Creative Destruction from outside the sector

Joseph Schumpeter's Creative Destruction comes from the outside of the sector most of the time.  Vacuum tubes versus transistors; newspapers and print media versus digital content providers; etc.

Here is one in the making, which may up end a part of the medical sector: non-invasive surgery.  And it is not a medical doctor but a physicist who has come up with the breakthrough.  Enjoy!

Innovation is coming from outside the sector

Breakthroughs emerge from within as much as from outside an industry. Mostly, inside the sector, the incumbent products market share forces Kodak's of the world to hide the digital camera they could have developed, or the Xerox's of the world to not create what could have transformed the company. The list goes on.

Yet, this lesson is not lost on the leaders in the oil and gas sector. It was delightful to read Mr. Gerald Schotman comments when he was asked recently, "What is an example of a freaky idea that became successful?" Mr. Schotman's replied:

"In the offshore business, there was a guy who went with his kids and bought one of these small plastic reptiles toys. If you put them in a bottle, they expand. Someone realized that if you want to seal off water zones in an offshore well, that is exactly the material you need. You put it next to the well, when the oil starts to turn to waters, then that material swells and closes off that water and the water will not interfere. It is a nice way of shutting off water zones. The thought required to develop that material and do tests – that was a nice freaky thing which is now a reality."

Read the complete conversation here.

Procter & Gamble has made this art into science a while back, see an article "Innovating from the outside in" here explaining some of the thought process and in market results.  The article states:

"We don't corner the market on good ideas and every good idea doesn't have to be ours," said Vice President of Business Development, Jeff Weedman. "The goal is to identify and collaborate with innovators who can help us consistently improve existing brands and create new products that delight the world's consumers."

See Procter & Gamble's Open Innovation program Connect + Develop here.

Visualization of Data

Previous Procter & Gamble colleague, Mr. Franz Dill writes about the Harvard Business Review article on visualization of data for decision support at P&G, "How P&G Presents Data to Decision-Makers".  The article states:

"... (Procter & Gamble) has institutionalized data visualization as a primary tool of management...  — over 50,000 P&G employees now have access to a "Decision Cockpit"..."

The author Dr. Thomas Davenport, a visiting professor at Harvard Business School, and a senior adviser to Deloitte Analytics, is particularly taken with heat maps.  I though am more aligned with Franz on this subject who states:

"In general, heat maps distort comparisons between data, so they are readily scan-able, but are not a good means for interacting with complex data. Other graphics shown in the article are more typical dashboard visualization styles."

Read Franz's complete blog here.

The author highlights a key insight:

"P&G's CIO Filippo Passerini calls it "getting beyond the what to the why and the how." If decision-makers have to spend too much time with the data figuring out what has happened in an important area of operations, they may never get to why it happened, or how to address the issue."

I previously wrote about the Business Sphere here.  Read the complete HBR article here.

Predictions - Who to trust?

Harvard Business Review publishes ""Experts" - Who beat the odds are probably just lucky".

"People whose predictions were most in line with conventional wisdom proved the most accurate overall. But those who made contrarian predictions that paid off big once or twice were viewed as the real market sages—even though their forecasts were incorrect more often than not."

Jerker Denrell answers the questions to prove the about point with his research. He is a professor of behavioral science at the Warwick Business School. One of the more interesting questions was:

"What leads people to make wild predictions? Personality? In the lab, that seems to be the case. In the world there are any number of incentives to make bold predictions. TV ratings, for example. Think of sports prognosticators. Being right about the upcoming game is much less important than getting people to tune in to their outrageous predictions. This is why we used Wall Street Journal inflation and interest rate predictions—those forecasters had no incentive to make optimistic predictions."

Read the complete article here.

Future of our identities

United Kingdom's Department of Business, Innovation & Skills provides an excellent study "The Future of Identity".  The report published by Sir John Beddington, UK's last Chief Scientist describes the trends, predicts changes, and suggest areas for actions related to our "notion of identity"!

Mr. Pallab Ghosh, science correspondent for the BBC discusses the report in his article "Web 're-defining' human identity says chief scientist".  He states specific to the impact of online social applications and role playing games:

"One consequence could be communities becoming less cohesive... This change could be harnessed to bring positive changes or if ignored could fuel social exclusion, says the study."

In specific, I enjoyed reading the part of the report on "Hyper-Connectivity".  Sir John Beddington said in his comments to BBC News:

""The most dynamic trend (in determining identity) is hyper-connectivity," ... "The collection and use of data by government and the private sector, the balancing of individual rights and liberties against privacy and security and the issue of how to tackle social exclusion, will be affected by these trends," he said. "I hope the evidence in today's report will contribute to the policy making process.""

I am curious to see the action UK's government plans to take as a result of the report.  There are generations alive today to whom the speed of change is excessively fast.  While the latest crop of tweens expect faster, smaller, cheaper, embedded, always on, realtime, push relevant content, etc. devices to continuously emerge every year.  A simple example is, some of today's tweens don't know what is laser disk, or any rotating digital storage device; they only understand unlimited storage and that too available to them wherever they are, independent of geography!  Absolutely fascinating.

Mr. Ghosh's article can be read here. The report can be downloaded here.

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!