Are They Blind or Just Stupid?

Why is it that so many of the World’s greatest product innovations have been missed by the companies that should have owned or invented them?   

Sony is a fantastic company.  Time and again their combined talents of innovation and design have transformed the commercial landscape.  Perhaps greatest amongst these was the Sony Walkman.  Launched in 1979 it transformed music onto a portable medium and changed the way people listed to music forever.  As innovators and leaders in a market they created, how is it that they missed the MP3 market and allows Apple, an upstart computer company from California, to steal the market from under their noses?

In 1938 a man by the name of Chester F Carlson developed a process for picking up fine particles of powder and fixing them on ordinary stationary through the application of heat. Excited by his invention but lacking the funds for taking it into production he spent six fruitless years touting his idea around the main office equipment manufacturers such as Remington Rand, GE and IBM.  Even the National Inventors Council dismissed his idea as impractical.  The idea was eventually taken up by a small $7m turnover organisation called the Haloid Company, which later renamed itself the Xerox Corporation.

In the mid 1970’s a young British designed came up with an idea for a wheelbarrow that that would be better than a conventional wheelbarrow on soft ground and more stable on rough ground.  The result was the Ballbarrow.  Once production was underway in 1978 the inventor noticed that the air filters in the spray-finishing room were constantly clogging with powder particles, so he developed a “cyclone tower” that would use centrifugal force to extract the particles rather than conventional filters.

In recognising that this would also solve the problem of vacuum cleaner filters becoming clogged he developed a bag-less vacuum cleaner.  Unfortunately no manufacturer or distributor was interested as they couldn’t see beyond the fact that the UK market for replacement bags was worth £100m per year.  James Dyson therefore went into production himself and cornered nearly 50% of the UK marker and almost a quarter of the US market.

In each of these cases, companies who should have known better, failed to see the potential within their own market.

To understand why this occurs, consider the work of an illusionist or magician.  Their profession relies on the fact that when humans see something we subconsciously compare it to our past experiences and leap to a conclusion.  We fail to judge every situation on its individual merits, because that would take too long and provide our brains with too much information to process.  Therefore when we see the magician appear to throw the knife at the lady, we assume that the knife has indeed been thrown.

In the same way, when we have grown up in a market where the dust from the vacuum cleaner goes into a bag which can easily be removed and thrown in the bin, our instinct is to assume that it will always work that way and concentrate our efforts on finding better bags, bio-degradable bags, more attractive bags, scented bags etc.
Being “set in our ways” is therefore natural – it is a basic human instinct.

But surely companies have ways of getting around this; through market research and innovation teams?  Let’s look again at the case of IBM and Xerox as, of all the large companies Chester Carlson contacted, they probably came closest to buying his invention.

IBM did not dismiss Carlson’s invention out of hand, they did what all large companies tend to do when they cannot decide and employed consultants. After an extensive 18 months study (they have to justify the fees somehow!), the consultants came back with a thick report which conclusively proved that there was no market for a plain paper copier.  They had two chief reasons and a host of minor ones.  One: there wasn't enough copy volume and two: the xerography process cost more than ten-times as much per copy as the AB Dick mimeograph process (the “duplicator” you might remember from your school-days), which was the technology they compared it against. The consultants concluded no one would spend ten times as much to copy anything.
What they failed to take account of was that the mimeograph process was messy and slow to set up, that the quality was nowhere near as good, that the xerography process was vastly superior if you only wanted a small number of copies and that the costs would decline as the process was developed.

Perhaps even more startling, they failed to see the photocopier as a facilitator of communication.  Communication is a basic human need and, throughout history, people have always been willing to pay a price-premium for better and faster communication – airmail vs. land mail, the telephone vs. the post, just look at how much people spend on their mobile phones when a cheap one would work just as well.
The solution is to constantly challenge, not the business you are in, but the paradigms or “models of the world” you assume or typically conform to.

During the Dot.Com boom of the 1990’s Jack Welch, the CEO of General Electric set up a division to create new internet businesses in competition with their existing businesses.  Their job was to test all the assumptions that GE worked to so that, if they found new ways of working, new markets or significant cost savings, GE would be aware of it before the competition.

Your job is to find the opportunities that you will otherwise miss.  Are you currently in the process of dismissing an iPod, a photocopier or a bagless vacuum cleaner as a bad idea?

About the Author
Alistair Schofield is Managing Director of Extensor Limited.