One of my research partners invited me along to a show last night called Elvis Meets Buddy. It was a great evening, with a lot of interesting discussion of innovation, New Zealand wine and other interesting topics over dinner. Then we went to see the show, which was also pretty fun. It was a guy that looked like Buddy Holly playing Buddy Holly songs during the first half, then a guy that looked like Elvis doing Elvis songs during the second. All good fun.

One thing struck me though as it was going on. The guy doing Buddy Holly songs is from Brisbane, but he talked with an American accent all the way through – and to be honest, to me he sounded a lot more like Elvis than like Buddy Holly when he spoke. Which got me thinking – when you’re imitating something, you end up getting judged on the accuracy of the imitation more than you are on the actual quality of what you’re doing.

This is an important innovation issue. It shows why it is very difficult to succeed with me-too type strategies. You have to be substantially better than whatever you’re copying to break through.

Innovation is all about finding new combinations of ideas. If you do it well, it gets around this problem. When you are doing something novel, you’re more likely to be judged on the value of what you’re doing, rather than on the quality of your copying. This is a much better place to be.

All in all, I’m more interested in hearing original songs, or interesting interpretations of old songs than I am in hearing copies. It’s the same in business – I’m a lot more interested in new ideas than copies of old ones.

That’s the point of innovation – finding new connections between ideas. It’s harder than copying, but a lot more interesting. More profitable too.

(Here’s Seth Godin saying something similar today, but with fewer words)

This idea must be in the air today – I wrote that and then read the Seth Godin piece, and now there’s this from an excellent piece by Tom Peters on social media:

Beware of learning too much from others. Michael Schrage: innovation from “serious play.” Gotta try your own combinations, not copy others.

(photo from the collection of the awesome Archie McPhee store – flickr/Archie McPhee Seattle under a Creative Commons License)

I saw Naomi Simson, the founder and CEO of RedBalloon, give a talk at the Future Summit sponsored by the Australian Davos Connection. It was a fantastic talk, and she had a number of interesting insights on the innovation process. This talk gets at a lot of the same issues that she touched on last night – it’s well worth a listen:

She made several key points about innovation:

• “It’s one thing to have a great idea, but it’s worthless without great execution.” This is dead right – she also talked about people asking her how she came up with ideas, and she said she has too many ideas. There are two related points here. One is that the value of a great idea isn’t in the idea itself – it’s in the execution. The second is that not every idea works. You have to execute them to figure out which ones are the ones that will be successful.
• She also said that now when she talks about innovation, she can fit a theory to what she did, but that when she was in the middle of starting up her business, all she had time for was doing things. This rings true to me. One of the points that is striking when we do our intensive executive education teaching is that the main thing that people seem to value in these is just having some time to think. We get so caught up in keeping our heads above water that this can be difficult.
• I had a quick chat with Naomi after the talk, and she said one other striking thing – she designed RedBalloon specifically as a business that could only work on the internet. She founded the company in late 2001 (right in the middle of the dot.com crash), and she put a lot of thought into coming up with something that was not simply an online version of something that already existed. I’ve talked before about how taking advantage of the web really requires completely new business models, and RedBalloon is a great example of doing this.

On that last point, RedBalloon is another great example of an aggregate, filter and connect value creation strategy. The site is a place for you to buy experiences as gifts for people. The site aggregates many different experiential gifts from a whole range of providers – you can buy chocolates, great meals, adventure sports, a whole range of things. Having access to all of these things in one place provides a tremendous resource.

There is filtering too, as the firm screens the experience providers. This is to ensure that they will deliver the experiences that are promised. You can also filter through the various offerings on the website.

Finally, there is connecting. Obviously the site connects people with experience providers. More importantly, once people do something through RedBalloon, they tell their friends and associates about other – connecting the site with people that they know. The firm has grown almost exclusively through word of mouth (Naomi even talks about this as connecting). Remarkably, they have been able to grow to over $12 million in annual sales with no outside investment. This is a sign of remarkably successful connection strategy.

The RedBalloon story is a great one. It was fascinating to hear Naomi talk about her experiences and to see how closely they aligned with general principles that I have observed across many organisations. There is a lot to be said for having such a strong focus on executing ideas – it’s something from which we can all learn.

Why is it so difficult for established firms to deal with disruptive innovation? In general, I think that Clayton Christensen’s model of disruptive innovation is correct. His basic idea is that since disruptions generally start in niches, the economics of pursuing disruptive innovations look really bad for large incumbents:

Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Because the new niche doesn’t look very attractive, it makes rational economic sense to let someone else fill it. And also, you wouldn’t want to cannibalise your existing products, would you?

Well, yes, actually – you would. Or at least you should. Here are some examples from Wired’s articles about tablet computers.

First off, this is from the discussion of Microsoft’s approach to tablet computing:

Incremental change, however, can ultimately mean no change. A decade ago, Microsoft came up with its own vision of a tablet computer. But the company tried to have it both ways: a new category of device that ran an old style of software — specifically, a modified version of Windows. (Using Windows, computer pioneer Alan Kay says, was “a very bad idea for this kind of interaction.”) The Tablet PC, introduced in 2002, was a flop. Meanwhile, advances from Microsoft’s labs can approach bar mitzvah age before finding their way into products. Surface is the most exciting product out of Redmond in years, but the company has been shockingly timid in pushing it into the marketplace. Almost three years after it was announced, Surface is still a novelty in a few hotel lobbies and retail stores. Apple all but announced that the iPad could damage its own desktop and laptop business, but Microsoft never seems to put all its weight behind groundbreaking products — especially if success may come at the expense of its Windows and Office cash cows.

And then there’s this from Fake Steve Jobs on the reaction of the NY Times and others to the iPad:

Anyway, do you really think saving newspapers is just a matter of putting your old crap on a new device? Because from what I can see, The New York Times sucks just as bad on a Kindle as it does on paper. That, in fact, is the real problem with The New York Times: It sucks, and everyone knows it, except, apparently, the [umm, idiots] who write for The New York Times, which is, oddly enough, the heart of the problem. Quod erat demonstrandum, as Socrates once said.

The iPad isn’t about saving newspapers. It’s about inventing new ways of telling stories, using a whole new language — one that we can’t even imagine right now.

This is the problem – when faced with a disruptive innovation, you can’t just innovate a little bit around the edges, while doing everything you can to protect your current market. You’re either in or you’re out. All of the numbers tell you that it makes no sense to be in. The problem is that if you’re not in at the start, then you’re playing catch-up, and you probably won’t ever catch up.

That’s what makes the iPad interesting – Apple here is taking aim at their own market. This is different from trying to disrupt markets that they are just entering, like mp3 players and mobile phones. If the iPad takes off, it’s not great news for MacBooks and Airs.

Here’s how I put it in an earlier post:

The simple fact of the matter is this: we must introduce innovations that take away our current market share. There’s no such thing as a cash cow – if you have a product that is dominating the market, but you’re not innovating around it, it’s not a cash cow, it’s already dead.

Cannibalise your current products. Kill your best performers, or someone else will kill them for you.

(iPad picture from a nice photostream by flickr/Yutaka Tsutano under a Creative Commons License)