Someone once asked me, "Sure, I get that there's a niche in the market, but is there a market in the niche?" Eight years ago, William Rowden and I started Gray Hill Solutions to create innovative software for the transportation management sector. In the end, we were about as successful as we could be.
So I'm going to tell this story based on my perception of this particular vertical. I believe the lessons here translate out to all verticals. Every vertical has blind spots, cultural issues, and built-in waste.
It seemed like Gray Hill couldn't miss. There is an entire industry called "Intelligent Transportation Systems" (ITS), but there are very few innovations in the product lines year to year. The industry was certainly large enough to support a niche player like Gray Hill.
The actual technologies of ITS at the time were lagging the rest of the tech community by about five years. That led to easy identification of high-value innovation (or at least technical application) for the industry.
Now, the industry lags behind by about 9 years and is only slipping further and further back. What is killing innovation in transportation? Why aren't obviously superior solutions being installed? Why do suppliers continue to make minor improvements on feature-poor products, rather than truly innovate?
(Click on the link below to read on...)
Suppliers
You show me an ITS supplier and nine times out of ten I will show you a bored person. Simply bored. They know that the tech they are selling could have been built with a Heath kit in the 1980s. They know that there are simple innovations that could radically improve performance. But the industry simply won't allow it.
The market in which they operate is a sea of standards organizations, RFPs with rigid specs, clients who fear visible failure over any type of success, and just general ennui.
Many of the older companies have innovated in the past, gotten excited about it, and then been burned. The industry let them down.
The newer companies (like Gray Hill) come in gung ho with good products and achieve amazing results out of the gate only to find that the initial success was due to latent demand in transportation's long tail. The bulk of the clients simply aren't prepared to accept new innovations, business models or management styles.
Therefore, innovation happens at a snail's pace and often only because it has become so obvious that the industry is behind that people begin to get embarrassed.
Government
I don't want to sit here an vilify government as a whole. I, for one, think I get my money's worth from taxes in the US. I pay far less in taxes than I do for my house and for that I get police protection, roads, parks, schools, social security, urban forestry, safe travel, environmental protection, etc. So it is a pretty keen investment.
However, there is little incentive in government transportation operations for innovation. This results in high-cost, low-value solutions being repeatedly offered to solve complex transportation network issues.
Government management styles, risk averse behavior, and methods of contracting create a culture that is low trust, does not empower its work force and creates massive complexity.
These issues result in:
Rigid Specs - A government contract tells you exactly what to do, how to do it, how much it will cost and when it will be done. They do this in the interest of mitigating risk. By dictating the terms and conditions of the engagement, the agency feels they are mitigating their risk of budget or timeline overruns. Yet they rarely do. Why?
1. Single points of failure - Rigid specs create a long list of zero sum game points. Did item 2,396 happen? No! Then the whole project FAILS! Never mind that the actual value of that item was nil. It was on the list and not satisfied, therefore the project is not done. I have seen projects go long waiting for high-cost, low-value items to be satisfied.
2. Rigid = Inflexible - A rigid spec by design limits the amount of innovation possible.
3. Specs are Lies - Specs are usually drawn up by a few people before a project starts. These people are busy and responding to an internal deadline. They are almost always incomplete and rife with vague or incomprehensible requirements. When building the traffic.511.org site for the San Francisco Bay Area, our functional requirements included such gems as "The system will be user friendly" and "The system will look nice."
4. I'll stop here, suffice it to say rigid specs are the bane of progress.
Resistance to Change - If something works, you can be pretty sure it will work again and again and again and again. So that is what risk-averse organizations look at first.
"Did it work before?" "Yes." "Then lets do that."
Innovation involves risk. Risk averse cultures obviously value low-risk over high-reward. This creates a very very slow technological migration path.
In 2005, one of our clients was - by fiat - still using Netscape 2.0 and 640x480 monitors. No, I'm not kidding. We had to convince them that they were not normal Internet users.
This resistance works its way into the culture and creates morbid fear of risk. Personnel will work to stop risk at all costs - including spending much more money on an older, inefficient system than spend less money on a newer, more stable one. And especially including spending money to mitigate highly unlikely risks.
High Overhead - All projects in a risk aFverse environment come with high overhead. This overhead is spent keeping an eye on the project to make sure everything happens as it is supposed to (mitigating risk). Of course, this means nothing happens on time. Tasks take longer than estimated because of inefficient oversight.
What's funny is, the oversight to make sure things are going right, make them go wrong. Risk mitigation in the end is self-defeating.
More strategic, collaborative oversight would be more effective and make the project run faster. This type of oversight, however, can't happen in a low-trust environment.
Programmatic Waste - Every project Gray Hill did, we could have done for much less money. We begged them to let us bill less. "Please don't make me fly down for this unnecessary meeting." "Please let me kill off these 10 unnecessary features." "Please don't make me write a 300 page Detailed Design report that you will edit so many times that it won't be completed until after the software is."
Yes, all those are real. We had a project where the Detailed Design Report cost about half what the software did and was completed after the software because they couldn't stop editing it. But it's okay, I'm sure they read it all the time.
Closing - What Can We Learn
This is a blog post, so it's vague and scratches the surface. Over the years I've had people tell me "That's exactly what we need, but no one here would understand it." The products they were saying this about cost tens of thousands of dollars, would save millions of dollars, increase transportation network efficiency, increase public safety, and reduce waste. The cost-benefit ratio made it a no brainer.
When working with suppliers we said, "We can give you this new innovation." They would be intellectually interested, but professionally deadened. "That just doesn't show up in the specs we get from customers."
Of course it's not in the spec - it doesn't exist yet and the customers don't know it's possible! But, the suppliers understand their risk-averse market. New products are very scary and the ability to sell the products needs to predate the desire to innovate. In other words, the vertical demands people know about the invention before it has been invented.
More than an indictment of ITS, which I admit it is, I want to daylight how entire industries can have a culture and that these cultures have profound impacts on what gets built, when it gets built and why. Cultures are created and have a great deal of impact on their population.
How can people of good conscience within such populations change the cultures that are stifling them?
Wondered when you would get to the political angle!
I think it comes down to what we believe is worth doing and why this is our story.
Posted by: Jo | 04 July 2008 at 12:50
Have you seen Sir Ken Robinson's talk at Ted about this topic? It's worth a gander. http://www.ted.com/index.php/talks/ken_robinson_says_schools_kill_creativity.html His idea is that it's more basic - we are taught to be afraid to make mistakes.
Posted by: On a limb with Claudia | 04 August 2008 at 19:40