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What You Don’t Know You Don’t Know

Wednesday, August 28, 2013

    

The bigger challenge with innovation is not coming up with new ideas, but rather putting yourself in the right position to see what’s already out there and bring it together in a way that works for you.

 

In 1984, Steve Jobs and Apple spent $20 million building a factory in Fremont that was beyond state-of-the-art. Apple’s engineers had turned their brilliance to creating a highly automated factory that would revolutionize manufacturing in the same way that it’s product, the new Macintosh, would revolutionize computing. By 1986, they closed the Macintosh line, shifting its production to older factories, and by 1992, closed the factory altogether. Nothing, I was told when I worked at Apple, could profitably be built there.

Consider some of the more recent and notable failures in sustaining innovation. Fisker was a beautifully designed car, but management lacked some of the basic understandings of how to build the complex supply chain and engineering capabilities of modern automobiles. The Fisker A123 was built on an advanced battery technology, but the company floundered on the challenges of building a reliable and scalable manufacturing system.

Solyndra was a promising solar power technology that, too, failed in maintaining its quality while scaling its manufacturing.

Before I go any further, two points: the founders and everyone else involved in these efforts were very smart people, and it’s easy to second-guess failures. But since the innovation literature spends most of its time second-guessing success, it’s worth taking this one shot.

It’s worth it because these failures highlight a significant challenge that gets in the way of most innovation but particularly those of companies large and small that take on sustainability initiatives. That challenge is getting out of our own way.

Companies see the world’s opportunities and threats through the lens of their existing capabilities. Faced with the need to innovate, our first reaction is to start innovating. Or at least to start trying. And yet, in zen-like fashion, the best way to find a solution is to stop looking for it. There are four places to search for new ideas:

  • In what you know you know how to do;
  • In what you don’t know you know how to do;
  • In what you know you don’t know how to do; and
  • In what you don’t know you don’t know how to do.

The failures of the A123, Fisker Automotive, Solyndra, and others can, like Apple’s Fremont Factory, be explained in part by recognizing how these companies tried to build their solutions by staying comfortably within what they already knew they knew how to do. And they were all undone, in many ways, by what they didn’t know they didn’t know — the lessons learned over 200 years of manufacturing.

In 1999, after Steve Jobs returned to Apple (and wiser for his experience with the failed NEXT Computer), he faced a threat that required significant innovation. At the time, Apple’s market share was in the low single digits and retail partners like Best Buy had little enthusiasm for selling its computers. Apple launched their retail stores in 2001 — a strategic response to the company’s shrinking presence and poor performance in the major retail chains like Best Buy and CompUSA. Today, there are approximately 400 retail stores worldwide, and at $16 billion in revenue they are responsible for 13 percent of the company’s revenues, 14 percent of its profits, and over half its employees (roughly 42,000).

Rather than apply the creative brilliance of Apple’s designers and engineers to building an Apple store, Steve Jobs recognized what Apple didn’t know Apple didn’t know: how to build a successful retail store. Rather than see this ignorance as fertile ground for new thinking, Jobs saw it for what it was. He brought Mickey Drexler, former CEO of Gap, onto the Apple board of Directors and together they then recruited Ron Johnson, who had overseen Target’s rise. Johnson then built a team of people from the retail world of retail to design the Apple Stores.

Jobs’ approach was eerily similar to Henry Ford’s, when he decided to mass-produce the automobile (Who Built What). Ford’s strategy to capture the emerging mass market depended, almost entirely, on a set of capabilities that the company didn’t yet have, or even know they needed. So rather than “invent” the car and the process, he hired two engineers, Walter Flanders and Max Wollering, who had extensive experience building, installing, and running machine tools for the mass production of sewing machines, agricultural equipment, and other industries.

As Wollering once said: There was nothing new to me, but it might’ve been new to the Ford Motor Company because they were not in a position to have much experience along that line.

Over the next eight years, from 1906 to 1914, these two men and others who followed would radically redefine the automobile and the process by which it was produced and, in the process, transform the Ford Motor Company. The company would go from producing almost 1,600 Model T’s in the first year of production to, seven years later, over 265,000 (55 percent of the new mass market).

Some of the greatest leaps in innovation have come when people stepped back to consider what they didn’t know they didn’t know and, rather than chase new ideas, went in search of those people whose old ideas, tried and true, were the right answer. They began, in other words, by embracing their ignorance. It’s interesting that both Ford and Jobs had failed in previous ventures before taking this approach; perhaps failure offer the best view of our own ignorance.

 

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AndrewHargadonAndrew Hargadon is the Charles J. Soderquist Chair in Entrepreneurship and Professor of Technology Management at the Graduate School of Management at University of California, Davis. Hargadon's research focuses on the effective management of innovation, particularly sustainable innovation, and he is author of numerous articles, essays, and the book How Breakthroughs Happen: The Surprising Truth About How Companies Innovate (Harvard Business School Press).

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