Page 93 - ENTREPRENEURSHIP Innovation and entrepreneurship

53231_Innovation and Entrepreneurship.qxd 11/8/2002 10:50 AM Page 86

86 THE PRACTICE OF INNOVATION

rin” and sold it effectively. After all, the dangers and limitations of
aspirin were no secret; medical literature was full of them. Yet, for the
first five or eight years, the newcomers had the market to themselves.
Similarly, the United States Postal Service did not react for many
years to innovators who took away larger and larger chunks of the
most profitable services. First, United Parcel Service took away ordi-
nary parcel post; then Emery Air Freight and Federal Express took
away the even more profitable delivery of urgent or high-value mer-
chandise and letters. What made the Postal Service so vulnerable was
its rapid growth. Volume grew so fast that it neglected what seemed
to be minor categories, and thus practically delivered an invitation to
the innovators.
Again and again when market or industry structure changes, the
producers or suppliers who are today’s industry leaders will be found
neglecting the fastest-growing market segments. They will cling to
practices that are rapidly becoming dysfunctional and obsolete. The
new growth opportunities rarely fit the way the industry has “always”
approached the market, been organized for it, and defines it. The
innovator in this area therefore has a good chance of being left alone.
For some time, the old businesses or services in the field will still be
doing well serving the old market the old way. They are likely to pay
little attention to the new challenge, either treating it with condescen-
sion or ignoring it altogether.
But there is one important caveat. It is absolutely essential to keep
the innovation in this area simple. Complicated innovations do not
work. Here is one example, the most intelligent business strategy I
know of and one of the most dismal failures.
Volkswagen triggered the change which converted the automobile
industry around 1960 into a global market. The Volkswagen Beetle
was the first car since the Model T forty years earlier that became a
truly international car. It was as ubiquitous in the United States as it
was in its native Germany, and as familiar in Tanganyika as it was in
the Solomon Islands. And yet Volkswagen missed the opportunity it
had created itself—primarily by being too clever.
By 1970, ten years after its breakthrough into the world mar-
ket, the Beetle was becoming obsolete in Europe. In the United
States, the Beetle’s second-best market, it still sold moderately
well. And in Brazil, the Beetle’s third-largest market, it apparent-
ly still had substantial growth ahead. Obviously, new strategy was
called for.