Copying innovation

The Economist's Schumpeter defends the claim that for businesses, being good at copying is at least as important as being innovative.

Let's start with the "Not invented here" syndrome:

"Some business people are willing to talk about the limitations of innovation. Kevin Rollins, a former chief executive of Dell, a computer-maker, asked, “If innovation is such a competitive weapon, why doesn't it translate into profitability?” But most remain obsessed with their own inventions. Copying is taboo. Praise and promotion do not go to employees who borrow from other firms."

How fascinating! In contrast, the entrepreneurial world, the entrepreneur is hard dependent on his predecessors failures for his own successes.  The breakthroughs of the fast moving startup company is based on its leapfrog innovation that is built on the last failure or poor execution.

"History shows that imitators often end up winners. Who now remembers Chux, the first disposable nappies, whose thunder was stolen by Pampers? Ray Kroc, who built McDonald's, copied White Castle, inventor of the fast-food burger joint. ... A study by Peter Golder and Gerard Tellis, “Pioneer Advantage: Marketing Logic or Marketing Legend”, found that innovators captured only 7% of the market for their product over time."

Excesses in any direction do not serve, though for the astute corporate, there are times to drive extremes on inventions and at times it works to simply copy.  An example is GM; it was a copy and paste platform for japanese front wheel drive cars, specifically in the 1980s and the 1990s.  They captured the revenue, though the product was poor.

Schumpeter ends with:

"Excessive copying, of course, could be bad for society as a whole. Joseph Schumpeter worried that if innovators could not get enough reward from new products because imitators were taking so much of the profit, they would spend less on developing them (hence the justification for granting inventors temporary monopolies in the form of patents). But that is not the immediate concern of corporations. Copying is here to stay; businesses may as well get good at it."

Read the complete article "Pretty profitable parrots" here.

Measuring Innovation

Ms. Kathleen Papageorgiou, old GE colleague passes along a HBR blog post on "How to really measure a company's innovation prowess" by Mr. Scott Anthony.

A fanscinating subject indeed!  Creativity driven innovation remains an art.  Artists are the least understood among human capital.  In our drive to understand the "artist", we are incrementalizing innovation so it can be made generic, and all can feel they are innovators.  Just as leaders are born, and circumstances enable them to emerge such as George Washington and Ghandi, similarly, innovators like Mr. Steve Jobs of Apple and Dr. Gordon Moore, founder of Intel, are born to be one.

Mr. Anthony highlights the reality of innovators below:

"Until they do, at least be wary of the next company that graces a magazine cover. After all, half of the top 20 companies traded on U.S. equity markets* on BusinessWeek's 2008 list ended up underperforming broader market indices between March 2008 and March 2013. While strong performance by Amazon.com and Apple meant an investment in those 20 companies beat an investment in the S&P 500, Blackberry (see Research in Motion), General Motors, Nokia, Sony, and Toyota certainly have had their share of difficulties over that time period."

Read the complete article here.

"Fail Fast" - Can the corporate begin to think about it?

Colleague Mr. Aali Raza passes along an article "Oh, the joys of screwing up".  Though a delight to read, the reality on the ground for the corporations when it comes to the concept of "fail fast" remains a stretch.  The deliverables are quarter bound, Christianson's middle manager is a bottle neck most of the time, and "the" street must be satisfied in case of publicly traded companies. What is the answer? And who is leading the way?

See my previous blog "Branson, redefining capitalism" here for further interesting insights.

"Our ability to "think different" may be as much a result of what we stop doing as what we start. Learning to do anything new requires sufficient time to acquire the capability. Learn to play an instrument or speak a foreign language and the point becomes clear. All learning is developmental regardless of age. The point is that real innovation requires that we get to a destination we have never been to before and by a new route. We make it up as we go along. Otherwise it's just another lap around the planning circuit."

Read the complete article here.

Be Inspired to Create

Dean Haroon, my son forwards to me the impossible, creation of music from garbage.  Perhaps we can learn from the video below from Paraguay's Landfill Harmonic - The Recycled Orchestra.  Enjoy!

Invention Trading

From multiple legal battles between Oracle and Google over patent and copyright claims related to Java programming language, to Apple, Samsung, and others fighting over smartphone patents, the Economist writes here:

"Accusations abound that innovation is taking a back seat to litigation. Only the lawyers are smiling."

Enter Intellectual Property Exchange International (IPXI), a financial exchange that let's organizations trade and hedge patents like assets.  See IPXI here.

"The idea is to offer a patent or group of patents as “unit licence rights” (ULRs), which can be bought and sold like shares. A ULR grants a one-time right to use a particular technology in a single product: a new type of airbag sensor in a car, say. If a company wants to use the technology in 100,000 cars, it buys 100,000 ULRs at the market price."

The concept has traction and continues to sign up members such as Panasonic, see further news on it here.  The article concludes with:

"Good news for innovators, perhaps, but bad news for lawyers."

SXSW

In support of SXSW, here is an excellent info graphic showing the impact of SXSW and to persuade you to consider going. Well done Rocksauce Studios!

Please move your cursor on the image for options to view.

Rocksaucestudios.

World Economic Forum & Global Leadership's Integrity

At one point I used to admire most of the discussions from the World Economic Forum.  In 2006, I found the excitement at WEF hit hyperbole levels, and insights from a very few, such as Mr. Nouriel Roubini, were ignored, if not outright neglected.  See Mr Roubini's article in the EconoMonitor here regarding his 2006 speech at Davos.

In the January, 2013, The Economist's Schumpeter brought this hyperbole into reality:

"...when the public look at what is on offer [WEF at DAVOS], they are not impressed. Many of the bankers and politicians caught dozing by the financial crisis were regulars at Davos. Ordinary folk trust Davos Man no more than they would a lobbyist for the Worldwide Federation of Weasels. A survey by Edelman, a public-relations firm, finds that only 18% of people trust business leaders to tell the truth. For political leaders, the figure is 13%."

The article goes on to question the current global leadership and its various pitfalls today.

What I am interested in highlighting is that a corporate and political leadership that has grown up during the times when the past pretty consistently and with regular intervals repeated itself, are unable to comprehend the the continuous flux of economics, need for flexibility with sustainability, and the march of technology driving democratization.  The days of living the efficiency and effectiveness mantra do exist though without extreme agility across all aspect of business and government, only create dilemmas such as two economic crisis within a decade (2002 and 2009).

"...there is still a flaw with the very notion of global leadership. Abraham Lincoln observed that “nearly all men can stand adversity but if you want to test a man’s character, give him power.” Similar temptations afflict those who are given the title of “young global leader”. Clever businesspeople have a tendency to be arrogant at the best of the times; telling them that they are masters of the universe can only magnify it. Arrogance breeds mistakes: look at all the empire-building bosses who attempt ambitious mergers despite ample evidence that such mergers usually fail."

It is a time for a 21st century global leadership to emerge, and I believe it will not be crafted through the amalgamation of the old to drive the status quo.  Key to this new leadership in the corporate and political worlds will be to know that they do not know the unknowns that are to challenge them.

So... the question is, how does one prepare for the unknown unknowns?  One thing is for certain, it will not be learned by extrapolating the past!

Gorilla hiding in plain sight

It is proven fact that through training, individuals improve upon a particular type of learned behavior.  The learned behavior inherently disables the individual, the more they train, to not look at what is outside the boundaries of their learned behavior; it is not important.

Yet, that is where the breakthroughs exist today, just beyond the boundaries.  Technology has enabled the availability of knowledge that was created and retained within an individual over years.

Researchers at Harvard recently conducted experiments to further validate the above fact, and more commonly known as the Invisible Gorilla.

""If you watch radiologists do what they do, [you're] absolutely convinced that they are like superhuman," says Trafton Drew, an attention researcher at Harvard Medical School."

"He took a picture of a man in a gorilla suit shaking his fist, and he superimposed that image on a series of slides that radiologists typically look at when they're searching for cancer. He then asked a bunch of radiologists to review the slides of lungs for cancerous nodules. He wanted to see if they would notice a gorilla the size of a matchbook glaring angrily at them from inside the slide."

"But they didn't: 83 percent of the radiologists missed it, Drew says."

"This wasn't because the eyes of the radiologists didn't happen to fall on the large, angry gorilla. Instead, the problem was in the way their brains had framed what they were doing. They were looking for cancer nodules, not gorillas, so "they look right at it, but because they're not looking for a gorilla, they don't see that it's a gorilla.""

Read further details, videos, and references here.

Gamification

Previous Procter & Gamble colleague Franz Dill writes about gamification here.  Collaboration and competition driving management of behavior to direct and produce specific results... magic, gold dust, music to the ears of corporate managers?

And here is a TED talk by Jane McGonigal on the subject.

The Economist's Schumpeter pipes in with some insights here, though it warns:

"Level-headed management types, meanwhile, say that many of the aspects of gamification that do work are merely old ideas in trendy new clothes. High-score lists for sales staff, for example, have been around for decades, as have employee-of-the-month contests. Airlines were giving points and perks to loyal customers long before anyone had heard of “Farmville”."

Needless to say, angel investors, and venture capitalists are jumping on the hype cycle.  Get ready to for gamification of cooking to shampooing of your hair to gamifying consumption of utterly repulsive food and that too for babies.  I am interested in seeing what do the management consultants come up with!

Prediction Markets and Elections

Rather than developing mathematical models for prediction and decision support, should organizations consider designing methods for managed betting!  It seems like betting has continued to predict the election outcomes in the USA correctly, and companies like InTrade may just set the next transformation driven by leveraging social behavior in how to think about the future.

Visit Intrade's website here, it is worth a visit.

Though do note from The Economist article here:

"It now appears that the spotlight may have done Intrade more harm than good. On November 26th America’s Commodity Futures Trading Commission (CFTC) sued the company for allowing betting on the prices of products, such as oil and gold, which trade on derivatives markets it regulates. (In 2005 Intrade had promised the CFTC not to offer such contracts.) In response to the suit, the firm announced it would no longer let Americans trade on its site."

Entrepreneurship in Healthcare

The health law passed in 2010, now come to be known more commonly as Obamacare, seems to have inspired a bourgeoning of health care centric entrepreneurial activity.

The Economist writes:

"Smaller companies are coming up with ways to help bigger ones cope. Venture-capital firms see at least two promising areas: companies that serve consumers directly and those that help hospitals provide better, cheaper care. For some firms, Obamacare is a direct boon. For example, Getinsured.com, which helps people choose health insurance online, is also helping set up California’s insurance exchange. Since the election more states have asked about its services. Peter Hudson of iTriage, which lets a patient tap symptoms into a mobile app and search for doctors nearby, thinks Obamacare will add to his firm’s growth. By directing patients to general practitioners rather than pricey specialists, iTriage may cut costs for ACOs."

I continue to keep an ear out to this sector to see if Obamacare does truly enable a resurgence of creativity where it usually comes from, the one or two man shop, the tinkerer, the thinker of impossible concepts, ... the entrepreneur.

Perhaps, here the political aisles are being crossed?

"The most interesting model may belong to athenahealth, which offers hospitals and doctors billing, electronic health records and other services. Start-ups pitch to athena’s customers at the company’s “More Disruption Please” conference. The winners get to offer their products to the 35,000 doctors in athena’s network, alongside athena’s own. HealthFinch and iTriage are both due to join. Jonathan Bush, athena’s boss (and a cousin of George W.) favours young companies that help hospitals work better by doing the jobs “that all doctors hate and suck at”."

Read the complete article here.

Business Model: Tata Sons

The Economist publishes excellent articles.  Yet, at times, a disappointment does emerge.  While discussing the $100 billion conglomerate and the transition of Mr. Cyrus Mistry to the Chairman of the company, the magazine disappointed in completely missing the history of why Tata Sons' ethos are as they are, while complaining about it sustained growth rates of 3% to 4%.

Tata was founded by Mr. Jamsetji Tata, a Parsi (or Zoroastrian).  The core of Tata companies has always been social sustainability and ethical conduct.

A founder of one of the largest private equity firms in the USA told me recently that he will not work with any company in India, except for a Tata company.  He said simply, "They don't take or give bribes, and they don't lie."

The article states:

"The Jack Welch comedy club
This is the sort of approach that Tata veterans disdain. They see the “kill, cure or sell” philosophy of famous Western managers of conglomerates, such as Jack Welch of GE, as comically macho and short-sighted. One divisional head admits: “Return on capital is not at the centre of our business. Our purpose is nation-building, employment and acquiring technical skills.” This benevolence even applies to staff abroad. Embattled Tata Steel Europe has 33,000 employees."

Perhaps it is time for Capitalism driven on quarterly returns to have a longer term view for the health and well being of its employees and the society.  But then it may not be considered Capitalism with a capital 'C'.

Read the complete article here.  Read the "Purpose and values" of Tata here.