Let’s not go down the way of the Crazy Horses Again! – A Lesson in Basics in Business.

You have no possible idea how I rued the passing of the Parisian inspired Crazy horses show. Only because a perky derriere and a silken mane does wonders for a flagging appetite – these days, I am back to staid Sentosa, whenever I have to entertain my regular troupe of overseas customers whenever they make their way to Singapore. Things just aren’t the same.

Recently there has even been talk of turning our little red pimple into a Monaco of sorts. Yes, I know the Formula 1 is scheduled to make its roaring debut soon. Along with the ear shattering screams and the aroma of burning exotic rubber – it’s enough for me get excited again.

But I am already jaded and there is enough of me to say “we’ve seen it before haven’t we?”, the sort who knows only too well how hatching a smart product is only half the story. The other half of is whether such “great ideas” can sustain and more importantly make money without fizzling out like Crazy horses and packing off like a traveling circus. Whenever I am in one of my famous fatalistic moods, I console myself with sobering thoughts like – have you forgotten the helium filled days of the dot-com era? – didn’t Temasek take a dive with Shin Corp? – Hey remember those Iranian Siamese twins who died?

Yes, we have all seen it before haven’t we –the before, during and sad after when some great idea starts off with all the razzmatazz only to slink silently away with an air of abject embarrassment – I wonder: why do good ideas go so bad?

Looming somewhere in the far off distance is of course the IR along with the giant Ferris Wheel that’s just completed – it sharpens my mood enough to ask the question: Can we really see a good idea through this time without it exploding in our face? Will business proposing big bang ideas manage to find the happy sweet spot that allows them to deliver value yet materialize a healthy return on their investments? Or will they just fizzle out like the “has-been’s” who once tried only to fail?

One clue lies in looking deeper into the lessons accounting for why good ideas fail. The time honored adage might at first appear to hold true: Bankroll smart people and they’ll use it to bring us all a better mouse trap. Hey, I’m all for the spirit of rugged individualism, innovation and all that etc. We should at least give it a try. Right? No risk, no gain.

Well, while I agree a good idea does have its merits. I am also worldly enough to realize this doesn’t necessarily translate into success anymore than sinking a line in the sea guarantees one a good catch. There’s of course the brass tack issues such as practical necessity of sustaining and growing a business – to do all that, we need to move away from the flash-in-the-pan or more aptly bubble tea syndrome which seems to dog so many seemingly good ideas which simply fall flat. In short businesses it highlights a reality: businesses can’t run away from the bread and butter issues of turning in a good return on their investments.

This brings into sharp focus the issue of sustainability – which looks on the first touch like materializing a profit albeit with a slight twist. The only reason why I say this is because “profitability” remains quite a narrow definition of success. I prefer a looser definition of “sustainability;” which encompasses a wider remit beyond just the task of bean counting and squaring off the accounts. To one which also includes good will benefit, or even higher customer satisfaction, or saving the whales, or all of those things at the same time. Sustainability = Profits is just one of many – albeit frequently very important – measure of success. They’re not everything. They can’t be. There’s more to it.

So what gives – boil it all down what do we get? What’s the low down?

This brings into sharp focus the need to appreciate one enduring myth about successful businesses: not all innovation needs to be radical or even ground breaking. Yes, I don’t doubt pie-in-the-sky enterprises do manage to get the front pages and take us all in shock in awe style. I know, we are accustomed to Pharoahic plans like transforming Singapore into a bio-tech and education hub. Indeed these attempts are laudable (as alchemy once held all the promises of the ages). But let’s get real, most attempts at taking out a bite at the pie-in-the-sky stuff and pursuing big bang innovation as a business plan regularly fails!

Fact remains, they have a lousy history. Remember the Segway? Need I say more?

Now you may pelt me no end for saying this, but I am one of those who subscribe to the belief, it important to go back to basics. Only because the best yields are usually the kind of enterprises that starts off in rooms where clothes go to die or in garages where misfits are trying to figure out what day of the week it is; that’s to say, I am one of those who really believe: small is beautiful. I am not saying, small is God and the Omega and Delta, only based on my personal experience with innovation small, it pays dividends to pursue an incremental improvement strategy, building on work that’s already done, instead of rebuilding the wheel, utterly un-noteworthy to all but these geeky enterprises usually reap the highest return on investments – IMHO.

Of course many of these initiatives hardly ever get recognize, let alone get mentioned by our beloved ST, but this doesn’t detract from the fact: statistically at least the odds seem to favor those who start small in obscura-ville.

Hey, don’t believe me take a real long look at Youtube, where did it start? In a beat up garage where kids were fiddling with lousy components to try video clips of their mountain biking rides to impress their girl friends! I know because I have shares in that enterprise What about Apple’s iPod. It may look like it’s a best thing since slice bread innovation, but look again! Its nothing more than a modest innovation on the walkman.

Nor have all the innovations in the iPod success story have, in themselves, been profitable some have lost money big time! That just goes to show, the level of innovation in each component is not a predictor of that component’s profitability. The key thing is that each bit of delivery has helped develop the (very profitable) whole. That’s to say, you win some but lose along the way, only the winners cancel out the losers and you still end up with a healthy balance sheet.

To illustrate the inter-relationship between how managing losers and winners all adds up to the bottom line. Take the case of  iPod’s move to take over the world was the software – not the iPod. iTunes allowed you to organise your MP3s – nothing new there, except it was well designed (a modest innovation over other software at the time). This software has always been given away free. No money there, but it did wonders for building up customer loyalty!

The other screwy way in which business make money these days highlights the lateral value of goal reaching – take the case of the iPod itself – an MP3 player that synched with iTunes (not innovative) with great industrial design and user interface (innovative).

Then there was iTunes music store – a store to sell music online (not innovative) but with a lighter-touch digital rights system than rivals (innovative), tight integration with iTunes and iPod (innovative) and deals with all the big labels (innovative). iTMS is not thought to be wildly profitable for Apple, but its central position in the vertically integrated iPod world makes it a vital component.

Finally, a rolling programme of improvements to all these components has run since the start; improving industrial design (thinner iPods, smaller iPods, coloured iPods, better battery life, video iPods), improving software (album art in iTunes, better synching) and improving the store (more music deals, adding podcasts, adding album art, adding videos, adding games).

Now this leads me to the main plank of this article: what I am trying to say here, is none of these accidental things which appeared to pile up on each other would have had their full impact without the others. This really throws out the whole idea of strategic and linear planning out of the window. It suggest for one big bang go it alone innovation which relies on central planning may not hold the key to craving out sustainable and competitive advantage in new enterprises. Rather all the evidence appears to suggest success emerges in a non-linear and haphazard fashion. One which doesn’t even conform to any plan or architecture. Taken together, they have changed not only businesses are run but more importantly it highlights the need for policy makers to appreciate how this new competitive landscape also means the end of an age when they can rely on archaic “command and control” tools to create competitive advantage.

What businesses are starting to realize these days is there isn’t a shortage of new ideas. If you ask around, you’ll probably find it’s not ideas we’re lacking. What’s tricky (I know – this is my job) is capturing the best ideas, mapping them to strategic goals, and delivering them in a way that makes them successful.

I hope we get it right this time – God dam it! You have no idea how I miss those crazy horses.

[This has been brought to you by Aurora written by Darkness & Astro Boy / Business Socio Political / Brotherhood Press 2007/  983724 ES The Brotherhood Press 2007]

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