Wednesday, July 20, 2016

Strategy Planning Analogy #565: Not Enough Monkeys

There’s an old saying (originally attributed to Thomas Henry Huxley) that goes roughly like this: “If you get enough monkeys sitting at enough keyboards, one of them, by random chance will write the next Shakespearian play.” While that may be theoretically true, there’s a problem with that logic.

The problem is with the word “enough.” In order to get random tapping on a keyboards to come out as a coherent Shakespearian play, you need a lot of monkeys sitting at a lot of keyboards.

How many? I would guess at least a million times more monkeys than exist on the entire planet sitting at more chairs and with more keyboards than exist on the planet.

So, while the statement may be theoretically true, from a practical matter it is worthless.

The big word in strategy today is “innovation.” People want strategies which make them leaders in innovation. And if that’s what people want, you can rest assured that countless numbers of consultants will come out of the woodwork saying they have a way to make you a leader in innovation.

A lot of these consultants have a theory similar to the story about the monkeys. They say that if you have enough experiments taking place, one of them will turn out to be a big hit. That’s like saying if you have enough monkeys, you can write a great play.

The problem is that many of these consultants don’t get very specific about how many experiments is “enough.” The reason they don’t get very specific is because they don’t want you to know your real odds for success. Like the story with the monkeys, the only way to guarantee that you will have a successful innovation is by doing a lot of experiments. And by a lot, I mean more experiments than you could possibly ever do over several lifetimes.

Look at the social media space. How many truly successful bone fide outstanding and hugely profitable innovations have there been in social media? 20? 50? 100? 1,000? Even if you are generous and say there have been a thousand big innovations, compare that to how many people on the planet have been experimenting around the world in this space.

There’s probably at least tens of millions of people world-wide who have tried on average dozens of experiments in the social media space. That would put us at about 1 in 500,000 being a hit. And I think that’s a very generous number. Do you think you can do 500,000 experiments in order to guarantee a winner?

So, while this type of response to innovation is theoretically possible, it is worthless on a practical level.

The principle here is the difference between randomness and purposefulness. Randomness is about producing large quantities and hoping you beat the odds. Purposefulness is about focusing on ways to intentionally improve your odds in a meaningful way. Randomness is about repeating a lot of fast failures (and I do mean “a lot”). Purposefulness is about focusing on places where failure is less likely to occur.

Here are some characteristics of purposeful innovation:

#1: Purposeful innovation plays off your strengths
Even if you do beat the odds and by chance stumble upon a great innovative idea, you still don’t have a hit on your hands. You still have to develop it, bring it to market, and win versus others with similar ideas. The odds of random success at all five levels (ideation, development, operations, distribution and marketing) is really not in your favor.

As I alluded to in an earlier blog, even if you have a one in a million idea, there can be more than a million experiments in that space, so you have to fight to win against others with almost the same idea. The idea alone is not enough.

So if you want to succeed, you need to play to your strengths. Look for innovation only in places where you have competitive advantages in all of these areas. This means that you need to shut off innovation wherever your differentiating advantages do not apply.

This will narrow the innovation scope very quickly. But it will also increase your success very quickly.

Another option is to take away resources from random innovation and apply them to building competitive advantages. The more advantages you have, the better your odds of creating an innovative hit that will win.

I remember touring the area in Austin Texas where a lot of innovation start-ups were located. They all looked about the same to me. None of them were building differentiation capabilities. They were all just pulling all-nighters to get lines of code written. How do you expect to beat the odds if you are not doing anything meaningfully superior?

#2: Purposeful innovation looks for superior solutions to real problems
A lot of innovation focuses on applying the coolest new technologies in a spectacular way. These may be the types of innovations that make other engineers jealous of what you’re working on, but that doesn’t mean the rest of the world will care.

Consumers are looking for superior solutions to existing problems at reasonable prices. You need to ask yourself these questions:
  1.  Once the coolness wears off (and it will, sooner than you think), is there any real substance to your innovation?
  2. Is this just a short-lived fad?
  3. What existing problem does my innovation solve? Does it solve the problem better than current options? It is superior enough to be worth the price you need to charge? Is it superior enough to overcome the barriers to switching from current solutions and networks?
  4. Will consumers intuitively get what you’re trying to offer or will it be confusing and hard to explain? (Hint: If it takes more than a sentence or two to explain the superiority of your innovation, it probably won’t catch on.)

So the place to start is by finding where customers are complaining the loudest about the stress points in their lives. Then, you focus on looking for better ways eliminate these stress points. This means putting solution solving ahead of just looking at what the latest technology can do.

#3: Purposeful innovation avoids imitation
Facebook has been very successful. But that doesn’t mean that a copycat of Facebook will also be successful. That innovation has already been done. That market has already been captured.

Even if your innovative imitation of Facebook is a little bit better, it still won’t win. The network effect will keep people from switching for only minor improvements.

Almost by definition, true innovation is not a close copy of what already exists. It is doing something different. The blue ocean approach says it is easier to succeed in places where there is no established market/solution than one which has already been staked out by a host of competitors.

Imitation may be a sign of flattery, but it usually is not a path to success, especially when you need to get people to switch networks.

Great innovations can often lead to success. Unfortunately, most experiments in innovation will be failures. The odds of randomly stumbling into innovation success are about as likely as having a monkey randomly write a play on a keyboard. Rather than rushing off to do as many experiments as possible, it is wiser to take a moment first to determine a strategic focus for your efforts. Narrow the scope to improve the odds. This is purposeful innovation. Purposeful innovation narrows the scope by: 1) Looking in places that take advantage of competitive strengths; 2) Looking in places where you can provide a superior solution to current problems consumers are complaining about; 3) Not looking to imitate what’s basically already out there.

Good fishermen know that you are more likely to catch fish if you fish in locations where there are more fish to be caught. They don’t just randomly fish anywhere. They go where the odds are better. Innovators should do the same thing.

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