India's Innovator's Dilemma

23 Mar, 2012

The term innovator's dilemma is applied when talking about how a company handles disruptive technologies that could cannibalise its existing revenue streams. Innovator's Dilemma is also the name of a book written by Clayton Christensen from where the term originally came.

Kodak is a company that couldn't handle the innovator's dilemma and recently filed for Chapter 11 bankruptcy. As crazy as it sounds, Kodak actually invented the digital camera. However, it did not commercialise the technology because it couldn't look past the highly lucrative camera roll and printing business. Those revenue streams would have been killed but it potentially could have made a killing with its latest innovation "the digital camera.

Another recent example is Cisco. Since the early 2000′s Cisco has been selling internet telephony products which were complex and required a lot of expensive equipment. In the meantime, Skype was building a consumer product that was easy to use and cheap. Ideally, Cisco should have bought Skype but it couldn't look past its enterprise customers who were buying expensive equipment. And remember, back then, Cisco was looking to be a consumer-focused company by acquiring brands such as Linksys and Pure Digital, the makers of the Flip camera. Instead, Microsoft saw an opening and eventually acquired Skype. Now Cisco is challenging the Skype/Microsoft merger because it fears its own video conferencing solution may be blocked and enterprise customers would opt for a Skype/Microsoft solution.

This brings me to India, which I believe, is stuck in its own version of innovator's dilemma. Inefficiency, middlemen and leakage are all words for the same thing – corruption. When technology is pitched as a solution to curb corruption, people come out of the woodwork and say how the proposed system is too expensive or too difficult to use or politically motivated. The reason for the bad press is because no one really wants to change the way they work.

One example is the government's plan to move to an electronic system of government subsidies and social welfare payments using Aadhaar-linked accounts. Initially, it would appear that the middlemen would be completely cut out from the process. However, by having the money go directly to bank accounts, many other industries/services might benefit from it. Services such as micro insurance, micro payments, micro financial services, etc… The dilemma is that the middlemen will have to do more work to benefit from these new opportunities and usually, that is not taken very well. Hence, all the trash talking about how bad Aadhaar is for the country and people's privacy will be at risk.

This is a classic case of innovator's dilemma "the middlemen are happy with the status quo because they can't think beyond their current revenue stream.

The above example is par for the course all over India. People don't like technology because it speeds up everything, makes people accountable and introduces transparency. People are afraid of technology because they feel they will become irrelevant, but you become irrelevant if you ignore technology.