innovation is over-valued, execution is under-valued

Lately i spend a great deal of time thinking about THE GAP between VC mindset and entrepreneur mind set.

this includes CEOs of VC backed companies, my portfolio included, and not just CEO/entrepreneurs of companies trying to raise money.

what i find is that people are fascinated with innovation way too much.

and boy, that is understandable.

innovation is fun.

as Israelis we love to think out side-of-the-box and to behave outside of any process or methodology. as my mom likes to say, i’m special

in addition, a real innovative product or service offering

  • is differentiated
  • can redeem premium pricing
  • is attractive for M+A purposes
  • is defensible

HOWEVER

many people, especially customers,

  • do not like innovation
  • do not like to change their ways
  • do not like to buy from start-ups, unless they have to do so
  • do not like the risk that comes with innovation

this actually creates an innovation barrier in customers mind.

what are the keys to break this barrier?

i would love to hear your thoughts

but, what is clear to me is that execution is a great way to show that you have figured things out

  • you promise a OEM partnership with in 6 month?  make it happen
  • customers can see value in the product within hours?  wow
  • the product can be installed in 1 hour by a channel partner sales engineer? you will scale

my belief is that in the software world these are the sources for differentiation and the keys to success much more than how innovative is the product.

at this point in time, in the israeli hi-tech market, execution is much more rare than innovation.

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5 Responses to “innovation is over-valued, execution is under-valued”

  1. ophirk Says:

    I believe the point is valid but I want to offer a different perspective.

    1. Israeli companies tend to focus on technological innovation rather than product innovation.
    Both are innovations, but the common background for Israeli companies comes from military projects focused on communication and algorithms.
    In projects, unlike products, you can get away with a lot less stability and quality because there is only one instance of the software.
    Moreover the operators (customers) are friendly and don’t really have alternative suppliers.

    Innovation in products also tends to be less sexy and therefore the instillation , upgrade, logging and UI are often left to the less capable developers.

    2. I’m not sure VC’s are different than entrepreneurs here.
    How many investor try to install their company product prior to investment ?
    When was the last time you saw a “barrier to entry” slide that said “Our product installs in five minutes and never fails but we have no patents”
    VS “We have five useless patents but our product install takes four days and fails 40% of the time”

    3. It seems to be true that many Israeli companies, not just start-ups, are weaker in operations side of the business.
    As one example, even the most hi-Tech companies selling to enterprises have a lousy internal IT systems.

    • adisababa Says:

      ophir
      a few thoughts:
      – few israeli companies have created product excellence AND operational excellence. very few
      – i very much agree that we (israelies) think technological excellence is the same or better than product excellence. we are wrong
      – i am not sure why project allow for less stability and quality. can you expand?
      i do think projects and the customization, integration and professional services requires are poison
      – SaaS does allow for the ability to do one instance with stability (a must) and quality (product and technology)
      – agree that VCs suffer from the ques6t for innovation, that is my main purpose of writing this post can calling our hi-tech industry to change

  2. ophirk Says:

    Hi Adi,
    Projects are easier because of the numbers and probability.

    Lets say that both Check Point and Amdocs have a strange upgrade bug that only happens when moving from Solaris 9 to Solaris 10.1 when a certain operating system package is missing.

    In Check Point \ Mercury scenario this bug will surely happen in at least one of the 100,000 installations.

    In Amdocs \Comverse case (1000 telco customers ?) most chances are the same bug will never materialize.

    Furthermore, it is reasonable to assume that Amdocs\Comverse know in advance which exact OS their customers use , with what patches, which is not the case for large product companies.

    In the army this is even “simpler” ,since the number of instances is typically less than 10, similar to SaaS.

    Of course, there are many other considerations, this is just one side of the story. For example, in SaaS one needs to take care of his own storage http://ophir.wordpress.com/2009/03/15/a-case-study-in-restore-nightmares/🙂

    On the first point, BTW, it is not just VC’s, it is also true for the press. See http://ophir.wordpress.com/2009/03/05/the-questions-reporters-never-ask-but-should/ for my opinion.

  3. adisababa Says:

    ophir
    i understand the project example better, and see now that my post does suggest that VCs are less innovation focused.
    thanks for educating me
    adi

  4. #5 No Demos « Adisababa’s Weblog Says:

    […] i am not sure i have the answer. part of it may be about innovation vs execution […]

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