Tim Kastelle

Category: book riffs

  • Two Great Innovation Misquotes

    There are two popular quotes that often get used when discussing innovation that were never actually said or written by the people to whom they are attributed. Despite the fact that they are fake quotes, there are still things that we can learn from them.

    The first common quote is attributed to Henry Ford:

    If I had asked people what they wanted, they would have said faster horses.

    This quote usually comes up when people are discussing focus groups, or design-driven innovation. However, there’s no evidence that Ford ever said or wrote it.

    Even though it’s not a real quote, it raises some interesting points. You can interpret it as meaning “you should ignore customers,” or some people even seem to think it means “customers are stupid.”

    But that’s not really what it’s saying at all. People do have limited vision if you ask them open-ended questions. And as innovators, our job is to invent the future. Nevertheless, there is useful information in the faster horses idea.

    If people really had told Ford that they wanted faster horses, what would that mean? If you frame it in a jobs-to-be-done way, it means that the main job that they’re trying to do is to get somewhere fast. That actually is a pretty good argument in favour of automobiles.

    In his HBR post on this topic, Patrick Vlaskovits sums up the issue well:

    An innovator should have understanding of one’s customers and their problems via empirical, observational, anecdotal methods or even intuition. They should also feel free to ignore customers’ inputs. Because by now it should be clear that Ford’s adherence to his vision of the mass-market car and how to materialize that vision was instrumental in both his early success in growing Ford Motor Company as well as his later failure to respond in a timely and effective manner to rapid innovation in the marketplace.

    The real lesson learned was not that that Ford’s failure was one of not listening to his customers, but of his refusal to continuously test his vision against reality, which led to the Ford Motor Company’s failure of continuous innovation, resulting in a catastrophic loss of market share from which it never recovered.

    So the quote is useful, even if Ford never said it.

    The second quote is a bit more problematic – this one is frequently attributed to Charles Darwin:

    It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

    As with the Ford quote, Darwin never actually said or wrote this (he never wrote “survival of the fittest” either – that was Herbert Spencer building on Darwin). This one is a bit more problematic too, because it is actually a major misinterpretation of Darwin.

    Consider the Large Ground Finch, one of the species from the Galapagos Islands described by Darwin:

    Darwin's Large Ground Finch

    In a remarkable research project that has spanned nearly 40 years now, Peter and Rosemary Grant have studied the evolution of Darwin’s Finches in the Galapagos (the work was beautifully described in The Beak of the Finch: A Story of Evolution in Our Time by Jonathan Weiner – a terrific book).

    Here is their key finding. When times are good, there is wide variation in the beaks of the finches. However, the Galapagos are subject to the El Niño/La Niña weather cycles, which means that they have frequent droughts. In times of drought, the finch populations dive. In the case of the Large Ground Finch, the individuals that survive these events have the biggest beaks. Why? Because the bigger beaks enable them to crack larger seeds, which would be ignored as too hard to crack when there are plenty of seeds around.

    In other words, it is precisely the strongest of the species that survives.

    And sometimes it’s the fastest, or the smallest, or the one that can cope with warmer temperatures the best – it depends entirely on the changes they encounter.

    The fake Darwin quote is completely wrong with regard to which individuals survive. But it might tell us something about which species survive. The reason that Large Ground Finches have been around for as long as they have is that there is enough variation in the species that whenever conditions are extreme, some individuals in the population will be able to adapt to the change.

    If we apply this to innovation, you might think of it this way: products are like individuals and organisations are like species. To do well, products need to be the best at getting some job done for some group of customers.

    However, for an organization to do well over time, it needs to be adaptable. This means that unless its environment is unusually stable, it needs to generate variety. Even though economic evolution is directed by the choices that people make, we still don’t have much control over which ideas work and which don’t. Or over which take off, and which never really click.

    To maintain variety, to improve responsiveness to change, we must experiment.

    Why have these two quotes become so widespread? It’s not the internet – both incorrect attributions were made in books. Both quotes are catchy and short, and they capture ideas that seem like they reflect what Ford and Darwin thought. Even though the Darwin quote is not very Darwinian, it reflects a very common misinterpretation.

    The catchiness is one thing, but also, we like to argue from authority. If we don’t want to run focus groups, it’s easier to get Henry Ford to make the argument than it is for us to do it ourselves.

    I wanted to think through these quotes for a couple of reasons. One is that they do offer some useful lessons. The second is that we need to figure out how to make compelling arguments ourselves. This is the key to getting our own ideas to spread – not by arguing from authority.

    (The superb Large Ground Finch photo is from flickr/Steven Bedard under a Creative Commons License)

  • Innovation Mistake: Thinking Tools Will Fix Your Problem

    I had lunch a while back with two executives from an organisation that the Business School does a fair bit work with. They wanted to improve innovation and that’s what triggered our meeting.

    We talked for a couple of hours about what was happening in their organisation. We talked about innovation as a process, the different forms of innovation, incremental versus radical – all the big topics. It seemed like we were making some progress towards figuring out how we might be able to work together.

    Then at the very end of the lunch, the one that’s actually in charge of innovation there leaned over and said “Look, just tell me what piece of software to get and I’ll get it.”

    I was dumbfounded, because it had seemed as though we were on the same wavelength. However, theirs is a common innovation mistake: thinking tools will fix your problem.

    They won’t.

    Tools are great, but to fix an organisational problem, you need to figure out how tools interact with people and processes. If you don’t address all three, you won’t fix your problem (see for example, this, this, this and this).

    Tools

    This is where The Plugged-In Manager: Get in Tune with Your People, Technology, and Organization to Thriveby Terri Griffith comes in.

    Griffith is an expert on organisational design, and her book is very useful. She talks about how to integrate people, processes, and technologies. Her definition of a plugged-in manager is one that is able to perform this integration successfully.

    The guys that I was talking with were connected, but not plugged in.

    Here is how Griffith describes plugged-in managing:

    … organizational success more likely occurs when all three critical dimensions – technology, organization, and human capabilities and dimensions – are taken into account concurrently. There are no silver bullets. Even excellent management actions, if restricted to a single dimension, can never have the same success as when all three dimensions are managed together. Fredrick Brooks, summarizing the issues in a classic 1986 article, notes “There is no single development, in either technology or in management technique, that by itself promises even one order of magnitude improvement in productivity, in reliability, in simplicity.

    And here is John Hagel in the forward to the book:

    In a world increasingly entranced with technology, this is a powerful antidote to the claims of technology evangelists who attribute miraculous powers to their favorite new technologies. The truth that Terri’s book drives home is that technology in isolation is useless and perhaps even dangerous. Only by integrating technology effectively into a specific social and business context can we release its latent power.

    If Hagel likes the book, you probably don’t need my recommendation on top of it. Nevertheless, I will say that it is well worth reading, particularly the second half, which is filled with outstanding case studies of how to make this work. There is also a quiz to test how plugged-in you are, which you can also take online.

    This interaction between technology, people and process is a big part of what I am trying to get at with the innovation matrix. Technologies usually come into the innovation process as part of an increasing commitment to innovation. This is why I was having lunch with those guys, and that is why they wanted to know which technology to use.

    However, the skill at actually executing ideas comes from people and process. In order to improve innovation, you have to both increase your commitment to it, which often includes adding tools, but you also have to improve your processes and the skills of your people. You have to move up both dimensions of the innovation matrix.

    Tools don’t solve innovation problems, people do. You can use the principles of plugged-in management to integrate tools, people and process more effectively. Doing this will help you avoid a common innovation mistake.

    Disclaimer: I know and like Terri, and I received a free copy of the book. I also bought my own copy. I’m writing about the book because of its quality, not because of who wrote it or how I got it.

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

  • Three Mistakes We Make With Models

    Imagine that you live in Australia and you would like to eat a good, genuine bagel. After fairly extensive research, I have discovered that there are two places that you can go. One is called Bagel Nook, and it’s here in Brisbane. Not many people know about it, and one of the reasons is that it’s really hard to find.

    Here it is on a map:

    Here’s why it’s hard: it’s address is Creek Street, but you can’t actually reach it from Creek Street. To get to Bagel Nook, you have to go down that tiny little laneway that comes off of Adelaide Street. It’s a classic example of the map not being the territory.

    The other place in Australia with good bagels is Glicks in Melbourne. It’s also on a tiny hard-to-find street, so to get there you need an equally detailed map.

    Now, imagine making an Australian Bagel Road Trip and travel from Bagel Nook to Glicks. If you start with the map with Bagel Nook, and stick with maps of that scale, you’ll need roughly 8,335 pages to cover the trip that you’ll take.

    That’s no good. Instead, for most of the trip, this map is what you need:

    Maps are models, and we use models all the time to help us understand the world. We use models of roads to help us get around. We use models in science to help us understand physics, the way that economies work, and many other things. John Kay makes a good point about how we use models:

    All science uses unrealistic simplifying assumptions. Physicists describe motion on frictionless plains, gravity in a world without air resistance. Not because anyone believes that the world is frictionless and airless, but because it is too difficult to study everything at once. A simplifying model eliminates confounding factors and focuses on a particular issue of interest. To put such models to practical use, you must be willing to bring back the excluded factors. You will probably find that this modification will be important for some problems, and not others – air resistance makes a big difference to a falling feather but not to a falling cannonball.

    Our use of mental models is so ubiquitous that we’re often not aware of using them at all. However, we can use the Australian Bagel Road Trip and the quote from Kay to look at three common mistakes that we make with models:

    1. Using the wrong scale: just as we need a map at the right scale to get from Bagel Nook to Glicks, our business mental models also need to be at the right scale.

      In her excellent book The Plugged-In ManagerTerri Griffith talks about the thought process that a manager goes through in making the decision to start using the cloud for some of their computing functions. She talks about how to make this decision, you have to think about how the technology, your people, and the organisation’s processes interact.

      But it’s also important to have a good model of how cloud computing works. And this means having a model at the right scale. For most managers, you don’t need a hugely detailed model that includes servers, packet-switching and communication protocols. That’s the wrong scale – too small. But you do probably need to have a model that includes issues like back-ups, security and mobile access.

      If you use a model that is the wrong scale, it will be very hard to make good decisions. That’s the first mistake to avoid.

    2. The map isn’t the territory: even if you have the map for Bagel Nook, it’s hard to find it. You need to be on the ground to figure out to go into that little laneway.

      Mistaking the map for the territory is a huge problem in business. Roger Martin addresses this in his book Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL. Martin talks about the difference between the real market and the expectations market. In the real market, firms make and sell real goods and services, and their performance depends on how effectively they do this. The expectations market is the stock market – and here, a stock is a model of how the firm is expected to do.

      Steve Denning talks about the implications of mistaking the expectations market (map) for the real market (territory):

      “Maximizing shareholder value” turned out to be the disease of which it purported to be the cure. Between 1960 and 1980, CEO compensation per dollar of net income earned for the 365 biggest publicly traded American companies fell by 33 percent. CEOs earned more for their shareholders for steadily less and less relative compensation. By contrast, in the decade from 1980 to 1990 , CEO compensation per dollar of net earnings produced doubled. From 1990 to 2000 it quadrupled.

      Meanwhile real performance was declining. From 1933 to 1976, real compound annual return on the S&P 500 was 7.5 percent. Since 1976, Martin writes, the total real return on the S&P 500 was 6.5 percent (compound annual). The situation is even starker if we look at the rate of return on assets, or the rate of return on invested capital, which according to a comprehensive study by Deloitte’s Center For The Edge are today only one quarter of what they were in 1965.

      In other words, mistaking the model for reality has destroyed shareholder value, the opposite of what was intended. We always have to be aware of the models we’re using, and ensure that we’re managing the reality, not the model.

    3. Using the wrong map: a lot of people contend that a significant cause of many of the recent stock market crashes has been the use of incorrect models. That’s the fundamental issue that Nassim Nicholas Taleb keeps trying to get people to acknowledge. His contention is that the market models in use have vastly underestimated the probability of large price fluctuations. Consequently, when these fluctuations do occur, things blow up.

      The post by John Kay addresses the problems with this, as does this one by Mark Buchanan, and they’re both worth reading. The key point though is simple: if you use a model that isn’t accurate, you can’t make good decisions.

    Models are an important part of how we make sense of the world. However, we often make mistakes in our use of models. To avoid these mistakes, try to make sure that the model you use is at the right scale for the decision you’re making, try to manage the real market, not the model built on top of reality, and try to make your models as accurate as possible.

    And if you know of any other good bagel places here in Australia, please let me know!

  • Innovation Betterness

    Why does your firm exist?

    To maximize shareholder value? No – that’s the dumbest idea in the world.

    To reduce transaction costs? No – that’s another economic model that doesn’t have much grounding in reality.

    In fact, if you ask this of most firms, they don’t have a very good answer. There have been a few compelling contributions to this discussion recently. In the post linked to above, Steven Denning suggests that delighting customers is a much better goal than maximizing shareholder value.

    And in his new book Betterness: Economics for Humans,Umair Haque says that firms should exist to make us and the world a better place. That might sound a bit utopian, but think about the opposite of that idea – do you really want to spend your life working for an organisation that makes the world worse?

    Betterness

    Here is the problem that Haque is trying to address:

    Big Question: what does it mean to live meaningfully well? If you accept the less-than-heretical proposition that our way of life, work, and play, while materially rich, might be leaving us emotionally, relationally, socially, physically, and spiritually if not empty, than perhaps just a little bit unhealthy; that it might be optimized for more, bigger, faster, cheaper, nastier over wiser, fitter, smarter, closer, tougher — how would we redesign economies, markets, and organizations to help us live better?

    He suggests that we start by redefining what we are trying to achieve with our organisations.

    Looking up at Mount Ossa and Cathedral Mountain

    To do this, Haque says that “Going from business to betterness means going from vision, mission, strategy, and objectives to ambition, intention, constraints, and imperatives. To give you an idea of what this means, I’ve been using the book to think about what I’m trying to accomplish in my work. So I’ll walk you through what I’ve been thinking, which I hope will give you some ideas about how you and your organisation might change as well.

    Ambition

    Ambition replaces vision – and it answers the question “why are we here?” More specifically, ambition is meant to outline the kinds of returns you will provide, and to whom you will provide them. It’s based on delivering genuine value to people.

    My Ambition: I will help make work better through encouraging innovation that matters – innovation that makes customers’ lives better, and which encourages strong, sustainable and interesting organisations.

    Intention

    Intention looks at how you will make the people you interact with better. How will you achieve your ambition? Which day-to-day activities will drive this forward?

    My Intention: My work will help build innovation skills and strong networks to make firms more fun, resilient, adaptable, and sustainable. I’ll do by doing research that contributes to developing a genuine understanding of how organisations create value; and by communicating the results of this work in a way that will have an actual impact on the way people work – through teaching, through books and articles, through this blog, through speaking and through working directly with organisations.

    Constraints

    This is the trickiest one to get my head around. Constraints are the things that must not be done. Instead of trying to carve out a competitive advantage through executing a strategy, the betterness approach looks to build value by enabling customers. Constraints are about avoiding things that do damage.

    My constraints: I will not: encourage innovation just for the sake of novelty; try to elevate my ideas by taking shots at others; get caught up in publishing for the sake of publishing instead of communicating to effect change.

    Imperatives

    Imperatives are simply the things that must be done daily.

    My imperatives: I will: make evidence-based recommendations; share knowledge daily; have a positive impact on the people with whom I work.

    Innovation Betterness

    If you take these ideas seriously, you end up with what Haque calls behavioural innovation. In summarizing the research behind the book, he describes the organizations that were more successful:

    Those who were able to create wealth were a new kind of innovator: behavioral innovators. Innovation is often conceptualized at the level of products and services, business models, or competencies. Behavioral innovators pushed the boundaries at a higher level. They made novel, different, innovative sets of decisions compared to current rivals and historical peers. These decisions weren’t one-offs, but consistent, repeated, and predictable: novel habits about products and services offered, investments seeded, people employed and goals sought, more sharply focused on elevating human potential.

    This gets at another question that Steve Denning asked recently: Why Are There No Successful Innovation Initiatives?

    In part, it’s because change is hard. As Gregg Fraley says in a comment on yesterday’s post – if innovation were easy, everyone would be doing it.

    But it goes deeper than that: to have a successful innovation initiative, it’s not enough to just talk about the importance of innovating. It’s not enough to get some tools. To innovate successfully, you actually have to change how you do business.

    This is one of the key points that Jeffrey Phillips makes in Relentless Innovation. He says that to embed innovation, you have to make it part of Business As Usual. That’s why we keep talking about the importance of linking innovation to strategy.

    But if you do that, you are changing your whole business model. If you are genuinely committed to making a change, you end up changing your value proposition. Once you do that, everything else has to change as well.

    I think that Haque’s Betterness principles can help with this. If you are going to become genuinely committed to innovation, you might as well start with your value proposition. If you work through defining clearly your ambition, intention, constraints and imperatives, you will have to embed innovation into your new Business As Usual scheme.

    It took me longer than usual to write this post. I’m a bit nervous about stating my intentions as clearly as I have, and this is still a work in progress. But I hope that you will tell me if my ambitions are failing you, since the people here are a big part of who I am trying to have an impact on. If you have any feedback on how I’m doing, or suggestions on how to do it better, please let me know.

    Here’s one last thought from Umair:

    A life well lived is a consequence of human choice: the decision to pursue the significant over the trivial, the enduring over the evanescent, and the meaningful over the useless. So here’s my challenge – live one.

  • Four Ways You Can Be More Innovative

    Innovation is the process of idea management. This means that to innovate effectively you need to have great ideas, select the best ones and execute them, and then get those executed ideas to spread.

    All three steps are interdependent, and you need to be good at all three to innovate effectively. Today I’m interested in things you can do to get better at getting your ideas to spread. The improvement points cover all three steps of the innovation process, and I picture it like this:

    To get better at getting your great ideas to spread, you can do three things:

    1. Have better ideas,
    2. Get better at making your ideas real, or
    3. Find better networks into which you send them.

    Have Better Ideas

    The first two ways you can be more innovative are:

    • 1. Move to a more densely populated, better educated city.
    • 2. Make your city more densely populated & better educated.

    What do these two things do? They give you access to a more diverse range of ideas, which in turn make your own ideas better. Two books have addressed this recently. Harvard academic Edward Glaeser has written Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier,and The Economist Editor Ryan Avent has an excellent little eBook called The Gated City. A lot of the foundational research covered in both books has been done by Glaeser, and he writes very well, but I prefer Avent’s book by a small margin.

    Both authors make the point that cities with higher population density are more productive, primarily because this increased density leads to an increase in innovation. Here is what Avent says:

    Innovation is rarely an individual act. Complex problems often take time and multiple perspectives to solve. The atmosphere of communicative competition within big cities is incredibly good at facilitating this process. Talented workers in similar fields wrestle with problems, try to top each other, learn from each others’ mistakes, hire each other, fire each other and inadvertently create competitors, and generally advance the state of knowledge within an industry.
    …
    Density boosts productivity, economists find, though estimates of the effect differ. Antonio Ciccone and Robert Hall find that doubling county-level employment density raises productivity 6%. They note that over half of the variation in output per worker across US states can be explained by density. That’s remarkable. Employment density – not skill level, not the composition of industry, not tax policy – explains most of the difference in productivity across states. Timothy Harris and Yannis Ioannides also find that doubling density raises productivity by 6%.
    …
    Jaison Abel, Ishita Dey, and Todd Gabe find, by contrast, that doubling the density raises productivity by just 2% to 4%. They add a caveat, however: the impact of density on productivity varies with the stock of human capital – essentially how skilled a city is. Cities with low worker skill levels experience virtually no productivity improvement from increased density. The productivity gains in skilled cities, on the other hand, are twice the average.

    So you can improve your personal innovation performance by moving to a bigger city, and tapping into the diverse networks there. Just make sure it’s a well-educated city (these are more fun to live in anyway!).

    If this seems like too much trouble, then you should at least work to encourage immigration into your current city. Get culturally diverse, well-educated migrants moving to your city.

    Get Better at Making Your Ideas Real

    For many people, the fun parts of creative work are having the exciting ideas in the first place, and seeing those ideas come to fruition at the end of the process. The part in between isn’t as much fun. As Dorothy Parker said: “I hate writing. I like having written.”

    There are a whole string of books written that basically try to spur people to action – to execute their ideas. They read like self-help books, but a lot of times, innovative people do in fact need to help themselves to get their ideas out the door. Seth Godin has published a series of these books as part of his Domino Project, including: his own Poke the Box,Do the Workby Steve Pressfield, and most recently The Flinchby Julien Smith.

    Which you prefer will depend on whose style of writing you respond to most strongly. My favourite of the three is The Flinch. In it, Smith describes The Flinch as the response that we have to danger – we put our hands up in front of ourselves for protection, and flinch. He contends that while this response was evolutionary useful in the days when anything surprising was in fact likely to cause us harm, these days we flinch at things that don’t threaten us at all. The Flinch is the response that prevents us from executing ideas. If they are just ideas that no one else ever hears, then they won’t be rejected, and we won’t be hurt.

    But they also won’t be loved, and we won’t accomplish the things that we hope to.

    To be more innovative, we have to conquer The Flinch. Smith’s recommendation is to train ourselves to do things that are difficult:

    Consider this: in your corridor, every flinch is a door you can open with a new scar and lesson behind it, the same way a kid learns by touching the burner. It’s an experiment—an attempt at something new. Not all experiments hurt, but all of them are valuable—and if you don’t open doors, you’ll never get the scars or learn the lessons. Open doors mean expanded options. The flinch will block you, but once the door is open, the threat vanishes. A new path appears.
    …
    But there’s a secret here, too: getting lost is not fatal. Almost every time, it will make your world bigger. You can look at the edges of your map, the places you were unsure about. Old explorers even had a phrase for it: “Here be dragons.”
    …
    The ability to withstand the flinch comes with the knowledge that the future will be better than the past. You believe that you can come through challenges and be just as good as you were before them. The more positive you are, the easier it is for you to believe this. You move forward and accept tough situations, so no matter the breakup, the job loss, or the injury, you believe you’ll recover and end up fine. If you believe this, you’re right.

    The book currently costs $0 (that’s right – $0!), so there’s not much excuse for not checking it out. You should get this book, read it, and try out the ideas in it- they can help you be more innovative.

    Here is an interview with Smith by Chris Brogan that explains more about the book (it contains swearing):

    Find a Better Network

    Ideas diffuse through networks. One way that you can be better at innovating is to find a network that is more receptive to your ideas. As Seth Godin says in his TED talk, you’re much better off sending your ideas to people that really care about them, and if you’re lucky, they’ll tell their friends.

    Recent research has shown how ideas spread through networks – and that a small minority of committed people within a group can get everyone within the group to buy the idea:

    “When the number of committed opinion holders is below 10 percent, there is no visible progress in the spread of ideas. It would literally take the amount of time comparable to the age of the universe for this size group to reach the majority,” said SCNARC Director Boleslaw Szymanski, the Claire and Roland Schmitt Distinguished Professor at Rensselaer. “Once that number grows above 10 percent, the idea spreads like flame.”
    As an example, the ongoing events in Tunisia and Egypt appear to exhibit a similar process, according to Szymanski. “In those countries, dictators who were in power for decades were suddenly overthrown in just a few weeks.”

    10% can be a small number of you are in the right group. On the other hand, if you’re trying to sell everyone in China on your idea, 10% is a pretty massive number. So you need to give some thought to the network that you’re pitching your idea to.

    To identify the right network, you need to have a very clear idea of what your value proposition is, and who will gain the most benefit from what you have to offer. People resist new ideas, so you have to find a way to give them ideas that really matter.

    The key point is that you have to choose. Don’t try to appeal to everyone, because winning over 10% of everyone is really hard. Create specific value for a specific group, and you can get to that 10% more easily.

    There are other ways that you can get better at getting your ideas to spread. But these are all good places to start.

  • When is it OK to Ignore Innovation?

    The earth has been around for 4.5 billion years or so. If you think of the last 10% of that time, a fair bit has happened. There have periods of major global warming, and a few ice ages. There have been asteroid strikes, and other natural disasters too numerous to count. Continents that were one continuous land mass 450 million years ago are now separated by oceans. And there have been five major extinction events.

    Through all of that change, disruption and chaos, what has been the most stable environment on earth? The deep ocean. There’s no light down there, so it doesn’t matter if an asteroid strike kicks so much stuff into the air that all of the coral reefs and dinosaurs die out. It’s always cold, so climate change up on the surface doesn’t have much of an impact either. The deep ocean has stayed pretty much the same all the way through.

    And that’s where the Coelacanth lives.

    I’ve been fascinated with Coelacanths since I first read about them in On Methuselah’s Trail: Living Fossils and the Great Extinctionsby Peter Douglas Ward.

    The first fish in this family show up in the fossil record about 400 million years ago. Their fossils are pretty consistently around for a long time, until they disappeared about 65 million years ago around the Cretaceous extinction, the one that killed off the dinosaurs.

    Because there was no record of them for 65 million years, scientists thought that they were extinct. And then a museum curator found one in the catch of a fishing boat off the coast of South Africa in 1938. In a curious aside, it turns out that the fishermen had known about the Coelacanths for a long time, but whenever they caught one they threw it back because they’re apparently very poor eating. It was only once they realised that museums were willing to pay them for specimens that they started to keep them.

    There are two species of Coelacanth around now, and structurally they haven’t changed much at all since the first specimens from 400 million years ago.

    In other words, they haven’t innovated one bit in 400 million years.

    Why? Because they live in the deep ocean, the most stable environment in the world over that period of time.

    So the answer to the question When is it OK to Ignore Innovation? is: when you’re in a stable environment.

    Just as the Coelacanth shows that you don’t necessarily have to evolve to survive, in the economy you don’t necessarily have to innovate to survive. If, and it’s a big if, your environment is stable. It doesn’t need to be as stable as the deep ocean, but if you have good market share in an established industry, with little macroeconomic fluctuation, and you’re happy with your overall performance, then go ahead and ignore innovation.

    The rest of us probably need to be thinking about how to execute some great new ideas, and also how to get those ideas to spread.

    In his book The Evolutionary World: How Adaptation Explains Everything from Seashells to Civilization, Geerat Vermeij discusses how previous global warming periods have led to explosions in evolution:

    The evolutionary dividends of a warmer world are attainable only if three conditions are met. First, populations must have ready access to a plentiful supply of necessary resources, so that when an imperfect innovation arises, it can linger in the population long enough to be improved by selection. If the population is allowed to grow under a permissive regime of of predictable plenty, not every deviant individual is purged from the population, and selection has enough to work with. Second, competition for locally scarce resources – the main agency of enemy-related selection – must be intense enough and consistent enough to allow improvements to spread in the population. Third, there must be sufficient evolutionary time – thousands to millions of years – to allow selection to do its work.

    You can translate these rules of evolutionary innovation over to economic innovation:

    • You need slack resources to innovate. This is why efficiency and innovation often come into conflict. As Greg Satell says, most innovation is crappy. Vermeij points out that imperfect evolutionary innovations need sufficient resources to keep them around long enough to be improved by selection. It’s exactly the same for economic innovations. They rarely work as planned at the start – they need feedback from customers, suppliers and others to really become good. That takes time and resources.
    • Innovation works best when there’s competition. Even though there are extra resources around, there still needs to be competition to drive improvement. If the environment is too stable, like the Coelacanth’s, the lack of competition leads to no innovation.
    • You need time to turn your crappy innovation into something excellent. Innovative ideas diffuse along an S-Curve, and it usually takes a lot longer for this to happen than we expect it to. Fortunately, economic innovations don’t need hundreds of thousands of years for this to happen, but the gap between having the great idea and seeing it adopted is still usually very long.

    Innovation is an evolutionary process, and you can learn interesting things about this process by studying natural history. And the story of the Coelacanth shows us that there even times when you don’t have to innovate at all.

  • Four Ideas Triggered by Haruki Murakami

    Haruki Murakami is one of my favourite authors, and in reading a couple of his books recently, I ran across several quotes made me think about innovation. In large part, this is because nearly everything I encounter makes me think about innovation one or another. Nevertheless, here are four thoughts triggered by Murakami.

    The first two quotes come from his most recent novel 1Q84. In the first, two characters discuss a section from a book by Chekhov that one had read out loud to the other:

    Thanks for reading the book to me. I felt close to the Gilyaks. Why do the Gilyaks walk through the forest swamps and not on the wide roads[?]
    Even if the roads are convenient, it’s easier for the Gilyaks to keep away from the roads and walk through the forest. To walk on the roads, they would have to completely remake the way they walk. If they remade the way they walk, they would have to remake other things. … I don’t like to walk on the wide roads either.

    In the Chekhov passage, this was framed as a diffusion of innovation problem: there were brand new roads that had been built for the people, but the Gilyaks refused to use them. Why? This illustrates an important point – when you change one thing, you have to change others.

    It’s frustrating when people don’t adopt our great new ideas. Often, they resist not because of the idea itself, but because of the other things they would have to change to accommodate the new idea.

    In the second quote, one person who is in hiding discusses how she could be found out:

    “I don’t get it. Would an analysis like that really turn up where I am now?”
    “I don’t know,” Tamaru said. “It might, and it might not. It depends. I’m just saying that’s what I would do. Because I can’t think of anything else. Every person has his set routines, when it comes to thinking and acting, and where there’s a routine, there’s a weak point.”
    “It sounds like a scientific investigation.”
    “People need routines. It’s like a theme in music. But it also restricts your thoughts and actions and limits your freedom. It structures your priorities and in some cases distorts your logic…”

    This relates to a point I raised yesterday about the tradeoffs between efficiency and innovation. Routines help us become more efficient – the are an essential part of creating regular outcomes that can be measured and improved.

    At the same time, these routines limit the scope of the ideas that we think about, which makes it harder to innovate. If you’re trying to innovate, think about the routines you use at work and personally, to try to identify how they might also be limiting your freedom.

    1Q84 is an excellent book, but if you haven’t read any Murakami before, it’s probably not the best place to start.

    I also recently finished What I Talk About When I Talk About Running. This is a non-fiction book in which Murakami discusses how his life as a runner is deeply interconnected with his life as a writer. Here is one passage that struck me in it:

    In other words, you can’t please everybody.
    Even when I ran my bar I followed the same policy. A lot of customers came to the bar. If one out of ten enjoyed the place and said he’d come again, that was enough. If one out of ten was a repeat customer, then the business would survive. To put it the other way, it didn’t matter if nine out of ten didn’t like my bar. This realization lifted a weight off my shoulders. Still, I had to make sure that the one person who did like my place really liked it. In order to make sure he did, I had to make my philosophy and stance clear-cut, and patiently maintain that stance no matter what. This is what I learned through running a business.

    John always talks about how strategy is making choices. In addition to saying what you will do, you also have to be clear about what you won’t do – what you’ll say no to.

    In his new book Betterness: Economics for Humans, Umair Haque discusses Constraints as one of the key components of developing a strategy that matters. Constraints are simply those things you will not do.

    The math may be different in your industry – it might take more or less than one repeat customer in ten to succeed. However, the fact that you need to make this one insanely happy is a constant. And you can’t do that if you’re trying to please everyone.

    Finally, here’s a short quote from Norwegian Wood:

    If you only read the books that everyone else is reading, you can only think what everyone else is thinking.

    I’ve talke about this before – finding your own set of information resources is a crucial part of innovating.

    Of course, the real value comes from finding novel connections between the information that you’re processing – connecting ideas is the fundamental creative act in innovation.

  • Innovation is Impossible

    James Altucher recently suggested that “Eat All You Want of the Foods You Love and Still Lose Weight” would be a great book title – that no matter what was inside, it would sell. It’s easy to see why. Many of us like to eat all we want of the foods we love, and we also want to lose weight, so if we could do both at the same time, wouldn’t that be great?

    Well, maybe.

    In his new book Relentless Innovation: What Works, What Doesn’t–And What That Means For Your Business, Jeffrey Phillips points out a similar innovation paradox:

    Everyone understands from the beginning how difficult it is to create compelling new ideas in any sutation, much less to convert those ideas into viable products and services. To compound the difficulty, executives are asking for disruptive ideas while expecting the business to continue to operate at full effectiveness and efficiency. Middle managers receive these messages and understand the unspoken dichotomy in the request: create radical, valuable new products and services but don’t upset the status quo.

    Phillips nails the problem – many firms want an innovation program create radical, valuable new products and services but don’t upset the status quo.

    If that’s what you want, innovation is impossible.

    Relentless Innovation is a very good book. One of the key points that Phillips makes is that one of the major obstacles to innovation is the emphasis that many firms have on efficiency. You can innovate to become more efficient, and many firms do this well. However, to be successful over time, you also need to develop new products and services, and you can’t do this just through efficiency.

    Here is a big part of the reason for that. Efficiency is all about reducing variation. When you’re a manufacturer, and you’re using statistical process control to improve the quality of your products, then this is great.

    However, innovation that creates new products and services, requires increased variation. You have to try things that you’ve never done before, experiment, fail, learn, and get feedback from customers. This is the diametric opposite of increasing efficiency. Here is how Phillips puts it:

    You must shift your thinking to recognize that experimentation and prototyping is as much about discovery and new insights as it is about validation of internal perspectives and theories. Your firm must make it far easier to test ideas, gain new insights, and “fail forward.”

    In addition to increasing your experiment rate, Relentless Innovation includes a number of other practical steps you can take if you find yourself in a situation where innovation is impossible (you can check out Jeffrey’s blog too for more – Innovate on Purpose).

    To innovate well, you have to become comfortable with disturbing the status quo. Deborah Mills-Scofield addresses this very well in a recent post – listing status quo objections to innovation and good response to each.

    You also have to be able to maintain a focus on efficiency while also generating great new ideas. Efficiency reduces variation, but great new ideas increase variation. This is another of the ten tensions in innovation that must be balanced. In each of these situations, you need to think “both-and”, rather than taking an “Either-or” approach.

    If you want to innovate without changing anything, then innovation is impossible. To get around this problem, you need to align innovation with your strategy, and build a capability for innovating consistently within your organisation. It’s not easy, but it is possible. Relentless Innovation gives us some good ideas about how to do this, and that makes it worth a read.

    Note: If you want a more conventional review of the book (I’m lousy at reviewing), check out this one by Jorge Barba.

    Disclaimer: I know and like Jeffrey, and I received a free pdf of the book. I also bought my own copy. I’m writing about the book because of its quality, not because of who wrote it or how I got it.

  • Innovation Through Subtraction

    I don’t like focus groups. I’ve found the information that you get from them to be too shallow to be useful. However, this doesn’t mean that when we’re innovating we should just pursue whatever ideas drift across our minds.

    Steve Jobs was quoted last year about how Apple doesn’t use focus groups. A number of people used this quote to justify being completely out of touch with their customers, which is a perversion of the main point. The reason that Apple can skip focus groups is that they are incredibly good at understanding what people are really trying to accomplish with technology.

    To do this, you have to develop a deep understanding of what the core issues in your field are. Here’s an analogy:

    There is a chapter by the scientist/artist Jonathan Kingdon in the excellent new book Field Notes on Science & Nature, edited by Michael Canfield. There’s a fascinating section where Kingdon talks about drawing versus photography:

    In the age of instant digital photography it may seem perversely old-fashioned to put a value on the slow, primitive, and inaccurate techniques of manual drawing. Photography teaches us that the very act of putting a line around the edge of an observed object is an artifice. Such outlines rarely appear in photographs, or, for that matter, in nature, and yet… and yet? Contemporary research on the human brain shows that it does NOT process images as a neutral camera does. The brain finds edges and builds constructions that are at least partly based on previous experience 0 possibly including past contacts with artifacts such as “drawings” as well as previous knowledge of natural objects. Visual neurobiology is a discipline in its infancy, but it confirms that visual constructions are both complex and integral to cognitive development. This implies that even an outline sketch that bears little relationship to the so-called objectivity of a photograph might actually transmit information to another human being more selectively, sometimes even more usefully, than a photograph.
    …
    If the brain is unlike a camera in actively seeking outlines, there is a strong implication that “outline drawings” (just to take a single type of visual expression) can represent, in themselves, artifacts that may correspond more closely with what the brain seeks than the charts of light-fall that photographs represent.

    What does this mean in practice? It means that these drawings of a caracal by Kindgon may well transmit information to us that is more useful, more real, than what we could get from a series of photographs:

    Those drawings do a great job of capturing something fundamental about the animal, as simple things often do. But to be able to draw them, you have to invest an enormous amount of time in observing the caracals, looking at what they do, in which contexts, to build up a deep knowledge of how their physical form expresses what they are trying to do.

    You can’t ask a caracal (or even a house cat) what they are trying to express when they pin their ears back. But if you watch them long enough, the meaning becomes clear.

    Now, customers can answer questions more clearly than a caracal. Usually, at least… But sometimes, this greater ease of communication actually makes it harder to understand what they’re really trying to achieve.

    It’s not an accident that the Apple products look like art. The essence of great design is to be able to communicate simply by stripping down an object or a process to it’s fundamentals – which is the same problem with which artists grapple. This is filtering, and it’s how we deal with the avalanche of information which sometimes overwhelms us.

    To innovate well, we need the same kind of deep understanding of our customers that artists have of their subjects. This allows us to strip our offerings down to their essence – innovation through subtraction.

    (For more examples of some of the beautiful art in Field Notes on Science & Nature, check out this page from Wired.)

  • Innovation Obstacle: Gumption Traps

    Imagine that you have a great idea for how to make things work better at your job – it shouldn’t take too much effort, I’m sure you have plenty. Now think about an idea like that you had, but never acted upon – what happened? You probably thought of all the obstacles to executing the idea. People won’t go for it, they hate change, my boss won’t let me try it out, the organisation is too risk-averse, I didn’t get any recognition or support for the last idea I had, and so on. So you decided that the situation wasn’t really that bad, you could live without improving it if you really had to.

    You just fell into a gumption trap.

    Gumption Traps

    Joe McCarthy talks about Gumption Traps in a series of typically excellent posts. The idea comes from Robert Pirsig’s Zen and the Art of Motorcycle Maintenance: An Inquiry into Values. Here is what Pirsig says about gumption and Gumption Traps:

    I like the word “gumption” because it’s so homely and so forlorn and so out of style it looks as if it needs a friend and isn’t likely to reject anyone who comes along. I like it also because it describes exactly what happens to someone who connects with Quality. He gets filled with gumption.

    A person filled with gumption doesn’t sit around dissipating and stewing about things. He’s at the front of the train of his own awareness, watching to see what’s up the track and meeting it when it comes. That’s gumption.

    …

    Throughout the process of fixing the machine things always come up, low-quality things, from a dusted knuckle to an accidentally ruined “irreplaceable” assembly. These drain off gumption, destroy enthusiasm and leave you so discouraged you want to forget the whole business. I call these things “gumption traps.”

    There are hundreds of different kinds of gumption traps, maybe thousands, maybe millions. I have no way of knowing how many I don’t know. I know it seems as though I’ve stumbled into every kind of gumption trap imaginable. What keeps me from thinking I’ve hit them all is that with every job I discover more. Motorcycle maintenance gets frustrating. Angering. Infuriating. That’s what makes it interesting.

    I highly recommend reading all of McCarthy’s post on this, but here is part of what he says about Gumption Traps:

    Pirsig uses motorcycle maintenance as a metaphor for life, and explores a variety of gumption traps – externally induced out-of-sequence reassembly, intermittent failure and parts problems as well as internally induced traps arising from value rigidity, ego, anxiety, boredom and impatience – and ways of addressing and overcoming them.

    In innovation, we have both internal and external Gumption Traps.

    How to Avoid Gumption Traps

    There are a few things that we can do to avoid Gumption Traps. The first is that we have to be doing something that we believe in. This provides powerful motivation to act on our ideas. As is often the case, Hugh MacLeod captures this idea perfectly:

    There are also some very useful steps to follow in Nine Things Successful People Do Differently by Heidi Grant Halvorson. This idea started as a blog post, but it’s now an excellent short e-Book – the book includes the scientific research that supports her ideas, along with practical steps to enact each of the nine things.

    The nine things are not really surprising, but they are powerful. The one that most directly addresses the Gumption Trap is number 6: Have Grit:

    Grit is a willingness to commit to long-term goals, and to persist in the face of difficulty. Studies show that gritty people obtain more education in their lifetime, and earn higher college GPAs. Grit predicts which cadets will stick out their first grueling year at West Point. In fact, grit even predicts which round contestants will make it to at the Scripps National Spelling Bee.

    The good news is, if you aren’t particularly gritty now, there is something you can do about it. People who lack grit more often than not believe that they just don’t have the innate abilities successful people have. If that describes your own thinking …. well, there’s no way to put this nicely: you are wrong. As I mentioned earlier, effort, planning, persistence, and good strategies are what it really takes to succeed. Embracing this knowledge will not only help you see yourself and your goals more accurately, but also do wonders for your grit.

    Grit and Gumption are pretty much the same thing. Grit is an important part of innovation. Grit helps us learn from experiments that fail, instead of despairing. Grit helps us push our ideas even if the boss doesn’t directly support them.

    Grit helps us change the world, if that’s what we’re trying to do. And we should be.

    The next time you face a Gumption Trap, if you’re not finding a way around it, think of Halvorson’s nine ideas. They can help you change the world.

  • Are You Creating or Replacing?

    Are you creating something new or replacing something that’s already there? If you’re replacing, you need to do much different things than if you’re creating something new.

    Every time you try to get your ideas to spread, you have to break connections. This is a lot harder if you’re trying to replace a deeply embedded idea.

    Here’s how I’m thinking about it:

    Replacement is like trying to knock out the red target in the middle of the diagram. The triangles might be suppliers, or complementary products, and the circles might be customers. The point is, the idea is really embedded.

    If you’re trying to replace something, you have to come up with an idea that is MUCH better than the one you’re trying to replace. Here is how Stowe Boyd put it today talking about the new Microsoft Phone:

    The iPhone was easily an order-of-magnitude better that the shit phones we all tolerated when it launched. Microsoft had years to come up with something awesome, and it’s ok. Which means death, today.

    Replacement means being an order-of-magnitude better.

    More academically, here is Clayton Christensen saying something similar in The Innovator’s Cookbook, and pretty good edited volume put together by Steven Johnson:

    Even if innovators succeed in cramming disruptive technology into an existing market application, the incumbents typically win. Digital photography, online consumer banking, and hybrid-electric vehicles are examples of potentially disruptive technologies that were deployed in such a sustaining fashion. Billions were spent on these innovation to beat out already acceptable and habitual technology; little net growth resulted, as sales of the new products cannibalized sales of the old; and the industry leaders maintained their rule.

    In short, replacement is very difficult. You have to stand out from the crowd, which is awfully hard, and it requires a quantum leap in functionality.

    If you’re creating, you face a different set of problems. When you create something new, you don’t have any connections at all – you have to create them from nothing. This is tough.

    However, the payoff to creating something new can be a lot higher than replacing. And there are some ideas that make this easier.

    • Not all crazy ideas are great, but most great ideas are crazy: Fred Wilson says:

      When people ask me, “how do you know which companies and services are going to be the biggest successes?”, I usually tell them to look for the companies and services that are mocked and misunderstood. For some reason, that correlates highly with the biggest breakout successes.

    • New ideas start out crappy: Greg Satell has a great interpretation of Christensen’s research, and he summarizes it by saying that disruptive innovations come through changing the basis of competition. To do this, you have to smart small, often with a new customer base, and with ideas that aren’t yet fully formed. This is completely different from how you approach replacement ideas.
    • For new ideas, you can use things like the lean start-up methodology: this includes the concept of the minimum viable product. The basic idea here is that you get a working version of your idea out as quickly as possible, so that you can learn what works and what doesn’t. This requires clear thinking about metrics, and a good business model, which you test all the way through.

    Think about the difference between coming up with something that is an order-of-magnitude better than what’s currently out there, versus putting out a minimum viable product and experimenting. They are completely different. They require different skills, different mindsets, and different methods for experimenting and testing your assumptions.

    That is why you have to be clear about whether you’re creating or replacing.

  • Thirty Great Free eBooks for Innovators

    Two years ago, I wanted to give everyone that reads my blog a present. Here is how I put it:

    Whenever I make a new friend, one of the first things I usually do is buy them a book. I’m not exactly sure why – probably because I really value ideas & books, and I want to share them with people that I like. So for all my digital friends here, I thought that since it’s the holidays, I would give you links to a great set of books that are all downloadable for free.

    The result was the post Ten Great Free e-Books for Innovators. Then last year I wrote a follow-up called Ten More Great Free e-Books for Innovators.

    Since it’s the holiday season again, and since I still give books as gifts to everyone, I figure that it’s time for more free e-books. The 20 on the first two lists are still mostly available. I’m adding another 12 now – 10 plus 2 bonus books just in case some of the old links don’t work. This list is the best one yet!

    Have fun and enjoy the holidays! Thanks for all the time and support that you’ve given to me, John and the blog over the past 12 months.

    Please note: while these are free copies of the books, they are nearly all also buy-able if you want a physical copy and/or you wish to support the authors.

    One must-read book:

    The Flinch by Julien Smith: in order to innovate, we have to execute our ideas. The excuses for not doing this are legion, and they are just that – excuses. Julien’s book with Chris Brogan, Trust Agents, was outstanding. This one is better. It’s easy to dismiss as self-help, but it includes a bunch of practical ideas for executing your own ideas. Essential. Get the kindle version for free here (and if you don’t have a kindle reader, download kindle for PC, Mac, iPhone, Android or iPad).

    Three Innovation Books:

    Exploiting Chaos by Jeremy Gutsche: Gutsche created the TrendHunter website, which is a useful resource for finding out what’s out on the edge these days. The book consists of a ton of short, snappy pieces, organised around several important innovation themes: why we must experiment to innovate, the benefits of an obsession with customers, and why we need to break our current business models to succeed over the long-term. It’s a bit short on how-to, but it contains a lot of great provocation.

    Little Innovation Book by James Gardner: Gardner writes a great blog on innovation, and this book is an excellent step-by-step guide to managing innovation as a process.

    Making Open Innovation Work by Stefan Lindegaard: Stefan writes one of my favourite innovation blogs, and this book is full of great, practical advice. He’s one of the leading experts on open innovation, and I’m not sure that anyone knows more about how to actually make it work. If you want a physical version, you can order it from amazon here.

    From Open Innovation to Open Source, and Back:

    Content by Cory Doctorow: Doctorow is mainly known for writing great fiction, but he also co-founded Boing Boing, and this collection of essays on the nature of content is outstanding. He is a great example of how to use “free” as a method for actually turning a profit. He’s tried numerous experiments in this regard, which is the essence of innovation. Question: why is it mainly authors that are doing these experiments, when it is publishers that are under threat? I wish I knew the answer…

    Peers, Pirates and Persuasion by John Logie: an interesting discussion of the some of the legal and IP issues raised by sharing. This is a bit different from Doctorow’s work, which discusses free more as a strategy. It’s an interesting frame through which to view these issues.

    The Daemon, the Gnu and the Penguin by Peter Salus: Salus provides an interesting history of how “free” has worked in open source software. Open source and open innovation are often confused – they are related but different. This book explains how people have harnessed massive amounts of volunteers to create some great software.

    Innovation Happens Elsewhere by Ron Goldman and Richard Gabriel: this book takes us full circle – it discusses why to use open source as a method of development, how to do it, and how to build an open business model.

    How-tos and Bonus Books:

    Raising Angel and Venture Capital Finance by Tom McCaskill: McCaskill has written a bunch of books designed to help entrepreneurs and start-ups. If you need to finance your great idea, this book provides a very practical guide, and it’s a great place to start.

    Why Projects Fail by Uladzislau Schauchenka: if you’re in a big organisation rather than a start-up, innovation often has a significant project-management component. This book outlines how projects go wrong, including case studies, and it also has a number of suggestions for managing projects more effectively.

    Engagement from Scratch! by Danny Iny: because I needed at least one book with an exclamation point in the title. Written with a number of contributors (including Alex Osterwalder of Business Model Canvas fame), this book provides useful guidance for building a successful community. This is becoming increasingly important in getting your innovative ideas to spread.

    Insubordinate by Seth Godin: like Doctorow, Godin has a long history of giving away some of his ideas, and like The Flinch, this book is concerned with how to actually get motivated to execute your great ideas. It is the companion piece to his excellent book Linchpin – and it contains a bunch of case studies of people that have successfully managed to innovate in situations where innovation is difficult.

    So there you go. Books are great, and they can give you a lot of ideas. But remember, ideas themselves aren’t worth anything. You have to execute them to create value. That’s innovation.

    Happy holidays!