PRODUCTHEAD: Exploiting inertia for fun and profit

you and whose product? #

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tl;dr

When strategic frames grow rigid, companies, like nations, tend to keep fighting the last war

If organisations (incorrectly) view change as gradual they will have resistance to the change

The innovator’s dilemma: cater to current needs or attempt to anticipate future demands?

Many common financial tools distort the value, importance, and likelihood of success of investments in innovation

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every PRODUCTHEAD edition is online for you to refer back to

hello

Whenever I start working on something new, inertia inevitably crops up. Part of it is my own starting friction, of course. I also see it when I’m helping my clients to change how they work (ideally for the better).

Inertia keeps us doing what we were doing before #

We’ve come to use the word ‘inertia’ to indicate a tendency to do nothing or not get started with something. But I quite like the more technical definition from physics, that something will either continue to stay still or keep moving uniformly in a straight line until an external force acts upon it.

Inertia provides us a neat analogy for product management: in the absence of anything forcing us to change our behaviour, we just keep doing what we were doing before. Resistance to change is not necessarily ill-intentioned, it’s just … easier. To effect any change takes sustained effort, and always seems harder at the beginning.

Inertia leaves you open to disruption from new entrants #

We see plenty of examples of established companies being disrupted by startups. They may have seen the disruption coming, even researched their own response, and yet still fail to act in time. (Kodak famously developed a digital camera then shelved it long before digital cameras disrupted their photographic film business.) Part of why this happens is because it’s easier for the startup to introduce something new, than it is for an established company to change how they operate. It’s inertia at play again.

In The Innovator’s Dilemma Clayton Christensen wrote about why some companies are better at innovating than others. Established companies are great at creating inertia because it can be desirable. The kind of inertia where the company optimises itself to keep doing what it’s doing, but more efficiently, makes a lot of sense. Christensen calls this “sustaining innovation”.

Imagine a factory manufacturing a particular type of component. It wants to churn out these identical components as efficiently as possible, so it optimises its processes for efficient repeatability. Variation is the enemy. But in doing so, it also makes itself far more resistant to change. This makes it vulnerable to disruption from new entrants which are doing things differently, and don’t yet have that same inertia.

The new entrants have less to lose (customers, brand reputation, revenue and so on), so they can take more risks. They have not yet optimised their processes for repeatability, so they can also change and adapt more quickly and easily. In time, however, a successful new entrant itself becomes established, and optimises itself to keep doing what it’s doing, more efficiently in order to scale up. And so it too becomes vulnerable to disruption.

Inertia means change takes longer and more effort #

It is not impossible for established companies to successfully change and adapt, but it takes significantly more effort than many expect. This may explain why change often comes too late for them, and at higher cost.

Tesla disrupted traditional automotive manufacturers with its electric vehicles, charging infrastructure and online purchasing experience. However, it may continue to struggle to scale up mass production quickly enough — while also maintaining quality — to maintain its lead over the competition.

Many competing marques have either acquired or partnered up to bide their time while restructuring their company  and developing their own electric vehicle platform and charging infrastructure. Some of them are already offering driver assist capabilities that exceed those of Tesla’s over-promised Autopilot. And they can now exploit their prior experience in mass production to scale up quickly.

Exploiting inertia #

If your company is a new entrant without the ‘baggage’ of established companies in your space, you can exploit the incumbents’ inertia to steal their lunch. But unless you can then follow up your disruption with optimisations for scale, repeatability and quality, you may find your competitors catch up and overtake you because they’re already good at that.

And if your company is an established player, assuming you can see the disruption coming in the first place, commit early to the change, be realistic about the effort and time needed, and see it through. Then exploit your ability to scale.

Exploiting inertia is one of many strategic plays Simon Wardley discusses in the context of his eponymous mapping technique. I’ve included the relevant section from his online book in this week’s links. I also have some other insightful articles about the importance of exploiting inertia, both as an incumbent and as a challenger. Have a great week!

Speak to you soon,

Jock

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what to think about this week

Why good companies go bad

One of the most common business phenomena is also one of the most perplexing: when successful companies face big changes in their environment, they often fail to respond effectively. Unable to defend themselves against competitors armed with new products, technologies, or strategies, they watch their sales and profits erode, their best people leave, and their stock valuations tumble. Some ultimately manage to recover—usually after painful rounds of downsizing and restructuring—but many don’t.

When you’re stuck doing what brought success in the past

[Donald Sull / Harvard Business Review]

Inertia

In the previous section, I discussed the importance of interfaces for activities that commoditize and become components of higher order systems e.g. standard electricity supply, standard units of currency. There is a significant cost associated with changing these interfaces due to the upheaval caused to all the higher order systems that are built upon it it e.g. changing standards in electrical supply impacts all the devices which use it. This cost creates resistance to the change.

The more successful and established it is then the greater the resistance

Also: A pet favourite – Inertia

[Simon Wardley / Bits or Pieces]

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Disruptive innovation vs. sustaining innovation explained

The backbone of every great business is the pursuit of innovation. While there is a difference between disruptive innovation vs. sustaining innovation, the fundamental goal remains the same—to create value. From a strategic standpoint, it’s worthwhile to explore each classification. It will help you identify the best path for your company to travel. You can think of the information that follows as your crash course in each methodology. Welcome to Innovation Strategy 101!

Examples from Airbnb, Apple and Nintendo

[rready AG]

Innovation killers: how financial tools destroy your capacity to do new things

Most companies aren’t half as innovative as their senior executives want them to be (or as their marketing claims suggest they are). What’s stifling innovation? There are plenty of usual suspects, but the authors finger three financial tools as key accomplices.

It’s not all your CFO’s fault…

[Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih / Harvard Business Review]

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