Innovation and the NLE

illustrationLast week’s Economist included a special section on innovation. Innovation’s one of those soft concepts like creativity that everyone favors, but has trouble defining. Ask people to list some innovative companies, and a lot of lists include Apple. It’s a well-deserved reputation earned through the Mac OS, the iPod, the iTunes Store, Apple TV, and the iPhone. Talk about nonlinear editing, and perhaps Apple shouldn’t be so close to the top of the list. ScriptSync? Avid. Multicam? Avid. Dynamic Linking? Adobe.

What Apple’s done is commoditize the NLE. Color is cool, but it’s not innovative. It’s a smart purchase. This isn’t a knock on Apple. Making the NLE a commodity is no small feat. Taking a highly specialized product, broadening its appeal and lowering its price is tough stuff.

But this is about innovation. While Apple chomped at its market share, Avid did not engage in a race to the bottom. It lowered its prices somewhat, but continued to bank its future on higher margin customers. It’s the right strategy. Markets can support Chevys and BMWs. What’s odd is that its usually Apple playing the role of the Bavarian craftsmen.

So, how has Avid remained innovative? The common wisdom has it that Avid remains plugged-in to its best customers, and the outwardly visible evidence bears this out. Final Cut Pro has made the smallest of its gain in the large Hollywood studios and network facilities.

In the long run, focusing too heavily on the studios and networks could be Avid’s downfall. The Economist cites Clayton Christensen, author of the Innovator’s Dilemma, giving this warning to American companies regarding their Indian and Chinese rivals, but it rings true for Avid looking over its shoulder at Apple.

From A Dark Art No More (subscription required)

Mr Christensen, author of “The Innovator’s Dilemma”, believes he has cracked the code [of innovation]. He says it can require unlearning some of the things that managers often accept as golden rules. The chief one is the belief in listening and responding to the needs of your best customers.

This seemingly sensible strategy can be a dangerous siren song, Mr Christensen argues. His influential book shows how even successful firms can get into trouble by trying to please their best customers. Because there may be only a handful of highly profitable, high-end buyers who want and can afford more features and better performance, firms can invest heavily in trying to deliver what this elite group wants even though the resulting products may end up beyond the reach of the majority of their customers.

That, argues Mr Christensen, allows upstarts to enter the market and offer inferior (although perfectly adequate) technologies and products at much cheaper prices and push incumbents into ever smaller niches—and ultimately out of business altogether. He cautions this “disruptive” innovation is not the same thing as “radical” or “breakthrough” innovation, although the notions are often conflated. In his view, personal computers disrupted IBM‘s mainframe computers and Digital Equipment’s mini-computers, as did Nucor’s highly efficient mini-mills to US Steel’s blast furnaces.

From The Love-in (subscription required)

Mr Von Hippel thinks that firms that are close to their lead users can come up with much better designs for new products and get them to market faster. This advice appears to contradict what Harvard’s Mr Christensen says, but in fact the two theses are compatible. Mr Christensen’s point is that firms should not uncritically cater to the demands of their most profitable current customers. They must question those demands or they could end up doing little more than gold-plating their current offerings; like Mr Von Hippel, he thinks firms should keep a closer watch on new and dissatisfied users, who are much more likely to be the source of disruptive ideas.

The challenge for Avid, in other words, is to get close to your newest and most dissatisfied customers. In other words, Avid needs to establish a relationship young indies and pay a little less heed to gray beards. The advice of Steve Cohen, Steve Audette, and Frank Capria has taken the company as far as it will go.

One Thought on “Innovation and the NLE

  1. Hmmm.. it would see Apple has done to Avid what Microsoft did to Apple way back when in the operating system wars!

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