By: Chuck Frey
Why is it that, in industry after industry, it’s almost always the outsider that develops the breakthrough innovations? Paul Graham, in a ChangeThis essay entitled The Power of the Marginal, tackles this issue and comes up with some really intriguing insights. He deconstructs the power of the outsider, and offers some helpful strategies for thinking like one.
Why is it that, in industry after industry, it’s almost always the outsider that develops the breakthrough innovations? Paul Graham, in a ChangeThis essay entitled The Power of the Marginal, tackles this issue and comes up with some really intriguing insights. He deconstructs the power of the outsider, and offers some helpful strategies for thinking like one. Definition check: An insider is anyone working within an established organization, while an outsider is an entrepreneur, someone who has an idea and wants to start up a company to develop it.
Graham says most insider projects, including attempts at innovation, face some significant hurdles, including one or more of these: “…the selection of the wrong kind of people, the excessive scope, the inability to take risks, the need to seem serious, the weight of expectations, the power of vested interests, the undiscerning audience, and perhaps the most dangerous, the tendency of such work to become a duty rather than a pleasure.”
He explains how, as entrepreneurs become successful and their companies become successful, they often lose touch with their passion and their customers by delegating work to others. In effect, entrepreneurs evolve into managers as their companies grow. Work becomes subdivided into different roles, and delegation takes over as a solution to looming time shortages. Once this happens, he contends, the entrepreneur loses the ability to see opportunities for innovation.
In most startup companies, on the other hand, “the needs of customers and the means of satisfying them are all in one head.” As a result, products and services developed by startups often have a “purity” and a perfection that established companies can seldom achieve, because they must make so many compromises on the road from inspiration to the implementation of an idea.
Graham also explains in a very clear, concise way how insiders can become blinded to new opportunities:
“As well as being more comfortable working on established lines, insiders generally have vested interests in perpetuating them. The professor who made his reputation by discovering some new idea is not likely to be the one to discover its replacement. This is particularly true with companies, who have not only skill and pride anchoring them to the status quo, but money as well. The Achilles’s heel of successful companies is their inability to cannibalize themselves. Many innovations consists of replacing something with a cheaper alternative, and companies just don’t want to see a path whose immediate effect is to cut an existing source of revenue.”
“So if you’re an outsider you should actively seek out contrarian projects. Instead of working on things the eminent have made prestigious, work on things that could steal that prestige. The really juicy new approaches are not the ones insiders reject as impossible, but those they ignore as undignified.”
I love those last two sentences, because our expertise and ego tend to blind many of us to all but the most obvious opportunities. Besides, most breakthrough opportunities don’t look like diamonds in their native state, but more like lumps of coal. And thus most “experts” can’t even see them as the rich opportunities that they might become. I also like Graham’s observation that companies have a hard time cannibalizing their existing businesses and revenue streams. It’s a rare executive like Andy Grove of Intel, who once said that his company needed to become better than its competitors at “eating its own children.” No wonder so many established, risk-averse companies are blindsided by aggressive start-ups with limited resources and nothing to lose.
I came away from reading this manifesto convinced that outsiders (or insiders who have mastered the sleight of head of thinking like outsiders) wield immense power in the world of innovation. I think you’ll find many insights in Graham’s thought-provoking essay, and I highly recommend that you read it!