Looking beyond technology and business
How companies can innovate beyond their founding competency
By Anijo Mathew
Head of Department of Art and Design/American University of Sharjah + Founder/Vamonde
Most companies are founded on the premise of either technology or business innovation. While no company falls squarely into any one of these buckets, it can be argued that the DNA of every successful company is based on one of these two directions:
1. a Technology-centred evolution, where the founder invents a new product, process or service that is significantly better than a previous product or service. This innovation starts off small but eventually dominates the market. Ford, Nike, Godrej, Apple, Google, Facebook are all technology-centred companies. Godrej, a company I work with regularly was founded by Ardeshir Godrej with revolutionary new technology and manufacturing innovation in locks. “We are inherently a manufacturing company” is an oft-heard statement at Godrej, because the ethos of the company is in the technology of manufacturing. And they are extremely good at it.
2. a Business-centred evolution, where the founder looks at the world and says there must be a better way to do something. In this case, the company is simply better at doing something in their context than their competition or adjacent businesses. Jack Ma, the founder of Alibaba, for example, looked at Amazon and said, we can do the same thing better for the Chinese market. Same is the story with Flipkart in India. Starbucks, Ola, InMobi, McKinsey, Accenture are all business-centred companies that in some way changed the way business is done in their respective fields of engagement.
In the early stages of a company’s development, founders are willing to take risks, play with new ideas, and establish new protocols. Founders also try to keep the core competency of a company intact because it was built on a strong intuition or technology that he or she developed. Over time, a technology-led or business-led company will get extremely good at what it does. Leadership changes; the founder may no longer be at the helm of the company. Context changes; what was once a core competency has now become basic hygiene, everyone is doing it. Things must change but leadership hesitates. After all, their technology leadership or business leadership is what got them so far. What would the founder do? Increasingly leadership starts to ask what they can do rather than what they should do. In business, this is known as Founder’s Syndrome.
There is a third evolution that is slightly different from the above two. One that is seen in newer companies but still not as common as legacy technology or business-centred evolutions.
3. a User-centred evolution, where the founder looks at the world and sees a user need that needs to be addressed. In this case, the core competency is neither a technology nor a business idea, but rather the company’s ability to deliver products, services, or experiences that address this user need better than anyone else. Brian Chesky and Joe Gebbia, the founders of Airbnb, for example, saw an opportunity space where the user was missing something. In fact, the name Airbnb itself comes from their solution to a user problem. While living in the Bay Area, they had several friends who were coming to town to attend a conference. To address the needs of these friends who could not afford a hotel room, they placed an air bed and provided breakfast for a small charge. Air bed and breakfast (Airbnb, get it?) So successful was this experiment that they decided to build a product around this concept. With very limited technology and business resources (Airbnb is practically just a website that connects hosts with rooms with guests looking for rooms), they grew this idea into a US$38B business.
Business schools advocate careful succession planning as a solution to Founders Syndrome. I argue that legacy technology and business-centred companies may want to turn instead to Design, to user-centred innovation once they start showing signs of Founder’s Syndrome. Take, for example, the case of Nike.
Nike.
Phil Knight and Bill Bowerman, the founders of Nike were athletes who devised a new way to build lighter soles for athletic shoes. Ground-breaking new technology. Bowerman figured out by pouring urethane into a waffle iron, he could create a running shoe suitable for multiple surfaces. This new “technology” gave athletes a significant leg up on their competition. The US$21 Waffle Trainer took athletics by storm. By the ’80s Nike had cornered 50% of the US footwear market with a significant advantage in the global market as well. Over time, Nike got really good at what they did — making shoes. They invested in better technology, their material sciences division came up with innovative solutions to make lighter, faster, and cheaper shoes. They invested in great branding and marketing. Leadership knew exactly what they were in the business of and slowly stacked their technology, manufacturing, sales, factory optimization, product design expertise in the area of core expertise, the business of “making shoes.”
However, by 1984, Nike started to face a decline in sales, with revenue continuing to plummet all through the mid-80s. They were showing signs of Founder’s Syndrome. So they did what any good company does. Bring back the Founder.
When Phil Knight, the CEO of Nike, returned as President of the company, he asked a simple question: why do people buy shoes?
It turns out people don’t buy shoes for the shoes. They buy them to walk, to run, to play, or simply to show their brand affinity. Or in other words, Nike’s users were not trying to buy shoes at all, they were are looking to buy experiences. Experiences that would make them better athletes. They sought emotions. Emotions that connected them with other like-minded people.
Nike realised that they were never really in the business of making shoes. They were in fact in the business of empowering new athletes. Suddenly, the world opened up for Nike because they are no longer just a technology-centred company; they are a user-centred company.
A few things changed after this. The experience market is much bigger than the shoe market. Nike needed to re-align their manufacturing and sales strategy — they had to figure out how to make more than shoes. They needed to make some very key acquisitions to build a larger repertoire of products — they had to figure out how they might engage technology in their products rather than to build their products. They needed to re-think their retail strategy — selling experiences is more complicated than selling shoes.
In 1981, Nike changed its mission statement from “Crush Adidas” to “to bring inspiration and innovation to every athlete* in the world.” The asterisk further expands to “if you have a body, you are an athlete.” In 1988, they launched the now-iconic “Just Do It” campaign. The first ad in the campaign featured 80-year-old Walt Stack jogging across the Golden Gate Bridge. You can hardly make out any Nike products in the ad but by the end, you know why Nike is different from other shoe companies — the focus is on the athlete, not the shoe.
By the 2000’s Nike’s innovations in technology led to products such as Nike+ and a product-software collaboration with Apple. In 2019, their retail stores look nothing like other shoe stores. The NYC Flagship store, for example, has a sensor-driven treadmill and basketball court, indoor football courts, as well as training spaces and programs for amateur athletes.
During this time, Nike’s revenue started to grow. It grew from 2B in 1989 to 36B in 2019. 18x in 30 years. Wall Street Analyst Sam Poser suggests that Nike may be looking at US$50B revenue by 2020. Whether they will achieve that is insignificant. What matters is that Nike today is totally different from the one founded by Knight and Bowerman in 1964. From a company that sold shoes from a waffle iron to a company that sells athletic experiences for everyone. Not bad for a technology-centred company that invested in a user-centred future.
Astute readers will notice that the three evolutions mirror the Balanced Breakthrough model used in design thinking — feasibility, viability, and desirability. This is not accidental. As a designer, I believe that most companies will start from a technology or business perspective but when they get to a certain point, they must take a user-centred approach to evolve out of their Founders Syndrome. They must develop design competencies in addition to their technology and business competencies. The Nike story is a perfect example of how this was done successfully.
Special thanks to Shilpi Kumar at Khoj Lab, and Vijay Kumar, and Patrick Whitney at IIT Institute of Design for parts of the Nike story detailed in the article.
