Fabian Schonholz’s Blog

How does innovation happen? Not just in technology, but in general. I think that the question can be answered easily with the next three statements:

• Necessity is the mother of all inventions. We create it because there is a need.
• Build a better mouse trap. Paraphrasing Einstein: “I stand on the shoulders of giants”
• This is such a great idea! Somebody comes up with a completely novel idea, and as such, with a complete new problem to solve.

These statements however, deal with concepts in the abstract, and while some form of these happen in real life — we see them all the time: the internet, flip cap toothpaste tops and velcro — they do not directly deal with how to grow market share and revenue through innovation.

At some point in their life, companies experience a plateau in innovation. The idea mill dries up and nothing new comes out. This is not readily apparent as companies may be putting out new products, most of which will be leveraging existing ones, but not “creating” new ones. While I think this is not only a smart approach to “new” product development, but a MUST, regardless of the innovation problem, this approach has a limited life. You can not repurpose existing products forever without the introduction of new ones. It is similar to inbreeding. The reason I support repurposing existing products by morphing them, or combining a few of them together, is because this not only extends the shelf life of each product with the positive financial ramifications that the extension mean, but also, because it extends an ecosystem which users are familiar with and provides a launching board for new products that either extend the existing products, further complements them or completely changes them.

If the idea mill is dry, it needs to be wetted again. There are different ways to “wet” the idea mill and all include getting new blood. Probably the fastest is to acquire new companies, start-ups in particular, as they present either brand new technologies or better mouse traps. And yes, in some cases even new ideas altogether. The advantage of acquiring another company is that the “new” idea and the “new” product are developed, have some level of market traction and by it, an apparent lower barrier to entry. What remains is integrating into the existing product suite. This is easier said than done.

In some cases, a company is acquired not for the product, but for the people. The idea in general may not have much weight in the market, but the employees bring a tremendous potential and this is also a smart move, a possible good investment.

Another way to bring new blood is to hire new people. Yes, companies hire as a matter of course, but it is to increase throughput in existing projects or to alleviate resource constraints. The regular hiring process is not intended to rock the boat, but rather to steady the boat. This practice, in a way, contributes to the idea mill drying up. So, in the case of hiring new blood, some hand-picked hires MUST be chartered with rocking the boat and shaking things up. However, if you hire somebody in that capacity too soon, you risk tearing the organization apart. I have seen it happened and it is not pretty.

There are two cases I would like to explore: Google and Yahoo! (we could also look at Amazon, Microsoft, Apple and others, but for the sake of clarity let’s just look at these two.) Both companies have had a similar start and in a way, have had the same corporate development path. Before I go into it, I just want to also say that the following words are based on my observations as an outsider to both companies and as such are just my opinion (I wanted to say something else, but I am hardly self defacing )

It is not clear to me if Google is in a situation where the idea mill has dried up. On the one hand the indicators are there: acquiring companies and (based on rumors) copying other companies. On the other, acquiring these companies may be just part of expanding market share and protecting itself - the YouTube acquisition comes to mind - and for all we know, the gPhone and opening up the API set were part of the plan all along. More specifically about opening up the API set: Although the timing makes it seem as a response to Facebook, I have more faith in Google than that. I suspect the plan might have been accelerated due to Facebook. Furthermore, other rumors point to the fact that Google’s strategy is wider than we think, creating a great deal of fuel to power the idea mill. Now the question rests in execution and wheather Google is over extending itself.

In the case of Yahoo! I think the idea mill has been dried up for a while. Like Google, Yahoo! has been buying companies but has not been able to catch up to Google and the perception is that it is loosing ground to Facebook. It even seems to be falling behind new comers such as Facebook and MySpace. It is not that Yahoo! executives are not smart or intelligent, they are, but it may be that the culture of innovation might be dried as well and not just the idea mill. In this case, all the acquisitions will not be positively leveraged and/or integrated and instead of breathing new life, the new blood is creating more drag.

The following is an image I found on the web. It showcases the current M&A landscape which, in a way, also showcases how in the last few years companies not only have transformed themselves but also have gone about getting new blood and keeping the idea mill fresh:

Help me decide what to write about next. If you do not find what you would like, please add the topic in a comment.

Thank you.

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A little bit ago I came across an article that contained the following words. I am not sure if the presented scenario is true or not - I did not bother to verify - but regardless, it does present a few words of wisdom …

NOTE: This is true, please go to Professor Pausch’s blog.

Jeff Zaslow of the Wall Street Journal wrote about Professor Randy Paush’s last lecture and it’s worth quoting in full…

(For the actual lecture please go to TechCrunch post where the actual lecture is hosted)

Randy Pausch, a Carnegie Mellon University computer-science professor, was about to give a lecture Tuesday afternoon, but before he said a word, he received a standing ovation from 400 students and colleagues.
He motioned to them to sit down. “Make me earn it,” he said.

They had come to see him give what was billed as his “last lecture.” This is a common title for talks on college campuses today. Schools such as Stanford and the University of Alabama have mounted “Last Lecture Series,” in which top professors are asked to think deeply about what matters to them and to give hypothetical final talks. For the audience, the question to be mulled is this: What wisdom would we impart to the world if we knew it was our last chance?

It can be an intriguing hour, watching healthy professors consider their demise and ruminate over subjects dear to them. At the University of Northern Iowa, instructor Penny O’Connor recently titled her lecture “Get Over Yourself.” At Cornell, Ellis Hanson, who teaches a course titled “Desire,” spoke about sex and technology.

At Carnegie Mellon, however, Dr. Pausch’s speech was more than just an academic exercise. The 46-year-old father of three has pancreatic cancer and expects to live for just a few months. His lecture, using images on a giant screen, turned out to be a rollicking and riveting journey through the lessons of his life.

He began by showing his CT scans, revealing 10 tumors on his liver. But after that, he talked about living. If anyone expected him to be morose, he said, “I’m sorry to disappoint you.” He then dropped to the floor and did one-handed pushups.

Clicking through photos of himself as a boy, he talked about his childhood dreams: to win giant stuffed animals at carnivals, to walk in zero gravity, to design Disney rides, to write a World Book entry. By adulthood, he had achieved each goal. As proof, he had students carry out all the huge stuffed animals he’d won in his life, which he gave to audience members. After all, he doesn’t need them anymore.

He paid tribute to his techie background. “I’ve experienced a deathbed conversion,” he said, smiling. “I just bought a Macintosh.” Flashing his rejection letters on the screen, he talked about setbacks in his career, repeating: “Brick walls are there for a reason. They let us prove how badly we want things.” He encouraged us to be patient with others. “Wait long enough, and people will surprise and impress you.” After showing photos of his childhood bedroom, decorated with mathematical notations he’d drawn on the walls, he said: “If your kids want to paint their bedrooms, as a favor to me, let ’em do it.”

While displaying photos of his bosses and students over the years, he said that helping others fulfill their dreams is even more fun than achieving your own. He talked of requiring his students to create videogames without sex and violence. “You’d be surprised how many 19-year-old boys run out of ideas when you take those possibilities away,” he said, but they all rose to the challenge.

He also saluted his parents, who let him make his childhood bedroom his domain, even if his wall etchings hurt the home’s resale value. He knew his mom was proud of him when he got his Ph.D, he said, despite how she’d introduce him: “This is my son. He’s a doctor, but not the kind who helps people.”
He then spoke about his legacy. Considered one of the nation’s foremost teachers of videogame and virtual-reality technology, he helped develop “Alice,” a Carnegie Mellon software project that allows people to easily create 3-D animations. It had one million downloads in the past year, and usage is expected to soar.

“Like Moses, I get to see the Promised Land, but I don’t get to step foot in it,” Dr. Pausch said. “That’s OK. I will live on in Alice.”

Many people have given last speeches without realizing it. The day before he was killed, Martin Luther King Jr. spoke prophetically: “Like anybody, I would like to live a long life. Longevity has its place.” He talked of how he had seen the Promised Land, even though “I may not get there with you.”

Dr. Pausch’s lecture, in the same way, became a call to his colleagues and students to go on without him and do great things. But he was also addressing those closer to his heart.

Near the end of his talk, he had a cake brought out for his wife, whose birthday was the day before. As she cried and they embraced on stage, the audience sang “Happy Birthday,” many wiping away their own tears.

Dr. Pausch’s speech was taped so his children, ages 5, 2 and 1, can watch it when they’re older. His last words in his last lecture were simple: “This was for my kids.” Then those of us in the audience rose for one last standing ovation.