Archive for category networks
The Economy is a Network
Posted by Tim in complex systems, connect, networks, time on 9 March 2010
The word “network” causes a lot of the same problems that “innovation” does – it is used in so many different ways that it is often hard to tell exactly what the user means, it’s in fashion to the point of sounding like hype, and as a consequence a lot of people are ready to stop using it altogether. So when I say that “the economy is a network” it can cause some confusion. Do I mean it is like a network? That is has network-like properties? That it’s something between a hierarchy and a market?
No. I mean that the economy is a network – and that the best way to analyse it as a network. In network analysis, a network consists of nodes (people, firms, countries and so on) and the connections between them (economic exchange, friendship, family relationships, disease vectors and so on). An economic network then is one where people are the nodes, and the economic relationships form the connections between them.
Thinking about economics in this way leads to some useful insights. I was reminded of this when I read Umair Haque’s latest post today – The Real Roots of Recovery. Here is how he sets up the problem that he’s trying to address:
What is an economy? Is it just rivers of money and stuff, flowing back and forth between consumer and producer, resting on a bed of information? That’s more or less the way we’ve conceptualized it. It’s why economists often say that banks and funds make up the “financial economy,” while industries that make stuff are the “real economy.”
When we conceptualize an economy that way, the implicit goal for both “producers” and “consumers” is merely accumulation of money and stuff. More, more, more. That’s what I call a “thin” economy. That kind of economy is thin in three ways: it’s brittle, easily broken; it’s fragile, crisis-prone; and it’s as shallow as Paris Hilton.
His suggestion is that to make a stronger economy, a “thick” economy, we need to focus on making real connections with others.
Yet even that’s just a beginning. The economy is “constructed” by us: built anew every second of every day by each of our billions of tiny decisions, emergently. The real change begins with each of us, and the choices we make.
This is a network story! The issue with networks is that ties are expensive to maintain. If we think about economic ties, the involve money, attention, time and care. My read of Haque’s argument is that we tend to only think of the ties in terms of exchange. In this view, we choose to buy a loaf of bread, we pay for it, and that’s that. That’s thin. A thick network tie will consider attention, time and trust as well.
What does this mean in practical terms? If we think of our economic relationships as network ties, then the idea that every transaction is a one-off makes no sense at all. Each time we need something, we have to figure out who is cheapest, where they are, and how to make that transaction. On the other hand, if we think of economic relationships as network ties, as something that persists – we value them differently. Now trust becomes more important, as does attention. We want ties that we don’t have to worry about because we know what we’re getting. We want a stable, persistent network. The way to get that is to build relationships with the people in our personal economy. We don’t have to recreate a whole new network each time we need something.
Viewing the economy this way also changes where we want to be in the economy. Take a look at this network diagram from Valdis Krebs:
The people that I’ve circled are those with high betweenness centrality (learn about that here). In an exchange economy, those are great positions to be in because you can take advantage of your position in between two big clusters. Any goods or information that has to pass between the two groups has to go through you, and this is profitable. However, this also leads to a brittle network. If you lose the people with high betweenness, the network breaks down as the groups become isolated.
If you take a network view of the economy, you become worried about the overall structure of the network. You build links between people so that there is redundancy in the network (network weaving!). This is the strategy that O’Reilly Media has used very successfully. In a network economy, we try to build up the structure of the network to increase resiliance.
Finally, thinking about the economy as a network helps with innovation. In an exchange economy, you just have to get your new ideas out there. If they are better, people will buy from you. Everyone that has ever tried to get a new idea to spread knows that it’s not this easy. We have to get people to disconnect from whatever ideas they’re currently using and adopt ours. If we think of the economy as a network, this process makes sense. Our innovative ideas (new products, newservices or new ways of doing things) have to build new connections. Often this means that we need people to break old connections. This is the central problem in idea diffusion.
The economy is a network. Think about it this way and suddenly we move beyond transactions. The nature of the economic ties between us becomes much more important. These ties involve money, time, attention and trust. If we pay attention to these four things as we build up our economic network, we’ll start building a thicker, more resilient economy.
Information Wants to Be Free?
We often hear that “information wants to be free” – but does it really? If it does, why did my research partners and I just pay $13,000 to get a copy of this database?
Now that’s admittedly 13,000 Australian dollars, and once you take exchange rates into account it comes out to — a whole lot, in any currency. Why is it worth that? And why did we get it? Alert readers will be able to guess that the answer to both questions is aggregate, filter and connect.
This is a concrete example of creating value from information in both cases. First off the database. It is a compilation of data about strategic innovation alliances going back over 30 years. The data has been aggregated from public sources. It has also been filtered – out of all of the available news about strategic alliances, the original researchers have filtered out all of the ones that are not innovation-related. They’ve then also aggregated data about the objectives of the alliances, start and end dates, industry, and several other things. And they’ve connected all of that data together into a database. By starting with widely available information, they have used aggregating, filtering and connecting to create a valuable resource for researchers.
The people that have put the database together have already done plenty of analyses of the data, and published many papers on their findings. So why would we pay for data that has already been pretty thoroughly worked over? Because we can aggregate, filter and connect too. In this case, we’re paying them for most of the aggregating and filtering, but we have some unique connecting capabilities that makes it worthwhile for us. I have some skills in longitudinal data analysis that are fairly rare – connecting these with the data will create new information. My primary collaborator has developed some unique economic theory, which we’ll connect with the outcomes of my network analyses. By connecting our unique skills and knowledge to a database that anyone can buy, we’ll create new value.
Our objective is to provide some practical insights that will help organisations manage innovation collaborations more effectively. Studies show that somewhere between 50-80% of all innovation alliances fail to meet their objectives. If we can figure out a way to improve these outcomes it would be quite valuable.
So the next time someone tells you that “information wants to be free”, remind them of the entire quote from Stewart Brand:
On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.
And then remember that the way to create the expensive information is to aggregate, filter and connect.
An Innovation Manifesto
Posted by Tim in evolving economic entities, innovation, networks on 28 February 2010
There have been a few before, but here’s another Innovation Manifesto:
- Innovation doesn’t need a manifesto – it needs action.
- We won’t wait for someone to give us permission to innovate- we’ll just try things out.
- Innovations have a life-span – we will try to execute ideas that last, and that make things better.
- Not-Invented-Here is not for here. We will execute the best ideas we can find, regardless of where they came from.
- Innovation is a process of flow – we generate ideas, we select ideas, and we execute ideas. Since the last two are the parts that most people aren’t good at, those are what we’ll concentrate on.
- We will build fast prototypes, and iterate rapidly instead of trying to make things perfect from the start.
- We will find small, inexpensive ways to test our ideas.
- We will learn from the ideas that don’t work.
- We will scale up the ideas that do work.
- Innovation is the best way to enact strategy – we will keep the two aligned.
- Innovation happens in networks – we will understand ours as well as we can, and build them to facilitate innovation.
- Innovation is not invention – we will focus on making ideas work, not just having them.
- New ideas have to become embedded within the economy – we will build new networks for our great ideas, and put them within innovative business models.
- We know that innovation is the best way to keep our jobs interesting – we want to avoid this:
- We will not complain, we will instigate change.
- Our strategy and our brand are built by what we do every day, not by what we say. We will use innovation to build both.
- The purpose of innovation is to help our customers and to make the world a better place. These are our primary evaluation criteria. (from Graham Horton)
- We realize that the approach to innovation depends on the novelty of the idea. (from Ralph Ohr)
- Eliminate habits, that is the beginning of innovation. Both with risk & fun. (from Marion Popiolek)
- We will inspire others and bring them on board because innovation is a team sport. (from Jorge Barba)
So.
Who’s with me? What would you add?
Three Blogs I Love
Posted by Tim in filter, innovation, networks on 27 February 2010
I’ve spent the past couple of days reading an astonishing number of excellent blog posts. I share nearly all of them on my twitter feed, so if you want a compilation of those, check that out. Today I thought I’d share three different blogs which always seem to have great content.
First up is Innovate on Purpose by Jeffrey Phillips. Phillips writes for managers and others that are involved in the innovation process. The posts here are fairly concise, unadorned, and nearly always exactly correct. I haven’t run across any other innovation blog that I find myself agreeing with so consistently. Here is a clip from a recent post called Just Do Something:
There’s always something you can do, and starting now is much better than starting when you finally get the OK. In many firms, the OK may never happen. Create a small innovation capability and generate ideas about the future, new product and service ideas, and help other teams generate ideas. You’ll attract others who have similar needs and interests and gain incredible credibility. Eventually you’ll be the go-to person for innovation. Don’t laugh, I’ve been in at least two organizations where the head of innovation was simply the person who started doing innovation and was eventually recognized as the expert.
If you’ve been reading our blog regularly, I’m sure you can see the parallels between that message and some of the things that John and I are saying consistently. Phillips is also a regular contributor to Blogging Innovation, another outstanding innovation resource.
Next up is Network Weaving, written by June Holley, Valdis Krebs and Jack Ricchiuto. This is one of my favourite network analysis blogs. They’ve each been doing organisational network analysis for many years, and their experience and depth of knowledge comes through each post. Here’s an excerpt from a recent post by Ricchiuto called The 4 Laws of Networks:
Innovation = learning x diverse connections
I disagree with the argument that innovation is the child of desperation. I wish it was so, because if it was, we would be on a planet devoid of incredible amounts of preventable child deaths, failed economies, and the rest of what would otherwise be tragedies that could be prevented by innovations of all kinds. The pragmatic reality is that innovation happens at the intersection of learning and cultivating diverse connections. When you have diverse connections in a network, learning almost cannot not happen. Networks literally become learning disabled if the connections become too homophilous and without learning, no innovation is possible.
One of the subtle points of this post is that all four laws involve multiplication – not addition. It is an excellent example of the increasing returns that are inherent within networks. All of the posts on Network Weaving are like this – they make good points on the surface, and there are also insights lying underneath as well.
The last blog I’d like to highlight is This Week in Review by Mark Coddington. Coddington started his weekly review of news relating to the current state of journalism on his own site, but it was recently picked up by The Nieman Journalism Lab at Harvard. There are a couple of things that I love about Coddington’s blog. The first is that it is a tremendous resource. Personally, I’m interested in what’s going on in journalism, particularly from a business model standpoint. However, because it isn’t my core area of interest, I don’t have time to read everything on the topic. It is Coddington’s core area of interest, and he does an outstanding job aggregating information, filtering it down the key stories each week, and connecting up all the ideas into a coherent narrative. Here’s an example from this week’s post, discussing a great post by Jay Rosen:
Innocence, objectivity and reality in journalism: Jay Rosen kicked off some conversation in another corner of the future-of-journalism discussion this week, bringing his influential PressThink blog out of a 10-month hiatus with a post on a theme he’s been pushing hard on Twitter over the past year: Political journalists’ efforts to appear innocent in their reporting at the expense of the truth.
Rosen seizes on a line in a lengthy Times Tea Party feature on “a narrative of impending tyranny” and wonders why the Times wouldn’t tell us whether that narrative was grounded in reality. Journalistic behavior like this, Rosen says, is grounded in the desire to appear innocent, “meaning a determination not to be implicated, enlisted, or seen by the public as involved.” That drive for innocence leads savviness to supplant reality in political journalism, Rosen said.
The argument’s been made before, by Rosen and others such as James Fallows, and Joey Baker sums it up well in a post building off of Rosen’s. But Rosen’s post drew a bit of criticism — in his comments, from the left (Mother Jones), from the libertarian right (Reason), and from tech blogger Stephen Baker. The general strain running through these responses was the idea that the Times’ readers are smart enough to determine the veracity of the claims being made in the article. (Rosen calls that a dodge.) The whole discussion is a fresh, thoughtful iteration of the long-running debate over objectivity in news coverage.
That’s the other reason that I love his Reviews – they are a fantastic example of creating value through aggregating, filtering and connecting. If you click through to all the links from just that story, you have about a half hour of rally interesting reading to do. But you get a pretty good feel for what’s happening from Coddington’s summary. That’s not mere aggregation, nor is it simply curation. To create value in this way you need all three parts – aggregating, filtering and connecting.
So those are three of my key resources. I hope you check them out yourself!
Building an Entrepreneurial Network
Posted by Tim in business models, innovation strategy, networks on 20 February 2010
What is the biggest challenge facing an entrepreneur? There’s coming up with a great idea, which can be hard. There’s finding funding, which is definitely a challenge. There’s getting your idea to work, and we’ve been arguing here for quite a while that execution is critical. But I think that the biggest challenge is actually building your network – and it’s one that people give almost no thought to at all.
On the last day of the Australian Association of Angel Investors National Conference yesterday, we started the day hearing elevator pitches from three start-ups. It was pretty interesting to listen to them, and there were some common themes. All three firms had what sounded like great technology. The ideas were clever, they appear to meet market needs, and all of them are far enough along that they’ve successfully executed the ideas. All of them need more money now to get to the point where they’ll cash in, but I think that to actually get to that point, they need better ideas about developing their networks.
There are two key parts to this. The skills you need to execute an information-based business model are aggregating, filtering and connecting. Building the entrepreneurial network is all about connecting – and also getting people to unconnect.
The first key part is linking into the value network which surrounds and supports your innovation. Entrepreneurs often focus too much internall, on their own ideas, and don’t think as much about this, but it’s a critical issue. Which parts of the economy support your idea? What is your relationship to them? Finding financing is part of this, and so is finding suppliers and distributors.
In large firms, these links usually already exist. That is the easy part for them. The hard part is getting their own internal systems to change – this often means they have to break some of the existing links in their system which is hard. Entrepreneurs have the opposite problem – they have no existing links at all. They have to build their own, and in doing this, they often have to get people to choose them over their current collaborators. In many cases, entrepreneurs are trying to build links to existing companies as part of their exit strategy. When I was working for a software start-up ten years ago, everyone’s exit strategy was to sell out to Microsoft. The conversation at the AAAI Conference shows that the strategy now is exactly the same, except that we’re all trying to sell to Google instead.
In either case, your position within the value network will determine whether or not this can happen. Alan Noble from Google said yesterday that in many cases they are waiting for software start-ups to demonstrate these links before they’ll consider buying the firm.
The second part of building the network is connecting with customers. With the large firms, it means that they either have to get current customers to stop using whatever they’re buying from you now and switching to the new innovation. Many firms resist this, because they don’t want to cannablise existing markets. The other option is to find new customers for the new idea. The problem here is that the new customers often require a completely new value proposition – and existing firms find it diffiult to create these.
Again, entrepreneurs face the opposite problem. They don’t have to worry about cannabilisation – in fact, they want to cannabilise existing markets! Their problem is that they don’t have any customer connections at all. And in many cases (as in all three firms presenting at the conference), the assumption is that superior technology will automatically win. We know this isn’t true, even when the technology is demonstrably superior along all technical dimensions (see the story of the 56k modem, for example).
The example yesterday came from a firm with a bunch of bioremediation technologies. One of them sequesters hazardous waste, and it apparently does it more cheaply and more effectively than the current technology. The potential market is very big, and they are in negotiations with a couple of major firms to buy the product. The problem for them is that everyone knows that the current technology works. Why take a chance on something new, especially if there are major downside risks if the new technology doesn’t work as advertised? How can you demonstrate that your new technology will work when it hasn’t been used in this exact application or on this scale before? It’s a big problem.
To break these existing bonds, you not only have to be better, you have to get people comfortable enough with your innovation that they are willing to abandon what they’re currently using – you have to get them to unconnect from something else before they’ll connect with you.
I think that entrepreneurs would benefit greatly from thinking about building a network. To me, the most interesting questions for these start-ups are: how will you link in to the value network? and who is your competition and how will you get people to unconnect from them? If I were investing my own money, I’d want good answers to both of these questions before I signed a cheque.
(Picture from flickr/Eole under a Creative Commons License)
Think ‘Network Structure’ not ‘Networking’
Posted by Tim in connect, innovation strategy, networks on 13 February 2010
The biggest problem with the idea of ‘networking’ is that it is a bad idea. Why? Because as it is usually practiced, networking consists of going out and making a whole bunch of new connections, and then hoping that something good will come of them. It is much more productive to think about your position within the network as you create connections. Once we have creatively made connections between ideas (which is the core creative act in innovation), we have to get our new ideas to spread. We do this by connecting the ideas to people.
When we analyse networks, the basic assumption that we make is that network structure is important. In practical terms, what this means is that the overall structure of the network is important to how well it functions, and our personal effectiveness within our networks depends upon our positions inside those networks as much as on the number of connections that we have.
Here’s an example. One line of network research has been built around Ronald Burt’s idea of structural holes – it is discussed nicely here by danah boyd. The idea is that in large networks, there are often major clusters within them that are not connected – the gap between the clusters is a structural hole. It can be very profitable to be the one that fills that hole by connecting the two clusters. And you can fill a structural hole even if you don’t have a lot of connections – here’s an example from one of my research papers:
In this network, the actor at node 5 has a lot of power, because all information from the two clusters must pass through her. Burt’s original argument was that from an economic perspective, filling a structural hole was one of the best things that you can do. He has gone on to show that filling structural holes leads to creativity – it’s the power of connecting ideas again!
However, from a network perspective, you can see how this structure isn’t so good. There is only one path for information and ideas to pass from one cluster to the other. If this were an organisation, this would be a horrible structure to have. Valdis Krebs and June Holley talk about how to address this problem through network weaving. The key idea here is that you should try to fill triangles. Valdis illustrates the idea by telling the story of how Ed Morrison connected up two people that he knew from the Oklahoma City Chamber of Commerce and Commerce Lexington, who were facing similar problems.
You can see here that the triangle starts with Ed filling a structural hole. But instead of acting as a broker, he acts as a builder – and connects Lynda and Cynthia to each other by introducing them and initiating a conversation about their common problems.
The key idea in network weaving is that filling in triangles leads to better-functioning networks. The trade-offs that you get for giving up your position in a structural hole are twofold: you gain stature and social capital by connecting people up, and the network becomes more capable of generating beneficial ideas that you can use yourself. June explains this really well in her talk ‘Networks in a Networked World’, whic you can find on this page.
There are a couple of key points here:
- In both of these examples, your position in the network is much more important than the number of connections you have. This leads to the basic mistake that most people make when they are ‘networking’ – the focus on quantity. You are much better off to have a network building strategy, which you can use to weave a better-functioning network.
- Bridging structural holes and filling in triangles can both be good business strategies – but they support different business models. Amazon’s strategy works not because they are simply an aggregator – they have very effectively positioned themselves in the structural hole between publishers and readers. Apple has done basically the same thing with iTunes. But filling in triangles also works – in many ways this is the key method for building gift economies that are driven by effective communities. This is the model used by Seth Godin, Hugh MacLeod and O’Reilly Media.
- If you’re managing networks within an organisation, you almost certainly want to eliminate structural holes, and use the network-weaving approach instead. In first place, unfilled structural holes are bad, so you want to get those bridged. But having only one person filling the holes can also be bad – you’ve substituted a bottleneck for a hole, which might not be much of an improvement. In most cases, you’ll want to build a more densely connected internal network, with many pathways over which ideas can flow.
To get our ideas to spread, we need to connect them with people. But doing this is not simply about volume – it’s not how many pageviews we get, or how many followers we have on twitter. Who we’re connecting to and where we sit within the network is much more important. So stop networking. Instead, start building a network.
New Ideas in Old Systems
Posted by Tim in business models, evolving economic entities, networks on 4 February 2010
The fundamental point that I was trying to make in yesterday’s post is that most of us are facing the same innovation problem: it is extremely difficult to get new ideas to spread within most organisations. We are a bit deceived because we hear about innovation at Google, and 3M, and Apple, and we think that all of our organisations should work like that. Unfortunately, most of them don’t. My examples yesterday came from education, and I know that a lot of people in the public sector think that innovation is unusually hard in their organisations. But nearly everyone resists change. Here are some examples.
First off, here’s ex-Pitney Bowes CEO Mike Critelli on how they faced disruptive innovations:
In 1999, two start-up companies challenged us with online postage solutions. My chief operating officer, Marc Breslawsky, and I were in a minority among the senior team in believing that these companies posed no threat to us. Many employees and high-level executives, one or two board members and many shareholders told me that the world had changed and that I was in danger of ignoring potentially disruptive innovation. The reason Marc and I turned out to be right is that we understood that disruptive technologies are successful only when they are superior to the older technology they replace and when they can be marketed profitably. Neither condition was met.
The blog post discusses how Critelli has consistently had a world view that differed from those around him, and how this made it hard for him to get his ideas across. Many of his examples are cases where he was ultimately right – and in particular, I think that his experiences in changing healthcare are admirable. However, in this case, he wasn’t visionary – he was just lucky (be sure to read Mike’s response to this in the comments!).
Those two conditions are not actually required for disruptive innovations to succeed – especially the first one. Those two conditions are what entrenched incumbents always say when they discount the threat that new challengers pose. As the many studies by Clayton Christenson, Scott Anthony and others show, disruptive innovations are usually technologically inferior when they are introduced. This is precisely why the large firms don’t react – because they correctly perceive that their technology is better. The disruptive innovations change by creating a new market based on different business models, and different value networks.
This misperception of the threat posed by new technologies is one of the reasons that it is often very difficult to introduce innovations within established firms. The fact that P-B’s stock price is now 1/3 what it was when those threats appeared in 1999 suggests that a little more innovation would have proven useful for them.
Here’s another example – Kodak. Simon Waldman has a really nice post on some of the issues that Kodak was grappling with around the same time that Pitney Bowes was thinking about online competitors. He says that they didn’t react to the threat posed by digital cameras because:
* They were distracted by a ferocious price war with Fuji in the late 90s
* They were petrified of cannibalising their film business with digital (further compounding the impact of the Fuji price war)
* They massively underestimated how quickly consumers would ditch film
* Decades of comparable success had made them fat and way, way too happy with themselves
A few months ago, I asked this question to my favourite Swedish PhD student, Christian Sandstrom who has made something of a speciality of creating fabulous Slideshare presentations on the changes in the photographic industry. He responded quickly, but I never posted it here. You can see his answer here.
Here’s the quick summary
* Over aggressive diversification left them burdened with debt and in a weak financial state for dealing with the Fuji price war.
* They put too much focus on ‘hybrid’ solutions – using digital as a way to sell print (eg the Photo CD system)
To me, this sounds a whole lot like the problem that George Siemens is describing in education – they were trapped by their underlying beliefs and ideology. Their fundamental belief was that film would retain its dominance. Digital photos were technologically inferior (especially when they were first introduced), so why would anyone switch from film? Digital cameras took the normal route for disruptive innovations – they found a niche that would value their strength – people that wanted to post pictures on the web. They didn’t care about the poor quality – pictures looked lousy on the web back then anyway. And being able to transfer a digital photo straight to your computer was much easier and much faster than taking a picture, getting it developed, and then scanning it.
Like Pitney-Bowes, Kodak didn’t provide a great environment for innovators back then. Change was being fought hard.
Here’s a third example, going on right now – news. Here’s Felix Salmon arguing that the physical system of producing newspapers is one of the things that is making their transition to digital extremely painful:
Spencer Ackerman uncovers a bit of the hidden point here: newspaper conventions have been built for physical newspapers, and can look silly in the age of the web — especially when the stories themselves appear, pretty much unchanged, on newspapers’ websites. It might make sense for the physical LA Times to run one big story about Afghanistan, but once that decision is made, no one is going to chop that one big story into three smaller ones for the website.
Once again, inertia within the existing system makes it highly resistent to change, as we’ve discussed quite a bit here.
I think that the big difference between the public and private sectors in innovation imperatives is not that the private sector has the profit motive, but rather that occasionally private firms go out of business. It’s not Schumpeter’s “carrot of spectacular reward” that motivates innovation, but the “stick of destitution”. Even with this difference, fighting the inertia within established systems is our fundamental problem – no matter which sector we’re in. It’s hard to get new ideas to spread. That’s our challenge. We’ll keep talking about ways to meet it.
Fighting the System
Posted by Tim in complex systems, networks, replication on 3 February 2010
Today was one of those days when a lot of related ideas just seemed to keep popping up. It started when I read today’s post by George Siemens which discusses the difficulties of changing the educational system. I recommend reading the whole post, but here is part of his argument:
I want to resist the mindset of measuring what is possible by the existing system.
Look at a few of the biggest technological “innovations” of the last decade: learning management systems, student information systems, interactive whiteboards, iclickers, and virtual classrooms. These tools integrate with existing systems, which is why they are successful. The systemic design of education, from curricular planning to delivery to evaluation, has not been recast in light of the web. Instead, the web has been recast in light of existing systems. In many instances, teaching and learning has been transferred to, instead of transformed by, the internet.
What is the impact of this mindset? When I present on alternative views of assessment and accreditation, or suggest non-course approaches to teaching, the inevitable push-back is “well that won’t work because of _____ aspect of the system”.
Perhaps it is time that we turn our attention explicitly to working on, rather than in, the system.
The thing of it is, this is problem is not restricted to the educational system. It is another example of how the embeddedness of ideas makes it difficult for innovative new ideas to spread. I think that the extent to which this is a problem varies along a spectrum. It is an acute problem in education, and in the public sector. However, as I discussed in an earlier post, we see the same thing happen with the introduction of innovative new commercial ideas. Even products that are clearly superior along all dimensions, like the 56k modems versus the 28.8k modems they were designed to replace, innovation is difficult.
John and I were discussing this idea at lunch today, when I realised that another group of people have a similar problem. We are involved with teaching a class called Developing Business From Science. Many of the students in this class are in science-based jobs, and they have an invention or a new idea, and they want to figure out how to make some money with it. Their ideas don’t have any connections to other parts of the economy, and they usually have to displace something that is already economically embedded.
Here’s what I said when discussing the 56k modems:
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 problem is consistent across all organisations. It’s the problem that George is talking about in education. It’s the problem that innovators in the public service face. It’s the problem that people grapple with in commercial firms, whether their idea is for a new product, a new service, a new way of doing things or a new business model. The hardest part of innovation is getting our ideas to spread.
This idea was then brought home this afternoon, when I read an article by Seymour Papert that Phil Long forwarded to me. It’s called Why School Reform is Impossible, and it is looking at exactly the same issue – how can we revolutionise education when the system swallows every new idea and assimilates it into the existing structure. He concludes with this recommendation:
Complex systems are not made. They evolve. Where I part company from Tyack and Cuban is when they turn from the book’s historical theme of showing that reform will not work to give advice to reformers about how to do it better. My own view is that education activists can be effective in fostering radical change by rejecting the concept of a planned reform and concentrating on creating the obvious conditions for Darwinian evolution: Allow rich diversity to play itself out. Of course, neither of us can prove the other is wrong. That’s what I mean by diversity.
This is very similar to my view. When we’re trying to get new ideas established, we need to experiment, see what works, and do more of that. One of the areas in which we must experiment is that of our basic assumptions. Siemens’ prescription for education will for everyone, I think:
I’m suggesting something much more subtle: that we no longer allow systems-based arguments and criticism to dampen our creative exploration for what is possible in education. A period of “no boundaries” in our thinking. Forget even arguing against those who appeal to integration with existing structures. Just ignore those discussions completely. I’d like to focus instead on creating a compelling vision of what education could be given new technologies and almost global connectivity.
So there it is from two really smart guys plus me: innovation is evolutionary. The way to enact big change is to treat it as an evolutionary process. All of our organisations are operating within complex systems, so this is the approach to use, no matter what industry we’re in. Let’s start experimenting!
I Have No Idea How the iPad Will Do!
Posted by Tim in business models, innovation strategy, networks, time on 31 January 2010
With all the feverish discussion and prognostication about Apple’s preview of the iPad, I want to be the first person online to make this prediction:
I have absolutely no idea how the iPad will perform.
I’ll go one step further – neither does anyone else. The benefit of making predictions right now is that if you happen to end up being right, you can link back to your post in a few years. If you’re wrong, well, who reads blog posts that are a few years old?
One line of argument that I find really interesting, though, is being taken by people who are arguing that the iPad will revolutionise… something. The argument is by analogy – and what a lot of people are saying in response to critics of the iPad is that people hated the iPod and the iPhone when they were released as well. In particular, the initial response to the iPod introduction was pretty universally tepid.
Garry Tan from Posterous has collected a few of these, and this one pretty well sums them up:
I still can’t believe this! All this hype for something so ridiculous! Who cares about an MP3 player? I want something new! I want them to think differently! Why oh why would they do this?! It’s so wrong! It’s so stupid!
Haha! It wasn’t Apple that was stupid – they were stupid! Right?
Well, maybe. It’s easy now to look at the iPod’s 70%+ market share and wonder how anyone could have missed that it was a game-changing innovation. I’ll tell you how. The fact of the matter is that all the people that were skeptical about the iPod as a product innovation when it was introduced were actually completely correct. There wasn’t much there. Take a look at the iPod sales figures from wikipedia:
The first iPod was introduced at the end of 2001, and you can see that sales figures for the first three years were not good at all. By the middle of 2004, the iPod’s market share had been sitting in the 20-30% range for a while. By the end of 2005, that had shot up to over 70%. What happened?
iTunes happened.
Because the iPod and iTunes are so closely interconnected now, it is easy to forget that iTunes didn’t exist for the first years of the iPod. At the time, the iPod was just another mp3 player. The innovation with the iPod was not in the product – it was the innovation in the product’s value network. It was a similar story with the iPhone. And that is why nearly everyone that is yapping about iPad right now is completely missing the point. Because we don’t know what it’s value network is going to look like yet, and this is what will actually determine whether the iPad will take off quickly like the iPhone did, or slowly like the iPod.
Even when you make great products like Apple, your innovations never stand alone. They work within the context of their economic network. The better you understand this, and the more innovative you are in constructing your value networks, the more successful you’re likely to be.
So the next time someone talks to about all the great new features something has, ignore them. Instead, think about the business model and the value network that will support the great new thing.
Low Tech Networks
Everything is different now that we’re all knowledge workers, right? The digital world has changed everything… hive mind… singularity… chaos! change! panic! PANIC!
Maybe. Maybe not.
Yesterday I talked about the risks and rewards of low-tech innovation – if we re-think the most basic parts of our value networks, the parts that we take for granted, we can find great opportunities. Then today I read this in Shop Class as Soulcraft by Matthew B. Crawford discussing motorcycle repair (emphasis mine):
You also develop a library of sounds and smells and feels. For example, the backfire of a too-lean fuel mixture is subtly different from an ignition backfire. If the motorcycle is thirty years old, from an obscure maker that went out of business twenty years ago, its proclivities are known mostly through lore. It would probably be impossible to do such work in isolation, without access to a collective historical memory; you have to be embedded in a community of mechanic-antiquarians.
In all this talk of digital transformations, it is easy to forget that we are talking about systems and processes that have been around for a long time. A lot of the digital things that seem new to us now are simply new in digital form, not in general.
Crawford’s example shows how no matter how low- or high-tech our profession, we still depend on our network for storing, filtering and finding information – the extended brain works in all fields. And it is this network that creates value, that generates ideas, that innovates.
All of our economic and intellectual activity takes place within networks. The ones in which we’re embedded play a substantial role in what we are able to accomplish as individuals. It doesn’t matter if we’re twittering, developing a scientific theory in the 19th century, fixing motorcycles, writing a PhD, figuring out a new way to our job, or just thinking about something. Our networks help us create ideas, and they help us spread those ideas. They even help us craft those ideas. The better we know our networks, the more effective our ideas will be. That’s how we deal with the challenges of the digital age – through our networks.
(photo from flickr/zen under a Creative Commons license)
Filtering With Your Network
Posted by Tim in complex systems, filter, innovation strategy, networks on 27 January 2010
In yesterday’s post on Personal Aggregate, Filter & Connect Strategies, I didn’t have room for one key point: one of the key filters to use is your network. When he was in Brisbane last month, George Siemans gave a talk with an example that illustrated this perfectly.
For the past couple of years, he has run a course on Connectivism with Stephen Downes. Here is the definition of connectivism from Downes:
At its heart, connectivism is the thesis that knowledge is distributed across a network of connections, and therefore that learning consists of the ability to construct and traverse those networks.
As I understand it, one of the points of the course is to present students with so much data that they can’t possibly process or understand all of it as individuals. This forces them to create networks to build data-gathering and sense-making networks in order to succeed. There are more details about networks, connectivism and the course in this excellent presentation from Downes (the presentation also discusses Downes’ framework for building knowledge within complex networks, which consists of Aggregate – Remix – Repurpose – Feed Forward).
So as individuals, our network is part of our filtering system. This also points out how the three processes – aggregating, filtering and connecting – interact with each other. In the example of my twitter feed, I discussed this as part of my aggregation strategy. But at the same time, I’m actually counting on people within my network to filter. They’re not sending every little thing that they run across into their twitter streams – they are selecting.
This same process happens as part of the aggregate, filter and connect process for organisations. We can use our networks as aggregating/filtering tools. This is what is happening in customer-led innovation, crowd-sourcing and open innovation. We use our network to increase the flow of ideas into our organisation (aggregate), and we also count on our network to decide which things they run across might be important (filter).
And just as for individuals, these processes don’t work well for firms either unless they are good at all three steps. If you only aggregate, you get overwhelmed with ideas. You need some form of selection process. Both forms of connecting are important too. You must be able to connect ideas in novel ways – this is one of the central skills in innovation. If you’re not generating and executing your own innovative ideas, you run into several problems. Open innovation won’t work, because you’re not bringing anything of value to the table – so why would anyone want to partner with you? Customer-led innovation and crowdsourcing won’t work either, because the skills need to tell which ideas are worth pursuing – your filtering is worse if you’re bad at connecting ideas.
Outbound connecting is also critical – this is how we get ideas to spread. In the case of firms, getting ideas to spread is a critical part of innovatgion diffusion. This is also a network function. Using our networks to help with filtering is essential – both for individuals and for firms.
This is one of the reasons that we are doing research on networks. Knowledge creation within firms is also a network function. John and I recently made a video to use to explain network analysis and our main research project to people that are participating in our studies. Because many of them are in remote locations, we can’t visit everyone. And we figured that showing them a video might help them feel more of a connection with us than simply sending them a document with the same information. Take a look at this, and keep in mind the value of your network in executing aggregate, filter and connect strategies:
UQBS Innovation Networks in Project-Based Firms Information Video from Tim Kastelle on Vimeo.
Personal Aggregate, Filter & Connect Strategies
A while back my PhD student Sam and I were talking, and he asked me about my RSS feed. His question was something along the lines of ‘what blogs would I have to read if I wanted to be able to make the connections that you do on your blog?’ As we talked, I realised that it didn’t matter if I gave anyone else my exact RSS feed, they wouldn’t be able to replicate my blog – and the reason for this is aggregate, filter and connect.
When I first thought about aggregate, filter and connect as a framework, it was in an attempt to explain why Amazon’s business model worked better than that of other online bookstores. The first time I talked about it in public, it was to explain how open education might work. I’ve been working on making it in to a general model of how we create something unique when we’re primarily dealing with information.
As such, it can be used to explain business models, like Amazon’s, or blogs, like mine. The more I’ve talked about the model, the more other people are picking it up, which is great. Some of these recent discusssions have gotten me thinking about how aggregate, filter and connect works at a personal level. This was really Sam’s question. I’ve talked about how Charles Darwin basically used an aggregate, filter and connect strategy, Phil Long talks about it as part of personal knowledge management, Harold Jarche has discussed it as both a general model for business and for personal knowledge management (an idea that Jack Vinson picked up, and connected to the concept of enhanced serendipity from Ross Dawson), and Glenn Wiebe used the framework to discuss both Joseph Priestly’s inventions and teaching. So we’re starting to get a bit of discussion Today I’d like to illustrate the concept by discussing how I use it.
Aggregate, filter and connect is a non-linear process, with lots of feedback loops. However, it is unavoidable to talk about it in steps. While I do that, keep in mind that it is all going on at once. Here is how I use the framework to execute ideas in my main area of interest – innovation and networks:
Aggregate: I do a lot of data scanning. The RSS feed that Sam and I were discussing includes 182 blogs. I also follow 306 people on twitter, most of whom usually tweet about things relating to my areas of interest. In addition to that, I finish a book about once every 3 days, and I’ve been doing that for a looooooong time. I also talk to a lot of people, despite being an introvert (see Sacha Chua’s great presentation The Shy Connector to see how that works) – last year had over 80 meetings with people that are practicing innovation management, plus contact with my students, who are nearly all out in the workforce as well. Then there’s the stuff I’ve learned in all the jobs I’ve had. Collectively, this adds up to a fair bit of data.
Filter: This is my weakest area – I don’t outsource nearly enough complexity. I need to get better at taking notes on things I read, in searchable media, so that I don’t do all the filtering in my head. At the moment, I don’t even filter my twitter stream. Ken Gillgren argues that we should be taking in as much data as we can possibly handle, to improve our ability to see patterns and make novel connections. So I’ll say that’s what I’m doing. In addition to my head, I’m also using Evernote, my own tweets, diigo, and my blog as filtering tools. And I’ve used fairly primitive methods like writing reading notes, though that generally hasn’t worked too well for me – I actually find blogging more effective.
Connect: Harold Jarche has been doing some fantastic thinking about this topic recently, and he made this diagram to illustrate the process:
I think this is a nice diagram, which pulls together a lot of the recent discussion on the topic. The one thing that I would like to add to it is this idea: connection works in two related but distinct ways. The first is that we connect ideas to each other. This is the innovative act – as Schumpter said, “(Economic) development in our sense is then defined by the carrying out of new combinations”. This is where I put a lot of effort when I’m coming up with blog posts, with research papers, and even with ideas for consulting jobs. Making novel connections is a skill that I work hard to build.
The second way that connection works is that we connect ideas to people. This is the outbound side of Connection. I use several strategies. When I re-tweet something, I try to make a comment that links the tweet to a broader concept (sometimes a challenge with 140 characters!). I write about the idea connections that I make in my blog – as people read it, they start connecting with the ideas. I give as many public talks as I can – from last September until now I have given more than twice as many public talks as I had in the previous three years combined. In Canberra last week I had a talk with Geoff Garrett, who said “Innovations travel on two legs.” There’s something to be said for that idea – and I have a lot of discussions about my ideas face-to-face – it’s one of the most effective methods of outbound connection.
So that’s a brief summary of how I have been trying to use the Aggregate, Filter and Connect framework over the past few months. In using it, I have learned a few things that might be useful for others too:
- It really helps to think about the three tools explicitly. As I said, I’ve always been reasonably good at making novel connections. But my ability to get my ideas to spread has increased dramatically once I started thinking in this way. Particularly with regard to outbound connections. My use of twitter, and the increase in my public speaking were both ideas that I initiated to increase my connections.
- When people feel overwhelmed by information, it usually means that they aren’t filtering effectively. Like I said, this is my weakest area. But there are some really smart people working on this. In addition to the posts I’ve linked to, check out the rest of Harold Jarche’s blog for some ideas. Venessa Miemis and Ken Gillgren have done some really good thinking in this area too. This is one of the areas in which most of us probably need to improve.
- The other area that we probably need to address is this: we need to get better at connecting ideas. This is where we create value – by making novel connections. And it’s not enough to just make the connections in our head – we have to frame them in a way that others can act upon. That means creating tangible content – a blog, tweets that connect ideas, podcasting, something. My primary recommendation here is to practice making novel connections, and then express them in a way that enables your idea to spread. One good way to do this is to expand the range of areas from which you collect information, and as you read and hear things from outside your area, consciously think about how they connect back to things that you know well. This is the strength of weak ties between ideas.
- Finally, your personal knowledge management scheme isn’t complete until you are doing all three things well. Aggregating is great, but only an initial step. If you don’t filter well, you won’t be able to make sense of the information that you collect. At the same time, even if you aggregate and filter well, you only create real value when you make novel connections between ideas. Information is the fundamental building block of idea connections. Once you make these novel idea connections, you then need outbound people connections to get your ideas to spread. The three skills reinforce each other.
So there’s the answer to Sam – you can replicate my blog by copying my incoming information streams, using the same filtering tools that I do, and then making the same connections between ideas that I do. In other words, you can’t. Aggregate, Filter and Connect is one method you can use to generate unique intellectual value.
NOTE: I’d like to thank everyone I mention in this post, and many others as well for contributing ideas that I’ve been able to use as building blocks in this argument – It’s great that we’ve been able to Connect! George Siemens and Jon Husband have also written things on these topics that have influenced my thinking.
Another NOTE: Venessa has pointed out in the comments that Howard Rheingold has written one of the definitive articles on filtering: Crap Detection 101.
Third NOTE: Follow-up post: Filtering With Your Network
Final NOTE: Here is a practical example of how the process works.
Everything’s a Network
Posted by Tim in complex systems, networks on 18 January 2010
I ran across this on Paul Kedrosky’s blog – an article discussing international shipping as a complex network. It reminds me of some of the work I did in my PhD studying international trade as a complex network. Here is the diagram of shipping lanes and ports:
It raises a few interesting points about networks:
- Networks are everywhere! And it’s useful to analyse economic networks because you often find out interesting things. In this one the big news is that a lot of the most important ports in the network are places I’ve never heard of, and I bet a lot you haven’t heard of them either. One of the great things about network analysis is that you can learn about key players in the network, which might have been hard to identify otherwise.
- The hub ports seem to serve two purposes. Some of them are places that act as shipping conduits, like the Panama and Suez Canals. Others are endpoints, like New York/New Jersey and Antwerp. These are still conduits, but they are points of transition where cargo shifts from sea to land and vice versa. It would probably be useful to sort the ports along these lines.
- Network links are often surprisingly persistent. Antwerp has been a hub port for hundreds of years – since back in the time that Belgium was a major sea power. One of the things that surprised me in my thesis research was that Belgium is still a hub in international trade, even though we don’t think of it as a significant economic player anymore. Trading ties based on colonial relationships seem to persist for long after the formal ties have been severed as well. It is often very difficult to unbreak ties once they have been formed (and this is why it is often difficult to get new innovative ideas to diffuse through an economic network).
Networks are a central part of economic life. Gaining a better understanding of the network structures in which we’re embedded is an essential part of trying to get our innovations to spread. This study of international shipping gives us some useful insights into what we can learn from network analysis. What do you think you could learn if we studied the networks in your organisation?
Three Ways to Win With Your Great Ideas
Posted by Tim in business models, innovation strategy, networks on 12 January 2010
I’ve been spending a fair bit of time recently talking about how ideas are cheap. I’ve been doing this for two reasons: the first is that ideas really are cheap; the second is that organisations often overinvest in idea generation when they’d be better served by getting better at executing ideas. I ran across two different things today that add some support to this idea.
The first is from an interview with the economist Robert Fogel in From Poverty to Prosperity by Arnold Kling and Nick Schulz:
We tend to heroize the person who gets there first, but usually there are a dozen people who were so close that you can feel their breath on the back of their neck, so that if one guy stumbled, it wouldn’t be that that scientific stream wouldn’t materialize. It would be that some other scientific group or individual is the one whose name is attached to it.
I really think science is a collective enterprise. What you can do depends not only on what happened before you but on what everybody else around you is doing. You’re talking to each other and hoping you’ll be a little bit luckier, or a little bit cleverer…
And then I saw a post by Fred Wilson talking about how a third of his firm’s VC portfolio is being attacked by ‘patent trolls’:
But anyone who has spent a significant time in technology based businesses will understand that two groups working completely independently from each other will often solve a problem similarly. One group is not copying or ripping off the other group. They are simply coming to similar conclusions about how to get something done.
In these cases, it makes no sense to protect one group from the other. Nobody has taken anyone’s “intellectual property.” Both groups should own their inventions outright without having to license technology from the other.
In my experience, this has been generally true (although Michael F. Martin doesn’t buy Wilson’s argument). For the moment, let’s assume that this is the case – whenever a new idea is ‘in the air’, several people or organisations will be working simultaneously to operationalise that idea so that they can make money on it. What’s the best way to do this?
I don’t like patenting or other legal IP approaches for a number of reasons. The main one being that in the end, legal protection doesn’t offer you much actual protection. And from a psychological point of view, I think that most people with a great idea want to make money off the idea itself, not from lawsuits. I’m not saying don’t patent, but rather that you should think carefully about three other ways to make money off your great ideas.
- Win through better execution: Edison was at best the 24th person to invent a working incandescent light bulb. Why do we think of him as its inventor then? He had much better execution than the previous 23 teams. His light bulb had a better filament, so it burned longer. More importantly, his group actually got electrical power stations built, and electrical cabling laid.
- Win by having a better network: Stefan Lindegaard revisits the Sony Betamax story today. My thought while reading his post is that Betamax really failed because its value network was worse than that of those backing VHS. Lindegaard frames it as a problem with insufficient openness, but ultimately, you win by having a stronger value network (and a better position within it). The Apple iPhone versus Google Android battle will not be won by the better technology, but ultimately it will be won by the better network.
- Win with a better business model: The Nintendo Wii is a good example of winning with a better business model. The product itself is technologically worse than Playstation or XBox – at least in terms of processor speed and graphics, which is what everyone thought they were competing on. But the innovation with the motion sensor in the controller meant that Nintendo had a different value proposition (play activity-based games), which allowed them to pursue a vastly different market segment (people other than 18-30 year old men).
These strategies obviously overlap a fair bit. For example, your value network is part of your business model, so if you innovate in one it’s likely that you’ll be innovating in the other as well. But if you are in an industry that can not take advantage of legal IP protection, then you must use one of these approaches in order to benefit from your great idea. I would argue that even if you are in an industry with a strong IP regime, you will benefit from thinking about these strategies. They will help you find a way around the problem of working on an idea that others are attacking at the same time. They will help you win with your great idea.
Note: We are seeing an increasing amount of work being done on business model innovation, which is great. I tend to use Henry Chesbrough’s approach, but you can also find some great resources on the websites of Alex Osterwalder and Anders Sundelin. With all these people working on the same idea at the same time, I guess the one that wins will be the one with the best execution. Of the best network. Or even the best business model!
Networks and the Information Glut
Posted by Tim in complex systems, connect, networks on 9 January 2010
Everyone knows that we’re living in a time of unprecedented access to information, right? Personally, I’m always a bit skeptical of these grand narratives. To see why, watch this short video showing the social networks of correspondence among 18th Century scientists:
It’s great research that illustrates some important points:
- When we talk about ’social networks’ we don’t just mean facebook and twitter. People have always functioned within networks, and these have always been important in the development and spread of ideas. James Fowler makes this same point in his interview with Stephen Colbert.
- Ideas diffuse through networks. The structure of the networks through which we are trying to get our ideas to spread has a significant influence on the diffusion of our innovations. Our connections within the network can enhance or hinder our ability to get our ideas to spread. One of the reasons that Darwin gets credited with the idea of evolution through natural selection instead of Alfred Russell Wallace is that Darwin’s connections within the scientific community at the time were more numerous, more widespread, and better.
- Even though we often feel like we’re overwhelmed with information and data to be absorbed, the information glut is nothing new. Think about the volume of connections shown in the video. Or think about Charles Darwin – over the course of scientific career he sent over 15,000 letters. It’s safe to assume that he received just as many. Think about how much time he would have spent reading & writing letters, and how much new information and ideas would have been included in that – it’s probably more than we’re spending writing our blogs, updating our statuses and twittering. In fact, if you just look at the networks, you might argue that Darwin was the Chris Brogan of the 19th Century.
The fundamentals of innovative thought haven’t changed since the 18th Century – it’s always been aggregate, filter and connect. The great thinkers of earlier times corresponded extensively because it helped them aggregate information from a wide variety of disciplines and sources. Once they did this, they had to be skilled at filtering the data to figure out what was useful, and then they had to connect up the filtered data to create innovative ideas.
And, of course, once they had the great ideas, they had to execute them, and then get them to spread. Even though the media that transmits the data to us are different now, aside from that, not much has changed.
(hat tip to Mitch Joel for the video link)
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