Kumar Mehta, Ph.D.
Every company is continually looking for the next big thing. I can’t count the number of times I have heard executives say something along the lines of “I want to know what’s going to be the next iPhone before it becomes the next iPhone.” Corporations are looking for someone to tell them what trends and products are going to be the big hits. Once they know what the next big thing is (ideally, before everyone else knows about it), they can invest early, create a dominant presence, and reap the rewards. Simple.
Unfortunately, it does not work that way. While my research on innovation has revealed some distinct factors necessary to create breakthrough offerings, it also highlighted some of the misconceptions and fallacies that impede corporations as they try to become more innovative. One of the prime misconceptions in the corporate world today is that companies must continually quest for the next big thing.
There are three problems with looking for the next big thing. They are, in order, (1) next, (2) big, and (3) thing.
Let’s look at each of them.
Rarely do innovations and trends take the world by surprise. One of the consistent themes in the history of innovation is the concept of slow burn, or a slow evolution. Most industry trends are visible and provide clues about the next breakthrough. A few years ago, the Corporate Strategy team at a large technology company revisited a strategic plan it had developed over a decade ago. The purpose was to see how accurate its predictions of technology trends were, based on how many of its decade-old predictions had come true. They learned that they had done a remarkably accurate job in predicting the major trends and developments that would shape the technology sector. The innovations that occurred over that decade were not a surprise; they had been predicted by the various sensing and insights teams across the company.
Most innovations in history have had a slow evolution process. Things move slowly, but not because they have to; rather, it is because people often don’t see the value in what is being developed and don’t adopt the innovations. The printing press took centuries to become a breakthrough innovation. The earliest use of paper currency, an innovation used in ancient China for trade, was known by the Western world centuries before it was adopted; however, the notion of using paper to represent value (instead of gold, something tangible and with obvious value) was a farfetched concept. It took almost 80 years to get from the introduction of the first lightbulb to Thomas Edison’s mass-market lightbulb. It took a decade after Alexander Fleming’s discovery and publication of the wonder-drug penicillin for another group of scientists to take further action and develop it as a drug effective for treating people with infections.
The point is that the next breakthrough is often not a secret. It is already here. For most large companies, the next breakthrough is likely being developed within their own corporation. In-house creations, such as Kodak developing the first digital camera, and Xerox developing a computer mouse, are two examples of companies not recognizing the value of developments within their own walls, though they were likely looking outside their organization for the next thing. These companies are hardly alone. The hundreds of thousands of patents and new developments within corporations show that the problem is not that breakthrough ideas are not being generated; they are simply not being recognized, and their potential remains unrealized.
In the technology industry, where I spent the majority of my career, the trends have always been clear. They were the PC, the Internet, mobile devices, the smartphone, and the cloud. Today the trends include AI, machine learning, and other developments. The innovators were the ones who rode these trends to create fantastic products that customers embraced. They created business models that produced gravity-defying profits, and ecosystems that built a generation of entry barriers. Microsoft did not create the first computer operating system. Google did not create the first search engine. Facebook did not create the first social platform. Apple did not create the first portable music player or the first smartphone. None of these trends were a secret; they were available to everyone to build societal value. None of these companies were first to market; instead they did it better or engaged their users in better ways.
While there will always be valuable new developments, the challenge for companies is to recognize the existing developments in the world and to make the right bets. They have to build value from what is out there now. This is what separates the true innovators from the ones who are just looking for the next thing to jump onto. True innovators build, create, and transform. They don’t simply adopt a new development; they create something new and valuable with it.
The second fallacy of the continual search for the next big thing is “big.” Looking at the history of innovations, rarely does something become big right from the start, and rarely does the innovator know that what they are developing is going to change the world. Few world-changing innovations started with a view to change the world. Few billion-dollar businesses started with a view to earn a billion dollars. The one thing they had in common was that they altered customer experience through a unique approach and, in the process, created an immense amount of value for their users.
Corporations, both large and small, are wired to think big. Part of the corporate DNA dictates that only if you make big and bold plans will you be able to shape the world. Almost all management gurus advise companies to think big, make big bets, and think about big, hairy, audacious goals. Yes, it is important to think big, but companies need to think big in terms of inspiring customers and transforming experiences, not think big solely in terms of P&L impact. Financial rewards automatically follow a big change in experience. Understandably, in order to make a P&L impact, large corporations require big bets that pay off. They need to generate hundreds of millions, or even perhaps a few billion dollars, in incremental revenue gains every year simply to maintain a modest growth rate; naturally, this creates a strong temptation to implement the plans and ideas that show the biggest impact to growth and profitability. However, it is hard to create a billion-dollar business without creating a smaller business first. And unfortunately, many promising small plans get pushed aside in favor of bigger business plans that look great on paper but require a vast investment to pull off—and often don’t deliver on their promise.
Google, today’s Internet heavyweight, started off as an academic experiment by two doctoral students as a way to understand how web pages are connected to each other and to develop a better index for the Web. The idea was that you could determine the importance or rank of a website by looking at how many other web pages are linked to it and how many other web pages are linked to each of them.
Initially this wasn’t even a commercial initiative. Building the world’s leading search engine, which led to Google being the Internet’s most dominant player and one of the most valuable companies on the planet, was far from anyone’s imagination. Relevant search results were simply a by-product of the index they had created. Soon, the founders noticed that their search results were markedly superior to other existing search engines of the time. In fact, shortly after Google’s creation, its founders were ready to sell their company to Excite, one of the leading search engines of the time, for under a million dollars. Excite refused.
As we know now, Google became big—very big. The “big” happened not by executing a plan to build a world-changing company but by providing a big improvement to the experience of users—a large experience delta, the difference between the current experience and the new one. The business model (based on advertising revenues) that created over half a trillion dollars of market value was not part of a grand plan, but as the company increased its value to society, society figured out a way to reward the company.
The printing press was developed to ease the process of printing. The massive success of the printing press was the longest of long shots. Had the idea been presented within today’s corporate environment, or even to a venture capital fund, it might likely have been laughed out of the conference room. It certainly would not have been approved. Who would want to invest in a product that eased the process of printing books when most of the population could not even read? In today’s vernacular, the total addressable market was virtually zero and would remain nonexistent for the foreseeable future (during the years it would take each user to become literate). Yet this invention spurred literacy worldwide and transferred power from the elite few to the broader population.
The impact of the printing press is only matched by the introduction of the Internet, another innovation that gave enormous power to the masses. It began, quite humbly, as a way to send information from one computer to another, primarily in academic and research settings, through a technique called packet switching—breaking data down into small chunks, or packets, before sending them to another computer.
The list goes on and on. Uber started with three cars to provide a better service than a taxi, not to become a verb for the uberization of every industry. The founders of Airbnb turned their own loft into a lodging space and advertised it, without a plan to create the largest home-share network. Or consider a less obvious innovation: Instant replay was an innovation that revolutionized how we watch sports on TV (and even how sports outcomes are determined). Instant replay was originally a small experiment by a young TV producer named Tony Verna. He simply wanted to try and improve the broadcast and fill in some dead time between plays of the Army–Navy game in 1963.
In looking for the next billion-dollar opportunity, corporations spend countless hours doing strategic planning and modeling how their new initiatives will generate massive financial returns. I may be stating the obvious here, but breakthroughs rarely come from strategic planning or elaborate financial forecasting. In many instances, corporations make large investments in the wrong areas because strategic-planning exercises lead them down the wrong path. Most strategic plans focus either on assumptions, which are fraught with risk, or on costs, a variable that is entirely under management’s control. These plans rarely focus on customer experiences, because these are nebulous, or on products that inspire customers on a small scale, because although these small changes might add up to enormous changes for society as a whole, they don’t visibly move the corporate needle.
Worse yet, inspiring ideas and innovations that could be breakthroughs often get shoved aside (like the first digital camera developed at Kodak) because they don’t fit with the existing business model or have a billion-dollar plan. I have seen many potentially great ideas fail because they did not get the right attention or have a large enough contribution, or they got subsumed by a larger and more profitable business unit. Any of these factors can impede a small business from achieving its full potential and becoming bigger than you can imagine.
So keep in mind that the big opportunity you are chasing may actually appear as something quite small. The key is to learn to recognize the opportunities that alter experiences and to understand and articulate how these customer experiences are transformed. Once you can do this, even at a small scale, the chances are high you’ll find the right opportunities that will evolve into the big game changers we are all looking for.
The third flaw in the relentless search for the next big thing is the “thing.” My research has shown that there are two main problems with this. The first is that an innovation is often not a physical thing—a product. The second misleading aspect of “thing” is that the value of the innovation is often not in the thing that is being developed; the real value is in how an invention is supported—something I call the “thing behind the thing.” Let me explain both of these misconceptions.
First, while most companies are focusing on innovation through creating new products, many disruptions come instead from a change in business model. American Airlines revolutionized flying by popularizing the concept of frequent flyer miles. It was still selling the same airline seats, but the innovation that transformed how we think about air travel was simply a program designed to reward those who fly more. The frequent flyer program induced a sense of loyalty rarely seen in any product. Frequent flyer miles, which included free travel and first-class upgrades, were a tangible, material, and highly coveted reward for simply flying on American Airlines instead of another airline. The costs to the company were miniscule, as it simply used unsold seats as rewards for its best customers. It was the perfect win-win for the customer and the company, resulting in what can be considered one of the greatest loyalty programs of all time.
Amazon Prime has played a substantial role in the rapid growth in revenues and valuation of Amazon.com, but it is not a product. Prime was initially a membership program where customers paid $79 a year and got free two-day shipping on virtually anything they purchased at Amazon.com, a novel concept at the time that customers found incredibly valuable. Prior to the introduction of Prime, express shipping on online purchases was not a common occurrence and was typically used only for special occasions. The time required for items to arrive through regular shipping dissuaded many shoppers from buying online. Enter Prime from Amazon.com, a membership program that not only reduced the time for a product to arrive but also guaranteed a delivery date. Customers loved it and the company loved it. Amazon Prime became one of the most successful online shopping programs, ultimately altering the shape of Internet commerce. It is another example of the perfect win-win for both a company and its customers. Today, if Amazon Prime were a country, it would be roughly the twentieth-largest country in the world.
The ubiquitous Microsoft Office, one of the most successful franchises in the history of business, has generated hundreds of billions of dollars in revenue since its inception. Microsoft Office wasn’t a thing; it was simply a change from selling three productivity applications (Word, Excel, and PowerPoint) as separate programs to selling them as a bundle. This created immense value for customers, who could buy an entire suite of applications for a single low price, and the company, which benefited from being the virtually sole provider of these applications. Once again, it is the perfect win-win for the customer and the company.
As illustrated in the examples above, companies have always enjoyed unparalleled success not by selling things but by providing value in other ways. Innovation can come in many forms, and even if you are a product company, it would be wise not to think about innovation as solely the creation of new products.
The second issue with focusing on the thing is that the invention we think of as being the innovation is often not the main creation—it is something else. Sometimes, the key to the success of an innovation is an entire system of supporting developments. These supporting developments are the thing behind the thing, essential elements without which there wouldn’t be an innovation. For example, everybody thinks of the wheel as one of the greatest inventions of all time, enabling the first information and commerce highway in history. When you study the invention of the wheel, you learn that creating the wheel was the easy part; the hard part was connecting it to a stable platform. The true innovation was in the development of the axle, and it was the combination of the wheel and the axle that allowed the wheel to have a transformative effect on society. The axle was the thing behind the thing.
While Alexander Fleming is credited for the discovery of penicillin (the thing), it was virtually impossible to get pure penicillin in large enough quantities to treat even one person. The genius—the thing behind the thing—was in figuring out how to create substantial amounts of pure penicillin and thereby save millions of lives. The telegraph, created by Samuel Morse and his team and considered one of the greatest inventions of all time, was not valuable without the code to simplify the transmission of complex messages (Morse code). These are just a few examples of the thing behind the thing.
More recently, in the 1970s and 1980s many companies raced to be the dominant force in making and selling personal computers. Everyone focused on building computers, since that was the innovation. And, yes, the invention of the personal computer will always go down as one of the greatest innovations in history, but the thing that made it valuable and indispensable was the software that ran it and let you do magic with it. Today we know that far greater value has been created by the software (the thing behind the thing) than by the thing itself (the personal computer).
This article is not intended to dissuade you from trying to build the next big thing. There will always be a next big thing, even if it’s not technically next, big, or even a thing. There will be another iPhone, a new mode of transportation, or a blockbuster drug that cures cancer. These are all worthy pursuits. The reason I discuss the fallacy of the next big thing is that the language we use often guides how we think. If you only talk about the next big thing, you’re going to be looking outward, somewhere else, for something new and big. In fact, the real innovation may already be right in front of you, not large, and in a form you can’t yet define. If you limit your thinking, you may simply fail to recognize it.
Typically, companies looking for the next big thing are usually the ones whose growth has slowed or stalled. And when growth has slowed, looking outward for the next big thing distracts from the activity they should be primarily focusing on. They should be looking inward, reflecting on what got them to where they are in the first place.
Given the fallacies about the next big thing, your company should take a new approach when thinking about innovation. To start with, you need to have a deep-seated understanding of the trends in your business and of new developments that are being worked on within your own organization, other companies in your sector, and other sectors. We have learned from the history of innovations that the next idea is already here. The pieces are visible for everyone to see, and the one who puts them together in a compelling fashion is going to drive the wave of innovation. The answer, however, is not going to be obvious. You will need to put the right approaches in place to understand how you can meaningfully augment your customer’s experience. (One hint: Don’t ask your customers. They don’t know.)
You will also need to experiment more and increase the number of new bets you make. Your rate of success will increase once you have a culture of innovation—when launching new offerings to customers is part of your company’s DNA. Not all the new bets will have breakthrough success, but if you get in the habit of launching offerings geared toward transforming customer experiences, the rate of innovation will increase.
Finally, don’t think about new product introduction as the only way to innovate. Think about all the other forces that can make your product more successful. Think of the things behind the thing. Think of ancillary benefits that can provide insanely high customer value and make an existing product irresistible. If your corporation adopts this mindset, you increase your likelihood of creating groundbreaking innovations that inspire and enhance your customers’ lives.
(Adapted from: The Innovation Biome, available November 2017)