“Companies rarely die from moving too fast, and they frequently die from moving too slow.” – Reed Hastings, Netflix
We live in a time of unparalleled innovation and disruption. Since 2000, more than half of the Fortune 500 have gone bankrupt, been acquired, or ceased to exist largely as the result of digital disruption. At the current rate of churn, 75% of Fortune 500 are projected to be replaced by 2027 (Innosight) due to their own lack of innovation—incumbents with established products and processes, and many with PLM systems. So my question is: does PLM enable innovation?
There are a few good arguments that it does not. One is that the majority of PLM systems are still bogged down, focused solely as PDMs inside engineering. A corroborating point, which likely overlaps, is that 40% of organizations have not involved PLM in their digital strategy and have no plans to (PLM PULSE SURVEY 2017).
Let’s take a look at a well-known example of innovation and disruption: Netflix. In 2000, Blockbuster with its 7,700 stores turned down a $50MM offer for a 49% stake in Netflix for it to adopt the Blockbuster name and become their streaming service. They dismissed this, as Netflix only had 300,000 subscribers and relied on the U.S. Postal service. Game on—Netflix grew to 4.2 million subscribers by 2005. Blockbuster peaked at 9,000 stores. It wasn’t that the CEO of Blockbuster didn’t eventually see the threat, but it cost $200MM to drop late fees and another $200MM to launch Blockbuster online. In 2005, activist investor, Carl Icahn, fired that CEO and they returned to business as usual. Between 2004 and 2010, Blockbuster went from revenues of $6.6BN to bankruptcy—while Netflix reached $2.2BN.
What is true in every example like this is that the established market leader dismissed the threat of disruption, allowing the more nimble and often smaller companies to out-innovate them.
Clayton Christenson wrote a groundbreaking book in 1997 entitled The Innovator’s Dilemma, where he argued that the lack of innovation isn’t a failure of organizations, but the result of sound leadership trained in delivery and not discovery. He makes the distinction between two types of technologies: sustaining and disruptive. Established companies support their customers, trying to serve them better by investing in their current products—that is, until they get disrupted. The disruptive technology is not considered a threat to leading companies with the sustaining technologies because it doesn’t serve the customers in the same way. But the company adopting the disruptive technology has unique capabilities that allow it to make faster incremental improvements until the leader is surpassed. Although leading companies have the skill sets to succeed, Christenson argues that it’s counterintuitive for them to invest in disruptive technology.
Today, computing is ubiquitous, embedded in our cars and homes, soon to be commonplace in our clothing, and even in our bodies. Intel’s cofounder, Gary Moore’s predictions on the infinite power of computing have become reality. This infinite resource has given rise to open digital platforms along with an explosion of interoperability, which has shifted the focus from individual products to the experience provided by platforms. Technology always necessitates refinement. Professor Christenson now believes, “One of the main benefits of open innovation is that it allows firms to reach beyond their organizational boundaries and tap the outside expertise of a broader set of individuals than they could otherwise reach.” This allows a company to “develop strong communities of external innovators eager to solve problems.”
What has changed is the power of connections—that open, flexible platforms now allow for the fusion of ideas, thoughts, and knowledge across multidisciplinary designs, the supply chain, and across the lifecycle, resulting in better collaboration and a greater chance of ideas leading to significant innovations.
According to Lisa Kent, a Forbes Agency Council commentator, Dr. Szent-Gyorgyi, a Nobel Prize-winning researcher and author, likens this to viewing things we have already seen through a different lens. He coined the term “associative logic,” a system of putting things together in unexpected ways to address challenges and open new innovations.
Kent further expands, “To create an environment that inspires innovation and truly benefit from associative logic, organizations must value and reward it. They have to incentivize revisiting former thinking, existing data, and hypotheses, and put the pieces together in new ways. We need to foster collaborating when collaboration might seem counterintuitive.”
The 40% with no plans to involve PLM in their digital strategy are likely lost in their budgets and sustaining business-as-usual mode with legacy PLMs that persist in encouraging data silos. This translates to a certain slow death. Sound management to the end.
No one is as smart as everyone. Technology and, in particular, open platforms are changing how we work. Many organizations are focusing on rapid innovation and adapting their execution models. There’s nothing new about the correlation between innovation and growth, but there’s a tension between creativity and the discipline to execute and pay the bills.
Cutting-edge companies are quickly shifting to what I’d call “creative offense,” adopting an innovation mindset at the core, as opposed to some peripheral wish for some nebulous digital transformation they can throw money at.
Part of the reason some companies are now moving so aggressively is the low barrier to entry and the continual influx and merging of technologies. Size no longer has the advantage over innovation. You either re-invent or die as I describe in: The PLM Kiss of Death: Hoarding & Consolidation.
An open Product Innovation Platform encourages innovation for organizations with the right mindset because it allows a company to not compromise on agility. Regardless of physical location, function and discipline, and even company, creative design teams can work together to iterate on the best solutions and product designs. The platform allows for the intersection of the type of associative logic Dr. Szent-Gyorgyi describes and for countless iterations to provide valuable insights on better design, different uses of technology, and the data to assist with the right business model.
Consider the use of Digital Twins on an open platform. Knowing the exact configuration of the hardware and software with the usage and performance throughout the product’s lifecycle can uncover customers’ unmet needs. This can lead to breakthrough innovations before traditional competitors can even react.
To be clear, I mean truly “open” platforms, not the “walled garden” approach or “single vendor mousetraps” that Oleg Shilovitsky so persuasively describes in his blog, Product Innovation Platform: Single Vendor Mousetrap and Agile Services.
Companies that enable innovation are the ones that embrace digital transformation. They’re able to break free from their own organizational inertia and value a culture of discovery. They use open Product Innovation Platforms to enable rapid innovation. An open platform provides a flexible, agile collaborative ecosystem that enables more teams to see more views of product data in more ways, which fosters new perspectives and encourages you to think new thoughts. This leads to new ideas and iterations, consequently leading to innovative products and new business models. www.aras.com