The Slow Pace of Fast Change: Bringing Innovations to Market in a Connected World

Today's market faces an onslaught of new products, devices and such, which seek to change the way we work, play and interact. Every innovation is accompanied by tons of hype and an even larger advertising and promotion budget. More often than not, the market spoils the party. It gives many innovations a miss and creates friction for others. The disappointed innovator becomes introspective - seeking both explanations and excuses. Was it the timing? Was it the ad-campaign? Was it lack of "consumer education"? Fortunately, now the innovator has some help from Bhaskar Chakravorti. Chakravorti's book The Slow Pace of Fast Change provides innovators with both a decision framework and an action plan to successfully bring their innovations to market in a networked world. It provides answers to questions of the past - why did Apple's Newton flop and how did Palm make it? And to the future -will e-books ever see mass adoption?In the year 2000 the future of e-books looked very promising. Leading technology research and consulting firms were of the view that mass adoption in the United States would take three years. It was predicted that in five years, U.S. sales revenue from e-books and e-book dedicated devices would reach anywhere between $251 million and $2.3 billion. Depending on whose research one believed, the number of e-book devices sold in the U.S. was expected to increase from 50,000 in the year 2000 to between 1.9 and 28 million units in 2005.To be fair, not every research firm was sanguine. Some identified several critical success factors for mass proliferation which can be classified under three broad headings: device, user experience and delivery - or, DUD for short. The buzz was justified. At the time, it appeared as though all the pieces were about to fall in place. A company called Gemstar announced two dedicated devices with the RCA brand which were to be produced by Thomson Electronics. Adobe announced it would buy Glassbook and incorporate the latter's reader technology in its Acrobat Reader. Microsoft struck a deal with Barnes & Noble to distribute content compatible with its reader and a similar deal with Amazon was in the works. By late 2000 the largest English language publisher Random House had placed its bets on the e-book future. It even offered to pay 50% of sales to authors of e-books compared to the usual 5-15%. AOL-Time Warner entered the fray with its digital imprint iPublish.com. Famous authors were also on board - Stephen King published "Riding the Bullet" exclusively as an e-book and 400,000 copies were downloaded within the first two days.So what do things look like now as we begin 2005? Most estimates for 2004 put sales of e-books at no more than $15 million. The Open eBook Forum indicates that there has been double digit growth in recent years - so let's just double the number to $30 million in 2005 - a far cry from even the most pessimistic of predictions. Barnes & Noble no longer sells e-books; AOL and Random House have given up on their respective digital imprints and Gemstar started winding down operations in the summer of 2003 - about the same time as The Slow Pace of Fast Change hit bookstores.Chakravorti, explains why technology moves faster than markets. In a connected world, choice is interdependent as are expectations. Adoption of a new technology depends not only on how players behave but also on how they expect others to behave. Consumers will buy e-books if they expect others to do the same and if firms provide complementary products to support the platform. Firms in turn will only do so if they expect consumers to buy. The existing product which the innovation seeks to replace has created such a "lock-in" by validating and reinforcing best choices and expectations. In order to get to mass proliferation or beyond the "tipping point" the innovator has to break the status-quo or equilibrium and create a new status-quo which incorporates the innovation and reinforces a new set of choices and behaviours. In market economies where there is no central coordinating mechanism, this can be hard work. The network presents two faces to the innovator - first as a foe and then as a friend. The successful innovator has to fight the foe and nurture the friendship otherwise the market may just give the innovation a miss no matter how novel. Innovations compete with existing and future products; both inhibit adoption.Chakravorti provides innovators a framework for a successful campaign to bring new innovations to market. It requires innovators to take an "outside-in" view and spend some time in shoes of every player in the game. The first step is to describe the status-quo so as to understand the prevailing reinforcing choices and behaviours that create lock-in. These are the choices that the innovator must work on to unravel the status-quo. Then, look to the future - to the endgame or desired outcome and reason back to chart the action plan. The endgame will most likely have new players, often from different industries or sectors. Understand their behaviours and identify both barriers to adoption and motivating factors. The target endgame should be qualified using a plausibility check. The innovator should ask if their suppositions about the future are plausible given what they know today about the choices and behaviours of players. This will help to identify influential players - these are the ones that are critical to adoption and deserve the most attention. It will also assist the innovator in determining whether to target all consumers or focus on a particular segment of the market which may subsequently help in influencing the choices of others. An endgame which cannot be qualified in even a segment of the market is unrealistic and most likely unattainable. Might it have been better for Gemstar to focus its initial efforts on professionals such as doctors and lawyers or even students who would have appreciated getting a load of their backs?It is unlikely that the journey to the endgame can be made without enlisting the help of partners; who in turn will expect a share of the pie - in the game of business competition and cooperation are two sides of the same coin. Who should the innovator partner with and how should they negotiate? Chakravorti helps the innovator develop a coordinated action plan showing how characteristics of an innovation can be matched with the right partners and marketing mechanisms. Should the innovator partner with the producer of a complementary product or a "hub"? All networks have hubs which are powerful players because they are tied to so many other players. The e-books game had many hubs such as Microsoft, Adobe, AOL-Time Warner and Amazon. The trick is to avoid head-to-head competition with hubs, looking instead for ways to complement their products. E-books would help enhance the capabilities and popularity of Adobe's ubiquitous Acrobat Reader; Amazon could increase its product offering without committing to more warehouse space.As one would expect, the path to the endgame is riddled with uncertainty. Qualifying the endgame narrows the range of uncertainty but the innovator still has make the right bet at the right time. Strategic as opposed to tactical choices are usually characterized by irreversibility. The problem is that the big bet could very easily become the biggest mistake. Chakravorti shows the innovator how to preserve flexibility. When does it make sense to commit resources upfront to make that big pre-emptive bet? And when does is make sense to hold back and benefit from the leader's disadvantage?Though the book focuses on the world of technology and provides numerous examples, it recognizes in passing that there are other ways in which the world is taking on characteristics of networks. Most products are designed, produced, assembled, distributed, sold and serviced in numerous locations and countries. Connectivity will only increase with the removal of barriers to trade, investment and mobility. SARS and homeland security also require a "coordinated action plan with multiple points of attack".This is a fabulous book - it is not just a good read or even a great read - it is an engaging and enjoyable read - which is saying a lot for a business book! It is likely to become, albeit at a slow pace, one of the most influential books on business strategy. The book is very accessible and though it is pitched at the business executive, anyone with an interest in technology will find it useful. So will management consultants, B-school students and those who educate them.In case you are wondering if e-books have fallen by the way side - apparently not! Now technology research firms say that the dominant device will be the Tablet PC and after 2006 e-book demand will drive the sales of Tablet PCs. And there is new technology already in play, with new shepherds - Sony and Philips. Sony's digital e-book reader LIBRIé was launched in Japan in 2004. It uses digital paper technology developed by E Ink. Users can `loan' books for 60 days from Sony's collection of 400 books - no newspapers, magazines or periodicals yet. Initial user reviews on the Internet indicate dissatisfaction on three fronts: device, user experience and digital rights management - another DUD? Perhaps its time read The Slow Pace of Fast Change.This review first appeared on a now defunct blog on July 13, 2005.

It was a really wordy and long book, but it gives some good insights on why a complicated value chain or a multi-sided market is difficult and slow to sell to or innovate within. The short summary: there are many chefs and decision makes who all need to be united. (If you are interested in the details, read the book, but skim some chapters.)

ordered by mistake..... sent back...

The book opens with a reference to a newspaper article written by the author and illustrated by the picture of American actress Demi Moore. This was a visual pun on the author's version of Moore's Law, which says that the number of transistors on a microchip doubles every eighteen months. The author emphasizes that technological progress runs faster than market adoption, and that technology's impact in a network of densely connected market actors will most likely proceed at only half the speed predicted by Moore--hence demi-Moore's Law. Never shying away from geeky humor, the author adds that considering the limited impact of Moore's Law on productivity, its bark seemed to have been louder than its byte.Leaving puns aside, this book has several ideas bundled into one. The general idea is that a game theory framework, and more specifically the concept of a Nash equilibrium, can help business leaders predict and influence the trajectory of an innovation in a market consisting of interconnected individuals. To think in terms of strategies at equilibrium first helps innovators understand why the past lingers on, and why the fast change of technological discoveries translates into a slow pace of market adoption. Many good ideas now canonized as revolutions took decades to have an impact. One vivid picture of this slow pace of fast change is the continued presence, well into the 2000s, of VHS tapes on the shelves of video rental stores in the U.S., even though the DVD and the Blu-ray disc were already in existence.Previous eras of innovation were also characterized by inefficiencies and delays. When the railways were introduced, it took time for businesses and factories previously located near waterways to relocate along railways lines. When electricity was introduced in factories, the necessity of redesigning the shop floor or even tearing down entire buildings to accommodate the superior technology delayed adoption. In 1987, while the PC was becoming a common sight across the workplace, Robert Solow, an MIT Nobel laureate and growth economist, had remarked, "We see the computer age everywhere except in the productivity statistics." It took another decade for investments in information technology to deliver measurable economic returns, leading to another wave of sustained productivity growth.To succeed, an innovator must achieve two things. It must induce multiple behaviors to unlock in a coordinated manner. And it must recoordinate outcomes in a new equilibrium. A Nash equilibrium occurs when each party in a market makes a choice that it considers to be the best one relative to available alternatives, assuming that all other parties in the network are doing the same. It is hard to dismantle the status-quo equilibrium and recoordinate a new one, which is why the past endures. Barriers exist both at the front end (destruction of the status quo) and at the back end (creation of a new equilibrium) of an innovator's journey to market. But once incentives of dispersed players are aligned towards the adoption of a new technological solution, a new equilibrium can emerge very fast. The innovator's challenge is to orchestrate such a switch, and to accelerate the adoption of the new technology by the market. Game theory gives him the tools to plan and execute such a coordinated campaign.The author's discussion on strategy highlights four aspects of building a campaign designed to bring innovation into market: 1/ qualifying the endgame and, in the process, choosing between several strategic options at the outset; 2/ orchestrating the changes necessary across the network of players through a mechanism that propagates the innovator's selective interventions into the wider network; 3/ actively managing interactions with the critical agents that will pass on the innovation's influence; and 4/ making appropriate choices on how to commit to strategies that lead to certain endgames in the face of uncertainty--depending on the situation, one must choose between making a bet, reserving options, and seeking insurance.Each strategic move is illustrated with examples of networked industries: from PC broadband modems to online music stores, from Adobe Acrobat's portable document format to Sun Microsystems's JavaOS, from Xerox's struggle to remain the top document company to Sony's commitment to be at the center of the convergence between entertainment and networking. Some of these examples are dated, as the book was completed in 2002. It is up to the reader to think of other examples, not necessarily in the information technology sector. Two cases in point are, first, the introduction of electric cars and hybrids vehicles leading to a new equilibrium in the automobile industry; and, second, the construction of nuclear power plants in emerging countries, with a few powerful sellers competing to fulfill their energy needs. No doubt strategy experts and consultants have already worked on these cases, but the framework proposed in this book can help structure the thought process on these complex issues.In an interesting chapter, the author notes that Microsoft rarely takes the lead in introducing innovations in new applications. Instead, it often moves to co-opt the bets of other industry players. Microsoft introduced Excel after Lotus's spreadsheet software had become a "killer app" that helped bring the PC into wider circulation in the early 1980s. The Windows concept followed the innovations in the Apple Macintosh interface; Internet Explorer followed Netscape's Navigator; ActiveX followed Java originally championed by Sun Microsystems; Windows CE pursued opportunities demonstrated by the success of the Palm Pilot operating system; the MSN portal followed the Internet pioneers Yahoo! And AOL; Windows Media Player was a distant laggard behind RealNetworks; the Xbox game console followed the pioneering PlayStation from Sony; and so on. Microsoft is a prime example of what Constantinos Markides and Paul Geroski have labeled the "fast second" strategy.Bhaskar Chakravorti is not the first to apply game theory to business strategy. Indeed, most of the best recent advances in the field have been borrowed from theoreticians working from the perspective of game theory and its related disciplines, network analysis and decision science. The author has a certain talent to explain difficult concept in simple terms, and to infer theoretical perspectives from real-life situations. The examples he brings forth will be familiar to readers of the business press, but his approach grounded in theory helps bring these cases to a new light. All in all, this book was quite original and reasonably well written. But its ambition remains modest, and its scope limited to the framing of strategies aiming at bringing innovations to market. It says nothing on the management of innovation within the company, or how innovators come up with new ideas and products. Its vision of the introduction of innovation to market concentrates on the endgame from the perspective of the innovator, and does not touch upon the proliferation of products that characterize the cycle of variation, selection, and retention.

Great