Connected Collective Innovation

Mass Innovation

2007-11-16T10:07:00.000-06:00

Great article in the October 11th issue of The Economist entitled "The age of mass innovation". The article talks about the real threat America faces in terms of loosing its innovative edge to countries like India and China. This is not unlike the threat American manufacturers faced in the early 1980's when Japanese companies were winning the war on cost and quality. Edward Deming warned us, but it was the Japanese who listened. Will history repeat itself when it comes to innovation? My experience has been that the creative potential and talent exists within most countries and organizations, but few are successful at harnessing this potential. I think this has allot to do with complacency that comes with prolonged success. History has taught us that there is no finish line and countries and companies must always be adapting if they don't want to become extinct. The article quotes Elon Musk whose equation for success is "talent times drive times opportunity". How we as a nation can more effectively link the people with talent and drive with the opportunities will determine our future success.

Five Common Mistakes in Innovation

2007-10-23T09:05:00.000-05:00

Below is a summary of an interesting article about how companies that do not have both a clear plan for and commitment to sparking innovation can get into trouble.
“Five Common Mistakes in Innovation” by Dev Patnaik
http://www.businessweek.com/innovate/content/oct2007/id20071019_786269.htm

• Over-reliance on pilot initiatives
"We'll be more innovative if we do more brainstorming sessions."
In an attempt to have a quick win, some companies initiate projects that focus on delivering a near-term improvement. Alternatively, they latch on to a single innovation technique, such as brainstorming. However, companies that are successful innovators are taking a portfolio approach to innovation, working with multiple consultants and using multiple methods so that innovation evolves from the integration of various ideas collected from multiple ideation methods.

•Unhealthy fascination with unique charismatic examples
"Steve Jobs is so cool: We need to be more like him."
Charismatic visionaries such as Steve Jobs or Sir Richard Branson are nonexistent in most companies. So, the catalyst for innovation efforts within companies can not be dependent upon one charismatic individual.

• Misapplication of other companies' approaches
"P&G is using a 'Connect and Develop' strategy, so we should, too."
It can be dangerous to emulate the approaches of other companies. P&G implemented what they call their "Connect and Develop" strategy, whereby P&G connects with promising entrepreneurs in the hopes of commercializing the ideas they present.
"Connect and Develop" is a sound strategy for P&G, because of the categories they play in, and the DNA of the company. Just because something works for P&G doesn't mean it will work for everyone.

• Descent into a cycle of self-recrimination
"Our people just aren't creative enough."
Innovation planning teams often benchmark other companies only to come away feeling that their innovation efforts are not effective.
Companies such as 3M are instead looking internally and focusing on returning to what has made them great in the past. They are examining past moments of greatness, determining which activities spawned these moments of greatness, and then figuring out how to do more of that. In short, capitalizing on their organizations' strengths to create approaches to growth appropriate to their culture.

• Resignation to superficial changes
"Let's just paint the walls purple."
After benchmarking several Silicon Valley companies, one firm noticed that many companies it admired had yellow and purple walls. The team went back and painted the walls of their offices yellow and purple, thinking this might actually make them more innovative. While the environment can affect creativity, such initiatives alone usually aren't enough to change the DNA of the organization.

The Power of Observation

2007-10-18T14:41:00.000-05:00

An article in the Autumn 2007 issue of Strategy+Business entitled “See for Yourself”
http://www.strategy-business.com/press/article/07301?pg=0 discusses the importance of managers spending time in the field. This is especially important from an operational perspective for understanding what’s working and what’s not working within your own company. However, it is also important, from an innovation perspective, to take time to observe competitors as well as the customers who currently use or potentially could use your product. Successful innovators become true students of their industry.
One example of this is when Honda engineers visited the guest parking lots at Disney World to observe guest behavior and potentially uncover problems. They noted that people were struggling to lift awkward items such as baby strollers into and out of car trunks. Inspired to solve this problem, the team lowered the trunk opening to be flush with the car bumper. The lower opening is now a common feature among sedans, but in 1989, innovations such as this helped the Honda Accord move to first place in U.S. unit sales.

Managing Innovation

2007-10-17T10:32:00.000-05:00

The following is a good article about managing innovation. http://online.wsj.com/article/SB119023924039732943.htm
In order for innovation to work in any company, a culture of innovation must exist. Smaller companies inherently dive innovation because that is what’s required to survive. But as the smaller companies begin to change the ecosystem, can larger companies adapt or are they destined to become extinct? Anyone with an entrepreneurial spirit who is attempting to make changes within a large established company that does not sense the urgency for change will undoubtedly feel frustrated. Changing the culture to be receptive to innovation is not easy, but the article outlines four main factors that need to change in order to help a corporate culture become more innovative:
1.Have an awareness of attitudes – You have to have a certain degree of discomfort in your business to be willing to make the changes that are necessary.
2.The ways you think – Most people are trained to think analytically, but analytical thinking isn’t very good for trying to envision a new future. Consider “design thinking” instead.
3.Processes and tools – It’s not enough to just think differently, you have to build processes and support people by providing time for them to think on their own.
4.Managing risk – You have to have a tolerance for risk if you are going to try to be innovative. A lot of companies just do not have that tolerance.

Scenario Analysis

2007-10-16T13:46:00.000-05:00

I came across this article about preparing for the future and think it provides a good basic framework for performing scenario analysis. This is a tool that is often underutilized as it pertains to strategy and innovation efforts.

http://www.shambhalainstitute.org/resources.html#

Step 1. Refining our sense of purpose

Scenarios provoke genuine learning when they answer genuine concerns; otherwise, they are merely an academic exercise. The concerns should be compelling, shared by the entire group and beset with uncertainty.Articulating our focus is not a trivial task, especially because the participants are, ideally, diverse people with a common interest. As with a vision exercise, it requires moving past the concerns that people think they have to the concerns that truly motivate them.

Step 2. Understanding Driving Forces

Scenarios are built upon the distinction between two types of driving forces. Predetermined forces are reasonably predictable. We all know, barring unforeseen calamity, how many 20-year-olds will exist in any country nineteen years from now. We can assume that the pace of technological growth will continue, with costs of new devices falling at a fairly predetermined rate.

But the vast majority of forces at play are uncertain. We can't know the answer, but we can become far more aware of the reasons that events might move in one direction or another, and the implications of their movement.

Step 3. Scenario Plots

Developing scenarios involves considering "classic stories" in terms of the current situation. (Indeed, a few researchers are discovering that system archetypes and this stage of scenario planning are devilishly complementary.)

As participants, you create several stories of your own, trying to make each evoke a future that pulls you past your own blinders. As you talk, you enrich the plots, developing sketches of what might plausibly happen.

You don't care how likely or unlikely each story may be. You care about whether it illuminates your understanding. In fact, if a substantial drop in the demand for your product or service is undeniably plausible - even though the chances against it are 100 to one - you owe it to yourself to create a story around that event, to spark the necessary creativity and preparation that you might or might not need, but which is worth developing in any case.

Step 4: Strategy, rehearsal, and conversation

This may be the most important step, and, regrettably, the most often ignored. Having developed two, three or four scenario plots, you now consider each of them. What strategies would be effective no matter which of those futures came to pass? What would it feel like to live in those worlds? Some groups go so far as to rehearse the scenarios, as though they were pieces of improvisational theatre, with each participant taking the part of a different key actor. It's also important to describe the scenarios to others-to get insights from the rest of the organization that may make your pictures of the world richer.

You may find that your scenarios themselves go through several iterations. That's all for the better. When you are done, you will have a language you have created, in which collective assumptions can be voiced. "How will we know this particular world is coming?"

Most importantly, you will ask: "What decisions can we make now that are robust- so that no matter how the future unfolds, we will be glad we made that decision?" Because you have anticipated several possible futures, you can ask that question of your imagination.

Mass Customization

2007-10-08T15:05:00.000-05:00

What’s one thing sophisticated, discerning consumers have in common? They don’t want to be perceived as being common. Mass customization is defined as the use of flexible manufacturing systems that allow customer-designed products to be produced at costs comparable to mass produced items; and companies who can execute this model can offer their customers truly unique products. Two companies that recently caught my attention are Inmod (http://www.inmod.com/modern-bedding.html) and Water Werkz (http://www.waterwerkz.co.uk/). Inmod has a service which allows customers to design their own duvet covers. Customers choose from a growing variety of embroidered patterns as well as colors and fabrics to design their duvet just the way they want it.
Water Werkz has a vending system that provides drinks that are blended on demand, thus allowing customers to create their own distinct mixes.

Innovation Archetypes

2007-09-28T08:23:00.000-05:00

A new report from two leaders in the study of innovation argues that companies can not acehive sucessful innovation by simply replicating the approach used by other successful innovators.
http://www.innosight.com/research_papers.php#documents/InnovatingonYourOwnTerms.pdf
The reseach indicates that there are a small number of cultural and operational factors that companies use to drive innovation. The authors of the report call these combinations the "archetypes" of innovation. The four archetypes are:
1. The marketplace of ideas - a bottom-up approach in which employees generate new concepts, lobby for support, and then test a new product in the market. This is the Google approach, which works because its staff are creative and work in an encouraging environment.

2. The visionary leader - This model revolves around a senior executive who understands the future better than customers may. An example of this is someone like Apple's Steve Jobs, who spots and champions high-potential concepts, processes or products.

3. Innovation through rigor - Companies under this archetype create processes designed to produce results systematically. Samsung is one example, where organisational emphasis is on design strength, R&D spending, and cross-functional teams. The firm succeeds through a mix of senior executive proritization and tem processes. GE would be another example where the firm has a dynamic innovation portfolio review process. They actively manage their innovation pipeline with senior management and determine which ideas to continue funding and which to cancel.

4. Innovation through collaboration - This archetype is more externally-oriented, featuring companies that team with outside firms to evaluate opportunites, and quickly select the one to bring to trial. Collaboration organizations seek to gather "innovation intelligence" by building formal relationships with other firms that can help them shape the innovative concept and possible help to implement the solution as well.

Innovation out of Necessity

2007-09-26T15:41:00.000-05:00

General Motors and the United Auto Workers union are closing in on a new labor contract that could alter the way the Detroit-based carmakers provide healthcare benefits for their workers. GM is proposing to transfer about $55bn in future healthcare liabilities to a union-managed fund, known as a Voluntary Employees' Beneficiary Association (VEBA.

Benefits for retirees alone makeup more than half of the $20 per hour gap between wages and benefits paid by the Detroit carmakers and their rivals based overseas.

GM has pushed hard for the creation of the VEBA as a replacement for an open-ended guarantee of benefits for UAW retirees. Instead of relying on the auto makers for retirement benefits, the UAW would oversee billions of dollars provided for retirees, and it would have to decide to trim benefits if the fund was running low on money. VEBAs were created to pre-fund retiree health obligations for people covered under collective bargaining agreements. Employers could form these for other employees as well, but they would not receive a tax deduction, so nobody is doing that.

Given the recent GM/UAW discussions, I was curious as to what other organizations are doing to control healthcare costs. In addition to VEBAs, two additional healthcare provider options are emerging:

Competing Managed Care Programs
As health-care costs continue to rise, many companies are turning toward managed-care to help them control their medical-benefits costs. The majority of companies that engage these methods for their active work forces extend them to their retiree population as well.

However, the Ohio Retirement Systems,has implemented a managed-care plan that uses two competing health-care networks to deliver high-quality, cost-effective care to retirees and their dependents. For this particular plan, not only must the health-care networks—Aetna and Blue Cross/Blue Shield—compete in the initial selection process, they must continue doing so in the day-to-day care of plan participants.

The plan, which covers non-Medicare, nonprescription-drug claims in Ohio, uses the point-of-service model. Health-plan participants have the choice of staying within their chosen network or going outside the network each time they seek care.

The two networks provide identical benefits. They compete for plan participants on the basis of quality, access, service, and cost. As a result, participants receive both cost savings and improved quality. Approximately 85,000 retirees and their dependents participate in the managed-care plan.

Healthcare Coalitions
Instead of waiting for federal health-care reform to address the critical issue of soaring costs, employers in many communities are joining forces to reform the system by forming healthcare coalitions. Through their combined purchasing power, these coalitions are changing the way that health care is purchased and delivered in this country.

In Minneapolis, for example, the HR executives of several large, self-insured companies have pressured local providers to put greater emphasis on the quality and cost-effectiveness of care. A major aim of the coalition is to cut back on the care delivered by expensive specialists, and instead to rely more heavily on primary-care doctors.

At last count, there were close to 100 of these employer-driven coalitions, according to the National Business Coalition Forum on Health in Washington, D.C.

I'm Back

2007-09-25T12:51:00.000-05:00

I took a break, but now I will be back to posting regularly.

I had an opportunity to attend the 2007 Frost & Sullivan Growth Innovation and Leadership Conference last week and was a featured Though Leader. Here are some key takeaways from the conference:
•Look for mega trends. Listen to for the “weak signals” on the periphery

•Combine the data (market research, voice of customer, etc.) and look for possible intersection points – what are the possible impacts?

•Need to understand the customers’ ecosystem – How do they measure value?

•The best opportunities for growth and innovation come from seemingly unrelated industries or from the convergence of unrelated technologies

•One definition of innovation is “significant movement along a main parameter of customer value”

•Customers know what they want, but they don’t know what’s possible. Therefore, the voice of the customer should be only a small part of what influences innovation decisions

•The reason to innovate is to affect the business result

•HP has a Center of Innovation which proves the viability of new ideas through market and customer validation. Once they determine how the company will make money with the new product or service, they then begin to solicit sponsorship and funding as they continue through the validation process. This helps to facilitate the handoff from ideation to product development

•GE has a dynamic innovation portfolio review process. They actively manage their innovation pipeline with senior management and determine which ideas to continue funding and which to cancel. They have a relatively open set of criteria for determining if projects will continue to receive funding. They feel comfortable taking a long-term approach and depending on the situation, it may be acceptable to be investing in a product that may not begin to generate revenue for ten years. They also allow for flexibility and can adopt new projects mid-budget cycle.

•Several companies talked about experiencing failures due to “rushing to innovate”. They were not in touch with the marketplace, could not demonstrate the value proposition to the customer.

•Several leaders cautioned about anticipating what will occur after the product/service launch

Ten Types of Innovation

2007-08-17T07:58:00.000-05:00

Doblin, an innovation strategy firm based in Chicago, has a list (www.doblin.com) of what they deem to be the Ten Types of Innovation.

I like this list because they include process and delivery as innovation categories. I think too often the term innovation is heavily associated with products and technologies. However, companies don’t need to be designing and or producing cutting edge products to be innovative. A company’s competitive advantage can come through innovations in the less glamorous world of operations and logistics. Wal-Mart is an example of this. They have innovated in the area of inventory management. This has allowed them to place the correct products in the stores, at the right time, for the least amount of cost.

Amazon Fresh

2007-08-07T16:08:00.000-05:00

Amazon.com has launched a grocery-delivery service called Amazon Fresh. Currently, the service is limited to serving select areas of Seattle. Webvan,an earlier online grocery delivery company, previously serviced the Seattle market along with eight additional major metropolitan areas. The company had plans to serve at least 26 cities before going bankrupt in 2001. Webvan burned through close to a billion dollars chasing an aggressive and poorly planned growth strategy. Other online grocers such as Peapod based in Chicago and Fresh Direct based in New York City have pursued more metered growth within limited markets. Slowly proving and perfecting the business concept has allowed these companies to understand the intricacies of the local markets.

I believe there is still a great deal of untapped potential in the online home delivery market. The trend for the majority of the aging population is to stay as independent as possible. That means staying in their homes versus moving to a more expensive assisted living facility. Home delivery of groceries and medications may be a tool that caregivers will adopt. Additionally, the delivery of prepared meals for people with dietary restrictions could be incorporated into this model.

Corporate Open Innovation

2007-08-01T14:33:00.000-05:00

I came across an interesting article about open innovation by David Simoes-Brown entitled “Corporate open innovation – if it's so good why isn't everyone doing it? “ http://www.nesta.org.uk/informing/articles/corporate_open_innovation.aspx

He talks about how Corporate Open Innovation (COI) enjoys high profile proponents, such as Procter & Gamble, Philips, the BBC, Nokia, and Apple. Technology companies such as IBM, HP, and Cisco are starting to adapt their internal product lifecycle and development to accommodate open innovation. All these companies explore external collaborators to originate or develop innovations. This is different from traditional 'closed' innovation, where in-house research and development (R&D) is the primary catalyst behind the introduction of new products and services. However, these companies are in the minority when it comes to the adoption of COI practices. Why is that?
The following are some of the reasons most often cited:
Intellectual property. Who will gain reward from the exploitation of patents?
Complexity. Managing diverse teams is a key issue for open innovation projects.
Interdependence. Understandably, many companies are reluctant to place their futures in the hands of others. The emotional issues of power and control.
Culture and tradition. Companies have much invested in their innovation processes which are tried and tested.
Psychology. It can be difficult for a business steeped in the principles of competition to embrace cooperation. There is a suspicion of outsiders and a habit of secrecy.

Through much of the literature I have read, it appears that the results for early adopters of open innovation have been favorable. However, in order for companies to feel more comfortable utilizing COI, there will need to be a supporting infrastructure designed to reduce the complexity of coordinating efforts within a collaborative environment and address legal considerations pertaining to intellectual property rights. Regarding the issues of interdependence ,culture, etc., companies will perhaps need to reexamine their assumptions around what they believe their core competencies are. Companies who believe R&D differentiates them may be correct to a point, but I would suspect that their ability to market and implement the ideas generated internally is what truly gives them a competitive advantage.

“Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats.”
Howard Aiken
US computer scientist (1900 - 1973)

InnovationJam

2007-07-31T08:17:00.000-05:00

Open innovation is gaining acceptance as companies realize they need to look beyond their own research labs for great ideas. One of the companies embracing open innovation is IBM. Their InnovationJam held in 2006 brought together 150,000 people – including representatives from 67 external groups - from 104 countries to spark and build ideas. “Innovation today requires a collaborative, transparent approach - not building walls around your own company and seeking ways to keep others locked out,” says IBM Vice President Communications, Exploration, David Yaun. "By in effect running the largest focus group ever, we benefit from unprecedented shared insight. It helps us to be smarter, to ensure we anticipate, not react” “Ideas go round the globe in seconds anyway, whether you like it or not. Companies today compete on the basis of their ability to execute these ideas.” “It means that the nature of innovation has changed. The winners will be businesses that are collaborative, open, global and multi-disciplinary in their approach.”

How the InnovationJam worked:
Phase One: Idea Generation - In 72 hours, IBM employees, clients, business partners and even family members came together online and produced 46,000 ideas.
Phase Two: Idea Refinement - Jammers discussed how to improve and validate the top ideas, rating which ones had most impact and potential for near-term success.
Phase Three: Development - IBM invested $100 million to incubate the top 10 ideas.

InnovationJam builds on a highly successful series of internal "jams" IBM has held with employees annually since 2001, as well as the company’s collaborative Global Innovation Outlook process, which brings together hundreds of organizations worldwide to identify key innovation opportunities in select business and societal areas.

Social Networks

2007-07-30T14:24:00.000-05:00

Ron Burt is Professor of Sociology and Strategy at the University of Chicago, and an expert on collaborative networks and how they lead to innovation. Professor Burt argues that social networks are key to innovation, and personal and commercial success. People are not yet competent in how to take advantage of the capability of social networks because we continue to work in organizational silos.

Informal relations have always been with us, and they have always mattered. However, what is new is the range of activities in which they matter. Coordination through networks of informal relations creates competitive advantage. The advantage is visible when certain people or groups enjoy a greater degree of personal and financial success. People do better because they are better connected with other people; they are obligated to support others and are dependent on trusting and exchanging with others.

People that live at the intersection of various social networks:
• Have a greater chance of innovation
• Are predicative of who does well
• Are more likely to get ahead than their peers
• Are exposed to a broader range of ideas.

Vator.tv

2007-07-25T10:11:00.000-05:00

Online company www.Vator.tv describes itself as “a catalyst for innovation”.

Vator.tv is a professional network and marketplace for ideas and businesses. People pitch their ideas, businesses, skill sets or needs, such as capital, partner or staffing requirements, mainly through video. The site acts as a network to exchange knowledge and collaborate with other people who can help to take ideas to the next level.

Users sign up for a free account. They then create pitches for their ideas, projects or businesses by uploading video, images, PPT or PDF files. They can choose to share their pitches with a personal network or with the entire Vator.tv community.

The site also has a competition section which is a place to find and search for business or product ideas submitted to the latest contests held by Universities, venture capitalists, angel investor groups, conferences, and companies. Competitions typically last for three months and are designed to attract a particular type of business or product idea.

NESTA

2007-07-24T07:45:00.000-05:00

NESTA is the National Endowment for Science, Technology and the Arts based in London. http://www.nesta.org.uk/index.aspx NESTA is the largest single endowment devoted exclusively to supporting talent, innovation and creativity in the UK. Their mission is to transform the UK’s capacity for innovation. NESTA invests in early stage companies, inform innovation policy, and encourage a culture that helps innovation to flourish.

They believe what sparks innovation is “a clash of ideas, a fresh perspective, and a fusion of expertise. Innovation occurs at the point where disciplines, organizations or cultures collide”. NESTA wants to encourage the collisions that can stimulate innovation.

NESTA is focusing on three core themes.
• Interdisciplinary collaboration - focusing on academic or industrial research activity that creates innovation through the interaction of two or more disciplines or sectors.
• Corporate innovation - working with big companies to stimulate innovation by collaborating with small companies or individuals.
• Online communities – harnessing the participatory culture of the web, in particular through open-source knowledge networks and social networks, for social good.

"Everything we know about innovation tells us that it is not an isolated experience and that partnerships are essential...” Jonathan Kestenbaum, NESTA CEO

The Holy Grail of Technology Innovation?

2007-07-18T08:56:00.000-05:00

An article in the July 18, 2007 edition of the Wall Street Journal entitled “Batteries in Gadgets Can’t Support All The Gee-Whiz Adds” talks about how batteries aren't keeping up with the rest of electronics. Experts believe that things are unlikely to change anytime soon and they may get worse before they get better. Ever increasing improvements in computer chips have allowed the consumer-electronics industry to add features to products much more quickly than the battery industry can accommodate.

The Lithium-ion battery, used in consumer electronics for the past 10 years, is the best solution thus far. Though it appears there are no eminent technological breakthroughs, battery makers are working on achieving smaller advances. For example, efforts are under way to engineer lithium batteries so they generate less heat. Excessive heat build-up can lead to battery fires.

Although Lithium-ion batteries have been commercially available for some time, their use in applications that demand high current flows has been hampered by temperature related problems. Thermal Management of Lithium-ion batteries plays a significant role in large power applications. One of the side effects of exposure to high temperature is fast aging and accelerated capacity fade of the Lithium-ion battery pack.

Researchers at the Illinois Institute of Technology Technologies (IIT), Chicago, IL, have proposed and demonstrated successfully a passive thermal management system using what they call a phase change material (PCM) for Lithium-ion batteries. Start up company All Cell Technologies, LLC http://www.allcelltech.com has licensed the IIT PCM technology and is currently working with MicroSun Technologies, LLC on developing high power Lithium-ion battery packs for various portable and transportation applications. The thermal management system absorbs the heat from lithium ion batteries, rendering them safe and effective for a variety of applications.

Disruptive Innovation In Action

2007-07-17T16:33:00.000-05:00

An article in the July 16, 2007 issue of Crain’s Chicago Business talks about Chicago's biggest doctors' group pulling out of a deal with Walgreens to oversee in-store clinics. Oak Brook-based Advocate Health Partners signed with Walgreens last year to supervise the Deerfield-based pharmacy chain's Illinois clinics. The pact, which was supposed to bring more referrals to Advocate's 2,900 physicians, appears to have fallen short of expectations and has caused bad feelings among some of the doctors.

While Advocate claims the move was due to lower than forecasted patient volumes, I tend to believe this is more of a defensive move because the doctors fear a loss of patients to this disruptive innovation.

In St. Louis, SSM Health Care, with eight hospitals and nearly 2,000 staff physicians, had agreed to help supervise Take Care clinics in the area and review medical records to ensure care was appropriate. Take Care was to refer patients with more serious healthcare issues to SSM doctors. However, It appears physician pressure pushed SSM Health Care to terminate its patient records review agreement with Take Care. "In every market we go into, we face a small, vocal minority of doctors who are frankly -- largely for economic reasons -- concerned with our convenient care centers," said Peter Miller, chief executive of Take Care. "They're worried we'll hurt their practices, but experience says we won't. Still, SSM's doctors made a lot of noise, and out of respect to the physicians, (SSM) had to listen."

Mr. Miller, estimates about 20 percent of local physicians support retail clinics, 70 percent “don't love” the concept though they recognize its importance, and 5 percent to 10 percent are threatened by them.

Service Innovation

2007-07-16T08:57:00.000-05:00

Service innovation, the less popular sibling of product/technology innovation, is receiving more attention as companies are shifting their focus from products to services. The latest data from the Bureau of Labor Statistics (published in December, 2005) projects that the service-providing sector of the U.S. economy will see the highest employment growth by 2014.

In March of 2007, the Service Research & Innovation Initiative (SRII) was launched. http://www.thesrii.org The SRII is a Silicon Valley nonprofit founded by executives at IBM and Oracle.

The SRII is striving for the following commitments:
•Corporations – Commit to funding a permanent service R&D budget; active involvement in the SRII community and work with government and academia to develop service research.

•Governments – Sponsor research in universities and applied research centers; get involved in the SRII community; work with industry and academia to develop service research.

•Academic Institutions – Increase core research in services, establish curricula, programs and degrees for service disciplines (e.g. management, operations, design, etc.); collaborate with industry to develop research in commercially relevant areas; get involved in the SRII community.

There is definitely a need for breakthroughs in service innovation. A recent Bain & Company survey documented the extent of the customer service problem. The customers of 362 companies were asked to rate their customer experience. Only 8% of them described their experience as “superior”, yet 80% of the companies surveyed believe that the experience they have been providing is superior. It appears there is quite a disparity between the company’s’ perception of service and the customer’s.

The Ultimatum Game

2007-07-10T09:00:00.000-05:00

This next topic may be a bit of deviation from the topic of innovation, but I think there may be a connection here; and this blog is all about making connections. The July 5, 2007 issue of The Economist contains an article entitled “Money isn’t everything” which deals with the ultimatum game. The game is played between two people. One person has a pot of money they divide between the two players. If the offer provided by the first player is not accepted by the second player, then neither player gets to keep any of the money. The player with the money decides what percentage of the pot to offer the other player. If the player with the money decides to split it in an equal or close to equal amount, the second player usually accepts the offer. If the offer is considerably less than half of the pot, then the second player usually rejects the offer. Why would the second person reject free money, no matter how little? The conclusion of the study is that people really strive for “relative rather than absolute” prosperity. The second player would rather accept less themselves then allow a rival to get ahead.

This reminded me of the topic of swarm theory I discussed last week where I questioned whether a group of individuals could work collectively to achieve a common goal with no oversight – a self-organizing organization. This study seems to support my suspicion that unless the rewards were equally distributed, greed or the instinct to achieve social dominance would derail the collaborative efforts. I think organizations as a whole tend to exhibit these behaviors as well – perhaps leading to a less than optimal solution than could be obtained through open innovation. Could collaborative innovation between say three pharmaceutical companies be possible to develop a drug that would immediately stop the progression of cancer? I think it’s possible if we take into consideration human motivations. Perhaps a consortium of the resources from the three companies could be organized under a separate stock where each would own an equal share of the new venture. What are your ideas?

Research Dollar Allocations

2007-07-09T16:00:00.000-05:00

The July-August 2007 issue of Harvard Business Review discusses the results of a recent study conducted by the Industrial Research Institute (IRI). The IRI found that although U.S. companies are spending more on R&D, they are putting that money into new project development rather than basic research. The article defines basic research as “exploration of fundamental principals that’s guided by the organization’s strategic goals”. The IRI surveyed 99 firms that do research. While more than a third said they are increasing expenditures on new projects by at least 5%, only 14% reported plans to increase basic research. In other words, companies are not investing in the types of research that are important to long-term innovation efforts. Discoveries made during basic research, although not necessarily applicable to current projects, open up avenues for further investigation which in turn may seed future projects. For the last five years, companies in the study cited “growing the business through innovation” as their biggest problem. However, their allocation of R&D dollars does not support a healthy balance between short-term and long-term growth through innovation. It would be interesting to see a similar study done with non-U.S. companies. I would suspect that European and Asian-based companies would have a better balance between long-term and short-term goals. Do the results of the IRI survey reflect the allocation of R&D dollars in your company?

Swarm Theory

2007-07-02T10:30:00.000-05:00

An individual ant or bee isn't smart, but their colonies are. The study of swarm intelligence is providing insights that can help humans find solutions to complex problems. The June 2007 issue of National Geographic has an interesting article on swarm theory.

The article quotes Deborah M. Gordon, a biologist at Stanford University. "Ants aren't smart," Gordon says. "Ant colonies are." A colony can solve problems unthinkable for individual ants, such as finding the shortest path to the best food source, allocating workers to different tasks, or defending a territory from neighbors. As individuals, ants might be tiny dummies, but as colonies they respond quickly and effectively to their environment. They do it with something called swarm intelligence.

One key to all of this is that no one's in charge. There are no leader ants directing workers. The queen plays no role except to lay eggs. Instead of a formal management hierarchy the colony relies instead upon the interactions between individual ants, each of which knows its role and executes independently. Scientists describe such a system as “self-organizing”.

Swarm intelligence is a problem solving technique based around the study of collective behavior in decentralized systems. Swarm intelligence systems are typically made up of a population interacting locally with one another and with their environment. There is normally no centralized control or leadership structure to dictate how individual members of the group should behave. It is the accumulation of all the local interactions between individual members that often lead to the emergence of global behavior.

I have a couple of thoughts about this. First, utilizing swarm intelligence as a method for solving complex problems such as routing trucks or scheduling airlines is another form of biomimicry. Nature will become more of an inspiration for human innovation as we take the time to uncover the solutions to problems nature has already solved.
Second, I wonder how close human organizations can come to achieving self-organizing structures. The program Best Buy implemented may be a step in this direction. The company has invented a system called ROWE — Results-Only Work Environment — in which you go to the office only when you want to. The end result — how much you get done — is all that matters. So, each individual worker knows what they need to accomplish and does so with minimal oversight.

However, the ants and bees always have the same basic missions-find/produce food, find/build shelter, and reproduce – all in an effort to sustain and grow the colony. A human organization can essentially be broken down into those same basic elements. A company has the mission to produce/provide a product/service in order to sustain and grow the company. With that basic framework in mind, could individual workers form a consensus on the direction of the company? Would a self-organizing organization be possible? I think this would be possible to a point. Perhaps with a small group of like-minded people who share equally in the rewards? One aspect of human behavior that probably does not exist among the ants and bees is the existence of greed. Humans typically want to maximize their personal well-being over that of the community. Perhaps with the proper incentives, acting in the best interests of the collective and the individual would be one in the same. It would be an interesting experiment.

Characteristics of Successful Innovators

2007-06-28T08:41:00.000-05:00

A recently published white paper by futurethink http://www.getfuturethink.com/innovation/index.php?cPath=180_186 talks about the four capabilities for effective innovation based on their study of successful innovators across a variety of organizations. Here are the four capabilities and the ways in which organizations demonstrate them:

1.Ideas. The best innovators develop a stream of original ideas based on their business objectives.
a.Think Forward. They look to the future to leverage macro trends.
b.Enhance. Make improvements to existing solutions.
c.Discern. Identify unmet needs of customers.
d.Break the Rules. Develop new industry paradigms.
e.Partner. Collaborate with third parties

2.Strategy. Successful innovators lay a clear foundation for innovation objectives.
a.Define. Determine what innovation means to their organization.
b.Aim High. Develop a vision around the role of innovation within their organization.
c.Select Governance. Assign ownership and establish accountability
d.Establish Metrics. Select metrics to measure innovation efforts.
e.Mobilize. Chart specific initiatives to foster innovation.

3.Process. Successful organizations know how to move their best ideas forward.
a.Coordinate. Ensure consistent facilitation of innovation projects
b.Invite Ideas. Create methods for capturing ideas from diverse sources.
c.Objectivity. They utilize consistent criteria and tools to identify the best ideas.

4.Climate. The best organizations make innovation efforts sustainable for the long-term.
a.Lead by Example. Senior management plays an active role in innovation.
b.Experiment. Cultivate a climate of risk-taking.
c.Fuel Thinking. Encourage new and alternative perspectives.
d.Energize. Develop meaningful ways to reward and recognize their workforce.

A Very Sticky Wicket

2007-06-26T15:27:00.000-05:00

Another open innovation website you may want to checkout is www.ideawicket.com
The site provides a portal for individuals to provide ideas and innovations to corporations.

Here is a brief overview of how it works:
What a user can do:
•Submit ideas, product designs, industrial designs, process improvement techniques, service innovations, business solutions
•Mark your content as 'Public' which is visible to all or 'Private' which permits
access only to the people you choose
•Suggest corporations that could benefit from your idea
•Share ideas and innovations with friends
•Comment on and rank innovations

What corporations can do:
•Run Innovation contests.
•Registered corporations can contact innovators.
•View 'Private' innovations shared specifically with them by users

There are some interesting ideas posted. I like the pizza in a cone suggestion. I think they may have gotten the idea from the movie The Jerk where in one scene they talk about a product called "Cup'O Pizza" which is pizza in a cup.

Spotlight on Solar Power

2007-06-26T09:18:00.000-05:00

Solar energy is becoming hot again. California and other western states are requiring utilities to obtain more electricity from renewable sources. Solar energy is being sold to public utilities under 20-year contracts from companies such as Stirling Energy Systems of Phoenix. They have signed agreements to provide up to 900 megawatts of solar energy to San Diego Gas & Electric and another 850 megawatts to Southern California Edison.

However, solar power only accounts for 1% of world-wide electricity generation due its cost over fossil fuels. It costs 35-45 cents to produce a kilowatt hour of electricity from solar panels versus 3-5 cents burning coal. A new approach to collecting the sun’s rays known as concentrator photovoltaic systems use arrays of mirrors to track the sun. While more efficient, the cost is still more than coal, 9-12 cents to generate one kilowatt hour.

The following are considered to be the three next-generation solar technologies:

Heliostat Concentrator Photovoltaic – Fields of mirrors beam sun rays onto a receiver containing photovoltaic cells which generate electricity.

Distributed Power Tower – Mirrors focus sunlight on a water-filled boiler to create steam which in turn drives a turbine. Natural gas can be used to power the turbine when the sun is not shining.

High-Concentration Photovoltaic – Mircrodishes track the sun and concentrate the rays on small solar cells. Each platform holds 176 dishes which can be placed near a city to provide additional power during periods of peak demand.

According to a recent RBC Financial Group report, the demand for photovoltaic power will grow about 40% by 2011, making it an attractive market for venture capital.
Sol Focus is one company that is currently attracting the interest of venture capitalists The Company is working to create a solar cell that produces electricity both cheaply and efficiently.

Some innovative applications for solar energy are emerging. Solar Roast Coffee, based in Pueblo, Colorado, catches rays of sunshine directly on a drum roaster filled with beans. The roaster is capable of reaching temperatures upwards of 550 degrees Fahrenheit, and swivels and tilts allowing it to track the sun throughout the day.

As the use of solar power becomes more efficient, it will be interesting to see what other types of applications or methods for collecting solar energy will emerge. I know that flexible sheets of solar collecting cells exist today. Maybe one future application, once it becomes more cost effective, would be to stretch sheets of the flexible solar cells across farm fields during the off season. So, when the land is not being used to grow crops it can be used to generate power.