"What kind of economic environment would make the best use of the new digital technologies?
McAfee: One that’s conducive to innovation, new business formation, and economic growth. To create it, we need to focus on five things:
The first is education. Primary and secondary education systems should be teaching relevant and valuable skills, which means things computers are not good at. These include creativity, interpersonal skills, and problem solving.
The second is infrastructure. World-class roads, airports, and networks are investments in the future and the foundations of growth.
Third, we need more entrepreneurship. Young businesses, especially fast-growing ones, are a prime source of new jobs. But most industries and regions are seeing fewer new companies than they did three decades ago.
A fourth focus is immigration. Many of the world’s most talented people come to America to build lives and careers, and there’s clear evidence that immigrant-founded companies have been great job-creation engines. The current policies in this area are far too restrictive, and our procedures are nightmarishly bureaucratic.
The fifth thing is basic research. Companies tend to concentrate on applied research, which means that the government has a role to play in supporting original early-stage research. Most of today’s tech marvels, from the internet to the smartphone, have a government program somewhere in their family tree. Funding for basic research in America, though, is on the decline: Both total and nondefense federal R&D spending, as percentages of GDP, have declined by more than a third since 1980. That must change.
"One program in development is the Maine Network of Innovation and Creativity, which facilitates "requests for collaboration" that connect people both online and in person, using MCC's platform as a hub for shared information. "You might have someone in a very small town who is an expert in puzzle making, for instance, who just happens to be known internationally," says Maginnis. "It would be really important for us to know that here, because there may be a project that's very related to puzzle design in a corporation that would want to know that this expert lives here in Maine. The keywords are 'seek,' 'find,' and 'collaborate.' It's about identifying talents and then creating a mechanism for collaboration.""
"When you look at the four domains described here think incremental innovation for working in the obvious, distinctive innovation for the complicated domain, radical or breakthrough for the complex domain and disruptive innovation when it comes to the chaotic domain. Think disorder when you have no established innovation system in place, just expecting innovation to happen!"
1. Make a list of things we do and take for granted.<br /><br />Sony once heard: "We listen to music in the living room or in the concert hall, that's the way it is".<br /><br />And Karl Benz heard: "Transport is by train for long distances and horse for mid distances, that works nicely thank you".<br /><br />If something is done the same way every day then you can be sure that assumptions are not questioned, that's where you should start.<br /><br />2. Ask "why is it so?" to challenge the assumptions.<br /><br />"Because the HiFi is supposed to be in the living room, period."<br /><br />"Because the horse is the biggest mobile power source known to mankind except for steam engines which are too big for the roads."<br /><br />3. Find new technology or ways that could negate the reasons.<br /><br />"We now have chips and miniature motors, so small that you can carry the HiFi and speakers in your pocket."<br /><br />"I can miniaturise the combustion engine so it fits into a carriage, and it can be stronger than a horse."<br /><br />4. Choose the situations with the silliest counter argument.<br /><br />"Why listen to music when on the bus?"<br /><br />"Why have the freedom to travel 100 km whenever it pleases you?"
In a special issue of the journal Long Range Planning, Charles Baden-Fuller and Mary Morgan say that business models can serve three different purposes. They can describe different kinds and types of businesses. This is critical if we are trying to study them analytically. They can be short-hand descriptions of how firms operate – the primary value here is that you can use the business model to ensure that you have strategic fit across activities. Or they can be role models – you can use them to describe how you want your organisation to function.<br /><br />More recently, Steve Blank has added another use – he says that business models are hypotheses about how your organisation might be able to create value for customers (see my discussion of this here).
"Anybody who's ever worked in a very repetitive, menial job will recognise this suspicious atmosphere – the less enjoyable a job is, the more people there are who suspect you of trying to get out of it. That's reasonable, I suppose, though if people were treated less like robots to begin with, they might not need so much surveillance. But the fabled "innovation" of the private sector never seems to be able to extend itself towards making jobs more self-determining and satisfying. Presumably this is because there's always a danger that self-determining, satisfied people might distinguish themselves in some way, might cease to be interchangeable and might want – indeed, deserve – more than the paltry wage they might be being paid."
Based on my experience, there are at least three (largely unintentional) reasons why managers send mixed messages about innovation.
First, managers need immediate results, often reinforced by short-term incentive plans or the regular expectation of earnings improvements. Innovation may take a long time to produce returns, which conflicts with these short-term requirements. So even though managers know that innovation is necessary, most do not have the patience to wait years for results. Consequently, they say that innovation is important, but they don't back it up with time or resources.
Managers may also fear that innovation will cannibalize current business. I've seen managers slow down investments in new products because customers might switch to something less expensive or longer-lasting, or otherwise impact existing results. In other words, while managers might want to disrupt their competitors, they are less comfortable disrupting themselves.
Additionally, managers are often schooled in slow, continuous improvement. Approaches like Six Sigma have helped companies squeeze out inefficiencies, but also tend to reinforce existing processes with an eye towards doing them better. On the other hand, innovation requires messy experiments instead of methodical analysis. As a result, managers who have grown up in a continuous-improvement culture may be uncomfortable with change that doesn't happen step-by-step.
If you recognize these mixed messages in your organization, here are a couple of ideas for picking up the pace of innovation:
Talk about how innovation is avoided. Politely and respectfully ask your manager or senior team about their commitment to innovation. Share the mixed messages you've perceived and provide examples of missed innovation opportunities. Remember that most managers are not intentionally trying to prevent innovation — so discussing the dilemmas will make decision-makers more conscious of them.
Work on innovation with colleagues. Instead of working alone, partner with co-workers to achieve an explicit innovation goal. For example, one divisional leadership team decided to spend every Friday morning focusing on how they could develop business for "the year after." By carving out the time, and reinforcing to each other the legitimacy of working on something without a short-term payoff, they were able to make more progress than any of them could have made alone.
In today’s manufacturing plants, information systems are usually very hierarchical and depend on predetermined rules. As manufacturing systems become more complex, it will become much more difficult for individuals to spot small deviations and trends within the system. This means that factories, in a way, will need to become “self-aware” in order to support optimized systems. This self-awareness will cause transformations in the way people work. There will be far greater use of simulation to look at the manufacturing systems’ ability to react to changes, such as the introduction of a new product or factory rearrangement. The line between the virtual and physical world will also start to blur, forcing most manufacturing engineers to become more adept at dealing with virtual control systems simulation and other such technologies.
Any new idea polarizes everyone into two camps: those who will benefit and those who will lose.
The losers will do everything they can to change the idea so they’ll lose less. They’ll likely do this by painting the idea as something that is bad.
What does that mean?
It means the thing that made the idea brilliant in the first place is going to get changed. There’s nothing malicious about this: everyone tries to protect their positions when threatened.
But for an innovator, there is really only one defence: you have to motivate those who will win to stand up on your behalf.
Rule of thumb: you need a vocal winner for every loser you can identify, and then a few more on top to account for the political foes you have that are clever enough not to show themselves up front.
We can contrast strategic planning and Strategic Doing in another way. The role of metrics and the process of accountability are fundamentally different. In strategic planning, metrics are set by the small group of people who develop strategic plan. The metrics provide a measuring rod to make sure that people lower in the hierarchy––the people charged with the responsibility of executing––are following the plan. Accountability comes from reporting against these metrics: command and control at work.
In Strategic Doing, metrics play a different role. We use metrics to facilitate learning. Whereas strategic planning is a deductive process of thought and action, Strategic Doing using inductive reasoning. We learn as we do. Metrics provide a convenient tool to accelerate our learning. With them, we figure out what works. Without them, we would be lost. Accountability in Strategic Doing comes through transparency and the mutual interdependence embedded in the relationships of the network. Forget command and control. It does not work in open networks. Mutual trust becomes the fuel for economic transformation.
In a complex economy, the way to think about the future is this:
We can’t predict the future.
But we can learn about the patterns from which the future will emerge.
In fact, while we can’t control the future, we can influence it.
The best way to influence the future is by innovating through experiments.
Networks are a critically important source of great ideas. The lone inventor idea is still with us. Here is what Johnson says about networks:
Ideas rise in crowds, as Poincaré said. They rise in liquid networks where connection is valued more than protection. So if we want to build environments that generate good ideas—whether those environments are in schools or corporations or governments or our own personal lives—we need to keep that history in mind, and not fall back on the easy assumptions that competitive markets are the only reliable source of good ideas. Yes, the market has been a great engine of innovation. But so has the reef.
The term Business Model is one that gets thrown around a lot these days. Even though it might sound like a buzzword to you, it’s important to understand what a business model is, and how they are useful.
One of the confusing things about the business model concept is that there are a wide variety of models of business models, and it seems as though everyone that talks about them makes up a new one. This can be frustrating if you are trying to figure out how to use the concept.
The headline screams like a disaster. It's not really that bad. Yes, Lego took a loss around that size when they decided to shut down their online game, Lego Universe, but they also learned some valuable lessons.
Jyllands-Posten, a Danish newspaper, did a story on the closing of Lego Universe, a so-called Massive Multiplayer Online Game (MMOG). It was a good article with interesting comments from Lego executives that were useful to extract some lessons on (open) innovation that go beyond Lego.
Lego admits they did things wrong with Lego Universe. A big mistake was that they required people to buy a DVD in a store before they could start playing the online game. The reason for this was that extensive research had shown Lego that kids really want a physical product that they can touch and feel.
Ok, the use of market research sounds fair enough, but Lego's approach still highlights an important lesson on innovation. Extensive research can be dangerous.
In this case, it not only created a barrier for using the game although it should be noted that successful MMOG's use a similar model. However, it seems as if Lego also started to rely too much on research as they allowed it to impact the game as well. This is in stark contrast to Apple for which Steve Jobs famously stated that they do not use market research to create their products.
I think companies need to find a proper balance on market research. It can be relevant, but it is interesting that Mads Nipper, a Lego executive, notes that they should probably have gone a little wild and "just" have sent out the game, listen to the users and then develop it further from there.
The second lesson to extract on this story is that you cannot do everything by yourself. Even though Lego is a pretty big company with around $3 billion in revenue and healthy profits, Lego early on realized they lacked key competences and thus needed a partner. Some companies with big pockets might be tempted to just do things themselves although the open innovation mindset seems to be growing in most industries.
Hopefully, failures like this one will not allow companies - in this case Lego - to fall back into the trap of believing that since the partner approach did not work, they should just do everything by themselves in the future. I don't think so, but executives and open innovation leaders must be aware that an event like this might make internal open innovation skeptics stronger.
A third lesson is that you need to take chances. Yes, Lego lost a big chunk of money, but in the long run, you need to take chances to win. Perhaps Lego even learned that they should have taken even bigger chances - Nipper's comment on going a bit wild - and this lesson might help them on future challenges.
If you like to read more about Lego and their open innovation initiatives, you should check out this blog post: Crowdsourcing meets Open Innovation - You gotta love Lego!
One of the greatest myths of our time is this: if you create something original, something that’s genuinely a breakthrough, you have a better than average chance of getting rich. For most businesses and most entrepreneurs, this notion is something of a fantasy. If you think back over the great corporate successes of the last two or so decades, you’ll find a striking absence of any great breakthroughs significant enough in themselves to create huge wealth. On the other hand, many endeavours that have become hits are at best incremental improvements of other things.
It is a story I’ve found repeated time and time again, across sectors, countries, and cultures. Hit products and services are almost never genuinely original.
Some readers will be familiar with the top-selling drug of all time, a product called Lipitor, by Pfizer. It has broken all records in the deeply research-dependent drug business. But Lipitor wasn’t all that new. It was the fifthdrug in its class, and was just a bit stronger than what came before. Yet it has eclipsed all its competitors.
Ridley does not have much faith in science as a source of innovation. Most innovations comes through tinkering and trading ideas. Science and law come after the fact to codify what was learned. In effect, science may support innovations and inventions, but it is not the causal agent. What you want is trade and the freedom it brings. I share his vision. After all, Russians had top-notch scientists, but they were still unable to innovate in most fields.
He sees a cycle, where innovation creates value which is then captured and killed by bureaucrats or obsolete corporations. But innovation always reappears elsewhere. He believes that the best place to be right now is on the Web. One day, governments and corporations will kill Web-based innovations, but by then, a new frontier will have opened.
Ridley predicts the fall of corporations and the rise of bottom-up economics where individuals freely assemble to create value. Apple, Google and Facebook will soon collapse, faster than comparable companies a century ago.
And then I realised something.
My reaction to this music is probably little different to the reaction that conservatives have when confronted by corporate innovators.
Their minds, trained for years in accepting things in a certain way, find the new stuff modern. Chaotic. Terrible.
And, because they’ve not had much practice in accepting new things, it is probably unrealistic to imagine they’ll see the competence and artistry that underlies decent innovation execution.
The large innovative move from an established company, or the disruptive startup that become a billion dollar company at the founders first attempt, is the exception. There is no silver bullet, a single thing they did and which we can replicate.
Most of us need to play a longer game if we want to see success. Each time we roll the dice we need to ensure that the odds move a little further into our favour by:
being frugal with our resources
moving to a position where we have a better chance of success
make the most of the opportunities that are presented to us
learning from our previous mistakes
So, the question is: What are the most critical intangible assets in your company? What are you doing to cultivate them? Who is responsible for managing the invisible that creates the intangibles?
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