Is your company an innovator or a farmer?

Truly innovative companies are hard to come by.  They come and go, but are definitely NOT the norm.  Also, most innovative companies tend to be run by their founders rather than successors.  So what happens to these companies as they pass on?  What marks this difference?

The big distinguishing factor on innovation vs farming is the overall focus of leadership – is it the products, the service and the customers, or is it the bottom line financials?  

Apple inc. provides a perfect example of both.  Steve jobs was truly an innovator – he was a brilliant technology expect with a vision for his products and how they would be used.  He would prefer to release a product late and perfect rather than early and flawed.  Apple under Jobs was known for making innovations in intuitive interfacing – products and services that were sleek, savvy, and most importantly easy to use.  

Contrast this to Apple under John Sculley.  After Jobs resigned in 1985, following the great success of the Macintosh, Apple focused on a higher price points strategy.  They went on to spread into an overall peripheral devices style of growth, making every accessory and part of the computer so that anything you purchased for your Mac would be through Apple.  As a result they became known as expensive devices that were good at some things, but very limited in others and with highly restricted software selection.

I fear that post-Jobs Apple will follow the same path.  My friends with Android phones have tons of free apps better than what I can get on Apple.  Example – you can purchase some old Nintendo games on iPhone for $2-$5 each, or get an emulator with any old game free on an android.  Music is very restrictive… I’ve been listening to Great Courses lectures on long drives which I share with my mother and brothers.  The only way I could get them on my iPhone is to purchase an overpriced cable, get iTunes reinstalled some special way to work with Windows 10, and then re-burn the CD’s into iTunes on my computer.  My brother plugs in his android and drags them over from our shared network drive.  The new iPhone is a blatant copy of popular features of the Samsung Galaxy.  

The modern corporation, with its focus on Wall Street and finance-focused CEO’s is the new order of things.  Technological innovation is beaurocratized with a focus on new products and changes rather than improvements.  This is why Microsoft drives us all nuts by changing exactly what we like or are used to about things … Like dumping the popular Windows 7 start menu for a screen filled with ads in Windows 8, then for a modified task bar in Windows 10.  They have a department for updates which focuses on change for its own sake and occasional ideas of getting more revenue from existing technologies, like putting up toll roads in places previously accessible.  This has a long term affect of isolating customers, but can force in some temporary revenue streams that appear to up the bottom line for the current 2-5 year term of a current CEO.  

The only way to combat this and innovate is to have policies which not only allow, but support new competition.  Examples:

Lighter product-requirement inspections and regulations, 

Tax breaks for start-ups, 

Regulations which even the playing field – which don’t allow companies like UPS or Fed-Ex to charge $1.99 shipping to a behemoth like Amazon and then turn around and charge $14.99 to ship the same item for a new eBay vendor, or income-tiered reporting requirements for companies (think of the huge drop in companies going public after Sarbanes-Oxley)

A government that discourages monopolies rather that encouraging consolidation (think Dodd-Frank and the too-big-to fail four).

They’re are so many ways to innovate that would have a huge demand – such as re-invigorating the drive for plug-and-play computers.  Retiring boomers won’t want thousands of questions on options and directions to get a new computer working – they’ll want one that plugs in, uses the Internet, and has the basic package to read documents (word, excel, PDFs, jpegs) and write and print papers.  My father is struggling over installing a new $300 computer he wants to do just that.  

I’ll end this for fear of getting too long-winded here, but I hope I left some food for thought.

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About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at gluskinsheff.com. Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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