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Archive for June, 2011

What Drives the Growth of New Hi-Tech Businesses?

Tim and I are on the road for a few weeks at the moment. I think Tim is in Rome and I am at the Judge Business School at Cambridge University. Judge is a very large business school and is usually placed in the top 10 of any business school ranking. Just for this week, I am a guest of the Centre for Business Research, directed by Professor Alan Hughes.

Judge Business School: Cambridge University

Alan’s research group has been highly influential in shaping the agenda around innovation in the UK. I have written about some of their work that dispels some of the sacred myths surrounding innovation. Many of their findings are controversial but the quality of the research is first class. Despite the the mounting evidence of how innovation really happens, Alan says that he finds himself repeating the basic messages.

One of these important messages is that customers are a major source of innovation. We know this is true in many industries such as food manufacturing and sporting equipment but what about the high-tech industries such as life-sciences and IT?

In a major report from the Centre for Business Research, David Connell and Jocelyn Probert find that customers play an important role in getting hi-tech startups off the ground but the way that it happens is different from what most people expect.

Starting a new hi-tech business is risky and start-up capital is hard to find (even in the UK). In the Cambridge area where there are hundreds of hi-tech businesses, many of these started as ‘soft companies’. Rather than produce hard products they initially undertook highly customised work for established clients. These small consultancies are often the seeds of new companies but are easily overlooked.

The biggest advantage to the soft company model is that the cash flow ‘valley of death’ is much shallower and management skills can be developed over several contracts as the business grows. Without the need for venture capital these businesses can control their own direction and take advantage of opportunities as they see fit.

The key to the success of the soft company start-up is being able to access leading customers but often the founders of the start-up are also previous employees of these customer companies.

Again, this finding is another nail in the linear innovation model where an idea starts in the head of a tech expert. The soft-company start-up is a valuable business model for entrepreneurs and one that governments should do more to understand.

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Scarcity as the “Mother of Invention”

Can we decouple growth from consumption of resources?

Guest post by: James Bradfield Moody

Co-Author, The Sixth Wave: How to Succeed in a Resource-Limited World

Over the last 200 years, since the industrial revolution, we have seen economic growth strongly coupled with the consumption of more and more resources.  The more we grew, the more we consumed. 

This model works well in a world without limits, with plenty of resources to go around.  We’re starting to realise however that these resources, from ores to phosphates and water to topsoil are not as plentiful as we once thought.

For example, a report released at the World Economic Forum last year estimated that we are already consuming 95 per cent of the existing reliable supply of freshwater on the globe, yet also forecasting demand for freshwater to increase by 61 per cent  to 2030 in China alone.  Something has to give. 

And what might give is the model that rewards the conversion of as much resource as possible into outputs to drive growth.  Instead we might start to see a model where resource scarcity drives many of our choices.  This is a shift from an old mode of operation where we have been harvesting resources that were plentiful and cheap to one where we are managing resources that are scarce and valuable. 

In this world we start to decouple economic growth from resource consumption. 

But does this mean that we will see any less growth in our economy?  Not if we rise to the challenge.  Indeed, our recent book ‘The Sixth Wave: How to succeed in a resource-limited world’ identified areas of massive business opportunity for companies and countries that come from focusing on scarcity as an opportunity, not a challenge.

The first place to look for growth without resource consumption is in waste.  If you want to succeed in a resource-limited world, find a major source of waste and develop an innovation that either dramatically reduces that waste or does away with it altogether. New and old businesses are extracting methane from landfill to generate electricity, turning organic waste from supermarkets into compost or minimising heat and light waste from houses and office buildings.

Many companies are also finding business models that take waste and turn it into something productive, such as the Canadian Brewery that found it could use its grain waste to grow Shitake mushrooms.  Car share businesses are finding that as many as 10 families are sharing a single car, making much more use out of a single capital asset. 

The second big idea for separating growth from resource consumption is this:  Sell the service, not the product.  Companies and nations are learning that the best way to create value without consuming resources is through services, which has far reaching implications for the world economy, the internet and the way of life as we know it.  Do you want a car or do you want mobility?  Perhaps a car share service might be good for you.  Do you want energy or do you want heat and light?  Woking Borough Council in the UK has found a way to sell ‘heat’ to households and then works out how to deliver that heat through as little energy as possible.  Businesses that sell services quickly find that it is in everyone’s interest to deliver the service with the least consumption possible.

With more value in monitoring our natural resources, more and more devices will emerge that connect the digital and the natural worlds.  Think of this as having absolutely everything around you connected to the net (you already have your digital analogue – the mobile phone).  The whole planet and all of its natural resources will be measured and monitored to the point that everything in the natural world will one day have a digital counterpart, and many companies will emerge to manage and take advantage of this rich source of information.

Put these together and you get a fourth idea: Information is global, consumption is local.  Reducing the consumption of natural resources will drive everything to do with natural resources to become more local, while services that don’t consume resources will be truly global endeavours.  Energy production will be distributed and localised and resources will be recycled as close as possible to the point of consumption. 

If we do decouple resources from growth, what will our world look like? It will be a world where nothing is wasted and everything has a value.  It will be a world in which we don’t think so often in terms of ‘products’, but of ‘services’, and a world where resources are mapped and measured to a degree never before seen.  We still enjoy the quality of life that we expect, but we have changed our business models and incentive structures to reward what we really value and get rid of everything else. 

Dr James Bradfield Moody (@jamesbmoody) is Executive Director of Development at CSIRO and co-author of The Sixth Wave; How to succeed in a resource-limited world (www.sixthwave.org) with Bianca Nogrady (@SixthWaveBook).

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Searching for Unicorns: The Innovation Matrix

Thanks to everyone that has made comments and suggestions on The Innovation Matrix Reloaded. I’ll continue to incorporate your thoughts and ideas as the concept evolves. With that in mind, today I’d like to ask for some help.

First, let’s take a look at the Innovation Matrix again – I’ve highlighted the two categories I want to talk about:

Organisations that are innovative without having any commitment to innovation are interesting. Who falls into these categories?

When I first started thinking about this, one example immediately came to mind. A few years ago John and I started a big research project looking at innovation networks in project-based firms. One of the companies with whom we’ve done a lot of work on this project is a big mining company. Early in our relationship with them we had a meeting with several of the knowledge-management people in their main office. When we asked them about innovation, their response was “we’re not innovative.”

We were a bit surprised by this, but if they said it, it must be true, right? But as our research progressed, we discovered something interesting. When we went out to visit their mines and started talking to people, we found out that they are generating and executing innovative ideas all the time. True, nearly all of them are incremental, but still, in practice, this firm is actually reasonably competent at executing ideas – despite the fact that their upper management thinks that they are non-innovative, and in fact provides basically no support of innovation at all.

This is the kind of firm that I was thinking of as Accidental Innovators.

There are a few other examples of organisations in this category. Jürgen Stäudtner commented yesterday that firms with a strong focus on meeting customer needs can also be Accidental Innovators. They might not be consciously trying to innovate, but in meeting needs, they end up generating new products and services. This is similar to a comment that Rohan Hine made on the first version of the matrix, when he said that firms that are just starting out might not have a formal innovation process in place, but that in the course of figuring out how to survive in the market they may generate and execute innovative ideas.

So I can think of a few examples of organisations that fit into this category in the matrix. I think that in most cases these types of organisations will be limited to executing incremental innovations. However, with some added commitment, they also have the potential to become very good at it. They already have some skill at executing ideas – and this is one of the most important factors in innovating.

But this leads to the help that I need from you:

Where are the Unicorns?

Unicorn Rampant

Are there organisations that you can think of that have no commitment to innovation, yet are excellent at generating and executing new ideas?

Here’s another way to think of it: what’s the biggest innovation you can think of that came from an organisation that you would normally not think of as being innovative?

I’d love to hear your thoughts on this. If we can find some Unicorns, I might have to change the name of the category. On the other hand, being the first to actually find a mythical creature would be pretty cool…

(Photo from flickr/ranil under a Creative Commons License)

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When Should You Give Up on an Idea?

Braden Kelley posted a great transcript of a talk from Jeff Bezos of Amazon recently on Blogging Innovation. Here is one of the sections that I thought was really interesting:

If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company. AWS also started about six or seven years ago. We are planting more seeds right now, and it is too early to talk about them, but we are going to continue to plant seeds. And I can guarantee you that everything we do will not work. And, I am never concerned about that…. We are stubborn on vision. We are flexible on details…. We don’t give up on things easily. Our third-party seller business is an example of that. It took us three tries to get the third-party seller business to work. We didn’t give up.

But. if you get to a point where you look at it and you say look, we are continuing invest a lot of money in this, and it’s not working and we have a bunch of other good businesses, and this is a hypothetical scenario, and we are going to give up on this. On the day you decide to give up on it, what happens? Your operating margins go up because you stopped investing in something that wasn’t working. Is that really such a bad day?

Mike Masnick picked up on this and wrote an interesting response, which includes this:

Bezos’ ability to stand up to investors who regularly called for changes in strategy and to focus on the long-term has really paid off. In this age when “pivot” has become a buzzword in the startup community (there’s even a whole conference on the subject), where companies completely shift strategies on whims, perhaps there’s something to be said for seeing the long term game plan better than others, and sticking to it. Obviously, this doesn’t mean being totally pigheaded if an idea isn’t working, but Bezos’ point is to be flexible on the details, but stay true to the ultimate vision you believe in. That’s really, really tough for a lot of entrepreneurs to do, but it’s a really important lesson to learn.

I was thinking of these two ideas during my Executive Education class today – the two quotes pose an interesting question – when should you give up on an idea?

I’m actually not convinced that the idea of the Pivot is necessarily in conflict with the approach that Bezos is taking. It’s true that some pivots do take a new firm too far away from their original vision, but this doesn’t have to be the case.

Bezos is describing a Little Bets type approach to executing your new ideas. Test a lot of ideas (planting seeds) to see what works. When something gains traction, build on that.

This is one of the few innovation ideas that is easier to execute in a big organisation. When you’re big, you can try out a lot of different ideas, and it’s not such a big deal if some of them don’t work.

bandera blanca | white flag

However, in a start-up, it’s not so straightforward. Here you basically have one idea, so you need it to work. Still, you have an opportunity to test the various parts of your business model as you go along.

I think that the answer to the question is that you should give up on your ideas easily when you’re still in the idea-testing stage, but then hang on to them stubbornly once you’re trying to get the idea to diffuse.

Giving up on ideas when you’re in testing phase is part of being flexible on the details. You’re still at a point where pivoting makes sense.

However, once you’ve settled on an idea, and shown that it works, that’s the time to hang on – ideas always take longer to spread than we expect.

As with many parts of innovation, the correct choice between flexibility and stubbornness is all a matter of timing.

(Photo from flickr/Neil Wykes under a Creative Commons License)

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The Innovation Matrix Reloaded

Since I put the Innovation Matrix together last year, we’ve been experimenting with it to see if it makes sense. I’ve used it in a couple of classes, and John and I have discussed it with a number of people that are actually responsible for innovation within their organisations. We’ve learned that the basic principle seems to resonate pretty strongly with people. We’ve also learned that the original configuration could use a bit of work (conversations with Mark Dodgson and Kate Morrison also helped in this regard).

Here is the new version of the Innovation Matrix:

This is a bit of a distillation of observations over time.  I thought of it because I think that a lot of people that are trying to improve innovation within an organisation think that they can go from the bottom left (No Innovation Capability) to the top right (World Class Innovator) in one jump, simply by introducing some sort of innovation program.  I think that this is impossible – that you actually have to make the trip in a number of steps, and that there are many different paths that you can take.

The table has two increasing dimensions.  Across the horizontal axis there is increasing commitment to innovation.  This can include things like talking about how innovation is important, including it as a core value, putting in systems to support and improve innovation, and explicitly earmarking time, money and other resources to innovation. This is measuring innovation inputs.

Going up the vertical axis shows an increase in innovation competence – mainly the ability to generate and successfully execute new ideas. This measures innovation outputs.

Here is a brief description of each box:

  1. No Innovation Capability: these firms don’t innovate.  This isn’t necessarily bad – there’s no value judgment being made. They can be successful if they have strong positions in stable industries, or they can be average performers or struggling in other circumstances.  I think we can probably all think of examples for this category.
  2. Thinking About Innovation: firms in this category are starting to talk about the importance of innovation.  They might add it to their list of core values, or have a CEO that is starting to talk it up.  Regardless of this increase in awareness and commitment, they are still not very good at it.  This is often the first step that organisations take in trying to improve innovation.
  3. All Talk, No Action: is a self-explanatory category.  They are talking the talk, with official innovation programs, commitment of time and resources, etc.  But they’re still lousy at actually executing ideas.  They may have an excessive focus on ideation, a bad selection process, or just not be very good at executing.
  4. Accidental Innovators: These would be firms that innovate under some other name – so they might be really good at process innovations through a continuous improvement or lean program.  They are able to execute ideas reasonably well, but they don’t have any structure in place to support it, nor do they think that they’re innovative. They innovate through stealth.
  5. Average at Everything: these firms have some structure in place to support innovation, and they are getting better at doing it. Several firms that I work with have gotten to this level after moving first to Talking About Innovation.
  6. Potential Stars: there are two paths to get to this point. Along on, these organisations are good at innovating, and they are putting more resources into getting better at it.  They have top-level commitment to innovation, good processes in place, and dedicated resources for innovation.  They are reasonably good at executing new ideas and have the potential to become extremely good. The other path is to be very good at executing new ideas, but with less structure. These organisations aren’t sinking huge amounts of resources into the process, but they are consciously trying to innovate. Because they lack full commitment to innovation, it might not become systematized, but they also have the potential to be extremely good.
  7. Unicorns: the problem with making a matrix is that you have to put something into every box, even if it’s mythical.
  8. World Class Innovators: Another self-explanatory category. In these firms innovation is deeply embedded in the culture – everything is oriented around innovation. Think Google, Apple, 3M, Procter & Gamble etc.

How to use this:

Here are some things that I think we can do with this:

  • Use it to make a better picture of how firms improve at innovation:  Many of the people in my classes are in firms towards the bottom left, and many of the examples that we use to illustrate points are from firms in the top right (Google, P&G, 3M, etc.).  This might be too big a conceptual jump. Not every firm can get to the top right, and neither should every firm aim to. It is more productive to think of this as an incremental process of steps, rather than one big jump.
  • Track the evolution of firms: we can learn about how to best manage innovation by tracking how firms progress through this matrix.  For example, one firm I work with started with No Innovation Capability, then started talking about it and moved to Thinking About Innovation, and now that they are getting better at it they are Average at Everything.
  • Realise that there are multiple targets to shoot at: Like I said, not every organisation can be Google. Thinking about innovation with this matrix, you can see that all of the categories in the top row are excellent at innovation. However, the farther you go to the right, the more resources you have to commit to build and maintain this level of excellence. There are many situations where you can try to be an excellent innovator with a more bottom-up, less resource-intensive system in place.
  • Think About the Best Path to Follow: Almost everyone starts by increasing commitment.  The danger with this is that you can end up in the All Talk, No Action category.  I wonder if we should be figuring out ways to improve capability rather than commitment.  Or is this even possible? It’s an interesting question, and you can certainly make a strong argument in favour of increasing capability before you increase how much you talk about innovating.

The main point with The Innovation Matrix is that improving your innovation performance is a journey of many steps, not simply one big leap. The matrix is designed to help us think about this more accurately, and to be more successful at improving our innovation performance.

If you have any thoughts on this, we’d love to hear them.

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Three Signs That Your Business Model is Obsolete

When I was working on yesterday’s post about the business model experiment that Kaiser Chiefs are running, I came across a quote from Paul Morley that bothered me enough to trigger this post. It’s from the discussion of the idea in the Financial Times, and Morley is suggesting that the experiment is a terrible idea. Here’s why:

If you’ve got the time, it is always best to listen to a great album from beginning to end, preferably with a break in the middle where you turn the record over – creating four very specific moments of drama, the beginning and ends of sides one and two, with moments of surprise and intrigue carefully distributed in between to make separate songs work as a whole.

Bringing It All Back Home, Bob Dylan’s 1965 album, is my choice from the 1960s for the perfect album sequence…

Consequently, letting listeners choose their own album sequence is bad.

Look, I still own about 800 records on vinyl, so I can understand why he’s saying what he’s saying. But still – give me a break!!

Bringing It All Back Home is nearly 50 years old now. Criticising modern artists for not following the same tropes today is exactly the same as saying that Dylan should have been making records in exactly the same way as people were around the time that Robert Johnson was five years old. It’s just nuts.

This is dominant logic thinking – and this is an approach that can kill you in turbulent environments.

A firm or industry’s dominant logic is usually determined by whatever business model first led to success. While things are stable, it is fine to just keep innovating incrementally. However, when things around you start going unstable, you need to start experimenting.

Here are three signs that your business model might be obsolete – if you say:

  • We should be doing things in exactly the same way that we were fifty years ago: I don’t think we need anything more on this – it’s a huge danger sign.
  • I want you to think outside of the box: this one is tough, because it sounds like you actually are asking people to innovate. However, here is what it usually means:

    “Think outside the box” usually means “make a small jump that will move one edge of the box out just a tiny bit”. Incremental. If someone asks you to think outside of the box, and you come back with a star instead of a slightly rejigged box, you’ll most likely be in trouble. Thinking outside of the box is a good sign that your business model is too old.

  • We have to educate the market: this can mean two things – “our new idea is ahead of its time, so people don’t understand it yet”, or “if we just explain it to people, they will still love the business model that we’ve been using all along.” Unfortunately, it usually means the latter. I have yet to hear someone use this phrase when they weren’t already deeply in trouble.

It’s really difficult to move beyond the dominant logic of your firm, or your industry. In part this is because of how strongly connected these offerings are with existing suppliers and customers. Changing the business model is just the first domino in a long line that will then inevitably fall.

Nevertheless, if you see one of these signs that your business model is obsolete, the time to act is now. And at this point, you can’t just move the lines of your box. You’ll have to experiment to see if you can come up with a star.

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Kaiser Chiefs and New Business Models for Music

I just finished listening to my version of the new album by Kaiser Chiefs, The Future is Medieval, and I have to say that I’m pretty happy with it.

You may well ask what makes it my version?

The thing that makes it mine is that I picked the 10 songs to go on it, I picked the order they’d go in, and I made the artwork. And I guess I’m promoting it now too, even though what I’m really interested in is the business model.

Here is how Mike Masnick describes the idea:

…there are two key things that the band is doing with this digital (and it’s only digital) release:

  • Let fans create a “custom” album with custom artwork. The band is effectively releasing 20 songs, and users get to pick which 10 they want, and put them in any order they want — and then they get a custom piece of album artwork, based on the choices. The website is fun to play around with as well.
  • Then, once you’ve bought the album, you also get a “fan page” for the unique album that you created, and if you drive others to that page and they buy the copy of the album that you created, you get £1 (the full album costs £7.50).

There are some other little features as well, but those are the two big ones. It’s definitely an interesting idea, and I’ll be curious to see how it goes.

I’m pretty curious to see how it will work too. Masnick has some reservations about the choices that they’ve made – but it illustrates an important point. When you face a turbulent environment, as record labels certainly do at the moment, then you have to experiment with new business models to find out what works.

This is an interesting experiment.

Here is what singer Ricky Wilson had to say about it in an email to The Lefsetz Letter:

We’re quite excited about this. Why not make an album yourself? We wanted to reward the fans for being our fans and thought this could be nice.

We just sold all our tickets for our first two gigs exclusively on our facebook page, which worked a treat and we’re going to be getting fans to use Facebook polls to help us pick set-lists and stuff. God knows if it’ll work.

We’ve used a load of our own money to hire some really clever people to build the site and market it so we’re hopeful.

This definitely isn’t some sort of two-fingers-to-the-system thing. In fact our label Fiction have been very supportive.

It’s not supposed to be a massive statement to the world or a fight against anything. It was just fun and we needed that to be honest.

So what’s different from a business model standpoint? A few things.

By getting people involved it changes the value proposition pretty significantly. If you take an hour to put together your own version of the CD, then you’re likely to feel pretty invested in it. In my case, that worked pretty well because even though I love and have bought a couple of Kaiser Chiefs songs, this is the first full CD of theirs that I’ve ever gotten. Marion Gibbon has a good analysis of some of the issues here as well.

The value network is different too, with fans promoting the record (although here is a critique from Dan Catt of that part of the scheme who suggests that this isn’t necessarily the best idea in the whole experiment – something that I agree with).

It’s also interesting to see what hasn’t changed – the value chain that produced the record is pretty standard. The band was supported by their label to go into the studio to make the music, and all the rest of the process right up to distribution is pretty standard. So it’s not a full DIY value chain like Kristin Hersh is using.

I’ve got no idea if this will work or not. But in a sense it doesn’t matter, because once it’s done, we’ll know something about this type of approach. And other bands and labels can try it themselves, or come up with a way to make this business model better.

The one thing that I do know is that if your business model is in trouble, trying out ideas that involve your customers more deeply in the process of creating things is probably smarter than suing them.

That was the end of the regular post, but here is where I’ll tell you a bit more about my version of the album. Carl Wilkinson has a good discussion of the ideas behind the album, whether or not it is a good idea for artists to give up control over track sequences, and the story behind his version of the album in this story at the Financial Times. Strangely, his first three tracks are identical to mine, even though I’m pretty sure we used a different method for picking songs.

In looking at this and a few other posts about the records, I think I messed up the artwork on mine. In any case, if you’d like to see the artwork, or check out my song choices, you can go here:

timkastelle

I’m pretty sure that the overlap between people reading this blog and Kaiser Chief fans is pretty small:

If you’re interested in hearing some of the music from the record, this is the first single Little Shocks:

If all this grabs your interest, you should check out the new record. But whatever you do, don’t buy my version – make your own!

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How to Use Networks to Spread Ideas

Here’s a question for you: imagine that you have a package that has to be delivered to someone that you don’t know and you’ve never met that lives across the world from you – let’s say a particular lawyer in Antinanarivo, Madagascar. The only way to get it to them is to pass the package along to someone that you know on a first-name basis, and you ask them to do the same. The chain continues to grow using this method until the package eventually reaches the shop owner.

If this sounds familiar, it’s basically a version of the small-world experiment that Stanley Milgram ran in the 1960s. He had people from the Midwestern US trying to get letter to a banker in Boston. This experiment was the first test of the six degrees of separation idea – that any one of us is only six handshakes away from anyone else in the world.

But now, think about this: if you had the actual task of getting that package to Madagascar, who out or your friends and acquaintances would you actually send it to?

Do me a favour and take a minute to think about this and come up with an actual name.

Do you have a person in mind?

Good, now here’s a question – did you think of someone that is highly connected? Here’s what I mean – here are Facebook pictures for four people that I know (the stats are all from about 18 months ago):

At the time, the average number of connections that people had on Facebook was about 100. The for people are me, with 111 connections, and my friends Kate (75 connections), Siri (1320 connections) and Robert (2178 connections).

So the question about your choice in trying to get the package to Madagascar is this: did you pick someone that is less connected, like me or Kate, but which may have a particular connection to our target? Or did you pick someone that you know is highly connected, like Siri or Robert?

The story that we often hear about getting ideas to spread through networks is that the best way to do this is to find the influencers. Often, these are the superconnected people. This is how Ed Keller and Michael Berry describe it in their book The Influentials:

One in ten Americans tells the other nine how to vote, where to eat, and what to buy…. Few important trends reach the mainstream without passing through the Influentials in the early stages, and the Influentials can stop a would-be trend in its tracks.

Duncan Watts has been right in the middle of the development of social network analysis over the past 20 years or so, and he’s not so sure that this is how things actually work. In his new book Everything is Obvious (Once You Know the Answer), he describes an experiment that he put together with some colleagues to test how influential the Influentials were. They recreated the small world experiment, this time using email chains – they had over 20,000 chains trying to reach 18 targets in 13 different countries.

Here is how he describes the results:

We also asked people why they chose the next person in the chain, and here, too, we discovered little evidence of hubs or stars. Subjects in small-world experiments, it turns out, do not typically pass messages to their highest-status or most-connected friends. Instead, they pass them to people they think have something in common with the target, like geographic proximity or a similar occupation… Ordinary individuals, in other words, are just as capable of spaning critical divides between social and professional circles, between different nations, or between different neighborhoods, as exceptional people. When you want to get a message to a graduate student in Novosibirsk, Russia, for example, you don’t think about whom you know who has a lot of friends, or goes to lots of parties, or has connections in the White House. You think about whether you know any Russians. And if you don’t know any Russians, then maybe you know someone from Eastern Europe, or someone who has traveled to Eastern Europe, or has studied Russian, or who lives in part of your city that is known for its Eastern European immigrants.

If I were trying to get that package to Madagascar, I’d probably pick Siri to send it to next. Not because she’s highly connected (though she is), but out of the four of us in that picture, I know that she’s been to Africa most recently and that she has good connections there.

Which type of person did you pick?

These are important questions for anyone trying to get ideas to spread. They do spread through networks, and the structure of these networks is important. If we can’t target the Influentials to get our ideas to spread, what should we do?

Watts’ solution is to try using a Big Seed Strategy. Instead of using money and resources identifying and paying to get the Influentials to spread your idea, he suggests spreading the effort out across a wide range of “normal” people. In other words, his data suggests that rather than paying Kim Kardashian $10,000 to tweet your idea, you’d be better off paying 1,000 people with lower profiles $10 each.

This experiment was actually run once recently, when Connected, a book about how things spread through networks by Nicholas Christakis and James Fowler was spontaneously promoted by Alyssa Milano to her 1.2 million twitter followers (read the full details here). Unfortunately for Christakis and Fowler, the extra publicity didn’t sell any more books.

Curious, they then had Tim O’Reilly (1.5 million followers) and Susannah Fox (4700 followers) send out tweets about the book as well. The one that produced the biggest bounce was Fox – and she was chosen because her followers were the ones that seemed most likely to be interested in the book.

It seems obvious that the best way to get ideas to spread is to find influential or highly-connected people to buy into the idea. However, this doesn’t seem to be the way that things work in practice. It’s a topic about which we still have much to learn. However, since networks are so critical to spreading ideas, it’s a good topic to keep up with – especially if you’re coming up with your own great new ideas.

Other resources:

There are all kinds of good resources on the importance of influence within networks – some good ones include:

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Data Changes Everything

I was talking with a friend tonight over dinner about the PhD that she is starting. One of the suggestions that I made was to get through the literature review and research design phase as quickly as possible. The reason for this is that data changes everything.

PhD students share a common problem with inventors and innovators – they often get hung up on the value of their ideas.

The problem with ideas is that they are just that – ideas. They are a hypothesis about the way that things work. In order to figure out if the idea is any good, you have to test it. This is scary for a bunch of reasons: it might not work, if it doesn’t work you’ll need to go and have another idea, if it doesn’t work people might think less of you, etc.

In a Q&A session that he did to promote the new paperback version of his very good book The Myths of Innovation, Scott Berkun answered this question:

Q: When a new idea looks strange, how do you tell a great one from stupid? Try them all and see what works, or select one and push it as far as you can?
You [can't] tell just by looking. You have to put in action. Make a prototype. See what happens when the idea meets the world. Sometimes keeping a strange idea around and poking at it now and then is simply good exercise. It keeps your creative muscles working, so when a weird idea that has the potential to be great comes along, you’ll be patient and persistent enough to discover its potential.

Pivot Fakie.

In startups, this idea is referred to as the pivot – the point where your business model makes a 90 degree turn. Here’s a terrific post by Steve Blank describing the process in more detail – you should read it. Here’s part of his description:

Startups are inherently chaotic. The rapid shifts in the business model is what differentiates a startup from an established company. Pivots are the essence of entrepreneurship and the key to startup success. If you can’t pivot or pivot quickly, chances are you will fail.
Pivot.
Lessons Learned

  • A startup is an organization formed to search for a repeatable and scalable business model.
  • Most startup business models are initially wrong.
  • The process of iteration in search of the successful business model is called the Pivot.

Data changes everything.

See what happens when the idea meets the world.

Pivots are the essence of entrepreneurship and the key to startup success.

Having great ideas is exciting. It gives you a nice adrenalin rush, and it makes it feel you’re doing something. Testing ideas is often tedious, and it is a process that faces failure at every turn.

But in the end, value is only created by ideas that are successfully executed. This is true whether you are writing a business or forming a startup.

Get out there and start testing your great ideas.

(Photo from flickr/Daniel Dale under a Creative Commons License)

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Do Universities Matter for Innovation?

I’m probably going to get in trouble for this post because the answer to the title question is yes and no. I am employed by the University of Queensland which prides itself as being the most successful commercializer of research in Australia. However, I have never been convinced by the simple argument that univerisities matter because they produce groundbreaking research that can be patented and sold to commericial interests. While many academics believe this to be the case, the evidence shows that this is possibly the least important thing that a unversity can do for the business community.

In a survey of firms in Brisbane, Australia we found that unversities were relatively unimportant as sources of innovation. Customers, suppliers and competitors are far more important as sources of innovative ideas. That doesn’t mean that the three universtites in Brisbane are doing a bad job or that Brisbane businesses should be trying harder to work with universities because it is similar to the results from other surveys around the world. The following table from a study by Cosh, Hughes and Lester (2006) is typical of this. When firms were asked about valuable sources of ideas for innovation, universities appear down the bottom of the list.

If you really think about the companies that you regularly interact with, how many would be directly involved in university research? The fact that universities aren’t important for innovation in the majority of firms really isn’t that surprising. But what about the organizations that do interact with universities for innovation? What do they think is important? Again, the notion of universties being originators of IP that gets protected and sold to willing buyers doesn’t stand up to the evidence.

If you look at the table and think about what is at the top, it’s the flows rather than the stocks or knowledge that really matter. Informal contacts with sharing ideas between the university and external partners, smart graduates with new knowledge and connections between businesses and their former teachers, and published information in journals and conferences are far more important for innovation than protected IP.

This is important because many universities are restricting the flows of knowledge that really matter for innovation. Business engagement is rarely recognized in an academic’s performance review, lip-service is paid to teaching quality and lawyers are always ready to make sure that anything of remote commercial value is protected with a patent or a secrecy agreement.

Universities do matter for innovation, but this is because they can create a public space for the exchange of ideas. Andy Cosh (MIT) and Alan Hughes (Cambridge) tell us that this is the most undervalued way that universities contribute to innovation. In the rush to squeeze more dollars out of IP, there is a very real risk that universities will choke the knowledge flows that created this IP in the first place.

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