Archive for December, 2009

Expand Your Sphere of Controversy to Improve Innovation

Posted by Tim in innovation strategy on 31 December 2009

One of the biggest barriers to innovation that I see in firms is this: “That’s the way we’ve always done it.” I’m sure you’ve heard it yourself – when I hear people say that it just drives me crazy. It’s always used as a way to kill a new idea. I ran across an interesting post yesterday by Jay Rosen from NYU that gave me an idea for how to get around this problem.

Rosen talks about a model for thinking about journalism developed by Daniel Hallin in his book about press coverage of the Vietnam War called The Uncensored War. Hallin developed this model to explain what news gets covered and what doesn’t:

Here is how Rosen describes the three spheres:

The sphere of legitimate debate is the one journalists recognize as real, normal, everyday terrain.
The sphere of consensus is the “motherhood and apple pie” of politics, the things on which everyone is thought to agree. Propositions that are seen as uncontroversial to the point of boring, true to the point of self-evident, or so widely-held that they’re almost universal lie within this sphere.
In the sphere of deviance we find “political actors and views which journalists and the political mainstream of society reject as unworthy of being heard.”

I think that we have the same three spheres of discussion inside of our organisations. The sphere of consensus covers the things that we all assume to be true. When someone says we can’t try something new because we’ve always done it the old way, they’re saying that the new topic isn’t within the legitimate sphere of controversy. Instead, they are making the claim that it is in the sphere of consensus. This is where all of our routine activities lie.

At the other end of the spectrum, the sphere of deviance holds the ideas that are too crazy to consider. This is for all the ideas that are too risky, that don’t have a high enough Net Present Value, and that are just too out there to be considered.

Between these two, we have the sphere of legitimate controversy – the areas where we are free to bring up and debate new ideas. My contention is that in most organisations, this sphere is far too narrow. The reason that we find it hard to be innovative is that we don’t have too many areas where we’re open to considering new ideas.

Here’s an example. I’m currently leading a group that is refining the strategy for our MBA program. At the start we examined the parts of the program that are core – this is our sphere of consensus. It includes ideas like ‘our MBA is taught face-to-face’, ‘our MBA should be a premium product’, and few other statements. Stating them explicitly was very useful because it staked out a starting point. It also reflects a lot of conclusions that we were reached when we re-configured the program two years ago – so even though these ideas are part of the sphere of consensus now, they were heavily debated at the time. At the other end, we tried to avoid putting anything into the sphere of deviance. The result is that our sphere of legitimate controversy is quite broad. The advantage to this is that we have considered a broad range of new ideas, and my hope is that we’ll be able to execute several innovative ideas coming out of this process. The disadvantage to expanding this sphere is that we have to consider more ideas, which is time consuming (and threatening to everyone prone to saying ‘that’s how we’ve always done things’ – and there are always quite a few of those in any university department!).

That said, we’ve still left a lot unexamined in our sphere of consensus – the basic questions of ideology. One idea that is there is that students are our customers. Another is the idea that it’s reasonable to think of universities having customers in the first place. Both of these are assumptions that are worth probing in a bit more detail – and these are the type of core beliefs that need to be questioned from time to time.

Managers trying to increase innovation within their organisations need to make a conscious effort to expand the sphere of legitimate controversy. There a few things they can do:

Understand what is in your sphere of consensus. What are the assumptions that everyone believes in your organisation? Are they actually true? You need to understand what these assumptions are. We all have to have a few things in our sphere of consensus, or we’ll never get anything done. At the same time, we also need to make sure that we revisit these assumptions periodically to make sure that they still hold.
Start considering a few of the crazy ideas from out in the sphere of deviance. I keep saying that most organisations don’t suffer from a shortage of new ideas. Many of the ones that think they do actually have plenty of new ideas around, but they consider all of them to be outside the scope of legitimate discussion. When people keep seeing their new ideas discounted as being not even on the agenda, they stop telling you what their new ideas are.
Actively manage debate within your sphere of legitimate controversy. The first two suggestions help you expand the sphere of legitimate controversy – this step means that you have to actively encourage controversy. Not divisive arguing, but constructive discussion of new ideas. This is how we improve the processes of selecting and executing innovations.

The point that I’m trying to make is that as managers we set the agenda for our organisations by what topics we decide are worth discussing. In most cases, we will be more innovative if we expand the scope of these topics. You can improve your innovation performance by expanding your sphere of legitimate controversy.

9 Comments

The 1000 Cell Spreadsheet Kills an Innovation

Posted by Tim in business models, innovation strategy, replication on 30 December 2009

A few years ago I had a consulting job where my task was to help a company figure out how to sell the waterless composting toilet that they invented. They had already had other consultants working on the problem, but they weren’t happy with what they got from them. The only constraint that I had was that the plans had to be for selling the toilets in China and India (by the way, I was thinking about adding a picture to this post, but I think we all should be thankful that I didn’t…).

You may well ask why China and India? I certainly did. The company was already active in the US, Europe and Australia with other products, so why not go there first? Their answer was the 1000 cell spreadsheet. One of their early joint venture partners had developed an incredibly detailed market analysis spreadsheet. It considered about 25 possible markets for the toilets. The spreadsheet started by taking the population of these 25 countries, and then running this number through a huge long string of calculations (% of people buying a toilet each year, and a number of similar things). At the end of all of that, the two markets with the biggest potential were China and India. Why? Because every calculation that they made was either a multiplication or division of the original numbers, with no variation between countries. So the end results (value of the toilet market) were directly proportional to the original set of numbers (population).

This is clearly poor analysis, for a number of reasons. The key one is that trying to sell high technology toilets in countries where huge numbers of people lack access to any toilets at all is a bad idea. If someone hasn’t spent US$20 on a pit toilet, why would they spend 10 times that on a composting toilet? The answer ended up being: there’s no reason for people to do that. The company that I did the report for is now out of the toilet business, and their great invention never got into the market. This is a situation where thinking about value networks and business models would have helped.

I wish I had realised it at the time, but I hadn’t started thinking about this in great detail yet – the company had no business model for their new idea. Their value proposition was basically ‘it’s a cool toilet’. Consequently, the markets that they targeted were simply the biggest ones they could find in terms of number of people. The fact that there was no value network to plug into in these markets was never considered, despite my best efforts.

If their value proposition had been ‘this is a waterless toilet’, then they would have looked for markets with limited water supplies, like Australia, South Africa and the Southwest United States. All of these countries already had value networks for water-conserving toilets that my firm could have tapped into.

If their value proposition had been ‘composting toilets are green’, then could could have looked for markets that valued this highly, like many European countries, or California.

All of these would have been better options than China and India.

I think there some important lessons here.

First, don’t mistake numbers in a spreadsheet for reality. When you’re modeling markets for your new idea, you need to question all of the assumptions that underpin your model. The assumptions in this firm’s 1000 cell spreadsheet were deeply flawed – consequently, so were the decisions based on that spreadsheet.
Second, don’t automatically go for the markets with the most people. The number of firms that have gone broke following the ‘If we can just get everyone in China (or India) to just buy one of our products’ strategy is very high. You’re much better off finding a smaller market that values your idea.
Finally, you have to be clear about the business model for your idea. You need to know the hook for your new idea, who will value that, and what value network you’re in, among other things. Lack of clarity on just a couple of these can sink your entire effort before it really gets off the ground.

I just took another look at the report that I put together for them. I’m still happy with the analysis that I did, but I was answering the wrong question. I tried to lead them to better questions, but at the time I was too inexperienced to get that to work. The lesson of the 1000 Cell Spreadsheet is that while analysis is an important part of building your business model, a barrage of numbers is a poor subsitute for clear thinking. We have to get our business models right if we want our innovations to spread.

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You Don’t Need Any More New Ideas!

Posted by Tim in innovation strategy, replication, selection, variety on 30 December 2009

Scott Berkun let out the secret of innovation today in an outstanding blog post. It’s a secret that Rowan Gibson tried to let out of the bag recently, and so did Braden Kelley on Blogging Innovation. I’ve tried to tell you about it too, using both analogies and statistics. The secret idea of innovation is this:

You don’t need any more new ideas.

Here is Berkun on the what we really need:

If there’s any secret to be derived from Steve Jobs, Jeff Bezos, or any of the dozens of people who often have the name innovator next to their names, is the diversity of talents they had to posses, or acquire, to overcome the wide range of challenges in converting their ideas into successful businesses.

That’s it. The problem is executing your ideas. Here’s an example – yesterday I talked about mousetraps – here are some interesting stats.

The patent for the flip-trap mousetrap design was filed in 1899. That’s a better mousetrap, right? We’re still using that design over 110 years later, so it’s probably pretty good. And yet, since 1899, the US Patent Office has granted over 4400 mousetrap patents. They receive more than 400 new mousetrap patents every year. So there’s no shortage of ideas. But fewer than 20 mousetrap designs have led to products that have actually made money. The problem in innovation is executing your new idea, and getting it to spread.

There is so much effort put into improving innovation by generating more ideas. This isn’t necessarily wasted effort, but it’s not the smartest use of resources. My MBA students evaluated innovation within their firms:

This approach is flawed, and my MBA students demonstrated why. They came from a wide range of organisations – huge multinationals, small start-ups, government departments, and educational institutions. Despite these different backgrounds, their findings were remarkably consistent – only 3 of the 60 organisations that they work in are ideas-poor. The other 57 (that’s 95%!) have problems with either selecting or diffusing ideas.

Here’s more from Berkun:

The closest thing to a real secret is this: In my years studying and teaching all things innovation, there’s one fact that’s the hardest for people to swallow and it goes as follows – To invent or create is to take a bet against the unknown. No matter what you do, you are still betting you can do well in the face of many things that are out of your control. Don’t like that? Don’t want uncertainty? Then do something else. Comfort with risk and uncertainty is the real secret. Or at least acceptance of the fact you can work your ass off for uncertain rewards.

Where does this leave us? Here are some conclusions:

If you’re going to get some help to improve innovation at your firm, don’t focus on generating ideas. Get help on selecting ideas, or on getting them to spread. Those are the hard parts.
Innovation is a bet – you’re betting that your new idea will work better, that it will meet needs, that it will fit into the value network. All of these things have to happen for your innovation to work. Like Berkun says, this is a leap into uncertainty.
Most of the innovation problems that organisations face are problems with innovation diffusion – the challenge is to get your new ideas to spread.

The new idea that I’d like you to accept is that you don’t need any more new ideas. Instead of generating more ideas, let’s develop some plans for getting better at executing our ideas. That seems like a good idea heading into the new year, doesn’t it?

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Innovation Diffusion in a Network

Posted by Tim in book riffs, business models, networks on 29 December 2009

Yesterday I talked about how the interconnectedness of our economic networks often makes it more difficult for new ideas to spread. Because our products and services are embedded within a value network, we not only have to get people excited about our innovation, we have to get others within the value network to unconnect from whatever they are currently doing before they can reconnect with us. I thought that an example might help make this process make more sense, and I ran across a great one in The Slow Pace of Fast Change by Bhaskar Chakravorti, a book that is built around the idea that diffusing innovation through networks is difficult. It’s a good book and worth checking out. The example that Chakravorti uses is the uptake of 56k modems in the middle 1990s.

When the 56k modem was released, it was demonstrably better than the 28k modems that it was replacing. The modems were twice as fast, and the trade-off to get this extra speed was, well, nothing. It was simply a better product. However, one year after it was released, only 20% of new modems being sold were 56k, and after two years, that figure had only risen to 50%. Why weren’t people using the better product?

I was using one. As soon as they came out I bought one, opened up my PC, took out my dreadfully slow 28.8k modem, and popped the the lightning-fast 56k modem into the slot. I was ready to roll! However, as usual, I was atypical.

The problem was that the percentage of customers that just went out and bought a modem was extremely small. The vast majority of modems were packaged within new computers. This meant that the new 56k modems had to fit within the value network that included PC manufacturer/assemblers (OEMs), end users, internet service providers (ISPs), and, critically, two modem manufacturers (U.S. Robotics and Rockwell), which had two competing communication standards. And you only actually got 56k speed from your modem if it was on the same standard as the one used by your ISP. Here is how Chakravorti describes the choices facing everyone:

Thanks to the competitiveness between the two standards, each participant had a critical binary choice. An OEM would slect a particular 56k modem if it expected that its users also wanted such a modem. But users would want these modems only if they delivered on the promise of higher speed. The ability of users to achieve speeds of 56k was, in turn, predicated on which standard their ISP was favoring. The ISPs would, on their part, favor whichever standard they believed would assure them of the largest customer base; in other words, they would back the modem standard that most OEM’s or PC distributers were likely to install in their machines. The outcome is that the market became a ring of interdependent decisions….The cycle created a self-sustaining equilibrium, in which the older technology persisted longer than it should have, give the state-of-the-art engineering. As a result, customer experience remained tethered to the status quo.

And of course, DSL broadband modems were also just becoming available, which made the interdependent network choices even more challenging. What can we learn from all this? A few things:

I was lucky that my first 56k modem was compatible with my ISP’s modem.
More generally, though, this is a great illustration of why it simply isn’t sufficient to come up with a better product, service or way of doing things. You have to embed your innovation within the value network, and this presents an additional challenge. Why are many people still not connected at 56k? Why is your doctor using a PC with an i486 processor that isn’t networked with the broader healthcare system? Why are you typing on a QWERTY keyboard? It’s because the value networks for these systems are stuck, which prevents innovation. The interconnectedness of the value network leads to the lock-in of inferior technologies.
To get your innovation embedded into the economy, you have to unconnect the members of your value network from whatever they’re currently using (28k modems, for example), and get them to reconnect to you. The unconnecting is a critical step that we often ignore – this is a mistake.
This explains a significant part of why it takes so longer for new ideas to spread. You not only have to get people to agree that your idea is better, you also have to get them to act on this belief. That’s the hard part.

Ralph Waldo Emerson was wrong when he said ‘build a better mousetrap, and the world will beat a path to your door.’ You have to build a better mousetrap, and then figure out a way to get it connected up within the mousetrap value network. That’s an entirely different problem. Solving it takes time, and that’s why innovation is different than invention, and why it takes so long for new ideas to spread.

(Picture from flickr/patterbt under a Creative Commons license)

8 Comments

Innovation and the Value Network

Posted by Tim in business models, complex systems, innovation strategy, networks on 28 December 2009

Today I will tell you why it is so hard for you to get your innovative new idea to spread quickly. Well, one of the reasons, at least. It’s because the economy is so interconnected. This is a bit counterintuitive – after all, I was just telling you how we can use networks to spread ideas. The good side of networks is that they can make it easier for ideas to spread. The problem with networks is that to get people to actually adopt your new idea, you often have to get them to break links within their existing network, and this can be very difficult. That is why it is important to understand how to build a position within the value network.

Value networks show up in most of the various business model frameworks. The idea is that when you have an innovation, you have to understand what products, services and routines are related to your new idea. Once you understand this, you can then figure out how much of the value network you need to control yourself. Anders Sundelin just wrote a terrific post on his Business Model Database blog describing how you can map the value network for your innovation, anlyse your position within it, and take steps to improve your position. He does a great job of explaining the mechanics of value network analysis. I would like to show you why it’s important.

As an illustration, here is a model of the value network for mobile phones, adapted from the book Invisible Engines by Evans, Hagiu & Schmalensee. It shows the postion within the value network that Apple has taken with the iPhone:

Apple has chosen to control everything within the circle – in other words, everything! Even the application developers don’t have full autonomy, since every new app has to be approved before it shows up on iTunes. The advantage to taking a position like this in the value network is that it is easier to coordinate the system. Because Apple controls nearly everything, every time they have a new idea, it is relatively easy to decouple the existing value network, insert the innovation, and move along. The disadvantage is that having such tight control over the value network limits the scope of the innovations that can emerge.

In contrast, look at the position within the value network that Google has taken with Android:

They have taken almost the exact opposite approach, controlling only the operating system directly. This greatly increases the the range and number of innovation opportunities within the value network. There are two big downsides though. The first is that they are at the mercy of the other players within the value network. One of the reasons that there are very few Android phones here in Australia is that all of the handsets using it so far have been lousy. The second problem is that with less control over the network, all of the innovations within this network take longer to diffuse as there is no central coordination.

Google has the market pull to take a position within the mobile phone value network that is similar to Apple’s if they choose to. So we have to assume that this is a strategic decision, and that their bet is that the increased innovation scope provided by their more open value network will outweigh both Apple’s first move advantage, and also their relatively slow increase in market share.

And this illustrates the problem that most of us face with our value network – we can usually only control a small piece of it – as Google does with Android. This means that not only do our end users have to prefer our idea, but we also have to get others within the value network to stop using our competitors. This process is slow, difficult, and frustrating – and it adds an extra delay to the spread of our great new idea. Innovations require many players within the value network to unconnect from competitors before they can reconnect with us. This unconnect-reconnect process is often independent from the process of customers adopting our innovation, and it adds another delay to the spread of our new ideas.

There are many different models of business models available for you to use. I don’t care which one you use, but you have to use one of them. They all include an element like the value network as one of the key things that you have to understand and manage when you try to get your innovative ideas to spread. The better your understanding of this network, the more effective you’ll be at innovating.

(Here is a follow-up post with an example to illustrate the issues involved.)

25 Comments

Some Innovation Lessons from Google

Posted by Tim in innovation strategy on 28 December 2009

It’s always hard to find good examples of innovative organisations to talk about in my classes. Not because there is a shortage of innovative organisations to discuss, but because people need examples from organisations that seem similar to theirs. One of the skills that I have to get better at is helping people see the analogies between the good examples that we have and their particular situation. I think that being able to do this well is a critical skill to have these days, so figuring out a way to build this skill would be useful.

One of the organisations that I often use as an example is Google. There is an excellent short piece on innovation at google on the Insead Knowledge site. I would like to use some of the points raised in this piece to show how even though you might not be a high technology company, there are lessons that everyone can learn from looking at how Google manages innovation.

The first lessons come from Google’s 20% rule:

anybody at Google can use 20 per cent of their time — one day a week, a week every five weeks — however they choose to define it, for them to work on what they want to work on. It also means their manager doesn’t tell them what to do.

There are two points here. To be innovative like Google, you don’t necessarily have to give everyone 20% of their time to work on whatever they want to work on. However, if you want to be innovative, you have to invest resources into the innovation process. You don’t need the specific initiative, but you do need to replicate the commitment to innovation. Too many firms tell people ‘we want you to be more innovative, and you have to do that in addition to all of the other stuff that we already expect you to do.’ This doesn’t work. One way or another, to be innovative you have to free up resources for innovation.

The second point is that at Google innovation is not a top-down operation. To encourage innovation, the people who are innovating have to have some level of autonomy. This relates to the first point. To encourage innovation, you need to give people time and space. This requires investment. To make this work, you need to ensure that everyone understands how innovation links with your strategy. But really, the job of managers is to figure that part out, while giving their teams the opportunity to figure out exactly what that means by developing and executing new ideas.

Here’s another important part of Google’s approach – quoting Dave Girouard – President, Enterprise of Google:

Girouard concedes that not every idea may bear fruit, but says there is internally a “formula” to assess new ideas. “We have a 70/20/10 model which Sergey Brin came up with several years ago, which is 70 per cent of our efforts are to be focused on our core business, 20 per cent should be focused on related but new areas that we’re developing off of that, and 10 per cent we should reserve for ‘crazy’ ideas, some of which may turn into great advancements and many of which may not pan out at all,” he adds.

This is a perfect illustration of the Three Horizons approach to developing an innovation portfolio. The key idea here is that effective innovation programs include new ideas that can be implemented across several time horizons. If you don’t have innovations that can help you right now, you won’t stay in business. BUt if all of your innovations are short-term, then you’ll eventually be replaced by someone else’s game-changing innovation. Consequently, you need to be working across all three of the time horizons that Google uses.

The general points we can learn from the Google story are:

Innovation requires resources.
Innovators need autonomy.
You need to develop an innovation portfolio across several time horizons.

These three points are important for all organisations that want to be more innovative. It doesn’t matter if you are a big software company, a small accounting firm, a government department, or an educational institution – you can use these ideas. Learning through analogy is a critical skill to build. So the next time you hear about how innovation works at a organisation that is completely different from yours, try to think about what general lessons you can learn from them.

3 Comments

When You Don’t Want Ideas to Spread

Posted by Tim in business models, innovation strategy, replication on 27 December 2009

One of the themes that I talk about a lot here is the importance of getting our ideas to spread. It is a central part of innovation – if our new ideas are not adopted, then we’re in trouble. But what about when our business model is based on ideas not spreading? The idea seems counterintuitive, but there are actually a lot of businesses that depend on our ignorance for their profits.

I had this idea while reading Socialnomics by Erik Qualmen. He talks about a new social-based search model and talks about why Google might not adopt this innovation:

Coincidentally, the search engine incumbent (e.g. Google) would be the least likely to introduce such a model. By endorsing such a shift, Google could see itself as a potential loser because it currently genreates a fair amount of money from the inefficiency of the old model.

I don’t agree with this quote – I think that Google is very well aware of the vulnerability they have with the current method of search and that is the big reason behind their constant introduction of new ideas. But Qualment raises an interesting point – Google does actually make money right now because our current methods of getting ideas to spread are not very efficient. We need search engine assistance.

However, there are more obvious examples of business models built around preventing ideas from spreading. Some of them are:

Media: The issue of file sharing is an obvious example. But there are plenty of others. What about the crazy regional code system on DVDs? Or the many streaming video sites that are only available in the US (Hulu, Netflix, and the one that kills me – Yahoo’s free NHL stream)? All of these models are built on the idea that the people generating the content will control how and when the idea spreads.
Car Dealerships/Real Estate Agents: Buying a new car used to be a horrible experience. You never knew what a fair price for a new car was, and as a consequence, people often ended up paying more than they should have. This is much less of a problem now as pricing information is much more widely available, as is data about which dealers have the cars of the make, model & features that you want in stock. There are similar issues in real estate – much of the purpose of real estate agents is based on the ignorance of home buyers. When we’re buying a house, we usually don’t know all the houses available in the area we’re interested in, what the going rates are, or how quickly houses are getting sold in the area. Well, it used to be the case that we didn’t know this – now we know a lot more.
Firms with poor customer service: It used to be much easier for firms to get away with bad service. If you weren’t happy with them, who could you tell? Ten of your friends? Ever since Jeff Jarvis & Dell Hell, it’s a lot easier now to tell everyone.

There are actually a lot of business models built on the idea that the firm has access to information that you can’t get. These worked for a long time, but they are increasingly difficult to maintain now. The key point is that if you are working in an industry whose profits are based on information asymmetries, it is unlikely that these will last for too much longer. That is the threat. The opportunity is that these industries provide fertile ground for business model innovation.

In particular, you can use strategies that aggregate, filter and connect to reconfigure the way these industries operate. We’re seeing that in real estate, as firms are starting up that collect all of the active house listings in one place (aggregate & connect), that provide sales histories for particular neighborhoods (filter), and that enable private listings to show up on google maps (aggregate, filter & connect).

We still have to get our good ideas to spread, but it’s getting increasingly difficult to prevent ideas from spreading. If your business model is based on preventing people from having information, you better get moving on coming up with a new business model. If you don’t, someone else will.

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A Few Innovation Ideas

Posted by Tim in innovation strategy, replication on 26 December 2009

How do we get ideas to spread? It’s a critical question, and one of the ways that we distinguish between invention and innovation. For me, an invention is a clever new idea, an innovation is a clever new idea that is packaged up in way that enables it to spread. There’s a big difference between the two. I ran across several interesting articles today that shed some light on how to get our ideas to spread.

The first is a profile of Duncan Watts from Fast Company. The article looks at the question of whether or not you need to spread ideas primarily through targeting superconnectors, an idea put forward by Malcolm Gladwell in The Tipping Point. Watts suggests that peoples’ tendency to be receptive to new ideas has a greater impact on whether the idea spreads than who starts spreading the idea does. This result is very similar to the findings of our colleague Andrew Stephen.

This has some interesting implications. One is that ‘Influentials’ actually aren’t any more effective at sparking trends than normal people. This leads directly to the second point, which is that ideas spread most effectively when the time is right. Taken together, this makes it very hard to predict which ideas will spread, and it also makes it difficult to develop a strategy to make your ideas go viral.

I think that the best response to this is actually to approach innovation alogorithmically. What this basically means is that the way to innovate is to generate a lot of ideas, figure out ways to try them out cheaply and quickly, and then scale-up the ones that seem most promising. The FC article describes an advertising strategy devised by Watts that functions very similarly to this, and I think that it is the way to go.

The second article that caught my eye was Atul Gawande’s New Yorker piece on health care reform in the US. In assessing the bill that the Senate passed last night, Gawande applauds the way that this experimentation mechanism is built into the bill. It does not specify precisely how the new health care system will function, rather, it provides a platform for encouraging experiments and a path for getting the best new ideas to spread. Gawande describes how this approach worked during reform of the US agricultural system at the start of the 20th century, including the efforts of Seaman Knapp in Terrell, Texas:

Knapp knew that the local farmers were not going to trust some outsider who told them to adopt a “better” way of doing their jobs. So he asked Terrell’s leaders to find just one farmer who would be willing to try some “scientific” methods and see what happened. The group chose Walter C. Porter, and he volunteered seventy acres of land where he had grown only cotton or corn for twenty-eight years, applied no fertilizer, and almost completely depleted the humus layer. Knapp gave him a list of simple innovations to follow—things like deeper plowing and better soil preparation, the use of only the best seed, the liberal application of fertilizer, and more thorough cultivation to remove weeds and aerate the soil around the plants. The local leaders stopped by periodically to confirm that he was able to do what he had been asked to.

In a very poor year for cotton, Porter’s profits jumped substantially. This led him to use the new ideas over his entire farm. Many other local farmers followed suit, and the federal government gave Knapp more funds to expand the program. This was happening all over the country, and it transformed the agricultural industry – first in the US, then around the world.

So, again, try things, figure out what works, then scale up. That’s an innovation algorithm that works.

Note: If you’re reading this and you feel bad about thinking about work in the middle of the holiday season, remember that we’re just doing what Chris Brogan is telling us to do:

12 Comments

Ten Great Free e-Books for Innovators

Posted by Tim in book riffs, evolving economic entities, innovation strategy on 25 December 2009

I hope that everyone is having a great holiday season. Whenever I make a new friend, one of the first things I usually do is buy them a book. I’m not exactly sure why – probably because I really value ideas & books, and I want to share them with people that I like. So for all my digital friends here, I thought that since it’s the holidays, I would give you links to a great set of books that are all downloadable for free.

Books to help with Business Model Innovation

One of things that creates opportunities for business model innovation is change in the environment – particularly in technology that creates platforms. The obvious platform technology driving change these days is the internet. I know that tech books tend to age poorly, but there are two that came out at the end of the 90s that I think are still essential reading.

New Rules for the New Economy by Kevin Kelly: This book does a great job of identifying key generic issues about the internet. Kelly was writing about the the technology drivers towards free pricing back in 1997, as well as the importance of managing your business as a network, and even a good description of how fitness landscapes can help you build strategy. If you haven’t read it yet, you should.

The Cluetrain Manifesto by Rick Levine, Christopher Locke, Doc Searles and David Weinberger: Takes a bit more of a marketing angle than New Rules, based around 95 theses for doing business effectively on the web. It starts with ‘Markets are conversations’ and builds from there.

There are some more recent books that also help us figure out how to deal with the changes wrought by the web.

The Wealth of Networks by Yochai Benkler: A more theoretical look at the network economy. Benkler talks about the impact that the web has on the economics of production and innovation, and then looks at the how this is leading to changes in politics and culture.

Networks, Crowds & Markets: Reasoning About a Highly Connected World by David Easley and Jon Kleinberg: Economic value is created through networks. Benkler’s book lays out the case for this idea, and Easley and Kleinberg provide an excellent guide to actually analysing networks. This book is comprehensive and gives you an excellent grounding in social network analysis. The downloadable version is a pre-release copy, so I’m not sure how much longer it will be available.

The Future of the Internet: And How to Stop It by Jonathan Zittrain: An excellent book which contrasts what Zittrain calls the generative web, which enables builders to make new things, and the closed web of proprietary technologies. He describes the main ideas in the book in this very entertaining talk:

Intellectual Property

The Public Domain by James Boyle: Boyle follows on from some of Zittrain’s arguments to address how the current intellectual property regime is broken. Copywrite and patents were designed to encourage the sharing of new ideas, but they are often now being used to prevent the generation of ideas. Boyle talks about how to correct this perverse situation.

Against Intellectual Monopoly by Michele Boldrin and David Levine: Boyle’s approach is from the legal angle, and Boldrin & Levine look at the same issues from more of a game theoretic view. Both are worth reading.

Getting Ideas to Spread

Unleashing the Ideavirus by Seth Godin: Another classic, this time from Seth Godin. The basic thesis is that ideas that spread, win. Godin talks about a number of strategies that we can use to get our ideas to spread quickly and widely. (also check out Godin’s latest project What Matters Now)

Intertwingle by Judy Breck: I actually haven’t read this one yet, so I can’t tell you too much about it. But it has an endorsement from Howard Rheingold, her blog is excellent, and it looks pretty interesting, so I think it’s worth giving it a go.

I suppose there should be some Fiction too

Makers by Cory Doctorow: If you want some fiction about innovation, this is a good one to read. An entire sci-fi book about business model innovation – what could be better?

So there you have it – that ought to be enough to keep you out of trouble this holiday season. And hopefully these will give some great ideas to go out and execute in the new year. Enjoy! If you have any other suggestions, I’d love to hear them.

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Linking Innovation to Strategy, part 4

Posted by Tim in innovation strategy on 24 December 2009

I’ve been talking recently about tools that you can use to link innovation to your organisation’s strategy. Jeffery Phillips explains the relationship between the two quite nicely in his post Do You Need An Innovation Strategy?

So, the takeaway is this: innovation is an ENABLER to corporate strategy, and what innovation needs to succeed is clarity about what is important to the business and what risks and scope are offered by the management team for any innovation to succeed.

And that is exactly why I keep returning to this topic – innovation must be linked to strategy. I also think that innovation can influence emergent strategies, but this can only happen if the two are linked up in the first place. John and I ran into an interesting case a while ago during an innovation review. We interviewed fourteen high-level managers within the firm, including two C-levels, and the people that have official responsibility for strategy and innovation within the organisation. All of the people that we interviewed have some official connection with the implementation of innovation there. As part of the review, we compiled trasncripts of all of the interviews, and ran them through Leximancer. Leximancer is a great text-analysis tool that analyses the language of the words in the text and creates a concept map for the document. The concept map shows which ideas are related based on how frequently they appear close to each other in the document.

Here are the results of all fourteen of the interviews – this map strips out most of the sub-categories in order to make it easier to see the major relationships:

What jumps out at you? The thing that jumped out at us is that strategy doesn’t even show up on the concept map! And we asked tons of leading questions to try to get people to make the connection – but they just didn’t.

This is an organisation that has Innovation as one of their core values. They are trying to actually walk the walk now with innovation, but it’s clear from this analysis that they can’t even talk the talk yet. Here is an excerpt of the interview with person in charge of strategy:

Manager: Yes, so – but I must admit I haven’t been really close to the innovation stuff.
John: I was wondering to what extent you could see innovation playing a role in delivering strategy. How would that work?
Manager: Yes, but I haven’t thought through that.
John: Okay.
Manager: No I haven’t thought through that, so I think yes there is a – [us] saying we will be an innovative company, what is the… (starts mumbling – can’t be transcribed)

All of the other tools that I have talked about for linking innovation to strategy (Part 1, Part 2, Part3) are useless if innovation and strategy aren’t linked in your head. The first step that we have to take to link innovation to strategy is to believe that has to be a link between them. If there isn’t, you can’t become more innovative successfully.

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