The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time – Jim McKelvey
The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time is a book by Jim McKelvey, founder of Square and author of The Launch Plan. The book provides entrepreneurs and business leaders with the knowledge and strategies they need to build an unbeatable business through innovation.
It covers topics such as craftsmanship, play, culture, and risk-taking, and provides practical advice on how businesses can identify and develop innovative ideas, build and manage teams, and access the resources needed to bring ideas to life.
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The book also provides case studies to illustrate how successful companies have implemented the “innovation stack” approach to achieve success.
The IKEA Innovation stack: Constraints help too!
IKEA had to evolve through a harsh environment and boycotts, using a catalog to attract customers to their store and allowing them to roam freely and place orders via mail. However, they faced the challenge of not being able to manufacture their furniture in their home country.
- They worked on an innovation stack, starting with sourcing labor from Poland due to low costs. But Polish factories had quality problems, so IKEA built efficient factories and created knocked-down furniture to save shipping space.
- Self-assembled furniture eliminated labor and delivery overheads, and custom design lowered production costs.
- Standardizing parts helped IKEA achieve economies of scale, and they built a global supply chain and warehouse showrooms to simplify logistics.
- Winding paths helped customers find products, and IKEA offered food and child care to keep customers in stores longer.
- IKEA’s low prices and trusted brand solidified their success.
Lesson #1 Learning when is harder than learning how
For most people, learning how isn’t the challenge. They can learn the task so well that they do it right almost every time. However, the same people can struggle in applying their skills at the right place at the right time. It’s the same with entrepreneurs.
The question “When should we implement our idea?” has bugged almost every entrepreneur on the planet. Here’s the thing. Many people have defaulted to “Now” if they don’t know the answer. But is “Now” really the right time?
Lesson #2 First isn’t always the best in entrepreneurship
Some elements of the innovation stack depend on each other. And when that crucial element is missing, it’s probably best to be late than early.
Take early social network platforms for example. GeoCities, not Friendster, was the first social network in 1995. Friendster only came in 7 years later. They did better until MySpace pushed them out of business in 2003. And then, Facebook came along… ultimately to crash the party.
GeoCities, Friendster and MySpace failed because they went to the market too early. They did alright back then but Facebook’s timing is just spot on. Facebook had a dozen ideas in its Innovation Stack at the very moment the mobile market exploded. This drives the point that you can be early in innovation and entrepreneurship.
Lesson #3 If the timing feels right, it is probably too late
Humans feel right when we’re in sync with the rest of the crowd. That means if the innovation feels right for you, chances are it feels right for a thousand other people with the same idea.
A good rule of thumb is to start when you feel early because there will always be uncertainty and unknowns looming around the corner. Ask yourself “Is the world also ready?”. If the world is ready, you’re ready.
Lesson #4 Great companies started out in a sea of obstacles
IKEA’s early competitors banded together to boycott any suppliers and manufacturers who worked with the young company. They even convinced the trade association to ban IKEA from entering the market. They barred Kampard from entering the trade marts and attacked him personally and politically.
For years, Square has been a target of dozens of competitors. One CEO even called McKelvey an idiot for serving small merchants. Regardless, Square refused to pay attention to unfounded criticism and political attacks until one day, they came under the threat of the world’s most dangerous company, Amazon.
Lesson #5 If you are under attack, do nothing
As a child, you might have been told “Don’t fight back and the bullies will leave you alone.” That might be a terrible advice to give to a child but it’s truly applicable when it comes to building your innovation stack.
Do everything you can for your customers and your company. Ignore the unfounded criticisms and personal attacks. By ignoring their hostility, you are sending a strong message that you’re here to compete with yourself and perhaps, form great allies in the process.
Lesson #6 Be first in the mind of your customers
If you can’t beat your competitors to the market, it’s okay. Beat them to the minds of your customers. When innovation happens, people process this new information and store in their memory. This is what you should be aiming for – occupy the mental real estate of your target market.
Once your customers are primed with your innovation, they are anchored to it and conservative towards your competition. Of course, it can also go against you. When your competitor beats you to occupy the space first, it’s extremely difficult for you to turn the tables.
Retraining someone is a lot harder than teaching him something new. Retraining requires the additional and nearly impossible work of breaking down your customers’ existing beliefs because when people think they already know, they just ignore the alternative perspectives (known as the ‘confirmation bias’ in psychology).
Lesson #7 Copy when you can. Invent when you must
Consider, for example, the restaurant industry. You don’t necessarily have to invent a thing while you can find a decent location, lure some good people from your competitors, buy tables, food, insurance and all other stuff from essentially the same suppliers everyone uses.
Price your menu similarly to the competition and may be plant a few positive reviews online. And then, work phenomenally hard. If you get it right this far, you’ll make more or less the same money as other restaurants do.
Following the wheel is great, but copying for the sake of copying should never be your primary strategy. Copying feels safe and comfortable but it will never produce a thrill of invention and excitement. On top of that, copying never results in extraordinary breakthroughs.
Expanding the market
Contrary to popular belief, SouthWest Airlines entry was not destructive to the airline industry. IKEA never brought disruption to the furniture industry. In fact when it entered South Korean market, IKEA even increased the sales of their competitors.
Disruption isn’t bad by itself. But it is never the focus of good entrepreneurs. Great entrepreneurs build things, not destroy them. They focus on potential problems they can solve and potential markets they can serve.
Above all, successful entrepreneurs realize they can’t offer something great to the world without putting their customers at the center of all product development and innovation efforts.