Some view Innovation as an abstract, serendipitous event. We have shown through dedicating our lives to research applied in practice that this is not true. There are more efficient ways to succeed with your innovation projects if only you know what to look for! The below resources will help you get a better understanding of that.
PayPal, Facebook, Shell Oil and Nokia: Antibodies, Part 5 of 6
Here is the success story of a company that had to go through many revisions before it discovered its own DNA is the digital payment service platform PayPal. This early leader in financial technology launched in 1998 as Field Link, a company that developed encryption software for palm pilots. The market wasn’t ready for that and palm pilots were not long for this world. Instead of shutting down operations, founders Peter Thiel and Max Levchin took the time to dig in deeper and determine what capabilities they had and how to use them in a smarter way.
An investigation of the external market revealed that e-commerce, which was just an emerging technology at the time, lacked an easy way for customers to pay for online purchases. At the time, eBay customers will still paying by check or money order due to resistance from traditional credit card carriers.
Building on their encryption DNA, Field Link transformed into Confinity and their lead service was PayPal. The rest is history, but even now PayPal finds that it must evolve again in the face of competitors like ApplePay, blockchain applications and emerging digital currencies. Incidentally, it also took the marketing might of Elon Musk, our central entrepreneur from episode two, to make PayPal an international success that excels at moving money around the world.
There are also several critical lessons to learn from the evolution of Facebook and its sharp wrong turns. You might remember that Mark Zuckerberg was a psychology student when he created Facebook for use by fellow Harvard students only. What you might forget is that for the next two years, 2004 – 2006, it was impossible to join unless you had an Ivy League email address.
This exclusive, closed society aspect of Facebook’s DNA was encoded into the company from the very beginning. The natural desire people have to be a member of a high-status group was a huge driver of demand. As they scaled up massively, Facebook lost that exclusivity but retained the feeling that you were part of a special group that cared about everything you did and posted about, from eating a nice meal to watching a beautiful sunset.
Facebook made a serious mistake when they sold or opened up access to 87 million private profiles for the political data wrangler Cambridge Analytica in 2016. The US Federal Trade Commission launched a probe to decide if Facebook had violated a privacy agreement they made in 2011. This struck at the core of their DNA as a safe online space for sharing personal memories.
Even Zuckerberg admitted:
“We have a responsibility to protect your data, and if we can’t then we don’t deserve to serve you.” He took out a full-page ad in all major US and UK newspapers to apologize, but it may not be enough. Though bankruptcy isn’t likely for this $138 billion company, but it faces over $1 billion in GDPR-related fines. The pressure is on for US and EU regulators to break up the company and it could wind up sold off in pieces.
Now, let’s turn the other direction – to a company that changed everything about itself, from the inside out, so much so that it is not even recognizable from where it started. Yet it managed to hold on tight to its DNA while evolving into something else.
I’m talking about Royal Dutch Shell. With $300 billion in revenues, they are the fifth-largest company on the planet and the number one largest in Europe. You would never guess that they got their start as a tiny antique shop in London’s East End. Marcus Samuel, purveyor of the M. Samuel & Company specialty store, noticed in 1833 that customers browsing his shop were searching for something more than the average European antiques.
He took a chance on importing seashells from the Far East, just as a trend known as Orientalism was starting to sweep the art and literature of Victorian Era. Samuel’s son, also named Marcus, rode the popularity of that exotic wave, eventually expanding to oils for lighting and lubricants brought back from the Far East on whaling ships.
When demand for the internal combustion engine and petroleum took off at the turn of the century, Samuel was ready. His reconfigured business, now Shell Transport and Trading Company, already had the supply chain in place to reap the benefits of this nascent industry. Yet he wasn’t content with oil. All along his trading route, Samuel’s ships delivered British machinery and textiles to Japan and returned with staples like rice, silk, and copperware for customers in the Middle East and Europe. Even after the company merged with Royal Dutch Petroleum in 1907, it retained the DNA of the original founder and his habit of looking beyond the next horizon.
That’s one of the central reasons why leaders at the mega-conglomerate that Shell has become today don’t consider themselves as working for an oil and gas company. Shell always refers to itself an energy company. Who actually buys oil and gas? No one. Not one single person. What they buy is the energy locked up in oil and gas. No one is drinking petroleum. It is worth nothing on its own. It is only valuable in that it fuels the things people need to survive. When better, less environmentally dangerous energy resources are cheap and easy to obtain, no one will care about oil and gas anymore. There is no room for things like that in a sustainable future.
Shell is already halfway living in that future, while maximizing revenue from their current business model so they can make the leap when the time comes. The Shell Scenarios program encourages managers and employees to ask “What if…?” and describe in detail what the world could look like soon, from the probable to the remotely possible. Their proposals for Germany’s energy grid after it exits nuclear power in 2022 include transitional phases for electric fuel cells, wind, and solar generators.
One final example of a company that has traveled far from its origin is Nokia, which recently came back to life by transitioning from mobile devices to 5G infrastructure, began its life as a pulp paper mill in 1865, when Finland was still part of the Russian Empire.
In the 1900s, their business expanded and flowed into electricity and then rubber tires before they arrived in telecom. What do all these things have in common? Nokia’s DNA has to do with connecting the world, which has taken them from books to lights to cars to mobile devices. That DNA can may well carry them into whatever new technology people will use to connect in the decades ahead.