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.
A few weeks after I arrived in Shanghai I was given the opportunity to speak at a TEDx Salon event about technology and society where I met David Li, founder of the Shanghai Hackerspace and dedicated to increasing indigenous innovation. So I listened closely when he spoke to me about a concept he called “Shanzhai-Innovation” which turned the ugly idea of copying on its head to empower a new breed of Chinese innovators.
TEDx Salon held in September 2011, Shanghai
Shanzhai (roughly pronounced Shawn-jai) is a controversial term referring to “fakes, or copies” of a well-known branded product. From products like sunglasses to consumer electronics to IKEA to entire Apple stores, it seems nothing is out of reach for Shanzhai these days.
Over lunch, David introduced me to the concept of Shanzhai-Innovation. At its core, Shanzhai-innovation is the copying of a core technology like cell telephony and rapidly iterating it to suit local needs. As David and I spoke, the tremendous power I found in this approach was not the act of copying, for which the Chinese are much maligned, but in the iteration of the technology to meet local needs. When this iteration is coupled with a blistering fast-paced market like China, radical innovation emerges through evolution - innovation that can outstrip the imitated.
Origins of Shanzhai
A painting depicting the smuggling of goods
Shanzhai (山寨) is a word in Mandarin literally meaning “camp on a mountain” and is loosely rooted in the outlaw’s camp that smuggles or makes fake goods. The closest English translation of Shanzhai today might be the word “tinker”.
G’Five in India
Lately these copies are no longer just cheap knockoffs but are becoming a credible alternative to the original. Over lunch, David Li related to me the remarkable story of G’Five, a Shanzhai phone manufacturer learning to innovate almost by accident - and becoming a global force because of it.
A Chinese G’Five Tablet for India
G’Five is a mobile phone manufacturer that quickly evolves its products for the Indian market (as short as 45 days from idea to launch), producing small runs of phones that contain a new feature in addition to a regular run. By measuring the sales velocity of the experimental run relative to the regular run, G’Five is able to determine which mixture of price and features will work best at that moment. Iterating like this has helped G’Five go from market entry with no marketing or presence into the 2nd largest phone provider in India, gaining market share in the country at a much faster rate than mature brands like Nokia and Sony Ericsson. An interesting interview with their India MD here.
Copying Runs Deep through History
Through copying, cultures are able to transmit knowledge and technical know-how. Of course, without the West copying the East, paper nor gunpowder would have never left China in the 13th century.
Shanzhai IKEA store in Kunming, China
China is not the first country accused of stealing technology and copying its way to success with cheap knockoffs. Japan’s now famed industry quality was considered cheap imitations of the goods made in the USA for years and then held in suspicion for corporate espionage. “Made in Korea” meant junk when I was a kid, but now Samsung leads the world in core technologies like DRAM and LCD panel development, supplying the likes of Apple with their components.
If we look outside technology to the arts we see an even deeper history of copying, or plagiarism. “Good artists borrow, great artists steal”, as Picasso or TS Eliot may have said.
Three Ball Total Equilibrium Tank, 1985 by Jeff Koons
The Physical Impossibility of Death in the Mind of Someone Living, 1991 by Damien Hirst. Inspired by Koons?
The music industry has recently seen an explosion of the remix genre from sampling sound bites to entire mixtapes. When sampling first became popular with Hip-Hop in the 70’s and 80’s, there was a public outcry over the “plagiarism” of music. Over time sampling has become an inspirational part of world culture giving birth to entirely new branches of music. DJ Danger Mouse launched to international fame with his Grey Album, an unauthorized remix of the Beatles’ White album and Jay-Z’s Black album. In the art world, Damien Hirst borrowed from Jeff Koons’ Three Ball Total Equilibrium Tank for his own formaldehyde series. Andy Warhol re-contextualized Campbell’s products to make a new statement. It makes me wonder, can Shanzhai products be seen as re-contextualized products for a new consumer? If products become remixable, what will be their value?
SinaWeibo - The Once and Future Twitter?
To really get a feel for the power of fast markets and rapid evolution of businesses we turn to the phenomenal growth of Sina Weibo. Launched in 2009 as a “copy-cat” of Twitter, the team at Sina Weibo didn’t stop there – they pushed the pace of iterating the design of the site based on Chinese user feedback and learnings in the competitive market.
Sina Weibo’s website evolved into a blend of Facebook and Twitter
140 characters in Chinese is more like 140 words - a richer type of message was being delivered. As a result, Chinese used Sina Weibo more like a place of self-expression than broadcasting very short messages. In response, Sina Weibo quickly added features like rich multimedia posts and the ability to verify your identity with V+. The result is an SNS that combines Facebook behaviors such as games, likes, and apps with a Twitter-type following system. Sina Weibo is no longer copying Twitter but leading by leveraging the unique forces of the Chinese market. Just three years after it was founded, Sina Weibo has 300 million users sending an average 86 million messages a day. As Twitter evolves its service, it is ironically now looking to Weibo for inspiration - it was just announced Twitter has acquired Posterous, a USA based blogging platform with tight iOS integration.
From Breakthrough-Innovation to Evolutionary-Innovation
By thinking about innovation as the rapid evolution of an idea we can free ourselves from having to start over every time. Starting with what already exists and evolving it in the “wild”, we can leverage rapid prototyping and market forces to create human-centered, market-proven innovation. Life itself has evolved by (imperfectly) copying itself over and over in different environments leading to innovations that succeed in new conditions.
An early evolutionary tree of life showing the relationship between life forms
Shanzhai- Innovation can be viewed as a form of this copy/paste/evolve mechanism leading to inspiring new goods and services for the rest of the world.
An evolutionary tree of video game controllers (Via Pop Chart Lab)
We may end up in a co-created world where we literally become part of the products and services we use, with these “service-objects” (to borrow a phrase coined by my colleague Robert Suarez) adapting to our specific needs at any moment. Web and app developers have already embraced an evolutionary approach to innovation. Zynga and other game developers now build their games using live A/B testing as a way of forcing “survival of the fittest” features.
Charles Darwin. Amazing Beard.
The physical world is not far behind the virtual. And when it does catch up, smart designers and organizations will see fast, blind and dense market forces as just another designer on their team. Darwin will be proud.
Click the arrow below to share this post:
One of millions of Indian merchants selling goods from Yiwu through local “Tippers”.
Needing some sandals because it was hot and sticky, my cousin took me to the mall. I was taken aback by an unexpectedly familiar sight. Everywhere I looked were the exact goods I had seen in Yiwu, now imported by Indian “Tippers” that buy container-loads from China and resell them across India. I was amazed to see the exact same goods from Yiwu for sale throughout this mall, except now I could buy one pair of sandals for 1 USD instead of 10,000 pairs for 5,000 USD. These Tippers were building an economic bridge with China enabling cheap goods to enhance daily life for India’s citizens. My relatives told me everything plastic was made in China. They said “China is the Hare and we are the Tortoise. They are way ahead but one day we will win”. Most importantly, “They have shown us we can progress, India’s massive population can move”. China had inspired the people of India into action.
While many of the goods from Yiwu are ultimately disposable and transient in their owner’s lives, I have seen a growing desire for choice beyond color of plastic. My cousin told me how she can feel the difference between a luxury watch like a Rolex and a knockoff even if you can’t see it. And how others can too - if you are caught wearing a knockoff you are ostracized.
What will ultimately activate what could be the biggest engine of growth the world has ever seen is communication between these demographic giants. As in the Silk Road of antiquity, what begins as economic trade invariably ends in the more important trade of ideas. Ideas like gunpowder, paper, the compass and Buddhism.
Sandals for sale in Kolkata, imported from Yiwu on the New Silk Road
Having chai and chatting with my family later that evening, it snapped together. There is a New Silk Road re-connecting and re-shaping our world, and I was standing on it.
The New Silk Road doesn’t look anything like the old Silk Road. Fiber-optic cables, satellites, railways, oil pipelines, and ships the size of small cities criss-cross the globe at breathtaking speed. The Silk Road of old has become a new idea binding the future of our world to the emerging economies, and it is happening fast. The speed of this new silk road is one of its outstanding characteristics, and one of its greatest dangers.
This New Silk Road, ever expanding, is connecting China, India, the states of Africa, Asia, the Middle East, and finally the West in an impenetrable web of trade driven by the desire of its people to have a better life. This manifests in entrepreneurial spirit that isn’t about making a billion dollars but making their family and country proud. It manifests in factory workers that threaten mass suicide at Foxconn supplying iPhones to the world. It shows up in Angola as freeways, hospitals, and schools built by Chinese in exchange for oil and it surrounds us as the failure of banks in the US cascade to Europe and finally to Asia.
You and I are connected on the New Silk Road, whether we like it or not. The road is fast, blind, dense and is yet to be finished. Smart companies and governments will alter its course, like a dammed river, to point the New Silk Road wherever they want it to go. We could end up in a future where China and India dominate growth, innovation and outsource its jobs to the West. Or it could enable a new global prosperity where all countries benefit from each others resources through frictionless trade.
I invite you to join me in traveling this road to discover the new world order and discover the forces at play in shaping it. It won’t be straightforward, it won’t be obvious but it will certainly be exciting.
Click the arrow below to share this post: