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The Innovation Trap: The Challenge of Continued Innovation at Software Startups

By April 10, 2009Article

It seems accepted wisdom that smaller software companies are better at innovation than larger firms!
But, is this really true all the time?
It goes without saying that start-up firms produce breakthrough innovation. This is because they have no existing customers to worry about or existing markets to defend. They are free to start out on a clean slate, tap the latest technologies and drive innovation aggressively.
Three things could happen now:

  • The innovation is not successful, which means they are still free to tinker around with breakthrough ideas (until they succeed or close down)
  • The innovation is successful and they get bought out by a larger firm. Acquisitions like this catch the eye and contribute to our perception that small companies are the drivers of innovation.
  • The third alternative is where the innovation trap lies.

Let’s assume the innovation is successful and the market accepts the product.
Suddenly, all those sharp engineers who built the product are stuck dealing with and satisfying all kinds of mundane customer requests. Before you know it, feature requests (and of course, bugs) flow in and there is no time for anything else.
The same engineers who were at the cutting edge when building the product start to fall behind because their very success keeps them busy enhancing the existing product, but no longer innovating.
Meanwhile, the company cannot spare the funds to build a separate innovation team because it is spending on marketing the product, building implementation teams, and opening sales offices. Neither can they easily hand-off existing product enhancements and support to another team since no one knows the intricacies (code base) of the product. Also, the team cannot spend the time to bring anyone else up to speed, given that they are barely able to keep their head above water meeting customer needs.
There are more companies in this trap than one realizes.
While the company and team were successful (once upon a time) in innovating, that very success is now the reason for not innovating.
Large companies do not suffer from this problem, since they have the ability and cash flows to manage both aspects at the same time (of course, it is another question as to how much passion they pour into innovation, as passion is a much more critical ingredient for innovation than ability to invest).
So, how should one break this innovation trap?
One solution is to work with a product development partner early on. In the early stages of product development, it is important to engage a handful of engineers from the product development partner as a part of the team.
As the product reaches success and it is time for the core team to innovate the next product, the development partner can seamlessly carry on the work of enhancing and supporting the current generation product. Since the partner knows the product in and out, they will be in a position to easily take things forward.
For a newer development effort starting now, one could take the above approach. But, what about the thousands of products today where the core team is too busy and can’t find time to hand-off or build the next-gen product?
It is also quite possible that, in many cases, the core team might be working on older technologies and would require substantial time to reinvent themselves.
In such cases, one option is to outsource development of the next-gen product to a partner. Today, there are a handful of excellent companies specializing in product development and they can add substantial value and innovation throughout the product lifecycle. To bring in the domain and product expertise, one or more of the core team members can be embedded into the newer development team.
Over the past few years, the outsourced product development industry has evolved substantially and several earlier concerns around IP security and capability to build products have been addressed.
Several product development partners bring global delivery capabilities to the table, bringing down development costs as well. A handful of them also invest substantially in building methodologies to build products faster and have innovative platforms that can serve as a base to start from, hence reducing time-to-market and increasing quality.
It goes without saying that one has to choose a product development partner wisely and after a lot of diligence, but given the available options, one has no excuse to be stuck in the innovation trap any longer.
Happy Innovating!
Gowri Shankar Subramanian is CEO of Aspire Systems, an outsourced product development (OPD) firm.

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