Sunday, February 02, 2014

Why Google is the ideal innovator


I have been researching innovation for the past 18 months as I have been doing my masters in innovation management at Central Saint Martins in London. A lot of people, friends and companies have been asking me what is it all about so I thought I would give an example combining some things Ive found as well as 14 years experience in advertising and personal obsession with technology and subcultures.

When I started this blog 8 odd years ago it was a scrapbook of thoughts to throw out there converse with others and hopefully build on or help articulate my point of view. I have been particularly bad at using it during my masters but I thought I would return here to try to simplify it all especially in light of Google’s recent spending spree which everyone is questioning. Here we go

The simple concept is that innovation is a strategic tool for growth. There are other ways to grow such as expansion into new markets, resource optimization for efficient delivery of you current market but it seems that innovation tends to get the headlines. What type of growth depends on where you are coming from financial for companies, understanding maybe for governments (I understand I shouldn’t smoke) or behavior change (social innovations if I buy a RED iPod money goes to Africa). There are a few quick categorisations of innovation we need to clarify first.  Growth for today is known as sustaining innovation it has a more short term approach. Growth for tomorrow is known as disruptive innovation with longer term metrics looking at what could potentially throw the market dynamics as they currently stand. Innovation as a process for me comes down to three simple steps Identify, Create, Exploit

Identify: is to find opportunities. In the short term they tend to be insights about the customers needs. In the longer term it is about patterns that lead to future needs.
Create: a product or service that addresses those needs. Then test, iterate and validate the product / service as well as the customer need.
Exploit: is to drive market adoption understanding.

Lets have a crack at how it works using Google as an example.  

How do you innovate for today.

The concept of sustaining innovation is the idea that you take an innovation already created (search) and you add additional benefits to it to gain more revenue from an existent market or customer. This approach consists of a lot of the innovation we currently see. Product extensions, add ons etc. An example would be that Google created google+ not to ‘disrupt’ or steal audience from facebook they did it purely to gain more data for their search terms to make more targeted ads to gain more revenue from their current audience.

Google Identified an insight using data from current customer’s past behavior that the more personalized search suggestions are the more likely people are to click.  Then Created a new platform, Google+ to gain additional data from their current audience’s online behaviour and interests. They then Exploited that platform through different approaches such as Chuck Hack a collaboration between Google Creative Labs + Converse + other creative companies including TechnologyWill Save us (in an act of transparency I am an Investor and advisor for TWSU and HirschandMann who helped with the project). This campaign looked to push smaller creative subcultures (or communities) to use the platform in a fun way.

In summary sustaining innovation is a pretty simple approach. Identify insights using data from past or current behavior of your or other current customers in your market. Create something new that offers more benefits to a current product but enables you to gain more revenue. Google have done this over and over again, maps, gmail, android, chromebooks etc . Last time I looked Google’s quarter financials on 1st of February were up 17% so the short term sustaining innovation approach for growth seems to be working for them.

Another example I give is O2’s current Priority campaign. They Identified an insight that its current customers and customers within their market spend considerable money on entertainment. They Created Priority which added the benefit of early tickets to top events at O2 places as well as others to drive more usage from current customers as well as switching from others in the market. Then Exploited it with campaigns for Lady Gaga, English Rugby Union team etc.

How do you innovate for tomorrow.

Here comes the fun more interesting part. How does one innovate for tomorrow ? Everyone is questioning Google’s recent behavior of buying NEST that makes thermostats, Artificial Intelligence companies and what did they do with Motorola. Lets look at our model in the future innovation sense. ICE

Academic and ex editor of Harvard Business Review Ed Levitt came up with the concept of the marketing myopia in 1960s which is the idea that companies create products and technologies that don’t link closely with the wants and needs of their customers. The reality is technology advancement is so fast companies can create the next technology way before any customer even hints they need such a thing. Therefore it all becomes a matter of timing.

A number of years ago I met Bill Buxton Microsoft’s head of design research (hilarious guy reminded me of Doc from Back to the Future). Bill left me with something I will never forget. If you want to know what is going to be big in 10 years, look back 10 years to what was invented then. He explained the concept of the Long Nose of innovation he found in his research that from invention to market traction took ten years. He has one of the largest collections of technology objects in the world as validation for his research as what he found is that it takes a number of years for refinement and augmentation of the technology itself, then there is the need for market traction. He said his job at Microsoft was to go and find all the awesome invention in house and shrink that process. Surface was their first example of shrinking that process they cut it to 6 years. One approach to innovation I believe is the use of engineers who invent, refine and augment technologies to make sure they work. The designer / engineer combo takes that technology to the next level Creating (or designing) something that is user friendly. It is then the job of the marketing or other teams to Exploit it to the masses or gain traction through understanding their needs.

The problem with innovating for tomorrow is people don’t know what they want in the future and past data will not project 5- 10 years into the future. So identifying insights about peoples current articulated needs like I explained in sustaining innovation from online behavior, surveys, buyer or economic data isn’t sufficient.  There needs to be a more interpretive method that looks to people's future unarticulated needs. You need to Identify patterns that could drive those future needs. Levitt also asked an interesting question of train companies at the time who were later disrupted by airplanes. Which business are you in ?Are you a train company or a transportation company ?. So the question for Google is what business are you in ?? Search or Data.

Google is a data company and Google+ is just one way they show that in the short term. In the longer term they have identified patterns in the concept of the internet of things and the data it will create. Currently the only way the average person believes Google gets data is from the screens we interface with. PCs, Laptops, Phones, tablets which are closed interfaces behind the box we make changes to by touching screens, keys or our mouse. Google (as well as others) accumulate data from our online actions but that is only the beginning of what is available. Every action in the real world we do more and more will accumulate data. The term ‘smart’ is not new you may have seen the Smart Cities concept from IBM or smart fridges from Samsung or quantified self with market adoption of wearable technologies. This is the idea of interfaces everywhere creating data. Top IT analyst company Gartner forecasts 26 Billion devices connected to the internet by 2020. That is 6 years away.  So what did Google do?

Google Identified the pattern of the growth of devices creating more data and the need for more advanced computational methods to analyse all that data. Google was built off the back of an algorithm that made data into something of value for people. The idea of “Big Data’ is being thrown around businesses and governments as the future. The bigger question is who has the computational power to deal with that sort of data ?? Artificial intelligence has already shown promise in turning large amounts of data into value. You’ve seen Minority Report, the new film HER gives you a more emotive view of the concept. (If you want to see a fun example of AI objects reacting back to humans check out my friend Katrins conceptual piece ).

Secondly they now have one of the best design / engineering teams in the world in house to start to Create (or design) the best interfaces possible to create more data which is what Nest currently does. It is a way to create data about someones home and their energy usage. Google’s Project X Created Google Glass as a new data interface that they are testing and evaluating whilst testing an Exploitation approach through a game of scarcity. Have you got one, look at that weird guy on the tube with one. Have you seen the stupid things they have come up with. The reality is they are working to help translate what I have found in my research in Exploitation phase as a language gap between great technology that is created and great technology that is adopted. Have you ever seen a technical person try and explain what their technology does to someone who isn’t technical. My research has found that technical people will talk about what the technology does, early adopters are more interested in what the big change does for them or in other words the change in benefit, the early majority are only interested in how it makes their lives slightly better the late majority and laggards are sheep and will just follow. Giving the product to people to use and build on is an interpretive method that shows Google not just being myopic in its engineering or design approach that focuses on making a great product to a more interpretive approach to understanding what the customer wants to Exploit it at a later stage. One thing that has emerged from the Google Glass experiment is when people give the heart symbol with their hands in digital photos and Google's attempt to patent it. They are trying transfer a technical language images with data to a more human language where a human action becomes like a #.

What I have also found in my research is that you do need a completely separate business to create disruptive innovations for future use. As their metrics of success and timeframe  are much different to sustaining innovations. An example would be O2’s Priority vs O2’s disruptive innovation giffgaff. Priority’s first year targets were 1.5 million new customers paying £60 pm whilst giffgaff took 4 years to get to 1 million subscribers at around £15pm.  Including disruptive innovation in your daily business process will only get all projects cancelled before they identify an appropriate market and understand any value that could be created in that space. Do you remember when Sergey returned to Google shut down all those additional projects this was because they sat within the day to day business (some weren’t that good also). But he didn’t stop their innovation he just realized the need to separate short and longer term, sustaining and disruptive. Google X became the future space with different metrics, more money and more time. (also being public about the future innovation pipeline doesn’t hurt your share price even if no one understands any of it)

What is the role of Motorola ? Google has sped up the 10 year process by buying the already made patents or technologies. Keeping Motorola would’ve led to an expensive war in an already ridiculously competitive smartphone market (although Motorola teaming up with PhoneBloks is the future of technology and an example why I invested in TWSU but thats for another post). They will pass those patents over to Tony Fadell his new hardware team from NEST and Google who will start creating user driven products as interfaces for the world to add more data to the machine. Combine that with best computational technology or artificial intelligence to analyse the data to turn it into value. Google will then use what they have learnt from previous Exploitation methods from Google Creative Labs and others things across the world to begin to drive market traction for products.

Innovation is a strategic tool for growth that must look at identifying, creating and exploiting for today and tomorrow. Google have done a great job using previous and current data to Identify insights to Create new products and then Exploited them in fun to gain more data ways to sustain their current innovation of search. It is hard as today seems much clearer, when tomorrow is such a haze. Google's future pipeline looks even brighter by Identifying the pattern of IOT devices as new interfaces to growing available data. Gaining the technology to analyse that data and putting the best team together with a bunch of inventions to Create the future interfaces of data and then no doubt by then Google Creative Labs and other departments of Google will take Exploitation to the next level. They have created a very strategically strong duel approach to innovation that has an eye on the customer of today but never takes their eye of the customer of tomorrow.


Next post I will attempt to look at Amazon and why they are a bit one sided as they only focus on Disruptive or future innovations not sustaining ones in the short term.  One easy check is to look at their growth in revenue vs their loss in profit %'s in the past 5 years. 

1 comment:

mikej said...

This is why Tony Fadell is the master to make this combination work is why google wanted him

'There are a lot of designers who think they understand technology and a lot of technology guys who think they understand design. But to put them together and make it robust and repeatable for the mass market? It's an art'

http://www.fastcompany.com/person/tony-fadell