Archive for November, 2011

A Thanksgiving Innovation Reflection

Posted by Tim in innovation on 24 November 2011

As people in the US get ready for Thanksgiving weekend, I was reminded of the story about Joseph Heller told by Kurt Vonnegut in the New Yorker. Bob Sutton has a terrific post on this, which I encourage you to read. Here is the poem:

Joe Heller

True story, Word of Honor:
Joseph Heller, an important and funny writer
now dead,
and I were at a party given by a billionaire
on Shelter Island.

I said, “Joe, how does it make you feel
to know that our host only yesterday
may have made more money
than your novel ‘Catch-22′
has earned in its entire history?”
And Joe said, “I’ve got something he can never have.”
And I said, “What on earth could that be, Joe?”
And Joe said, “The knowledge that I’ve got enough.”

Not bad! Rest in peace!”

–Kurt Vonnegut

The New Yorker, May 16th, 2005

The knowledge that I have enough is something I struggle to gain myself, but it is well worth striving for. I’m incredibly lucky with what I have in life, and it is enough – more than enough.

It’s another reason that when we think about innovation, it’s important to focus on delivering things that create genuine value, not just novelty. I’d be thankful if we can do that.

(I don’t have permission to reproduce the poem like Prof Sutton does, so I hope it’s ok, because it’s something that everyone should read. The photo is from flickr/Edsel L, under a Creative Commons License)

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The Most Important Innovation of All Time

Posted by Tim in complex systems, experiments, innovation on 23 November 2011

What is the most important innovation ever?

There are plenty of candidates. Fire, the telegraph, electricity, and the internet would all have to be candidates.

There’s another one though, that has had an enormous impact on every single one of us. And surprisingly, it’s not a whiz-bang piece of technology. It’s a simple process innovation.

The most important innovation of all time is: medical practitioners washing their hands before they touch patients.

Hand washing has been an unbelievably important medical breakthrough. It is one of the main reasons that we actually live long enough to retire now.

As with many great innovations, hand washing started with a scientific discovery – the germ theory of disease. And as with some innovations, the theory was driven by beer. Louis Pasteur’s work was motivated by brewers who couldn’t figure out why some batches of beer fermented well, while others failed. So in trying to make better beer, Pasteur made us all healthier.

There are some critical innovation lessons here:

Ideas need to be executed to create value: the germ theory of disease is an important scientific breakthrough, but a theory isn’t an innovation. Theories are often great ideas, but to become an innovation they have to be turned into something that can be executed to create value. Germ theory led to many important innovations: pasteurization, antibiotics, and hand washing. These innovations have had impact on a wide range of industries and activities, and that is where the value has been created.
Innovation isn’t just about new technology: hand washing in hospitals isn’t a sexy new piece of technology (which is maybe part of why it’s still hard to get everyone to do it consistently). Hand washing is a process, and process innovation can be incredibly important. Just think about the assembly line, lean management, or agile software development. All are process innovations, all are important, like hand washing.
Small innovations can have enormous impacts: one feature of complex systems is that small changes can results in gigantic change. That’s what happened with hand washing. This new process has made childbirth much safer, it improved the success rate of all surgeries, and it greatly reduced the chance of secondary infection in medical procedures. And it’s about the simplest thing imaginable!

So the next time you wash your hands before eating, think about what a great breakthrough you’re participating in. And when you’re thinking about innovation, remember that it’s often the smallest ideas that can make the biggest difference.

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How to Steal Like An Innovator

Posted by Tim in connect, innovation on 21 November 2011

I’ve been obsessed with this video for the past couple of days:

The song is Nouvelle Vague covering Dance With Me by Lords of the New Church. It’s a great cover. The video is an even more inspired piece. Youtube user Luakabopper took the song and put it over this amazing dance sequence from Bande a Part (the movie after which Quentin Tarantino named his production company). The combination of a Bossa Nova cover of a new wave song spliced with new wave cinema is genius all the way around.

It might not be obvious, but this great video tells us a lot about innovation. Here are some ideas:

Innovation is about connecting ideas: I’ve always been fascinated by covers. When they’re done well, talented musicians take a good song and make it completely their own. This is combinatorial creativity. Taking an existing song, and combining it with your existing talent.
Innovators connect ideas as well. In his controversial article on Steve Jobs, Malcolm Gladwell says:

The visionary starts with a clean sheet of paper, and re-imagines the world. The tweaker inherits things as they are, and has to push and pull them toward some more nearly perfect solution.

John Gruber points out some of flaws in this argument, but the main one is that there’s no such thing as a clean sheet of paper. Connecting ideas is the fundamental creative act in innovation.
Innovation gets to the core of ideas: the key to making a good cover is to find the key part of the song you’re playing and focus on that. This is what separates the talented bands from the not so talented ones. There are plenty of cover bands playing bars all around the world that don’t do anything special. The just play the songs as closely as to the original versions as they can. The thing that is great about Nouvelle Vague is that they are extremely skilled at finding the the critical core of each song that they play.
In his great post How to Steal Like an Artist, Austin Kleon included this picture:

And he said:

It’s often what an artist chooses to leave out that makes the art interesting. What isn’t shown vs. what is.

In this age of information overload and abundance, those who get ahead will be the folks who figure out what to leave out, so they can concentrate on what’s important to them.

This is true for innovation as well. The key to connecting ideas is to get to the core of the ideas that you are adapting. If you just copy an idea in its entirely, there’s no creativity involved, and no innovation. You must subtract to innovate through combination.
You can’t just copy ideas, you have to create ideas of your own: you might argue that doing Bossa Nova covers of 1980s punk and new wave songs creates more novelty than value, but I love the Nouvelle Vague. It’s definitely novel, but in their best songs, there is something fascinating going on – these songs are interpretations that genuinely add something good to the originals.
This illustrates the innovation idea called absorptive capacity (Paul Hobcraft has done a great job of explaining the ideas behind absorptive capacity). The basic concept is that in order to absorb knowledge and ideas created by others, you have to be generating new knowledge and ideas yourself first.

This is a critical point if you innovating through any form of collaboration. You don’t gain an advantage by collaborating unless you’re capable of developing and executing good ideas on your own.

So the key to stealing like an innovator is this: don’t just copy ideas, connect them. Connect ideas from the outside with the internal capabilities that you use to create unique value.

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Get Your Process Right to Innovate Successfully

Posted by Tim in book riffs, innovation strategy on 18 November 2011

What wins in innovation, great ideas or great process?

Ideally, you’ll have both. But I suspect that if it’s either/or, process wins.

There is an interesting example from the world of chess in Michael Nielsen’s fantastic new book Reinventing Discovery: The New Era of Networked Science. The book discusses how our improved ability to network via the internet is changing the face of science. It’s an interesting book, and also an important one and I recommend it highly.

One of the stories that he tells is of a tournament sponsored by playchess.com in 2005. It allowed humans and computers to enter together as hybrid teams. The expectation going in was that the teams put together by the dominant chess-playing computer of the time, Hydra, would win because no one could beat their computers.

However, the Hydra teams didn’t even make the quarterfinals. The best machines didn’t win. Neither did the best human players – the grandmasters. Here is how Nielsen describes the tournament:

The grandmasters could beat the Hydras because they knew when to rely on their computers, and when to rely on their own judgment. Even more interesting, the winner of the tournament was a team called ZackS that consisted of two low-ranked amateur players, using three off-the-shelf computers, and standard chess-playing software. Not only did they outclass the Hydras, they outclassed the grandmasters with their strong chess-playing computers. The human operators of ZackS demonstrated exquisite skill in using the data-driven intelligence of their computer algorithms to amplify their chess-playing ability. As one of the observers of the tournament, Garry Kasparov, later remarked, “Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process.”

It’s an amazing story, and a counterintuitive one. We like to think that genius always wins, but it doesn’t. You need to execute as well.

It’s an important innovation lesson. Here is a quote from le Corbusier that makes the same point:

Genius is personal, decided by fate, but it expresses itself by means of system. There is no work of art without system.

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

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Innovation Obstacle: Social Habits

Posted by Tim in innovation on 11 November 2011

For some insight into another common innovation obstacle, consider this quote from John Maynard Keynes:

Worldly wisdom teaches that it is better for reputation to fail conventionally then to succeed unconventionally.

Because it’s pithy and quotable, it might be easy to dismiss – and just as an aside, why aren’t modern-day economists as good with one-liners as Keynes and Schumpeter were? But I’ve seen this type of thinking far too much – I’ve come to believe that Keynes was probably right.

This is another form of risk aversion.

If we don’t take a risk, we may well fail, but at least we’ll fail conventionally. But if we do take a risk, then we might fail, which would be bad, or, if we succeed, we’ll be weird, which would also be bad.

I think that to successfully innovate, we have to be willing to be weird. We must be prepared to succeed unconventionally.

Furthermore, if we are managers or in a position to influence people, we have to stop rewarding failing conventionally. This is hard, because risk-aversion appears to be deeply hardwired.

How can we get around this? Here are some thoughts:

Reward people that come up with the weirdest ideas: don’t reward volume of ideas, or success, but weirdness. If we want more unconventional success, we have to get comfortable with being weird.
Be extra vigilant for conventional failures: these are hard to spot because people who are failing conventionally will look normal, or average. This is the outcome of the saying that I kept running into back in my photocopier days – “no one ever got fired for buying Xerox.” But if Xerox isn’t the best choice (and they weren’t then), then someone should be getting fired for buying Xerox. Or you should at least have a word with them…
Make it risky to not test out new ideas: we have to make it hard to play it safe. We need to test ideas promiscuously. Measure and reward this, and it is harder to sit back and fail conventionally.

Preferring conventional failure to unconventional success is comfortable, but it’s intellectually lazy.

It’s time to be weird.

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You Can’t Know Everything About Everything

Posted by Tim in innovation on 10 November 2011

I had a striking reminder of my ignorance on Sunday.

I’m currently in Ciudad Juarez, Mexico to give the keynote at a conference tomorrow. I arrived a few days early to get acclimated, and on Sunday, my hosts took me around town, including a visit to the new Museo de la Revolucion en la Frontera. The museum was great, and I learned a lot.

At one point, we were invited in to watch a puppet show that the Museum was staging for the kids there that day. We watched a bit of, but even though the puppets used a vocabulary fit for kids, very little of it overlapped with 40 words of Spanish that I know. And while I watched the show, I realized that most of the 6 year olds in the audience probably knew a whole lot more about the Mexican Revolution than I did. That’s when I was feeling fairly ignorant.

As I thought about it more, I realized that when I was growing up, I thought I could know everything about everything. As I’ve got older though, I know that’s impossible. Now I hope that I can know enough about some things.

In terms of learning Spanish, my 40 words do a reasonably good job of getting me around on a day to day basis. And I can’t learn the whole language because then I would have to skip learning something else. The window for learning Spanish (for me at least) was back when I was in junior high and we had to take a language class.

The case of the Mexican Revolution is more interesting. I knew some basic facts, but not much else. So I learned as much as I could from the Museum. Then I did some more research. And on the following day I asked a few people from Juarez about it, and was able to have some reasonably sophisticated discussions about causes and outcomes, the current state of politics here.

I had gotten to the point where while I didn’t know everything about the Revolution, I knew enough.

This raises an important point for education. We often get caught up in learning facts. Facts are the easy part.

These days, a lot of people don’t worry about facts, but they want higher education to provide people with the work skills that they need in whatever job they will have once they graduate. Learning skills is better than learning facts. But at the same time, most of the people currently enrolled in universities will have jobs in the near future that don’t exist right now. How can we train them for these?

We can’t. Instead, we have to help people build the skills they need to acquire new skills. They need to learn how to learn.

In discussing my recent post on powerpoint, Neil Kay wrote to me that when he’s teaching, he wants people to know that knowledge is contingent.

That’s a very important point, and one that we lose sight of if we focus too much on teaching facts and skills.

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Learning From Failure

Posted by Tim in book riffs, evolving economic entities, experiments on 2 November 2011

What’s the biggest new product launch failure ever? The biggest I’ve seen was New Coke, but the example that often springs to mind is the Ford Edsel.

Ford put a lot of effort into the Edsel. They had lagged behind GM for a few years, and the Edsel was supposed to put them back in front. Ford sunk a lot of time and effort into product innovation for the Edsel, and into market research as well. They launched one of the biggest marketing campaigns ever.

And the Edsel sold miserably.

Steven Johnson has followed up Where Good Ideas Come From (discussed here) with another book on innovation, this time, an edited volume called The Innovator’s Cookbook. The first chapter is by Peter Drucker, who remains one of the best management thinkers we’ve seen.

Drucker outlines seven sources of innovation opportunity: unexpected occurrences, incongruities, process needs, industry & market changes, demographic change, changes in perception and new knowledge. The essay was originally published in Harvard Business Review, and one way or another, it’s worth tracking down to read.

In discussing unexpected occurrences, Drucker has an interesting take on the Edsel story:

Everyone knows about the Ford Edsel as the biggest new-car failure in automotive history. What very few people seem to know, however, is that the Edsel’s failure was the foundation for much of the company’s later success. Ford planned the Edsel, the most carefully designed car to that point in American automotive history, to give the company a full product line with which to compete with General Motors. When it bombed, despite all the planning, market research, and design that had gone into it, Ford realized that something was happening in the automobile market that ran counter to the basic assumptions on which GM and everyone else had been designing and marketing cars. No longer was the market segmented primarily on income groups; the new principle of segmentation was what we now call “lifestyles.” Ford’s response was the Mustang, a car that gave the company a distinct personality and reestablished it as an industry leader.

In other words, Ford learned from the failure of the Edsel. Here is how Matt Haig describes it in Brand Failures:

As Sheila Mello points out, between 1960 (when the Edsel was phased out) and 1964 (when the Mustang was launched) Ford, along with most of the car industry, had shifted its focus towards what the consumer actually wanted. ‘The success of the Mustang demonstrates that Ford Motor Company did learn from the Edsel experience,’ she writes. ‘The key difference between the ill-fated development of the Edsel and the roaring success of the 24 Brand failures Mustang was the shift from a product-centric focus to a customer-centric one.’

Here are some key points from this story:

Failure is only useful if we learn from it: we often talk about the need to fail in innovation, however, there is only value in failure if it helps us learn.
Try to fail as cheaply as possible: the main problem with the Edsel isn’t that it failed – it’s that it failed so expensively. There is a hierarchy of failure, and we need to figure out how to fail as early in the process as possible. One way of doing this is through prototyping.

The lesson from the Edsel is to learn from ideas that don’t work. And also, if you’re knocked over, get back up…

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The Property Ladder Theory of Bubbles

Posted by Tim in business models, complex systems on 1 November 2011

I’ve always thought that the BBC show The Property Ladder provided the perfect illustration of how bubbles worked. The show ran from 2002-2006 and it was hosted by Sarah Beeny. The show profiled aspiring property developers who bought properties, renovated them, then tried to sell them for a profit.

If you’ve never seen it, this will give you a flavour of how it worked:

That show that included Sian Astley – who was atypical in that she went on to become a successful property developer. The normal pattern in the show is that the developer-to-be buys a property, then spends most of the show ignoring the advice given by Beeny (because otherwise it wouldn’t be nearly as interesting).

Inevitably, the projects run way over time, and way over budget. Nevertheless, the properties always ended up selling for a substantial profit, and they nearly always ended with the new developer planning to move on to their next development project.

The reason that it’s the perfect example of a bubble is this: the reason that the properties always made a profit is not that the developers did a great job, it’s that the UK house market was red-hot throughout the time the show was made, so every house went up in value. In fact, running over time helped the developers out, because it gave the properties more time to appreciate.

What happened to all these “property developers” once the GFC hit? There’s a hint in that the revised series is now called Property Snakes & Ladders. I suspect that unlike Astley, nearly all of them went bust.

Here’s the problem: if you start a business in a bubble, it’s easy to make money, but it’s very hard to define the value that you provide. If you fail to provide clear value, whenever the bubble bursts, you’re out of business.

I ran into two examples of this in conversation today. The first was talking with Nancy on our drive in to work. She recently joined the board of directors for an association that for years made money from their conferences. How? By getting lots of sponsorship from drug companies. Now that the pharmaceutical sponsorship bubble has burst, they have no idea how to make up the lost revenue.

But their real problem isn’t how to make up the revenue – it’s that they don’t appear to have any idea what value they actually provide to their members. If they could answer that question, then they could figure out how to make up the money.

The second example came from an energy consultant. He told us about all the companies that formed in New South Wales to take advantage of the government subsidies designed to get people to switch to compact fluorescent lightbulbs. While the subsidy was in place, they all made money. When the subsidy disappeared, so did they.

Again, they didn’t have a clear value proposition.

If you don’t have a clear value proposition, you can’t build an effective business model. Without the value proposition, all the other business model factors are incoherent.

This is one of the reasons that more successful firms are founded during depressions than they are during bubbles. To be successful when times are tough, you have to have a clear value proposition.

Don’t just surf the rising tide. To figure out how to last, figure out how you provide value to people. This is the first, essential step to building a successful business model.

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