The Innovator’s Dilemma meets the Sales Dilemma !

 There are tens of thousands of business books published each year.  Some provide useful new insights, but most repeat the obvious in new fonts, colors and charts.  However sometimes a book or theory comes along that wakes you up and provides an amazing new perspective into building and managing companies.  The Innovator’s Dilemma by Clayton Christensen  tops my list as one of the most influential and relevant modern business books.   During my time as head of corporate strategy @ SAP I had the privilege of engaging with Prof. Christensen and came to respect even more the timeless nature of his thinking.

As a quick refresher the Innovator’s Dilemma asserts that incumbent companies can only do “sustaining innovations” as they seek to protect their existing customer base, margins and business models.  “Disruptive innovation” comes about when new entrants develop technologies that initially target markets that are unattractive (eg. smaller markets, lower margins, simpler products) but over time that innovation moves up to the higher-end and eventually dislodges the incumbent.  This has happened over and over again.  On demand/SAAS software is a recent example in the technology industry.

There are several other notable books that have over the years have made significant contributions to our thinking – for those short on time and attention span may I suggest you read “The 100 Best Business Books of All Time”   to get a crash course in business strategy and insight.

The purpose of this blog post is not to explain the Innovator’s Dilemma nor is it to provide my views on the merits of various business books.  Rather the intent of this post is to explore the impact of disruptive innovation on the go-to-market or sales channel strategy of a company.

For simplicity sake, let us focus on the software and technology industry as an example.   The pace of innovation is breathtaking – both by large incumbents but especially by start-ups.  The bulk of this innovation is what I would call product innovation – think iPad, smart phones,  chip and memory technology, voice recognition etc. 

In certain situations there has been a business model innovation – think software as a service, online advertising, and “freemium” (though this one I still have doubts about as the “premium” part often does not happen).

In a few cases there have been significant new advances in the sale/go to market models, mostly in the consumer space – think eCommerce (Amazon) , iTunes (Apple) , mail order movies (Netflix – now of course online).   In each of these consumer models companies were able to create new ways to access the customer – the person paying for the product.

So far so good.  Great new innovation, new business model and in some cases new sales channel for consumers.

So here is the challenge – there has not been much innovation in selling to the enterprise. Over the last couple of months I have met tens of companies and talked to them about a range of topics related to starting and running a disruptive business.  The overwhelming challenge faced by those seeking to sell to a business is not the new product they have developed, it is not that the product is difficult to understand, it is not that it take a long time to implement – rather the challenge is the enterprise sales process.

Especially with the heavy consolidation in the enterprise software industry the incumbents have a significant advantage that is not impacted as much by the pace of start-up  innovation – this is their direct distribution channel.

Is the “Sales Dilemma” overtaking the Innovator’s Dilemma ?  That is the Right Question…

As always, I welcome your comments and insights.

Zia.

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7 Responses

  1. Enterprise sales are by nature complex and painful. Both vendors and buyers jointly wrote the rules for beauty contests to protect the ecosystem. Like our legal systems the whole process is obsolete. Things are changing and the main drivers are: a) cloud-computing like the globalization is not optional and will change the economics of IT, and b) the Enterprise can not get more value out of standardization, not to compete effectively. Innovation is a must on the Enterprise. I think we need to try harder and brake the spell.

    • Lionel, Thanks for the input. It is correct that enterprise sales are complex and painful today – I am not sure that that is a state we should be happy with. Both the vendors and buyers would be happy with a simpler process.

      So i agree with you that technology changes will enable the sales process to change as well. I hope it does.

  2. Sales is hard when you come out with a product that market didn’t tell you to make – this is the trouble with most disruptive innovation. This is especially true in B2B world. In B2C – social media etc can somehow give you a shot at making a case. But B2B world is a high inertia one – very rarely will a stable business want to try something new -especially in a bad economy where companies save cash.

    Selling is still very much possible – if you have the right sales team in place. For start ups, I think it is up to the Angels and VCs to identify the right sales team before they make investment decisions. The guy with the big idea might not know what it takes to sell it – but the guys pputting the $$ better know 🙂

    • Vijay, thanks for your comment. I agree with, to little attention I paid to the go to market aspects in a start up and to much on the technology innovation. This becomes a challenge very quickly.

      Zia.

  3. Good question;)

    I don´t know if it´s so much the direct distribution channel that favours incumbents, or “just” the fact that they have an established relationship at all, that makes selling products, innovative, disruptive, or “just new”, so much easier than for a start-up, which has to go through a lengthy vendor process with all kinds of departments first before they can actually start selling their products/services (and this lengthy process/these processes are especially tough for start-ups which usually have a very different “emotional perception of time”).

    And if for instance the new product/service will not “stand alone” but have to tie in with existing products/services, it will require even more efforts from both vendor and buyer to do so than for the buyer to just rely on eventually getting something similar from a long-standing partner, and until then continue without the innovation.

    But maybe that is just a kind of darwinism to see, which ideas and/or start-ups are strong enough to overcome these obstacles and eventually brake through the canopy to see the light;)

  4. Bernd, thanks for your comment. I think the concern regarding the viability of a start up is a valid one and will not go away. As such in an enterprise context channels become critical for success.

    Zia.

  5. At the end of the day, selling is more about people and their individual – and to some extent, collective – needs. My personal experience in selling enterprise software is that the “sales process” is only a process – and can only be “processized” (is that a word?)- upto a certain point. After that point, we have to understand and deal with people or, more accurately, individuals in order to “close the sale”. I am not sure that a process that takes people through what is essentially an emotional journey can be universally developed let alone adopted.

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