From my article originally published in "Gazeta do Povo" on 23/02/2019
The fourth industrial revolution – marked by the confluence of different technologies such as artificial intelligence (AI), 3D printing, the Internet of Things, among others – has left CEOs with their hair standing on end when it comes to innovation, because never before has the world seen such a disruptive process of transformation of businesses and entire companies. At the forefront of this discussion, what is most debated today, especially within large companies, is how to innovate. There is no doubt that it is necessary to do so, but what are the paths available to get there and by which one to follow? A good way to start is to look at the four strategies used by phenomena like Apple, Google, and HP:
Form 1 - Copying someone
This is the most popular method. It may seem simple, but the model can still work very well when it comes to saving time and surviving, especially in markets with a high degree of commoditization. The secret here is the famous "cat hop" in product development – copy, but do it differently and better, which can be characterized by a superior business model, price or customer experience for example.
The examples here are numerous, but I really like to mention Mercado Livre which was an adaptation of e-Bay for the Latin American market. Joining this list are hits like OLX and Despegar, Latin twin sisters of the American Craiglist and Expedia, respectively. Features that Apple introduced in the iPhoneX, such as the borderless screen, facial recognition and wireless battery charging, already appeared on the devices of its competitors such as Samsung.
The tip here is if you are going to copy, do better of what already exists in the market and adapt to the specifics of the local public.
Form 2 - Merger and/or Acquisition
In the first half of 2018 alone, US$ 2.5 trillion in mergers and acquisitions were handled globally, in the most varied sectors ranging from entertainment and healthcare to finance. Such acceleration is due to the threat from technological disruptions that have overwhelmed entire industries. The analytics and research market, for example, has never been hotter. In September, SurveyMonkey went public with a 42% jump in market cap in the IPO. In November, SAP announced its purchase of Qualtrics for $8 billion. It's an exceptional value for a research firm. But it's all worth it, because at the heart of the purchase, SAP seeks to get closer to the CRM and insights market.
When companies wake up and understand that they can no longer fight with new market players or even dethrone major brands in areas crucial to the survival of the business, it is time to attack and go shopping. Maybe Blockbuster would have had the opportunity to buy Netflix in its origins, but it didn't. Many traditional retailers have seen Amazon's mind-blowing growth and done nothing while there has been time. Mergers and acquisitions to work need to be executed early and require an enormous amount of humility for executives to recognize that the future no longer depends solely on creative geniuses at home.
When Brazil's Movile bought iFood many questioned it, but look where that has gone: an additional $400 million has been invested by the current funds, creating a potential to take its valuation to $10 billion. The great secret to an excellent acquisition is the preservation of the values and culture of the acquired company. Many companies when they acquire another tend to stifle it, forcing an integration of culture and product unnatural and that, in many cases, leads to acute failure.
Apple's famous SIRI — one of the first voice assistants to become popular on the market — is not an in-house creation, but the product of an acquisition of a small Silicon Valley startup called SIRI whose technology was incorporated into the iPhone 4S at its launch in October 2011.
The model practiced by Amazon when it acquired Zappos years ago and that of Microsoft when it acquired LinkdeIn are examples of how a company can grow and innovate in new markets while maintaining independent brands and operations after a major acquisition.
Form 3 - Organically
This is the process where companies understand that innovation and reinvention must happen within the company and triggered by the team itself. The big secret here is how to do it or even how to perpetuate this transformative DNA over the years. That starts with culture. Companies that hire and promote based on the ability of people and teams to evolve their products and services are always ahead. A business that sees the self-cannibalization of its products as something positive – when the company itself kills its products, it is the company that is dictating the pace of the market and not its competitor – ends up being at the forefront of its industries.
Apple (with the entire iPhone lineup), Google (Ads, Chrome, Self-Driving Cars) and HP (2D to 3D Printing) are perhaps still the greatest exponents of this culture. The culture must contain a powerful and transformative vision of the world, capable of attracting great talents that will lead companies to high performance when the subject is execution and innovation. Another great point to be addressed for a company to have a strong innovation agenda is people. That's because innovation doesn't fall from the sky.
It is first necessary to transform the business, which requires a cadre of highly motivated and organized people in order to collaborate to the maximum between the areas. And what is more important: people who are humble and able to learn to unlearn. As important as creating and learning something new always, it is also accepting that unlearning is necessary to break outdated paradigms and strategic visions that no longer work. Perhaps this is the biggest obstacle within large companies. Corporate arrogance covers the eyes of leaders who, once in the spotlight, lose their ability to listen and accept that the new can come from anywhere and from anyone.
Form 4?
It is worth as a conclusion to this reflection. It is one in which the above three modes are not mutually exclusive, but rather capable of being combined partially or in their entirety as a strategic model. That is, depending on the market, timing, availability of capital and competition, companies can copy, buy or even innovate at home. Most important is the view that, no matter what you do, yesterday's products and services are no longer a guarantee of tomorrow's success.
Innovating was costly in the past. Today, two founders with a PC, internet access and vision can attack any business and get it to the canvas in the blink of an eye. What will you do so that yours is not the next victim? Figuring out the right answer to that question is always your next challenge. Do it while it's time.
ABOUT THE AUTHOR:
