17 May 08 Strategy and Innovation: Learning from experimentation and failure

One of the key changes in the world of strategy making is predictability or should I say the lack of it.

A quick scan of just one issue of the Financial Times will reveal trends and developments that you may not have been aware of just 12 months ago. Take the 25th April edition for example which included:

· The prospect of a long-term recession led by failings in the financial sector.
· Capital rationing.
· Global food shortages.
· Doubts over the wisdom of turning to biofuels as an alternative to fossil fuels.
· Diversity and fragmenting consumer values.
· Ever shortening product life cycles especially in the consumer electronics sector.
· The rise of national protectionism in the face of the new acquisitive kid on the block – “sovereign wealth fund”.
· The rise of anti-Western sentiments in China with Western brands taking the brunt.
· The prospect of a new wave of increased and possibly Draconian regulation.
· Question marks regarding the financial solidity of banks that we have long accepted as cornerstones of a profit focused economic system.

The fact is, the world is too unpredictable to risk your company’s future on the annual planning process. More companies are using experimentation to continuously learn more about developments in the outside world and use this knowledge to continuously craft and hone their strategies.

The news that Qualcomm (they make the computer chips that are inside your mobile phones) has bought a segment of the radio spectrum in the UK is a good example. The idea is to use this purchase to experiment and develop TV and movie streaming directly to the next generation of mobile devices. Virgin Mobile was the first to try to do this but their handsets weren’t apparently that convenient and channel coverage was limited. So the Virgin offering did not offer convenience – a key lesson from the Sony – Toshiba HD DVD wars (see my analysis here ). It looks as if Qualcomm has learnt from the experiences of the first mover and is setting up a framework for learning.

Bad news for those whose business depends on selling or renting out DVD disks. Remember those black vinyl spinning things that we used for music?

Tags: business strategy, first mover, innovation strategy