One Vote for the Goliaths

As you might guess, most of the e-mails I’ve received on the innovation debate have been in favor of the best-of-breed vendors as the source of innovation. One reader, though, took exception and offered her own perspective:

“Very interesting read. Being a former BoB girl, I'd be the first to admit that we large vendors struggle with our “bigness.” However, after spending 5 years in ERP, I have a couple of items to point out:

1. Given the fact that it takes users over 18 months to take advantage of new technology and technology solutions (and that time frame seems to be lengthening), do large vendors need to outpace the little ones in innovation or do we merely need to move fast enough to keep pace with customers' ability to adopt? Of course, that doesn't excuse us from innovating but it enables us to take the time to evaluate and develop a comprehensive offering, taking into account the technologies and solutions that we already offer.

2. Having a large number of customers means that we have a responsibility to deliver solutions that work. We can't add lots of new and experimental technologies into the solution and then remove them later when they are either not commercially viable or don't work. Remember i2's DOM (Distributed Order Management)? It was innovative but never managed to provide customers with a usable solution.
3. We don't turn fast but when we do, we can be much more effective than our smaller vendors. And we manage to stick around, affording our customers with peace of mind and an ongoing product strategy.

Best regards - I always enjoy the Sunday e-mail from you. “

We welcome your comments, too.

Comments

[Subraya Mallya]

Bruce,

I have a different take on BOBJ girl's opinion about "customer taking 18 months to uptake". I think it has a lot to do with the all the logistics around absorbing the change. Each of these upgrades takes a lot of investment, budgeting, resource planning etc. All this when the customers are required to run their business.

SaaS/On-demand solves this very problem by relieving the customers from the painstaking upgrade process and focus on their business. Business conditions change all the time and so customers have no reason to uptake new functionality. If only the big vendors can make it easier.

I "sort of" agree with Sonny's comment that as a public company they have limited flexibility in doing a lot of innovation. But then again, it is the management's challenge to explain the investors and market on why it takes more money for R&D and innovation. Apple does it, so does Google. The entire pharma and biotech industry does it. As the industry matures (like the aforementioned) software industry will also go through the same.

To me the fundamental reason smaller companies innovate and larger ones don't is purely the intent. In smaller companies, there are few (if any) restrictions on innovation. Quite the contrary in larger companies. Oracle does innovate a lot in the database side but the same is not true in applications.

[Doug Hadden]

One of the difficulties in this debate about innovation is to define what sort of innovation we are talking about it. Perhaps we could look at four or more types of innovation and identify whether large or best-of-breed vendors are more likely to innovate. Here's my contribution:

1) Pure Research Innovation where an organization innovates even though there is not obvious product or business opportunity. More likely to happen in academia and large companies. (Xerox PARC and IBM are probably the classic examples.)

2) Discontinuous Innovation where an organization builds a disruptive product or service. Far more likely to happen in small company and best-of-breed.

3) Continuous Innovation where an organization improves on existing technology. Happens in companies of all sizes, but probably more likely in larger companies. (Fits to the Oracle DB example provided.)

4) Customer Innovation where an organization leverages customer demand and ideas to improve product, process or service offers. More likely in smaller companies, particularly best-of-breed, who have stronger ties to customers and tend to understand the domain. This type of innovation is going to become more important thanks to Web 2 tools.

The first two types of innovation are often "inside out" where someone within the organization has a clever idea. Despite naysayers, the entrepreneur moves forward. Pure research is the luxury of larger organizations who can invest a percentage of their R+D portfolio to high risk/high reward.

The second two types of innovation are much more "outside in" where customers have an influence. Larger companies are often highly structured that can isolate staff from customers.

I'd also say that the notion of "customer innovation" has been throught to be an oxymoron. For example, the "Discipline of Market Leaders" implies that you can't do both. Many believe that listening to customers will put you out of business because the majority is not forward looking. Samller companies are more able to engage the outlier customers to harvest new ideas.