Don’t Innovate Like Steve Jobs

When it comes to creating the next new, innovative business, no one can pick winners – not even the geniuses of Silicon Valley. The evidence for this is overwhelming. At any one time, there are more than 20,000 funded startups here in the San Francisco Bay Area. The big successes we get are from lots and lots of smart people trying small improvements until one of them works. Venture funds are organized around the expectation that the majority of their portfolio firms will fail.

When I’m giving a talk and point out that no one can pick winners, inevitably a hand goes up in the audience and someone asks a version of, “Well, what about Steve Jobs? He was always right.” Sigh.

Let’s look more closely at the track record of this gifted genius and his amazing collaborators who have had such a big impact on how billions of people live their lives every day.

What I learned from my research is that even for a genius, innovation:

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The Agile Business Model Innovation Manifesto

Creating new business models is hard. Creating an organization that is continuously creating new business models is extremely hard. The closest I’ve seen is organizations running an Agile Product Development (APD) process. APD focuses on creating a culture and processes that support small, semi-autonomous, high performance teams.

APD has done a lot to radically accelerate product delivery, better value employees, prioritize decision making and show how organizations can have speed and stability. With the DevOps revolution evolving into the GitOps revolution, the increase in speed between Agile organizations and organizations that use waterfall product development models can easily top an order of magnitude.

Unfortunately, APD isn’t the answer when it comes to business model innovation. The brightest minds in Agile lay this out well even if they don’t say the words “business model innovation” when they talk about where APD has challenges:

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Agile Business Model Innovation: Because No One Can Pick Winners

We’ve coached over a thousand startups and large company teams working to create new products based on innovative business models. The number one mistake they making is simply recognizing that when it comes to innovation, no one can pick winners. The data is overwhelming:

  • Only 12% of venture capital funds outperform the market (1)
  • Just 7% of angel investments account for 75% of the returns (2)
  • YCombinator, perhaps the top Silicon Valley accelerator, made 940 investments to get 8 $1b valuation startups – a 0.009 “unicorn” yield (3)

Innovation efforts don’t fail because of stupidity. They fail because of math. Even Steve Jobs couldn’t pick winners. After the successful Apple II, he sold only 50,000 Apple IIIs and roughly 100,000 Lisa’s. That’s at a time when over 1.3 million PCs were being sold per year. The original Macintosh sold 320,000 units in 1984 against 2 million PCs and Mac sales promptly went down to 200,000 units in 1985. NeXT sold about 50,000 computers in a market where 80 million PCs were being sold each year. Pixar was an unsuccessful hardware company, then a somewhat successful software company, and finally, a very successful movie company. Even for a genius, innovation is hard. (The One Device has a more nuanced view of Job’s prodigious talents while making us remember the iPod Hi-Fi, ROKR phone, and long, twisty road to the iPhone.)

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Blowing up the Business Plan at UC Berkeley

A post I wrote with Steve Blank for his blog:

When I came to U.C. Berkeley in 2010 to run the Lester Center for Entrepreneurship in the Haas School of Business we were teaching entrepreneurship the same way as when I was a student back in 1995. Our core MBA class used the seminal textbook New Venture Creation by Jeffrey Timmons of Babson College that was first published in 1977. The final deliverable for that class was a 30-page business plan. We had multiple business plan competitions. As I looked around at other schools, I saw pretty much the same landscape – business plan classes, business plan competitions and loosely coupled accelerators that focused primarily on mentoring.

Over my career as a serial entrepreneur I observed that since the late 1990s, no early-stage Silicon Valley investor had used business plans to screen investments. Even those who asked for them never read them. Traction and evidence from customers were what investors were looking for – even in “slow” sectors like healthcare and energy. There had been tectonic shifts in the startup world, but our business school curriculum had barely moved.

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About Andre Marquis

Andre Marquis is the CEO of Hypershift Systems and Founder of the Innovation Acceleration Group at the University of California Berkeley. Mr. Marquis has a long record of successful startups with a particular focus on winning in markets where scalability is critical. Two companies Mr. Marquis helped start became publicly traded and a third was acquired by Amazon for over $190 million. The Chorus Group at Eli Lilly, which he co-founded, is a significant corporate lean business model innovation that sped up and lowered the cost of drug development by almost an order of magnitude. His most recent startup, Amplyx Pharmaceuticals, has raised almost $200m.

Andre was the Executive Director of the Lester Center for Entrepreneurship where and his team built a global-scale business model validation process that delivers funded startups and breakthrough product and service innovations for corporations. His Hypershift methodology has scaled to support rigorously testing hundreds of business model innovations per year and delivered breakthrough results to >1,200 teams. Real innovation has a high failure rate and requires testing lots of opportunities (scale) and testing them rigorously (repeatable process). Hypershift delivers all four: acceleration+education+scale+repeatable process and is delivering a consistent pipeline of $100m revenue potential businesses.

Examples include the BOSCH global business model innovation accelerator (>120 teams/year), reality TV show America’s Greatest Makers, Bay Area NSF Innovation Corps, Innovate for Digital India, Berkeley LAUNCH Startup Accelerator (teams raise over $10m yearly) and programs delivered in dozens of countries for governments, universities and companies including Intel, HP, BOSCH, and more. The Hypershift process drives rapid digital transformation and enduring culture change.

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