Innovation Can Be Risky


Successful companies are praised for their sound decision-making by responding to customer's needs and for focusing on investments that give the best returns. However, this is sometimes sowing the seeds of their demise.  Only up to 20% of investments into innovations are successful (Clayton Christensen, 2016). Thus investing in innovation is risky & unpredictable.  Some of the reasons for this are the pace of technological change, types of technology change (disruptive v. sustainable) and status quo thinking about investments. Some examples include Sears Roebuck, IBM, Xerox, Digital Equipment Corporation.


The watch industry is a good example of unpredictability, ie who would have believed that
- men would ditch the pocket watch for the more feminine "wristlet" version
- in the 1970s, Swiss watch industry was decimated by the quartz time piece made famous by Japan's Seiko. This less expensive and more accurate watch marked the end of the traditional industry with mechanical cogs-and-spring movement, ie it is estimated that 3/4 Swiss watchmaking workforce and their machinery disappeared. There was no certainty that the mechanical watch was going to survive. The Swiss watch industry recovery was based on the watch becoming a desirable luxury item like the Omega Speedmaster watch that went to the moon and is still a huge success in 2016.  Nicolas Hayek Snr was the man responsible for introducing a face-saving Swatch and consolidating the Swiss industry
- smart or connected watch, ie in addition to telling the time, being a luxury item, etc the watch had become a mini computer (Bani McSpedden, 2016)

One of the best way of handling the dominance and monopolistic approach of big tech companies like Microsoft, Intel, Google, Apple, etc is to encourage innovation. Rapidly changing technology is more effective than laws, rules and regulations, etc in increasing competition. Also, the legal cases can take years, if not decades, of work their way through courts, appeals, etc. Some recent examples of the impact of technological change include

- both Microsoft and Intel focused on PCs. Thus they miss on the rise of tablet computers and smart phones which allowed companies like Apple, Google, Qualcomm, etc to become dominant players in mobile devices.

- for Google, mobile apps are now challenging its lucrative web search as cellphones use the likes of Amazon, Yelp, etc to search directly for products and service, etc, ie

"...Today 7 out of every 8 minutes on mobile devices is spent within apps......consumers are going to whichever website or apps serve them best. And they face no friction or costs in switching between them..."

Vindu Goel et al, 2015

 

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