Tag: Technology

How Do Established Companies Innovate?

How Do Established Companies Innovate?

Innovation

Most companies start form a few people who have a goal of running a business. Sometimes there’s a vision. Sometime’s there’s a very unique idea that will change an industry or create a new market. All of these start up scenarios require innovation. Once these start ups grow up and become established companies they want to protect the moat they created. This is normally done by continually updating their product. This same product is the one that likely initially disrupted the market. The continued enhancements of the product help to keep their position in the marketplace.

Once a company is established they tend to become comfortable with where they’re at in the market. Whether the business is taking advantage of an existing market through innovation, pricing, or creating a new market, a time will come when the business feels like their established. The business will often have loyal customers and good momentum in the market they are doing business in. This inevitable feeling of comfort will try to set in. The business will want to slow down especially if the employees have been working long hours just to get the business to the comfort point. So then the question arises… Should a business ever feel comfortable? It’s a fine balance between maintaining the status quo and trying to defend yourself from the next disruptive start up.

When Google launched Google Plus (g+), Facebook went into lock down mode. For about 2 months the staff was instructed to not leave the office. This is common in the game industry, but most employees were not expecting to not come home for 8 weeks. Studies have shown that burnt out employees become bitter and become less productive. This instance was a little different because all of the employees knew their stock options were about to become gold when Facebook went public. Facebook was able to hold their employees at ransom. Why not take advantage of the situation?

From the Facebook lock down, they were able to turn out enhancements to their chat and feed parts of the site. In that case g+ forced Facebook to innovate. If g+ were to not be unleashed to the world, Facebook would go along its merry way. Why? Because Facebook doesn’t want to push its employees to the extreme, like a communist regime. Burn out developers will most likely quit and end up working for a company who may end up disrupting what Facebook is doing.

Usually the answer is to innovate within the niche that you have created. If you’ve created a niche in the healthcare industry, it usually doesn’t make sense to jump into another industry and try to innovate there as well. When a company continues to innovate within their market, they are likely to increase their competitive moat they have already created.

Once and a while an established company will even have a big breakthrough that will support future growth for years, or even decades to come. This is what IBM is betting on with Watson, their super computer that thinks likes a human, but has vast more resources than a human does. The implications that Watson can have on society are enormous. In this case IBM is innovating with brute force, pouring billions of dollars into R&D along with purchasing companies that can help speed up the delivery of Watson to the market.

The larger the company becomes, the harder it is to innovate. At least innovate enough to move the earnings needle. That’s why companies in the S&P 50 usually resort to acquisitions to support their growth.

To me, innovating is a fascinating topic that I continue to learn about. I love to read how start-ups were born, and how established companies keep moving the earnings needle forward each quarter. I welcome your comments.

Notes from CTA Apex Event

Notes from CTA Apex Event

I recently attended Colorado Apex put on by the Colorado Technology Association. The CTA is a great organization doing great things for the technology community in Colorado. The following is a summary from the event.

Colorado was recently ranked 4th in the nation for new tech startups. Pearl Street in Boulder is a well known hub for tech startups in Colorado. With Colorado as one of the most desirable places to live in the United States, it only makes sense that the state will draw entrepreneurs to start their companies here. This is great news for the state, but the discussions on Wednesday were mostly about how do we accelerate and become better. Currently a new technology company is created every 72 hours in Colorado. The goal is to continue to bring that number down and accelerate the pace of new technology companies forming. Is that really what we need? More startups? I think we should be more concerned about the success rate of startups rather than the amount of them being created.

A common discussion point was Silicon Valley. Silicon Valley is a breeding ground for some of the most well-known and largest technology companies in the world. Imagine driving 20 minutes and passing the headquarters of Google, HP, Intel, Cisco, Facebook and Apple. These are some the most valuable companies in the world, and they are all located in the same area. Silicon Valley is able to feed off itself with the smaller companies selling to the larger companies. The smaller companies eventually become the companies that new smaller companies are selling to. This type of environment attracts some of the most talented and ambitious people in the world.

Colorado currently is home to 9 companies in the Fortune 500. While none of these companies are considered technology companies, there is still opportunity to tap into their large revenue streams and provide new technology services. There is a lot of concern that Colorado does not have the large companies to support a really good technology ecosystem. With plenty of startups, the success rate could be much higher if larger companies could be attracted to the area. There was also a concern that there aren’t enough medium size companies in the area (100 million to 1 billion in size).

As Colorado definitely isn’t struggling for technology jobs and technology startups, how can we do even better? I believe geography is currently a limiting factor to taking our technology scene to the next level. One reason a lot of great companies are in Silicon Valley is the location. The coast is beautiful and the mountains are not far away either. I believe we have the climate to compete with Silicon Valley, but not the location. The #1 place for startups in the state is Boulder and there is limited space in Boulder. It’s very hard to attract people to live in Boulder due to the high cost of living there. Most of the communities around Boulder are suburban style communities, or older blue collar communities.
If we were to start over from scratch, Golden would be a great location for a tech startup hub. Today Golden is too much of a blue collar city to turn into a hotbed for new technology companies. West of the continental divide is beautiful, but real estate and space is limited. And who really wants to start a technology company next to a bunch of ranches?

I believe Colorado will continue to be one of the top places in the nation for tech startups although there’s no way it will get close to the level of Silicon Valley. The tech scene there is in another stratosphere leaving the rest of the world envious of what has been created. Technology companies can and will thrive here for the foreseeable future, and we should continue pushing the envelope to nurture what is happening in this great state.