What are you willing to give up?

Innovation doesn’t come for nothing.

Innovation requires that something is given up in return. There’s always some kind of trade-off; resources, a process, a job, a machine or even an identity has to be abandoned in order to make room for innovation. The old way of doing things has to be left behind, or at the very least, re-contextualized.

If someone were to innovate the English language too much – perhaps in order to make writing and reading more efficient, to create more consistent spellings and grammatical rules, or to improve certainty of comprehension – they might create a better or more effective communication tool, but many will likely have to do without the benefits of understanding writings that are the bedrock of a shared culture and language such as Shakespeare, Dickens, or Wharton. Any innovation has to be compelling enough to give up the benefits of the old, and any innovation that dismisses the importance of an existing system, no matter how flawed, is unlikely to succeed.

But that doesn’t mean that people are unwilling to trade for innovation. When a new approach is compelling enough or when the old approach is too cumbersome or difficult, people will even give up things they are passionately in love with. When compact discs and then MP3 files replaced vinyl records – those records and everything that was built up around it, such as record players, cover art and vinyl record cleaners was abandoned by millions of music lovers. It was difficult to believe that vinyl records could be abandoned in just a few years, as everyone had to buy new disc players, re-build their libraries, and build new furniture to house their collections. And yet, CD’s became the dominant form of music distribution in as little as ten years. MP3 players, once introduced to the masses by Apple’s iPod and iTunes, took less than a decade to sell over 100 Million players, and 2.5 billion songs. (“Apple: 100 million iPods sold, and counting” by Peter Cohen, Playlist Magazine 4.27.07) Effectively, most people gave up their vinyl records even though they loved them.

Three or four generations of music lovers had grown up with vinyl, how could they give it up so fast? It turns out that despite our love for vinyl, there were shortcomings. The music degraded too easily, dust and scratches made distracting sounds; the records took up too much room on the shelves and dancing in a room with a record player tended to jump the needle off the turntable. Everyone was willing to live with those problems until someone better made those minor irritations seem unreasonable. Now, the only vinyl records that remain are essentially a nostalgic collectors’ item, and record companies are fast losing revenues as fewer and fewer people are even buying CD’s.

In the 1880’s, most homes were lit by gas lights. Thomas Edison had invented the electric light, but most reasonable people thought it was an impractical idea. In order to light people’s homes with electricity, an entirely new infrastructure of power generation and distribution would have to be built. As long as the gas light didn’t set your house on fire or poison the occupants, it just wasn’t worth the trouble and the investment to change. Gas companies didn’t want to lose the lighting market, (though they eventually got into the business of generating electricity in addition to providing for heating and cooking).

But over the next quarter century, electric lighting was adopted. Despite objections that electric light was less attractive than gas lights, the danger, cost and dimness of gas lighting became difficult enough that everyone abandoned gas lights and embraced electricity.

It seems likely that we will give up gasoline powered automobiles in the near future. Once a majority of drivers embrace a new form of locomotion, such as electric cars, those gasoline powered engines, along with all the companies, products and practices that surround the use and maintenance of those engines will have to be abandoned and or changed. That is one of the main reasons it has been so difficult for electric cars to be successful commercially – not because the technology is especially difficult, electric cars have been around at least as long as their gasoline cousins, but because companies and individuals who service and use the cars will have to give up a lot.

And yet, according to William Clay Ford, current Executive Chairman of Ford Motor Company, “Customers don’t want to give anything up. So our job as manufacturers is to deliver these new technologies in a way that doesn’t require any trade-offs.” (Ford Looks to the Future, by Bill Vlasic, NYT, 10.20.9)

Drivers will likely have to give up the satisfaction of a powerful rumbling engine as well as the particular look and feel of a gas-powered card we have grown accustomed to. Cars have to become smaller. “Refueling” an electric car takes a bit more time and perhaps some advanced planning. Driving ranges are different. Oil companies, refineries, and gasoline retailers will have to come up with different markets for their products or different products to manufacture and sell. Manufacturers of engines and support services will have to find new customers and new applications as well – and it is very likely that those new markets will not be as large as the ones they have today. There’s quite a bit to give up.

But it is a mistake to believe that no one will give up anything. Mr. Ford, though long a vocal supporter of alternative energy and sustainable manufacturing, has been limited by the conventional wisdom of automobile manufacturers in the US. If you take as a given that customers won’t give up anything, then you have accepted that innovation is impossible. Even if electric cars can deliver precisely the same performance that a gasoline powered car, they will not come without some kind of trade-off. The moment drivers are irritated enough with the price, the inconvenience and the implications of the internal combustion engine, they will be willing to give up the particular thrills of gasoline – no matter how much they may love it now. The instant drivers are seduced by alternative thrills, they will also likely drop their old love as quickly as an old scratched record.

A new buyer of a Tesla electric roadster, a sports car enthusiast and no stranger to the excitement of high octane driving recently confessed to me the thrills of never visiting a gas station, of silent exits and entrances and of unbelievable acceleration that only an electric motor can deliver. The pleasures of gasoline powered cars may begin to appear quaint in comparison, and giving up the advantages may not be as difficult as Mr. Ford imagines.

Just as electric lighting required us to abandon gas lights in the 19^th century, electric transportation will require us to abandon gasoline cars and much of what is associated with it. Just like the gas lighting industry, those engines, the technology, fueling and the support of those engines will be re-focused on task specific applications such as construction vehicles or on-site generation of electricity.

When innovating, make sure you understand the trade-off as well as the benefit, and don’t be afraid to give up the old in return for something better.

Customer Hacking

From the moment you start selling a product or service, it is becoming obsolescent. Initially, you may solve a problem for a customer - you help them do something they couldn't do before - you do a better job at something than anyone else, but then things begin to change.

Customer expectations change - as your solution becomes the new floor for what is expected in the future.

Customer needs change - as their businesses change, as their objectives change, as they themselves change.

Markets change - as competitors figure out new ways to take business away from you.

How fast your product or service becomes obsolescent depends on a lot of factors - but it's as reliable as entropy, death and taxes that your product or service has an expiration date on the lid.

That's why everyone must innovate - not just if they want to succeed, but ultimately if they want to survive.

Thankfully, people are, by nature, adaptable...and so are your customers. More often than anyone wants to realize, customers are very good at adapting your product or service so that it solves their problem.  In a process not unlike jamming a square peg into a round hole, customers will take what you give them, then adjust, support or work around it to get what they want.

For example, in the days of vinyl records, music lovers wanted to hear music, so they were willing to buy large and akward plastic discs that scratched and degraded easily, just so they could hear a song. Music lovers bought huge stereo systems to play the records, took over entire closets to store the records, they learned how to clean the record with special brushes, to gently handle the record by the edges and to delicately place the needle in the right groove. They even learned to bump the record player when the needle got stuck.

And record companies learned to help music lovers by giving them the same thing they already had, only a little better. They reduced prices by manufacturing poorer quality vinyl. They made the large discs more interesting by packaging them with "album cover art".  

For decades, to love music meant to love vinyl records.  The symbol or "brand" associated with music was often that of a record.

Customers were willing to use a technology decades past it's expiration date, not because it consistently and easily delivered good music - but because there wasn't anything else available - and they adapted to the existing technology.

And when they were presented with something better, such as CD's - it took less than five years for everyone to switch. When they were presented with something even better at delivering music on demand, the mp3 player, they switched even faster.

It is extremely dangerous to rely on customers' willingness to adapt. The moment someone has a better answer - the adaptation will end and they will abandon you.

But if you discover the adaptation first, your customers can guide you to innovation.

Asking customers what they want is pointless at best, and destructive at worst. When asked what customers want in the future, most likely they will describe a version of what they can get now - only with a little better quality, some slight changes in design, and at a much lower price. Surveying customers with direct questions around innovation can even help you persuade yourself not to innovate.

"Research shows that customers love album cover art, they even hang it on their walls; they'll never buy a small disc or a digital file."

So instead of asking customers what they want, perhaps you should observe how they are adapting your square pegs to their round holes.

The best customers to watch are the "hackers". By "hacking", I mean a certain kind of creative development practiced by computer giants such as Steve Wozniak or Linus Torvalds and all the behaviors, methodology and thought processes that allow them to develop new approaches to problems. Not to be confused with the criminal exploits of those trying to obtain credit card numbers or infecting computers with viruses, true hackers adapt whatever is at hand in order to create very useful products, services, and systems.

Jon Erickson introduces his book, Hacking: The Art of Exploitation, with the following:

"The essence of hacking is finding unintended or overlooked uses for the laws and properties of a given situation and then applying them in new and inventive ways to solve a problem - whatever it may be."

Substitute the word "innovation" for "hacking" and suddenly Mr Ericson's quote becomes a useful definition for innovation. At the same time, it's a useful model for the kinds of customer behavior you might be need to observe.

For example, when Harley-Davidson's business was pummelled in the 1970's by Japanese competitors able to deliver a better quality motorcycle for less money, customer "hacks" allowed them to find a new definition for their company, their products and their customers.  Even as new bike sales continued to drop, their accountants were able to see that their after-market parts business remained strong.  It became clear to the company that their best customers were customizing their bikes - "hacking" them to make them more personal.

The accounting insight led to a realization that they could innovate the motorcycle business. Instead of selling the best quality or the highest performance motorcycles, instead of rejecting the dark images of motorcycle gangs, they could embrace their hackers and become a premium lifestyle company.  They could sell customization, club membership and the romance of an old-fashioned, rebellious, and incredibly loud experience.  Motorcycle sales jumped upwards, along with branded clothing, accessories, tatoos, and of course, after market parts.

Despite some difficulties in recent years, the turnaround of Harley-Davidson remains one of the more innovative re-inventions of a company.  All because they noticed how their customers were hacking their product.

Are there customers hacking your services or products?  Are they using them in a different way than you think they are?  

Find out, and you may be able to find meaningful - and profitable - innovation.