3 Ideas in 2 Minutes on Innovative Thinking
How to Innovate, the Trap of Marginal Thinking & Autocatalysis
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I. How to Innovate
How does innovation come about? Writer, comedian and coffee drinker Jerry Seinfeld explains how his Netflix series Comedians in Cars Getting Coffee originated:
It’s very important to know what you don’t like. A big part of innovation is saying, “You know what I’m really sick of?” For me, that was talk shows where music plays, somebody walks out to a desk, shakes hands with the host, and sits down. “How are you?” “You look great.” I’m also sick of people who are really there to sell their show or product. “What am I really sick of?” is where innovation begins.
—Jerry Seinfeld, Interview with HBR
II. The Trap of Marginal Thinking
Remember the movie rental service Blockbuster? Their business model relied on customers renting movies. But also on customers returning the films in time so that other customers could rent them again. Since people didn’t like returning the DVDs, Blockbuster ended up massively increasing their late fees.
In the context of Blockbuster’s decision, Clayton Christensen, author of How Will You Measure Your Life?, explains why settling for small changes (as opposed to innovating a whole business model) can be fateful:
Set against this backdrop, a little upstart called Netflix emerged in the 1990s with a novel idea: rather than make people go to the video store, why don't we mail DVDs to them? Netflix's business model made profit in just the opposite way to Blockbuster’s. Netflix customers paid a monthly fee-and the company made money when customers didn’t watch the DVDs that they had ordered. As long as the DVDs sat unwatched at customers’ homes, Netflix did not have to pay return postage — or send out the next batch of movies that the customer had already paid the monthly fee to get.
Blockbuster filed for bankruptcy in 2010.
Autocatalysis is a chemical reaction that creates a product that itself serves as a catalyst for yet another similar reaction. Broadly speaking, the reaction speeds up itself.
Investor Charlie Munger has used this concept as an analogy in business. Imagine an original product that keeps on giving as technology advances:
Disney is an amazing example of autocatalysis. […] They had those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.
—Charlie Munger, as quoted in Seeking Wisdom by Peter Bevelin
Have a great week,