Who Are You Calling an Industrialist, Mr. Seth Godin?

The other day, renowned author and blogger Seth Godin posted his blog “Industrialists are not Capitalists.” He made a point that “capitalists”, as he calls them, are the innovators, and industrialists are the optimizers, realizing efficiency and more profit out of industries created by the capitalists.

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Is building a better mousetrap an innovation or an optimization?

[SOURCE: © June Campbell, used according to Creative Commons License]

This subject resonated with me because I blog often on the topic of innovation vs. optimization, pointing out what is, and what is not innovation. So I was more than happy to retweet his blog that on first reading as it seemed to make total sense. I was surprised at some gentle pushback from some colleagues on Twitter who I would have thought would see eye-to-eye.

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Vijay Vijaysankar and Chris Kernaghan are giant thinkers in the universe of SAP-related people. Follow them and pay attention to what they say.

Well, clearly I must have missed something…

Upon carefully rereading Seth’s blog I realized what I missed is that Seth seems to think capitalization of inventions only pertains to new classes of product, not in other dimensions of business needed to create an industry.

Seth writes:

Capitalists take risks. They see an opportunity, an unmet need, and then they bring resources to bear to solve the problem and make a profit.

Industrialists seek stability instead.

Industrialists work to take working systems and polish them, insulate them from risk, maximize productivity and extract the maximum amount of profit. Much of society’s wealth is due to the relentless march of productivity created by single-minded industrialists, particularly those that turned nascent industries (as Henry Ford did with cars) into efficient engines of profit.

You can accuse me of arguing over shades of gray with regard to the definitions of capitalist and industrialist in Seth’s context, but I think it does disservice to those who innovate beyond just products. In fact, I would argue that those who focus on more than just product features are the true innovators rather than merely being inventors. Per Seth’s definitions:

  • For automobiles, Karl Benz is a capitalist, Ford is an industrialist
  • In social media, Friendster would be a capitalist, and MySpace and Facebook are industrialists
  • In smart phones, Palm would be the capitalist, Blackberry, Google, and Apple would be industrialists

When I discuss business innovation, one of my favorite devices to illustrate is the Innovation Radar, which describes 12 different dimensions in how a company can innovate, with only one of those being direct product features.

InnovationRadar

The Innovation Radar shows the many dimensions of business innovation in addition to product features.

[SOURCE]

Apple’s iPhone story is an overanalyzed example in the business innovation topic, but I’ll use it to illustrate my point anyways. They developed a competitive advantage through excellent design (product feature), trendy branding, a wide-open platform, and value capture in terms of purveying digital content through the Apple App Store.

Apple’s story is also an excellent case of optimization in their supply chain. Through Foxconn and Apples’ other suppliers such as Samsung, they are able to provide millions of potently powerful devices at an incredibly cheap price to consumers. This isn’t necessarily a long-term competitive advantage for Apple since it’s the same supply chain that most US consumer electronics providers use, but Apple executes their supply chain operations in an amazingly optimal fashion.

Apple’s amazing business innovations, coupled with perfect optimization of their supply chain, has allowed them to disrupt multiple consumer electronics market segments. It’s this textbook disruption that makes me call them a capitalist rather than an industrialist according to Seth’s definitions. In fact, one can argue that Apple may very well be entering an industrialist stage now since their product cycles seem more based on incremental improvements as opposed to whole new category launches.

Not all innovation is good. In fact, companies should only focus innovation that creates and strengthens competitive advantages, and optimize everything else through best practices or outsourcing.

I make this point for a very important reason. These days I’m mentoring a number of startup founders as well as IT practitioners within large enterprises. With loose-lipped managers running around overselling innovation when its unnecessary, or having a limited view of innovation as being only related to technical features, they cause people to miss a lot of opportunities for dramatically improving lives through correctly applied innovation, and incrementally optimizing innovation to realize full benefits.

I welcome your thoughts on this topic, and am always happy to discuss your innovative or optimization ideas.

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