Innovation Lessons from Hollywood

The movie industry has traditionally resisted change. Yet it has adapted, mainly in response to outsiders who learned how to approach it

Mark Cuban tried to change the way movies are released, putting them into theaters, broadcasting them on cable, and releasing them on DVD in the same short time-frame. Steve Jobs tried to turn iTunes into the world's largest video store. George Lucas tried to spark a revolution in digital cinematography and digital projection.

All of them ran into a barrier they weren't expecting: Hollywood's intense resistance to innovation.

Ever since Thomas Edison and Kodak founder George Eastman helped invent the movie industry in the 19th century, the people who populate it have tended to give the cold shoulder to every new tool, technology, or business model that comes along. From sound to color, television to home video, computer animation to the Internet, each new idea has been dubbed too expensive, too unreliable, just a fad, or a threat to existing business models.

And yet if Hollywood hadn't eventually embraced each of these innovations, it's unlikely that the business would have survived.

Hollywood, it turns out, isn't so different from every other successful, established industry—from health care to financial services to auto manufacturing. Amazing amounts of energy are spent fighting ideas with the potential to expand the business and enable it to survive.

So what's an innovator to do? Looking at Hollywood as a case study for how innovation is successfully introduced—and how it is often resisted—offers five lessons:

•Allies are essential

Innovators who try to go it alone face incredibly long odds. Cultivating alliances can provide crucial input during the development of a new product or service, and can make others feel that the innovation is "safe" and proven. Pixar, one of the pioneers of computer animation, found a key ally in George Lucas, who supported the Pixar team as part of his company in the 1980s and gave them projects to work on. Later, allies in the advertising industry were willing to pay for the company's services to create animations for TV ads. Disney bought hardware and software from Pixar to do automatic coloring of animated "cels," helping to sustain the fledgling company. In 2006, Disney bought Pixar outright—for $7.4 billion.

•Persistence is a virtue

Even the smartest people tend to underestimate the amount of time it will take to hone a new idea and persuade the world to give it a try. Without the tenacity—and the resources—to keep plugging away over years (or decades), innovators inevitably fail. Herb Kalmus, founder of Technicolor, realized in 1915 that it would require a series of "progressive steps" to develop the technology for capturing color on film and playing it back in a theater. Over the years, he had to continually hunt for new investors and cajole his board to bankroll more experiments. In 1939, two pivotal Technicolor movies came out: The Wizard of Oz and Gone With the Wind. Their success helped persuade Hollywood—after almost 25 years—to move toward all-color movie-making. (And Technicolor is still a key part of the movie industry today.)

•Psych 101

A fixation on product development, design, funding, and business plans often causes innovators to overlook something that's crucial: developing a nuanced understanding of the psychology of the people they hope will use their product or service. How do they work today, and what tools do they use? What are their business models, and their worries? In Hollywood, the adoption of digital cameras has been slow not because of flawed technology, but because the manufacturers didn't spend enough time understanding the psychology of the artists who would use those cameras.

•Mastering the demo/feedback loop

Too often, innovators develop a new idea in total secrecy. When they finally unveil it, they're faced with a fusillade of criticism—and constructive ideas for improvements. (And sometimes, their sense of what the market needs is completely askew.

) As Texas Instruments developed its DLP (digital light processor) technology for use in high-end digital projectors in the late 1990s and early 2000s, it mastered what might be called the "demo/feedback loop." The company brought early projector prototypes out to Hollywood, showed them to directors, studio executives, and cinematographers, and sought feedback. Then, it went back and incorporated that feedback in a new version of its projector, and repeated the process. Today, the vast majority of digital projectors used in movie theater projection booths incorporate Texas Instruments' technology.

•Befriend the outsiders

You shouldn't avoid meeting with industry insiders when the opportunity arises, but power players are the people most likely to come up with a long list of objections to a new idea. Industry outsiders, or less-established companies, can prove surprisingly influential friends to innovators. Warner Brothers wasn't among the top tier of movie studios when it decided to take a flyer on some technology developed at AT&T's Bell Labs. The result was The Jazz Singer and the talkie revolution. More recently, Avid Technology, a company developing digital movie editing systems, linked up with Steven Cohen, a talented but not very well-known movie editor, to introduce its technology to Hollywood. Cohen used the system on a 1993 movie, Lost in Yonkers, and served as an evangelist to other editors and directors. By 1996, the first movie edited with an Avid system had won a Best Editing Oscar: The English Patient. (Avid was awarded an Oscar of its own three years later.)

As for Mark Cuban, Steve Jobs, and George Lucas? They're all still making a case for their innovations.

Cuban has tried releasing movies he has helped produce to the Landmark Theatres chain, which he owns, as well as on a cable channel he also owns and on DVD—all in the same week or two. The result is that most other theater chains have refused to show those movies, since cinema owners are accustomed to several months of exclusivity before a new movie appears on DVD or the small screen. Although Steve Jobs has turned iTunes into the leading legal download destination, it still doesn't stock thousands of important movies—from Disney classics like The Lion King to award winners like The Godfather to the biggest box-office hit of all time, Titanic. Movie studios would prefer to sell those titles on DVD (and Blu-ray DVD) for just a few more years. And almost a decade after George Lucas decided to show Star Wars: Episode I using digital projectors, he still hasn't convinced Hollywood that shooting movies with digital cameras, distributing them in digital form, and showing them digitally is inevitable.

Even for billionaires, Silicon Valley CEOs, and A-list directors, innovation isn't always easy.

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