How do you innovate?

by admin on January 19, 2010

in Cloud Computing/SaaS


Stuart Lynn, head of R&D, Sage mid-market division pinged me to say he’d written a piece about innovation in part inspired by one of my YouTube videos. Stuart took an interpretation of that video content with which I don’t wholly agree but that’s of little consequence. If you’re interested, then check out the video which heads this piece. He says of getting it wrong:

Why does this happen? Did they get it wrong from a customer perspective? Did they work with customers to see if the original ideas were valued before they went on to deliver them? Did they fail to commercialise them? Do the company see this as a failure? Or was it actually a ‘share of voice’ Marketing and PR success despite the ideas not being widely adopted? Plenty of food for thought, and only the vendor themselves will know the answers.

And then goes on to hypothesize about getting it right:

Is the secret behind innovating to ask customers what they want before you start?

Controversially, I would have to say no to this question, well not entirely anyway… Whilst, I would advocate speaking to customers at all times and involving them through the process to add value, you can’t always rely on customers as your only source of “innovative ideas”. What’s more the customer will most likely be focused on today’s issues as opposed to looking for step change innovation. Henry Ford’s classic quote sums this up nicely…

“If I had asked my customers what they wanted, they would have told me a faster horse.”

It’s not uncommon to bring out the Henry Ford example and bringing forward to today, I don’t see Apple with a ‘customer experience’ lab or for that matter caring what people think. They’re into design and that is not something you outsource to your users. But it got me thinking about the different styles of thing I see going on around innovation.

Duane Jackson at KashFlow for instance says that his company looks to see what customers are after and then cherry picks based on a combination of popularity and what seems commercially sensible. It’s certainly a valid approach but I would not rely entirely on customers to drive innovation. Features? Yes or at least mostly. The lads at FreeAgent recently announced they have dynamic multi-currency. That was in large measure because the community of users was making a lot of public noise. Are these ‘innovations?’ That depends on your point of view:

At the extreme end, I would argue that an accounting system that makes tea and toast when I switch it on is innovative. In FreeAgent’s case, the manner in which they’ve executed is within the realm of what I would consider innovation. As Ben Kepes at CloudAve says:

The FreeAgent offering is really slick, including on the fly calculation of daily unrealized and realized gains and losses on these invoices between the date of the invoice and the date customer payment is received. Like Xero, FreeAgent have opted to use the forex codes from XE.com – as the biggest exchange rate publisher – this makes sense.

It’s more than sense making. It is taking the best of what is available and then extending it ot meet a need in a smooth way. Compare that to what Ben says about Freshbooks approach to the same problem:

The FreshBooks approach is to mainly separate reporting by currency. While this makes life easier for them, it does make it harder for a business to get a really clear picture of their position – however at least P&L and tax show aggregate figures.

You can look back and argue that the pace of change is forcing innovation upon new players in ways that never happened in the past. Think how long it took Sage to get there with multi-currency. But then we live in a different world where as Ben adds:

All in all it’s interesting to see that multi currency is becoming almost a non-negotiable requirement, even for the smaller end of the SMB market – yet another feature that all vendors need to plan for…

It’s amazing to think that less than a year ago, SaaS developers were telling me that multi-currency in accounting services was not top of mind for customers. I kicked back saying that getting that done early represents a step forward that others would find surprising and useful. Innovation? Not really but it becomes so when delivered in a novel manner. Relating that back to our world, would you expect clients to come up with a new way of financing? Would you expect them to know which tax arrangements are best? Highly unlikely. But then how many clients have asked the question: ‘Do you know about XYZ scheme?’ Plenty.

So where are the next innovations in SaaS accounting likely to come? Already we see some providers offering accounting dashboards through which they can aggregate client information generated by SaaS solutions. I’ve long had a much broader vision where that information is tied to mining data for benchmarking, adding in client specific correspondence, tying that back to activity patterns, having inline profitability analysis. The list goes on but has almost nothing to do with what I see being requested by professionals. It is simply a matter of extended thinking around the technologies that are coming available parsed against the need to develop new business models. Some developers are working on these ideas. Some ideas will never see the light of day. Others will miss the mark. A few will score a bulls eye. That’s the nature of innovation.

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David Turner January 19, 2010 at 4:42 pm

Our take on the multicurrency issue is quite different Dennis. The rash of small cloud players entering the online accounting space are already on the back foot when it comes to adding functionality like this. For example:
- Calculating gains/losses on the payable line only considers the balance sheet rather than providing revaluation capability for the income statement.
- Posting and calculating realised and unrealised currency gain/loss on a daily basis would lead to clutter in the GL and could obscure rather than help.
- Using the currency master to calculate unrealised values can cause problems. The rate to use will differ between balance sheet and income accounts.

Our multicurrency functionality has been born out of decades of heavy duty international accounting experience so would be impossible to replicate. Even small businesses we talk to about SaaS have a minimum multicurrency requirement. Makes it difficult for newcomers to compete on a function by function basis.

More detailed comment on multicurrency at http://blog.financialforce.com

dahowlett January 20, 2010 at 12:36 am

lol – I wrote my answer on yer blog post a couple of hours back David !! For some reason Disqus has only just notified me about this (doh!!)

David Turner January 19, 2010 at 7:42 pm

Our take on the multicurrency issue is quite different Dennis. The rash of small cloud players entering the online accounting space are already on the back foot when it comes to adding functionality like this. For example:- Calculating gains/losses on the payable line only considers the balance sheet rather than providing revaluation capability for the income statement.- Posting and calculating realised and unrealised currency gain/loss on a daily basis would lead to clutter in the GL and could obscure rather than help.- Using the currency master to calculate unrealised values can cause problems. The rate to use will differ between balance sheet and income accounts.Our multicurrency functionality has been born out of decades of heavy duty international accounting experience so would be impossible to replicate. Even small businesses we talk to about SaaS have a minimum multicurrency requirement. Makes it difficult for newcomers to compete on a function by function basis. More detailed comment on multicurrency at http://blog.financialforce.com

David Turner January 19, 2010 at 4:42 pm

Our take on the multicurrency issue is quite different Dennis. The rash of small cloud players entering the online accounting space are already on the back foot when it comes to adding functionality like this. For example:
- Calculating gains/losses on the payable line only considers the balance sheet rather than providing revaluation capability for the income statement.
- Posting and calculating realised and unrealised currency gain/loss on a daily basis would lead to clutter in the GL and could obscure rather than help.
- Using the currency master to calculate unrealised values can cause problems. The rate to use will differ between balance sheet and income accounts.

Our multicurrency functionality has been born out of decades of heavy duty international accounting experience so would be impossible to replicate. Even small businesses we talk to about SaaS have a minimum multicurrency requirement. Makes it difficult for newcomers to compete on a function by function basis.

More detailed comment on multicurrency at http://blog.financialforce.com

dahowlett January 20, 2010 at 12:36 am

lol – I wrote my answer on yer blog post a couple of hours back David !! For some reason Disqus has only just notified me about this (doh!!)

Dennis Howlett January 20, 2010 at 3:36 am

lol – I wrote my answer on yer blog post a couple of hours back David !! For some reason Disqus has only just notified me about this (doh!!)

Chris Tanner January 20, 2010 at 9:28 am

How about building the accounting app on the same database that runs the CRM, website and warehouse management system? No need for integrations. No need for multiple software vendors. A couple of examples:

- Your email dropbox/contact relationship trail is accessible in one click from their financial statement.
- Your website, hosted on the same app, tracks leads in from Twitter. You sell some items. At month end you look at the P&L and see revenue sourced from Twitter, without having to life a finger. Who else does that kind of stuff? And that’s only the tip of the iceberg.

That’s pretty unusual and here at Pearl, we’d like to think it’s innovative too. Saves a HUGE amount of time for busy businesses. And time’s a pretty damn useful thing to have more of in the SMB space.

Chris Tanner January 20, 2010 at 12:28 pm

How about building the accounting app on the same database that runs the CRM, website and warehouse management system? No need for integrations. No need for multiple software vendors. A couple of examples:- Your email dropbox/contact relationship trail is accessible in one click from their financial statement. – Your website, hosted on the same app, tracks leads in from Twitter. You sell some items. At month end you look at the P&L and see revenue sourced from Twitter, without having to life a finger. Who else does that kind of stuff? And that's only the tip of the iceberg.That's pretty unusual and here at Pearl, we'd like to think it's innovative too. Saves a HUGE amount of time for busy businesses. And time's a pretty damn useful thing to have more of in the SMB space.

Chris Tanner January 20, 2010 at 9:28 am

How about building the accounting app on the same database that runs the CRM, website and warehouse management system? No need for integrations. No need for multiple software vendors. A couple of examples:

- Your email dropbox/contact relationship trail is accessible in one click from their financial statement.
- Your website, hosted on the same app, tracks leads in from Twitter. You sell some items. At month end you look at the P&L and see revenue sourced from Twitter, without having to life a finger. Who else does that kind of stuff? And that's only the tip of the iceberg.

That's pretty unusual and here at Pearl, we'd like to think it's innovative too. Saves a HUGE amount of time for busy businesses. And time's a pretty damn useful thing to have more of in the SMB space.

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