Some notes on innovation

"When you're finished changing, you're finished" - Benjamin Franklin

Adaptative survival

To survive over the long term, businesses must adapt, and adaptation requires innovation. Businesses that remain in their comfort zone for too long risk potential collapse. Sooner or later, every business will face adversarial attacks on its market shares, whether from direct competitors or through tangential solutions. Small businesses and technological start-ups often strive to be these tangential disruptors, creating new distribution models, altering the technological flow, and sometimes exploiting legal loopholes¹. For all SMB entrepreneurs, distinct characteristics are essential to differentiate from the competition. In my opinion, constant innovation is the key to maintaining constant differentiation².

Indeed, only massive monopolies can afford to go long periods without innovating, often due to their unfair, and sometimes illegal, advantages³. However, if you're not the CEO of a company like Goldman Sachs or a founder of a Fortune 500 company, this message is particularly relevant. In this article, I'll discuss why long-term survival hinges on continuous innovation and what may constitute effective, customer-centric innovation⁴.

Later in this serialized book, I will dedicate an entire chapter to this topic, addressing various aspects such as brand, technology, distribution, communication, and organizational structure. But first, let's get into the fundamental principles.

What is innovation?

Per Wikipedia :

Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services.

Yes, you're reading it right. No technological advancements or complicated algorithms get mentioned here. Innovation isn't invention, nor a scientific breakthrough. New ideas drive innovation.Your constantly compounding market knowledge is your best tool when building an innovative company. The essence of innovation lies in launching new goods or services that users actively engage with. Without practical application and users, innovation remains merely theoretical. You can't just claim to be innovative; it's a status earned through the distinctiveness and novelty of your products and services, as validated by user experience and feedback.

What can innovation practically mean in your business? It's anything that provides your product's end-users a unique experience, different from what they previously knew. I’m obsessed with banking monopolies - and their collapses - and I've repeatedly discussed the neo-banking ecosystem. Why does this fascinate me? They haven't technologically invented anything new. They offer a well-known service, using tools that are not even specifically modern. Mobile apps and user-friendly websites aren't rocket science - they're just modern. This is innovative because no middle manager in those big, bloated banks recognized the elephant in the room: how about making the user experience far from a complete nightmare?

Innovation is challenging, particularly in the context of creating a company. This difficulty arises from various factors. Interestingly, small businesses tend to be inherently more innovative. What drives this tendency? Why are positions such as Innovation Director or Chief Digital Transformation Officer completely pointless? Because they are stakeholders with no skin-in-the-game and prioritize ideas over practical execution, they function outside the user feedback loop.

While innovative transformations in small businesses can threaten their stability, they are crucial for growth, adaptation, and survival.

This is a paradox: you need to embrace risks to have a chance to survive. Let’s explain why and approach how.

But … why should businesses innovate?

If you are creating a small business, you should innovate to survive. It's that simple. Your company is likely short on cash, revenue, or both. There is a very low probability that clients will start flooding in if they perceive you as non-original. As a small business, you operate on a very fragile trust basis. Nobody knows you, you've never solved anyone's problem, and you might well be another flash in the pan with some miraculous solution. In all probability, your solution won't be operating a few years from now: your first clients don't need you, you need them desperately.

Businesses don't need as much innovation as they need what necessarily comes with it, and its very requirements:

• The ability to be critical of the market you operate in, your competitors' practices, and what is obviously wrong and room for improvement.

• Iterative processes. Your small company should not operate on a bureaucratic, broken, slow feedback loop and rigidly follow a 12-month product roadmap. Get users feeback, and move on.

• The necessity to invest in research of new distribution models, technology, and its applications.

• Injecting within your business the mentality to be different for its own sake: the minute you lose it, you'd better be already cash-rich and in a very strong position.

Innovate on your organizational management: If your competitors are large, bloated, bureaucratic companies, then instill a maverick mentality within your teams. Your clients must perceive a difference and must be convinced that you will at least try to be different.

Innovate on your distribution: The market you operate in may be such that some key stakeholders have low incentives to foster novelties. For example, bank clients were only seen as a source of money by big bank monopolies. Once new fintech companies introduced reward programs for bringing new users home, they triggered explosive network effects that the little suit-and-tie guys in banks had been sitting on for decades.

And obviously, innovate on technology. Your users can be upset, shocked, traumatized, and disappointed, but they just can't be jaded and bored. Bring novelty, move fast and break things, and slightly favor exploration over exploitation. Once you've found a hook, a technological advancement that brings users in, build on that, and make it rock-solid. The first versions of the most famous softwares were either very minimalistic, extremely buggy, or both. It's totally fine as long as you bring something different on which you will build something both new and reliable. Amazon's Alexa first versions had dramatic scary laughters, Quickbook's initial inventory system was sometimes completely unbalanced, Facebook is still so insecure they mention the likelihood of being hacked in the terms and conditions you signed⁵.

But, for goodness' sake, avoid creating rigid, twelve-year product roadmaps that disregard user feedback. True innovation involves introducing new practical ideas that people are willing to pay for, rather than merely producing technical inventions that lack practical applications.

Change your users life with new ideas, cash-in.

Conclusive aphorisms

Innovate or stagnate and meet death

Bureaucracy is where innovation goes to die

Smart ideas outshine money – innovation doesn't need funding

Your process of knowledge creation is like tapping into an endless oil well; refine it better, dominate the market.

Keep the faith,

Voss

1. Uber for example, meets those three characteristics.

2. And, by extension, avoiding deadly competition based on decreased margins (which is different than purely price-based competition, what matters are your margins).

3. Lobbying is not illegal, but it’s in the same vein.

4. Complicated algorithms no one use are not innovation

5. Please check it out, and read the book Future Crimes.