Arrr, Mateys - Top 7 Innovation Pirates

August 12, 2007 · Filed Under Brand, Branding, Business, Business Model, Creativity, Customer Experience, Innovation

“Innovation is a pirate ship that you create and sail under cover of foggy darkness into the safe harbor of your competitors.” - Larry Keeley, lecture at UCSB, 1995

If innovation is the pirate ship, an innovative company is the pack of scurvy dogs, armed to the teeth and ready to wage war on the competition. Like pirates attacking from the cover of night and fog, innovators attack in areas of weakness their competitors don’t even know exist.

Here are seven companies that came from nowhere to dominate their markets by seeing opportunities overlooked by their competitors, and in doing so redefining how their industries operate.

At one time, Microsoft was the archetype of the pirate innovator. Circa 1989, the PC software market was dominated by DOS-based programs like Lotus 1-2-3, dBase and Wordperfect - stand-alone applications representing the state of the art. Microsoft changed everything in two ways - 1) transitioning their operating system offering from DOS to Windows and 2) inventing Office. Microsoft Word, Access and Excel not only exploited WYSIWIG - they were integrated into a ’suite’ that allowed information created in one to be actively linked to products created in the other. Their competitors never saw it coming. The first version of Wordperfect for Windows wasn’t even WYSIWIG. In no time, Office replaced the standalone market leaders as the preferred business software application.

When Michael Dell started making PCs there were tons of competitors - Compaq, HP, Gateway, and literally dozens of smaller manufacturers. He saw a opportunity in the form of direct retail sales. By charging customers up front, he was able to get paid before his PCs were even manufactured. By making every PC to order from a menu of popular options, he eliminated inventory. And since he didn’t have to pay his suppliers for 30-45 days, he was in a net positive cash situation from day one.

Who knew that an online international auction would create a near friction-free economy? Before Ebay, auctions were limited to fine art, collectibles, estate sales, coins, and repossessed property. The secret of Ebay is that it combines the best from two formats - classified ads and true auctions. The resultant hybrid is better than the sum - you can sell anything on Ebay that you can in the classifieds, to far more potential buyers, and you let the market dictate the sales price. And when sellers succeed, Ebay succeeds.

They weren’t the first search engine but they became the best by focusing innovation on customer experience and a novel business model. Far more than a mere search engine, Google’s goal is to put all available information at the fingers of their customers - text, images, mapping, video. They’ve found a myriad of ways to exploit the intrinsic value of searches - from keyword positioning to paying content providers for hosting related ads.

Innovation in caffeine delivery? Customer experience is the word of the day at Starbucks. They found value in a slice of their customer’s time, and vowed to make that slice the part of the day they looked forward to most. Plus Starbucks is a networker par excellence - they co-locate with book stores and other synergistic retailers to enhance customer experience further.

I decided to include one darkhorse, a personal favorite. ISB redefined basic and applied research in biology by creating the science of systems biology and in doing so reinventing the way research is conducted. Scientists collaborate with non-scientists, laboratories belong to everyone, facilities are layed out to encourage random collisions, and breakthrough innovation in biology is the unlikely outcome.

This last one could have gone many ways but I think they deserve a spot for redefining the home information delivery channel. They weren’t the first to offer DSL, but they’re the first to invest in fiber optics to the home. Fiber will offer the fattest pipe ever and allow Verizon and their partners to offer everything: voice, high-speed data, HDTV, pay per view, and a Blockbuster’s worth of video on demand. They might obsolete Comcast and all other cable competitors.

I also could have mentioned Apple (for the iPod). Who are some of yours?

Social Bookmarks: