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CHAPTER 5
Mining the Future

What methods do you and your company employ to detect changes that could spell doom—if appropriate action isn’t taken—or boom, if they are? How do you look for “white space” opportunities, those that don’t fall neatly into the purview of present operating units? How satisfied are you with your process for mining the future?

Many firms are tempted to put off rethinking and revamping this part of their innovation strategy. Unless their backs are clearly against the wall, they point to recent quarterly performance and say, “we aren’t doing that badly, just look.” Or “we know we need to improve our processes in that area, but right now we’ve got a lot on our plate that is more pressing.”

Listen to the head of a mid-sized specialty chemical company describe what happened to him.

“We felt we had the [market] niche sewn up because of our strong relationship with a leading customer, a textile manufacturer,” said this CEO. “Then a competitor came out with a less expensive substitute. Their product didn’t do everything ours did, but it did everything our customer needed. 98Within months we had lost the account, and no matter how hard we tried, we couldn’t get back in.“

The company eventually recovered, but the loss of that leading customer cost five years of profits. In hindsight, the signs were all there: Articles in trade journals about the new competitor; testing of the new product by independent labs and positive reports in the technical literature; and even industry rumors about government subsidies enabling the new competitor to enter the market with lower prices. Looking back, this chastened leader and his senior team asked themselves how this could have happened.

It happened because the company’s method of mining the future—of collecting and creatively analyzing trends—was inadequate in an industry with high “clockspeed,” or rate of change and evolution. Discontinuous changes aren’t some idle, academic concept. They happen often and suddenly and spring from the unlikeliest of places. Disruptive technologies don’t just happen to other companies in other industries, they happen in all industries today, and they happen faster than ever before.

A reactive, linear approach won’t cut it. Leaving it up to the strategic planning department won’t do. Saving it for the annual off-site isn’t enough. To respond in a timely manner to changing customer needs and wants, to anticipate what your customers will want in the future, takes serious effort. It needs to be systematic and disciplined. We’re not talking about predicting the future but rather not being blindsided by it. And being early to recognize an opportunity, regardless of whether you and your firm choose to move first to exploit that opportunity or not. Later in this chapter, we’ll explore how innovation-adept firms operate differently. Let’s start by going behind the scenes at one of our Innovation Vanguard companies to gain a few practical insights.

Filling the Funnel at Royal Dutch/Shell

Tim Warren, executive vice president for exploration and production at Royal Dutch/Shell, began looking at his division’s growth rate, and he grew worried. His thinking about the problem led him to conclude that his division was overly focused on incremental process improvements and needed bigger ideas, and the entrepreneurial zeal to pursue them. Warren grew determined to do something about it. The result was a dramatic new approach to innovation at Shell that came to be called GameChanger.

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Twenty-four months after implementation, Shell’s new approach was working so well that other divisions within the company decided to set up their own versions. At Shell Chemicals, the company’s third largest division, the GameChanger unit is led by a six-person team whose job it is to look for ways to exploit new and existing technologies and ask “how can we do this business in a different way? How can we change the rules of the game?”

That’s how Dave Austgen describes the unit’s mission. One program manager does nothing but scan the horizon for potential discontinuities and manage a global network of volunteer “scanners” who read industry journals, attend conferences (the odder the better), and report on regulatory, societal, technological, and global trends and changes. When something looks interesting, “deep divers” run database searches to assess what is going on and feed their insights to the scenario planning process.

Shell Chemical’s futurist team is more than an early warning system or think tank for producing reports that never get read. Its focus is all about “filling the funnel” with growth-spawning opportunities. As such, GameChanger is linked to an internal venture capital process that solicits, sorts, selects, and sometimes funds promising white-space opportunities, and nurtures them into new products, services, processes, technologies, and capabilities.

A big chunk of Dave Austgen’s time is devoted to soliciting ideas from division employees around the world and gaining buy-in for the approach. “We try to get face time in the plants to make presentations about what our unit is up to,” Austgen told me when I interviewed him. “We tell as many people as we can that we want their ideas. We believe these ideas can literally come from anywhere and anybody.” A quarterly newsletter reports on hot projects and encourages managers, technologists, and individual contributors to submit their ideas over the company’s intranet. The GameChanger team then discusses the contributions every Wednesday.

“We get 50 proposals a year,” says Austgen. “We never reject an idea outright. We focus on enriching the contributor’s idea. We don’t want to dismiss anybody. We want to help people think through the ideas themselves, and we help them work through the process. We have found that the people who come up with an idea are the best champions of that idea. We team them with a member of the GameChanger group, who becomes their coach, helping them think like an entrepreneur.”

Since the cycle time in the chemical industry is generally 5 to 15 years, it’s too early to truly assess the impact of GameChanger on the division’s 100growth. One promising idea currently in development came from an engineer at a plant in the Netherlands. GameChanger funded the employee’s idea, which proposed a new business that would market a waste product generated at that plant. After GameChanger funded initial development work, the brass in corporate headquarters became enthusiastic; this new business is on its way to generating revenue for the corporation.

Taking the Fuzz Out of the Front End of Innovation

In innovation circles, the “fuzzy front end” refers to activities that come before the formal, well-structured new product process kicks in. It’s here that future possibilities and opportunities first come into view, or fail to. “The front end of innovation appears to represent the greatest area of weakness in the innovation process,” concludes a study of company practices published in Research Technology Management.

Companies like Royal Dutch/Shell are leading the way in revitalizing this vital part of the discipline. You can too.

How Growth-Spawning Companies Mine the Future

Innovation Vanguard companies have an organized, systematic, and continual process in place. As one manager described it, “We are actively seeking to discover new technologies that might become disruptive to our business, or that we can use to disrupt our competitors.” The box on the next page lists six strategies innovation-adept firms are using:

Mining Strategy 1: Scan and monitor the sources of innovation opportunity.

Many breakthrough innovations have a common, but less-than-obvious attribute: They exploit change. McDonald’s Corporation rode lifestyle changes to success as increasingly mobile Americans were eager for inexpensive, fast food of consistent quality. Old Navy, Gap’s retail clothing chain, rode the Generation Y demographic wave by providing hip clothing at affordable prices. Federal Express rode a wave of customer demand for time-sensitive parcel delivery that existing freight forwarders hadn’t yet noticed.

The types of change are almost endless: global, economic, technological,

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social, regulatory, and political. Let’s look at how a change of the regulatory variety impacted one firm.

How Progressive Made Lemonade from a Regulatory Lemon

Like all auto insurers operating in California in 1988, Ohio-based Progressive Insurance faced a sudden regulatory change. Fed up with the bureaucracy, high prices, and unresponsiveness of auto insurance companies, California voters passed Proposition 103, which regulated auto insurance companies and rolled back escalating rates. The law was a huge hit to Progressives bottom line, forcing the company to give back $60 million in refunds to customers and to reduce its workforce by 19 percent to survive. But what could have been a voter-tossed lemon became instead a chance to make lemonade.

In response, Progressive rethought and completely altered its business model, supplementing its traditional agent distribution network to also sell directly to customers. It now settles claims on the spot rather than indulging in lengthy delays and attracts new customers via its website by posting not only its own rates but the rates of its competitors, even if their rates are cheaper. Result: Progressive enjoys wider profit margins than any other insurer and grew six times faster than the industry as a whole throughout the 1990s.

Mining Strategy 2: Create your personal future-scan system.

In studying 50 leading innovators for my 1986 book Winning the Innovation Game, people like Federal Express founder Fred Smith, Andrew Grove of Intel, polio vaccine pioneer, Dr. Jonas Salk, inventor Dean Kamen, and many others reported how passionate and systematic they were in keeping 102abreast of trends and new ideas. “They are like vacuum cleaners,” I wrote. “I would be there to interview them, to understand their success characteristics and they would in turn pepper me with questions; it’s just their approach to life.”

Today, it’s imperative that all of us have a system to keep ourselves apprised of broader currents. If you actively track the trends, you bring more to the table. You can better help your company wrestle with technological, demographic, social, regulatory, lifestyle, and global trends. By delving more deeply into your industry, you make yourself the resident expert, which doesn’t exactly hurt your chances of career advancement either.

Here are three components to developing your own future-scan system:

Component 1: Make Time for Reading

Many executives barely have time to flip through the Wall Street Journal and the weekly business magazines, much less keep up with general interest publications. After a grueling day, they want something escapist and entertaining.

Lack of good reading habits can hurt you. An effective personal future-scan system must include broad-based reading of high-quality material. Subscribe to a variety of publications, even if you aren’t able to read them all immediately. Then when you’re on a flight or have a block of unscheduled free time, whittle away at the stack. Even if you only skim them, you’ll pick up a wealth of information and you’ll notice connections and start seeing patterns of change emerge. In addition:

• Take stock of your reading diet. What newspapers, magazines, newsletters, e-zines, and trade publications do you read? Is your information diet broad enough?
• Read widely. Pick up a copy of Seventeen or People or Chain Store Age or Fast Company. Look for what’s different, incongruous, worrisome, exciting. Professional trend forecasters call this “scanning and monitoring.” The goal is to notice and to read what jumps out at you. When you spot something unusual, ask yourself: How might this trend become an opportunity?
• Read for different points of view. Accept free literature and sample-issue offers. You never know where a new idea may come from. Buckminster 103Fuller supposedly bought the top right-hand magazine whenever he visited a newsstand, no matter what magazine it was. One such purchase was a science magazine that contained an article about the eye of a housefly. It is said that this article inspired him to invent the geodesic dome.
• Read up on at least one new subject every week. It might be a new technological or scientific breakthrough or emerging political or social issue. Make it a point to read in-depth articles on the subject, even if you aren’t particularly interested. The more you understand about the other pieces of the puzzle, the less likely something will blindside you.
• Scan your mail. Even your junk mail, including email, can convey patterns of change. Scan conference brochures and advertisements for clues. For example, the Comdex program, which is mailed to thousands of prospective attendees every year, offers a particularly concise window on the technology world, and monitoring conference brochures from other industries can alert you to trends and issues you might otherwise miss.
• File hard copies to store the information you save. There’s power in being able to lay your hands on an article, report, or seminar handout when you need it. Highlight excerpts with special meaning and significance to you. Post-it Notes and highlight markers can remind you of the value you first saw in the material that you may want to quote later in speeches or memos and reports.

The bottom line is this: Leaders are readers. Take stock of your reading habits and keep working to improve the quality and variety of what you read.

Component 2: Connect with People

The people in your life have a tremendous influence on how you think, on what you think about, and on your ability to spot opportunities in change. To connect with people, join networking groups and professional and trade associations; attend special focus conferences. Ask questions. Do those in your present circle of contacts challenge you to think new thoughts, to grow, indeed, to assault your assumptions? Or do they merely reinforce attitudes, knowledge, and perspectives you already hold? “Better a nettle in my 104side than my echo,” wrote the 19th-century transcendentalist Ralph Waldo Emerson in an essay on friendship. Those who unflinchingly bring differences of opinion to us may not always echo back to us what we want to hear. But what they will do is make us more effective in a world of change.

Component 3: Observe Yourself

The greatest opportunity-spotters are not only good readers and networkers, they are also self-observant. They listen to their intuition, that little voice inside that says, “wait a minute, this is important.” Or “this doesn’t feel right,” or “I don’t think our customers will want this.”

Fred Smith, chairman of Fed Ex, told me in a 1985 interview that most people have an inherent resistance to what he called “kaleidoscope thinking.”

Imagine yourself as a customer of your company. Then ask, “What might I want that isn’t available? What do I like? What are my own needs that are not being filled by this company and its product and services?”

Reading, interacting with people, and taking the time to develop your own perspective on events and trends are ways to add value to yourself and to better contribute to your firm’s future.

Mining Strategy 3: Integrate future scanning with your company’s idea management system.

Companies often establish a future-scan group only after there has been a major oversight, a missed opportunity, or an unpleasant surprise. While better late than never, this behavior seldom unleashes the imaginative dialogue needed to seize the future. Innovation Vanguard companies, on the other hand, proactively upgrade their scanning processes not just to avert disaster, but to get a jump on opportunities.

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BMW Group’s Future Scan System

In 1997, Munich, Germany-based Bavarian Motor Works (BMW) felt it necessary to rethink and redesign its methods of mining the future. Being the “ultimate driving machine” is a tall order, given the technological and competitive clockspeed in the auto industry and the need to differentiate itself at the premium end of the market. The firm thus organized a Central Innovation Organization in Munich, composed of 35 people to coordinate its efforts. This group in turn manages six innovation “fields,” 100-person, widely dispersed networks of BMW managers and engineers that focus on such issues as comfort and convenience, safety and security, and environmental or what it calls “green” issues. Each field is responsible for early identification and reporting on new developments, trends, regulatory changes, and of course emerging technologies.

To support the field’s work, the firm also established a number of satellite outposts in places ranging from Tokyo to Los Angeles to Palo Alto to provide a local listening presence.

The Palo Alto, California, outpost facility is typical. BMW’s offices have no sign outside, and the visitor is led into an open, airy facility lined with car body and chassis parts, and engineers working at computers or engaged in passionate discussions. A 20-person group is charged with imagining how emerging technologies might be applied to future automobiles, giving BMW first-mover advantage. The staff scans technology publications and monitors developments in nearby Silicon Valley, attending technology fairs, electronics conferences, and networking events.

The group does more than engage in “blue sky” thinking. Success is measured by how well the team not only discovers interesting technologies, but also by how many technologies it can get adopted into future automobile designs. In the basement of the Palo Alto facility, a parking garage has been converted into a makeshift prototyping center, and BMW autos are retrofitted with all sorts of experimental gadgets. Periodically the garage doors fly open and swarms of BMWs go out in convoys to test-drive on California’s freeways.

If a new application is deemed feasible, the Palo Alto group must then use its selling skills to persuade one of the six councils to adopt its idea. To break down the “not invented here” barrier that so stymied Xerox’s PARC, BMW rotates engineers from the firm’s main design center in Munich 106through stints in Palo Alto, and the hope is that returnees become champions for the new application once back at Munich headquarters.

Your Future-Scan System Must Fit Your Company

Future scanning doesn’t have to be as elaborate as BMW’s. A distribution firm uses a simple ten-person cross-functional team to read general interest magazines, technology publications, trade magazines, and newsletters. These range from highly technical publications to popular periodicals such as The Economist, Harvard Business Review, Wired, Fortune, Wall Street Journal, and Investors Business Daily. Each participant is asked to clip material that might have potential impact on the company: advertisements, articles, editorials, etc. In quarterly meetings, participants are asked to comment briefly on what hit them about the information when they first read it and why.

Organizing an opportunity-scanning process is an effective way to take some of the fuzz out of the front end of the innovation process. Think tank participants should represent people from various functional areas, should include maverick personality types, and should be voluntary. This is integral to making innovation a discipline and as such doesn’t supplant the traditional strategic planning process. Instead, it takes away that department’s monopoly status and embeds the organization with an alternate, systematic way of mining the future.

The important thing is to build awareness, to lay the groundwork for ideation, and to stimulate new thinking.

Mining Strategy 4: Assault industry assumptions.

Assumptions are what “everybody knows to be true” but may no longer be. Today assumptions often get obsoleted by reality before we have let go of them. Too often, strategic planning consists of merely tired assumptions being projected forward without any real thought. Too often, companies are stymied by narrow or rigid assumptions about how fast they can grow, what markets they might serve, and what existing customers will expect tomorrow. Mining the future, then, has a lot to do with identifying assumptions that can hold us back. How to assault assumptions? First, by recognizing that this is part of the discipline of innovation. Regis McKenna is a pioneer in the field of public relations who helped Apple Computer, Genentech, and other startups gain credibility. McKenna, chairman of McKenna Group, told us about a rule 107in his company, which provides strategy consulting to technology firms: If you’re going to hold a meeting, everyone must come with a list of questions to stimulate an assumption-assaulting discussion.

Similarly, the late Sam Walton encouraged questions as he built Wal-Mart into the world’s largest corporation. “Our company works best when we continue to ask questions,” said Maxie Carpenter, vice president of personnel and training for Wal-Mart’s Supercenter division. Wal-Mart encourages questions in many ways, from store visits and conference calls to focus groups and grassroots meetings at headquarters with store managers.

Questioning why management does things the way it does isn’t always comfortable. It must be encouraged, sanctioned, and modeled by leadership as part of the company’s culture. It must be unimpeded by rank or politics. This is easy to say, difficult to do. Things that should be said aren’t. As an outside facilitator, speaker, and consultant to numerous organizations each year, I’ve had more than a few hosts tell me during a preparatory conversation, “Now, you probably don’t want to mention x or y or z because the folks are a little sensitive.” My response is always “as you wish,” but I try to encourage a free-ranging discussion that leaves all issues and trends on the table.

Mining Strategy 5: Broaden your company’s vision.

No doubt your firm has a vision statement. Ironically, instead of inspiring vision, it could limit it. Consider:

• If Disney defined its vision as theme parks and animated motion pictures, it would never have moved into hotels, Broadway shows, retail stores, cruise ships, and myriad other businesses.
• If Microsoft defined its vision as software, it never would have diversified into the 1,001 businesses it is now into, from travel to encyclopedias, real estate to automobile sales.
• If Kimberly-Clark had limited its vision to existing product categories, it might not have “invented” whole new products (disposable training pants, adult diapers, etc.).
• If GE had defined itself as a manufacturer, it would not have envisioned its future in services, and GE Capital would not be the growth engine it represents today.

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What about your firm? When was the last time you looked at how you define your industry with an eye toward broadening that definition? Yours may be a manufacturing company today but might your future be in service as well?

Embracing Growth at GE

Lewis L. Edelheit, Ph.D., GE’s senior vice president for Corporate Research and Development and director of GE’s Research and Development Center in Schenectady, New York, is a big believer in the power of broadening your firm’s vision of itself in order to embrace future growth opportunities. Until a few years ago, Edelheit explained in an article, GE’s businesses were structured as a pyramid, with the base as the product and the other elements— services, manufacturing processes and information—built upon that base.

“We have literally turned the pyramid upside down to where the product becomes just one piece of the picture, the tip of that inverted pyramid,” writes Edelheit. “The biggest growth opportunities might come from providing services to the customer: providing the customer with ways to become more productive and with information so valuable the customer will pay for it.”

Mining Strategy 6: Strategize your place in the first-mover, fast-follower race.

Much has been written in recent years about “first-mover” advantages—the rewards and benefits of being first to discover and commercialize a new product, service, technology, process, or business model. For many observers it is a deeply held assumption that such market pioneers enjoy enduring advantages. During the height of the late 1990s dot-com bubble, such thinking reached the level of a self-evident truth.

Academic research strongly supported this assumption. One study, for example, purported to show that of 25 market pioneers in 1923, 19 were still market leaders today, and that all 25 were still in the top five in their respective categories. Another study, based on analyzing the U.S. government-sponsored Profit Impact of Market Strategies (PIMS) database, concluded that more than 70 percent of current category leaders had been the market pioneers.

Then came the revisionists, the assumption assaulters as it were. 109Researchers Gerard Tellis and Peter Golder hypothesized that the research cited above and other studies may have been skewed because they looked only at surviving firms—those likely to promote themselves as first movers, whether they really were or not. In conducting their research, Tellis and Golder relied instead on analysis of news articles and annual reports written about the companies at the time the product was launched. They supplemented this analysis with interviews with company insiders at the time the market was developing and analysis of reports written when the markets were still in their infancy, to form a different picture.

After studying 50 product categories from their inception, the two reported in Sloan Management Review that self-described pioneers (“defined as the first to sell in a new product category”) were market-share leaders today in only 4 out of 50 product categories. Their conclusion: the failure rate of market pioneers of 47 percent is higher for durables than nondurables, and market pioneers are still market leaders in only 11 percent of the categories. Calling your firm a first mover, conclude Tellis and Golder, doesn’t mean you really were.

• While Procter & Gamble’s Pampers unit might boast that it “literally created the disposable diaper business in the United States,” Tellis and Golder found that disposable diapers were available as early as 1935 from Chux brand of Chicopee, Wisconsin.
• Apple Computer might be remembered as having pioneered the personal computer industry, but that distinction actually goes to Micro Instrumentation and Telemetry Systems—MITS—not exactly a household brand today.
• Miller Lite, which Miller Brewing claims was the first low-calorie beer, was preceded by Rheingold Brewery’s Gablinger Light, launched a full decade before.

Do Tellis and Golder’s findings mean that companies should never attempt to be first to sell in a new product or service category, or to pioneer new business models? Not at all. What their findings do mean is that mining your firm’s future means constantly attempting to be first in discovering new opportunities but not necessarily that you move first to develop the market, product, or strategic opportunity. Because of Tellis and Golder’s work as well as a growing volume of research of the world’s best thinkers in the area of 110“innovation timing advantages,” you can avoid the mistakes other companies have made. More importantly, you and your firm can benefit from the practices that brought some first movers tremendous growth, breakthrough product success, and commensurate profits.

Before Pioneering, Consider These Questions

You can earn the title first mover with that new idea you’re considering but will it benefit your top and bottom line? Will it create the growth you seek? The time to consider such issues is before proceeding blindly down a path lined with rosy scenarios and unchallenged assumptions.

Lasting benefits accrue to firms that can honestly answer yes to these seven questions:

1. Do you have proprietary technology or designs that can be protected by patents, copyrights, or other means?

If you have scientific know-how that your competitors don’t (and can’t readily acquire), you might have the potential to break out a product or service that gives you a significant, sustainable market edge. Pharmaceutical companies have exploited the legal protection afforded to their industry for years (drugs are protected for 12 years by patents), and a similar situation exists with medical tech devices, at least in theory. Count on having to defend your patents though, from imitators.

2. Can you, by going first, preempt assets or investment capital from going to competitors?

Many dot-com firms in the 1990s came to market with essentially the same idea at the same time, but the initial edge often went to the first one or ones to secure large amounts of venture capital, essentially preempting investment capital from going to others who came along later with the same idea. At least until the dot-com crash of 2000, when whole categories were obliterated because their business models failed to explain an even more fundamental question: How does this idea deliver value to real customers?

Assets aren’t confined to capital by any means. If you have physical assets such as supermarket shelf space or valuable territory such as a desirable location, these could also afford you a sustainable first-mover advantage.

3. Can you achieve brand loyalty by going first?

If first movers can make a big enough splash fast enough, they can establish 111a reputation for being the best, most trusted brand. Brand loyalty in effect preempts demand, instead of preempting assets or supply. Although not a first mover in the market for word-processing software, Microsoft Word was the first word-processing software to be adopted by millions of customers. For them, switching to an alternate brand would require learning a new program. Often, as we’ll explore in a later chapter, that’s more trouble than it’s worth, so customers become loyal to a product they find less than satisfying.

4. Can you enhance your reputation by going first?

There’s no question that being the first mover can endear a product or brand to customers. In the minds of consumers, brands such as Kleenex, Post-it Notes, and Walkman are synonymous with the product and the product category. That, in a nutshell, is the benefit of having what scholars in this area of innovation call “reputation effects.”

Theoretically, anyone can copy the “look and feel” of a service sector innovation, whether Starbucks, California Pizza Kitchen, Hard Rock Café, or Disneyland. Only actual logos and trademarks can be protected. These and other first movers enjoy reputational effects because they went first and had a superior or unique offering. Later entrants wind up being perceived as ho-hum also-rans, or worse, copycats.

On the other hand, if you rely on the supposed strength of your brand or your reputation, yet fail to deliver better value, you can lose the market to competitors. Sony was also first to market with its Beta version of the video-cassette recorder (VCR), well before other consumer electronics manufacturers even had such a product in the planning stages. Yet Sony shot itself in the foot by trying to keep Beta proprietary and was overtaken by later VCRs that relied on VHS technology, leaving Sony with a shrinking, moribund market that eventually the company was forced to abandon altogether.

5. Do you have a vision of the mass market?

To receive first-mover payoff, you must continually assault your assumptions about the market potential of your idea. If you don’t, somebody else will.

In pioneering the disposable diaper market, first mover Chux limited itself to targeting wealthy households and marketed its diaper for “special circumstances,” such as car trips. But second mover Procter & Gamble had a vision of a much bigger mass market, where moms and dads would use disposables all the time instead of then-common cloth diapers. P&G used its 112expertise in consumer research to improve Pampers, and its marketing muscle and distribution reach to make Pampers a growth engine for decades.

In 1979, AT&T commissioned a market research study to size up the market for its new invention: the cellular phone. The study predicted a subscriber base of only 800,000 by year 2000, concluding there was “no market at any price.” AT&T stayed out of the business, leaving it to local phone companies and independent operators to pursue. For a time, it appeared the forecast was right. Cellular service was unreliable and expensive (handsets cost thousands of dollars), installation was cumbersome and available only in cars. Sales volume wasn’t enough to offset the large infrastructure costs, and cellular companies suffered huge losses.

But all that changed when leading cellular companies envisioned a mass market for their service and took action. McCaw Cellular bought up local providers, worked with manufacturing partners to reduce the cost and size of handsets, broadened its target market beyond an elite group of executives, and offered below-cost handsets with service contracts. Result: McCaw achieved growth rates of 40 percent to 50 percent a year for years. By 2000, there were over 80 million cellular subscribers in the United States alone, 100 times as many as the initial study had predicted. Instead of owning the market, AT&T had to buy its way into the market, acquiring McCaw for $11.5 billion in 1994.

6. Is your management team willing to be persistent over time?

Breakthrough inventions sometimes catch fire with customers right away, as the Internet and the World Wide Web did during the years 1995 to 2000. The same is sometimes true for breakthrough innovations, those that move your firm’s growth needle almost immediately after you launch them. Witness the Chrysler Minivan, Gillette’s Sensor, Disneyland, DIRECTV, and numerous other examples.

Other times, however, breakthrough products and new business models are the fruit of dozens upon dozens of small, incremental improvements in design, manufacturing, and market building over a period of years that finally qualify them as breakthroughs. Sometimes, a long period of often slow progress in research and development precedes the launch, after which a period of long and often slow post-launch market-building activity is necessary to convert customers to the new idea and begin to show a profit. We’ll have more to say about DuPont’s Kevlar in Chapter 9, “Selling New Ideas.”

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During both phases of what we’ve defined earlier as radical innovations, you must be persistent, especially if it represents a radically new way to solve the customer’s problem. Persistence is required through the comings and goings of CEOs, boards of directors, innovation champions, and so on.

RCA pioneered color television in 1954, yet sales lagged for years because the vast majority of programs were broadcast in black and white. RCA’s long-term persistence in building color technology ensured acceptance. It accomplished this goal two ways: First, a program of technical research led to improvements in quality and protected those improvements with patents the company licensed profitably for years. Second, a commitment to broadcasting color television programs through its NBC subsidiary gradually built demand for color.

The message is clear: If you and your firm have short-shrifted projects with a longer-term time horizon, this isn’t the place to start trying to change your culture. Persistence, in individuals or on the part of management teams, is never easy to instill if it has long been lacking. All too often, projects start out with lots of enthusiasm and adequate financing, only to be shortchanged the minute the political winds change, profits soften, or a new CEO comes to the helm.

In 1967, Rheingold Brewery spent $5-5 million to build market share for its Gablinger Light beer in the eastern United States. Unfortunately, sales of its regular beer fell that year and in response, the company’s directors fired top management in favor of more profit-conscious leaders. The new management dropped support for Gablinger’s Light and the product died.

Compare Rheingold’s response with second mover Miller Lite’s introduction. In 1975, Business Week reported that Lite’s advertising expenditures averaged $6.50 per barrel, while the industry average was only $1. Further, Philip Morris, Miller’s parent, was willing to forgo profits from all Miller brands for five years in order to build market share and establish the light beer category. Miller’s financial commitment was rewarded by long-term leadership in light beer, even after a swarm of imitators jumped into the market.

7. Ate you willing and able to relentlessly keep on innovating after you’ve launched the idea?

Long-term leadership requires continuous post-launch improvements. Unfortunately, internal considerations often hinder companies from 114investing in and following through on good ideas. They might fear cannibalizing established products as IBM did, when it stymied development of minicomputers and workstations to protect mainframe sales, even as competitors were making inroads into the mainframe market.

Ampex’s failure to bring video recorders to the home market was caused partly by management’s satisfaction with sales to the professional market. In company cultures that are bureaucratic and factionalized, this needed post-launch aggressiveness is slowed or stopped when second movers appear on the scene. Sustained leadership requires a solid commitment not only to build a bigger pie, but a relentless drive for value-adding improvements that continue to drive growth.

Unless you are strategic in your approach to the front end of innovation, and carefully work through these questions, “fast followers” will likely steal your thunder. Larger firms with substantial resources sometimes benefit by waiting for the resolution of uncertainties and to see if customers perceive value in the first mover’s idea. Others can sometimes buy up the first mover’s product or service or company, as we saw with AT&T’s purchase of McCaw

These second movers can benchmark and copy what works; they don’t have to speculate. They can ask users and existing customers for suggestions on improving the first mover’s product.

Designing Your 21st-century Future-Mining Capability

For the customer, the ultimate issue is not which product got to market first or which company came out with the new business model before the others. What customers care most about is which company or product or service wins their loyalty by providing not only the new way to solve their problem or satisfy their need, but the best total solution overall, the best value of doing so.

To gain growth by going first, you must carefully study the individual situation, the cultural barriers inside your firm, the resources available, the conditions in your industry and in the individual marketplace before strategizing a course of action. It’s best to think of all important innovation projects from the largest possible context and to, as Steven Covey has it, “begin with the end in mind.” Otherwise you might end up doing the pioneering work of designing and building the product or service and even go about the 115arduous task of building a new market, only to find fast-following competitors come along and eat your lunch.

When it comes to mining the future, there’s little question that innovation-adept firms do things differently. Here’s a quick recap of the important ideas in this chapter that you can use to make the front end less fuzzy and more productive.

1. How satisfied are you that the way you personally scan and monitor trends is adequate to give you an edge in spotting threats and identifying opportunities?
2. How effective and systematic is your firm’s future-scan system, and what steps might you take to strengthen this system?
3. How integrated is your current future-mining capability with your firm’s idea management system?
4. Do you and your firm regularly seek to assault your industry’s assumptions and broaden the vision of where your firm might seek opportunity in the future?
5. How systematic are you in strategically thinking through and developing a longer-range plan for each new product, service, and market that you pursue?

With concerted attention to the front end of innovation, you’ll soon be ready to take on the next stage of designing a 21st century innovation strategy. You’ll be ready to fill your firm’s idea funnel, which is the subject of our next chapter.