E10: Blizzards, Crises, and Innovation

What if people are more motivated to eliminate a pain than they are to achieve a gain? Welcome to Invisible Solutions. I'm your host Steven Shapiro. Each week we tackle your most complex problems using the lenses from my book, Invisible Solutions. If you need the lenses, go to getthelenses.com and and with that, let's get started with today's episode. And today's episode is a special episode because it is the first one of 2021. Let's face it, 2020 was a year like no other. It was a year of huge crises, challenges and difficulties for so many. But it was also a year of innovation. And so to celebrate and welcome in the new year, instead of solving a specific listener submitted problem, I want to share with you a story from over 40 years ago that shows how crises can lead to the adoption of new technology and innovation. And we saw something very similar play out in 2020. This story is a powerful illustration of lens number 19, which is the pain versus gain lens. We often hear the expression build it and they will come. And with innovation, probably a more accurate statement would be eliminate a pain and they will come. The ultimate success of the automatic teller machine. The ATM machine is a great example of this. Now for those of you in other countries, you might call it a cash machine or a cash point, but basically it's an electronic device where you put a card in and it spits out money. You can deposit checks and all of those great features. In the mid-1970s, Citibank was the second largest bank. And in 1977, after investing hundreds of millions of dollars in ATM technology research and development, Citibank decided to install these machines across all of New York City, everywhere, blanket to city. Now you would think that this would be a wildly popular technology. Who wouldn't want access to their money? 24,7 but soon after the launch, people became concerned. In fact, the front page of the New York Times on May 31, 1977 said quick electronic banking slowed by the public's habits and fears. People were concerned the ATM machines weren't popular. In fact, I talked with some people who were involved with the installation of the ATM machines back in the 70s and they said people were actually leaving their accounts, they were closing their accounts because they were concerned that the machines would take over the in person tellers. People had their habits, they liked to know their tellers, they felt it was safe. The technology was confusing. First time users were concerned that it might not be accurate. In fact, they actually did dispense the wrong amounts of money at some times and For a lot of people, they felt it was impersonal. So Here we are, 1977. May 1977. It looked like maybe the ATM machine would be dead in the water before it really had a chance to flourish. And then something happened. The ATM machine might never have been as popular as it is if it weren't for a natural disaster. February 1978 will always be remembered for a blizzard that dumped as much as 4ft of snow in the Northeast. I'm from the Boston area originally. I remember pictures of me and my sister as a kid. The snowbanks were so high that they were much taller than we were. And everything shut down. I mean, the cities just closed their doors to everything. Cars couldn't go anywhere. New York City had two feet of snow. Throughout the entire city, there were Snow banks of 13 to 15ft high. Everything was shut down. Banks weren't open. So what people did was because they couldn't go to their bank, they would go to a supermarket and cash a check. But very soon after the blizzard started, all the supermarkets ran out of money. So this created a massive pain. People couldn't get money. So where did they turn? Well, the people who had a Citibank account turned to their ATM machines. In fact, it's estimated that during the storms, the use of ATM machines increased more than 20% in just a short amount of time. Soon after that, Citibank started running TV ads showing people trudging through the snow drifts of New York City. And that's when the company introduced their wildly popular slogan, the City Never sleeps. This was the real birth of the automatic teller machine. In 1981, Citibank's market share of New York deposits had doubled, with a lot of the growth being attributed to the ATEM machine. So here's a situation where it's a technology that seems obvious, but people weren't adopting it. And so when the natural disaster came along, now all of a sudden, people became interested. And this story illustrates an innovator's dilemma, yet at the same time, an opportunity. Brilliant innovations are not necessarily adopted by the masses, and some just need time to incubate, to gain acceptance. But here's the question you have to ask yourself is, will your business survive long enough to see that success? Here's the thing. I know people will take massive risks to eliminate their pains, but they will play it safe when it comes to adding convenience. The ATM machines were viewed as primarily convenience. But what did it take for them to become a success? It was a pain caused by a natural disaster. So what was going on here? So here's one of the things which I found is that when it comes to innovation, there are often two phases of innovation, especially during times of disaster, like during the blizzard of 78 with the ATM machine. The first phase is what I call reactive adoption. Reactive adoption. Reactive adoption is what happens during that initial crisis. People are doing anything and everything they can to stay afloat. They're going to grab anything that is viewed as a lifesaver. And so what ends up happening is they will grab technologies that exist and basically try to replicate what they were doing before. So the key thing with reactive adoption is there's not really a lot of innovation taking place, but it is really rather an automation or a replication of things that we've done in the past. Whereas with the second phase, the second phase is what I call proactive innovation. And now, here's what you do, is you hit the pause button, you rethink everything, and you ask yourself what's going to create the greatest value. And then, instead of just adopting technology, you adapt technology to meet specific use cases and needs. And so the pandemic that we just went through and that we're still going through is a great example of this in action. Because if you think about it for a moment, in March, the world changed. In March of 2020, the world changed. And virtual technologies, let's face it, they've been around for decades. In fact, the first virtual reality headset was actually created in 1968, and 1968 was the first virtual reality headset. That's a long time ago. And. And WebEx was founded in 1995. So the technology's been around. But just like the ATM machine, adoption was slowed. Fortunately for the ATM machine, the Blizzard happened just a matter of months after its launch. But that's not the case for companies like WebEx, which have been around for decades now. But then COVID 19 hit March 2020, rolled around, and everybody was scrambling to go virtual. And the hot platform was Zoom. And so what ended up happening was people were doing this reactive adoption. The reactive adoption phase basically says, we're gonna try to do what we did before, but we're just gonna use technology. We're gonna try to replicate the past using different tools. And so everybody felt that their lifesaver, their platform, was going to be Zoom. And so it's fascinating to look at the journey for Zoom over time. In January of 2020, Zoom had a healthy market cap of $16 billion. $16 billion. So that's a pretty sizable market cap. And if you compared Zoom to the major airlines, American Airlines, United airlines, Delta and JetBlue, those combined airlines had a $74 billion market cap. So 16 billion versus 74 billion, that is basically like a five fold difference. The airlines were five times larger combined than Zoom. Now here's what's fascinating is by July of 2020, just a matter of months later, the market cap for Zoom went from $16 billion to $72 billion. And for the major airlines, they went from $74 billion to, to $29 billion. So when you look at this, this is actually pretty amazing. Zoom in relation to the airlines basically had like a 15 fold improvement in their market cap in just a matter of months because everybody was very quickly trying to adopt anything that was around. They were looking for a lifesaver to keep them afloat. And for those of you who are trying to do virtual events, know that some, some of the technologies that were once plentiful and inexpensive, such as webcams, they were sold out, overpriced. There was price gouging. So what happened was during this first phase, this reactive adoption, everybody was looking for something to be able to hold onto. But we're now, I think, finally getting into the second phase, which is proactive innovation. Instead of just automating what's been done in the past, people are now starting to take the time to rethink everything they do, from customer service to employee engagement. And I think that's the opportunity we all have right now for our businesses is to not just do what everyone else is doing, to not just replicate what we've done in the past, just using different technologies, but really start to step back and ask ourselves, how can we create a business that's going to be powerful and survive and thrive in the next 12 months, during 2021, during 2022, 2023, when hopefully the world gets back to some level of normality, whatever that might be. And let's face it, we can't predict the future. So whatever we come up with has to be flexible and adaptable. We have to be willing to make changes over time. So whatever solutions we develop, we don't want to take a lot of time to develop them. We want to develop them quickly enough so that as we get new information, as the world starts to give us new information, as things start to evolve, we're able to adapt, evolve and change with them. I think 2021 is going to be an amazingly exciting year. I mean, the technology that's been used to develop the vaccines is an incredible example of innovation in action. They were able to do something in a matter of months that typically took many, many, many years. And so we are in a situation right now where, where we are seeing innovation on steroids. We are seeing innovation happen at a faster pace. And I think when we look back in the future on this period of time, when we look back on 2020 and even 2021, I think we're going to say that this was probably the renaissance period of innovation. This is the renaissance period of innovation because people are developing new technologies but also new business models. The way that we do our work, it's not about the technology. It's about the technology enabling a different model. So I think 2021 is going to be a fascinating year, an exciting year and I hope it is for you. I wish you all the best. And with that we will wrap up this episode of Invisible Solutions. I look forward to being with you next week. Until then, happy problem solving. Sam.