By Stephen Day
In the late 1800s and just after the turn of the 20th century, the most technologically advanced company in every town was neither the electric company nor the telephone company. It was the ice plant. Really, every town had one. It had changed the way people lived. For the first time, vegetables and meat could be kept for long periods and even shipped by rail or truck to distant towns, usually no more than 500 miles. At first, blocks of ice were delivered to each house a couple of times per week by horse and wagon. Later, small trucks replaced the horses. The ice plant owner had a lock on an essential necessity for every grocery, food distributor, and every home.
“If at first the idea is not absurd, then there will be no hope for it.” -Albert Einstein
So what happened to the ice plants? They failed to recognize what business they were in. Oh really? Weren’t they in the ice business? NO!!!! They were really in the business of keeping food cold. When the first refrigerators came to market, the ice plants refused to recognize the future. Most ice plants were offered the dealership for the first refrigerators but they refused. No one could afford these new electric ice boxes. What an absurd idea.
Think about Kodak. If you are older than 40, you will remember the term “Kodak Moment”. Kodak was one of the great companies in the last century but new technologies caused them to lose focus on their mission. Did you know that Kodak actually was developing a digital camera in the 1970s? But the management dismissed the concept because it would be a threat to their film sales.
Kodak saw the rise of the digital age, and refused to change their company. With their legacy of photography, one would assume that they could have continued to be a dominant player in the space.
Later, Kodak would file for Chapter 11 because they tried to protect their legacy film business instead of being the change force in how images are created and used. Kodak still survives but not so much in their traditional business. Kodak had to recreate itself.
We have many examples of companies that failed to innovate. Often, as with Kodak, there was such a strong legacy of products that it was inconceivable that anything could replace them. But when was the last time you saw anyone buying film in a CVS? Not lately, I bet.
Let’s talk about some others that we all know. In the early 1980s, Macy’s was approached with a bold idea. Why not start a cable television channel selling their merchandise? If we look at the pure logic, it made great sense. Regardless of how many stores Macy’s had, the chain could not be everywhere. But Macy’s said NO!
So a little company called QVC was started instead. Now QVC is a major competitor to Macy’s. I know everyone in this room has seen QVC on their televisions at home. But why are they so successful? Macy’s insisted upon the customer going to their store, usually in a mall with dozens of other stores also selling similar merchandise. One can only wonder how many other stores “stole” the potential sales from Macy’s. But Macy’s, like most retailers, were in love with the whole traditional store concept.
What did the QVC do? Instead of forcing customers (mostly women) to shop in a store, the store literally came to their homes, via the QVC channel. Macy’s thought they knew their customers well, but they did not know the millions of others who did not shop there. Nor did Macy’s consider the millions of women who did not like shopping at all. What about the millions of women over size 12 or 14 who mostly disliked shopping, especially when they had fewer selections in larger sizes? Add to that the sulky young, slim sales people in the stores, who often treated the larger or older customers with less than warm respect.
Here came QVC. Not only did they eliminate the trips to the mall, but they also had larger sizes of major designers. If the customer received the product and did not like it for any reason, they could return it ….no questions asked. And guess what? They even had normal-sized and plus-sized models. Often the designer was actually pitching the new clothes, and would chat with the call-in customers.
What we are discussing, is not selling dresses but a complete new business model that identified the needs of all the potential customers and found a way to meet those need. What we are discussing is INNOVATION.
Recently, Macy’s announced that they are closing 100 out of their total of 635 stores. That is 15%. Why? Because they say they are trying to adjust to the changes afforded by shoppers buying from the web.
Terry Lundgren, the Macy’s CEO, says that Macy’s is the 3rd largest online retailer, close behind Amazon and Wal-Mart. Yet, he insists that shoppers prefer to shop in the bricks and mortar stores. Is he correct? Or is he keeping to the same old mindset that most retailers have had for years….that the store is EVERYTHING. Time will tell. Macy’s did not really understand what their business was…to sell merchandise wherever the customer was.
Here we are in Texas, home of the most prestigious department store in the USA…Neiman Markus.
Back in the late 1990s, at the height of the internet boom, the Washington, DC metro area was second only to Silicon Valley for dot.com startups. I had an office in a tower that was adjoining the Tyson’s Galleria Mall.
One day, the general manager of Neiman Marcus in the Galleria invited me to meet his boss. It turns out his boss was the CEO of Neiman Marcus from Texas.
We went to lunch at the adjoining Ritz Carlton, where we chatted about the new wave of internet companies. I asked the CEO about how his website would affect his business. He told me that they had no intention of launching a website anytime soon. And if they did, it would be much later, and then only to drive people to the store.
Again, another bricks and mortar store executive who failed to innovate.
Later on, Neiman did add a website but by then, the CEO was long gone. One cannot easily estimate how much revenue was lost by the failure to innovate.
Let’s chat about one of the most respected brands ever…NATIONAL GEOGRAPHIC. Fox took them over for $750M, far less than the value of 4 years of their cable revenues.
Their mainstay, the prestigious yellow National Geographic magazine was continually losing subscribers and their cable channel was well regarded, just not profitable. Where did NG go so terribly wrong?
In the 1980s, a group of television producers and some investment backers visited the management of National Geographic at their office just a few blocks north of the White House. The producers pitched an idea for a new NG cable channel, using the huge stockpile of films and mountains of research that NG had accumulated. NG was just not interested, as they were focused upon their traditional magazine featuring their renowned explorers.
So these visitors got into their car, drove up 16th Street to Silver Spring, MD and rented offices there. Because National Geographic could not see the potential in a cable channel, the Discovery Channel was born, along with the History Channel and others. In 1997, NG launched a cable and satellite channel but it was too little, too late. By then, the Discovery Channel was in thousands of households, and today the NG channel is only second in viewership but much less in revenues.
Please understand, I am NOT an innovator, nor a scientist, nor a researcher. Yet, through my companies, Day Capital Partners and FundWorks, I get to meet people like you…..some of the smartest people on earth. In places like NASA, and research institutions and universities and companies like you represent, I meet lots of folks who I consider just plain brilliant. You are the people who develop solutions to problems. Some big problems, some small.
What I most love is hearing from people who think about serious global problems and come up with creative solutions. That is how I define INNOVATION.
I am guessing that many of you have had bosses, or senior management or Boards of Directors who dismissed your ideas. The world does not accept new ideas so quickly….especially if those ideas might cause your revenues to end.
How to Get Your Innovations to Be Accepted
“You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.” -Lee Iacocca
Let’s talk about what factors hold innovation from being accepted. Use the three questions below as a check-list.
1. Does the CEO, the CFO, and the Board understand how this will enhance your company? If not, why not? Did you sell it?
2. Have you developed a commercialization plan for your innovation?
3. Did you develop a PITCH DECK?
Transforming a Traditional Company into Innovation Leader
“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” -General George Patton
Here are some areas where strong, visionary leaders can transform a
company into an INNOVATIVE Enterprise:
1. Create a culture that allows people to try out new ideas and treats failure as a learning experience
2. Consider each business unit as an internal venture
3. Reward the best ideas, especially when they come from the bottom up or from customers.
“I have not failed. I’ve just found 10,000 ways that won’t work.” -Thomas Edison
Share the Innovation
Here is an idea that some of you may find surprising…..Once you have the IP secured, offer it to the public. NOT FOR FREE, of course. But certainly issue a press release describing the innovation and request proposals from interested parties. Urge prospective licensees to present concepts on how they would commercialize your innovation. Offer a cash prize. You and your company might find your innovation has many more uses than you suppose.
If these proposals have merit, why not allow the licensing to other companies in other industries? Not only will your company look great and progressive, but you will raise the esteem of your management, your Board of Directors, the company investors and your colleagues.
Perhaps the innovation that will make the strongest impact will not be the technology you and your team developed. It may be the cultural change within your company when you demonstrate how your team can bring new products or technologies to market.
Now that is INNOVATION!