Thursday, October 9, 2008

Analogy #212: Incremental Dead-Ends

In case you were wondering why it has been so long since I wrote my blog, two weeks ago I was on vacation. This past week I had a medical problem with my eye.

The eye doctor diagnosed it as “Recurrent Corneal Erosion.” What happened was that the outer layer of my eye became sort of detatched from the rest of the eye. It is sort of like what happens when a popped boil creates loose outer skin on your body.

Every time my eyelid rubbed against the eye, it was irritating the loose eye layer. It was sort of like the pain of pulling a bandage off a scab. The eye doctor said that she was taught in school that this is the most painful condition one can have with an eye. I don’t know if it is the most painful, but I can vouch that it was indeed very painful.

To counter the pain and help it heal, the standard recommendation was an anti-biotic inside petroleum jelly. The jelly supposedly helps lubricate the scraping of the eye by the eyelid, while the anti-biotic fights infection.

The jelly came in a little tube, like tiny toothpaste. However, when you squeezed on the tube, the jelly all rolled up into a ball, making it almost impossible to apply to the eye. I was not very good at applying it, so it was not helping. Next, I had my wife help me apply it. That was better, but still problematic. The next day I went to the eye doctor and had her put it in. I figured that since she was a pro, she could do it better. It was only slightly better. I even asked the pharmacist if she knew any tricks to applying the jelly.

Even with the jelly in my eye, it only temporarily helped ease the pain. And it made it hard to see, because I was looking through a film of jelly. So even at its best, it wasn’t very good.

Finally, my eye doctor referred me to a specialist. It only took him a couple of minutes to solve the problem. He took something like a blank contact lens and put it in my eye. The contact lens immediately and permanently protected the cornea from the eyelid. The pain was finally gone. And I didn’t have to mess with the jelly any more. I wish we would have done that a lot sooner.

In the business world we need strategies to solve problems and grow the business. Often times, the place where we start is with the conventional thinking of the recent past. In other words, we try to create a better future by making incremental improvements to the current way of doing things.

This was what I was trying to do with my eye problem. I was trying to find incrementally better ways to apply the jelly. The thinking was that the jelly was good and the standard cure, so if I can just apply it better, I’ll have a better cure.

The solution, however, required throwing away the jelly and trying something entirely different. Instead of looking to prescription ointments, we went in an entirely different direction and tried an artificial lens-like device.

Frequently, we need to do the same thing with our strategy. Rather than trying to improve the current business model, we need to throw it away and come at the problem from an entirely different direction that has almost nothing in common with the old approach.

The principle here is the concept of discontinuous improvement. Great leaps in innovation and growth rarely come from a series of small incremental improvements. Instead, the great leaps come from completely abandoning the old business models and technologies and processes and doing something entirely different.

You cannot make incremental improvements to the radio and eventually end up with an iPod. The technology is entirely different. The way the money is made in the business model is entirely different. The players in the business model are entirely different.

Similarly, you cannot make incremental changes to the stove and eventually come up with a microwave oven. The technology is totally different. The cooking is done in such a radically different way that entirely new ways of packaging and preparing food developed.

If you want to go back even further, you cannot evolve carbon paper into photocopiers. You cannot evolve slide rules into calculators. New approaches created entirely new industries, which made the old ways obsolete.

One of my favorite recent examples is Procter & Gamble. For years, they had looked for solutions for better cleaning through better chemistry. This had about run its course. Then someone got the idea of looking for cleaning solutions through better physics. Suddenly, there were several new cleaning products for Mr. Clean, such as the Magic Eraser. Swiffer was based in part on the science of static electricity. These successful new products were relying on business principles as different from traditional chemistry as my petroleum jelly anti-biotic was from contact lenses.

Speaking of contact lenses, Bausch & Lomb for years had relied on lens technology to help improve eyesight. Eventually, they had the epiphany that you can improve eyesight with treatments that have nothing to do with creating lenses. For example, Bausch and Lomb is a leader in building machines to do laser surgery. Bausch and Lomb is also a leader in producing vitamin supplements which have been found to improve particular types of eye problems.

You cannot incrementally get from lenses to laser surgery and vitamins. These are radically new approaches with an entirely different business model. It requires taking an entirely different look at your entire approach to profitability.

The pharmaceutical industry has been hitting a slump because the traditional approach has pretty much been exhausted. New blockbuster drugs are not coming out like they used to. Perhaps the problem is that we shouldn’t be looking for blockbuster drugs anymore. The age of the pill as the solution may be coming to an end.

Perhaps the next phase will be electronic signals…or nano machines…or sound waves…or implants…or whatever. These new cures may not provide any business for the local pharmacy. A whole new industry may replace it.

Some key things to remember.

1) If the current players in an industry do not embrace and lead in these new directions, eventually an outsider will try going in the new direction. As long as the old ways will eventually be cast aside and marginalized (or made obsolete), one may as well seek out the replacements.

2) Don’t be afraid of experimenting with radically different business models. I don’t think the folks at Apple are upset with the new model they created with iPod. Of course, one may need to try many small experiments before finding the next big thing.

3) Don’t look at your changes in isolation. They may not only upset the current way you do things, but also the way others in the supply chain need to operate. In fact, it may require you to reinvent yourself into taking some of the roles.

4) Rather than focus on the process, focus on the solution. When Bausch and Lomb switched their thinking from the process (making lenses) to the solution (better eyesight) entirely new growth paths came into being. Consumers buy your solutions, not your process. If a new process gives customers a better solution, they will abandon you in a heartbeat.

Big new successes and major leaps in growth typically come through radical changes to the business model. Incremental improvements to conventional wisdom won’t get you there. They eventually lead to dead-ends. Instead of thinking of how to do the current thing better, think of how to create a superior solution by doing something different.

I’ve still got a ways to go before my recurrent corneal erosion is healed, but I am so grateful that someone thought out of the box and came up with a radically better solution. Otherwise, I would be lying in bed in pain rather than writing this blog.

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