Bob Morris Book Review – Blogging on Business

The power of small ideas: A low-risk, high-reward approach to innovation
David Robertson with Kent Lineback
Harvard Business Review Press (May 2017)

Do innovators have only two options: innovate little by little or innovate big in a disruptive way? “There is another option”.

At least some business books share ideas that are more valuable now than when they were first published. For example, The power of small ideas.

As you already know, in brick by brick, written with Bill Breen, David Robertson explains how “a new leadership team achieved one of the most successful business transformations in recent memory. One by one, LEGO reinvented those academic prescriptions for innovation, synthesized them into a world-class management system, and re-emerged as a powerful serial innovator. LEGO built the world’s first line of buildable action figures, fueled by a fascinating story that unfolded over a span of nine years. He launched a line that included a ‘smart brick’, which allowed children (as well as many savvy adults) to build programmable LEGO robots. In another first, LEGO launched a series of board games that could be built, taken apart, and rebuilt.”

As Robertson explains in his latest book, The power of small ideas, written with Kent Lineback, “The purpose of this book is to show you, the reader, how you can learn and adopt the approach that LEGO and others have used so successfully, without the crisis that precipitated the LEGO turnaround. The other companies that have adopted the LEGO strategy followed a sequence of decisions, a process that is the focus of this book. This book lays out the steps you need to take and the challenges you will face if you decide to take this approach.” (Page XIII)

Robertson recommends what he characterizes as the “Third Way” to innovation, an approach that is not bound by binary thinking that says innovators have only two options: “innovate small.” [incrementally] or innovate big [disruptively]. There is another option. This approach has three distinctive features:

1. Companies that follow the Third Way “create multiple complementary innovations around a core product that make that product more attractive and competitive.”

2. The next is that “complementary innovations operate together and with the key product as a system to carry out a single strategy or purpose – what we call the [begin italics] promise [end italics] to user.”

3. The third distinctive feature is that “complementary innovations, even those provided by external partners, are closely and centrally managed internally. Although this may seem like a small point, it is crucial to Third Way’s success.”

It rigorously examines several companies whose leaders have embraced the Third Way approach, notably Apple Computer, CarMax, Disney, Gatorade, Novo Nordisk, USAA, and Victoria’s Secret. Each of his “stories” serves as a mini-case study.

Robertson poses four critically important questions that must be answered correctly when considering adopting the Third Way approach. Here they are:

1. What is our key product?
2. What is our trade promise?
3. How will we innovate?
4. How will we deliver our innovations?

In this context, I presume to insert an observation that one of The Home Depot co-founders, Bernie Marcus, shared during the company’s first store managers meeting. “Remember, when someone walks in the door, they’re not buying a 1/16-inch bit; they are buying 1/16 inch hole.” It is imperative to understand what the customer wants/needs and then innovate around that.

In my opinion, some of the material in the final chapter of the book is of great interest and value, as David Robertson and Kent Lineback suggest a number of lessons to be learned from an American icon, The Walt Disney Company. What we have is a mini-case study of how the successful application of the Third Way “can lead to internal dysfunction, the separation of different types of innovation, and ultimately, in the case of Disney, an erosion of capacity to the core.

This is truly a great story of how a great company lost its way and then got its “magic” back and became an even bigger success. Without calling it that, Walt Disney envisioned a “third way organization with movies, especially animated movies, as their creative hub where they provided the stories and characters that nurtured everything else.”

As this story illustrates, “The success of the Third Way project depends on maintaining a strong and vibrant core, even if the core doesn’t generate the most revenue. As Disney nurtured its core by producing a series of animated feature films, its core and non-core businesses thrived. When you neglected the core, when you tried to live off the legacy of past success, both your core and non-core businesses suffered.”

The details are best revealed within the chapter’s narrative, in context, but I will reveal a lesson that would not be a spoiler: the success of a company begins with, and depends on, the right key product at the center of operations. For Disney, as he indicated, they would be “the stories and characters that continue to feed everything else.”

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