THE WIDE LENS - What successful innovators see that other miss
Introduction
The discussion topic is the difference between great innovations that succeed and great innovations that fail. In particular, it is worth noting that company’s success depends not just on the ability to execute its own promises but also on whether visible or hidden partners deliver on their promises too. In other words, company’s success depends not just on its own efforts but also on the ability, willingness, and likelihood that the partners that make up its innovation ecosystem succeed as well. Thus, a new perspective must be adopted, a wide lens, with which to assess a company strategy using a new set of tools and frameworks that will expose a company hidden sources of dependence.

The Innovation Behind Spot and Avoidable Failure
Although great execution is a necessary condition for success, it is not enough. Indeed, while the execution focus draws attention to important aspects of a company strategy (developing customer insight, building core competencies, and beating the competition), it creates a blind spot that hides key dependencies that are equally important in determining success and failure.
Examples:
Philips Electronics despite sterling execution and rave reviews, Philips's high-definition TV flopped, because its value creation depended on other innovations (the high-definition cameras and transmission standards necessary to make high-definition TV work) that failed to arrive on time.
Sony it launched its e-reader to market before its rivals but even a great e-reader cannot succeed in a market where customers have no easy access to e-books.
Johnson Controls it developed a new generation of electrical switches and sensors, but until architects, electricians, and a host of other actors adjusted their own routines and updated their own capabilities, the value of its innovations would never be realized.
All three companies fell victim to the innovator's blind spot: failing to see how their success also depended on partners who themselves would need to innovate and agree to adapt in order for their efforts to succeed. Indeed, talented managers may successfully implement brilliant innovations to market, but after the innovations launched, they failed, because an innovation success depends not only on meeting the needs of their end customers but also on partners’ support.

Innovation, Expectations and Reality
Every year, a lot of efforts are spent for new innovation to safeguard economic growth. Innovation is an imperative. In a world of aggressive competition and highly demanding customers, frequently changing tastes, innovation is not a choice but a necessity. However, successful innovation remains the exception rather than the rule, given the high rate of failures. The challenge is to understand the causes of innovation failure and to find ways of increasing effectiveness and safeguarding success.
There are two schools of thought. The first school argues that most innovation failures are rooted in a shortfall in customer insight. The second school argues that failure is rooted in shortcomings of leadership and implementation. However, both perspectives, even taken together, are incomplete, because they do not take into consideration the impact and role of ecosystem in the innovation success. Seeing the Hidden Traps
Innovations may not succeed not because they are less innovative than their competitors or cannot execute on their project, but because their innovation ecosystem won't come together. Managers should see hidden traps going beyond the execution focus and extending their lens of view. By adopting a wide-lens perspective on innovation strategy, two distinct types of risk may be identified within the ecosystem. * Co-innovation Risk, the extent to which the success of your innovation depends on the successful commercialization of other innovations. * Adoption Chain Risk, the extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.
By considering the entire ecosystem, managers may develop a clearer view of their full set of dependencies and, still based on great customer insight and execution, innovations may succeed.

How We Got Here
The need for collaborative innovation has defined progress since the Industrial Revolution. What has changed is the way the collaboration is organized. The shift toward innovation ecosystems follows a historical trend toward greater complexity and interaction. In the beginning, the dominant approach was to house all this complexity within a single firm, the vertically integrated organization. However, while vertical integration offered control, it required massive investments. At the close of the twentieth century, firms started learning how to leverage external supply chains to outsource activities. The first firms to master the principles of the new approach enjoyed a substantial competitive advantage. As these innovation strategies diffused more broadly across organizations, they stopped being a source of differentiation and became, instead, simply an operational requirement.
Today, enormous benefits that accrued to firms who mastered supply chain management are still real, but they are now widely shared. However, a major change taking place as firms shift from using supply chains to offer better products to embracing partnerships and collaboration to offer better "solutions." There is a growing trend to not go it alone. They have deployed a wide lens in setting their strategy and prospered in their embrace of the ecosystem opportunity.

Chapter 1
Why Things Go Wrong When You Do Everything Right
The mantra of success was: (1) "Put the customer first," (2) "Deliver on your promise," and (3) "Do a better job than the competition". The real challenge lies in satisfying all three requirements simultaneously. As customers get bored and competitors catch up, firms are trying to break out of the commodity trap by finding ways to leverage products and services provided by other partners to drive their own success. Companies are pushed into a world of greater collaboration. The upside is that, by working across organizations, you can accomplish greater things with greater efficiency. The downside is that your success now depends not just on your own efforts but on your collaborators' efforts as well.

Michelin’s Run-Flat Saga
In the early 1990s, Michelin was in an enviable position, but was always looking for new opportunities to create value and grow. It is necessary to keep on innovating because the tire industry was highly competitive, marked by overcapacity and low margins. Moreover, the majority of drivers did not differentiate among tires, and therefore chose their tires largely on the basis of price.
In 1992, Michelin managers proposed the potentially next big innovation, the PAX System. It was a so powerful technological breakthrough that it launched Michelin on an ambitious path to transform the entire tire industry. A half century earlier, Michelin had commercialized the radial tire, a breakthrough innovation turning Michelin into a world leader and forever changed the tire and automobile industries. PAX was Michelin's chance to do it again. The PAX System was a run-flat tire that would continue to “run flat” and not sacrifice performance even if punctured. The run-flat as a revolutionary growth engine not only for the company, but also for the entire tire industry. It tried to redefine the way consumers would think about tires by satisfying an unmet customer need, safety related to flats.
Michelin executed brilliantly on a well-thought-out innovation strategy. Moreover, since the PAX system would make customers' lives easier and safer, Michelin management were super-confident that the adoption of the PAX System was inevitable. However, they were too much higher expectations. Indeed, in the end, despite brilliant execution, the PAX story is one of failure. Because when your success depends on others, as it did for Michelin, execution is not enough.

Seeing the Unmet Need
Before analyzing why Michelin failed, we have to understand where it succeeded. Michelin's extensive market research showed that flat tires were dangerous. If Michelin could manage to eliminate the danger of underinflated tires and flats, it would satisfy an unmet consumer need in terms of safety. The PAX System was not the first attempt to tackle the problem of flat tires and safety in general. Goodyear, Bridgestone, and Michelin itself had all introduced self-supporting tires (SSTs) that incorporated reinforced sidewalls to support the weight of the car in the event of a flat. However, SSTs had always suffered from significant drawbacks. As a result, there was plenty of room for improvement and the PAX System tried to bring it. In contrast to the SSTs, the PAX System's unique architecture offered an elegant solution that sacrificed nothing in performance and weight, and provided twice the range of the existing alternative.
Michelin's partners were also enthusiastic about the idea.
Automakers liked the PAX System's improved safety, which they could leverage as a key differentiator for new vehicles. The new design possibilities run-flats offered were even more appreciated. Because it gave automakers the freedom to innovate for themselves by creating roomier car interiors.
Service garages were also enthusiastic about the prospect of repairing run-flat tires, because they could charge customers higher prices for repairing the tire, enjoying higher margins while maintaining service volumes (the PAX System would not reduce the number of punctured tires—it would only eliminate their danger and inconvenience).

Moving to Execution
PAX System development started in early 1993. The PAX System was a radical product change, but it required even more radical organizational changes within Michelin to become a reality.
Traditionally, tire companies (like Michelin) made tires, rim manufacturers made metal wheels, and the two were assembled by the auto manufacturers.
With the PAX System, Michelin had to oversee the design and production of an integrated system. The support ring, the wheels and the tire pressure monitoring system, with its sensor, control unit, and alarm system, presented an enormous material science challenge to support the new mechanism. Michelin had to shift from product manufacturer to system integrator. Despite the big challenges, Michelin launched the PAX system in 1998.
To secure the PAX System's success, Michelin listened to carmakers request of having multiple suppliers for their components (this issue was a main obstacle to the adoption of radial tires). In strategizing its rollout of PAX, Michelin proactively found partnerships with other tire makers to whom it eagerly licensed the technology. In June of 2000, Michelin established an alliance with Goodyear. The two companies controlled almost 40 percent of the global tire market, and both expected the new alliance to open the door to widespread industry adoption.

Expecting Success The first company to sign on was Mercedes, and, as time went by, there were dozens of other development projects in the works with all the major automakers. The new members Sumitomo Rubber Industries and Toyo Tire & Rubber Company provided a strong entry into Asia and opened up future deals with carmakers based there, especially Honda. To ensure a successful launch, Michelin and Honda embarked on unprecedented coordination, with Honda announcing in 2005 it would equip its best-selling Odyssey minivan with PAX system. In the rush to market, however, many of the Honda dealers were not ready when the Odyssey was launched. Michelin was aware of the problem, but it thought that as more vehicles took to the road with the PAX System, the traditional service and repair networks would continue to grow with them”. But, this was little comfort to Odyssey owners with PAX tires. Confronting Failure Despite a worldwide alliance of the leading tire manufacturers, and incorporation into popular car models, problems surrounding PAX were mounting, and eroding carmakers' initial enthusiasm. First, there was growing consumer frustration with the difficulty of finding service centers that could repair the tires. Unable to repair flats, many drivers were forced to purchase brand-new tires, often in pairs so as to maintain their vehicles' balance. Several class-action lawsuits were filed alleging that Michelin, Honda, and Nissan had "never disclosed that neither they nor any third parties maintained sufficient repair or replacement facilities. Consequently, the run-flat value proposition was rapidly eroding. For all these issues, in November 2007, Michelin formally announced an end to further development of PAX. * The failure of PAX was not rooted in a misunderstanding of customer needs or in a competence shortfall, rather the failure was due to the inability to deliver the promised value proposition because of an unseen but fully predictable problem with the service network. Michelin’s Blind Spot The PAX System failed because it was not a stand-alone innovation, but, to succeed, other members of Michelin's innovation ecosystem (the car manufacturers and the service stations) would need to buy into the system as well. Indeed, end users would be able to assess the attractiveness of the full run-flat value proposition only after the rest of the ecosystem embraced the new tire. Thus, Michelin's blind spot was that to succeed, PAX would require a fundamental transformation in the tire ecosystem. The current traditional tire ecosystem is the following. Tires are sold into two main segments: 1. the replacement market (RM), which makes up three-quarters of industry unit sales, 2. the original equipment manufacturer (OEM) market, which accounts for the other one-quarter. Tire makers put huge efforts on winning OEM contracts because they are a strong predictor of RM sales (most consumers simply replace their old tires with the kind they originally had). Thus, automakers provide a boost for new tires and tire makers operate in the replacement market. Most tire innovations succeeded in the replacement market first and were only later able to penetrate the OEM market. The very nature of the PAX System, however, required a different path to market, one which would add new actors and new interactions to the system. First, it required automakers to provide a very different level of support. Because of their asymmetric wheels and tire pressure monitoring systems, PAX had to start in the OEM market, as a designed-in feature of a new car. there was no possibility of building initial support in the replacement market. they would need to be included as part of a vehicle's design, long before it was even produced. They have to decide to adopt Michelin's innovation years before consumers would even have a chance to decide whether PAX tires were an attractive option. Second, it required new car dealers to enter the picture. Since run-flat tire are sold as optional features, customers must be convinced to buy it. Thus, a new player is added, the salesperson at the new car dealership. Now, sales also depend on whether the salesperson is able and incentivized to lead customers to buy the PAX package. However, while Michelin had deep experience in dealing with automakers and tire dealers, their relationship with new car dealers was much less established. Finally, service garages to enter the PAX picture in a new way. Repairing a PAX tire required a completely new equipment and new training for its repair staff. To ensure correct repairs, Michelin required technicians to undergo a rigorous certification process to be qualified to service the tire. * In the past, carmakers, auto dealers, and service garages had served only a peripheral role, but with PAX they became core to delivering the value proposition. Thus, they would need to be managed in a very different way than ever before. Moreover, the PAX System created new interactions not only between Michelin and these players but also among them. For a carmaker, the attractiveness of installing run-flat tires on a car depends on how many garages are able to repair the tire in case of a flat. However, the attractiveness for a service garage to install the repair equipment and train its personnel depends on how many cars on the road have PAX installed. To sum up, underlying the PAX value proposition, this was a complete reconfiguration of the tire ecosystem, where new actors are added, old actors eliminated; positions are shifted and new links and relationships are created. Thus, the difference between the success and failure of PAX would hinge on Michelin's ability to see and drive this reconfiguration. However, managing innovation ecosystems is problematic because the tools and systems they have honed over years of managing successful stand-alone innovations are ill suited to address the interdependence challenges that are inherent in the transition to ecosystems. PAX Run-Flat Epilogue The PAX value proposition created an entirely new role for service garages. The non-adoption by this critical partner was the key barrier to the PAX System's success. The inability to service PAX tires led to consumer backlash and lawsuits that, in turn, reduced automakers' enthusiasm for the system. Simultaneously, the uniqueness of the PAX offer was being eroded by the spread of tire pressure monitoring systems (TPMSs). An Alternative Market The bottleneck to success in the commercial market was the service garages that kept the value proposition from being realized. A modified version of the PAX System, where service stations do not play an independent role, was a great success. The new target market was the military sector. The critical difference was the structure of dependence, without intermediaries. Indeed, since the military runs its own garages, the buyer takes care of the service role themselves. Thus, there was much lower adoption chain risk since the customer agrees first, and then the rest of the system follows suit. Is There a Better Way? Michelin's failure was rooted in its inability to bring enough service stations on board with the PAX System. However, in the beginning, Michelin treated service stations as a low priority, because historically, service station support could be assumed. However, in the run-flat world that Michelin constructed, service stations held the keys. Because Michelin underestimated their role, it underinvested in managing this critical dependence. We actually have been taught the consumer is the final arbiter of value. Since Michelin satisfied exactly what they wanted, in theory PAX should have worked. However, in practice, the consumer is not the only arbiter of value. Partners stand between the innovator and the end consumer. They act as intermediary and if they do not support the innovation, the consumer may never reach the innovation and assess it. Partners customize activities for every product launch—new procurement arrangements, new manufacturing, new marketing support, etc. But, the ways in which these activities are organized, and the ways in which different partners interact with one another, tend to follow a well-established set of routines. As long as your innovation fits within their routines, these partners remain invisible and your success is determined on a stand-alone basis. But when your innovation depends on these partners to change their routines (as Michelin's PAX System did) they become a critical but often overlooked determinant of your success.
To assess the value proposition of a new innovation, three risks of innovation must be analyzed: * Execution risk: The challenges you face in bringing about your innovation to the required specifications, within the required time. * Co-innovation Risk: The extent to which the successful commercialization of your innovation depends on the successful commercialization of other innovations. * Adoption Chain Risk: The extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition. Each of these risks is governed by a different logic, but it holds always that success requires that each risk be addressed. Michelin managed its own execution challenges well. It was also successful in navigating its partners' co-innovation challenges. Its failure was rooted in mismanaging the adoption risk posed by the hidden assumption in its strategy. Garage stations should have invested in PAX repair equipment in advance of PAX's mass-market adoption. The traditional tools of strategy, marketing, operations, and project management offer excellent guidance for seeing and managing execution risk. Co-innovation risk and adoption chain risk lurk in the blind spot of traditional strategy. Indeed, a strategy that does not properly account for the external dependencies on which its success hinges does not make those dependencies disappear. In order to avoid these accidents, you need to adopt a structured approach to innovating in ecosystems.