved positive profits within five years, whereas even after ten years, ACo was struggling to achieve positive profits. MCo had an estimated equity value of 5x, while ACo struggled for even a par-equity value. What differences did I observe?
The successful venture, MCo, took a measured approach and spent money cautiously. It crossed the river by feeling the stones, to borrow a Deng Xiaoping expression. The founders were collaborative by nature, they paid themselves modestly, travelled with tight budgets and set their sights on multiplying their longterm share value. They postponed gratification, focused on execution, abhorred debt and were respectful enough of business principles to target positive profit and cash flow.
The ACo leader came through as a slick salesman, full of flamboyance. Even after a few years of missing budgets, the founder could not admit to inadequacy in execution. Company officers were paid competitively and travelled comfortably. The founder periodically looked to the funder for more equity. There was an element of narcissism—which means ‘success mine, shortcomings others’’ type of high betting on the future fruits of research, without planning for a downside. Positive profit and cash flow seemed to lurk around the corner every year, but somehow they did not arrive.
Both of these cases—ACo and MCo—illustrate the importance of business process skills and discipline in the young-adult stage of the innovation.
An exposition of social skills in a book on ideas and innovation may seem antithetical to some readers. Notwithstanding such an impression, it is worthwhile to emphasize that it is an essential part of innovation development. Ego trips, the inability to listen and building collaborative relationships are important during this phase of the innovation journey.
Humility Vs narcissism
Narcissism is a good thing in small doses. The limits that make it dangerous are undefined. Narcissism can become overpowering to the point of focus on the self rather than the task, and of dreaming of ideas rather than execution. An idea is merely the mental equivalent of a newborn baby.
But the miracle of birth is just the beginning of yet another hazardous journey. Some of the hazards are externally induced but some are genetically encoded; these become a part of the human personality. In management jargon, these are called ‘derailers’ to connote hazards that can derail an otherwise sound leader. One of the greatest dangers to the continued promise of an idea is the innovator’s obsession with himself or his idea. The innovator inadvertently becomes Shiva, the potential destroyer of his own idea through narcissism and inattention to execution.
William Shockley: Brilliant but impossible
I first read about William Shockley when I was an undergraduate engineering student. Along with two other scientists, he had won the Nobel Prize for his work on transistors just a few years before I was deciding what to study further. Of course, I knew nothing about Shockley as a person, but his accomplishments as a scientist were certainly inspiring to me and were an influence in the choice of electronics as my main subject. I learnt more about him later in my life. I was fascinated to read that Shockley, a brilliant scientist, worked at Bell Labs. Along with John Bardeen and Walter Brattain, he worked on introducing non-electrical conducting material with germanium and silicon to establish that it could be a conductor. This laid the basis for the transistor revolution and the chip revolution. Shockley went on to establish his own company in 1953 so as to gain commercial benefits from is invention.
Shockley was as brilliant a scientist as he was a poor manager. He arrived in the Bay Area with every chance of high success. He first rigorously interviewed and assembled eight fine, upcoming scientists. Among them were Robert Noyce, Gordon Moore and Andy Grove, who felt greatly honoured to be recruited by a famous scientist in his company, Shockley Transistor Laboratories, to develop transistor technologies. What they found was that Shockley turned out to be paranoid, contemptuous of subordinates and hugely arrogant. He was a tyrannical boss and such a poor leader that each of the eight people working there walked out of the company. They set up Fairchild Semiconductors and, subsequently, Intel Corporation.
Shockley was pig-headed in many matters and he treated these bright, young people with scant regard. He behaved as though the eight were trying to undermine him. When, in frustration, all eight walked out, he called them ‘the traitorous eight’. When he was ousted from his own company, Shockley joined the Stanford faculty. He became interested in distracting race matters, dubbing African-Americans as less intelligent than the Caucasians in the population. He was called a ‘Hitlerite’ by a reporter, and that remark caused him to get into a libel suit.
Shockley won a symbolic amount of $1 as damages, but his reputation was in the mud by the end of the suit. Shockley died of prostate cancer in 1989, almost completely estranged from all his relatives and friends. His children reportedly learnt of his death through the newspapers.
--Excerpted with permission from Penguin Random House India