March 3, 2011
Michael Price: General Partner @ CEO Ventures
Name: Michael Price
Company: CEO Ventures
Position: Founder and General Partner
Situation: Michael is a very successful and well respected leader in the Atlanta venture community. His wide range of contacts include key leaders at Barnes & Noble, so I asked him to share his thoughts on why B&N missed the opportunity to bring a disruptive product like "Kindle" to the market (see February 27, 2011 blog post for Kindle analysis).
Challenge: It's all about incentives. B&N's focus was "retail excellence" and its employees were clearly incentivized toward this goal. (Side note: Incentives don't only refer to a tangible reward. Incentives are always present because there is always a reason a person does something.) Because of the focus on the existing, traditional business and the incentive to spend time, creative energy, and capital on providing a best-in-class retail experience, B&N's eyes were "down" instead of or in addition to looking for the next disruptive product.
Solution: Michael shared a few thoughts:
1. "Innovation usually comes from the outside." I think this can mean two things: 1. We have to "source" innovation from our customers, competitors and the general market and 2. Internally, we need to think "outside" of our traditional processes, foci, and culture.
2. "Too focused on the current mantra." Isn't it interesting that as leaders we can be too focused on the goal? We daily drive our businesses to measurable goals and the feeling is that successfully reaching those goals equals success. That's not necessarily true. Barnes & Noble created an excellent retail experience; they hit that goal every day. But they also missed being first to market with a disruptive product.
3. "At a big company, they tend to incent solely on what makes a difference to the P&L." A disruptive product initially only has a negative impact on the P&L, at least directly and measurably.
A key takeaway for me is this: focusing on the goal can be dangerous. Why? Simply because "we don't know what we don't know." Of course, we must focus on P&L-centric goals and drive our businesses, but if we want to create and deliver disruptive products then we also have to frequently ask this question: What could be introduced to my currently very satisfied customers that would cause them to be suddenly very unsatisfied with the product we are offering them? If you come up with an answer, then you might have come up with the next disruptive product in your industry.