The Canadian Innovation Exchange (CIX) recently announced the most innovative companies in Canada, so what better time to write about innovation. In the world of tech startups, the idea of pioneering a radical innovation that disrupts an entire market is often held up as the ultimate trademark of a successful entrepreneur.
Certainly the biggest entrepreneurs of our time—Steve Jobs, Jeff Bezos, Mark Zuckerberg—have revolutionized our lives. However, the nature of that revolutionary change is often more evolutionary than we like to think, or choose to recall. With the exception of Elon Musk, most successful innovators are in fact making incremental changes, borrowing and improving upon other people’s ideas, and transferring knowledge and process from one industry to another in order to fuel the next technology revolution.
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Take a company like Google, which has been lauded for their “20% time,” which encourages employees to spend one day per week working on innovative new ideas. While Google is pushing the technology envelope with Google Glass and self-driving cars, neither its core business of search nor its economic engine—cost-per-click search advertising—were ideas original to the company.
What Google did was incrementally improve on existing search technology pioneered by companies such as Inktomi and AltaVista, and a business model it borrowed from Overture. For those who may not remember the era before Google owned search marketing, it is amusing to read this analysis written by search engine expert Danny Sullivan at the time Google introduced its CPC model.
As you can see, 12 years ago it was hardly a foregone conclusion that Google would be the dominant force it is today. They got there by continuously improving their search capabilities, to attract a greater share of searches, and their AdWords platform, to make it easy for businesses of all sizes to advertise online.
Some mistakenly believe incremental innovation means small change, and therefore dismiss it as not “thinking big.” But incremental really means a series of gradual improvements, which can ultimately lead to a rather big step forward.
Think about the original iPod, which was arguably a marginal improvement over the Diamond Rio, the largest selling MP3 player at the time. Apple continued to innovate the form factor and then, of course, introduced the real breakthrough: the iTunes store, which made it easy to purchase music for your iPod. But the iTunes store came two years after the release of the first iPod.
I recently joined SoMedia Networks and it has been exciting to see how the company first innovated the video production process and is continuing to innovate to provide more integrated video solutions demanded by businesses. The traditional process of video production is quite complicated, and producing a large volume of videos in multiple locations was previously next to impossible. Using technology to manage a distributed workforce of videographers, and a good deal of process automation, we have been able to make a lot of incremental improvements that together create a radical new model for video production at scale, with high levels of quality control.
For years investors have been pouring money into companies solely based on the theory of “first mover advantage.” However, the data on pioneering innovation is mixed (here’s the full research for the academics in the crowd) and there is a strong argument to be made for being a “fast follower” that incrementally improves upon a product or business model.
In Silicon Valley lore, the story of how Apple developed the original Mac graphical user interface and mouse based on what Steve Jobs saw at Xerox PARC is legendary. It is also a terrific example of how being the first to develop an idea or product is not nearly as valuable as being able to successfully market and sell the innovation. Apple has proven this time and again with personal computers, MP3 players, mobile phones, and tablets, none of which were invented by Apple.
Facebook is another counter-point to the argument of first-mover advantage. Facebook was not the first social network (Friendster has that honour) or even the second (Myspace), but it emerged the clear winner. Moreover, one of Facebook’s most defining product innovations—the News Feed—is an idea it borrowed from FriendFeed, a company Facebook eventually acquired. The FriendFeed-Facebook story is a good example of one company’s entire business becoming a mere product feature within a larger platform. This is often the case with successful technology innovation.
At SoMedia we’ve recently expanded into the realm of video players and video analytics, where several competitors already exist. Other companies have made video players or analytics a stand-alone product offering. Because of our roots in video production we are in a position to develop innovative ways to use these tools to actually produce better video content. This is something we are uniquely able to do by making incremental improvements to an existing product category and overlaying our business model.
When we look back at companies that have revolutionized an industry, we must dig deeper to examine the process by which they got there. Often times we will find that what we perceive as radical change was in fact a series of incremental innovations.