A growing number of enterprises feel the headwind from capital markets. Up and coming businesses get valuations far above conventional businesses that may be more than ten times as big. Those warning signals all too often are simply ignored. But that could become a fatal mistake.

Innovation takes 7 to 10 years

Theoretically, enough time for any established market player to respond and fight back. But it isn’t quite that easy. If you look at the early years of the then, new automaker, Tesla, you notice that the established players sold more cars in some metropolitan cities in a month than Tesla sold globally in an entire year. Airbnb sold so few vacation rentals a year that established hotel chains didn’t even notice. Early freelancer platforms connect some inexpensive workers with businesses who had a short-term need in a way that the established recruiting firms didn’t even take the time to understand their business. Now, some people may say this is ignorance. But taking the sheer number of companies and enterprises that have tried something and failed into consideration, an enterprise cannot respond to any brain spark that may happen in this world. However, one group does take that time and effort for a very different reason.

Financial Market Analysts get Extremely Smart

In the past years, top investment firms completely disrupted the financial market. Yet it went almost unnoticed. With far more detailed insights, more intelligent tools, and evolving algorithms, they are able to predict the success probabilities of new market entrants/enterprises to a degree that was unimaginable just a few years ago. CEOs, Board Members, Unions, Investor representatives, and enterprises as a whole will need to shift gear when it comes to innovation. Future-oriented investment decisions drive market caps (value of a company) into new directions. It’s no longer only in the tech space but now also in all other industries like the auto industry, the tourist and hospitality industry, in the business services where a substantial shift is happening: The capital market favors innovation over profitability and size. One newcomer in that market is investment management company ARK-Invest who states on their website “We Invest Solely In Disruptive Innovation”. And the reason is obvious; in the next 10 years, it is more likely that those new and innovative businesses will win, than the established and slowly evolving companies.

Innovation is Entering all Industries

We randomly choose Hospitality, Automotive, and Business Services in our research. You can see how companies with rapid growth into a large industry segment, while there is no or no adequate response from the current market leaders are seen by the capital market today.
AIRBNB
2007 first 3 guests – the company was founded
2009 21,000 guests
2018 300 Million guests
2021 market cap $93 Billion *
2021 Hilton market cap $36 Billion *
TESLA
2012 2,000 or so cars
2015 35,000 cars
2020 1,000,000 cars
2021 market cap $570 Billion *
2021 Daimler market cap  $84 Billion *
FIVERR
2010 Some 1,000 jobs at $5 each
2012 estimated $6 Million
2018 estimated $100 Million in revenue
2021 market cap $7 Billion *
2021 Kern Ferry market cap $3.1 Billion *
at $2 Billion in revenue
* = June 15, 2021

Is the world insane? Then, what was with the market caps of Intel, Cisco, Microsoft, Google Facebook, and so forth. What happened to their competitors like DEC, Amdahl, Zilog, Alta Vista, AOL, or MySpace? Today the disrupters are identified much earlier and get evaluated much earlier to higher levels. Not to help them and not to kill others. The new behavior is only a logical consequence of the desire to be in a rising giant early. The advantage for established enterprises: They get a brand new early warning system. But even then, there is a potential for huge mistakes as you can see in our mini case study below.

Innovate or Get Disrupted

Trying to counter-attack a market intruder that has a disruptive business model or disruptive product, by trying to build something better is not leading to any success. A weak attempt to focus on “Gradual Innovation”, which is nothing but improvement, is definitely not an adequate response either. The only way to counter an innovation from a competitor, no matter what size or age, is by another groundbreaking innovation. Improvement is important – but it isn’t withstanding an innovation. Trying to be better than the new innovator is only an improvement and makes the former leader a follower of the new innovator.

MERCEDES BENZ CASE STUDY
The Daimler AG was an investor in Tesla. But eventually lost interest and sold the shares. Tesla was built on 5 unique aspects: 1) A very fast electric motor 2) New high capacity batteries 3) A big display giving space to all kinds of information 4) A digital experience that went far beyond the proprietary “Board Computer” and 5) A customer experience not seen from the conventional carmakers.
The competition only saw the electric motor and battery. They also did not see the timeline that it took 5 years from introducing the first Tesla to getting it at least a bit off the ground. Chevrolet killed its EV short after launch because they thought the market does not exist. Mercedes ignored it completely, then began to invest and built the EQ series. But it was only the replacement of the motor and tank for an electric motor and batteries.
Only with the EQS, Mercedes finally pushed the innovation button in many ways – BUT – chose not to really talk about it. Still, a market leader by the volume of cars they produce, Mercedes became a follower and did not push their innovation but what Tesla has since 10 years: Motor, Battery, and a “hyper display”. The digital experience and also the customer experience fell behind. And the innovation they made was not even mentioned. When the tough gets going the going gets tough.

Instead of standing their ground and continuing rejecting a large display in or on the dashboard and introducing their innovative head-up display – they competed in a space that has no future for both cars. Instead of drumming up their real innovation, they ignored it because they did not understand what customers want. The innovative MBUX system with a large display mirrored on the windshield, supported by a perfect and unique augmented reality system was not part of the competition. The leader turned into a follower and the capital market recognized it. How is this possible?

Things you can do to correct the current direction

Innovation is everything but a small club of thinking and researching innovators playing in their innovation labs.
1) It needs an innovation mandate from the CEO.
2) It needs a robust innovation strategy that is blessed by the board
3) It requires innovation managers with exceptional talents and abilities – not skills.
4) An innovation process that empowers the team to develop brilliant ideas and then conducts relentless execution.

THE FIRST STEP however is an innovation readiness assessment that makes sure enterprises have the foundation for what is coming.
BlueCallom offers free Innovation Readiness Checks with no obligation at all.

WHY DO WE CARE EVEN BEYOND OUR OWN BUSINESS
Part of that first step is the understanding that by 2050 we will want to change our energy supply, the energy grid, or whatever we can create, we need renewable energies and tap into energy sources we don’t even think of today. We will want to create transport infrastructure for people, goods, and service infrastructure that is far beyond our today’s abilities. We need to have digitized commerce, business transactions, return services, and handling that is far more intelligent than today. We want to make sure that our health systems, health understanding, and sources for health failure are much better structured, organized, affordable, and available. While we could theoretically feed all people on earth even with a 20 billion population it works only if we can integrate those 20 billion people as contributors to our global society, economy, and humanity. Today only a handful of people seriously try to engage in terraforming mars or build a lunar station. That is far too less to be effective and far too less to prevent new monopolies.

The post How Failing to Innovate Affects the Market Cap of Enterprises appeared first on BlueCallom.

The time between the day when the need to innovate is recognized to the day the first version of a prototype is in the market. Innovation speed or perfection? Go for speed any time.

For instance: The need or the dream to have an internet connection in any place in the world, land, or water is as old as the Internet itself. But in 2015, Elon Musk had an idea how to solve it. In Feb 2018, he created a company called StarLink. Today in 2021, we have full coverage, and in the next few years, it will be a standard. By 2025 people will realize that over 30,000 satellites are in orbit and connect all of us any time from anywhere. Look back and wondering how this could happen. Very much how we wonder why there is only one search engine to be considered serious, one computer operating system, one super large social network, one shopping platform, and soon one internet provider. We all heard of StarLink; but so far, nobody dares to compete. Is California or Silicon Valley a time capsule in itself? Time seems to run much faster – but only because we don’t hear a lot from China, in particular Shenzhen.

If you want to innovate on Shenzhen speed you got to be even faster. Does it feel impossible? Yes, it does but only due to our massive overhead. If we don’t watch it, we will end like the British empire in 1900 or the Roman Empire in 1600 or Egypt or Mesopotamia or or or.

Western innovation labs, where are your results?

Innovation speed or perfection. In the past 20 years, several hundred innovation labs had been incepted. Yet, the outcome is more or less nonexistent. Yes, there had been nice improvements, some fun stuff, and maybe a few marketing Giggs. But nearly no groundbreaking innovation. They came all from startups. Something major may have gone wrong in those “Lost 20 years,” as one of the top Japanese executives told me recently. Everybody looked at startups because they seem to do something right. However, we all know 90% fail, and if you look at them, you will fail too. We all heard it “Innovation needs amazing creativity, and you can’t enforce it” – ok, so make innovation playgrounds with meditation, lego play games, sing together, and do sports together.  Hmmm – the unicorns show relentless execution, amazing speed; they work under enormous pressure. TIME seems to be a silver bullet. Very much like Elon Musks demonstrates it every day. When I founded my companies and watching my peers and the hundreds of startups we worked with, the best of the best were constantly full of adrenaline.

Groundbreaking Innovation in 40 days

We wanted to know:  What is the Innovation speed limit? The answer: 40 days right now. We can create groundbreaking innovation and validate the concept and bring it to market in 40 days. While most people are driven by their schedule, which is driven by others, who drive other agendas, and so forth, we need to put a stake in the ground NOW. The Nespresso Capsul took 15 years from idea to market success. The Tesla automobile took 15 years from inception to market success. Facebook took less than 10 years, Starlink probably less than 7 years. And the upcoming generation will be even faster. The western world already lost its first race against the red dragon in China. But we are used to not give up, to not surrender – to get up and compete.

Dare to compete

Some people use pacemakers to keep their heart beating – what is your business using? In a few days, we start with the global Ingenuity Cup. The promise is to get to groundbreaking innovation in 40 days. So far, most contestants are startups. While under huge pressure to deliver a real innovation for the first time, enterprise teams are struggling to make quick decisions, get approvals, find ways to put all the other administrative work to the side, and are fearful of failing. We MUST break through that barrier.

Dare to break all barriers and walls

• You have no time? Never say this again. Take the time for what is most important.
• You need approval? I don’t think so, because you have a mission.
• You have other e important things to do? Stop innovating – it’s a waste of time doing it on the side.
• You worry about your career? 5 years without success in an innovation lab is 25% of your career wasted already.
• The next company won’t take you !!!!

Mr CEO, tear down that wall

Make your innovation teams play by the rule of global markets, global timelines, global competitors, global speed limits, and compete against everything and everybody. Innovation playground time is over. Every unicorn on earth competes with relentless execution, other nations have no rules and no limits. If you spend more time protecting what you have than investing it into future solutions, you, your board, and investors declare the limits of your abilities.

Dare to join the Ingenuity Cup even last minute – Remember innovation speed or perfection, what are you seeking?

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