Big Products vs. Small innovations
October, 2004
Joel Whitman

Does dependence on a mature revenue stream make you blind to opportunity?

In many companies there is an unspoken organizational pecking order.  At the top, slotted right below the Senior Executives is Product Management. This is as it should be, since they are responsible for the products which generate the profit (or the loss). In many organizations however, particularly those which have several separate product lines, Product Management often are successful at creating their own little nation-states of staff and resources, building walls and moats between themselves and their peer organizations.  The larger the P/L the more unspoken freedom these organizations have to grab resources and internal headlines, often squashing valuable dissention at the expense of the greater corporate good. The corporate blind spots created by this organizational dynamic can be deadly.

The two most common behaviors in these types of organizations we often refer to as:

Skeptical?  Think Railroads - Shoes - Radios  - Cars - Steel - Personal Computers -Telephony. Think Sears and Roebuck sticking a catalogue under the seat of every buckboard heading west from St. Louis, creating the catalog industry in the late 1800’s and then doing it again and again and again until competitors like Wal-Mart and Target  almost put them out of business by re-inventing retailing from scratch. Whether the danger is from low cost imports or product aging - It is happening to you to!

It does have an irony to it – as a products power inflates its corporate power – the commoditization caused by natural market forces causes its long term profitability to be diminished at the same time. Yet these trends do not happen over night, in fact the slow changes in this type of situation can cause a company to become lulled into a false sense of security.

We all know the story, when an industry is young any number of innovative companies large and small can thrive, over time these companies either die off or get rolled together to form larger corporations which in turn gorge on ever increasingly efficient production of past products with minor function adjustments masquerading as innovation.

The Bubble product feeding on the Bubble market.

The Pin
The product or market shift which comes along poised to pop the bubble. Trying to alert corporate management to a Pin often becomes a source of internal futility and cynicism as less powerful (but not less smart) employees try unsuccessfully to swim against the political influence of the big product, the Bubble.

Of course bubbles can burst on their own, but that usually occurs at the market level, not an individual product or company. No, it is far more common for bubbles to get burst by a pin which Bubble Product Management and by association, Executive Management didn’t see coming. Train companies get killed by long haul trucking, radio loses to TV, domestic auto and steel loses to cheap imports. Most recently the absolute flood of fiber optic cable put into the ground by telephone companies jumping the market caused such a level of bandwidth saturation that we have still not seen the floor on pricing yet. Another irony is that all of that cheap bandwidth is only accelerating the market for internet telephony (VOIP) which will further erode the revenue base of the telephone companies who raced to stick it in the ground to begin width. 

Question is: Have you heard from your Pin lately?

A couple famous examples of this was when Xerox decided that there was no market for computers with an icon based interface – shazam – Apple computer. Or IBM believing there is no need to own the Operating System, the future was in hardware – shazam – Microsoft.  While we cannot say what your pin might be, we can almost guarantee that the genesis of it is floating around your offices today. And the larger you are, the most likely it is that this statement is true.

It is so politically correct to say that we abhor office politics and just want to get our work done, but an observant executive will understand that beyond the personal challenges of people trying to get along, an offices own politics often determines what they as executives get to hear. The perpetuation of a lopsided pecking order will not only prevent management from getting an honest picture of their own market dynamics, and product viability, but it may well prevent important ideas, trends, innovations – Pins – from getting heard. Until of course frustrated employees leave, start their own company, and come back and pop your bubble.  Sweet vengeance, yes - but also an unnecessary loss of potential shareholder value.

So what can you, as an executive, do to prevent this?

Three Steps for Prevention
First – Go out of your way to listen to people in lower levels of the organization, don’t expect the most important information is naturally going to find it’s way to you – it won’t.

Second – Listen to a cross section of customers. Everyone likes to meet with their brand name customers – take the time to hear from the little guys as they most probably depend on you in ways the big guys don’t.

Third – Don’t ignore commoditization. It is coming, just like growing old, you cannot escape it, but you can prepare for it.

Finally - Think like a pin. Ask yourself, ask your staff – if we wanted to pop our own bubble, how would we do it? You can bet that someone else is thinking about that, if you are good, you might beat them to the punch.

Bubbles and Pins:

Keep your organization talking, don’t be afraid to question the big guys, listen to the little guys and pop your own bubble before someone does it for you.