Connecting the world

Can you guess which innovative technology led to a worldwide interconnect, provided instantaneous news, reshaped businesses, gave birth to e-commerce, experienced massive growth and drove increasingly complex encryption and standards due to scams and fraudulent usage?

Most people would immediately suggest that this description obviously refers to the Internet. However, what if I were to tell you that the innovation described above was invented around the year 1840, well before the telephone?

In fact, this technology was the telegraph and it truly changed the world at that time, much like how we could not imagine a world without the Internet today. In his book The Victorian Internet noted journalist Tom Standage, shows the parallels between the telegraph and the Internet are nothing short of remarkable.

Actually, we should not be surprised by their similarities. Both innovations came about from the imperative to connect people and businesses. Innovators who have used the Internet to achieve this objective have profited. Those who have lost sight of the goal to connect people and businesses and have offered frivolous services instead, have lost money.

Innovation requires you to keep your eye on the target and not be distracted by any hurdles or stumbling blocks in your way. Renowned literary figure Henry James summed it up brilliantly when he said obstacles are those frightening things you see when you take your eyes off your goal.

The Internet threatened the business models of many conventional companies, but those who saw it as an opportunity rather than an obstacle have managed to ride the wave.

Western Union, a name familiar in Malaysia these days, is one such company. This 160-year-old organisation was a telegraph pioneer. When the Internet took centre stage, Western Union redesigned itself to become an e-commerce company specialising in money transfers. Today, it operates in more than 200 countries and has 2,500 service providers in Malaysia.

Although the telegraph was absolutely core to its business, Western Union was not fixated on the technology. The company realised its strength was in connecting people and businesses and the telegraph was merely a means to an end. Since the Internet could do this more effectively, the company embraced it and made the transition from the "Victorian Internet" to the modern Internet easily.

It is important to separate your core strength from your product offering. Just because a company makes motorcycles does not mean that is its core strength. Decades ago, Honda discovered its core strength was actually making engines, and motorcycles just happened to reflect that strength. This realisation made Honda venture into automobiles and today, it is one of the largest car manufacturers in the world.

Most housewives swear by Pyrex, glass kitchenware that can be used directly on the stovetop, the conventional oven and microwave oven. It looks so presentable it can be moved straight to the dining table, piping hot. Corningware is exactly the same.

Both come from a 150-year-old company that discovered its core strength is not really in cookingware, but lies in understanding glass technology, and that both Pyrex and Corningware are just products that reflect that strength. As a direct result of this realisation, it is now a formidable force in producing the glass for LCD screens from televisions to computer monitors.

Innovators know how to separate core competencies from the products they make.

Let's look at PayPal, an e-commerce company purchased by eBay in 2002. The fancy name "e-commerce" merely means a payment method for purchases made over the Internet, replacing the physical world's money orders and cheques.

As is commonly known, PayPal started off as a joint venture between two companies that had financial services and cryptography as their core strengths. Combined, these strengths enabled an e-commerce system to take form. The rest is history; eBay acquired PayPal for US$ 1.5billion (S$1.87 billion)

Another example is American Express, a 160-year-old company that Businessweek states is the 22nd most valuable brand in the world, worth US$15 billion (S$18.7 billion). One quarter of all credit card transactions in America happen through Amex.

The company started as an express mail company in New York in 1850. As its core strength was getting documents from one place to another securely, it started a money order business in 1882. The company never lost sight of its core competency, progressing from Letters of Credit to Traveller's Cheques to Credit Cards. These were just manifestations of the underlying principles moving documents from one location to another, securely. After all, this was what their customers demanded.

Today, American Express conducts Business-to-Business (B2B) e-commerce. The technology, systems and process have changed drastically but the core requirement has not moving financial documents from one customer to another securely.

This is what innovation is built on an understanding of core competencies versus the products or services that a company is able to offer. The separation is far more complex than it might appear.

It is unlikely that you will be able to make this separation without the help of someone who does not understand your business at all.

A fresh pair of eyes or "glasses" is essential, for you must be able to see and understand how you look through the eyes of others. If innovation was easy and obvious, I would not have to write about it. Whether it is e-commerce, or something else, you must think it through completely.