Diffusion of Innovations

¶ … business model innovation: Finfrock Industries.

Tags: change; risk; innovation; perseverance; control; resilience; observabiltiy'

Finfrock Company makes custom-engineered precast-prestressed concrete components - something like the Lego blocks for commercial construction.

Diffusing their innovative idea has, however, been an uphill drive, with their plans plagiarized at one stage in the beginning. To ensure that they retained complete control over their idea, Finfrock changed their business model and streamlined a new way of doing things that would help them control the project's design and schedule. Most other businesses would get disheartened by having their innovations plagiarized. Some would outsource, create a new product, disrupt the industry; push sales consequently aggravate their sales force, or relinquish some control of their industry. Instead, Finfrock decided to redesign his business model by, instead of selling to customers (as is customarily done), targeting owners and developers with the promise that it offers faster completion, cheaper design, and greater security than competitors. Realizing that it could impede others from stealing its design and that it could hasten building projects if it -- rather than the architects and general contractors employed by clients - control the design and schedule, Finfrock changed its business model and consequently became more successful than it would otherwise have been.

Finfrock's case offers various lessons. Overtly, it teaches us how perseverance despite failure is crucial and how a seeming defeat can spell triumph and success. Finfrock's example also points to the message of 'observabiltiy' where he made the results of his innovation -- faster time, greater security, and decreased cost -- open to his clients. This made it easier for them to see the results of the innovation and encouraged them to adopt it. Finfrock's innovation thus diffused more rapidly than it may otherwise have done.

When DEC was the king of innovation

Tags: opportunity; innovation; profitability; trialability; competitiveness

Ken Olson, founder of Digital Equipment Company (DEC) was considered one of the greatest innovators and entrepreneurs of modern times. Founded in 1957, DEC was considered a paragon of innovative success.

Their computer company became successful via a series of firsts. Firstly, it was the first computer company to be funded exclusively by venture capital money. The $70,000 sunk into DEC by American Research and Development Corporation placed the company off to its secure start.

Secondly, Olson devised a simple but acutely clever plan that directed the fledgling company along its dual phased road to profitability. The first phase consisted of manufacturing computer modules. These were simply independent electronic circuits that were tucked into a circuit board. Presto, you had a computer. Once the first phase was completed and a profit realized, the company could then embark on the second phase, which was to develop a complete computer, based on those prepackaged modules. The plan broke the procedure into two stages allowing the company to test and accomplish one phase before deciding whether or not to progress to phase two. Doing so helped it in various ways, not least not to endanger its resources whilst testing and promoting its success before moving forward.

However, companies have to adjust to the times, and DEC being unable to was, gradually overcome by its rivals.

DEC can teach us various lessons but one such lesson is that of Trialability - namely, that new ideas that are broken up in installments will more readily be realized. DEC was successful, precisely because it split its program into two phases. Doing so made it trialable which represented less uncertainty to clients and to the company itself.

Opening up innovation at P&G

Tags: Diffusion; external technology; marketing; compatability; mergers; licensing; spin-offs.

Proctor and Gamble devised an innovative way to spin-off or diffuse its innovations.

After having slipped and plunged in the late 1990s and in the early years of the millennium, to some of the biggest declines ever, P&G introduced a new CEO, A.G. Lafley, to modify their direction and to change their forecast. Lafley and Gil Cloyd, P&G's chief technology officer, opened their innovation process to external sources of technology, i.e. receiving half of their ideas from the outside, and, in order to do so, they developed a special research and development team.