I consult, write, and speak on running better technology businesses (tech firms and IT captives) and the things that make it possible: good governance behaviors (activist investing in IT), what matters most (results, not effort), how we organize (restructure from the technologically abstract to the business concrete), how we execute and manage (replacing industrial with professional), how we plan (debunking the myth of control), and how we pay the bills (capital-intensive financing and budgeting in an agile world). I am increasingly interested in robustness over optimization.

Sunday, December 31, 2017

And you may ask yourself, how did I get here?

It quickly became clear that the problem was not to explain why the market was in decline. it was to explain why the market had ever been so large in the first place.

— John Kay, Merry Christmas, whether or not you celebrate it with a sherry

Managers become interested in innovation when their company’s fortunes start to wane. Innovation is a hoped-for remedy to arrest the decline, spark new growth, and convince nervous investors that management is up to the task.

I have written previously that executives looking for business innovation should not start by looking at technology, but at socio-economic changes that can be exploited or responded to in part or in whole by a technological solution. For example, what makes the sharing economy possible is a willingness for people to monetize their vehicles, home, and spare time because real wages have been stagnant for over a decade and homeowners are underwater on their property mortgages. Similarly, what makes robo-investing viable is a change in investor attitude which once eschewed “average” returns but not embraces them in favor of trying to beat the market. In each case, the stage is set for change by socio-economic factors, not apps and algorithms.

But before figuring out what to try and do next, John Kay makes the point that executives should look at the historical context of their own businesses to understand how it got to where it is - or once was, if past its peak of glory - in the first place. A product or market that was simply “of its time” - and regardless how long, whose time has come and gone - will not benefit from incremental innovation and promises only to consume a lot of investor capital in pursuit of "radical reinvention."

Management that understands the socio-economic factors that gave rise to the opportunity for the business in the first place will recognize the change in conditions, monetize the decline if the change is permanent, and respect investor capital by trafficking in facts. As unflashy as it may be, sometimes the best strategy is not a capital intensive boondoggle in pursuit of a product revival, but periodic marketing campaigns that appeal to consumer nostalgia.