Originally published in Forbes.
We are in the age of disruptive innovation. Change, we are told, is the key to success. Take the cover story of this week’s New York Times Education Life Supplement, “The Innovation Imperative: Change Everything.” Authors Clayton M. Christensen and Michael B. Horn write that “The lessons from any number of industries teach us that those that truly innovate – fundamentally transforming the model, instead of just incorporating the technology into established methods of operation – will have the final say.”
Unless they innovate first.
People usually think it’s best to hit the market first with a disruptive innovation. This is one of the reasons that entrepreneurs starting up a paradigm-shifting business are in such a hurry. The idea is that being first to market lets you set the standard and shape how people think about the new innovation. You get to the customers first and then benefit from them not wanting to switch once they’ve gotten used to you. You leave a large and lasting impression on the market, thereby benefitting from long-term brand recognition. That’s certainly been the case for first movers such as Coca-Cola, Xerox and Nike.
But more often than not, the advantages don’t pan out. Studies show that pioneers are less profitable than followers. Facebook, Apple’s iPod, or Amazon’s Kindle, all second mover who came to dominate their markets, are representative examples. Coming out with a disruptive innovation before the market is ready means facing bafflement rather than enthusiasm. First movers have to create the market for their innovations, something that followers benefit from. One study of more than 1000 businesses from 1930 to 1985 found that although pioneers had initial sales advantages, they had even larger cost disadvantages, which led to lower profits in the long run.
The costs of being a pioneer is one of the lessons we learn from the career of Lou Reed, who died on October 27th. Reed offered the rock n’ roll world a disruptive innovation. “I thought, look all these [rock] writers are writing about only a very small part of the human experience,” he said as quoted in Transformer: The Lou Reed Story by Victor Bockris. “Let’s take Crime and Punishment and turn it into a rock n’ roll song!” And he did. First with the Velvet Underground and then on his own, Reed confronted audiences with the kinds of topics they would rather not think about (but were drawn to nonetheless): homosexuality, transvestitism, hard drugs, sadomasochism and prostitution.
What made Reed’s innovation particularly disruptive to rock n’ roll was that the medium reflected the message. The music was nasty, hypnotic, manic, and aggressive, just like the lyrics. As Reed said of the song “Heroin,” “The song is everything that the real thing is doing to you.”
Like most disruptive innovations, Reed’s products were ahead of their time. He was first to market, first to fail, a victim of first mover disadvantage. According to Reed, critics called it “porn rock” and music from the “fetid underbelly of urban existence.” Deejay Terry Noel said of the Velvet Underground, “Oh my God! None of them can play instruments. They’re all off-key.” He added, “It was so bad I couldn’t believe it. Nobody could believe it.”
But by 1968, just as the Velvets were beginning to unravel as a band, their influence began to percolate. As rock critic Robert Palmer noted, Reed turned Keith Richards and Mick Jagger onto plagal cadence, a one-chord-four-chord sequence (e.g., C to F to C to F). Reed’s “Heroin” and “Waiting for the Man” are plagal cadence songs. The Rolling Stones adopted the plagal cadence in “Street Fighting Man,” “Sympathy for the Devil,” and “Jumping Jack Flash.”
Then Velvet Underground mega-fan David Bowie played up the gay and camp themes in Reed’s music and popularized it in the “Glitter Rock” movement. Glitter rockers celebrated the drag queen aesthetic that Reed had been the first to write about.
Eventually, the punks came around and adopted Reed’s harshness, guitar distortion and simple song structures (his songs rarely had more than three chords). Punk rockers iconized Reed as their prophet, putting him on the cover of the inaugural issue of Punk Magazine.
Yet despite the eventual pervasiveness of his innovations, Reed didn’t enjoy as much commercial success as the second and third movers. This is often the case in business as well.
Online learning, the subject of the New York Times piece, has been around since the 1980s, before the World Wide Web was invented. In 1985, two graduate schools – The Ontario Institute for Studies in Education at the University of Toronto and Connected Education of the New School for Social Research in New York – each began offering graduate-level courses online. Students would log on to designated computer conferences to participate in class discussions, complete individual and group assignments, and hang out at virtual cafés and libraries. But it took decades for online education to gain traction and become mainstream.
Though rock n’ roll songs about the seedy part of town may seem to have little to do with disruptive innovation in business and education, some of the same things that undermined Lou Reed’s success make it hard for other disruptive innovation to break through. Those who innovate first often pay a price for their prescience. As first movers, they work in a legitimacy vacuum and need to convince the market that their innovation is worthwhile. They need to make the market, which takes effort away from making their product. And often, the pressure and uncertainty of being first corrode the founding team. This was certainly the case for the Velvet Underground, who, faced with a public that was indifferent at best and hostile at worst, could not agree about how to steer the band forward.
Being a new enterprise is difficult enough. But being new and different makes it almost impossible to succeed. And this is the dark secret of the “innovation imperative.”