8. Who Rocks at Market-Creating Innovation?


10. What Makes it Hard for Some Companies to Come Up with Their Next Act?

Participant comments on 8. Who Rocks at Market-Creating Innovation?

  1. It seems like many of the companies succeeding with MCIs are also the companies who have launched several unsuccessful products. I think of Google (Glass and Buzz), Amazon (Fire Phone), Corning (Several products and processes that were developed, shelved, and reselected for new applications), and Apple (launched the Newton tablet in 1993, 17 years before the iPad took off).
    Perhaps the volume of product launches as important as investment time horizon and patience. Larger public companies have the resources to compete on volume, but a newly formed small or medium sized startup would struggle with this if the first launch goes poorly. What should a startup company do to recover from a failed MCI and re-invest in a successful MCI?

  2. Big Scary Threats seem to have contributed to a few great MCIs– signals intelligence and missile technology to mitigate the Soviet threat in the early tech ecosystem and nuclear war for ARPAnet. I think we need that pressure–or something similar like a burning unmet need–to shake us up and get innovation moving away from safer, efficiency focused goals.

    1. Great point, Gavin…and definitely an important topic to explore further would include how government funding and government policy have impacted corporate strategy through time. Have the innovations spawned by government-sponsored programs generated enough value relative to the size of those programs/investments? Has there been a noticeable downside where governmental actions have steered capital or innovation focus away from the best opportunities? This is definitely an import issue when considering much of the innovation at Bell Labs and in the defense industry, for sure.

    As a company that didn’t stop at the online bookselling business, and continued on to become a leader/major player in general online retail, e-books, and recently TV shows/entertainment, Amazon has demonstrated that it is possible to replicate an initial MCI success. It is certainly recognized as a company that does not seem to be as hung up by internal barriers and fears of uncertainty as it “should be”, given its size and age.

    Jeff Bezos said in a shareholders letters yesterday that “Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow.” His advice is that one should be able to make “high-quality, high-velocity decisions” like a start-up. “If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, ‘Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?'”

    1. From FT this morning:

      “Like Mr Zuckerberg, who famously urged his workers to “move fast and break things”, the Amazon boss has turned speed into an obsession. Sometimes, he says, it’s better to make any decision — even the wrong one — than spend too long trying not to make a mistake.”

  4. I believe that many of the ‘base of the pyramid’ healthcare innovators in India are introducing a number of market-creating innovations by radically expanding the accessibility of medicine relative to Western MNCs. Recently minted billionaires like Kiren Mazumdar-Shaw are introducing ‘appropriate technology’ that’s both disruptive and market-creating. There are several more nascent examples like those listed here: . The Swasthya Slate holds promise, as does Jana Care. Jaipur Foot has already succeeded in creating a large national industry at least. Companies like Medtronic and GE do create MCIs through their India-based divisions, e.g. Micra TPS and Vscan ultrasound, respectively, but they fail to commercialize these technologies disruptively on a global scale for reasons of the Capitalist’s Dilemma. Sussing this out in interviews w/ them could be fruitful.

    1. I’m glad to see you addressed healthcare, Austin. Disruption and innovation in healthcare are of particular interest to me. It’s somewhat telling that the innovators you list are almost all India-based. It leads me to ask, could the MCIs in India be possible in the U.S. given the culture of healthcare we have here? Culture and market-creating innovation are inextricably linked. It seems a lot of healthcare innovation is stymied in the US, not so much by safety regulation (as the FDA and safety regulatory agencies are often accused of being too lax), but by 2 other factors: 1. A seemingly ingrained culture of aversion to anything that resembles socialized medicine, and 2. Conflicting ideologies within bio-ethics. While I feel it’s crucial to properly look at bio-ethics when talking about healthcare, I also feel that perspective is often skewed politically and therefore not applied objectively enough to gauge the true social benefits of a healthcare innovation. For example, I recently heard about a potentially game-changing innovation to treat severely premature births; very premature babies who, if they beat the odds and survive, often incur severe, chronic, and debilitating health issues. A new medical technology has been successfully developed to mimic the womb environment as much as possible and enable prematurely born infants to continue normal development outside of the mother’s body. The animal testing that’s been done reveals premature births placed in this artificial womb and developed to term result in near perfect health. However, the innovation could be slowed or halted due to a host of bio-ethics (could legislation arise to use this technology on aborted fetuses, could employers view this as an alternative to women needing maternity leave, etc.) So my question is, does culture in the U.S. contribute specifically to the failure to commercialize disruptive technologies in healthcare here?

      1. I think it does, Farsh. In BSSE we talk about how culture arises from repeating the same thoughts, practices, rituals again and again with some success. Western medicine has been remarkably successful by certain measures, and the FDA for all its problems is still considered the regulatory gold standard internationally. The protocols and algorithms of medicine have been developed over many, many years and medicine is an apprenticeship system that’s conservative because of the difficulty of mastering these protocols and algorithms, as well as the underlying science. The bio-ethics you mention are also conservative for a host of reasons.

        This all sets up a high bar for disruptive innovations to succeed, but many are. Medical wearables are a good example. Omada health for diabetes care is another. Telemedicine is another. Most of these innovations are taking hold in diagnostics at primary care as Clay predicted in The Innovators Solution. A recent article by Atul Gawande highlights an effort by one of the incumbents (a neurosurgeon) to plead for a change of culture to accept, reward, and elevate primary care in American medical culture: . I think there are many more clues in the article about how traditional U.S. medical culture can contribute to failure to commercialize disruptive technologies.

        But the two biggest factors I’d point to in answer to your questions are CMS fee-for-service reimbursement, and the FDA regulatory approval process. The first skews incentives towards traditional protocols with codes for reimbursement, and the second sets a high financial hurdle for even entering the market even before a company has found product-market fit.

        1. First, thanks for referring me to the article! A great read. I found the article contextualizes much of the Capitalist’s Dilemma and BSSE theories within healthcare really well. By looking at the “true” value vs. compensational and social values of “incrementalism” (long-term investments) vs. those of “rescue” medicine (“high-yield” immediate gains), it also addresses the problem with resource allocation, another significant factor contributing to the failure to commercialize disruptive innovations.

          Very interesting point about CMS fee-for-service reimbursements. There’s an argument that CEO and investor incentives need revision if long-term sustainability and more qualitative yield are true goals. As in healthcare, industry culture and incentives as whole in many industries need review if traditional, recurring problems are to find solutions beyond band-aids.

          With regard to the FDA and to your point, many disruptive innovations (wearables being among the most exciting and accessible) are indeed succeeding with a high entry bar (which healthcare seemingly should have), so does the FDA regulatory approval process need significant or any correction to benefit the marketplace?

          1. Glad you enjoyed the article as much as I did. Re: FDA reform, I’m certain that their approval processes could improve in ways that would better facilitate disruptive innovations. To give them a fair shake, they are bringing in new talent and leadership that just a few years ago introduced a new approval process for “Mobile Medical Applications” (things like wearables and apps to help manage chronic conditions), and here are the guidelines they released about their expedited approval process for such technologies:

  5. I wonder if some NGOs fall within the scope of market creating innovations.
    For example, the Akshaya Patra foundation is an NGO that created and operates massive production operations for hot foods to serve at schools and convince children to go to school in India.

    First, the organization creates jobs by investing in large-scale manufacturing equipment and operations (see here for some of their production innovation, and hires a whole staff associated with engineering, running, and supporting this fresh food manufacturing. Simultaneously, my sense is that in its locations, the following chain of events starts to happen:
    Nutritious food produced much more efficiently –> Meals available to children that would not ordinarily be able to get them –> Children that couldn’t go to school before start going –> Children get education and gain skills to get jobs –> They are trained to fill jobs.
    This would be longer lasting job growth.

    If this foundation were to measure job creation in the same way some of the large tech companies do, with the jobs it creates directly + jobs it creates indirectly + the job economy it creates, my guess is the numbers would be huge. Thoughts?

    1. This is really interesting, because previously we viewed the empowered employment (what you’ve called “job economy”) enabled by MCIs to be a case of customers using the MCI to create their own jobs/businesses (e.g. customers of smartphones/app stores creating their own businesses by becoming app developers). In the case of this NGO, it seems like there is no clear customer who takes the innovation to create their own jobs, but instead the NGO’s mission itself enables children to enter the workforce. It’s an example that doesn’t quite fit into our current framework.

      Along those lines, while I think this is an amazing and certainly admirable organization, but I am not certain if this counts as a market-creating innovation based on a set of criteria that we commonly see in MCIs. To run it through the criteria below:

      – Does it democratize something that’s only accessible to the rich and skilled? – Not directly, but it brings food and education to those who were previously “denied access to education because of hunger.” (Source: website)
      – Does it create a new value network? – They boast of a customized distribution system and scalable design, but I don’t know if this counts as a new business model, per se.
      – Does it empower customers to create something of their own? – If you count education and its empowering effects as a direct consequence of this business, then yes.

      As I mentioned above, I’m not fully convinced because the NGO’s product doesn’t quite fit into this framework. It could certainly be the case that it’s an anomaly that we should consider revising/expanding our framework for.

      1. Thanks Nate – breaking it down into the three separate criteria makes a lot of sense and I agree that the business model is where it doesn’t fit the definition as well. It creates more supply of employees but doesn’t necessary cover the market side.

        Revisiting the set of criteria also makes me wonder whether MCIs always start as MCIs or whether they must first be successful performance-improving or efficiency ideas so that they empower customers to create something of their own. For example, Corning’s Optical Fiber started as performance improving before it became market creating.

  6. I would recommend to talk to Joi Ito, director of the MIT Media Lab.

  7. SpaceX. Despite their growing pains, they are continually pushing the envelopes of efficiency and performance innovations to create NMIs in the commercial application of space. They are essentially re-creating the Apollo Space Program. And look at the tremendous number of NMI markets that opened up. Did you know modern food sanitation processes for restaurants and providers is a direct result of the space program?

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