More than 75 percent of innovative products retire before generating profitable revenue. But a few of them succeed in systematically ferreting out economic value. Do the successful ones begin the journey as a big bang? For example, did smartphones, or digital cameras started the journey as a highly profitable business? Did all of a sudden, customers start grabbing them generating huge profitable revenue? No, like them, all successful innovations started the journey in a humble form. Invariably, in the beginning, they were poor, and customers were hesitant to buy them. Their great successes have emerged through the consistent addition of momentum turn by turn—creating an innovation flywheel effect. Due to its immense importance in managing innovation, management professors have been after it. The innovation flywheel effect has been at the core of creating scale, scope, and network externality effects–crucial KPIs.
In the management literature, Jim Collins is credited for introducing the flywheel effect for consistently increasing the momentum of organizational performance. He popularized this concept through his book Good to Great. He argued that instead of one killer innovation, solitary lucky break, or miracle moment, organizations succeed to show great performance by improving turn by turn. It resembles relentlessly pushing a giant, heavy flywheel, turn upon turn. As a result, momentum keeps building consistently, reaching breakthrough performance. The same analogy works for innovations like television, computer, automobile, word processing software, or search engine. The creation of the flywheel effect in forming an S-curve-like life cycle is at the core of the success of innovations.
Examples of innovation flywheel
Examples of innovation successes include smartphone, personal computers, word processor software, mobile internet, and Amazon’s e-book. For sure, none of them emerged as a big bang. In the beginning, mobile internet was extremely slow, and the cost of the data pack was very high. Similarly, IBM’s Smartphone, Simon, was quite primitive and costlier than we use today. Hence, although Apple succeeded to sell more than 237 million pieces of iPhone, IBM succeeded to sell only 50,000 units of the world’s first smartphone, Simon.
How to create an innovation flywheel effect
Scholars have highlighted the importance of creating the innovation flywheel effect. They have preached continuous knowledge building, insight generation, running experiments, and innovating. But they seem to be quite generic. How they do fit within the evolution of innovation and underlying forces is not sufficiently clear for practitioners. Hence, although their write-ups play a vital role in sensitization, they fall short in giving guidance for practice in creating an innovation flywheel effect. Hence, this article attempts to explain 6 major areas and underscores their integrated practice.
Focus on empathy and passion for perfection
The challenge of creating an innovation fly effect is to improve innovation to ease customers’ pains. Hence, each successive release should keep helping the customers in getting jobs done better, preferably, at less cost. But how to know which features to be added, removed, refined, or rearranged? Often, management gurus suggest keeping gathering customers’ feedback. Does it mean that customers are smarter than innovators about what the next release of the innovation should be? Perhaps, no. As Henry Ford said, “If I had asked people what they wanted, they would have said: Faster Horse”. If customers had known better than innovators, what could have been the role of advertisement? Hence, responding to what customers are asking for is not enough. The team in creating innovative flywheel effects must silently observe and listen to the untold requirement to generate ideas.
And they need to keep doing it endlessly. In addition, innovators should have a passion for perfection for creating a flow of ideas for consistently adding momentum to innovation, turn after turn. That is the tons are not good enough. Innovators need to work on those ideas for data that are not around. Furthermore, generating and finetuning ideas through a series of rapid-fire experiments is not also feasible due to high cost and time, and the risk of infringement of ideas before the next release. Hence, the focus should be on empathy and passion for perfection in creating innovation flywheel effects. In a nutshell, the innovation team, with empathy, should play the role of customers having the passion to keep digging down in getting additional insights about customers’ requirements and product features to meet them.
Creating scale, scope, and externality effects
The learning loop is at the core of the innovation flywheel. Management scholars suggest interaction with end users generates information and data that provide insights on where and how new value can be created. But creating value is not sufficient. Innovators must also increase value extraction means. Furthermore, customer interaction will likely have an infinite set of ideas for improving innovation. but are we going to add all of them? For sure, no. Hence, how we are going to filter out most of them to select only a few is a real challenge in creating an innovation flywheel effect. To address it we need key performance indicators (KPIs).
The most important one is our progress in improving the quality and reducing the cost simultaneously. Broadly, all the quality and cost attributes could be grouped into three categories: economies of (i) scale, (ii) scope, and (iii) externality effect. Hence, innovators’ challenge is to search for those ideas which contribute to the advancement of these three indicators. For example, the idea of the multi-touch-based user interface in replacing the physical keyboard-centric design has created economies of scale effects. On the other hand, the idea of having the option of 3rd party app downloading has created a positive externality effect on the smartphone.
Manage suitable technology portfolio
Upon generating suitable ideas for creating scale, scope, and externality effects, innovators face the challenge of having a suitable technology portfolio for implementation. For example, the idea of multitouch has merit for adding momentum to the innovation flywheel effect. But for this, Apple needed suitable technology. Hence, Apple went out and made two major acquisitions. Furthermore, Apple had to have strong internal R&D to keep refining it to reach a level of creating excitement in customers’ minds. Hence, creating an innovation flywheel effect demands managing a suitable technology core. Innovators should keep monitoring, detecting, assessing, and acquiring suitable technology portfolios.
In pursuing ideas around potential technology core, key issues should be investigated. Some of them are (i) technology feasibility, (ii) customer receptiveness, (iii) economic viability, (iv) organization capacity, and (v) suitable organizational structure. Therefore, creating an innovation flywheel effect is far beyond design thinking and practices. For example, Nichia got it clear that customers would like LED light bulbs. But to harness the latent potential of demonstrated technology, Nichia had to sponsor Nobel prize-winning scientific discovery.
Fuel creative wave of destruction
Creating an innovation flywheel effect demands the cumulative effect of incremental innovation. Hence, we need a long runway of incremental progression. Therefore, innovations which are at the matured stage of the S-curve life cycle are not amenable to creating an innovation flywheel effect. Consequentially, for creating an innovation flywheel effect we need to step into the reinvention wave for fueling a creative wave of destruction. For this reason, all the great examples of the innovation flywheel effect are instances of creative destruction, often, forming disruptive innovations. Yes, those reinvention waves begin the journey in a humble form.
They keep growing through a consistent flow of ideas, adding momentum turn by turn. Hence, innovators should detect the opportunity and manage the journey of creating innovation flywheel effect as succeeding with the creative destruction wave of reinvention. Therefore, innovators need to find a suitable target for launching the reinvention journey. It’s not about a management practice that could be applied to any state of the product in any organization.
Face sustaining innovation challenge with innovation flywheel effect
For unleashing the flywheel effect, innovations must sustain in the market. Any successful innovation must withstand the effect of competition unfolding as the dragging force of replication, imitation, and innovation. To counter it, innovators must release successive better versions. Furthermore, successive versions should be suitable advancements for creating as well as leveraging positive externalities. As a result, the diffusion effect of the innovation flywheel effect unfolds as a series of wavelets as opposed to linear progression.
Barriers to creating an innovation flywheel effect
Some the notable barriers are:
(i) management is reluctant to dive into the unproven loss-making beginning of the reinvention wave—for fueling the creative destruction force.
(ii) lack of availability of suitable technology core, or premature saturation of selected technology core before reaching the whoosh! moment.
(iii) innovators fail to sustain the innovation, despite consistent incremental advancement, due to the effect of competition.
(iv) due to a lack of shared understanding about what it takes to pursue the journey of creating innovation flywheel effect in a competitive market, organizations fail.
As explained, creating an innovation flywheel effect is more than management jargon. It is about fueling a creative destruction wave of reinvention through a flow of ideas. Hence, in addition to empathy and passion for perfection, we need a suitable technology core. Furthermore, despite the consistent improvement, organizations fail to add momentum due to competition response. Hence, sustaining innovation plays a vital role. Therefore, as opposed to standalone management sensitization, creating an innovation flywheel effect demands managing the reinvention wave by leveraging technology possibilities in a competitive market. Consequentially, often time, the journey of the innovation flywheel effect fails due to having a shared understanding of the unified theory of innovation dynamics.