The original IBM PC, the Apple Mac, and Microsoft's Xbox were all innovative products that were disruptive to existing products or business models. Big companies really can develop disruptive innovative products, but rarely within the normal organizational boundaries.
Why it usually doesn't work - Last week I wrote "Why startups innovate while big companies incrementally improve". That post walked through all the reasons that big companies usually focus on incremental improvements to existing products, and how The Innovators Dilemma usually kills off innovative ideas.
What about 20% time? - Lloyd Budd, a regular reader, submitted a comment about Google's "20% time" or "distracted time" that got me thinking. Every startup I have ever worked for has consumed 100% of my waking hours with total focus on making the business succeed. There was no way to carve out 20% of my time to focus on "optional" things. My response to Lloyd's question was that companies should set aside 20% of their resources and people to focus 100% of their time on disruptive innovative ideas.
The IBM, Apple, Microsoft example - IBM, Apple, and Microsoft did exactly this when they developed the PC, Mac, and Xbox. They set up a new group at a separate facility that was totally focused on one thing. They had an executive sponsor with total authority and adequate budget to make it happen.
IBM set up the Entry Systems Division in Boca Raton, Florida...far away from corporate headquarters in New York. Apple did a similar thing for the Mac group, and Microsoft for the Xbox team. It seems obvious now but at the time this was revolutionary thinking, and in some cases it still is.
Disruption and risk? - The IBM PC was totally disruptive to the main stream computer business. The Apple Mac was a huge gamble at the time, and it threatened Apple's main revenue source...the Apple III. The Xbox was a radical departure for Microsoft, branching out into hardware development and consumer games.
Why don't big companies do this more often? - Why not allocate 20% of R&D spending to disruptive innovative projects? The IBM PC, Apple Mac, and Microsoft Xbox should be excellent proof points that this "skunk works team" approach really works. Am I ignoring examples of failure?
How are new markets created? - I have learned over the years that doing the engineering to create a new disruptive product is only half the battle. The other half of the battle is creating a new market, defining the pain points, value propositions, competitive positioning, building successful pilot projects, getting reference accounts, and providing technical support and hand holding throughout the whole process. Most big companies are not set up to do these things.
Selling versus taking orders - It takes a different kind of sales force to sell an unproven product that usually doesn't work as advertised. Lets face it, most V1.0 products from startups have lots of bugs and lack many features. I call this "missionary selling" where the sales person is part evangelist, part technical visionary, and part technical support person. The startup sales people face a million obstacles and disappointments but they just keep on going with a smile on their face. They go for the big deals with high risk...but somehow they make it happen.
Put yourself in their shoes - If you were a salesperson at a huge company with a $1 million sales quota and a small defined territory what would you do? Would you sell the well known reliable product to existing customers, or would you take the time to get trained on the new, complicated, unproven product, and try to sell it into new markets? Pretty simple choice. This is why new disruptive products from big companies usually fail when they hit the market.
Create a separate sales force too - If it was necessary to set up a separate R&D group to build the new product, doesn't it make sense that you should set up a separate sales force with different compensation incentives to sell it? Well, I think it depends on how closely aligned the new disruptive product is to the existing product. The Mac was a replacement for the Apple III so it didn't require a new sales force. The Xbox was a totally different product which was sold through completely different sales channels like Best Buy and Circuit City. The point is that considerable thought should be given to how the new product will be marketed and sold.
What do you think? Why isn't this done more often? What are the counter examples of failure? Why did they fail? Do new products fail because the product is flawed or because the organization is not set up to succeed?