Innovation Stack by Jim McKelvey is a book that was published this year in March 2020 and I highly recommend it to anyone interested in Innovation and start-ups. The book introduces the concept of innovation stack which means that you create one innovation on top of the other, this will make your company a lot stronger and less likely to be copied. The author is renowned for being the co-founder of Square payments.
Jim McKelvey suggests the reader to focus their attention on the market’s end of a certain industry or vertical and focus their innovations on areas where other companies are marginalising the needs of those customer segments linked to the targeted vertical.
The secret sauce to innovation is highlighted throughout the book in which the author will share the formula that can be replicated and they used it at Square when Amazon decided to get into their market and out-compete them. For example, when the author was building Square, Amazon became a sudden new competitor for them and everyone would have imagined that Amazon was going to win over their market. However, In the end Square managed to survive Amazon’s attack as they were well equipped with an Innovation Stack that was difficult for Amazon to replicate. So, these are the main lessons learnt from the book.
1- Coping and innovation are partners, so if you want to build a great company it is good to copy some industry best practices however, you will need to invent new things and practices that are relevant to your market therefore, your company will need to adapt easily.
2- An innovation stack that serves the end of the market (the segment marginalised by other companies) can give you access to a huge potential for growth and market share.
3- Culture is really important when building your innovation stack, so treat your employees well and they will treat your customers well too.
4- Make sure that right now is the right time to bring your company to the market. Throughout history some innovations have come to the market too early and therefore, they were a failure that in later years became a success of another company. Knowing when is the right time is a difficult task to master as if you think that right now is the right moment for your innovation it might be too late, so be early but not too early. (I know this does not sound simple.)
5- Think in a horizon of possibilities, Map out a system of global innovation stacks that are not linked to your product or company but might enable your product to succeed. In my opinion this is similar to Moore’s law and a good example of this is Netflix which in the 90s had a vision ahead of their time and worked on it making sure that everything was ready for when the time came (infrastructure).
6- Keep improving and doing what you need to do to achieve the end goal even if you have some missing element in your innovation stack. But don’t neglect those missing elements as they are super important and as a founder you must work on the things that will help you achieve those missing elements so when the time comes the whole stack is completed.
7- Keep an eye on competitors in other markets who can easily adapt your innovation stack to their markets.
8- An Innovation stack is a block of innovations that works in conjunction with one another, so they are dependent on one another that means that if you create it in the right way then your competitor will have a bad time trying to replicate in the right way all blocks of your innovation stack. It is simple to copy only one block and get it right but is difficult to copy 20–30 blocks and get them all right. This stack is what will protect you against your competition.
9- Communicate well using the appropriate language that is adapted to your market otherwise, people will have preconceptions and biases against your product. This is really important.
10- Practise a contrarian approach to feedback which in the book is called feedback failure because this is the reality of businesses as many users or customers often provide bad feedback so, you need to be aware of it and be ready to recognise it.
11- Don’t get associated with only with the lowest price in the market so make sure that your product has certain quality standards but also keep in mind that a low price can provide you a competitive edge against your competition.
12- Don’t focus on disruption but instead focus on solving the right problem for your customers.
13- What are the main characteristics of a good entrepreneur:
- Humility
- Fear
- Ability to listen to feedback
14- Don’t think that if you don’t have the right experience you are not qualified to solve a problem because if you set up yourself to create an innovative business this has never been done before so experience does not count. The kind of businesses that usually need experience are the ones that are the copycats of already existing businesses ( incremental innovations in existing markets) so if you think that you have found the right problem to solve with a new solution hypothesis and don’t have the right experience don’t worry just start working on it.
15- Find the right problem for you as a person. This needs to be something that you care deeply about and you want to solve no matter the obstacles.
Entrepreneurship is rare according to the book as for the author an entrepreneur is someone who is creating a completely new business and not as the majority of people copy businesses that already exist. Money, experience and connections are great if you want to replicate a business. If you want to innovate and build something new those things don’t matter much because each solution that you will create for your innovation stack will create another problem and challenges that will force you to keep innovating in order to create a unique set of inventions.
In conclusion: The book is really good and worth reading as it can open up your mind to new ways to create and combine innovation. All the concepts are well explained and the analogies, examples and companies are familiar to the majority of readers. The advice for building up your innovation stack should be taken and put into practice by every entrepreneur. Definitely worth reading and if you are interested in something that can expand into some of the techniques mentioned in the book I highly recommend reading also Blue Ocean strategy (This will be my next post).
