The world failed to end over the weekend. In Los Angeles, at least, this was a bit surprising, as there were many dire predictions made about the impact of closing down the 405 Freeway for a weekend of construction.

Many of the key issues are summarised in this remix from Downfall (which is funny, but NSFW, and probably not politically correct). There are also more straightforward discussions of the event dubbed “Carmageddon” on the LA Times website.

Even on weekends, the 405 carries a staggering amount of traffic, so it stands to reason that shutting it completely would have a major cascading effect on traffic throughout the rest of LA.

And yet, it didn’t. Why?

Because people changed their behaviour for the weekend. They stayed home, or walked place, or travelled in the opposite direction of where the traffic was supposed to be.

In the end, Carmageddon was a complete non-event.

This is actually the second time that this has happened in LA. The first time, it was supposed to be even worse. That was during the 1984 Olympic Games. Most of the events took place around the LA Coliseum, which is right next to downtown. Traffic from people going to see the games was supposed to shut down the entire city – this time for two weeks.

The fact that this didn’t happened has been referred to as the “LA Traffic Miracle“.

Why were the Olympic weeks actually one of the smoothest traffic periods in memory? Because people changed their behaviour:

But The Times noted back in 1985 that it wasn’t exactly a miracle: ” [It was] no fluke but resulted to a large degree from employer policies during the Games (23% of major employers surveyed used staggered shifts; 33% permitted flextime).”

In both cases, the prediction that was actually being made was:

This event will be catastrophic, if people act as they normally do.

The problem is that no one ever says the second part out lout – it’s just assumed.

We run into this problem a lot when innovating. We introduce a new idea, and people resist it, because it will only work if they change their behaviour. This is a key innovation challenge – how can we make the behaviour change easier?

Scaring people is one method, as they did with Carmageddon and the 1984 Olympics.

However, this approach often only has short-term success.

The other approach that works is to create clear value for people with your innovation.

Peoples’ capacity to effect large-scale change is often surprising. Major changes in behaviour are often shocking, because we always assume that change is hard. However, if you create value for people with innovation, you can make it easier for them to change.

Once again, change will occur, and it won’t be the end of the world.

(photo from the LA Times)

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.

One of the key issues we face in managing organisations is the state of the environment surrounding us. Is it stable or turbulent? This has an impact on our innovation strategy. In stable environments, we can afford to concentrate just on getting better at what we’re doing. However, in turbulent environments, we need to undertake more exploratory innovation efforts.

One problem with this scenario is that stable environments can turn turbulent quickly and without warning. Think about the housing markets in the US and the UK in 2008 (and all the markets related to those two). This is the basis of Nassim Nicholas Taleb’s black swan theory.

Lee Smolin makes some important points about coping with these types of shifts. The main thrust of the article is that scientific research may be too conservative these days as researchers focus more on taking a safe approach to facilitate publishing, while not spending enough time on the riskier big questions. While black swan events (things with a low probability of occurring, but which have a large impact if they do actually arise) are often negative in financial markets, they are sought after in science and innnovation.

I found the article through the a good post by Roland Harwood. The angle that he thought was most interesting was that the article proposes the formation of markets for research. That is an interesting angle, but not the one that grabbed me. I was struck by this section:

Some scientists, he suggests, are what we might call “hill climbers”. They tend to be highly skilled in technical terms and their work mostly takes established lines of insight that pushes them further; they climb upward into the hills in some abstract space of scientific fitness, always taking small steps to improve the agreement of theory and observation. These scientists do “normal” science. In contrast, other scientists are more radical and adventurous in spirit, and they can be seen as “valley crossers”. They may be less skilled technically, but they tend to have strong scientific intuition — the ability to spot hidden assumptions and to look at familiar topics in totally new ways.

To be most effective, Smolin argues, science needs a mix of hill climbers and valley crossers. Too many hill climbers doing normal science, and you end up sooner or later with lots of them stuck on the tops of local hills, each defending their own territory. Science then suffers from a lack of enough valley crossers able to strike out from those intellectually tidy positions to explore further away and find higher peaks.

This is a nice description of innovating on fitness landscapes, an idea that John and I have been talking about in our classes. And it is particularly important now. There are numerous reports coming out showing that companies have become increasingly conservative in their innovation efforts as a response to the global financial crisis. In Smolin’s analogy, companies are reverting to only undertaking hill climbing. Many have never thought much about valley crossing in the first place, while many others are pulling resources out of more speculative ideas.

This is as wrong for business as it is for science. Innovation is central to survival, and successful innovation requires both hill climbing and valley crossing. Now more than ever it is critical for firms to figure out a way to continue to invest in areas that have breakthrough potential. Newspapers and record companies have collectively been very effective at getting to the top of their hills. And these industries are in big trouble now because they have completely missed on out the discovery of new, better hills. It’s a challenging process to manage in good times, and probably even harder now. But it’s still essential.

One way to cope with this problem is to maintain an innovation portfolio. The idea with this is that we always need to investigate ideas that both help us climb hills and cross valleys. A large percentage of our efforts do need to go into hill climbing. This leads to incremental innovations that keep us competitive.

However, it is essential to always be working on a few ideas that will lead to valley crossing. This can prepare us for times when our environment becomes turbulent unexpectedly. This turbulence can come from an unexpected financial shock, a natural disaster, or the introduction of a disruptive innovation.

In all of these cases, maintaining an innovation portfolio will make you better equipped to deal with this change.

On the innovation journey, we need to be climbing hills, but we also have to cross a valley every now then as well.