Tuesday, September 25, 2007

Finding Innovators

So many different characteristics define a great company - leadership, vision, strategy, people, culture, IT ... Recently I came across three news articles which highlighted a key success trait - innovation.

The first example is the front-page article in today’s WSJ. It's a review of Microsoft's (MSFT) efforts to assert itself in the booming online space. Obviously the competition is Goggle (GOOG). The #1 player in the software business is today struggling to keep up with the stalwart of the new online economy. Did Microsoft not see the coming online revolution? Did it become complacent or just too big to react quickly to the changes in online usage and the web business model?

The other example also in today’s WSJ talks about the similarities and thereby the challenge facing Facebook. Geocities was supposedly the pioneer in 1994 when it launched this concept of "web based community". Today Facebook is the rage and Geocities a distant memory. In a similar vein I recently read about Palm and it's shrinking market share today.

The lesson here is innovating. Innovation and execution on your ideas puts you ahead of the curve. Getting ahead is the start - the approach needs to be continually refined and tuned. Apple (AAPL) and Goggle definitely showcase the innovative trait. Similarly you see the innovator in Toyota with their hybrids and top-notch quality culture upsetting the established leaders in Detroit. Indian outsourcers like Infosys (INFY) and WIPRO (WIT) are creating a new IT paradigm, which has forced established players, like Accenture (ACN) and IBM (IBM) to reinvent their business models.

Beyond assessing market conditions, leadership, valuation, business model and strategy - a smart investor should be always on the lookout for the innovator. Ultimately innovation drives change, which leads to new business avenues and growth.

No comments: