Tag: innovation

  • Reading This Post Will Change Your Brain!

    Reading This Post Will Change Your Brain!

    Reading this post will change your brain

    I’m not sure if the change will be good or bad, but reading this will change your brain. I’m sure you’ve heard the arguments about the internet – google is making us stupid, and even more alarming – using the internet changes your brain!  That must be bad, right? Well, not necessarily.  The problem with this argument is that everything you do changes your brain.

    Using google changes your brain, eating a donut changes your brain, and yes, reading this post changes your brain. The correct question to ask isn’t “does doing X change my brain?”  but rather “what activities do the changes enable?” Nicholas Carr wrote the original article Is Google Making Us Stupid, and he understands this distinction.  His argument is that the rewiring in our brains caused by internet usage makes it harder for us to concentrate for extended periods, and that we are losing the ability to focus and follow complex arguments. Ironically, his argument is sophisticated enough that a lot of people seem to misconstrue it.

    My actual personal brain!
    My actual personal brain!

    Interactions change us

    So yes, using the internet does change our brain.  It makes it easier for us to do some things, and harder to do others. Personally, I’m not convinced by the evidence people have suggesting that internet use decreases our powers of concentration.  And as for google, well, we’ve been outsourcing complexity to various tools for centuries – I’m not sure how this is all that different.

    It was Plato that argued that writing things down was causing a horrible deterioration in our ability to remember things.

    That might be true, but it also means that the part of our brains that devoted to remembering stuff could now work on other activities – and some of those have turned out to be pretty useful.

    Who do you want your customer to become?

    The idea that interactions change us is the central issue driving Who Do You Want Your Customer to Become? by Michael Schrage.  Seth Godin outlines the implications of this question in his new book The Icarus Deception:

    Everyone you interact with is changed forever. The only questions are: How will they be different? and How different will they be? Author Michael Schrage wants you to ask, “Who do you want your customers to become?” At first this seems like a ridiculous question. Your customers are your customers. Your coworkers are your coworkers. This isn’t true.

    Connection creates change. Unless you are selling a standard commodity, the interactions you have with the market change the market. Zappos turned its customers into people who demand a higher level of service to be satisfied. Amazon turned its customers into people who are restless with online stores that don’t work quite as well or quite as quickly. Henry Ford turned his customers from walkers into drivers.

    When you disappoint someone (or exceed their expectations), that interaction is going to color all the interactions that person has tomorrow and next year. Apple is talked about more than any other company for one simple reason: They have huge aspirations for who they want their customers to become, and they deliver on them.

    … Answering Schrage’s question honestly gives you a chance to describe the change you want to see in the world. Not at the Henry Ford industrial-scale level, of course. No, but even if you connect with six people, you are changing them.

    Changing them how? Whom do you want them to become? I’d like you to become an artist. To make connections that matter. That’s my mission.

    By writing, Godin wants his readers to become artists.  And Schrage himself wants to change how we innovate:

    Significantly, they should become managers and leaders who are justifiably more confident that they are asking the right questions when they look to innovate and create new value in new ways. They should have the courage to take smarter risks and the ability to learn faster because they know they’re committed to treating their customers with empathy and respect. Most importantly, they should become more successful. Why? Because successful innovators know how to ask the right questions and create the most value for themselves and their customers. The Ask of this book is that you become an innovator who gets the best possible return on the innovation investments you make in your customers.

    Who will we become?

    I think that both Schrage and Godin miss an important point though.  Yes, when we send our ideas out into the world, they change the people with whom they interact.

    But sending these ideas out, and seeing how they interact with people changes us as well.

    Asking who you want your customers to become is a great way to clarify your value proposition.  Changing your answer can help you innovate your business model. I think it’s a transformative question, and Schrage’s book is definitely worth reading.

    But we need to pair this with another question – who do we want to be?  If we make our customers stupider, it makes us shallower.  If we make our customers more transactional, we’ll often end up greedier.

    Here’s the change that I’d like to see from our interactions over ideas: that together we figure out how to make work work better.

    For too many people, work is lousy.  Most organisations are mediocre, at best (maybe even 90% of them!)  We need to innovate how we manage, how we deal with our people, and how we deal with customers.

    If my writing this and your reading this helps us take even a small step in that direction, I’d be very happy.

    Reading this post will change your brain. Now let’s change our behaviour.

     

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  • Why Either/Or Thinking is Dangerous

    Why Either/Or Thinking is Dangerous

    Here’s a quick quiz – see how you do:

    1. Do people love change or hate change?
    2. Are big companies more innovative or are small ones?
    3. Is innovation good or bad?
    4. Is growth good or bad?
    5. Is Google making us stupid or smart?

    All five questions have the same answer: both.

    How did you do?

    I was struck by the response to my post Actually, People Love Change.  I had a surprisingly large number of people say “No they don’t!”  That kind of missed the point of the post.

    The point that I was trying to make is this: there are some changes that people actively seek out.  They view these changes as good.  Yet we know that in many cases, people strongly resist change.  They view these changes as bad.

    So you can’t categorically say that change is good, or that change is bad – it’s both.  The challenge is that you have to figure out type of change you’re dealing with in each particular case.  You have to categorize the change.

    Classification is an incredibly important tool when you’re dealing with complexity.

    It’s complexity that led Theodore Sturgeon to develop Sturgeon’s Law:

    90% of everything is crap.

    Of course, some philosophers have found a more elegant way to show this:

    TAO1

    Here is how Sturgeon phrased it:

    I repeat Sturgeon’s Revelation, which was wrung out of me after twenty years of wearying defense of science fiction against attacks of people who used the worst examples of the field for ammunition, and whose conclusion was that ninety percent of SF is crud.

    Using the same standards that categorize 90% of science fiction as trash, crud, or crap, it can be argued that 90% of film, literature, consumer goods, etc. are crap. In other words, the claim (or fact) that 90% of science fiction is crap is ultimately uninformative, because science fiction conforms to the same trends of quality as all other artforms.

    His short form of this reflects the thinking behind the Tao as well:

    Nothing is always absolutely so.

    Everything that’s black contains some white.  Everything that’s good contains some bad.  Change can be mostly bad, but sometimes good.  Or vice versa.

    Either/Or thinking is very dangerous in a complex system – precisely because nothing is always absolutely so.  And, for better or worse, we live in a whole set of complex systems.  We have to figure out how to move beyond Either/Or thinking.

    So how should we respond to this?

    Here are some ideas that can help:

    1. Classification: how do biologists learn about how the world works?  The first step is always classification.  They can’t say anything if they can’t accurately tell what type of things are interacting with each other.  That’s what The Innovation Matrix is – a classification tool.
    2. Study the part with the outcomes you want: we know that most large firms struggle with innovation, while some have become very good at it.  What makes them different? Figuring that out is a classification challenge.  One way to attack this is with The Positive Deviance approach:

      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.

      Or, alternately:

    3. Pay attention to outliers:  In complex systems, outliers matter – a lot.  That’s why thinking about averages is so dangerous.  If we take Sturgeon’s Law seriously, the average science fiction is bad.  But as he says, that’s uninformative.  The critical question is “how good is the best Sci-Fi?”  It turns out that the best is pretty good – the outliers are a lot more important than the average.

    Absolute statements get more attention.  That’s why I named that post “Actually, People Love Change” instead of “Sometimes Change isn’t so Bad” or something equally wishy-washy.  But the truth of the matter is that reality isn’t absolute.  Neither black nor white.  Neither either nor or.

    It’s “both.”

    Developing some skills to deal with “both” is pretty essential these days.

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  • Innovation Matrix 4.0 – Now With More @Nilofer

    Innovation Matrix 4.0 – Now With More @Nilofer

    If you google “innovation,” you get more than 417 million results. If you narrow it down to “Innovation Management” you knock that number down to 3,160,000 results.

    On amazon, you get 228,716 hits for “Innovation.”  54,485 of those are in Books.  You can cut the number down to 1,330 in the Patio, Lawns & Garden category, but that probably doesn’t do you much good.

    If you’re trying to make your organisation more innovative, how can you navigate all of the available resources?

    That’s one of the problems that I’ve been trying to solve with The Innovation Matrix.  It’s changed a lot since the last time you’ve seen it.  I’ve been using my Artefact Cards to help figure out how things work.

    IMG_0495

    First up, the big news: I’m collaborating on this now with Nilofer Merchant! She and I are developing the ideas together, and as we start to roll them out in earnest, you’ll see some big differences.  She explains what we’re up to here:

    It is an idea that when developed could help any organization figure out where they are, and the moves to take based on where they want to be.

    We’ll be sharing as we go. Which means anyone — quite possibly you — will have ideas on what to include or cover or you will start to challenge our thinking and in doing so, shape ours. You will ultimately be the sharers of those ideas, if you deem them worthy.

    For now, I’d just like to outline the rationale behind this tool.

    Innovation is important because it drives growth.  It may seem like a buzzword, but if you want to grow, you’ll need to innovate.  That’s why you need to find a way through all those results on google and amazon.

    Innovation is executing new ideas to create value.  You need to do all three to innovate successfully – the ideas must be new, you have to actually execute, and they have to create value.  Often, when innovation initiatives fail it is because innovation is managed as an event (I got a new idea!) rather than as a process.

    When organisations try to become more innovative, their first step is usually to increase their innovation effort.  They put “Innovation” into their company values, or buy idea management software, or spend some money on R&D.  Their hope is that by doing these things, they’ll get better innovation outcomes – that they will improve at executing new ideas to create value.

    In a perfect world, as you increase your innovation efforts, your outcomes will improve proportionally – just like on the card on the bottom right up there.

    IMG_0491

     

    Unfortunately, that’s not the way it works.  If you map firms based on their innovation efforts and outcomes, the outcomes don’t follow a nice, straight line.  They scatter all over the place.

    IMG_0492

     

    The problem for most of these attempts to improve innovation is that effort does not equal outcome – and this is a problem.

    IMG_0493

     

    If we think about how organisations innovate, you can divide them in three categories based on effort, and three more based on outcomes.

    Organisations in the left column aren’t trying to innovate much at all.  They are content with their current business model, and they are happy to keep working it as hard as they come.  Growth comes mainly through acquisitions, and if they do innovate, it is usually done to improve efficiency – to cut costs.

    This might sound bad, but there are loads of successful, profitable companies in this region.  Most of the traditional strategy tools that organisations use are designed to get you into this category – where you have a sustainable competitive advantage and you can build a protective moat around it to keep others out.

    The organisations in the middle column realise that innovation is important, and they are committed to doing it.  Most of the time, these organisations have a core value that they use to differentiate themselves, and all of their innovation is done to support this core value.

    On the other hand, innovation itself is the core value, and the main source of differentiation for the organisations in the column on the right.

    We can sort organisations in the same way in rows.  Those on the bottom aren’t getting any positive innovation outcomes.  They might not be generating any ideas at all, or they might be generating plenty of ideas, but those ideas aren’t creating value, and they aren’t spreading.

    Organisations in the middle are pretty good at executing new ideas to create value.  They do it regularly.  However, nearly all of their innovations are incremental – this is how we can tell them apart from organisations in the top row.

    The ones on top are the ones that are great at innovating.  They come up with both incremental innovations, and bigger ones – new product categories, or new business models.  They probably innovate everything – products, services, processes, and business models.

    If we put these six categories together, we can identify nine types of innovative organisations:

    IMG_0494

     

    This has some important outcomes:

    • It helps you identify where you are right now, and where you want to go. This journey is a big part of developing a strategy, and it can help you figure out where innovation should sit in your business model.
    • You can discover which tools to use.  The big problem with many of the 54,000 innovation books is that they try to provide one-size-fits-all solutions.  The problem is that in a complex world, using a one-size-fits-all tool can do more harm than good.  The Innovation Matrix will help you figure out which ones are right for you in your current situation.
    • No one stays in the same box for long.  When you start mapping organisations using this tool, you quickly realise that nothing stays the same.  Organisations follow trajectories through the various regions.  The dynamics of innovation are very important.

    Traditional strategy is dead – so what should you do?  Innovate.

    We’re working on new names for the nine categories (to answer the most common question I get when I say that – yes, Unicorns are still there), tools, operating rules and investment strategies that you can use in each region, and examples of how organisations have changed through time.

    We’re going deep on this, and we’ll let you know what we learn.

    If you have any questions, or problems that you need help with, please tell us.  If we connect up to discuss these, it’s likely to help make this a more useful tool for everyone.

     

     

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  • A Seven Step Program for Innovating RIGHT NOW!

    A Seven Step Program for Innovating RIGHT NOW!

    You can’t wait for permission to innovate – you’ll never get it.

    You need to start changing things on your own – right now.

    Here are three things I ran across this week that make this point.  First up, a great quote from artist Ron English – in the introduction to the special issue of Juxtapoz that he edited on the topic of politics and art:

    Every time I do a lecture there is the inevitable question from a guy who is miffed that I don’t do anything to address the issue of our military’s use of uranium tipped war heads in Iraq, Monsanto’s ware on independent farmers, the Mayan apocalypse, or some other issue that they are deeply passionate about, and my usual reply is, “Why don’t YOU do something?” This is usually followed by “Well, I’m not an artist” or “I don’t have access to the media.” Got photoshop? Know where a Kinko’s is located? Know where a wall is? The thing is, nobody in this issue was born with a megaphone in their hand, and they didn’t wait for an invitation or an art degree to express themselves. I know a lot of people reading this are already out on the streets doing art and I just want to let you know your art can serve a higher purpose than advertising your own career. Art has been successfully used by liberators and dictators alike. It is a powerful tool that is in your possession.

    It is a powerful tool that is in your possession.

    Here’s an example from this issue – a remarkable piece from Molly Crabapple:

    Innovation is a pretty powerful tool as well, and it is also in your possession.

    Hugh MacLeod says that business needs more art, and he’s right – that’s one way to access the tool of innovation.  The second thing that crossed my path was this cartoon from Hugh’s daily newsletter:

    It’s a tool that’s in your possession.

    And then there’s this from Nilofer Merchant:

    Not everyone will, but anyone can.

    Innovation is a powerful tool, and it’s in your possession – so what do you do?

    Here’s my prescription:

    1. Think about how much you can get away with – if you manage a budget, how much discretion to you have? If you don’t have a budget, what are the parts of your job that you control?
    2. Make a list of 10 things that you can do within the current scope of your work that will make things better for the people with whom you interact – customers, co-workers, bosses, whoever.
    3. Do those things.
    4. Figure out which ones worked, and do those more.
    5. Figure out which ones didn’t work, learn why not, then forget about them.
    6. Apply what you learned to the next set of ideas.
    7. Do it all again.
    Focus on the ideas that went well – even if only one of them works, you just made your work a better place.

    The point with this is to just get started with innovation. Try things that are cheap experiments. Learn from failures, amplify successes. Try a lot of ideas at once so that you don’t get too attached to them – if you only have one idea, the stakes are much higher, even for a cheap and quick experiment.  And remember what English says about serving a higher purpose – that’s just as important for innovation as it is for art.

    That’s how you can start to get the future out of your head, and out into the world where it will do some good.

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  • Innovating by Going Backwards

    Innovating by Going Backwards

    Innovation always moves forward, right?

    Well, not necessarily.

    I’ve been working really hard recently on a new version of The Innovation Matrix (more on that soon!), and one of the tools that I’ve been using is Artefact Cards.  They’re a pretty cool method for capturing ideas, and I initially used them to help myself figure out the story.  Here’s what they look like:

    But after I worked out the latest version of the matrix, I realised that they were actually a pretty cool presentation tool.  When I’m testing the new version with people in a one-to-one setting, I just lay out the cards as I tell the story – it ends up looking a bit like this:

    For larger groups, I’ve done something weirder.  I’ve taken pictures of each individual cards, along with some groups of cards.  Then I’ve downloaded those to my laptop and turned them into a slide deck.  This is what I use for public talks.

    Every single time I’ve shown either the physical cards or the deck to people, I’ve gotten comments about them.  The overwhelming response is that they are very cool, and very innovative.  Not everyone is impressed by my artwork though – on one of the cards my friend Kate looked at it and said “Is that a bunny??”  Several people have asked if I’ve been making them on an iPad, or with some other drawing software.  When I show them the physical cards, they’re surprised.

    Think about that for a bit – drawing crude pictures with a sharpie onto paper, and showing them to people is innovative!

    There are a some interesting ideas that come from this:

    • Sometimes you can innovate by going back to older technology. In the 1970s, Canon and Ricoh nearly put Xerox out of business using photocopier technology that was 20 years old.  Innovation isn’t an endlessly forward march of progress.  We can innovate with business models, and with ideas – and these often support “old” or out-of-date technology.  Sometimes going backwards is the best way to make a jump.
    • There’s still space for craft. That’s why Dan Roam has been so successful with his Back of the Napkin work. Check out Sacha Chua’s awesome sketchnotes for another great example.  While scalable business models are attractive, I’m still strongly attracted to craft-based businesses.  We can innovate in both spaces – as long as we do awesome work.
    • Changing the tools you use to think can change your ideas.  Like Nilofer, I think by writing.  But by changing the tools I was using to think about the Innovation Matrix, I have actually come up with a string of new ideas.  Changing your tools can change your ideas.
    • Novelty attracts attention. I haven’t been surprised by the response to the cards when I use them in person.  But I have been surprised by how much people like the slide version.  In part, this is probably a “powerpoint, powerpoint, NOT-powerpoint” thing.  Novelty attracts attention.
    • Delivering value is what keeps attention.  The novelty helps me connect with people, but I still have to do awesome work to keep their attention.  If you’re not delivering value, then getting the attention in the first place is a waste of everyone’s time.

    The response to the method of delivery has been great, but the response to the content has been even better.  I’m not sure that it’s awesome work yet, but it’s moving in the right direction.  I’m looking forward to telling you about the fantastic collaboration that’s going on with the new version, and to showing you what it looks like.

    In the meantime, I’ve got to go redraw the thing that looks like a bunny…

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  • Innovation for Growth

    Innovation for Growth

    Why all this talk about innovation?  I get that question a lot.

    The reason that I think innovation is important is that it is the driver for growth.  Consequently, we’re changing the name of the blog to Innovation for Growth.

    Here are some of the reasons that I think it’s important to link innovation with growth:

    • It answers the “so what?” question. Innovation for the sake of innovation is pointless, and can be destructive.  For innovation to work, it has to be tied to purpose.  Innovation is about executing new ideas to create value – and if we are creating value, then we will be growing.  Not necessarily financially, but at least in terms of impact.
    • Innovation must be tied to your purpose and strategy.  Again, it’s not enough just to “be innovative.” You need to innovate to support your core purpose.
    • Growth happens at multiple levels.  When you get good at executing your ideas to create value, it helps you grow. It can lead to increased opportunities, and helps you generate even better ideas that create even more value.  This is true for people, and it’s also true for firms.  It’s even true for regions – innovation is the one thing that reliably distinguishes regions and countries that grow more quickly than others.Blue Tiger butterfly emerging
    • Innovation requires change – growth reminds us that change can be good. Resistance to change is often cited as a barrier to innovation, but there are some types of change that people welcome, or even seek out. Growth is an example of good change.
    • Everything grows.  Skills grow, firms grow, economies grow, impact grows, reach grows, your network grows – and innovation drives all of this growth.
    • Not all growth is good.  When cells grow out of control in a person, it’s cancer.  Not all growth is good.  This is why the link to purpose and strategy is so essential.  Growth just for the sake of growth is counterproductive.  It’s important to remember this.

    As Peter Drucker said:

    Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.

    Marketing and innovation produce results; all the rest are costs.

    Innovation for growth – I think this better reflects what we’re about. What do you think?

    (photo from flickr/jemasmith under a Creative Commons License)

     

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  • The Four Stages of Responding to Disruptive Innovation

    The Four Stages of Responding to Disruptive Innovation

    What can we learn from the experiences of the record and newspaper industries about effectively responding to disruptive innovation?

    That’s the question that I discussed with Andrew Byrne from The Cloakroom this afternoon.  As we talked, I realised that the steamroller scene from A Fish Called Wanda perfectly illustrates what normally happens.  Here is the scene – it contains a ton of spoilers and bad language – but the movie came out in 1988, so if you haven’t seen it yet I’m not sure what you’re waiting for:

    As Ken rolls towards Otto with the steamroller, you can see the four stages of responding to disruptive innovation.

    1. Ridicule: as Greg Satell says, innovation always looks crappy:

      However, the kind of innovation that changes paradigms is usually crappy. The stuff that doesn’t work all that well. The carpetbaggers who come into your industry utterly unprepared to service your existing clients. That’s where the danger often lies.

      Because it looks crappy – it’s not very threatening at first. So the powerful incumbent ridicules it – just like Otto ridicules Ken on the steamroller.

    2. Aggression:  once the threat is recognised, when there finally is a response, it’s usually aggressive.  When Otto realises that he might be in trouble, he starts shooting.
    3. Bargaining: when aggression doesn’t work, we bargain. How we can we coexist? How can we fit the disruptive ideas into our current business models?  Otto bargains like crazy.
    4. You get smashed like a bug: it ends when the steamroller runs you over

    We’ve seen this pattern again and again. How can you get crushed by a steamroller? Go through that response cycle.

    Clay Shirky points out today that the steamroller is heading towards higher education now. It’s a must read article – both for those interested in higher ed and for those interested in innovation.

    Here is one of the key quotes:

    Every college provides access to a huge collection of potential readings, and to a tiny collection of potential lectures. We ask students to read the best works we can find, whoever produced them and where, but we only ask them to listen to the best lecture a local employee can produce that morning. Sometimes you’re at a place where the best lecture your professor can give is the best in the world. But mostly not. And the only thing that kept this system from seeming strange was that we’ve never had a good way of publishing lectures.

    If you read the article, you can see the first two stages of response from established universities to massively open online courses (MOOCs) – ridicule and aggression.  Soon we’ll start to see bargaining – “how can we fit these in with our normal operations without having to change anything?

    There is plenty to learn from what’s been happening to news over the past few years.  What is the best response for higher ed? We need to break the ridicule-aggression-bargaining-smashed like a bug cycle.  There are a few ways to try to do this.

    In another very good post, Greg says that you need to ask this question:

    If someone came to you with a breakthrough innovation, how would they sell it?

    Answering this question will help you recognise the barriers to put up to innovation – it can help you identify blind spots.

    Another good question to ask is: if we were starting today, would we do this?

    If you were starting a new university today, would you build a big campus with lots of gigantic buildings? Who would you hire? Would you deliver lectures locally, even if they’re not among the best in the world?

    The new higher ed experiments have answers to these questions that are very different from those that we get from most existing universities.  That’s a danger sign.

    The best respons: start experimenting like crazy.  There are two good reasons to do this:

    1. No one knows what will end up working best.  When that is the case, you should be in there yourself, experimenting away, in case you run into a business model that will work.  After all, the existing universities do know a few things about educating.
    2. It builds absorptive capacity. Absorptive capacity is the ability you have to take in ideas from the outside.  It’s really hard to absorb ideas from outside your organisation if you arent’ generating and executing new ideas within it.  Building a culture of experimentation and execution will make it easier to adopt the new business model that works if someone else comes up with it.
    The danger signs come if you are going through the first three stages of responding to disruptive innovation: ridicule, aggression, and/or bargaining.  If you’re doing that instead of experimenting, we all know what comes next.
    Smash.

     

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  • How to Manage Innovation as a Process

    How to Manage Innovation as a Process

    It’s much better to think of innovation as a process than to think of it as an event.  I think about it as the process of idea management inside an organisation.

    This means that in order to innovate effectively, you not only have to generate great ideas, but you have to select the ones that you want to invest in, then execute them, figure out how to keep people inside the organisation committed as you go through the process, then get the new ideas to spread out in the world.  And if one part of that process goes wrong, then your innovation efforts will likely fail.

    That’s kind of scary.

    One of the tools that I use to help organisations assess where they are is the Innovation Value Chain – which helps assess how effective an organisation is at each step.

    When you start measuring, it turns out that organisations rarely suffer from not having enough good ideas.  I’ve had my MBA and Executive Education students assess their own organisations for a few years now.  They have analysed more than 200 organisations, which cover nearly every type that you can imagine: big multinationals, small 1 or 2 person firms, for profits, not-for-profits, government agencies, schools, churches, high tech firms, low tech firms.  Out of those 200+ organisations, fewer than 10 have idea problems.

    That’s less than 5%!  The other 95% are split pretty evenly between having problems with selection and development, or with sustaining and diffusing.

    Here’s a practical example.  I did two different Exec Ed classes for one firm this year.  The first one with a group of senior managers, and the second was with a group identified as future leaders of the firm.  Here are the results of their innovation value chain analyses for the firm:

    The scores are the average for each group, and low scores are better.  If there is a score of 5 in a category, then the firm is as good as they could possibly be, but if the score is 15, then they have major problems.

    I surveyed the senior leaders in March, and their scores on the right.  The steps are ranked from 1-5 in red, with 1 being their strongest area, and 5 being their weakest.  As you can see, idea generation is by far their strongest area.  They have problems with Selection and Implementation.

    I ran the survey with the young leaders a couple of months later.  I was a bit worried – what if their results were completely different?  Astonishingly, they listed the five steps in exactly the same order!  Idea generation best, Selection and Implementation the worst.  This makes me feel better about the validity of the tool.

    There’s one noticeable difference though – the rankings for the young leaders were worse across the board than those of the senior managers.  What do you make of that?

    After spending a week with each group, my conclusion is that the young leaders feel much less empowered.  The senior managers score things relatively well because they feel in control of the situation.  The younger group does not.  This kind of gap between senior managers and line workers is a sign of a broken innovation process.

    So what should they do?  Obviously, there are cultural issues to address.  But in terms of managing innovation as a process, there are a few options.  A couple of years ago, the Australian Public Service Management Advisory Committee put together a great report called Empowering Change: Fostering Innovation in the Australian Public Service.  This includes an appendix that has a quiz you can use to evaluate your innovation value chain, along with a set of actions you can use to improve each part of the process.

    Their summary table looks like this:

    So here is how to use this tool:

    1. Evaluate where you are right now. Use the quiz to identify your current strengths and weaknesses in the innovation process.
    2. Find  the weakest link.
    3. Choose some actions that are designed to improve your weakest area, and execute them. The MAC report includes brief descriptions of all of the tools.  The execution bit is obviously very important.
    4. Give it some time to see an effect.
    5. Remeasure.  If you’re doing it right, then your first weakest link should improve.  So after the remeasure, figure out where you’re weakest now, then:
    6. Iterate!
    For this to work you will need to have any extra cultural issues sorted.  However, if you do this, it is a systematic approach to improving your innovation process.
    Organisations that are score high on Innovation Competence in The Innovation Matrix usually do well at all five parts of the innovation process.  A well-managed process is one of the key measures of competence.
    I will put an online version of the quiz up sometime in the near future.  When I do, you can use it to test your own organisation’s innovation management process.  Or, if you’re anxious to get going sooner, you can download the public sector report and use the quiz in it.  In either case, I hope you find this tool to be useful!
    Just remember that innovation is still a people process – don’t depend on tools alone to save you.
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  • Why You Need to Be Vulnerable to Innovate

    Why You Need to Be Vulnerable to Innovate

    The Biggest Innovation Obstacle

    Fear of failing is one of the biggest innovation obstacles around.

    Within organisations, mistaking ideas for innovation is the most common innovation mistake that I come across. In part, this is due to fear of failing. If your idea is never executed, then it can’t fail, right?

    The problem is that if the idea is never executed, then it will never succeed either. As Wayne Gretzky said, “you miss 100% of the shots you never take.”

    I’m currently reading Brené Brown’s superb book Daring Greatly, and it’s giving me some great insight into this.

    Lessons From My Biggest Screwup

    Before that, though, let me tell you a story.

    I was a pretty good student in high school, and I was pretty excited when I was accepted by Princeton. Up until then, I defined myself by how well I did in school.

    So I felt a great deal of shame when I really struggled once I got there.

    There were plenty of reasons that I did (and everyone’s first guess, partying, was definitely not one of them!), but the main reason was that I was scared to try my hardest and fail.  Instead, I didn’t try much at all – I sabotaged myself.  It gave me the illusion of control, but it also made me deeply unhappy.

    To my amazement, it wasn’t as disastrous as I thought it would be.  I took a break to reset, and worked in a feedmill.  I saved enough money to pay for finishing up college myself, and when I went back to Princeton, I did pretty well, and graduated.

    I learned a few important lessons from all of this.  The first is that it is foolish to define ourselves by how we’re viewed by others.  In the end, trying to be “the good student” wasn’t a very good strategy.  Here is what Brown says about this in the book:

    What we all share in common—what I’ve spent the past several years talking to leaders, parents, and educators about—is the truth that forms the very core of this book: What we know matters, but who we are matters more. Being rather than knowing requires showing up and letting ourselves be seen. It requires us to dare greatly, to be vulnerable. The first step of that journey is understanding where we are, what we’re up against, and where we need to go.

    I wasn’t willing to be vulnerable – rather than try and maybe fail, I just didn’t try.

    The second lesson is that you don’t learn the important things in the classroom – you learn them by doing.  Instead of partying, the main thing that I did while avoiding my schoolwork was spend time at the campus radio station.  I was a DJ, and ended up holding bunch of different management positions there.

    DJing went most of the way towards getting me over the painful shyness that plagued me in high school. And I learned an unbelievable amount about managing (and about myself) while helping to run the station.  Meanwhile, my time at the mill kicked most of the remaining arrogance out of me, and taught me a lot about resilience as well.

    I’ve only learned the last lesson recently – and that is that everything that I have done and experienced has made me who I am – and I need to draw on all of it if I am going to achieve the things that I’m aiming for.  Here is how Nilofer Merchant put it in her post Why I’m Glad I Got Fired – one of the inspirations for this post:

    But just as my success led to failure, my failure led to success. Thinking more and more about these questions, I started a consulting practice that ultimately blossomed into a multi-million dollar business, with the idea that having a great strategy wasn’t enough to win. If we didn’t also address the organization’s ability to change, to behave differently, to believe in the new direction itself, then any good idea would simply fail. Strategy without an adaptive context to absorb the idea into its fiber would fail. Winning once wasn’t enough — organizations had to build the ability to co-create solutions and thereby win repeatedly.

    I had changed. I had changed from being an accomplished, smart, results-oriented person with the corner office to someone who was also a human being, wanting to belong and co-create something that endured. I accepted that part of me didn’t have all the answers, and that led me to ask more questions. Who I was after that firing was a fuller me.

    True in my case too.

    Why You Need to be Vulnerable to Innovate

    Watch Brené Brown’s talk from TEDxHouston – it’s well worth your time:

    Brown quotes Peter Sheahan in Daring Greatly, who says:

    If you want a culture of creativity and innovation, where sensible risks are embraced on both a market and individual level, start by developing the ability of managers to cultivate an openness to vulnerability in their teams. And this, paradoxically perhaps, requires first that they are vulnerable themselves. This notion that the leader needs to be “in charge” and to “know all the answers” is both dated and destructive. Its impact on others is the sense that they know less, and that they are less than. A recipe for risk aversion if ever I have heard it. Shame becomes fear. Fear leads to risk aversion. Risk aversion kills innovation.

    Vulnerability leads to innovation.  How many great ideas have been pre-emptively killed because we’re afraid that they might fail? A lot.  We can talk all we want about frameworks and tools, but if we don’t address this problem, none of these can help us.

    Brown takes her title from this speech by Theodore Roosevelt:

    It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.

    The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again,

    because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause;

    who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly . . .

    If you’re a manager, you need to do whatever you can to help put people into positions to dare greatly.

    If you have a great idea yourself, you have to tackle that fear of failure and take a shot.  That makes you vulnerable. But it also makes you alive. And who knows – it might work! It’s the only way to find out…

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  • Innovation Big & Small

    Innovation Big & Small

    Can big companies innovate?

    Of course they can. Even though that question has been getting asked a lot recently, it’s not really a very interesting one.  It actually goes back at least to Schumpeter, who thought about the issue throughout most of his career.  He famously changed his mind on the question of big versus small, mainly because the process of innovation changed during that forty year period.

    A much more interesting and useful question is: what can my organisation do to be more innovative?  The point is that innovation is not deterministic – you’re not doomed if you’re big, and you’re not automatically innovative if you’re small.  The critical issue to figure out how innovation fits with your strategy and then what skills and processes you need to innovate in your particular context.

    Size becomes important when you think about context – the way that you innovate will be different if you are big than it will be if you are small.  No matter what the context, innovation is a process – it’s the process of idea management.  I’ve pictured it something like this:


    However, in the excellent report on public sector innovation in Australia, Empowering Change (downloadable here), led by Alex Roberts, they had a slightly different version of this model.  It was adapted from a report on public sector innovation from Deloitte, and theirs looks like this:

     

    I made the fourth circle red, because that is the one that I’ve always had some trouble getting my head around.  But some of my recent discussions have given me some insights into this.  The report describes Sustaining Ideas as “keeping the innovative initiative going and integrating it, which includes monitoring and adapting where necessary .”

    This ends up being one of the key areas where innovation is different for big and small organisations.  If you are a startup, you don’t need to worry too much about sustaining innovation initiatives.  If you fail to do this, you go out of business.  Simple enough.

    But if you’re big, you have plenty of other things to worry about.  You have quarterly objectives to meet.  You have other processes you need to make more efficient.  And so on.  Not so simple.  So if you’re big, and you’re trying to innovate, a lot of effort needs to go into this part of the idea management process.

    This came through in my discussions with Stacy Coughlin and Kristina Bobrowski about the Xiameter business model innovation that Dow Corning implemented.  Describing the same case, Jeffrey Phillips says:

    The hard work, they said, wasn’t in setting up the new distribution system or attracting customers. The hard part in changing the model wasn’t in the external efforts, but in the internal workings of Dow Corning.

    It turns out Newton was right. Objects at rest tend to stay at rest. In fact, they come to prefer to remain at rest and actively resist movement and change. It’s not our customers or our markets that will resist innovation. In fact they often want and need new products and services. No, the biggest enemy of innovation is us – the compendium of existing expectations, processes, knowledge and experience.

    So while big firms can indeed innovate, this means that they need to manage the process differently – there’s no one-size-fits-all solution – sorry!  If you’re big, what are some of the things that you should do?  Here are some ideas:

    • Increase your innovation speed. If you’re going to innovate like the small, agile organisations, then you need to act more agile yourself.  Here’s Phillips again, in a different post on the importance of velocity in innovation:

      If these assumptions are true, then VELOCITY, as defined as speed in a specific direction, becomes very important for a firm’s ability to grow and compete. Relying on long product life cycles is not an option. Customers will demand new products, new features at an ever increasing rate. Firms can’t simply “dump” older technologies and products into “developing” markets because those market too understand the product/feature acceleration and reject older products.

      Phillips recommends innovating your product development process, making innovation a core part of your strategy, and building executive support for this vision as the three critical steps to achieve this.

    • Open up!Think about the five steps in the innovation process model.  What are big firms good at?  They are great at getting things to market – that’s how they’re big.  So they have idea diffusion covered pretty well.  But this is often a huge problem for smaller organisations.  They might have brilliant ideas, that have been executed very well, but they can’t get anyone to pay attention to them.  How do they get around this? Collaborate.That’s the point that Ralph Ohr raised in his recent post, and Scott Anthony makes a similar point:

      WSJ: Are you saying startups are no longer capable of innovation?

      Anthony: I don’t want to go so far as to say startups are pointless. But today, the second a startup has had a taste of success, the race is on, because anyone can copy them.

      WSJ: What’s in store for these smaller companies then?

      Anthony: They have to recognize their success can’t be predicated on the stupidity or slowness of big companies. It might be time to start thinking about partnering with a big company instead of just being pirates.

    • Get to know your customers deeply. Often, big firms resist innovation because they think that they know best.  But one of the things that they can do with their extra resources is invest more in learning what their customers really need.  And you don’t do this through focus groups – you build deeper knowledge than that. One way to do this is to follow the customer home – as Soren Kaplan explains:

      Intuit’s innovation success is tied to a value for finding and savoring customer surprises–unexpected insights about customer needs, problems, and desired experiences that can’t be anticipated or pre-defined. That’s why the company does customer “follow-me-homes,” where everyone from CEO Brad Smith to engineers and marketers immerse themselves in the customer’s natural environment to see how things are working (or not) in the real world.

      This is actually one of the techniques of ethnography, something that PARC has been investing in over the past few years. Ellen Isaacs from PARC talks about how this works:

      With ethnography, you’re more interested in what people do than what they say (usually two different things), and you’re more likely to come out of it with answers to questions you didn’t know to ask. At its best, ethnography uncovers “aha!” insights that transform thinking. But since nobody knows know what they’ll learn, there’s no guarantee — and that makes people nervous.

    The issue isn’t big versus small.  And size doesn’t determine whether or not you can innovate.

    The question to address is: what’s best for us?  And the key point is that the answer will probably be different if you’re big.

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  • Where Does Innovation Fit in Your Business Model?

    Where Does Innovation Fit in Your Business Model?

    Business models are important – they go a large part of the way towards determining how successful your organisation will be.  So here’s a question: where does innovation fit in your business model?

    There are a number of different ways in which people describe and talk about business models – the common feature is that they describe how an organisation’s activities interact to create and deliver value for their stakeholders.  Today, I’ll use the Business Model Canvas version of the business model to illustrate the discussion:

    The answer to the question of where innovation fits is not very satisfying.  The answer is: it depends.  On what?  On where you sit on The Innovation Matrix:

    So let’s work through where innovation fits in a variety of business models.

    The three boxes in green are the three categories where your innovation effort and your returns from innovation are in balance.  These are all reasonable places to be, depending on what you are trying to achieve.

    If you are Not Innovating Very Much, then innovation doesn’t fit into your business model at all.  For this to be a stable strategy, you must be in a relatively stable market, with a strong competitive position.  In other words, your current business model is working well, and you don’t need to do anything very innovative.  You could even argue that attempting to innovate from this position is a waste of resources.

    On the other hand, if your competitive position isn’t strong, or your market or environment are changing, then you’ll need to innovate. Which means that you’ll need to change your business model.

    If you are a Fit for Purpose Innovator, then innovation needs to support your value proposition.  In this quadrant, your primary value is probably not based on innovating.  Here, your value proposition is probably based on being the lowest total cost provider, having the best product, or providing the best customised solutions.

    In this situation, then innovation will mostly be focused on the back-end operations – it will be a key activity, which requires some resources, and possibly partnerships.  All of the innovation will need to support improving your primary value proposition.  Alex Osterwalder describes these firms as Business Model Masters – they are organisations that “outcompete others with a superior business model where every one of the business model building blocks reinforce each other.”

    If you are a World Class Innovator, then innovation is central to your entire business model.  Your value proposition will be somehow based around your innovation capability.  Osterwalder calls these organisations Invincible – they “continuously disrupt themselves while their business models are still successful.”

    As is the case with Business Model Masters, all of the business model building blocks reinforce each other, but in this case, innovation will be at the core of all of these blocks.  As I said, the value proposition will be innovation-based, key activities, resources and partnerships will also need to organised around innovation.

    In these three cases, your business model is basically balanced with your innovation effort – that’s a big part of why these are three stable innovation strategies to follow.  The other six locations in the innovation matrix have some problems.

    The three red squares are all situations where your business model is based on having some level of innovation, but you’re not delivering the level of innovation that you need to support that strategy.  The worst position to be in is Bewildered.  Organisations here have invested a lot in innovating, and it is likely that their value proposition is innovation-based.  An example here is Procter & Gamble in the late 1990s – their slogan was “Touching and improving lives” – which implies that they are innovating.  Yet, at the time, despite heavy investment in innovation efforts, they weren’t delivering that at all.

    This is a sign of a business model that is not coordinated through all of the building blocks.  In the case of P&G, their key activities did not support getting innovative new ideas out the door, and they had to completely realign their cost structures, key partnerships and revenue streams to better support their innovation efforts.  As they did this, P&G evolved to become a World Class Innovator.

    Organisations that are Thinking About Innovation are in a similar situation.  For them, it is likely that they are trying to become Fit for Purpose innovators – they want to use innovation to improve and support their core value proposition, which is not innovation-based.  But again, they have business model misalignment.  Most of the time, these organisations fail to organise their key activities and resources to support innovation.  So again the business model is not coordinated.

    The organisations in the red squares tend to have customer-facing activities that require innovation to succeed, but their operational back-ends fail to support these aspirations.

    The organisations in yellow are in a slightly different situation.  We won’t talk about Unicorns (firms that are great innovators without putting any effort into it), since they are mythical and don’t exist. But the other have business models that are often the opposite of the ones in the red squares: their operational back-ends are innovative, but their customer-facing activities are not built around innovation.

    In other words, even though these firms are often very innovative, they do not necessarily think of themselves in that way.  So they are not differentiating their value propositions based on innovation.

    Here are some of the key points:

    • Your position on the Innovation Matrix will determine which parts of your business model need to be innovation oriented.  One of the key points with The Innovation Matrix is that your innovation activities need to be consistent with your strategy.  Similarly, your building blocks of your business model must reinforce each other.  If you do both of these things, then your business will be built to execute your strategy.  And innovation will support this.
    • Your position on The Innovation Matrix is dynamic. The P&G case study shows firms evolve over time.  They started out Bewildered, but as they changed their innovation capabilities, and got their business model aligned, they turned into a World Class Innovator.  The Innovation Matrix is a tool for identifying where you currently sit – but where you are now isn’t where you’ll always be – you can change!
    • Changing your innovation performance requires a change in business model. There is no one-size-fits-all approach to how much innovation you need.  One of the critical points with The Innovation Matrix is that it is not enough to just talk about being more innovative – if you do this, it leads you into the red zone.  Instead, to successfully change your innovation outcomes, you must change your innovation-oriented activities, and your investments in innovation.  Innovation requires a change in behaviour.
    The business model approach is very useful for assessing where your innovation efforts are most effectively applied.  To innovate successfully, you need to have a coordinated business model, with innovation in the right places.
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  • Why the Future of Innovation is Open

    As outlined in my previous post, sustainable innovation requires evolution and revolution. Over the long term, organizations need to be capable of both moving along existing growth trajectories and creating new ones when the old business matures or stalls. This can be depicted as recurring movement along innovation s-curves. In the case of a new venture, acquiring lean start up skills can significantly increase the likelihood of successfully passing through the s-curve for the first time. Yet, research shows, only a minority of startup ventures are able to manage this challenging journey. Unlike Google, most of them struggle or are incorporated by bigger companies before they scale up.  As Tim Kastelle points out, s-curves basically consist of the following stages (see figure):

    • Invention (Y): The time from when you first have an idea to the time when the idea is genuinely ready to spread. This can be, for instance, the application of a new technology or the development of a novel product.
    • Diffusion:  According to Steve Blank, this stage can be divided into two sub-stages, referred to as Search and Execution.
      • Search (X): this period covers the search of a repeatable and scalable business model. These activities usually involve early adopters to validate the innovation.
      • Execution (following X): In order to spread the innovation, the business model is executed and continuously refined. Crossing the ‘chasm’ and scaling requires an appropriate value proposition in place.

     

    Innovation Curve

     

    S-curves basically reflect value chains: innovation success is eventually determined by being able to scale novel ideas. Being first-to-scale, in turn, is based on inventing and properly validating the idea. One main characteristic of a chain is: it’s just as good as the weakest part.

    An important point here is that every stage requires dedicated capabilities and culture in order to be completed successfully and efficiently. Invention is mainly based on technical and research expertise, whereas the business model search process depends on hypotheses testing, experimentation and customer-related skills. Finally, successful execution relies on commercialization competency and operational capabilities.

    With regard to innovation culture, Costas Markides and Paul Geroski distinguish between ‘Colonizers’ and ‘Consolidators’. They describe the differences between these different players as follows:

    The fact that firms that create new product and service markets are rarely the ones that scale them into mass markets carries serious implications for the modern corporation. Our research points to a simple reason for this phenomenon: The skills, mind-sets, and competencies needed for discovery and invention not only are different from those needed for commercialization; they conflict with the needed characteristics. This means that firms good at invention are unlikely to be good at commercialization, and vice versa.

    Some firms are natural colonizers, able to explore new technologies quickly and effectively and to make the creative leap from a technological novelty to a product or service that meets customer needs. What these firms are good at is creating new market niches. Other firms are natural consolidators. They are able to organize a market, turning a clever idea into something that reliably and regularly meets the promise, can attract consumers, and can be manufactured and distributed efficiently to a mass market.

    Very few firms are good at both sets of activities.

    As a result, the authors make a radical claim: To succeed in scaling up new radical markets, don’t even try to create them. They suggest for established businesses to leave the challenge of market creation to startup firms and to focus their own attention and resources on consolidation:

     We believe that big established firms do not have to be actively involved in both the colonization and the consolidation of new radical markets. Given their skills and attitudes, incumbents will be better off if they stick to consolidation, positioning themselves to exploit the pioneering efforts of others. One primary way established firms can accomplish this is by developing a network of feeder firms and serving as a venture capitalist to them.

    Indeed, in face  of increasing pace of change, resulting in decreasing life cycles and shortened s-curves, this might be an important point to consider. Effective and efficient coverage of each innovation stage may require a craft vs. scale specialization and ‘job-sharing’ among different players, rather than targeting at doing all activities under one roof.  This suggests the formation of value networks with complementary roles along the innovation chain according to the following chart:

     

     

    Major preconditions for the formation of these value networks are openness and the willingness to collaborate, rather than to compete to each other. Large firms take a key role as ‘interface’ to the market. They are required to tie open and customer-oriented business models by integrating and orchestrating their partner networks. „The most exciting new business models are networks connecting capabilities across boundaries“, says Saul Kaplan. Why? Simply: customer value doesn’t care about silos and boundaries. Organizational capabilities to reinvent and create new business models become more and more important. There are two reasons for this: Firstly, innovation activities tend to shift from product and process innovation towards business model innovation. Secondly, business model innovators outperform traditional innovators (e.g. product innovation within an existing business model) over time.

     

    Source: http://www.bcg.com/documents/file36456.pdf

     

    Recently, Scott Anthony has announced a new era of innovation, identifying big companies as drivers of innovation and transformation. One of his main points is that the trend towards business model innovation taps incumbents’ unique strengths. This goes well together with an argument made by Irving Wladawsky-Berger:

    But, the kind of innovation that Michael Mandel writes about in his article is a mixture of disruptive and incremental. It favors large companies because of their ability to address complex systemic problems, manage the large-scale ecosystems that solving such problems requires, and bring their solutions to market all round the world. The problems are typically not based on new inventions, so it is hard think of them as representing disruptive innovations, but their scale and scope puts them in a class way beyond incremental. This kind of complex systemic innovation leverages lots of known ideas and makes them work together to help address important problems. (…)

    Large companies that make the successful transition to an open, collaborative style of innovation will emerge as effective ecosystem leaders. Such companies will find that their scale is a major asset for the kind of complex systemic innovation that will be increasingly important in the decades ahead.

    Taken together, all this seems to indicate that the future will be about open and collaborative innovation, benefiting from ecosystems with dedicated roles for all stakeholders. On the people level, corporate catalysts are then going to play an ever important role to drive innovation. Those integrators combine entrepreneurial spirit with an ability to leverage corporate resources and to orchestrate the diverse network.

     

    Takeaway

    Sustainable innovation requires recurring innovation diffusion along s-curves. The different stages of the cycle demand distinct capabilities, cultures and mindsets. This suggests the formation of open ecosystems with dedicated roles for research organizations, startups and larger firms – in accordance with their natural strengths. Due to an ongoing shift towards business model and large-scale innovation, established firms will likely take a leading role in the future. On the people level, innovation is then primarily going to be driven by integrative thinkers with an ability to orchestrate the value network, referred to as corporate catalysts.

     

     

     

     

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