Fast, Blind and Dense

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Exploring the art of innovation in emerging markets.

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The Need For Speed

Like the fighter pilot, today’s leaders must make decisions quicker to come out on top.

"I feel the need… The need for speed!"

So says Maverick, played by Tom Cruise in the best movie of all time, Top Gun. But behind the awesome acting and everything 80s there is an important innovation lesson to learn. In modern air combat, jets scream at each other at speeds faster than sound. In this environment there is no time to think - just act. The mayhem and ripping speed of a dogfight is a great laboratory to gain insight into innovation in fast, blind and dense markets.

John Boyd, the real-life Maverick,  was a USAF (United States Air Force) Colonel who did more to advance modern air combat than anyone in the past 5o years.  Although John Boyd never fired a shot in war, his observations and insights into the fluid, chaotic world of aerial combat led him to literally write the book on modern air combat – a book still used in the USAF today. It was his work that led directly to the successful strategy of Norman Schwarzkopf in Desert Storm.

John “40 second” Boyd , USAF Colonel 1927-1997

Business is often compared to war - while I don’t like the analogy it is helpful to think about decision-making in unstable conditions. This is in contrast to traditional markets which are stable. In these markets competitors are competing against each other for a known target audience; like in Chess where the rules don’t change, competitors and consumers are predictable at least a few moves ahead. In this environment it makes sense to gather as much intelligence as possible, create a master strategy and execute flawlessly.

In Chess, players can think many moves ahead because the rules are predictable. This is not true in Fast, Blind and Dense markets.

In Fast, Blind and Dense markets none of the above applies. The market itself is constantly shifting as it evolves toward some unknown equilibrium. As a result, it is not enough to find an audience and continue to deliver the same product or service to them because as the market conditions change (new technologies, new consumer understanding, etc.) their needs will quickly evolve beyond your offering. In this simple way a Fast, Blind and Dense market can put you out of business as quickly as your competition. For example, China and India are markets that are constantly evolving. Doing business there requires constant vigilance and evolution as the market changes. Blockbuster Video and Netflix are another clear example of a Fast market steamrolling slow companies. We’ll examine them shortly.

To successfully survive the Fast, Blind, Dense market while competing with competitors we can turn to John Boyd’s teachings on aerial combat for help. The cornerstone of his teaching is the pilot that can make decisions fastest wins – every time. He noticed that all pilots have to sequentially go through four steps every time they do anything - turn left, dive, or “switch to guns”. Boyd identified and coined an acronym for the steps all pilots must take to make a decision during a dogfight; he called it the OODA loop (Observation, Orientation, Decision, Action). This sequence of decision making is continually repeated until the fight is over.

In a dynamic environment, those that make decisions fastest, wins.

In the same way, businesses must make numerous decisions to launch products, diversify risk, or pull the plug on something, all in the presence of a rapidly changing market. To make decisions takes a huge amount of time for most organizations, especially large ones. For example, companies like P&G, Samsung and others have vertical silo’s like marketing and R&D. These silo’s must come together somehow and share a common point of view around a new offering. Then a leader needs to own the initiative and put their career on the line to pull the trigger; they of course are then incentivized to gather as much data as possible on the subject to provide a cushion should something go wrong. All this hand-wringing adds months, even years of time to get even one decision made. Without the ability to make quick, informed market-based decisions, a fast paced market (where truths change quickly) often puts even great companies into a tailspin from which many never recover.

A typical stage-gate process is too complex and lengthy for fast and chaotic markets. Diagram source: Innovation Playground

Like the modern fighter pilot, business leaders must shorten their decision cycle by moving from lengthy and linear stage-gating of projects to an Adaptive approach that provides flexibility through in-market learning.

It is useful to simplify the process of innovation to two fundamental activities - Creating and Learning. An Adaptive approach simply alternates between those two states. 1. Have an idea and build a prototype (create). 2. Then use the prototype to learn from the market through feedback (learn). 3. Then refine the prototype based on the learnings (create). 4. Simply repeat until you have a market viable offering ready for a scaled launch.

By shortening the time it takes to make a decision and increasing the quality of decisions through in-market learning, adaptive companies are able to innovate and build new offerings much faster than their rivals and easily outmaneuver their competition.

So how has this worked in the real world?

Blockbuster dominated the video rental market using scale but their business model became brittle.

Consider the sad case of Blockbuster Video, a traditional movie rental company that found itself in a Fast, Blind and Dense market without knowing it. Their model of physical stores boomed during the rapid adoption of DVD technology. They successfully consolidated the fragmented and local market of mom & pop video shops through massive availability of movies (I remember going to Blockbuster because they always had the movie that just came out – they had a whole wall of them!) and scale of stores. According to Wikipedia, “at its peak in 2009, Blockbuster had up to 60,000 employees. There are around 1000 Blockbuster stores in the U.S. with locations in 17 countries worldwide”.

The mail in model eliminated late fees and disrupted Blockbuster.

The video rental market by this time was already becoming Fast Blind and Dense. New technologies threatened Blockbusters entire business model of renting a physical product for three days with late fees after that (which is where they made most of their money). Broadband internet enabled people to use Napster and the Pirate Bay to pirate movies for free. Netflix emerged as a market disruptor by creating a platform to remove late fees through mailing DVDs. Blockbuster did nothing – blinded by their business model, they could not see past their physical stores and late fees.

Netflix now streams direct to mobile devices eliminating the gap between content and consumer.

Meanwhile, Netflix became an adaptive company with a mission to deliver movies to people’s homes. They experimented with online delivery, another groundbreaking idea based on learning from the market (broadband based downloads of movies off the internet) and creating (testing its ideas with real services) new offerings that would disrupt their own business model to make way for a new one.

Netflix quickly saw from the market response they were a streaming company more than anything. They doubled down based on this learning, buying Starz entertainment to get new titles to stream. Movie recommendations became a key advantage for Netflix, learning from Amazon and other digital content providers. Even their biggest misstep, splitting the mail-in DVD business off into Qwikster was reversed based on their ability to listen to the market. They also listened to consumers when they eliminated, then re-instated user profiles on their streaming site. They are now creating original content using star power like David Fincher and Kevin Spacey. As a result, Netflix is one of the most successful of internet IPOs to date. Netflix is by no means safe in this fast paced market but if it continues to create and learn and adapt, it will continue to evolve with the market – and dominate.

A Gap pop-up shop helps to test ideas in-market.

There are many tools at the company’s disposal to help them create and learn. From rapid prototyping to pop-up piloting to using Google Adwords for feedback on value propositions creative companies are building a new toolbox with which to design quicker and better with confidence (I’ll share and explore these tools in another post).  These tools also let companies know when they have made a mistake and course-correct.

Is massive, disruptive change an advantage to your business?

Creating and Learning as a way of making decisions and adapting to the marketplace enables companies to always be in a “Blue Ocean” of new opportunities as the market shifts. Like the mammals overtaking slow-to-change dinosaurs, smart companies will use Fast, Blind and Dense conditions as a competitive advantage to wipe out or leapfrog the competition.

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