Archive for May, 2009
impact
Posted by Tim in book riffs, replication, selection on 31 May 2009
There’s an interesting post on the Six Pixels of Separation blog today about metrics for social media. Here’s the problem that is set up:
Maybe we have it all wrong (and I’m just as guilty as the next person). Why are we looking at how many people have joined Facebook overall? Why do we care about how many people are following us on Twitter? There are countless online discussions about the quantity over the quality of these platforms, and we all know that it’s not realistic to have one person try to engage in any sort of meaningful way with 312,000 of their closest “friends.”
There is then some further discussion about things like “… engagement, attention, intention and time spent. All very interesting metrics, and all of them make most traditional media folks roll their eyes.” The post ends with a call for more thinking about the matter.
Even when I was in marketing, I never took those metrics relating to reach very seriously. For me, it’s always been much more about impact. How can we best measure impact? It’s harder, but possible. On my first blog, the main thing I tracked was comments. There weren’t many good web metrics available on the site that hosted that, so all I had to go on was page views and comments. Since I wanted people to be engaging with what I said, comments was the only metric I really cared about. On this blog, I’ve got much better data available. But I’m still mostly interested in getting ideas to spread – so the ones that I pay attention to are average time on the site/page, and comments (again!). Mark & I edit a journal called Innovation: Management, Policy & Practice, and I keep having arguments with our published over the value of page views on the journal’s web site. He loves it when the site gets a lot of hits. I’m a lot more interested in how often the journal gets cited, and how many people are actually reading the articles.
Since innovation is about introducing new ideas into the economy, and getting them to spread, we should get better about figuring out how to measure impact. I’m absolutely convinced that this is the key. Who cares how many people are exposed to an idea? I want to know how many people engage with the idea, who is taking it seriously, and how it’s being used. These are all harder to measure, but whether you’re writing a blog, providing a service or making a product, these are the things we need to know about. I guess in the end it’s a lot easier to measure a broadcast than it is a conversation.
Here’s something that I can’t figure any good way to write a whole post about, but it’s still interesting. Economist Peter Leeson talks about his book The Invisible Hook: The Hidden Economics of Pirates
solar business model innovation
Posted by Tim in business models, innovation, innovation strategy, replication, time on 30 May 2009
I spent a lot of time in my talks this week discussing business model innovation. The main point is that this is often the most powerful form of innovation while also being one of the most overlooked. I ran across a great example of business model innovation today on Kevin Kelly’s blog.
One of the big obstacles to installing solar panels is the pretty high upfront cost. Even with big subsidies and an environment that would be pretty close to perfect for solar power, Australia is lagging in this area right now. So someone here should pick up the business model being used by a couple of companies in the US. They install solar panels on homes for $0 down. Then over the course of 15 years or so, they generate revenue essentially by taking a chunk of the money that is saved through generating your own power. So if you start generating 80% of your own electricity, your actual electricity bill drops by maybe 10%, with the difference going to the company that put the panels in.
If you run the math, you’re better off just buying the solar panels upfront. Provided you have $10,000 on hand. This model is a really nice way around the problem that lots of the people that want solar panels don’t happen to have an extra $10k lying around. This is very similar to the way that Xerox changed the business model for photocopying. They got around the problem that their initial machines cost about 6 times more than other (inferior) copying technologies by leasing them instead of selling them, then adding a per copy charge for any copies over the monthly allowance. By changing the revenue model, they eliminated the major barrier to getting their innovation to spread.
I think that $0 solar panels are a great idea – I wish someone was doing that down here! In any case, this is another excellent example of the power of business model innovation.
Where do valuable innovations come from?
Posted by John in innovation, networks on 29 May 2009
Tim does a really nice talk on the invention of the computer and he has posted the slides on this blog. While he uses the story to discuss the difference between innovation and invention, I think there are a lot of other really interesting lessons here. Firstly, I’d like to add to Tim’s story by claiming that Hindus invented the technology that allows the modern computer to exist and then I’d like to make the observation that the fundamental difference between innovation and invention is connections.
So, what was the amazing technology developed in India nearly 2000 years ago? Quite simply, it was the number 0. Before this invention, there wasn’t a numerical way of describing nothing. It seems such a trivial idea, but it the basis for the digital economy. The first record of a 0 in use can be found in a temple in India where the inscription dates to 876 AD (the inscription below is the number 50).
The idea of 0 is an invention but it becomes an economically valuable invention (an innovation!) when it gets connected to other things. When we combine 0 with other numbers then we can start to develop some pretty powerful mathematics, which become more valuable when we connect them to systems of accounting and government. It isn’t surprising that the Moghuls were masters of empire building through careful accounting and measurement of every activity. Fibonacci brought the decimal number system to Italy at the beginning of the Renaissance , which set the Medici family on the path to greatness through the development of modern banking. Imagine trying to perform complex financial calculations with Roman numerals!
Finally, when we connect the humble 0 to 1 to develop binary code and then connect this to other inventions such as transistors and silicon chips, we get the computers and their applications that would have been unimaginable for the Indian mathematicians who invented the 0 in the first place.
The point is that valuable innovations come about through connecting things together so that there are new applications for things that already exist. It’s a bit like the conservation of matter principle. Matter can’t be created or destroyed but we can get new combinations of matter that are innovations.
I think what this means for firms is that they can’t think of managing innovation without thinking about managing connections. They are two sides of the same coin. Tim and I get to see many firms who have innovation management processes but few consciously think about the role of connections. One exception though is one of our research partners, Rio Tinto. They don’t describe themselves as being particularly innovative, although we can see many incremental innovations that have resulted from their community of practice program that tries to bring people together to match solutions to problems.
If we are getting serious about managing innovation then we need to start to understand the connections that are behind them. One way of doing this is through network analysis and we are currently looking at how network structures in firms influence innovation performance (there is a chapter by us on this subject in a recent book published by the Australian Business Foundation).
you are what you share
Posted by Tim in replication on 29 May 2009
There’s a nice post by Lisa Katamaya on Boing Boing Gadgets about coffee in a can. She talks about how popular various forms of a coffee in a can are in Japan, and how they are being promoted as being ‘American’ even though there is nothing like it available in America. I love all the different coffees in a can that make their way down here, so I was interested to learn a bit more about them…
And I was a bit discouraged to read the comments on the post. I know that as a general rule, you should never read the comments sections, unless you happen to be reading this blog, but still… A lot of them ended up being like this one:
Coffee in a can would be gross. Coffee needs to be brewed fresh to taste good (and ideally, the beans ground fresh too.)
On the other hand, Americans have drunk vile instant coffee (and nearly as vile Robusta pisswater like Folger’s) for decades, so I don’t know why they didn’t go for canned coffee too.
In reading that (and others like it), I realised why that kind of attitude annoys me so much. These are people that obviously know a lot about coffee, and they’re not unlike people I’ve run into that know a lot about other things, like birds, music, sports, etc. Knowing a lot about something comes naturally to people that are smart, and maybe have a bit of a tendency towards obsessiveness. And to me, the question is – once you know a lot about something, what do you do with that knowledge? Do you use it like a club to whack people that know less than you do, or that, even worse, don’t like exactly the same things that you do? Or do you spread the knowledge?
Knowing a lot about something is a gift – and using knowledge to batter people is abusing that gift. The best thing to do with a gift is to spread the wealth. As Charles Leadbeater says in We Think – you are what you share!
understanding innovation
Posted by Tim in innovation on 28 May 2009
Here are the slides from the talk that Mark gave at the UQ Business School Industry Breakfast yesterday:
The people there were a bit sceptical to hear that Josiah Wedgwood is the greatest innovator in history, but in the end I think Mark won them over to his point…
the innovation spectrum
Posted by Tim in innovation, time on 27 May 2009
The NESTA Connect blog is probably one of the two best innovation blogs going, and Jonathan Crowley wrote a terrific post there today, which nicely summarises a lot of issues that we’ve been discussing here. He starts with this picture:
which shows the spectrum of innovation. He then goes on to say that most people tend to think of ‘disruption’ when they think about innovation, but that he’d rather consider both ends of the spectrum.
The other key points in the post are:
- There are benefits to working at the small end of the spectrum – you can experiment quickly and cheaply, and cycle through many ideas at once.
- The main benefit to working at the smaller end of the spectrum is that it’s easier to take action.
- And finally, it makes good sense to have projects across the entire spectrum.
The last point reflects the issue that John was trying to get at in discussing the three horizons framework – which he ties in to the idea of time. You should read the whole post, and it’s also worthwhile to spend some time on that blog – they are consistently interesting. I just wish they posted more frequently!
the power of examples
Posted by Tim in innovation, replication on 27 May 2009
One thing that was really striking up in Cairns is how many Toyota Priuses are on the road. There are a whole lot – led by the taxis. I’d estimate that the Prius makes up about 2/3 of all of the taxis there (including one that’s gone over 500,000 km!). I just did a quick bit of research into Prius sales in Australia, and it looks like about 2% of all sales are in Cairns – about three times what you’d expect based on population. And since Prius sales have been overwhelmingly concentrated in the capital cities, that number is probably more like eight or ten times what you’d expect for an Australian city the size of Cairns.
Nancy and I were talking about this on the drive in today, and she suggested that maybe people up there are greener. That’s possible, but aside from all the Priuses on the road, there wasn’t a lot of evidence for that. I actually suspect it’s something simpler. In Brisbane and the other major cities, a Prius is still rare enough that people notice it and talk about it – and its ‘greenness’ is one of the big selling points in that situation. However, in Cairns, they’re so common that they’re unremarkable. In some respects, the Prius is just another car up there. And that actually makes it a lot easier to buy one. You’re not making a big political or environmental statement, you’re just buying a good car that’s really fuel efficient – if it’s good enough for the cabbies, it must be good enough for regular use.
If Toyota wants to get the Prius to go from being a niche vehicle to a more broadly popular one (and I’m still not convinced that they actually want to do this yet), this is the transition they need to make in peoples’ minds. They need different examples to show people. As a niche vehicle, it’s fine to have endorsements from celebrities that are known to support environmental causes. But if you want everyone driving one, go for the cabbies and turn it into just another car.
talks – invention, innovation & business models
Posted by Tim in business models, evolving economic entities, innovation on 26 May 2009
Here are the slides from a talk I gave this morning:
They might not make much sense as standalones – so here’s a summary of the two main points. The first is that invention and innovation are two different things. It is pretty closely related to the posts I’ve made here about the relative importance of ideas (first post, second post). The key takeaway point is that it is not enough to come up with a good idea. From an evolutionary perspective, an idea just generates variety. Innovation encompasses variety, selection & replication – and that you have to consider all three things to innovate succesfully.
The second point is that the best way to turn an invention into an innovation is to build a business model around the idea. I illustrate this by using the Kristin Hersh model that I talked about a couple of weeks ago.
This talk is a stripped down version of the one that I gave as part of the Brisbane CitySmart Innovation Festival last night. Turnout for that was low, but the quality of input from the people that showed up was extremely high – so I was pretty happy with the way that went.
Next time I do one of these I’ll record some audio to go with the slides…
innovation networks
Posted by Tim in evolving economic entities, innovation, networks, replication on 25 May 2009
I was thinking again about the discussion here last week about fuzzy concepts – in particular that of networks. In that post, I was trying to get at the value of the network concept for economic analysis. Neil Kay made an interesting point in the comments – which was that you could substitute the word ‘map’ for ‘network’ all through the discussion and that might add some clarity. His point is that we need to define the boundaries of the network, along with the purposes for which a network is constructed.
In the main, I think that this is correct. But on the other hand, I’m not sure that ‘everything is a network’ actually is a strawman. The way I tend to think about networks is as an economic substrate, or as a basic analytic unit. In neo-classical economics, the economic substrate is formed by utility-maximising members of homo economicus, which follows from the basic axioms upon which orthodox economics is built. If we take an evolutionary approach to economics, as in The General Theory of Economic Evolution by Kurt Dopfer & Jason Potts
From this angle, everything is a network, but that ends up being a trivial observation. This is where Neil’s comments come into play – the point is to figure out how networks differ, and how they serve different purposes. This is what I was getting at when I talked about the three forms of organisation – markets, hierarchies and networks:
I think it would be more useful to define the different forms of organisation as networks, and then look at the three questions of description, classification and evolution. From this perspective, the three forms have different network structures through time, which leads to differences in classification.
In light of this, the innovation network mapped in the figure above is interesting for a couple of reasons. It shows a project team from one of our research partners. The colours of the nodes indicate people working from different offices, and the size of the nodes indicates the person’s rank within the organisation (bigger = higher ranking). A lot of people talk about network structures as being inherently ‘good’ or ‘bad’, but I think it’s more useful to take Neil’s approach and make this judgement based on how effectively the structure serves the purpose for which it is designed.
The structure above has a clear split between people in the two geographic groups. Furthermore, most of the connections between the two sites goes through upper managers. From an information flow standpoint, this is a ‘bad’ network structure. However, when I was talking about this with the firm last week, we realised that for the purposes of this project, this may actually be exactly the right structure. Keep in mind that maintaining network ties is always expensive. If the two geographic groups are working on different parts of the project, there might not be a need for extensive knowledge sharing between them.
So I can take the evolutionary approach to this first by describing the network (a geographically distributed innovation network for a project-based firm, and so on), then by classifying it (still working on that bit – but clearly it is different from other types of innovation networks that have been researched to date), and finally I can track how it evolves. The last point is where the real action is – if this project continues to completion we’ll have a chance to map the evolution of the problem-solving network within the project over its life. If we can do this, then I think that will be a real contribution to network research.
the long tail for restaurants…
Posted by Tim in innovation, selection on 24 May 2009
… doesn’t exist, does it? Well, it exists, but how can you get to it?
I was thinking about that today while Nancy and I had a fantastic lunch at a Japanese noodle place called Ganbaranba in Cairns. We’ve run across four classes of Asian restaurants in Australia, and you can divide them up by eating utensils:
- Places that give you a knife & fork, and you can’t even get chopsticks if you ask for them
- Places that put out both forks & chopsticks on the table, and let you choose
- Places that give you chopsticks, but you can get a fork if you ask nicely
- Places that give you chopsticks, and you can’t even get a fork if you ask for one
In my experience, the quality of the food goes up as you go down that list. And while I haven’t found any restaurants with edible food in the first category, there are at least a couple of good ones in the second. Ganbaranba is in category four though. And the food was stupendous – if you’re ever anywhere near Cairns, you must try it out. It’s a bit funny to find a place like that in a place like Cairns (population 135,000) though – you can see from the picture that it’s not that big!
When we moved to Palmerston North in New Zealand, there was a great record store there called Pretty on the Inside. The guy that ran it was named Paul, and his philosophy was that you could buy top 40 cds in petrol stations, so there was no point in him carrying them as well. So he had nothing but indie-label stuff, which was absolutely fantastic. But a bit of a tough go in Palmerston North (population 70,000). I had seen similar stores fail in Seattle, with five times the population and a much more vibrant musical scene, so when Paul was moving to Melbourne and closing down the store, I told him it was incredible that he was able to keep the thing going as long as he did.
When he got to Melbourne, he opened another music store, this time an online one. And this time, he decided to specialise in his true love – Japanese noise rock. So he went from serving one pretty small niche, to serving an even smaller niche. This is the classic long tail story that Chris Anderson talks about, and it is something that has really been facilitated by the web.
As someone whose tastes always tend to be out in the long tail, I think this is great. But it still leads to problems when trying to find a place to eat. Any time we get outside of Brisbane, we get category 1 & 2 Asian restaurants. So I was pretty well gobsmacked to find a place as good as Ganbaranba this weekend. I think it works up there because Cairns is basically a tourist town, and a LOT of the tourists there originate from Asia. Consequently, there is a disproportionately high Asian population there as people have moved there to serve these tourists, plus there is the transient population. Plus the small number of people like me that search out place like that. If the restaurant had to depend on just people like me, it would be sunk. As it is, there are sufficient numbers to keep it going.
I’m not quite sure what overall point to draw from all of this. One key idea is that ideas like the long tail, crowdsourcing, and so on all have pretty strong intuitive appeals. But it’s also important to delineate boundaries. What are the situations in which ideas like this don’t apply? We can crowdsource restaurant reviews, but that still won’t provide enough customers to keep a place like Ganbaranba going in most Australian towns with populations less than 500,000 or so. Boundaries are important, and they’re another thing to which we don’t always pay enough attention.
EDIT: My friend Rick brings up this example:
Here’s your long tail in action: See Kogi BBQ in LA. They cook a rapidly changing secret menu, cooked in trucks that park in secret places. You have to twitter to find them, and to order their best specials. They are getting huge lines of devoted followers. Google: “AP Kogi” for more.
Which is a great example of a long tail restaurant. The thing that I was trying to get at is that these can only exist in places where the long tail is physically present – so you need lots of people. And there are a few things (mostly services) that are still like that – you can’t get too niche unless you’re in some place like LA or London…
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Metrics
Tim was named #5 in the Top 40 Innovation Bloggers in 2011 at Innovation Excellence.
Tim and John were both named in the Top 40 Innovation Bloggers in 2010 at Innovation Excellence.
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