Close to your customers

Close to You
By Paul Herbig

It is a well-regarded maxim of innovation that most radical innovations come from outside the industry. Automatic transmissions is an excellent example from the automotive industry. Small cars were popularized not by any of the Big 3 but from American Motors and the Japanese imports. The personal computer came, not from IBM or any of the seven dwarfs (the “Bunch” as they were nicknamed) but from Steve Jobs and Apple with Dell leading the pack today. AT&T created the transistor but Texas Instruments and SONY popularized it but it was Intel who moved the concept into the next generation with the Microprocessor.

A major reason is directly caused by the successes of the firms of the prior generation. IBM was highly entrenched in computers; GM in large cars; Douglas in fixed wing planes. Typically the technology is so ingrained in the large company, the mindset so established that considerable inertia is built up. The entire workforce is oriented towards the current technology and to consider destroying what made the company a success (a concept Schumpeter so eloquently called “creative destruction”) is paramount to writing one’s own pink slip. It isn’t that the trend is not seen, but those few prophets cannot get the message across to decision makers. And consequently, smaller firms with nothing to lose and no attachments to the current technology end up with most of the pie.

But there is another good reason. A second axiom of innovation says that not only are the players from outside of the industry but they tend to be start-ups. As a result, Garage shops have become enshrined in the laurels of American entrepreneurship. The reason can also be directly related to size. The leaders of the industry have become big, fat, and lazy on the current technology. Even if the leader of the firm once was a garage shop start-up (re: Hewlett and Packard in 1939 or Olson of DEC in 1958), either the leaders have retired or left the company or they have been so absorbed in running a gigantic bureaucracy they have lost touch with the industry, the market, and the customers.

Olson of DEC was on the money when he started his company making minicomputers, emphasizing distributed processing. But twenty years later, his famous quote about “Why would anyone ever want his own personal computer?” showed how distant he had moved from the market trends and incestuous with the industry he had become.

Examine most successful start-ups and you will see an entrepreneur who is also an avid user of the product. The entrepreneur sees a problem, a void, in the activity he/she has a passion for and steps in to fill-it, for no other reason than it makes his life easier. For example, mountain bikes were not the creation of any of the major bicycle companies but an avid user who wanted a better bike and designed the bike to fit his needs. Ditto for scuba, surfing, etc. Dell started making computers in his dorm room at U. Texas because he wanted his PC different from what was the standard fare. His business skyrocketed as other students and then members of the community began giving him orders. He was personally involved and knew the industry and marketplace firsthand and understood their special needs and wants because he was one of them.

And that is the key to why the newcomers succeeded and the old timers fell from grace. The old-timers no longer had their hand on the pulse of the marketplace. The newcomers were not only intimately involved in the industry, being avid users, and therefore could spot immediately currently existing problems which they proceeded to overcome and hence make their fortune. Being close to the market is not only good advice for a company to succeed but for any company to survive, not just for today, but for the new round of technology, which is becoming shorter and shorter.

Know your marketplace. Don’t hide behind a big desk and ten layers of management. Get out. Mingle, Talk to customers. Or you will be left behind.