Category: book riffs

Innovate by Re-Imagining
There are three ways to come up with a disruptive innovation. If you are taking on an existing product or service in head-to-head competition, you need a 10X performance improvement. If you are a small firm taking on a big one, you need to change the rules of competition with business model innovation. The third way to develop a disruptive innovation is to re-imagine.

There is a great example of this in this talk by David Kelley:

He tells the story of Doug Dietz, an MRI engineer for GE Healthcare. Kelley tells the story as well in his new book Creative Confidence, written with his brother Tom. The story is excerpted here on Slate too.

Dietz was shocked one day when he saw a girl in a hospital crying uncontrollably while waiting for an MRI. She was terrified of the machine. After asking some questions, Dietz discovered that around 80% of paediatric patients required sedation in order to have an MRI done. Dietz found this deeply disturbing.

He was doing the design thinking program at Stanford’s d.school at the time, and he decided to redesign the process from the children’s perspective. The Kelley brothers describe the outcome:

By thinking holistically about how children experienced and interacted with the technology, Doug helped transform the MRI suite into a kid’s adventure story, with the patient in a starring role. Making no changes to the complex technology inside the scanner, Doug and his ad hoc team applied colorful decals to the outside of the machine and to every surface in the room, covering the floor, ceilings, walls, and all of the equipment. They also created a script for machine operators so they could lead their young patients through the adventure.

One of the prototypes is a pirate ship worthy of an amusement park ride. The ship comes complete with a big wooden captain’s wheel that surrounds the round opening of the chamber—a sea-faring detail that also makes the small circumference seem less claustrophobic. The operator tells kids that they will be sailing inside the pirate ship and they have to stay completely still while on the boat. After their “voyage,” they get to pick a small treasure from the pirate’s chest on the other side of the room. In another story, the MRI is a cylindrical spaceship transporting the patient into a space adventure. Just before the whirring and banging of the machine gets louder, the operator encourages young patients to listen closely for the moment that the craft “shifts into hyper-drive.” This reframing transforms a normally terrifying “BOOM-BOOM-BOOM” sound into just another part of the adventure. Including the pirate experience and the rocket ship, there are now nine different “adventures.”

We watched David’s talk in my executive education class today, and one of the participants has done a great deal of MRI research. He said that all of the MRI manufacturers had been competing by trying to reduce the noise, and make the process quicker. The results are that instead of being “bloody loud” to just “loud”, and the time was reduced from 30 minutes to 20.

It took a great deal of research effort to achieve this. But it doesn’t make the machine any less terrifying for children. The breakthrough innovation came through re-imagining the experience.

Ralph Ohr describes this as the outcome of design thinking. Re-imagining is how we change the meaning of something – this is how we jump from one competitive hill to a new one. Doing this requires empathy.

You can’t do this through focus groups. If you had asked the kids what they wanted, the only answer they’d be able to give would be “don’t make me go in the machine.” The idea of turning the machine into an adventure only comes through understanding why the kids are scared, and then thinking creatively about what might alleviate that fear.

Like business model innovation, this is another way of changing the basis of competition. Instead of competing on reduced noise and time, GE Healthcare ended up competing in a completely new arena – reducing the costs and time taken sedating the children – with the new design, the number that required sedation fell below 10%.

How might you re-imagine competition in your industry? It’s a question worth thinking about.

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14 November 2013
The Problem With Being a Fast Follower: Tacit Knowledge
Tacit Knowledge and Why It’s Important

There is a mining CEO in Australia who often says in private conversation something like:

When it comes to new ideas, we’re anxious to be second

They want to use a fast follower strategy. And there’s some sense to this approach. After all, trying to be first is risky. And there’s a fair bit of research that shows that the winner in a new market is often not the first to market. So you can make a sound argument for being a fast follower.

The big problem with trying to be a fast follower is this: tacit knowledge.

Tacit knowledge is stuff that we know, but we can’t explain how to do it. Think of it this way: have someone throw something at you, and try to catch it. Now, describe exactly how you figured out where to put your hand to catch the flying car keys (or whatever). You can’t. There are calculations of speed, and trajectories, and muscle movements, and all of that goes on inside your brain and you can’t explain any of it. That’s tacit knowledge.

When it comes to innovation, most of the important knowledge is tacit. Paul Hobcraft makes a strong case for the importance of tacit knowledge in innovation. In his excellent post The Tacit-Knowledge Economy, Ricardo Hausmann says:

To make stuff, you need to know how to make it, and this knowledge is, to a large extent, latent – not available in books, but stored in the brains of those who need to use it.

Getting it there is really tough. Tacit knowledge is acquired mostly through learning by doing. That is how we train musicians, barbers, doctors, and scientists. Consider how long it takes an adult to learn to speak a language or a musician to master the violin.

Tacit knowledge is important for innovation for several reasons: it means that the best way to innovate is to learn by doing, it means that you can’t quantify the knowledge you need to do this, and it means that you can’t explain what works to others, even within your own firm.

Tacit Knowledge Problems

One-time CEO of HP Lew Platt once said: “I wish we knew what we know at HP.” That’s describing a tacit knowledge problem – but we often deal with this as an information storage problem instead. My first PhD student Sam MacAulay shares a great case study that reveals the problems of knowledge sharing. In their book The Knowing-Doing Gap (a must-read), Jeffrey Pfeffer and Bob Sutton say this:

The fact that knowledge is acquired through experience and is often intangible and tacit produces a third problem in turning knowledge into action. One important reason we uncovered for the knowing-doing gap is that companies overestimate the importance of the tangible, specific, programmatic aspects of what competitors, for instance, do, and underestimate the importance of the underlying philosophy that guides what they do and why they do it. Although specific practices are obviously important, such practices evolve and make sense only as part of some system that is often organized according to some philosophy or meta-theory of performance. As such, there is a knowing-doing gap in part because firms have misconstrued what they should be knowing or seeking to know in the first place.

When knowledge is tacit, we don’t know what to copy. Can you see how this makes it hard to be a fast follower? Pfeffer and Sutton go on to discuss why so many automotive firms found it really hard to be fast (or even slow) followers of Toyota:

Why has it been so difficult for other automobile manufacturers to copy the Toyota Production System (TPS), even though the details have been described in books and Toyota actually gives tours of its manufacturing facilities? Because “the TPS techniques that visitors see on their tours—the kanban cards, andon cords, and quality circles—represent the surface of TPS but not its soul.” The Toyota Production System is about philosophy and perspective, about such things as people, processes, quality, and continuous improvement. It is not just a set of techniques or practices: On the surface, TPS appears simple…. Mike DaPrile, who runs Toyota’s assembly facilities in Kentucky, describes it as having three levels: techniques, systems, and philosophy. Says he: Many plants have put in an andon cord that you pull to stop the assembly line if there is a problem. A 5-year-old can pull the cord. But it takes a lot of effort to drive the right philosophies down to the plant floor.

This is an important point.

You build up tacit knowledge when you learn by doing. This means that if you want to be a fast follower, you still have to be an innovator yourself. It’s almost impossible to just sit back, wait for everyone else to come up with good ideas, and then copy them. You need to be innovating yourself, because that’s the only way that you’ll have enough tacit knowledge to be able to apply the innovations that others come up with.

Let’s go back to that mining CEO. His firm actually does have quite a bit of innovation capability. So they may well be able to be an effective fast follower. But it’s a tough game to play. Scott Anthony correctly says that you must avoid using this strategy as an excuse to not innovate:

But make sure that when you say that you want to be a fast follower you aren’t really saying, “Can’t I just go back to running my core business?” Too often people find that when it is a strategic imperative to respond, it is too late. Sometimes the resources aren’t there. Sometimes the corporate innovation muscles just aren’t strong enough to respond appropriately. The need to respond can force a “Hail Mary” acquisition that has little chance of sticking.

Start building your innovation capability now. It’s ironic, but the only way to be a fast follower is to be an innovator. That’s how you build the tacit knowledge that you need to succeed.

(the cartoon is from Hugh MacLeod’s Daily Newsletter – subscribing to it is worthwhile.)

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5 November 2013
What is the Best Organisational Structure for Creativity?
We all know that creative people are different from you and me, right? Creative people are more creative in, well, everything. They dress differently, they tend to be depressed a lot of time, or manic, they need exotic settings to work in, and so on.

If this is true, what is the best way to make your organisation more creative? You hire a bunch of special creative people, you isolate them from the rest of your company so that they aren’t inhibited by the mundane day-to-day operation of work, you give them special rooms with bean bag chairs and nerf guns, and you leave them alone. You let the creative people create, and let the normal people do the real work.

Lots of companies try this. The problem is that the idea that creative people are different from everyone else is a myth.

This is one of the myths that David Burkus tries to dispel in his excellent new book The Myths of Creativity. He calls it the Myth of Breed – that creative people are a breed apart. Burkus thoroughly goes through the evidence for this idea, and demonstrates conclusively that this idea is false. First, he reviews research investigating whether or not creative people have a particular type of personality – they don’t. Then, he looks at whether or not there is a genetic basis for differences in creativity – there isn’t. In fact, creativity is mostly due to opportunity – if people are put into the right situations, their natural creative will come out.

This has big implications for business. Burkus says:

If creativity isn’t limited to specific types and creative ability is not a result of the genetic lottery, then why does the strict separation in some organizations continue? Why do we insist on segregation between creative and noncreative roles? If creativity is within the grasp of every person, in every department or industry, then perhaps the way we structure our organizationa should reflect that integration and make it possible for everyone to contribute his or her own creativity.

This is the basis behind one of my favourite quotes from Nilofer Merchant – “Not everyone will, but anyone can.” That quote is part of why I keep making you look at my lousy drawings, and it’s right in the middle of my laptop:

The Myths of Creativity is an excellent book. Burkus does a great job of using research to show what is and isn’t true, and why a lot of the things that we think are true, aren’t. This kind of belief is dangerous, because believing myths leads us into making poor organisational choices.

So what should an organisation look like if it is built for creativity? Burkus says that it might look a lot like W.L. Gore & Associates – the company that invented Gore-Tex. Paul Hobcraft has a great summary of how innovation works at Gore, and you should read that post. In brief, Gore is organised in small teams of 8-12 people. They only have three layers of management, the CEO, a handful of functional heads, and Associates (everyone else). And that’s in a company of 8000!

Hobcraft outlines some of the key things that enable innovation at Gore:
- Information sharing and peer review are the norm.
- A strong focus on getting the environment right and the business stuff gets easy.
- More coaches than bosses, lots of peer reviews.
- Belief that giving the right people the tools and knowledge will bring out the best in everyone.
- Trust individuals to do the right thing.
Everything is driven by the team. If you have a great idea, and can convince others that it has potential, you can start a team. Burkus describes their lattice structure:

The lines of communication are direct, and the responsibilities are lateral. There are no real organizational charts, no ladders to climb, and no departmental distinctions between creative and noncreative roles. Gore’s structural units are the self-managed teams of associates who band together around each project. These associates are responsible to each other. They rely on each other’s creative contribution to a project’s success, and they even determine each other’s compensation.

But if everything happens within these small teams, how does the company keep moving in the same direction? CEO Terri Kelly answers this in an interview with Gary Hamel:

The challenge in this distributed leadership model is to make sure it’s not just chaos. First of all, there are norms of behavior and guidelines we follow. These are our ‘rules of engagement.’ Every associate understands how critical these values are, so when leaders make decisions, people want to understand the “why.” They know they have the right to challenge, they have the right to know why this decision is the right one for the company. This puts a tremendous burden on the leader to explain the rationale behind the decision, and to put it in the context of our culture: Why is this fair? Why is it consistent with our beliefs and principles? So again, the burden on leaders is different from what you’d find in many other companies, because our leaders have to do an incredible job of internal selling to get the organization to move.

And the results at Gore at great. They are one of the largest private firms in the world. Because they are private, figures are hard to come by, but they are reportedly one of the most profitable private firms in the world as well. In other words, their radical approach to management and creativity works.

So why doesn’t everyone organise their company in this way? There are a few reasons. One is that it’s hard. It is a lot easier to put up some inspirational posters on the subject of creativity, and hope that works. But it won’t. Restructuring a company to reflect the fact that everyone there has creative skills takes a lot of work. Gore has been built this way from Day 1.

The second reason is that many people still don’t believe that everyone can be creative. The Breed Myth is powerful, and widespread. If you believe it, then you hire special people and put them in special rooms. If you don’t, you have to figure out how to put everyone in your firm into a position to be creative.

That’s hard work. But it pays off. If you genuinely want your organisation to be more creative, then think about organising like W.L. Gore does.

The Myths of Creativity tackles this idea, and nine other dangerous myths. It’s worth reading.

Here is Kelly talking about Gore’s innovation culture:

And here is the preview for The Myths of Creativity:

Related articles
- The Myths of Creativity: Book Review
- The Truth About Creativity At Work
17 October 2013
Innovation Lessons from the Rise, Fall, and Rise of LEGO
Innovation at LEGO

When was the last time you played with LEGOs? For me, it must have been at least 35 years, maybe longer. But then last month I built the LEGO version of Frank Lloyd Wright’s Fallingwater House, part of the LEGO Architecture Series. I’ve been revisiting a few different thing recently – in this case, the motivation was reading the excellent book Brick by Brick by David Robertson and Bill Breen. (I recommend it.)

And it’s not just me. I was visiting my friend Jim last week, and we were surprised to discover that we’re both playing around with arduino programmable gear. In Jim’s case, he’s been working with a LEGO Mindstorm kit – including figuring out how to program it to solve a Rubik’s Cube. It seems like a lot of us old guys are playing with LEGO these days.

LEGO was founded by Ole Kirk Christiansen, whose founding value was “only the best.” They became one of the dominant toy companies in the world through the second half of the twentieth century, then nearly went bankrupt in 2003. Since then, LEGO has reoriented itself, and become wildly successful again. Robertson and Breen focus on the events leading up to the near-death experience, and then those that led to the reinvention of LEGO. In particular, they look at the role that innovation played in both the crisis and the recovery.

One of the points that Robertson and Breen make is that LEGO was trying hard to innovate all the through both the crash and the recovery. They implemented many of the common innovation tools in the time leading up to the crash: they had a huge focus on disruptive innovation and searching for blue oceans, the formed diverse creative teams, and they tried several different versions of open innovation.

Nearly all of the products that resulted from these efforts failed – and that is what led to the collapse.

Then, as LEGO successfully launched the Architecture Series, and LEGO Games, and a whole series of wildly successful new products, they used the same set of tools to create these breakthroughs.

Clearly, the issue wasn’t which innovation tools they were using.

Here is Why Innovation Tools Don’t Matter

In the late 90s, LEGO’s market share had begun to decline. Kids were playing more with video games, and other toys, and LEGO wasn’t cool anymore. They decided that they had to disrupt themselves, before someone else did. So they want all out in trying to do this. This is when they started to consciously implement the innovation principles just mentioned.

The outcome was a string of very expensive failed product launches. Robertson and Breen frame this as a case of over-innovation, I’ve argued before that when something looks like over-innovation, it is really poor innovation. If we think of innovation as executing new ideas to create value, the problem the LEGO faced was that they were executing plenty of new ideas, but they weren’t creating much value with them.

This is a common innovation problem – and it reflects several underlying factors:
1. Poor overall management. As LEGO reached its crisis point in 2003, everything was going wrong. Their financial control was very poor, and they had lost touch with what customers wanted. Furthermore, even when people that loved LEGO reached out to try to contribute ideas, the firm was fairly arrogant in ignoring this input, believing instead that they knew best.
2. Lack of strategic focus. In all of the pre-2003 innovation efforts, LEGO was obsessed with novelty – with doing new stuff. But they were so far removed from understanding what their customers wanted (or even who they were), that these new ideas failed to create value. They thought that the power was in the brand – so they launched things like LEGO TV series. But really, the power was in the bricks – it was refocusing on this that started to turn the firm around.
3. Disconnection from customers. Many of the misfires prior to 2003 were the result of not understanding what kids wanted – most of the new products were based on assumptions about this, not on feedback from the customer base.
When you are messing up the fundamentals of management, it does not matter what innovation programs you throw on top of a flawed strategy. Any innovation will be based on a faulty view of the market. This is why Greg Satell is right when he says that strategy and innovation are two distinct things.

Peter Drucker once said: “There is nothing so useless as doing efficiently that which should not be done at all.”

The case of LEGO shows that it is also true that there is nothing so useless as doing innovatively that which should not be done at all. You have to get your management fundamentals right first. Once you do, then you can start applying innovation tools.

Getting Innovation Right at LEGO

The first step in righting the ship at LEGO was focusing on the right goals. They went back to a focus on quality, and making sure that everything was built on the bricks, not just the name. Here is the graphic that Robertson used in his HBR article on LEGO:

The next step was building an innovation portfolio. LEGO had gotten so obsessed with disruption that they forget to build on their successful core products. Here is how Robertson and Breen put it:

Having defined the different areas of innovation that LEGO would pursue, the working group also recognized that “innovation” doesn’t necessarily mean “radical”—that, in fact, different opportunities require varying degrees of innovativeness. The new model spotlighted three different approaches to marshaling the kinds of change that would help LEGO advance its goals. The first, simplest type of innovation was to adjust existing toys—that is, to freshen up an evergreen line so that it attracts news waves of kids without adding significantly more development and manufacturing costs. After the first launch of Bionicle, each subsequent release was an exercise in making incremental improvements. Adding new features, new story lines, and (later) vehicles for the Bionicle characters were small but very profitable innovations. Senior vice president Per Hjuler captured the attitude of many LEGO managers when he asserted, “I am continually humbled by the power of the little idea.” The next, more challenging innovation was to reconfigure—to change existing building systems or platforms to provide a new customer experience. LEGO had a blockbuster with its Star Wars toys and a minor but promising success with Slizer. Combining the two concepts to produce a set of buildable action figures with a rich, episodic story line meant that LEGO had to blaze a new path to profits, but it was starting from a familiar place. The result was a hit series of toys that generated significant sales for almost a decade. Reconfiguring innovations change the terms of competition in an existing market. The most difficult and unpredictable innovation is the kind that redefines a category. Case in point: the 1998 Mindstorms RCX kits, the company’s first foray into robotics. (The second version of Mindstorms, released in 2006, was a reconfigure innovation for LEGO.) Another example was LEGO Universe, an online game where kids from all across the planet could connect and play. In the next two chapters, we cover each of these radical attempts at redefining LEGO play.

The next big step was opening up to the LEGO community. Why is my friend Jim able to make his Mindstorm solve Rubik’s Cubes? Because of the community. Shortly after Mindstorm was released, the enthusiastic community of adults that love LEGO hacked the software. After a great deal of thought, instead of shutting down the hackers, LEGO embraced them. It was this community that led to the overwhelming success of the product.

This then led to further collaboration with the community:

Smith-Meyer returned to Knudstorp and Pallesen and won their backing to revise his brief. Instead of taking a year to find two potentially big growth opportunities and then invest significant resources to develop them, the front-end team would align with entrepreneurs who were already working on nascent but promising projects. Within a matter of months or even weeks, the team would use the LEGO Group’s know-how to help these entrepreneurs test the market, make necessary revisions, and test again. The idea was to avoid making bet-the-farm mistakes by launching a series of low-cost, low-risk experiments, which would increase the odds that one might grow into a runaway success.

In the end, it was the renewal of purpose and the engagement of community that drove the revival at LEGO. These are two key components of innovation success, and they are much more important than whatever tools or techniques you choose to use. These are fundamental components of management, and you have to have these right before you can innovate.

Personally, I’m glad that LEGO figured out what to do, and that I’ve rediscovered them. Now I just have to figure out what to build next.

Here is Robertson outlining the story:

David Robertson: The Story of LEGO from BrightSightGroup on Vimeo.
13 October 2013
How Can We Increase Insight?
The conflict between efficiency and insight

One key step in innovating is generating novel ideas – and this is based on insight. So how can we increase insight? That is the topic of the excellent book Seeing What Others Don’t by Gary Klein (check out Harold Jarche’s review here).

Klein starts by looking at the impact that insight has on performance, using this diagram:

According to Klein, performance improvement results from a combination of reducing errors and uncertainty, while increasing insights. This is a fundamental tension in organisations. As Paul Sloane says:

Businesses are good at getting better but poor at getting different.

Jeffrey Phillips outlines how firms manage this balance, and why it is easier to focus on efficiency at the expense of insight and innovation:

Businesses, with timelines and incentives that are somewhat different, focus on short term financial results, which tends to shift the balance between innovation and efficiency toward efficiency. Most initiatives that focus on improving efficiency have an immediate, and positive financial impact. Thus efficiency is rewarded, and initiatives that are rewarded are repeated. Innovation often has a negative short term impact – costs without an immediate benefit – so innovation is far less likely to produce a short term financial benefit, and therefore much more difficult to do. Slowly, over time, the scales shift from a balance between efficiency and innovation to ever more efficiency and increasingly less innovation. Eventually efficiency is well understood and easily accomplished, but it has ever decreasing marginal returns. Innovation, on the other hand, becomes more difficult the less it is practiced, and is viewed as risky, uncertain and become even less likely to be taken up.

How insight works

How can we address this problem? Klein’s answer is to increase insight. To figure out how to do this, he studied 120 cases of insight, looking for commonalities. Which he didn’t find. Instead, he found five forms of insight, some of which contradict the others: contradictions, coincidences, connections, curiousity and creative desperation.

His basic premise is that these forms of triggering events cause us to change the stories that we tell ourselves, and, ultimately, others. It is this change in story that leads to performance improvements. Here is how Klein maps the process:

One of the routes to insight is curiousity – this is based on keeping an open mind. This is how many scientific discoveries come about. But contradictions generate insights through being skeptical – this is the opposite of keeping an open mind! Klein’s insight is that it is not the type of action that defines an insight, but rather the outcome – the change in the story.

This illustrates a very common error that we make when we study things – we don’t classify them very well. Previous insight researchers have focused on the act that led to the insight. This led to arguments about whether they were always generated by a flash of inspiration, or if they incubate and build up over time. It turns out they do both. And both open minds and skeptical minds can generate important insights.

The critical step is changing the story that we tell ourselves about how what we’re thinking about works.

Increasing the up arrow

Klein agrees with Phillips that the natural tendency in organisations is to over-emphasize the down arrow of efficiency at the expense of the up arrow of insight. And he has some ideas for improving you insight capabilities.

The first step is to understand the different forms of insight, and how they work to create changes in behaviour. This is the change in story that we have already discussed.

Inside of organisations, Klein advocates using insight advocates. These are people that collect and share stories of how insights have been generated and successfully acted upon inside the organisation. We know that one way that people become more innovative is by having role models. Actively gathering and telling stories of insight will help to create these role models within our organisations. It helps to build community too.

Another tool is to build some capability in helping people gain insights. Klein says:

Many professionals have a dual mission – to gain their own insights and then to enable others to grasp these insights or even to reach ones that are different but valuable. Therapists are continually trying to gain and give insights in their sessions with patients. Artists and writers also traffic in insights even though they rarely have a direct relation with their audiences. Historians are engaged in seeking and sharing insights. And, of course, teachers are also in the insight business.

Managers should be on this list as well. I’ve said before that removing obstacles is one of the most important jobs that managers have. This includes removing obstacles to insight.

Finally, Klein talks about the need for willpower – removing gumption traps. This can mean being open to changing your behaviour and goals in response to insights. Klein says:

Organizations demonstrate willpower when they act on insights, particularly insights about their primary goals. An insight about a gola isn’t about being flexible and adapting plans in order to reach the original goal. It’s about changing the goal itself.

Insight is a critical part of innovation. If we are to innovate, we must be able to generate insights. This can’t be done on a schedule, but we can make changes that improve our odds. The tools that we need to use reduce our mental and organisational rigidity. They disrupt our thinking, and they change our stories.

This often makes people uncomfortable. But it’s what we need to do to find new ideas.

Related articles
2 October 2013
Seven Steps to Build Your Experimental Capability
Experimenting is a core innovation skill. It helps you find ideas that work, it’s a great way to select ideas, and it is an important part of building an innovation culture.

In his book The Year Without Pants, about the year he spent managing a team at Automattic, Scott Berkun outlines the approach that the firm uses to build new features. It’s a pretty good method for building an experimental culture. First, he says this about experiments and innovation:

The fundamental mistake companies that talk about innovation make is keeping barriers to entry high. They make it hard to even try out ideas, blind to how much experimentation you need to sort the good ideas from the bad. I’ve visited companies that use big meetings, with far too many cooks in the room, to rank ideas based on one-sentence descriptions. It was madness. While few at Automattic had ever experienced this, their process was on the other end of the spectrum: they had faith in the future. If a feature launched and had value, the missing things could be addressed later. And if after launch it didn’t have value, few would use it and it could be killed (although I’d learn later that killing of experiments was far too rare).

Here are the seven steps that they use at Automattic to build new features for WordPress.com:
1. Pick a problem. Right off the bat this is a different approach than many organisations use. Often people are try to push a cool idea that they’ve had, hoping that people will like it. Starting with a problem is more of a design-thinking approach – it gets you thinking about the customer’s perspective right from the start.
2. Write a launch announcement and a support page. Not everyone will take this specific step, but the general principle is a good one. Berkun says:
  
  The point is that if you can’t imagine a compellingly simple explanation for customers, then you don’t really understand why the feature is worth building. Writing the announcement first is a forcing function. You’re forced to question if your idea is more exciting for you as the maker than it will be for your customer. If it is, rethink the idea or pick a different one.
3. Consider what data will tell you it works. Figuring out what success looks like will make it easier to kill ideas that don’t work, freeing up resources to try other experiments.
4. Get to work. Build it! Focus on the goal you outline in step two, but be willing to pivot the idea once your idea starts to become real.
5. Launch. At Automattic, it sounds like they’re about halfway in between launching a minimum viable product and one with full features. They never launch with everything in place – they iterate based on the data that they’re measuring from step 3.
6. Learn. Learning is what distinguishes experiments from mistakes.
7. Repeat. It’s always a loop, not a line.
One of my recent experiments

This approach raises some interesting points. One is the idea of the forcing function – building in a point that requires you to define your objectives. In part, this is where innovation intersects with strategy. More importantly, it is good practice to include steps that force you to think like your customers – a point made well by Ralph-Christian Ohr here. This is basically another version of Simon Sinek’s Start With Why idea.

The second big idea is the focus on learning. If you try an idea and it doesn’t work, and you don’t learn anything from this, then it really is a failure. None of us have enough spare resources to afford this. Nevertheless, to innovate we have to try out a fair number of ideas that end up not working as we expected. This is only feasible if we structure things so that we learn from our experiments.

The third point is that very often our really big ideas start out pretty small. One of the projects that Berkun’s team worked on ended up being JetPack. This is the biggest feature that WordPress has added to their interface, I think (and it’s awesome). But it didn’t start big – it started out as an effort to coordinate the services provided to customers with self-hosted blogs (like this one) and to customers with their blogs hosted on WordPress.com. It was only as they built it that it grew as big as it ultimately became.

The seven steps clearly come from an online business. Nevertheless, with a bit of tweaking you could use this approach in nearly every type of organisation. And since experimentation is such an important skill to build, it is worthwhile to do the tweaking.

So find some things to work on, and get to work. Start small, and who knows where you’ll end up?

Notes: I’ve got a more regular review of the book here. And the cartoon is from Hugh MacLeod’s daily newsletter, which is worth following.

Related articles
19 September 2013
Making Work Better – Scott Berkun & The Future of Management
Lots of Work, Some of it Not Terrible

I’ve had a LOT of jobs over the years. Some of them have been:
- Strawberry picker
- Church janitor
- Warehouse guy for a pottery company
- Babysitter (terrible babysitter, more accurately)
- Disc jockey, assistant music director, program director, station manager and sales manager at my campus radio station
- Floor hand and feed mixer in a feed mill
- Slave labour in the campus department of food services
- Research assistant (one job photocopying journal articles, four jobs over 20 years doing actual research)
- House painter
- Construction worker remodelling a K-Mart
- Office equipment salesman
- Industrial water treatment consultant
- Builder of an accounting system for a tannery
- Manager of student recruitment at a polytechnic
- Freelance consultant
- Employee number 3 at a startup (Director of Sales and Marketing)
- Teaching assistant and casual lecturer at a University
Right now, I have five positions that I currently hold listed on my LinkedIn Profile:
1. Senior Lecturer in Innovation Management at The University of Queensland Business School
2. Instigator at The Discipline of Innovation Blog
3. Managing Editor of the journal Innovation: Management, Policy and Practice
4. Mentor at iLab Accelerator (and also in the Mentoring4Growth Program)
5. Consultant in UQBS Consulting
And I have a few other odds and ends going on too. And with all of those jobs, with a few notable exceptions (including all of my current work!), the jobs have been lousy. Or at least the management has been.

Yes, I’ve learned a huge amount in nearly all of them. And all of these experiences have made significant contributions to who I am and how I view work. But the average standard of management that I’ve encountered over the years hasn’t been great. So one of my main objectives when I went into academia was to do work that would help make work better.

Making Work Better

How can we make work better? We need to change the way we manage. Steve Denning lays out the goals:

This management rejects the traditional sharp dichotomy between those activities that are commercial, calculating, manipulative, insufferably dull and tolerated only because they are thought to be either useful or lucrative, and those activities that actively generate genuine human pleasure, such as dance, poetry, music, art and drama. This management aims to be both financially and spiritually profitable, by generating widespread delight , joy, and happiness. It seeks to inspire both those who do work and those for whom work is done. It aspires to uplift the human spirit and unleash the creativity latent in every human being while also achieving more disciplined execution than traditional management. It is as passionately romantic as it is relentlessly operational, specific and practical.

That’s pretty aspirational, isn’t it? But I agree with him – this is what we must aim for.

In his new book The Year Without Pants, Scott Berkun lays out some of the methods that might help us get there.

Scott Berkun (Photo credit: Wikipedia)

Here is what I said about it in my review on Amazon:

If you want to understand how management really works, then this is an important book to read. Scott Berkun ditched his consultant/writer hat and went back on to the management frontline for a little over a year with WordPress.com, and this book reports on what he learned. Berkun is a terrific writer, and I find him worth reading even on topics that I find inherently less interesting. However, there is nothing uninteresting about this – he goes right to the heart of what makes good managers.

For me, there are three big ideas in this book:

1. You can only evaluate management in the context of culture. Here is a quote from the book that outlines this issue: “I’m certain that to learn from a place, you have to study how its culture functions. A great fallacy born from the failure to study culture is the assumption that you can take a practice from one culture and simply jam it into another and expect similar results. Much of what bad managers do is assume their job is simply to find new things to jam and new places to jam them into, without ever believing they need to understand how the system–the system of people known as culture–works.” This explains the title of the book – it references an inside joke within his team. I can see why he would use this as a title, but I’m not sure it reflects the content or quality of the book. However, within the WordPress,com culture, it makes perfect sense…

2. Experimentation is an essential management skill. Berkun experiments throughout his time at WordPress.com. This is a central skill for innovating, and it is not practiced widely enough. He has great insights into the roles that data and judgement play in managing, and how experimenting and learning can contribute to both.

3. How do you manage if everyone is a volunteer? One of the interesting features of WordPress.com is that it originated in a open source programming project. Everyone that works on such a project is a volunteer, and this requires a much different management style than the more traditional command and control approach. Berkun’s time at WordPress.com was part of a big experiment – introducing work teams and hierarchy into an open source style culture. The outcomes tell us a lot about how to manage effectively.

Scott Berkun has a great business mind, and he is a very engaging writer. This is an important piece of work, and if you are interested in what good management looks like and how it might be changing, you should read this book.

If you’d like a more traditional review, Bob Sutton’s is excellent.

We’re not at a point yet where every job can fit Denning’s goals. But surely we should be aiming for that, shouldn’t we? In addition to the points I outlined in my review, it is also important for people to have autonomy, even if we have to seize it ourselves.

The Year Without Pants gives us a starting point at least. And making work better is worthwhile work for us to do.

Related articles
- Scott Berkun’s The Year Without Pants: Funny Title, Silly Cover, Seriously Well-Crafted Book
- Does Remote Working Need More Flexible Thinking? Reviewing The RSA Paper – ‘The Flex Factor’
15 September 2013
Innovation Opportunity: The Future is Co-Created
Why do Ideas Spread so Slowly?

In 1969, six years before the Homebrew Computer Club had its first meeting, Honeywell launched its kitchen computer – the Honeywell H316. It looked like this:

Advertised in the Neiman-Marcus catalog, this was one of the world’s first home computers. Wired describes it like this:

Cooking up a gourmet holiday meal will be a snap, the department store promised. Push a few buttons, and — presto! — a shiny orange-red, white, and black machine will compute the perfect five-course meal. No more silly culinary errors. The days of your wife slaving away in her Chanel apron will vanish into memory, and all those blinking lights will add to your holiday cheer.

All you needed was space for this 100-pound machine. And about $10,000. And a teletype. And a paper tape reader. And some serious engineering skills.

f the lady of the house wanted to build her family’s dinner around broccoli, she’d have to code in the green veggie as 0001101000. The kitchen computer would then suggest foods to pair with broccoli from its database by “speaking” its recommendations as a series of flashing lights. Think of a primitive version of KITT, without the sexy voice.

“What that means is you have to be able to decode the lights in your brain,” says Spicer of the Computer History Museum. Or at least remember the pattern and look up what it meant. At that rate, dinner might be ready next week. “The reason this is such a joke, a gag item, was that there was no real human-readable I/O [input/output] for it.”

This story illustrates why new ideas often spread so slowly. They always spread though an S-Curve:

The time it takes to work through the period marked X always takes long than we expect it to. One of the reasons for this is that it takes some time to figure out what an idea is for.

The Future is Co-Created

The story of the Honeywell H316 demonstrates a few important innovation points:
- Timing is important. The right idea at the wrong time is still wrong. It’s entirely possible to see the future now, but to be unable to capitalise on this vision because the world isn’t ready for it yet. People often have difficulty in telling you what they need – but you can experiment together to figure out what will work.
- You can’t figure out an entirely new business model without feedback from the market. Chris Anderson tells the story of the H316 in his latest book Makers:
  
  Technologists had long predicted that computing would find a place in the average home—the Moore’s Law trend of declining price and increasing power practically guaranteed that day would eventually come. But they couldn’t imagine why anyone would want one. Computing was then used for tabulating census results and company accounting, running scientific simulations, and designing nuclear weapons—big, serious number-crunching. What need did a home have for that? Companies from IBM to AT&T’s Bell Labs got their best minds to brainstorm how a computer would be used in the future home, and came up with precious little.
  
  The most common prediction was that it would be used for recipe-card management. Indeed, in 1969 Honeywell even offered a $10,000 “kitchen computer” (official name: the “H316 Pedestal Model”), which was promoted on the cover of the Neiman-Marcus catalog to do just that—it was stylishly designed, with a built-in cutting board. (There is no evidence that any actually sold, not least because the very modern cook would have to enter data with toggle switches and read the recipes displayed in binary blinking lights.)
  
  Yet when the truly personal—“desktop”—computer did eventually arrive with the Apple II and then the IBM PC, countless uses quickly emerged, starting with the spreadsheet and word processor for business and quickly moving to entertainment with video games and communications. This was not because the wise minds of the big computer companies had finally figured out why people would want one, but because people found new uses all by themselves.
  
  Honeywell made a big bet, and for it to payoff, they had to get every hypothesis about the market right in advance. The odds of doing this are, well, slim.
- The Future is Co-Created. This is the much catchier way to restate the previous point. We build these new opportunities together with the people that will benefit from our new ideas. It’s co-creation. Nilofer Merchant coined the phrase “the future is co-created” and she’s right:
  
  Instead of capturing value, let’s find new ways of creating value, together. Think of collaborators as those you work with. Let’s have co-creators design what to build. Let’s ask communities to create scale. And, when we embed this new social language — words such as collaboration and purpose and community — into our discussions, value creation will flow. Relationships are to the social era, what efficiency was to the industrial era. And we all remember what relationships are built on, don’t we? Trust. After decades of building business on capital, oil, land and silicon, trust will be our foundation for what we create next.
  
  Trust is now one of our most important assets.
Inventors often don’t know what their new idea is really good for. It is something that we have to discover. Greg Satell says that disruptive innovation is crappy – in its first version it doesn’t look like much at all.

You can see that with the H316. If you were skeptical about the future of home computing, it would be overwhelmingly tempting to use the H316 to mock the entire concept – that’s often the first stage in responding to disruptive innovations.

But the crappiness is an important step. It is what allows us to engage with people, and if we design the opportunity correctly, it is what lets them help us make our idea better. And that is when an idea really starts to take off.

If you’re trying to get your great new idea to spread, co-creation is one of your most powerful tools.
15 August 2013
Are Creativity, Entrepreneurship & Innovation the Same Thing?
Who Owns Idea Execution?

Scott Belsky tries to unravel the mechanics of creativity in his book Making Ideas Happen. He includes this equation:

Making Ideas Happen = (The Idea) + Organization and Exuction + Forces of Community + Leadership Capability.

He goes on to say “Ideas are worthless if you can’t make them happen.”

Now consider this from Daniel Isenberg in Worthless, Impossible and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value:

Most of us would agree that innovation has something to do with the tangible manifestation of novel ideas. But entrepreneurship is about the creation of tangible value. Ideas help, but the sine qua nons for entrepreneurs – hard work, ambition, resourcefulness, unconventional thinking, salesmanship, and leadership – will usually trump brilliant ideas.

When he says “innovation” he clearly doesn’t mean the same thing that I mean when I say it:

Innovation is executing new ideas to create value.

Here is one way to picture it:

Thinking of it visually emphasises that all three parts of the definition. Everyone gets the “new idea” part of it. But it’s not enough to have a great idea, you also have to execute it. And even after you’ve done that, you’re not finished. It’s not innovation if you’re not creating value for people.

So the people talking about creativity, entrepreneurship and innovation all make a distinction between having ideas, and creating value with those ideas. And none of us want anything to do with just the “having ideas” part of the whole thing.

Does that mean that we’re talking about the same thing?

Innovation, Entrepreneurs and Entrepreneurship

Strangely, this confusion didn’t exist 100 years ago. When Joseph Schumpeter wrote about innovation, he was talking about the process of creating value from ideas. My definition of innovation basically builds on his. The “entrepreneur” was the person that innovated. And “entrepreneurship” didn’t exist.

Check out these stats from Google NGram tracking the use of the three words in books published between 1900 and 2000:

Innovation is the most commonly used of the three words, and “entrepreneurship” as a concept was basically born in the 1950s. Why? Because the nature of innovation changed.

When Schumpeter was writing, innovation basically happened in startups. So entrepreneurs were people that created innovation by starting new firms. But the first half of the 20th century saw the rise of corporate innovation – which meant that we had to be able to distinguish between innovation taking place in large organisations and in startups.

That’s when we started to distinguish between innovation (which usually meant ideas executed in established firms), and entrepreneurship (ideas executed in new firms).

So Where to Next?

To answer my earlier question, I don’t think that we’re quite talking about the same thing when we talk about creativity, entrepreneurship and innovation.

In his forthcoming book The Myths of Creativity, David Burkus says:

Although there is still no precise and agreed-on definition of creativity despite nearly one hundred years of research on the subject, there appears to be at least a small consensus. Creativity is seen by most experts in the field as the process of developing ideas that are both novel and useful.

Again, there is an emphasis on use (value!) – but the main concern is the processes through which we generate and execute these ideas.

This is obviously an issue of great importance in innovation, because better ideas lead to better outcomes. Provided, of course, that we execute them!

Innovation, then, is this process of idea management. Entrepreneurs are still the people that innovate, and entrepreneurship is doing this through the vehicle of a new venture.

If we accept all of this, there are a few important implications:
- Everyone focuses on idea execution for a reason. Why do all three fields want to own idea execution? Because trying to improve your performance by simply generating more ideas is one of the biggest mistakes that both people and organisations regularly make. All of us focus on execution because this is where the gap is. The great news here is that it means you don’t have to be a genius to be a creative entrepreneur. You can do this by being really good at executing.
- We need to put entrepreneurs back into innovation. It’s too easy to forget that innovation is driven by people. We need to put more focus on entrepreneurs – the people that are creating value out of ideas – and less on tools. It’s people that create value. If we’re in a big organisation, we need to figure out how to liberate and support our entrepreneurs. If we’re in a startup, we need to figure out how to build a business model that creates value out of our great ideas. Both approaches are people-based.
- We need to be clear on our definitions. Creativity, entrepreneurs and innovation are all important, and they all intersect. People that study or practice any of these fields should be working together, rather than creating artificial distinctions between them. My definitions might not be the best, but I do think that they have some historical weight to them, as well as reflecting fairly common usage. But I’m definitely willing to have a discussion about what’s what!
This important because while the three areas have slightly different meanings, they share the same goal – to create value for people. This is what leads to longer lifespans, higher standards of living, and more interesting and fulfilling work.
7 August 2013
Innovation Travels on Two Legs
People Drive Innovation

When we talk about things like disruption and radical innovation, and innovation tools and processes, it’s easy to forget that people drive innovation. But if innovation is a process (and it is), it is surely a people-centric process.

This means that innovative ideas spread from person to person – and even though we have tools now that make this easier, it still mostly happens one person at a time. As Queensland’s Chief Scientist Geoff Garrett often says – innovation travels on two legs.

Ralph Ohr & I: Spreading ideas

I’ve run across a few examples of this recently. The first is in the book Start-Up Nation by Dan Senor and Saul Singer. They talk about “the seminar” – the six-month series of meetings that David Ben-Gurion undertook to try to understand how to prepare for the conflict he viewed as inevitable once Israel was declared in independent state:

He spent days and nights meeting with, probing, and listening to military men up and down the ranks. … Ben-Gurion was keenly aware that hte next phase in the Arab-Israeli conflict would be very different from teh war the pre-state Jewish militias had been fighting: they needed to step back, in the midst of ongoing fighting, and plan for the existential threats that were nearing.

At the end of the seminar, Ben-Gurion wrote of the men’s confidence in their readiness: “We have to undertake difficult work – to uproot from the hearts of men who are close to the matter the belief that they have something. In fact, they have nothing. They have good will, they have hidden capacities, but they have to know: to make a shoe one has to study cobbling.”

Senor & Singer go on to describe how Israeli companies use similar approaches to prepare for disruptive innovations in modern times. In both cases, it is the face-to-face contact that both generates the new ideas and then helps them to spread.

Building Innovation Capability One Person at a Time

Warwick Absolon told a similar story in my Executive Education innovation course a couple of weeks ago. He talked about the innovation program that he has been running at AECOM for the past three years. One of the critical components of building that capability is the series of meetings that he held all around their Australia-New Zealand region. Warwick travelled to all of the main offices, where he held workshops all day long. In each spot, he told people that meetings would start every hour on the hour, and he would talk about innovation with whoever showed up.

This approach worked. The face-to-face meetings accomplished several things:
- They demonstrated a much higher level of commitment than you get from a memo, or an intranet announcement.
- Because attendance was purely voluntary, Warwick was able to identify most of the people in the firm with an interest in innovation. He calls this “assembling my tribe.”
- In face-to-face meetings, people were willing to tell him what was working and what wasn’t.
The main thing that Warwick built through this process was buy-in.

Atul Gawande wrote a great piece in the New Yorker last week on how ideas spread. Here is what he says about it:

In the era of the iPhone, Facebook, and Twitter, we’ve become enamored of ideas that spread as effortlessly as ether. We want frictionless, “turnkey” solutions to the major difficulties of the world—hunger, disease, poverty. We prefer instructional videos to teachers, drones to troops, incentives to institutions. People and institutions can feel messy and anachronistic. They introduce, as the engineers put it, uncontrolled variability.

But technology and incentive programs are not enough. “Diffusion is essentially a social process through which people talking to people spread an innovation,” wrote Everett Rogers, the great scholar of how new ideas are communicated and spread. Mass media can introduce a new idea to people. But, Rogers showed, people follow the lead of other people they know and trust when they decide whether to take it up. Every change requires effort, and the decision to make that effort is a social process.

Innovation is social. It is people-centric. Innovation requires a change in behaviour, and that is why we need to activate our networks to get new ideas to spread.

In a workshop yesterday I was asked “how can I find out what people want? It seems like the only way to do that is to talk to them, and that’s so slow.”

It is slow. But that’s still the best way to do it. Talk to people, all the time. That’s how you’ll get new ideas, and it’s how you’ll get them to spread.

Even in our wired world, innovation travels on two legs.

Related articles
29 July 2013
90% of Everything is Crap, and What To Do About It
90% of Everything is Crap

That is how Sturgeon’s Law is often phrased. To see what it means, let’s back up a bit and start by finding the flaw in this argument: most innovation consultants are lousy, so innovation consulting is worthless.

We see arguments like this all the time, about innovation consultants, about regular consultants, about academics, and about bloggers, and those are just the categories that apply to me!

The flaw in the argument is that just because we can find examples – often plentiful examples – of garbage in a field, this does not by extension make the entire field garbage.

I was reminded of this again this New Yorker review of Brainwashed: The Seductive Appeal of Mindless Neuroscience by Sally Satel and Scott Lilienfeld, which suggests that the argument they make in the book could be read as having this construction. I haven’t read the book yet, so I can’t say if does or not.

In his new book Intuition Pumps, and Other Tools for Thinking, Daniel Dennett recounts the full quote from Theodore Sturgeon outlining what has become known as Sturgeon’s Law:

When people talk about the mystery novel, they mention The Maltese Falcon and The Big Sleep. When they talk about the western, they say there’s The Way West and Shane. But when they talk about science fiction, they call it “Buck Rogers stuff,” and they say “ninety percent of science fiction is crud.” Well, they’re right. Ninety percent of science fiction is crud. But then ninety percent of everything is crud, and it’s the ten percent that isn’t crud that is important, and the ten percent of science fiction that isn’t crud is as good or better than anything being written anywhere.

Dennett follows this by saying:

A good moral to draw from this observation is that when you want to criticize a field, a genre, a discipline, an art form,… don’t waste your time and ours hooting at the crap! Go after the good stuff, or leave it alone. This advice is often ignored by idealogues intent on destroying the reputation of analytic philosophy, evolutionary psychology, sociology, cultural anthropology, macroeconomics, plastic surgery, improvisational theater, television sitcoms, philosophical theology, massage therapy, you name it. Let’s stipulate at the outset that there is a great deal of deplorable, stupid, second-rate stuff out there, of all sorts. Now, in order not to waste your time and try our patiences, make sure you concentrate on the best stuff you can find, the flagship examples extolled by the leaders in the field, the prize-winning entries, not the dregs.

Innovation Lessons From Sturgeon’s Law

I’ve been guilty of discounting entire fields based on the poor examples. Dennett is right – it’s bad practice. Here are some lessons that we can learn from this:
- Don’t trust sweeping statements, like “big firms can’t innovate.” Of course big organisations can innovate. Most of them don’t. Maybe even 90% of them are lousy at innovation. Actually, most small organisations are pretty bad at innovation too. And yet, we still have plenty of innovation going on. Arguments that make sweeping generalisations about an entire class of organisation are never right – when someone makes an argument like that, ignore them.
- Use the positive deviance approach to figure out what does work. Here is is:
  
  Positive Deviance is based on the observation that in every community there are certain individuals or groups whose uncommon behaviors and strategies enable them to find better solutions to problems than their peers, while having access to the same resources and facing similar or worse challenges.
  
  The Positive Deviance approach is an asset-based, problem-solving, and community-driven approach that enables the community to discover these successful behaviors and strategies and develop a plan of action to promote their adoption by all concerned.
- In a complex system, classification is really important. The economy is a complex system, and in complex systems there are no one-size-fits-all solutions. So you need to classify things. This means that things that look like either/or issues actually have both/and solutions. This also means that outliers are important. We tend to ignore outliers because they are, well, so outside the norm. But that’s just the point. In a system where the majority of examples are bad ones, we have to study the outliers to figure out what works.
If we take Dennett’s argument seriously, if you are trying to make the case that big firms can’t innovate, then you have to explain how Google, Li & Fung, IBM, Apple etc. aren’t innovative. If you can prove that, then you’ve made your case. If not, your argument is bad.

Here’s why I keep coming back to Sturgeon’s Law: managing is hard, and when people make simplistic, false statements about how it works, it makes it even harder. Short, declarative, pithy statements make great blog post titles, and they’re very retweetable. Complex arguments using classification and shades of grey do neither.

But our world of management is complex, needs classification and is grey, not black or white. We need to build our skills in dealing with this.

Related articles
- Daniel Dennett’s seven tools for thinking
- Wacky Laws Named After People
24 June 2013
Look for Innovation From the Edge
On one of my trips to Silicon Valley last year, Matt Perez invited me to go along with him to a one-day conference on The Future of Money. Throughout the day people made presentations looking at innovations they were working on that would redefine money in years to come.

The ideas ranged from the trivial, like the bank that had “the world’s first social credit card” – it was social because you can like it on Facebook – to the insanely ambitious, like the guys that are “going to replace the world’s banking system with tweets!”

I was disappointed that through the entire day, there was only one presentation looking at where the future of mobile money is going to come from – Africa.

That picture is from Jan Chipchase’s great presentation called Designing Services for Financial Inclusion, which you can download here.

Chipchase just put out a book called Hidden in Plain Sight, which recounts what he’s learned after many years of studying how people use technology around the world. Much of his work has taken place in developing countries, and there are definitely technologies that are world-leading coming from those places. Mobile money is one of them. Here is what he says in the book:

However, when it comes to cutting-edge technologies that haven’t yet been implemented in the community or country you’re interested in, it helps to go elsewhere, to the early-adopter places. They aren’t always the most tech-savvy cultures, just the ones that took a particular step first. For next-generation display technologies, Seoul is the place to look. For mobile money services, Kenya provides the dominant model. Tokyo, as discussed at the top of this chapter, is good for looking at highly integrated services across ticketing, noncash payments, and location-based services. “Cutting-edge” can mean many different things when it comes to mobile phone use, and San Francisco, Tokyo, Afghanistan, Ghana, Kenya, and India are all worth a visit to understand their mobile ecosystems.

…

Today, Kenya’s M-Pesa is considered one of the most successful mobile banking services in the world. And Uganda Telecom has since launched their formal mobile wallet offering, M-Sente. The informal practices around airtime transfers and converting airtime to currency played an important role in this growth: building literacy around mobile use; generating trust in the process of transferring abstract things (airtime, money); making it easier to identify areas for improvement; and ultimately priming expectations as to what could be.

He goes on to explain one of the main reasons that mobile banking is taking off in Africa – in countries with little formal banking, cash is dangerous to carry:

The gap between developed and developing countries in terms of access to financial services is striking: about 49 percent of households around the world have deposit accounts, but that ranges from close to 100 percent in Japan to less than 1 percent in the Democratic Republic of the Congo and Afghanistan. Access is growing, but the numbers don’t always add up to significant gains. For instance, from 2008 to 2009, the nation of Burundi (population 8 million) doubled the total number of ATMs across the country—from 2 to 4 (using an ATM as a signifier of more formal banking services). In contrast, Canada, with the highest concentration of ATMs per capita, had about one for every 458 adults. But regardless of nationality, people are driven by the same basic motives when it comes to their money. The difference is that, in a place like Canada, if you ask someone why he puts his money into bank accounts, he might say, “Because that’s where it goes,” whereas if you ask a Burundian with no bank account why he sews his money into the lining of his coat, his response is paradoxically more likely to tell you about the essence of banking: he wants his money to be safe, until the very moment that he needs it.

That’s a much more compelling reason to store your money in a phone than we’re used to hearing.

I love that there are people in Silicon Valley trying to replace banks with tweets. It might sound nuts, but so did being able to make a video call to anyone in the world with an internet connection for free. When you’re in a place with lots of people with ambitious ideas, every once in a while one of them hits. If we look at the scale of ambitions from “like the social credit card on Facebook” to “replace banks with tweets,” it’s great to have more people working at the ambitious end.

However, it’s also possible to get too caught up in the world you know. That’s why I love Chipchase’s work – he’s out on the edge. As John Hagel and John Seely Brown have told us, the edge is where innovation takes place:

Edges are powerful sources of business innovation because they are places of potential and friction, where traditional products and practices are no longer adequate to address unmet needs or unexploited potential. Much tinkering and experimentation occurs on the edge, as well as heated debate about the most promising options to address emerging needs, intensified by the diverse backgrounds, skill sets, and perspectives of participants gathering on the edge. By playing a part in this experimentation, companies participate in rich flows of new knowledge, flows that are the primary sources of innovation.

There are a few things that you can do to find the edge. First, test your assumptions. It’s an assumption that being on a social network makes your credit card “social” – an assumption that I think is false.

Second, as Nilofer tells us, travel, read and meet people. She talks about these as ways to fuel personal growth, which is true. But these are also ways to find the edge – they take you place you haven’t gone, and give you new ideas. If you never get out of Silicon Valley, you can’t find the cutting edge of mobile money in Kenya. If you’re reading widely, you can at least learn about it.

Finally, deliberately break your routine. To innovate you have to make your own map, not follow a recipe.

The future of mobile money is happening right now in Africa. Where is the future of your industry happening?

Note: If you want more from Chipchase, check out his book – it’s definitely worth the read. And you can also watch his TED talk from a few years back:

Related articles
3 June 2013