Best wishes for a spectacular 2019! As you consider your big aspirations for this coming year remember the difference between success and failure often boils down to six words. Successful innovators “think big, start small, learn fast.” Failures often do not.
Those who “think big” consider the full range of possible futures. They make sure they understand the emerging context, rather than assume that their current assumptions are right. They consider, for example, how large disruptive forces, like technology, deregulation and globalization, will change customer preferences, enable new markets and upend business dynamics. They are not too proud to explore doomsday scenarios, including how new developments might drive them out of business. And, rather than just looking for incrementally faster, better or cheaper improvements, they dare to dream big. Successful innovators are willing to start from a clean sheet of paper to pursue ideas that have the potential to rewrite the rules of a category, a company or even entire industries.
For example, even as Reed Hastings built the DVD business that toppled Blockbuster and the rest of the video rental business, he was guided by the big idea that mailing people DVDs was a mere way station on the road to streaming video on the Internet. That’s why he called his company “Netflix.” And, he continued to pursue his big idea, streaming video, even though it might someday render obsolete his wonderfully successful, highly tuned, mail-based system for distributing DVDs.
By contrast, those who fail typically think small. They assume that the future will be a slightly different version of the present. It’s human nature to see change as incremental and to think that our customers will stick with us. But, incremental thinking can be very dangerous. For example, Microsoft, Motorola, Blackberry and Nokia all missed the smartphone because it didn’t fit with their own technology assumptions, and they couldn’t envision how the iPhone might challenge their own products, upend strategic partnerships and endanger existing business models.
Successful innovators “start small” after thinking big. Rather than jumping on the bandwagon for one potentially big product, they break the idea down into smaller pieces for testing. They don’t allow themselves to make decisions solely on intuition or allow themselves to lock in on financial projections based on wishful thinking. They defer important decisions until they have real data.
Though Reed Hastings had a big idea that he fervently believed in, he started with lots of small projects. As far back as 2001, Hastings spent $10 million a year on research into streaming; he was willing to forgo most of his tiny company’s profits to finance his preparation. In subsequent years, Hastings frequently set up small tests to offer streaming video — only to junk the projects quickly when he realized they weren’t feasible.
Those who fail typically think small — like Borders, Blackberry, Blockbuster, Kodak, Motorola, and Nokia — but then start big when they do finally move. My research found that companies that should be innovating in the face of a disruptive technology tend to swing from complacency to panic. After ignoring opportunities because they can’t accept that they’re in danger, they finally see the disruption and make a last-chance, massive bet on a single idea — only to have it not pan out.
After thinking big and starting small, success innovators “learn fast” by taking a scientific approach to innovation. They take the attitude that a demo is worth more than thousands of pages of business plans. They conduct extensive, inexpensive prototyping before they even get to the pilot phase — let alone the big rollout — so they can gather comprehensive information and quickly analyze both what’s working and what isn’t. They also don’t fall in love with their own ideas. The successes develop the institutional discipline to keep on asking the tough questions and are ready to set aside or alter projects based on what they learn, not what they hope.
Such was the case at Netflix. When early efforts at streaming video looked iffy, Hastings adopted the poker player’s mantra that most money is lost early in a hand, when the tendency is to hope that something good will materialize even though reason suggests otherwise. Hastings folded his hands, saving his money for the day when he finally got a good hand.
As streaming started to become real, Hastings did a host of deals with content providers to see which would work and to make sure he wasn’t left out, even though it was clear that most of the deals wouldn’t amount to much. Hastings also considered numerous pricing models for streaming, ultimately deciding to start by giving it away as part of DVD subscriptions. That way, people could get used to streaming while he built his library of offerings, and he wouldn’t create an opening for a competitor. Netflix finally offered a streaming-only option in late 2010, after almost 10 years of experimentation.
By contrast, thinking small and then betting big usually leaves neither the time nor the inclination to learn. The combination of thinking small, starting big and not learning fast is what killed Blockbuster. It ignored Netflix’s DVDs-by-mail model for years, then bet big on its own version before fully working out the economic and operational implications — and it turned out that Blockbuster’s business model couldn’t handle the loss of those hated late fees.
Best wishes for a spectacular 2019 filled with ample opportunities to think big, start small and learn fast.
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