Monday, October 12, 2015

A Value Creation Platform

Innovation projects often start with a customer needs analysis.  The company wants to understand the “voice of the customer” so that the innovative new products can provide value in areas that are not being serviced.  But what if the product or service is so innovative that the customer can’t even envision it?  The customer doesn’t have any needs because they don’t understand what could exist.

An example is the smart phone with its thousands and thousands of apps.  Customers were not asking for a phone with all the features and functions that are available in the app store when the smart phone was first introduced.  They wanted to make phone calls.  Their customer needs were in the area of call quality, contact lists, and ease of use.  The smart phone platform totally transformed their perception of cell phone value and customer needs.

The key takeaway from an innovation perspective was the creation of a platform that would allow others to create.  This is a form of co-creation - where one innovation is the enabler for hundreds or thousands of other innovations.  Platform innovation is very powerful once it is accepted by the co-creators.  It will transform society and create exponential growth in customer value.

And the smart phone is not a unique example.  If we look back in history we can see other technology platforms that fundamentally changed how people lived their lives.  Customer value and customer needs were radically transformed.  Here are several examples:

  • The printing press invented in 1440.  When the printing press was invented there were very few books and very few people who could read.  If someone had done a market research study and conducted focus groups, printing of books and documents would not be near the top of the list for consumers.  Yet that innovation was the platform that enabled the Reformation and the Renaissance.  Men could easily express and share their ideas with others who were far away.  This led to a rapid growth in knowledge and knowledge transfer. The results were rapid global exploration, scientific breakthroughs, and a surge in the arts.   It also gave rise to new industries that were directly related to printing such as newspapers, magazines, and book publishing.  The ability to read, write, and communicate through the written word is now assumed in modern society.  

  • The electric motor invented in 1834.  The electric motor was the next logical invention following the invention of batteries and the scientific explanations concerning electromagnetic fields.  The motor was first created to be an alternative to steam engines and therefore the emphasis was on bigger motors with more torque.  There was no market research showing the need for small, quiet, and extremely accurate motors.  Rather the availability of the motor and its cost and size led to its rapid incorporation into all types of machinery.  The characteristics of the electric motor – cheap, reliable, consistent torque – were the enablers of machine design and innovation that was an essential part of the industrial revolution.  Today, you cannot find a piece of equipment in a factory that does not have at least one electric motor in it somewhere.

  • The integrated circuit (microchip) patent was filed in 1959. Although the technology was patented, numerous patents were filed by several companies to quickly fine tune the process and soon there were numerous chip manufacturers.  The integrated circuit technology platform allowed for automation and advanced control of virtually every machine and device in existence.  This led to increased performance and more features while also lowering costs and improving quality. A win-win-win-win.  Integrated circuits have re-energized old mainstream industries and have been the enabler for many new industries.

So let’s look at several characteristics of this aspect of co-creation - that is the creation of a technology platform that customers can use to create new families of products.

Open Platform.  The innovation platform was open enough to allow others to innovate their own products using the platform.  Inventors are often very protective of their invention.  It is their baby and they want to nourish it and reap the benefits that the invention creates.  But for a platform innovation to have a game-changing effect, it relies on many others using the platform in their own innovations.  This is the co-creation element.  Creating a platform open to customers and users results in new products and applications, this will further reinforce and benefit of the platform.  The platform inventor must provide the technical support or documentation to allow the platform customers to innovate and co-create value with the platform. 

Platform Support.  The speed of customer co-creation is increasing exponentially.  It was literally over one hundred years after the printing press was invented until the impact of the wide availability of the written word began to be felt.  The electric motor started to proliferate in the late 1800’s – fifty years after its invention.  The integrated circuit was creating a major impact by the early 1970’s – barely ten years after it was invented.  And a large number of commercial apps for smart phones were available within two years of the introduction of the iphone.  The technology adoption cycle is now very short for co-creation innovations.  The platform inventor must be immediately ready and able to collaborate with customers; or they may leave the platform behind and go on to the next new platform.

It is short-sighted for any company that is developing platform technologies to think that they should own the platform and all applications.  That will limit and likely kill the platform.  Instead open the platform up to customers and begin co-creation.  The value that the platform creates at the customer will accelerate both the customer growth and the platform growth. 

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