Culture plays a significant role in how companies innovate
After working with and mentoring hundreds (maybe thousands) of new and established companies, I’ve noticed that they typically fall into predictable groups. I’m sharing these groups to see how well they align with your perspective.
These fanciful labels are based solely on my observations, and I’ve added a few comments about each. No surprise: my most frequent advice to all of these groups is to gather more information before proceeding.
The cowboy (or cowgirl)
These innovative companies love the idea of inventing a disruptive technology. Their excitement for coming up with a new idea — never conceived of by anyone before — is palpable. How exhilarating for everyone who knows them! Unfortunately, companies in this group often don’t consider whether competitors already operate in their space or whether entrenched competition could force a course correction.
Observation: I believe that there is always competition for any new idea. When imagined future customers choose not to buy the product or idea, that inaction is serious competition.
Builders
Companies in this group often comprise people with technical backgrounds, and I’ll wager most engineers fall into this segment. Common characteristics include extensive technical research and product development, often involving multiple prototypes and/or expenditures exceeding $100,000. Software firms often fall into this segment by investing early in coders to build out their ideas. Near the end of their R&D cycle, they start considering intellectual property options and hiring salespeople. These two actions often occur late enough that money is tight and course corrections are not feasible.
Observation: Waiting too long to explore ways to monetize an idea and learn about the market that will buy your product can result in missed opportunities and wasted cash.
Pushers
Despite well-known and entrenched competition, these entrepreneurs think they can redefine an existing marketplace. Many do not consider that entrenched competitors could pivot if the inventor’s idea becomes a threat. The competition often has deeper pockets, well-developed manufacturing, distribution, and branding, along with customers that afford them a significant advantage. Of course, these companies also offer an opportunity since any one of them might want to buy out or license that idea.
Observation: Instead of planning to disrupt established competition, consider ways to protect your idea and whether licensing makes sense.
Unfocused
These folks have so many ideas that they can’t focus on any one. They may need to do a prioritization exercise first. Maybe this group’s preferred zone could be a source of ideas for others, rather than just implementing any single idea.
Observation: I often suggest that inventors in this category consider whether they can fund their ideas by picking the most likely profitable one and monetizing it first. I find myself in this category as I keep a spreadsheet of inventions, but I’ve paused on implementing them while I monetize my first idea. If I can’t monetize my “best” idea, my odds of monetizing the others must be lower, right?
The blabbers
These companies have people who love to share the details behind their idea with anyone and everyone. Sharing some high-level thoughts with willing ears could serve as primary market research to decide whether to proceed with the idea, but this is often just bragging. I cringe when I hear extreme details about how a potentially novel idea will work without the minimal protection of an executed NDA (Non-Disclosure Agreement). [“Yes”, I realize NDAs are not appropriate for every discussion, but that’s a post for another day.]
Observation: Being a non-blabber is generally safer. While they may not understand all the ways to protect an idea, non-blabbers are typically very conservative about spreading information. Good! Even better, know how to share just enough information to build a group of interested buyers or funders you can leverage later.
We’ll patent everything
This group realizes patents can be a powerful form of intellectual property protection, but they take it to a fault. Because patenting is the only method they understand, they don’t consider better options. Plus, they generally believe that one or more patents will bring them lots of money from the day they first receive their grant.
Observation: Patents are not cash machines and can be costly, especially when money is tight (ballpark $10,000 for the smallest companies to submit their application; larger companies will need to set more aside). In fact, in some cases, the patent process may cost more and provide less protection than options such as trademark, copyright, or other forms of IP protection. Bonus observation: Establish an early rapport with an IP Attorney who may help advise which methods should be used and when to pursue them for maximum advantage.
Bootstrappers
Bootstrappers have incredible pride in developing their new company’s fresh ideas. They will reject any outside influence, including money, that could slightly diminish their pride and sense of ownership.
Observation: I fully appreciate this mentality, as I’m guilty of bootstrapping both companies. However, bootstrapping limits available cash and pushes profitability so far out that the company wastes precious time and money failing. Know your options early so you can leverage one if you change your mind. My good friend and mentor, Jan Triplett, has documented hundreds of options for financing companies. Wow!
My idea is worth billions
This group often overestimates future market opportunities, even if they can execute flawlessly. These excessive valuations are frequently justified because the idea seems new and “everyone will want/need my idea.”
Cold, hard facts: New ideas are rare. My research commonly finds that ~95 percent of ideas already have prior art that is dead-on or highly similar. Worse, those ideas that are novel enough to have patent protection have steep odds of ever being monetized: A mere ~6 percent pass muster here. Ultimately, 65 percent of new products fail for established companies, and 90 percent fail at startups. [1] Bonus thought: your legal risks increase significantly when many patents precede your own.
Recognize your company on my list? Please share in the comments below.
Citations
[1] “If You Build It Will They Come: Three Steps to Test and Validate Any Market Opportunity” Rob Adams (2010)
Graphics Credits (Wikimedia):
Spencerville Stampede, July 2014 (cjuneau)
Construction of Azersu tower (Emsybax sabir)
Defense.gov News Photo 010322-N-0271M-005 (Airman Apprentice Lee McCaskill, U.S. Navy)
Magnetic letters scattered on a refrigerator door (lylamerle)
Getting em up (U.S. National Archives and Records Administration)
US Patent Certificate (Unbiassed)
Boot Strap (Eitan f)
Dollar Symbol (Rugby471)
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