Share
Synopsis
A flash of insight will not make you Steve Jobs, it just
means that you’ve recognized a pattern that may or may not
really be there.
When Steve Jobs launched the iPhone in 2007, many pundits
were less than impressed. Some said that its
unusual shape made it unwieldy. Others thought that it was too
expensive. Still others remarked that all the extra software
made it a poor choice for its primary function — making phone
calls.
But part of Jobs’s genius was his ability to recognize
patterns that others couldn’t. Executives at Xerox, for
example, didn’t see much potential in the
Alto, but he built the Macintosh based on it. When
music players seemed like a dead end, he reimagined them with
the iPod and transformed the industry.
The problem with patterns is that it’s so
devilishly hard to tell the good ones from the bad. What may
look like a promising pattern is often out of context or
incomplete. Sometimes, we think we see a pattern that isn’t
really there. That’s what makes innovation so difficult, we can
never validate new patterns by looking backward, we can only
test them going forward.
The Importance of Context
In 2001, Fabio Rosati left his lofty position as
Global Chair of Strategic Consulting for Capgemini to join a
troubled startup called Elance. The idea behind the company was a familiar
pattern, the disintermediation of a labor intensive industry by
technology. In this case, the aim was to automate the market
for freelance workers.
Unfortunately, the pattern was a false one. While it seemed to
work well in the context of job boards for full-time positions,
for some reason it just didn’t work for freelance jobs. So
Rosati imagined a completely new pattern. It seemed to him that
large enterprises, many of whom dealt with thousands of
vendors, could use technology to keep track of them all.
It turned out to be a very good idea and today, vendor management software is a big
business. Elance was soon profitable, but before long Rosati
saw another familiar pattern emerge. The success of the vendor
management business was beginning to attract stiff competition
from the likes of SAP and Oracle. He decided to sell
Elance’s software business.
However, in his five years running the vendor management
operation, he noticed other patterns. The problem with many
freelance contracts isn’t finding people to do the work, but
creating a successful engagement. With the remaining staff at
Elance, he relaunched the freelance marketplace, but this time
instead of focusing on making matches, the platform was
designed to create for successful engagements.
The idea took off and Elance grew at an astounding pace.
Later, it would merge with its rival, oDesk, to
create Upwork which is today a massive enterprise,
encompassing 12 million freelancers, 5 million clients and $1
billion in annual freelancer billings.
Familiar Patterns Gone Astray
As the Elance story shows, being able to recognize
important patterns is key to innovating effectively. The
problem is that just because we recognize a pattern doesn’t
mean that it’s worth pursuing or even that it’s really there at
all. In fact, there is an entire branch of mathematics dedicated to
identifying when distinct patterns arise from random points.
Consider the case of Coke executives in the early 1980s. They
had been humiliated by the Pepsi Challenge, a blind taste test that showed
consumers preferred their competitor. So the company developed
a new formula that focus groups said they loved. The result
was New Coke, one of the greatest marketing
disasters in history.
Not to be outdone, in 2010 Pepsi dropped its Super Bowl ad
spots and invested $20 million in Pepsi Refresh, a social platform that awarded
grants to good causes. Pepsi’s social KPI metrics soared, but
in business terms it was an unmitigated disaster. A Harvard case
study showed that sales dropped 5 percent
and, for the first time in 20 years, the brand fell to third in
its category.
Both companies made essential the same mistake. They recognized
a pattern that was out of context. A blind taste test told
Coke’s marketers nothing about the loyalty customers felt about
its branded product and while many applauded Pepsi’s social
efforts, they did little to spur sales for a brand built on
sugar water and good times.
The Power Of Embedded Patterns
Jim Allison spent his career learning
the patterns of the immune system and made some key
contributions himself. Yet when he imagined a new pattern, he
soon learned how difficult it is to break an old one that’s
been deeply ingrained in an industry.
Allison’s idea was that the human immune system was capable of
recognizing cancer cells, but because of the way immune system
works our defenses are turned off too soon. It seemed to him
that if he could just turn off the “molecular brakes” for a
while, the body’s own defenses could kill off cancer cells in
the body.
He performed some studies on mice and they were hugely
successful. So he began flying around the country to sell his
idea to pharmaceutical companies, but all of them refused. They
had seen this pattern before, lost a ton of money, and were
unwilling to go down the same road again. “It was depressing,”
Allison told me. “I knew this discovery could make a
difference, but nobody wanted to invest in it.”
After three years pounding the pavement, a small biotech
company, Medarex, invested in Allison’s idea and
today, cancer immunotherapy is recognized as
a miracle cure and has saved the lives of thousands of
terminally ill patients who once would have no hope. Medarex
was sold to Bristol Myers Squibb in 2009 for $2.4 billion.
You Can Only Validate An Idea Going
Forward
Think about Steve Jobs and Appl for a minute and you will
probably recognize the pattern and assume I mispelled the name
of his iconic company by forgetting to include the “e” at the
end. But I could have just have easily been about to describe
an “Applet” he designed for the iPhone or some connection
between Jobs and Appleton WI, a small town outside Green Bay.
The point is that we can only validate patterns going forward,
never backward. That, in essence, is what Steve Blank means
when he says that business plans rarely survive first contact
with customers and why his ideas about lean
startups are changing the world. We need to be
careful about the patterns we think we see. Some are
meaningful. Others are not.
Another important point is that recognizing a valuable pattern
is necessary, but not sufficient to create a business. Fabio
Rosati’s ideas about vendor management were only the start of
what made Elance successful. It was later moves, such as
offering certification and training for freelancers, building
private talent clouds for companies and countless others that
made the company a powerhouse.
Finally, we need to take a more Bayesian approach to strategy, where we don’t
expect to always get it right, but to become less wrong over
time. A flash of insight will not make you Steve Jobs, it just
means that you’ve recognized a pattern that may or may not
really be there.
This article originally appeared at
DigitalTonto
Greg Satell is a popular speaker and
consultant. His first book, Mapping
Innovation, is coming out in 2017. Follow his blog
at Digital Tonto or on Twitter @DigitalTonto
