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Ninja Innovation
Gary Shapiro
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Ninja Innovation
Gary Shapiro
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About This Book
Innovate or die
For thirty years, Gary Shapiro has observed the world's most innovative businesses from his front-row seat as leader of the Consumer Electronics Association. Now he reveals the ten secrets of "ninja innovators" like Apple, Amazon, Google, Microsoft, and many others.
What does it take to succeed? Discipline. Mission-oriented strategy. Adaptability. Decisiveness. And a will for victory. In short, today's most successful businesses are "ninja innovators." Drawn from Gary Shapiro's three decades of experience leading the consumer electronics industry, Ninja Innovation takes readers behind the scenes of today's top enterprises, uncovering their ten essential strategies for success.
As head of the Consumer Electronics Association and its influential annual trade show, the International CES, Shapiro has worked with the most innovative companies in historyâIntel, IBM, and Samsung, to name a fewâfocusing on creating policies and events that produce revolutionary products year after year. He has learned the key strategies that have guided these businesses to record-breaking profits, as well as the traps that have led so many others to crushing failure.
In order to stay in front of the pace of innovation, Shapiro observes, top companies must operate as an elite strike forceâjust like the legendary medieval warriors known as ninjas. Ninjas weren't called upon to do the ordinary; they had to perform truly extraordinary tasks, while risking everything. As a highly trained martial-arts black belt himself, Shapiro mines the valuable insights of these centuries-old warriors to spotlight the secrets of agility, creativity, decisiveness, and reinvention that are essential for twenty-first-century leaders seeking breakthrough success.
Taking readers inside the most cutting-edge businesses, Ninja Innovation is the ultimate guide to achieving victory in today's innovate-or-die economy.
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Chapter One
Your Goal Is Victory
Your Goal Is Victory
âIâM GOING TO DESTROY ANDROID, BECAUSE ITâS A STOLEN PRODUCT.â So said Steve Jobs to his biographer Walter Isaacson shortly before his death. Imagine that. Jobs knew he had not long to live and yet there he was, still trying to win. Thatâs a ninja for you.
Itâs no surprise to say that Jobs possessed many qualities of the ninja innovator. Jobs was smart, passionate, and relentless. A ninja must be all these things, but he must be something more: He must be driven by an unyielding desire to win. A ninjaâs job is not complete until he finishes the mission. Just infiltrating the castle is meaningless unless he can get back out. For Jobs and other ninja innovators, just inventing a good product is not enough. What is required is different for every person, but one thing is the same: To complete the mission, your goal must be victory.
What also made Jobs a ninja is that he never retired while he could still produce. And so there he was, in the twilight of his life, vowing to âdestroyâ the competition. Itâs an appropriate word choice for a famously demanding person. His example inspired countless people to pursue victory in their own lives, if not necessarily in the same way. Not only that, but Jobsâs products, and their successors, will be with humanity for centuriesâmuch as another ninja innovatorâs products are with us today.
Useful, Not Nifty
ON NOVEMBER 14, 2007, CON EDISON ENDED 125 YEARS OF DIRECT-CURRENT electricity service that had begun when Thomas Edison opened his Pearl Street power station in Manhattan on September 4, 1882. While the station itself clearly had changed over the years, thatâs as if in 2003 Ford Motor Company had finally stopped running the assembly line Henry Ford had first fired up in 1903. Itâs a remarkable testament to the brilliance of Edison.
Today, Edison is known as the innovator of the phonograph and incandescent light. But those werenât his greatest contributions. It was his development of a central power station that has resulted in his most enduring impact on the future of consumer electronics.
The first thing you do when you buy a stereo, TV, or any electronic device is plug it into a wall socket. This simple act is possible because Edison spent almost his entire fortune and risked his substantial reputation to build the Pearl Street power station in lower Manhattan. When Edison gave the order to flip the switch on September 4, 1882, stores all along Fulton and Nassau Streets, the editorial offices of the New York Times, and the brokerage house of Drexel Morgan were lit up with Edisonâs incandescent lightbulbs. Imagine that moment, when Edison knew he had achieved victory. He had forever changed Manhattanâand the world.
The reason the Pearl Street station was so importantâand why Edison would have failed had he not created itâis that the electric lightbulb couldnât replace the gas lamp as the primary source of lighting until an entire electrical system was created to sustain it. Otherwise, Edison would have been just a guy who had created a cool, but useless, gadget. In other words, inventing the lightbulb was not the end for Edison; it was only the beginning. The end would come when homes were lit by the lightbulbâand the effort to make that happen proved even more demanding and expensive than the invention of the lightbulb ever was.
The story of Edison and his Pearl Street power station defines for me what I mean by âYour goal is victory.â No one questioned that Edison had brilliance, but there are thousands of others out there inventing nifty things that we will never ever see. And Edison wasnât interested in just inventing nifty things. He was driven to winâand for him that meant creating something of value to everyday people, something that, yes, would revolutionize the world, but also something that would require no more from the user than simply flipping a switch. But to go from the lightbulb to turning on the switch required an expenditure of time and resources that would have surpassed the ability of most other inventors.
The same could be said of Jobs. He wasnât interested in creating a cool-looking device that was only used by the wealthy or technology geeks. He wanted to create devices that were useful to everyone. What this requires is a resolve and discipline that so often separate victory from defeat. Having brilliance just isnât enough. History is strewn with the leftovers of otherwise brilliant people who, for whatever reason, just couldnât succeed. Maybe they were just unlucky. But what is certain is that to win, you must have a clear idea of what it fully takes to win and where that requires you to go. For Jobs and Edison, their vision matched their determination to win.
Adapt, Adjust, Dominate
THE DRIVE FOR VICTORY ISNâT JUST EMBODIED IN THOSE RARE INDIVIDUALS who possess a seemingly superhuman intellect, vision, and determination to succeed. Itâs also something that must propel an enterprise, whether itâs an organization like the Consumer Electronics Association (CEA), an athletic team like the New England Patriots, or a company like IBM.
Letâs look more closely at IBM. Around the same time Jobs and Steve Wozniak were starting Apple, Paul Allen and Bill Gates set up shop in Albuquerque, New Mexico, to write computer programs, including a new computer operating system, PC-DOS, for the IBM Personal Computer. Gates and Allen and their new company, Microsoft, then adapted PC-DOS into MS-DOS for use in a PC that IBM was trying to build in order to capture some of the non-mainframe computer market opened by Apple.
By 1981, several companies, such as Atari, Tandy, Sinclair, Commodore, and others, had introduced small PCs that were of interest only to relatively niche market segments. This changed when several entrepreneurs introduced more functional computers that ran software such as MicroProâs WordStar (1978) and the SuperCalc spreadsheet program (1980). Adam Osborneâs Osborne 1, a twenty-four-pound device with a five-inch screen, was the first âportableâ PC when it hit stores in June 1981. Only 8,000 were sold that year, but sales jumped to 110,000 the following year. At one point, Osborne reported an order backlog of 25 months, but the company declared bankruptcy in September 1983. The Osborne 1 was followed by the Kaypro II transportable in late 1982, a similar bulky machine that experienced similar sales success.
But the real coming of age for the PC came between the introductions of the Osborne 1 and the Kaypro II: the unveiling of the IBM PC model 5150 in August 1981.
The IBM PC used Intelâs new 8088 chip, a wealth of off-the-shelf computing technology, and, most importantly, the MS-DOS operating system provided by Microsoft. IBM, the worldâs largest computer maker, quickly proved that there was a substantial marketâat least among mainstream businessesâfor the PC. Unlike Apple, IBM aimed its PC at the market segment it was more familiar with, and indeed already dominated: the business office. It would prove to be a wise decision.
A host of companies such as DEC, NEC, Xerox, Epson, AT&T, and HPânone of which previously believed that a mainstream, non-geek-oriented computer market existedâquickly jumped on the PC bandwagon. These machines came to be known as âIBM clonesâ since they essentially copied the technology included in the IBM PC, most of them running MS-DOS. In late 1983, IBM itself tried to expand beyond the market it had created by releasing its IBM PCjr, designed for the home market. But a lack of features and capabilities for average homeowners (and its much-derided âChicletâ keyboard) doomed the product. Yet IBMâs failure was short-lived because it became better at understanding the needs of new and broader market segments.
IBM followed up the PCjr in 1984 with the Kaypro-like IBM âtransportable.â A start-up company called Compaq made the first DOS-compatible transportable in 1986. The laptop age had begun, and today it not only survives, but it also arguably birthed myriad other portable personal computing devices. But it wasnât a straight line of technology or market development, much as the wars that ninjas fought often ebbed and flowed over decades.
Monochrome computer screens slowly gave way to color screens in the mid-1980s, thanks in part to the introduction of the 256-color VGA monitor included with the IBM PS/2 line in 1987. When videodiscs emerged in the early 1990s, with several formats available, there was serious threat of a format war. To avoid an industry-killing battle, the two competing companies, Sony and Toshiba, enlisted IBM to lead a multicompany committee called the Computer Industry Technical Working Group (TWG) to mediate a solution. Along with IBM, Apple, Microsoft, and HP, other members included Compaq, Sun, Kodak, and Intel. IBM executive Alan Bell chaired the group.
In 1996, IBM designed a chess-playing system known as Deep Blue. Smarter than any previous computer playerâthe computer player on your PC is a nitwit comparativelyâDeep Blue (and IBM) challenged the world champion Garry Kasparov to a match. Kasparov went on to win. But a year later Deep Blue was back and IBM challenged Kasparov again. IBM wanted to win, which it did in a six-game match with two wins to one and three draws.
In 2005, IBM sold its PC division to Lenovo. Three years later, the companyâs Blue Gene supercomputing program was awarded the National Medal of Technology and Innovation by President Barack Obama. Then, in 2011, an introduction known to millions of people around the globe would forever be associated with IBM: âThis is Jeopardy!â
In February 2011, during a three-episode tournament, the two most successful champions in Jeopardy! history, Brad Rutter and Ken Jennings, competed against a player named Watson. After the first round of the two-game tourney, Jennings had $4,800, Rutter had $10,400, and Watson had won $35,734. After the second game, where the playersâ scores carried over, Rutter came in third, with $21,600; Jennings came in second, with $24,000; and Watson won the tournament with $77,147.
Of course, as everyone knows, Watson was not a human player but an artificial-intelligence computer system able to answer questions posed in naturalâas opposed to computerâlanguage. And compared to Deep Blueâs slight victory over Kasparov, Watsonâs was crushing. The AI did have some unfair advantages over its human competition, such as response time, but its ability to answer questions stunned the world.
Jennings, using the humor that only a human (for now) can, summarized everyoneâs reaction: âI for one welcome our new computer overlords.â IBM had triumphed once again.
Not bad for a company founded in 1911 under its original ninja name, the Computing-Tabulating-Recording Company, or C-T-R. In its 102 yearsâand I only summarized the last 35âIBM has successfully reinvented itself over and over to the point where it is the second-largest U.S. firm behind Wal-Mart in terms of number of employees.1 In 2012, Fortune magazine ranked IBM the fourth-largest company in terms of market capitalization, the ninth-most profitable, and the nineteenth-largest firm in terms of revenue.2 That success is largely due to the ninja strategy that IBM has implemented through savvy product positioning and innovation. IBM has created software and programs to run cities and businesses by absorbing data and information and leveraging it to increase profitability, inventory management, planning, and efficiency.
IBM could have appeared in almost any chapter in this book, but I included it here because IBM is a company whose strategic goal has always been victory. To achieve victory, despite a Titanic-like size that might make it difficult to alter course nimbly, IBM has successfully transformed itself from a mainframe company to a PC company to a consulting company to a company that beats chess and Jeopardy! champions just because it can. It takes a ninjalike discipline, long-term vision, and technical and marketing skills to be a consistent winner. But more than that, it takes a desire to win.
IBM has rarely been defeated by its competition, but when it does loseâas with its PC divisionâit has the discipline to cut its losses and move to a new battlefield. Although the world celebrates both Microsoft and Apple in the early PC age, in many ways it was IBM that made it all come together, as the above history makes abundantly clear. The reason I recounted the early years of the personal computer is to highlight that while sometimes market victory is explosively quick, it can also be achieved with more modest, tightly calibrated successes. Successful ninjas, going to battle with limited resources, had to have a cold-eyed realism about what it would take to ultimately succeed, and short-term defeats were lessons from which to learn.
For instance, while Apple initially trounced the competition with the Apple II and then the Macintosh, it was IBM that stole the lead in the late 1980s and throughout the 1990sâof course with a little help from Microsoft. Part of the reason for Appleâs early successâand itâs certainly not the only oneâis that it chose to target families with a user-friendly product the entire family could enjoy. Apple made its Macs easier to use than any IBM-based PC, and it began to dominate the youth market by capturing customers first in their schools.
But then IBM, with an improving Windows operating system, altered its strategy. If a ninja knows that the wall blocking him from completing his mission is impassable, with a wide, deep moat; sheer sides; and hundreds of sharp-eyed archers on the barricades, he has two choices: either try to scale the wall and hope for the best, or find a way around it. Given a competitorâs product that was arguably superior in the home market segment, IBM faced a similar choice: attempt to compete in the home market segment with an inferior product, or instead avoid direct engagement by attacking a different, but related, segment. Critically, what defined victory would remain unchanged: controlling the PC market. It would be the tactics that made the difference.
IBMâs PCs were very successful in the huge business market and therefore were intimately known to one of, if not the, key decision makers for choosing a PC for the home: the full-time breadwinner, whether father or mother. IBM knew this market; this market trusted IBM. Like any good ninja, IBM simply went around the âwall.â
IBMâs strategy helped it remain the dominant competitor in the PC market, but it didnât âdestroyâ Apple. After the second coming of Steve Jobs, Apple is bouncing back, but its share hasnât risen above 10 percent or so for nearly twenty years. IBMâs later decision to spin off its personal computer division to Lenovo proved prescient: Both Hewlett-Packard and Dell faced layoffs in 2012 because of declining PC sales.3 The computing market is moving toward mobile technology.
IBMâs experience with the PC offers several lessons regarding ninja strategies and tactics. The first is that your goal (victory!) almost never depends only on you, but instead often requires the aid of allies. These allies include early-adopter customers, technology partners, distribution partners, and so on. Your relationship with them survives only at the point of interaction for your shared interests. The reality of this âwhatâs in it for me?â relationship means that an alliance is rarely permanent. Therefore you should plan in advance for the best way to dissolve it as well as to possibly reconstitute it at some future point.
Another major lesson from IBMâs experience is that ninja strategies and tactics are appropriate for capturing markets but not necessarily for permanently occupying them. IBM recognized when it was time to move on to new tech territories.
How does it do it? It adapts, adjusts, and dominates.
ADAPT
Few other companies have survived and prospered as long as IBM. Itâs no wonder that IBM is usually seen as the âdark suitâ company...