How not to shoot yourself in the foot

Not all innovation leads to financial success.

By the mid-1980s the British synth-pop music group Talk Talk was on top of the world after their 1986 album, "The Colour of Spring", sold more than 2-million copies.

What happened next is the stuff of legends. Based on their huge success, their record label, EMI, gave them carte blanche for their next project. And, boy, did they ever grab that opportunity. The result was a musical masterpiece - something akin to a Classical Music Symphony. They created one of the most stunningly artistic albums in all of music - light years ahead of where their previous music was. And, crucially, light years ahead of where commercial Music was (at the time).

The album? "Spirit of Eden".

The following quote from Pitchfork (and they have a great article on what transpired) explains it all:

"Legend holds that when the A&R man at EMI heard it, it brought him to tears — not just because of its tidal beauty, but because he knew it wasn’t going to sell".

Today, almost 40 years later, "Spirit of Eden" is still revered as a musical masterpiece. It birthed a whole new genre, namely post-rock, where bands such as Godspeed You Black Emperor could then create their art. Yet it was a commercial disaster (as the A&R man predicted).

Fourteen years later (in the year 2000) another British band, Radiohead, followed up their Alternative Rock successes, "Pablo Honey", "The Bends" and "OK Computer", with the album "Kid A". This was a huge left turn away from Rock towards a type of Electronic and Ambient music. In fact, it was a left-turn almost equal in magnitude to Talk Talk's. "Kid A" then became Radiohead's first number one album on the Billboard 200 and, eventually, about 2.5 million copies were sold.

Both "Spirit of Eden" and "Kid A" were huge innovations. Both could objectively (if such objectivity is possible) be called "masterpieces". Yet, the one failed commercially and the other succeeded. Why? What was the difference?

Before we get to the answers to that question, it is important to note that the difference, to a large extent, was not due to marketing. The following is from Wikipedia:

"Radiohead minimized their involvement in promotion for Kid A, conducting few interviews or photoshoots. Though "Optimistic" and promotional copies of other tracks received radio play, Radiohead released no singles from the album."

So, back to the question: Why this difference in commercial success?

This is a (perhaps even 'the') crucial question in the world of business. If we can arrive at good answers and if those answer apply (semi-)universally, it may greatly reduce the risks that are associated with many other types of innovation-sets. This, in a sense, is also the question that Venture Capitalists need to answer whenever they fund new startups. And it is the question that companies need to answer when they launch their corporate ventures. It really is the ultimate million dollar question. It is, in fact, a multi-trillion dollar question: "We have decided to venture and to innovate. We are considering this type of venture and these types of innovations. Are we doing the right thing?"

Now, let's display some hubris and try to answer this question.

Most of us should be aware of the notion of a first mover advantage. Many of us understand this to be an advantage that accrues to the first company operating in a certain domain. Read Wikipedia's definition though: "advantage gained by the initial ("first-moving") significant occupant of a market segment". Note that word, "significant", there.

From their book "The 22 Immutable Laws Of Marketing", Al Ries and Jack Trout's "Law of Leadership" states that you need to ensure that your product is the first of its kind in the market. Being first is better than being better. And their "Law of the Mind" states that true success only comes if you are first in the customer’s mind.

If we stand back from the information above, it appears as if there is a difference here. Talk Talk's left turn was a left turn for Music. Radiohead's left turn was a left turn for Radiohead. If you listen to both albums, it is quite clear that Talk Talk's album greatly influenced Radiohead's - perhaps not directly, but most definitely indirectly. "Kid A" would not have been what it is without "Spirit of Eden". The market for "Kid A" was partly created by "Spirit of Eden" and that market therefore, eventually, contained the raw materials that Radiohead could use for their creation. "Kid A" owes a lot to many other musical influences too - and it also, of course, owes a lot to Radiohead's unique genius, but all of this simply strengthens the answer contained in the next paragraph. (And we will come back to this point of 'influences' later.)

So, one of the answers to the multi-trillion dollar question, is that being the very first mover is probably, mostly, just simply too risky for most corporate risk-appetites. Having a strategy to be the first significant mover, however, can be a very good strategy - and one that fits better with the prevailing risk appetite (assuming that the risk appetite will not change - or change much).

Now, what does 'significant' mean (in this context)? It means many things, but, most of all, it means first to scale.

How do you achieve 'first to scale'? You insert yourself as first-in-the-customer's mind? How do you do that? You do what Peter Drucker said you should do: (1) you innovate and (2) you strive for excellence in marketing (i.e., you don't take the risky almost-no-marketing route that Radiohead chose). You do both of these in a way that inserts your product or service into the minds of your customers.

Next, you get the basics right. You ensure that your product or your service lives up to its promises. You ensure that you are able to fulfil that promise. This step, of course, was a given for the superb musicians in these two bands. Unfortunately that is not the case for many corporate funded efforts. Why? You have to truly believe that what you are doing is worth doing. Too much of what happens in corporate-land is entirely devoid of any such belief. So, companies step in half-heartedly. They first 'want to see'. Often then, by the time they finally 'see', someone else has managed to capture the market. That was definitely the case in the sixty-minute delivery market in South Africa. Commitment, most of all - for business ventures, means getting the basics right.

Lastly, but probably firstly in the order of actions here, you ensure that your strategy is, inter alia, also fully informed by what the pioneers did. If Radiohead never listened to "Spirit of Eden", they almost certainly listened to GYBE's "F#A#", Brian Eno's "Ambient 1: Music for Airports", Aphex Twin's "Selected Ambient Works 85-92", Miles Davis' stunningly brilliant "In a Silent Way", Pink Floyd's "Dark Side of the Moon" (with the seminal "The Great Gig in the Sky" track), and many more.

You must learn from the pioneers. SpaceX certainly learnt from NASA. Tesla almost definitely studied the General Motors EV1 and may even have looked as far back as the Flocken Elecktrowagen.

Are there other answers to this question of why not all good innovation is commercially successful? Damn sure there are. Alienating your customers too much, with your new direction, is one such reason. Talk Talk certainly made that (commercial - definitely not artistic) mistake. Radiohead did so too, but not enough so, in their case, to completely lose most of their support, and while also gaining new supporters.

Did either of these bands have a strategy here? Nope, not really. In the case of Talk Talk, their art was driven by blind faith. And in the case of Radiohead it was a case of "well-we-don't-care anymore" (due to burnout). Neither of these types of (no-strategy) options are available to large corporates that are beholden to their shareholders. Innovation, in business, must to be based on a good strategy.