Food: The Last Piece of the Digital Pie

Intro by Gina:  Sometimes in Corporate Entrepreneurship class we stray from the topic of how large companies can institutionalize capability for innovation….and we talk about interesting emerging innovations themselves.  Pelin, an architecture student studying for her Masters’ degree in Technology Commercialization and Entrepreneurship, is struck by the many attempts that have been made to increase the convenience of grocery shopping.  It’s all about the business model, and to date, it appears, no one has found the winning model.

Since the advent of the internet, big business and startups alike have been exploring the possibilities of online shopping. More and more people have stopped frequenting stores and instead opt to buy necessities online. Groceries, however, have had an increasingly difficult time jumping into the digital marketplace. Today, over 80% of groceries are purchased from brick-and-mortar stores according to the FMI, but it’s not due to a lack of options. Nearly every major grocery store has both pickup and delivery options in addition to the plenty of newer companies that offer food delivery services to major cities. However, no innovation has made a dent in traditional grocery sales, and even the “successful” ventures aren’t nearly as profitable as physical stores.

This lack of success is primarily due to customers’ continued desires to inspect their produce before purchasing it. This desire trumps any perceived inconvenience of physically going to the store. Additionally, both pick-up and delivery options come with fees or minimum delivery requirements. Customers won’t pay for others to do their shopping when they believe that selecting their own produce results in better quality. Of the 5% of people who utilize online grocery shopping, it is typically as a one time interest or last resort.

In 2007, Amazon introduced an online grocery delivery service in Seattle called AmazonFresh. Since then Amazon has expanded to several other cities, but has run into the same challenges in the food delivery business as others have faced. The company has begun transitioning towards physical stores in order to increase sales. Just this year, Amazon opened its first Amazon Go store in Seattle.  Using technology similar to self-driving cars, items taken off the shelves and placed in your shopping cart are digitally recognized and your Amazon account is charged automatically when you leave the store, eliminating lines and hassle. Amazon touts the notion of convenience as a major advantage of these stores, although they assure their customers that this is just the beginning.  As much as anyone, Amazon is unsure if the stores will be a success and are working on other options such as a grocery pick-up area and drive thru’s. Amazon is confident that the next generation will embrace online grocery shopping, it’s just a matter of time and establishing buyer trust.

At the same time Wal-Mart, which already commands 25% of the grocery market, is also pushing the limits of the grocery store business model. Rather than promoting online shopping, the company is moving forward with another concept which Amazon considered: pickup stations. Setting it apart from other stores that offer similar services, Wal-Mart’s dominance of the market enables the corporation to provide in-store pickup at no cost to customers. The few stores currently offering the services proved the stations to be remarkably successful. However, nothing is free, and offering an additional service at no cost to customers means that prices increase elsewhere. In addition, this pick-up option does nothing to alleviate the worries of the average customer about purchasing produce before even viewing it.

If Wal-Mart’s small sample size is indicative of the rest of America, perhaps Amazon should abandon its high-tech no-lines store in favor of a pick-up option. However, the pick-up option is not new, and others are skeptical of how successful it will be, and doubtful that it will make a significant profit for Wal-Mart.  Only time will tell if either innovation will be successful.

-Pelin Akman

David vs Goliath, the story of Fitbit vs Apple.

Wearable fitness trackers are hot as lava nowadays, and for many reasons. Whether it’s helping track heart rate, calories burned, and personal activity, “shipments of the devices spiked from 35.5 million in 2014 to 85 million in 2015, representing a 139% increase year-over-year.”[1] With such an eruption in sales continuing on, new fitness trackers and models are coming out every day by competitors in the industry trying to edge out one another. The two biggest ones are Fitbit and Apple. These companies share a similar product and target market, but they differ in many more aspects. Apple is… well its Apple. Everybody knows Apple is able to develop the newest innovations in products for both hardware and software better than arguably any company ever. And they have been at their best producing innovations from the early 2000’s until now. They have an advantage compared to Fitbit, a much newer company which had IPO’d in June of 2015. Now to gain an edge over each other, they have to compete with new models and apps that work with these watches, which means the company with the better corporate innovation will come out on top.

The strongest brand in the world is that way for a reason, constant innovation, and they stay on top because of it. The brand is very important here, since Apple will get customers who want to wear an Apple Watch more than they want a fitness tracker. The technology they bring to the smartwatch industry is similar to other products they have made in the past, like the iPod Nano with a touch screen, making it easy for them to innovate and create a product better and quicker than competitors. Not only that, when you check your Fitbit stats, you generally use an iPhone to do so. With the better technology than Fitbit, and the brand which is unbeatable, it’s easy to see why Apple is Goliath.

However David, also known as Fitbit, has something to say about that. Fitbit, being a newer company, still specializes in just fitness trackers and smartwatches. They innovate much quicker than Apple in this niche area, producing a wider variety of products, and all for a cheaper price. Not only that, they innovate in the fashion area, meaning people will buy their product based on how nice it looks, which makes its fashion at least as  important as brand. With a lower price point, they are able to win on fashion, as people can upgrade to a new style tracker more frequently than with a more expensive model such as Apple. With a whole company more focused on innovating in a certain area of products, it makes Fitbit the top dog. In Sept 2016 Fitbit held 25.4% of the market share in wearables, while Apple was third, with 7%, after dropping from 20.3% of market share just a year prior[2]. This shows how Fitbit, a new company, is beating one of the most innovative companies in the world. Fitbit is an excellent example of a niche player being able to maintain a 3 times the market share over the leading technology company in the world by intense focus and great execution.

-Dom Pizzano

Update: even more recent market share information can be found here: http://connexity.com/blog/2017/02/fitbit/

[1] https://www.fool.com/investing/general/2016/03/20/7-wearable-tech-trends-to-watch-over-the-next-5-ye.aspx?platform=hootsuite

[2] https://9to5mac.com/2016/09/06/apple-market-share-wearables-apple-watch/

Diving into General Motor’s Shark Tank

Automotive News highlighted an interesting (and perhaps innovative) approach to finding breakthrough innovations which is being used by General Motors; an internal innovation competition [1]. Their annual “Research & Development Innovation Challenge” provides finalists with an opportunity to present their ideas to GM executives during a 5 to 10 minute pitch à la the popular TV show Shark Tank. The winner is granted funding and a degree of freedom in order to pursue the idea. This is certainly an unusual process which combines a scattered initiation approach with a more formal evaluation structure.

According the article, “entrants must pitch ideas that have a high degree of commercial potential in
one of six key areas” in order to succeed (advanced propulsion, connected-vehicle technologies, advanced materials, sensors, manufacturing technologies, and analytics). Drawing on concepts from the book, The Entrepreneurial Mindset, this may help innovators by providing a “ballpark” for their efforts [2]. Additionally, it ensures that the potential ventures will align with GM’s current strategy. But at the same time, too much focus on commercial potential may lead to the dreaded “short-termism” that stifles corporate entrepreneurship. Perhaps GM should split the competition into two categories: one for short-term commercial applications and another for long-term technological breakthroughs.

Unfortunately there is no mention of potential benefits (bonuses, recognition, promotion, etc.) for the contestants besides the opportunity to pursue their innovations. This leads me to wonder if innovators will be properly rewarded for their efforts – including those who did not receive funding. After all, just reaching the finals and stepping onto that stage required great courage and initiative. Furthermore, if the winning projects fail to deliver positive financial returns, will the innovators receive the same opportunities for career advancement or will they lose time and reputation in the process? These questions may determine whether this practice is truly a sustainable method for encouraging corporate entrepreneurship.

Some food for thought…

  •   What are other pros and cons of this approach?
  •   How could this competition be improved?
  •   Can this technique be used in other industries?

– Kyle DeVault

[1] R. Truett, “GM’s sharks hunt for innovations”, Automotive News, 2017. [Online]. Available: http://www.autonews.com/article/20160229/OEM06/302299967/gms-sharks-hunt-for-innovations. [Accessed: 19- Feb- 2017].

[2] R. MacGrath and I. MacMillan, The Entrepreneurial Mindset, 1st ed. Boston, Mass.: Harvard Business School Press, 2004.

Introduction from Corporate Entrepreneurship

It’s such great fun teaching students who want to become intrapreneurs, and how to help companies get better at enabling innovators.  Most of our students are very early in their careers, and are pummeled with the idea of becoming entrepreneurs as soon as they set foot on campus.  So they join our Corporate Entrepreneurship course with no idea of what to expect.

Much of the course is devoted to showing them what doesn’t work.  It’s disillusioning for them, for sure.  But as we go through the different approaches to developing a sustainable capability for breakthrough innovation and corporate renewal that companies have tried over the years, students begin to understand the need for a complete management system whose purpose is to innovate in big and meaningful enough ways to enable corporate renewal.   There’s no better way to get them engaged than to have them read about breakthrough innovation and corporate entrepreneurship in the news, interview intrapreneurs or Chief Innovation Officers, and write about it.  So, I hope you enjoy this series of posts from students at RPI’s Lally school.

The Day to Day and the Dreamier Aspects of Google…and Alphabet

Great move Google…I mean Alphabet! Today’s NY Times reports that Larry Page and Sergey Brin will re-organize their company to separate the new ‘big bets’ from the ongoing operations of search.  Calico, Sidewalk, Next and Fiber, will become their own business units, along with GoogleX, the newstreams incubator, and a Finance company.  They want to model their approach after GE, Page says, which has obviously grown into new domains through acquisitions as well as organic growth and development to become a global powerhouse over the years.  But actually, it’s possible they’re following 3M’s model..a more organic model of new business creation.  It all depends on how Page and Brin think about the role of the centralized Corporate functions.  GE depends heavily on a strong Corporate Research Function, and strong corporate strategy to guide their decisions for investments. 3M allows a more free flowing ‘let a thousand flowers bloom’ approach.  I imagine Google Glasses, driverless cars, and drones, all housed within GoogleX, could become their next new divisions.  How will that be decided?  And how will the decisions about resource allocations be made between Google and the new fast growth, non revenue generating entities?  It’s all good, and what a great next step for this company.  While Jordan Rohan, founder of Internet advisory firm Clearmeadow Partners, is quoted in one of the Times’ articles as characterizing the new CEO of Google, Sundar Pichai as being able to handle ‘the day to day and the dreamier aspects of Google,’ this organizational structure allows the same for Page, Brin and the stockholders. Now…who gets to work in the newstreams, and who gets to stay in the mainstream?

A Breakthrough Invention is not a Breakthrough Innovation

A Breakthrough Invention is not a Breakthrough Innovation

The recent news of the ‘Cured AIDS baby’1, the second person ever to be cured of AIDS brought to light a news story from 20062,3when Timothy Brown was the first.  Timothy Brown’s story is amazing, starting in 1995 when he was diagnosed HIV+. He began taking anti-retroviral therapy. While this is a common story for HIV+ patients, Brown’s was not. In 2006 Brown’s health suffered a major setback when he was diagnosed with an acute myeloid leukemia, a fairly common form of cancer. Brown underwent a round of Chemotherapy; however, this made him prone to infections.  At this point, Brown and his doctors sought a new treatment in the form of a stem cell transplant. What happened next was a breakthrough in medicine. His doctors scoured the globe for a stem cell donor who had a mutation known as CCR5, which is known to make cells immune to the HIV virus.

The CCR5 stem cell  treatment cured Brown.

Now the question you have all been asking: why am I writing about this on a Breakthrough  Innovation blog? This is easy to answer: if there has been a  cure for AIDS known for years… why hasn’t it been brought to market? You may believe that having a cure for AIDS is enough for some socially responsible person or company to pursue it for commercial development and use. But, it’s not that easy. The treatment is cost prohibitive and too difficult to be mass marketed (i.e. it requires finding a compatible donor that has the gene and then harvesting their bone marrow. On top of the cost and difficulty concerns the procedure has potential side effects that can be as detrimental to one’s health. These side effects include: surgical complications, paralysis and potentially death.

The market needs a solution that everyone can participate in, not a one of a kind situation that is only cost effective  as an AIDS cure for those who have cancer. The market needs a couple of things to more forward:

·First it needs a solution that can be simplified and that doesn’t have serious side effects, e.g. creating a viral vectors for gene therapy.

·Secondly,  it needs process innovation along with the initial invention, i.e. solutions for mass production and distribution.

·Finally it needs to make sure the customer base can afford the solution.

This cure for AIDS is a huge advancement in medicine. The next big leap is to make one that can be mass commercialized to treat those suffering from this terrible disease. I guess that’s why breakthrough innovation takes so long. There’s enormous work to be done to move from the initial opportunity to commercial reality, no matter how important the game changer is.

We are seeing people take up the challenge presented, research into turning CCR5 into a drug therapy has started. In the research paper “Establishment of HIV-1 resistance in CD4+ T cells by genome editing using zinc-finger nucleases” the scientific team has looked into the possibility of creating a gene therapy to exploit this solution.4

1http://news.discovery.com/human/health/baby-cured-aids-130204.htm

2http://www.cbsnews.com/8301-504763_162-57479106-10391704/timothy-ray-brown-man-thought-to-be-first-cured-of-aids-says-hes-still-cured/

3http://www.nydailynews.com/life-style/health/berlin-patient-timothy-brown-cured-hiv-aids-work-article-1.1121558

4http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3422503/

We’re back with thoughts on boring breakthroughs

Greetings all! It’s been a long, long time. Lois and I have been way busy with the third phase of the Radical Innovation Research program. We have visited 9 companies in 3 countries over the past year and conducted over 150 interviews. Lots to digest about roles and responsibilities for Breakthrough Innovation in large established companies. But enough about us. There’ll be more to follow as we figure out what we’re learning. Right now it’s like drinking from a firehose.

Even more exciting is what’s happening at the Lally School…our school. We have an incredible group of MBA students who are extremely interested in this whole breakthrough innovation/corporate entrepreneurship thing. They are an inspiring bunch. Some of them have asked about why this blog has stalled,…and have offered to help. So I’d like to introduce one of them, Peter Roberts from Utah. See below some thoughts on the Tesla Electric Vehicle. Let us know what you think.

____________________________

The Tesla/New York Times spat this February overshadowed a great achievement in innovation. Some would say that Tesla’s model S is a radical innovation; however, they would be wrong, Thomas Parker invented the electric car in 1884. The real radical innovation from Tesla was accomplished was with the refueling stations. Tesla has already made inroads on the west coast as seen in this map. Tesla has been working to this implemented since 2011. By focusing on changing current infrastructure, Tesla is setting themselves up for success. They now aim to expand electric car potential from their lone pair of charging stations in NY and DC throughout the east coast.
In a broader sense, Tesla has opened up several possibilities for the future. By controlling both the vehicles and the charging stations, Tesla can work out pricing strategies with electricity and/or vehicles. Tesla is creating a whole new market and setting up the infrastructure for this market. The question we should all be asking is, ‘when the rest of the automakers jump on the electric bandwagon will Tesla’s infrastructure make them a dominant player in the marketplace?’.
Others seem to agree with this, see Adam Morath’s blog from 2/14/13 (http://translogic.aolautos.com/2013/02/14/opinion-tesla-versus-new-york-times-debate-misses-the-point/). Still other see adoption of the of the electric car will require an infrastructure revolution See Ben Holland post in January of this year (http://www.greenbiz.com/blog/2013/01/17/how-important-charging-infrastructure-ev-adoption).

So, while electric cars are all the rage, they’re the small part of the picture. It’s the infrastructure that’ll make this happen.