With headlines like “Apple under Tim Cook: A nicer company, but a better one?”, some people are questioning why 5 years into his tenure Apple has not delivered a breakthrough product. Such is the harsh reality for product companies whose business models are predicated on year-on-year growth.
Product companies are looking to nurture innovation as a strategic tool to meet the challenge. Sometimes they are minded to engage external consultants or vendors to drive innovation. Third parties may have a part to play in enabling innovation with an organisation, however there there may be a case for looking closer to home.
Profit from the core
The book Profit from the Core: Growth Strategy in an Era of Turbulence a book by Chris Zook and James Allen casts some interesting light on the subject.
US Car Rental Business case study
They provide a case study on the history of the US car rental business. The US car rental business started with Avis, Hertz and National Car Rental serving the business traveller. Alamo entered the market some 20 years later targeting the leisure business, followed by Enterprise who targeted the people who wanted a rental vehicle while their personal cars were being repaired. All these businesses have subsequently consolidated through acquisition and do pretty much everything today. What is interesting is that although they were all in the business of car rental, their respective infrastructures and operations were very different. Avis, Hertz and National Car Rental were sited at the top 100 airport locations. Alamo had low-cost locations away from primary airport locations and Enterprise concentrated on travel agents and influencers, with a sales force concentrated on insurance companies and body shops.
Requires a clear understanding of core competence
What we can learn from this is that companies need to understand their core business to develop innovative new products. There is also the consideration that adopting such an approach results in new products that are more coherent with current operations, therefore reducing the risk in execution. All this can be achieved by exploring adjacent and new market segments.
Everyone must take ownership
Based on such an approach, the solution is more about ownership, therefore it’s not possible for a company to outsource innovation to a third party vendor, or even the innovation department. However, vendors can play an essential part in defining their role as an innovation enabler, with empathy for the associated challenge.
The solution is closer to home
Hold on the “out-of-the-box” thinking in favour of understanding the riches that are contained within the current operations and look for adjacent markets.