Podcast Transcript
The following is a special presentation of Tony Kurre Radio. With Dr. Alex Heublein and Dr. Josh Klapow, this is Adapt or Perish.
Josh Klapow:
Hey, welcome back. This is another segment of Adapt or Perish, along with Dr. Alex Heublein, president of Adaptigent. I am Dr. Josh Klapow. And in today’s segment, we are going to go back to something we talked about in the last show. Alex played a classic rock DJ in the last show, you can go back and listen to that. He was talking about his favorite bands, Rush and The Police and the lessons learned. Hey, absolutely. Music is a business. But one of the things that we were talking about on the last show that I always have a hard time when I’m trying to think about this, is adaptability is being flexible, being nimble, being able to handle change in the marketplace, but then you hear the term innovation and disruption. And I think that I don’t always get the difference.
I mean, one, it sounds to me sometimes, Alex, like one is like, okay, be able to handle what’s coming at you. And then the other is like, all right, get out and for run of it and change the world. And I think, I mean, it’s confusing. It’s confusing to me just as an individual. I mean, I think about it as I go through my life. I’m supposed to be creating and developing and innovating and evolving as a human. But a lot of times what I’m just frankly doing is I’m adapting. Right? Okay. Well, this came at me. Well, now what do I do? So can we talk about that a little bit? Because it confuses the hell out of me sometimes. And that’s just me. I’m not even running a whole company.
Alex Heublein:
Yeah, no, I think that’s true for a lot of people. Right? What’s the difference between adaptation and innovation? And I think part of it is sort of the way that you’re doing things in terms of time. Right? If you think about adaptation, that’s usually in response to something else that’s happening. Right? A lot of times it’s a very reactive thing, where people say, “Ah, something happened in the market. I need to adapt to survive or to drive higher profits,” or whatever it may be. Right? Whereas innovation, particularly disruptive innovation, tends to be very proactive. And they’re not mutually exclusive by any means, but that’s kind of the line that I draw between, and it’s a very soft line, between adaptability and innovation. But they’re very well connected.
Because I worked for HP for a long time. And we had a saying at HP that the best way to predict the future was to invent it. And I love that line. I love that idea that it’s really about, if you really want to get out and do amazing things and grow your company and grow what you’re doing, there’s organic ways of doing that where you’re doing some incremental innovation, and then there’s ways to do it where you’ve got some truly disruptive innovation. And I think that’s the other thing that people get confused about is innovation can come from many different areas. Right? We think more about technology innovation when people say that. But you can innovate in your business model. You can innovate in the way you sell, the way you market, the way you bring your products to market, you can innovate with your customers. So there’re many different ways to innovate that aren’t just sort of what I’d call technological innovations.
And then you can kind of break those innovations up into a couple of different categories. Right? There are incremental innovations. And you see a lot of that, right? Adding a new feature to a product, creating something that builds upon what you’ve done in the past. It’s innovative. Now, is it going to disrupt things? Probably not. But that’s the vast majority of innovation that occurs out there in the market is what you’d call incremental innovation. And that’s great. And then you’ve got disruptive innovation. And disruptive innovation almost by definition is something that really changes the market. It changes the position of your company. And sometimes the really disruptive innovations are ones that create entirely new markets.
So you take something like the original Apple iTunes. Right? You had all of this music piracy going on back in the ’90s. And then Apple finally figured out, “Hey, let’s build an ecosystem here that’s going to work for everybody,” and really disrupted the music industry. This idea of being able to go out and stream music. We all pay 10 bucks a month to Spotify or whomever now to stream basically every song that’s ever been written. That’s a great business model, because in that model the consumers win, the artists, I think most of them win, and the companies that are kind of creating that ecosystem win as well. And so I think that’s one of the tricky parts here is understanding that there’re different kinds of innovation. And the innovation tends to be more proactive, whereas adaptability tends to be a bit more reactive, but they can be both.
Josh Klapow:
All right. So you talked about working with HP. And we even talked about this in the other show. If I’m Rush, right? The band Rush. If I’m The Police, if I’m HP, if I’m Apple, I almost feel like, and maybe I’m wrong, I feel like, “Yeah, I got brand recognition. I’ve got more room, I’ve got some degrees of freedom to go take some chances. I mean, granted my shareholders are going to get frustrated, et cetera, but my whole business doesn’t rely on it.” In other words, if I’m a new band coming out. And I’m going to change the way that music is done, maybe I’ll hit it, but there’s also a great chance that I’ll get nothing out of it. So I guess my question is: do you think you have to have enough stability as a company from a revenue standpoint, maybe from a market share, to have the best chance to innovate where it’s not just sort of a one in a million shot because you’re the new band coming up that somebody discovers?
Alex Heublein:
Well, yeah. I mean, I think it depends on where you’re at in the evolution of your company. I mean, that’s an ideal circumstance, where you’re in a really good financial position, you can go out and afford to take risks. But what I find is interesting is that companies that are in that position, in a lot of cases, companies that are financially stable, they have great revenue streams, so on and so forth, they tend to be the least innovative companies out there, because they get this complacency going on. Right?
Josh Klapow:
But okay. So I think it’s funny though. I mean, how do you force a company … not force … get a company to change? I’m thinking about, again, I’m thinking about even your … not your company, but when you as an organization go into other companies. And they say, “Yeah, we’re innovating.” kind of like you were saying, “Look. Look at this new product line we’ve got.” And the marketing groups and the product marketing groups are showing you how amazing this is, but it’s really just a small, incremental change. And it’s not disruptive. How do we get a culture of a company to use innovation as this powerful weapon in the marketplace? Because of exactly what you said, like, “Okay, my spear is already working really well. Why do I want to go to some sort of laser gun?”
Alex Heublein:
Yeah. No, exactly. And that’s the conundrum these guys face. Right? How do I foster innovation while still kind of making sure that I’m doing everything I need to go run the current business, the steady state business? And there’re different strategies companies have come up with for doing that. Right? And we talked about one of them on the last show, which is spinning off a company. Because one of the big things you see in companies with regard to innovation is that you’ll try to innovate, but when you try to innovate within a large company in particular, and I’ve seen this firsthand many times and tried to do it firsthand many times, is that all of those processes and rules and procedures and everything else that you absolutely need to run a scalable business, a lot of times they get in the way of innovation.
So a lot of companies have said, “We’re going to spin this out into a separate division, or we’re going to spin this out into its own company. And give that company the ability, the funding, but more importantly the freedom to go out there and truly innovate and truly disrupt markets.” So that’s one strategy, right?
The second strategy is that … and this was a strategy that a lot of companies pursued. This was really popular, let’s say, from the 1960s to, well, I mean even up until today, but it kind of fell out of favor, was creating an innovation group. So talking about HP, HP had this big group of people, 100s and 100s of people, and they were in a division of HP called HP Labs. And a lot of the rules didn’t apply to these guys. These were academic researchers. These were people that were going to bring truly innovative stuff to market, but you put them in sort of that standard corporate environment and you end up killing a lot of that creativity. So they said, “We’re going to use our organizational structure to go out and kind of not isolate these guys, but kind of get them out of the day to day fray. Let them focus on innovation.” Almost like spinning out a company but you’re still kind of in control of it. And their job is to feed innovation to the existing business units or to create new business units based upon those innovations.
The third way that we see organizations do this is to build a culture of innovation. And that’s a lot harder. Right?
Josh Klapow:
Yes.
Alex Heublein:
That is probably the most difficult of those three options. Right? I mean, it’s easy to spin off a company. It’s relatively easy to go create a new division or a business unit that’s focused on innovation and kind of let them do their own thing. Building a culture of innovation is really hard. It takes a long time. It takes changing the way you think about running a company. And you’ve got to listen to those voices that are potentially dissenting against what you’re doing today. One of the hardest things you’ll ever see a company do is disrupt itself. Many, many companies are very reluctant to go out and put innovations in the market.
So you take a company like Kodak, for instance. And for those of us who are old enough, we remember the Kodak film cameras and everything else. Those guys went bankrupt 20 years ago. But the funny thing is … and they went bankrupt largely because of digital cameras. But the irony of that story is that they’re the ones that actually produced the first commercial digital camera. They invented this technology. But they looked at it and they said, “This is really going to us up our film business. And we make a lot of money manufacturing film,” having all the chemicals that they use to develop the film photographs, so on and so forth. So they looked at it and said, “Wow, this is really going to mess up our current business. And then 15 years later they were out of business altogether there.”
So I think it goes back to this idea that, to create an innovative culture, you have to be willing to do some very unnatural things. You have to be willing to listen to ideas that might actually be detrimental to your business right now, but have a tremendous long term payoff for your organization. And building that culture is very hard though. It’s very, very tricky to build it, because it takes a lot of time. You’ve got to foster the right mentality. You’ve got to reward innovation. And you’ve got to reward things even when you go off and you try to innovate and it doesn’t work. That’s okay. You’ve learned something there. You’re trying new things in the marketplace. And so you have to have an attitude of, “Hey, not everything is going to work.”
And the interesting part about that is that we talked a little bit on the last show about venture capitalists. And somebody very early in my career told me … I said, “Well, what do venture capitalists really do?” This was before I really knew anything. He said, “Well, look. They fund startups.” And I said, “Well, why do they fund startups?” And they said, “Well, startups are people that have ideas and no money. Venture capitalists are people that have money, but no ideas. So it makes this really good synergy between those organizations.” Right? So I think you have to look at it that way. But to build an innovative culture you really have to be very deliberate about it. It’s something you can’t just say, “Hey everybody, let’s be innovative.” You’ve really got to work at it over time to make it happen.
Josh Klapow:
Have you seen it? So it’s one thing, and you watch a documentary about Apple and Steve Jobs and all that, but it feels like it runs counter to human behavior. And what I mean by that is, so we start off fresh, we’ve got a bunch of ideas. Like you said, like a startup company. We got this great idea. It’s new. We don’t really have anything. We don’t really have any revenue yet. And so in some ways it’s not that we have nothing to lose, but we don’t have anything … We’re not sitting on a bunch of stuff. And then maybe this idea takes off. Then it’s like the last thing or … And then maybe wave two we’re innovating. But then we got the VCs are saying, “Okay, we expect this amount of profit, and this amount of time. And we got to pay people.”
I guess what I struggle with when you’re talking about creating a culture of innovation, is once you start taking off, can you keep doing it? Or by definition, are you being rewarded for what you’re currently doing? Let’s go back to music, go back to music again. The band that makes it, I was just trying to think. Or any rock band, right? You look at their early, early stuff. Right? And diehard fans love it. But you look at early stuff, and some of that stuff sucks. Right? Here’s what they really sound …. I know the Beatles just released … Here’s what they really sound like in the beginning. And really, we don’t come to know them until something they did hit. And then they sort of worked with that. So that’s the part where I struggle when I see organizations trying to create the culture of innovation.
Alex Heublein:
I think a lot of it is about experimentation. Right? You have to have a certain amount of experimentation to be able to innovate. And you know that all of those experiments aren’t going to turn out the way you think. But I think what’s interesting about venture capitalists, and I think maybe this will help to shed some light on it, these guys don’t have a particularly high success rate when they go invest in small companies. Right? Maybe one out of every 10 or two out of every 10 of their investments will be highly profitable for them. But the neat thing about it is that they don’t have to have all 10 be successful. You only need to invest in one Google or one Apple or whatever to make billions of dollars. Right?
So they know that a fairly large percentage of their investments are going to fail. And they’re okay with that. That’s part of the business model. And basically what they’re doing is placing bets on experiments that are happening out there, where people are willing to take risks to go out and get these amazingly outsized rewards. So I think when you’re a startup you can build a culture of innovation fairly easily. But I think going back to your earlier point, when you’re an established company that gets a lot harder in many ways, because you’ve grown up from a startup. Every company was a startup at some point. You’ve grown up for this mentality. And in fact, I did my doctoral dissertation on this very topic is, can previously disruptive innovators disrupt the market again?
Josh Klapow:
Yes, that’s my … Okay, go ahead answer. That was my question.
Alex Heublein:
And there’s no simple answer for it. But let’s go back to Kodak. We’ve been using those guys. Right? They were incredibly disruptive innovators 100 something years ago. Right? They went out and had this brand new film camera technology that was revolutionary. I mean, before that you had to go take photographs. You’ve seen those old-timey movies with the big thing on the tripod, and the guy’s got the thing over his head and he hits the little button and the big flash ball blows up and goes off. That was the only way to get a photograph. It was really, really expensive. It was very difficult. You had to have a professional do it. And then all of a sudden they came out with cameras that people could actually buy, regular consumers could buy. But then 100 years later they were in this situation where they faced a new disruption, digital photography, and they just got wiped out by it.
And so I did a lot of research on this. And what I found was that the biggest difference between companies that were previous disruptors that failed to disrupt again or failed to be able to be a disruptor in a market, and the ones that were actually able to do it again, it all came back to that culture. And they spent a lot of time and a lot of money and a lot of effort reinforcing this culture of innovation even when they became successful. They went out and they promoted these ideas of experimentation. They promoted these ideas that failure was okay as long as you learned from your failure and didn’t do it again, and you failed quickly. So they went out and promoted a lot of principles within their culture. And the other interesting thing that I found out was that they built a culture around what people call open innovation, recognizing that not all of the good ideas and not all of the smart people are within your company. Innovation can come from anywhere.
So participating in a much broader ecosystem outside of your company, that turned out to be one of the critical success factors for a lot of the companies that were able to not just disrupt the market or create a disruptive innovation, but companies that were able to go and do it a second time or a third time.
Josh Klapow:
So if I’m starting a company, or if I’m established. Been around for a little while, maybe five or 10 years. Things are going well. And then typically my experience has been that’s kind of when you start hearing the, “Well, we need to pay more attention to innovation.” And like you said, we sort of spin out … not spin out a company. We have the division. We’ll create an innovation division and we’ll put some people there, and they’ll come up with innovative ideas. I was thinking, again, going back to some of our earlier shows about Adaptigent and this whole idea of how maybe existing technology can allow us to be innovative in a new way, to disrupt, without having to create the technology. Right?
Alex Heublein:
Yeah, yeah.
Josh Klapow:
Because I think a lot of companies, right. You know what I mean? A lot of companies think, “Okay, maybe even if we are a technology company, we’re not a technology development company.” And I see this all the time, Alex, I see companies like, “Well, we’re going to go develop this new technology.” Well, why? You got 16 companies. You got Adaptigent that can allow you to do it. So where is that balance between innovation maybe in product without necessarily having to innovate on a pure technology?
Alex Heublein:
Well, yeah. You’re bringing up a really interesting topic. And so if you go look at sort of the truly disruptive innovations out there, you can kind of categorize them into sort of two categories. Right? There are what people call breakthrough innovations that are just completely new technologies, like lasers for instance. Right? Nobody had ever seen anything like a laser when it came out, I guess, back in the ’50s or ’60s. Right? People were like, “Whoa. You can focus this beam of light. It’s a coherent beam of light. That was something that was a truly breakthrough innovation, and had many, many, many different purposes across a wide variety of industries.
But where you see most of the disruptive innovation happening, honestly, is in what academics call architectural innovation. And that’s exactly what you were just describing, is that I’m not going to go necessarily invent the core technologies that are required. I’m going to take a bunch of things that are already out there, and I’m going to combine them together in a novel way to go out and disrupt a marketplace. And so again, going back to Henry Ford and the automobile industry in general, that was the automobile. Right? There were internal combustions before there were automobiles. There were wheels and carriages and all kinds of technology. But the people that invented the first automobile sat down, and they said, “What if we combined all of these breakthrough innovations?” Like the internal combustion engine was a breakthrough innovation. “How do we take that and combine it with other technologies that already exist, maybe build a couple of things we need?” And they produced the whole automobile industry, which again, changed the world as a breakthrough innovation.
So it doesn’t have to be stuff that you just go off and say, “I’m going to go invent some brand new thing.” Those light bulb moments are very hard to come by. But that’s okay. You can still disrupt markets in a way by taking other breakthrough innovations, combining them together in a unique way, and then producing products and services that can truly disrupt a marketplace. And so I think understanding that distinction is really important.
Josh Klapow:
Is that something that you all bring to your clients? Because again, I’m thinking it’s one thing to come in as Adaptigent and you’re solving problems, but do you find yourself going in there for whatever reason, whatever problem that you’re solving, and essentially discovering or helping them discover, a company discover an innovation that, if you will, they did not even realize existed? But by between putting together what they’re doing and what your capabilities are, in some ways partnering with a company to create innovation?
Alex Heublein:
Well, I like to think of it more of what we do is enable companies to better innovate, and we help remove a lot of the roadblocks that are in place to go out there and innovate. And again, if you’re a large … we sell to large enterprises. And these large enterprises, they’ve gotten themselves into a position where they want to innovate, they want to go out and do some amazing things. Again, not just in technology or products, but it could be innovative marketing, it could be innovative sales strategies, it could be all kinds of things. But what they find is that, because they’ve been in business so long, they’ve got systems and processes and procedures and IT technology, it gets in the way of them actually going out and innovate.
So what we really try to do is to empower our customers to innovate. And one of the ways we do that is by helping them remove some of the barriers to innovation that they have in place that have built up over a long period of time. And that’s really important, because I think most companies realize how important innovation is going forward. If you go look at innovation over the last 100 years or so, it’s driven most of the economic progress we’ve seen in the world. It didn’t come from labor and capital and so on and so forth like people thought a couple of hundred years ago. They thought, “Well, there’s two equations to economic growth. There’s labor and there’s capital.” And what they left out was maybe the most important part of that equation, the most important variable, was, “No, actually it’s innovation. Right?”
You can have lots of people, you can have lots of money, but those ideas don’t come from nowhere. And so you’ve got to really be able to go out and innovate in the market to drive economic progress. And so I think a lot of companies realize that. They get it. They just don’t know how to do it. And I read a McKinsey study recently that said the average lifespan of a company in the S&P 500 60 years ago was 61 years. So that was the average lifespan of a company in the S&P 500. And today it’s 18 years. And that just blew me away. Right? Because that tells me that there are companies that are out there that are being disrupted on a daily basis. And I think a lot of people get, particularly in larger companies, that they have to go out and innovate.
But it’s a tough road. Right? And so you’ve got to come up with a strategy, whether it’s spinning companies off, whether it’s … a lot of people, they innovate through acquisition as well. And some great companies out there that are very, very smart about making acquisitions that are going to help them innovate, because they know that they’re not going to be able to build a truly innovative culture within their own four walls. They’re going to have to go acquire that culture and acquire those innovations to be successful going forward. And that’s a very legitimate strategy. But as a company, you’ve got to kind of figure out what strategy am I going to pursue? Am I going to pursue an innovation through acquisition strategy? Am I going to pursue an innovation through spinoffs or through creating separate divisions? Or am I truly going to try to build a culture of innovation that’s at the individual level not at a divisional or whatever level? And they all have varying pros and cons, and they all have varying degrees of difficulty.
Josh Klapow:
So cheesy, but would you say that you have to be innovative about innovation?
Alex Heublein:
Yeah, now, that’s a great way of looking at it. Right? Yes, you do. You have to be clever in the way that you innovate. And doing that is tough though, because if there were a simple answer for it I would’ve written that book and I’d be living on an island right now. There’s no simple answer for it, but there are a lot of things you can do. And there’s been a lot of good research. And there are a lot of great companies out there. There’re consulting firms that can help organizations build the culture of innovation, show them how to do it. And then there’re companies like the company I work for, Adaptigent, where we can come in and help remove a lot of the roadblocks to innovation so we can empower those organizations to be able to innovate faster and better over time.
Josh Klapow:
Well, I do really like two ideas. I like the two things that you said. One is not just thinking that you as a company have to come up with all of the solutions. It could be partnering, it could be acquisitions. But also, to talk about Adaptigent, realizing that if you’re hitting a wall in a company, you got the idea, you’ve got it scoped out, that there are companies like Adaptigent that can help you break through. Because what’s holding you up is not what you want to do, it is the technological piece or the technological stack. It’s that one thing. And it doesn’t have to hold you back. So whether it’s partnering, whether it’s buying, whether it’s acquiring, and that’s why I was saying, it sounds like there are so many ways to get at innovation that you almost get to craft your own weapon, if you will. It’s not just an off the shelf weapon, you make your own.
Alex Heublein:
Yeah. And you need that weapon. Right? Because that’s where competitive advantage is coming from. But yeah, it has to be unique, I think, for every company. And the strategy that each company pursues has to be something. But what all companies, at least all the big companies we work with, one of the common elements to every one of them is that there are some very serious barriers and roadblocks to innovation. So even if you have a great idea, getting it implemented and getting it to market quickly can be a huge challenge. And time to market is a very important aspect of innovation. There are plenty of people that have had great ideas, but the market timing had passed by the time they were able to get them out to market, and their competitors had passed them by because it took them so long to do it.
So not only do you have to have the ideas, not only do you have to be able to come up with a strategy for generating those innovations, but if you have a whole bunch of things that are in your way, if you’ve got IT systems that can’t do the things that you need to, that aren’t adaptable, if you’ve got an inability to go get the kind of data you need within your company to go out and innovate, that’s what causes a lot of the challenges. So it’s the best intentions, but then when you go try to implement those intentions you find it’s a lot more difficult than you thought it was going to be. And that’s one of the areas we help our customers with a lot.
Josh Klapow:
All right. So my expectation for you is to go write the book so that you can go buy an island or go … Actually, I don’t know if you were going to buy the island.
Alex Heublein:
I’m thinking about it. Yeah.
Josh Klapow:
Or going to go sit on the island where you can play your classic rock music. No, it’s awesome. It’s really mind boggling and mind blowing to think about this and to sort of make that difference between innovation and adaptation. And using innovation as a weapon, not just as a survival technique to adapt. No, great stuff, Alex. That’s all the time we’ve got though for this session of Adapt or Perish. I need everyone to stay tuned to Tony Kurre Radio for our next episode of Adapt or Perish.