Innovation companies suffer from a high failure rate. However, following Alain’s tips on innovation may lead to a lower failure rate.
I/ Alain’s bio
With more than 12 years of experience in digital and internet at management levels, Alain has got the expertise in setting up and implementing strategic business development plans to drive growth in startup and established businesses and a track record in negotiating and managing IP rights and digital distribution within Mobile Telecommunications, Digital Entertainment and Online Media.
He has had the experience of working in startups inside a big group as a CFO, a deputy CEO and a CEO at international level.
I/ To increase the probability of succeeding at innovation, companies should refrain from wanting to own and operate all technological assets in their value chains
Owning all technological assets in the value chain comes at a heavy price, according to Alain. And this generates high costs and increases the need for revenues in order to balance out incurred costs. Alain believes that companies should focus on identifying a robust and durable market before wanting to operate technologies in their value chain. And it takes time to test the market. It takes time to assess whether there is demand for a given innovation.
Furthermore, it is very difficult and costly to hire and manage the specialists of the techniques you base your business. This could could defocus the management of the prime target: to penetrate a market and find customers.
For example, today, Netflix is using Amazon’s platform to deliver much of its content to its clients. Had they tried to create their own platform, they would have had to invest massively in creating such a platform, thereby incurring higher costs, which would have needed higher revenues to reach profitability.
Amazon had decided to share its platform. The platform was designed to handle peak demand (during the 4th quarter) and was in overcapacity during the other quarters. At the same time, deciding to share its platform was a challenge for Amazon, because doing so it was exploring a business that was far from its core. But they have succeeded in sharing the higher than needed costs incurred the remaining periods of the year.
Moreover, they were able to make money with and not to defocus on their core business.
II/ To increase the probability of succeeding at innovation, keep the company agile
This means maintaining a company’s ability to adapt to its market and change with its market, according to Alain. This may sound like a truism but in fact, massive investments often mean lower agility. When companies invest massively in order to acquire a given set of assets, they tend to want to use their required assets and push those assets onto the market place, regardless of market dynamics.
III/ To increase the probability of succeeding at innovation, raise “good” money
As Alain was sharing his advice on succeeding at innovation, I thought about Clayton Christensen and how he distinguishes different kinds of money. There are really different kinds of cash, according to Clay:
- Good money is impatient for profit and patient for growth
- Bad money is patient for profit and invasion for growth
- Very bad money is patient for both profit and growth
IV/ To increase the probability of succeeding at innovation, innovate where the value is
And, as our discussion came to an end, Alain delivered one last insight. If one were to add the market capitalization of Vivendi content-focused companies, they would have to add blizzard, Canal + and Universal Music, such as:
Vivendi content = Blizzard + Universal Music + Canal +
If one were to subtract from this the market capitalization of Vivendi as a whole, one would get to the result of €2.4 billion, such as:
Vivendi – Vivendi content = €2.4 billion
In other words Vivendi’s remaining businesses, once content businesses are extracted from the corporation’s market capitalization, are worth €2, 4 billion. This means that the vendee’s network companies such as Maroc Telecom and Brazil Telecom are worth €2 billion.
However, analysts and markets will argue that Maroc Telecom and Brazil Telecom have higher value. This means that Vivendi’s telecom companies are overvalued, according to Alain compared with content. And this leads to a broader point. Today value is not created in technological innovation. Value is found in market access, whether it’s distribution or understanding market needs. That’s where value is today. And that’s what innovation should focus on.
- For a distinction on different type cash and their respective quality, please refer to Clayton Christensen’s Innovator’s Solution
- For a discussion on future disruptions in the telecom and IT industry, please refer to this article
- For a discussion on how to develop innovations that consumers buy, please refer to this discussion