Our good friend Phil Rosenzweig has just published a terrific book, called The Halo Effect. It's main thesis is that we come to a lot of erroneous conclusions because knowing the outcomes biases our reasoning. It's a fascinating read.
For more on Phil and the book, check out his website -
http://www.the-halo-effect.com
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I ran across the following mind-blowing numbers - and came to the conclusion that there are vast sums of money out there if one is creative enough to capitalize on what people are willing to buy!
$38 Billion - Amount Americans spent on pet food and care in 2006, nearly double that spent 10 years ago
$2,000 - cost of a doggie nose job in Los Angeles
$395 - cost of a Burberry dog bed
$50 - price of an oatmeal body wrap for big dogs at LA Dogworks, a doggie spa
47% of dog owners say they buy holiday or birthday gifts for their pets.
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Yet another great company (in this case, Dell) has fallen victim to a failure to engage in business model innovation when times are good. We see this all the time - hugely successful corporations get so wrapped up in exploiting their own business models that they fail to invest in the innovations that will help create their future success. Then, when things start to go wrong, they go on an all-out quest to find new sources of growth FAST, condemning their growth leaders to rushed, desperate and usually failed innovation efforts.
About three years ago, I was having a conversation with two CEO's of major computer manufacturers who observed that Dell's strategy was simply piggybacking off their R&D and other investments in innovation in the computer industry. They feared then that Dell would stunt the growth of the entire PC category be rendering innovation un-economic. Looks as though the model has actually come back to hurt Dell - its competitors have innovated not only in their products but in their production prowess. Moreover, turns out that many customers actually like to interact with a real salesperson when purchasing complex or new equipment. So advantage to HP, Best Buy, and other retails, disadvantage to folks like Dell.
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As I do every year, I'm in the midst of reviewing papers for the upcoming Academy of Management in August. The quality of the writing has always bugged me, but I particularly notice it when I go through a lot of papers. Typos, grammatical errors, spelling mistakes and mis-citations galore. What is disturbing is that this material is being sent to an academic conference on the presumption that it represents high quality social science, and that we as consumers of that research should believe what the authors are saying. And yet, they can't even write properly and in correct English. As I said in my review comments to one author: If something as simple as typing text is so error-prone, how can you expect me to believe that the rest of your research is not as sloppy? Just amazing.
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A perennial question that comes up with respect to organizing innovation is whether ventures should be set up far apart from core business or within it? Unfortunately, both approaches to organization are problematic. While so-called skunkworks and separate structures have been popular as a way of helping those working on innovation projects to avoid being smothered by the rules, politics and processes of the more established lines of business, their track record is spotty. Among the downsides are that essential connections are missing that would permit the venture to be re-integrated with the rest of the corporation if it is successful. At the same time, the struggles venture teams experience when within a larger entity that doesn�t understand them are terribly real.
What seems to work in resolving this dilemma? We would support the notion that a separate structure for managing ventures is necessary, one that is appropriate for the often-quirky path of their development. It is deadly to apply the same organizing, staffing, budgeting and planning practices to the new businesses that you do for the core. What we have found, however, is that it is a big mistake to set up a ventures organization with so many resources and managerial clout that it is possible for it to become an empire unto itself. Huge flops often share in common this organizational structure. Samsung�s ill-fated entry into the automobile business, Kodak�s efforts to enter pharmaceuticals, Federal Expresses� $600 million lost pursuing its �Zapmail� venture, and Exxon�s $4 billion oil shale venture are examples.
Instead, think of the ventures organization itself as a group in transition. Its job is to incubate ideas, develop people and capabilities and explore new terrain. At Nokia, for instance, the NVO (for Nokia ventures organization) was established as something of a service business, explicitly intended to pursue innovations with either market objectives or technical objectives beyond the remit of its more established businesses. This has the effect of creating natural interdependence between core businesses and ventures, because ventures do not have access to the resources they would need for growth without working with the core businesses.
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