I wrote here about a quote I found and challenged its premise that companies no longer innovate once they find their “cash-cow”.Â I used Google as an example of an innovative company howeverÂ Chris Saad made the very fair point that really Google’s “cash-cow” was not search, but rather advertising revenue.Â Most of its innovationÂ was about advertising, or product to drive advertising and not net new to the world.Â So is the original quote right after all?Â To summarise I’ll break it into two seperate ideas:
- Companies innovate until they make money (their cash-cow), then protect this revenue stream agressively.
- In protecting their cash-cow, they innovate only around this core idea and in doing so ultimatelyÂ kill future innovation.
It seems useful at this point to define innovation.Â Drawing together the various sources and definitions, I think innovation looks something like this in a business context.
Innovation:Â Reengineering existing products, processes and ideas to create novel applications that reduce costs or increase revenues.
Invention: An innovation that is both novel and non-obvious.
So, back to point 1.Â I’m going to take it as read that this is fairly non-contentious. Companies start out with some product or service they believe is sufficiently different on some parameter (location, cost, scale, convinience,Â leverage, uniqueness etc.)Â from other competitors that they will make money.Â In some instances, these initial innovations are sufficiently novel and non-obvious they qualify as inventions.To the second point, that innovating around core ideas kills innovation, I just don’t buy it.Â I agree that many companies have one good invention, but the company that fails to continue to innovate, improve and find new ways to generate revenue is dead in the water.So back to Google — Â here’s how I now see it:
- They invented a new way of doing search
- They hit on their hedgehog idea which is to generate money through advertising
- They continue to innovate around thisÂ hedgehogÂ concept to create more, and different ways of making money from advertising.
Chris in his blog post on Google raises some great points that are worth a read — and challenges us to consider if Google have moved too far away from their initial invention?Â Have they diluted their value through continual innovation around revenue raising instead ofÂ focussing on aÂ great search engine?Wether they have or not, time will tell, but there are plenty of innovative and inventive companies out there ready to take advantage if they fail.Â The web never stands still.Â Â EvenÂ old hands haven’t given up the gameÂ although will they succeed orÂ not?Â One thing I can safely say is that companies, Google included, will continue to try and be innovative.Â With the internet, whether that innovation ultimately succeeds or fails isÂ more than ever before bestowed in us as users to make the vote with our media consumption habitsThanks Chris for the comments and material that sparked some ideas for this post.