Wednesday, 7 September 2011

Innovation - today's Golden Calf

This week I had a conversation about Innovation and IBM. Vijay Vijayasankar wrote a follow-up post on that as he was forced to "leave early" - this is my reply to that. I think the three of us usually agree pretty much on pretty much everything. And this was an awkward one really

It all started with Vinnie Mirchandani's post in which he called out for more Apple and Google, and less IBM. That drove a few other comments and reactions and posts by others, and now we're here and I still have an issue with the very basis to this: the complete lack of or disagreement on the meaning of the word innovation

Socrates filled days and even weeks with discussing the meaning of words, before even starting a dialogue or debate. It would happen more often than not that after a while both parties agreed to disagree on the term(s) and each go their own ways.
In this discussion, I feel we skipped that part and are now missing the outcome of it

What is innovation? How can you measure it? Why all this talk about innovation anyway?
  • Some measure innovation in Research and Development cost,
  • some take that same R&D as a percentage of revenue,
  • others take it as a percentage of operating profit
  • Others say that that's just overall R&D and that it's never split across the various product lines - so it's impossible to tell how much R&D went into e.g. the iPod.
  • Still others say that it doesn't (only) matter what cost went into a new product, but also what is the result of that
  • And yet still others say that it's only the general opinion that can truly measure innovation, as it's such a hard-to-nail-down term that we need some global agreement there
Again, an elephant and blind men - as usual

Maybe Apple seems to be innovative in the eye of the public, but that's largely based on the fact that what they do, is in the eyes of the public: User eXperience, GUI, design.
How about all those chip-makers and boring hard-drive companies that year in year out manage to squeeze increasingly more power onto decreasing space?

I read (and fully appreciate) Vinnie's book The New Polymath and from what I gather there, innovation is best described by the extent to which companies successfully get out of their comfort zone by combining various techniques, industries and applications - that is entirely my phrasing but it would seem that Apple is absolutely not innovative then as they completely focus on whining and designing, proprietary lock-in technology, and steep prices: that's their core (business)

But one thing I can tell you: it is common among system integrators to not innovate unless - system integrators make money by selling meat & mind by the hour, and the more you sell, the better you do. Finding ways to accelerate a project by 30%?
Hell no, that would in fact mean a loss of 30% - not a gain

"We can only afford innovation by capitalising on a real customer case" - now that is the general opinion on innovation among system integrators.
Vijay gave the example of Sabre and that is an excellent example of "innovation the system integrator's way". And how much was spent on this "innovation"? 40 million dollars back in 1957, currently worth $450 million - that's a lot although IBM spends on average 6 billion dollars a year on R&D. If you take R&D spend as a percentage of revenue, however, you'll see that IBM spends least on R&D, only to be "beaten" there by HP and Apple (yes, Apple)

So, is IBM innovative? No - not at all or hardly. If you think otherwise, please provide detailed examples.
So, is Apple innovative? No - they just managed to get a higher success rate over the last 5 years than the last 25, stubbornly continuing what they've been doing for that same period

But are both companies successful? Absolutely. So why all this fuss about Innovation? I'd rather be successful and not innovative, than vice versa. Look at $2.2 billion revenue and not a penny profit. Catch my drift?

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