Jul 19, 2022 | Change, Governance, Innovation
There must be some sort of magic in the water supplied to the Santa Clara valley, just outside San Francisco, originally famous for its orange groves. What started as a ‘nick-name’ for the area in the 70’s, stuck, and we now know it as ‘Silicon Valley’.
Somehow, that same water has infected other places and times, leading to an extravagance of brilliance. Athens in the time of Aristotle, Rome in the time of Marcus Aurelius and Seneca, the Florence of Leonardo and Michelangelo, Paris in the 1920’s that spawned Picasso, Monet, and Modigliani, Hemingway and Scott Fitzgerald. Even a little pub in Oxford with a writers club, calling themselves ‘The Inklings’ that delivered three of the most popular books of all time, Lord of the Rings, The Hobbit, and Chronicles of Narnia from the pens of C.S. Lewis, and J.R.R. Tolkien rates a mention.
Futurist Kevin Kelly in a 2008 blogpost, looked at some of these creative clusters over time and concluded that there were four common characteristics:
- Mutual appreciation. Appreciation implies polite clapping, but real appreciation requires the injection and debate of contrary views, critical peer review, and competition driven improvement.
- Rapid exchange of tools and techniques, facilitated by the common language and competitive instinct moderated by the mutuality of a ‘safe haven’
- Network effects, and the geometric nature of influence and information when something interesting happens.
- High tolerance for the novel, and different, with barriers to prevent the status quo responding. The renegades are protected by the herd, rather than expelled
Kelly concluded that these groupings of genius were spontaneous, and self-supporting over time, and the best you could do was ensure you do not kill it. They also occurred after a time of considerable social and economic disruption caused by war, rebellion, and plague. Catastrophe it seems leads to innovation, as many if not most of the usual institutional barriers to change are removed, and there is a hunger for the new to replace the old.
Lurking amongst these four common characteristics are several other common elements. There may have been mutual appreciation and exchange of tools and techniques, but there was also fierce competition. Michelangelo and Leonardo were ferocious competitors, Monet and Picasso never agreed on anything. The characters involved in the morphing of a slice of semi desert into Silicon Valley, William Shockley, Sherman Fairchild, Gordon Moore, and the companies they worked for and founded were intensely competitive, while building on the successes of their peers.
Also present is a communal meeting place and ritual, usually in a coffee house or pub, as in the ‘Inklings’ meetings in the Eagle and Child pub in Oxford. These places were the key node in the generation of the network effects that characterises all these innovative ecosystems. They are the neutral, informal point from which the magic water of innovation is first dispensed.
These informal places attract intellect and experience from diverse fields, enabling a range of perspectives to be brought to the discussion table that can then be applied to complexities and problems in entirely new ways.
As we observe the world we are now in, on its own, the Corona pandemic might qualify as a catastrophic incident, sufficient to create another explosion of innovation. It could be easily argued that it has already created such an explosion. The rapid development of mRNA vaccines involved networks of researchers, companies, and public funds from around the world to commercialise with unprecedented speed, technology that has been slowly evolving for 30 years. On top of that, we now have another war in Europe, which has kickstarted the restructuring of the global economic and political status quo, shattering the ‘globalisation’ of trade and giving huge impetus to the development of renewable energy. Together with the rise of China, and the relative decline of the US, this surely rates as a global geopolitical pivot point.
How can Australia leverage this seismic restructuring of the global order?
If Kelly’s observations have any validity, and to me they reflect what I have seen over a long career, we should consider our strategies in the light of the constraints imposed by the current status quo, and rebuild those guiderails in a more appropriate manner. Constraints are useful for innovation, only so long as they direct the process productively.
- Divert academic attention from the necessity to spend significant time chasing grants and dealing with bureaucracies to keep working, to creating safe spaces for intellectual exchange and competition. The pub and coffee houses of the past have been partly replaced by Slack and Zoom, although the value of face to face cannot be understated. The tools are there, the guiderails are just in the wrong places.
- There must be a shared mission that motivates and engages the best minds. This will be the catalyst to assembling the resources enabling the pressure to innovate to be felt. Public funding is essential, but the governance of that funding needs to be driven by those funded, and in a position to leverage the outcomes, rather than by non-scientific bureaucrats and political appointees.
- The ‘field’ in which the ideas will be planted needs to be fertilised and watered consistently, again over a long term if the seeds are to germinate and grow. There also needs to be the recognition that many seeds will not germinate, and they must be seen as a learning experience, not a failure.
Sadly, our mindset works against this.
It is a mindset built by the 20th century, one characterised by a combination of catastrophe in the first half, and unprecedented advances and comfort in the second. However, it is now the 21st century, and the institutions that evolved in the 20th are inadequate to accommodate the 21st.
Unless we can change, we will remain hobbled.
The header photo is of the Eagle and Child pub in Oxford where ‘The inklings’ met from the early 1930’s to 1949.
Jul 11, 2022 | Change, Innovation, Strategy
When you look over commercial history, there is a cycle in scale.
A new industry emerges, then scales using the capital captured to build production and productivity, which in turn leads to scaled volumes, fed by sales and marketing dominance. At some point, a ‘tipping point’ of some sort emerges and industry fragmentation and change occurs.
Out of the fragmentation emerges a new set of products/services that renew the cycle of scale.
Perhaps the first modern industry that emerged from cottages, leveraging scale and branding, was Charles Darwin’s uncle, Josiah Wedgewood. The industry he created established a global dominance that lasted to 1940. After the war, Wedgewood was replaced by a host of cheaper, more utilitarian products emerging from a reconstructed Japan, and other low cost suppliers.
Early in the 20th century, there were hundreds of companies building their versions of horseless carriages. Henry Ford launched the first Model T in 1908, and built a further 15 million by 1927, almost squeezing out everyone else. Those that remained in the US merged to survive and became General Motors, evolving to be for a while, the biggest company in the world. They dominated until the mid 1970’s when the Japanese, followed more recently by Korean suppliers, almost destroyed them.
By the end of the 20th century there were few legacy car companies left. They are now in the throes of being disrupted by a new generation of electric cars. The incumbent manufacturers completely missed the emergence of battery stored electricity as a replacement for the internal combustion engine, leaving an open playing field to Tesla.
Today, Tesla is the biggest auto company in the world by market capitalisation, bigger than the value of the next 10 manufacturers combined. In terms of unit sales, Tesla is a relative minnow, demonstrating the capital markets view of the power of the trend towards EV’s. Few remember that cars and trams were run on batteries in the earliest days of ‘motorised’ transport.
You can track similar trends in all major industries. Media, communications, heavy engineering, retailing, technology, the only things that vary much are the speed and amplitude of the cycles, which are now accelerating at an unprecedented rate.
Picking where your industry sits in the cycle is an important strategic consideration, as it offers some insights about the types of investments required to stay competitive over the long term.
Jul 8, 2022 | Innovation, Marketing, Strategy
A former client has been providing engineering services to the fossil fuel industry for decades. Having breakfast with him a while ago, he expressed the view that the prospects for the industry in which his business competes, and thus his business are dismal.
He is right, so long as he continues to see his current capability set through the perspective of how the business has operated in the past.
The challenge is to position yourself to take advantage of opportunities as they arise. Emerging technologies of various types are opening substantial opportunities for which his business has deep capabilities, but which are hiding in an alternative perspective of how those capabilities can be leveraged. Changing the strategic frame through which they are seen provides a path forward.
The challenge of the future is to reposition yourself quickly towards the point at which there is real, monetised value to be added.
You must be prepared to make early bets on those opportunities with the best odds of success in the medium term with a minimum of information by which to make those decisions. Equally, you must be prepared to walk away from the sunk cost when new information emerges which reduces the odds of the expected success.
Stripped back to basics, you must set yourself up so that as clarity emerges you are in a position to accelerate into it.
In my younger days I spent half my life on a surfboard. In a big swell, the position on the wave you took after the take-off was critical. Done right, you were able to accelerate out of the bottom turn into the fastest part of the wave, and, hopefully, make it through the break above you. Get the timing of the bottom turn just a bit wrong, and ‘Wipeout!
It is the same in business, positioning yourself going into uncertainty in the manner that puts you in the best position to accelerate out as it becomes clearer will be the difference between those who make it, and those who do not.
Photo credit: John Morris via flikr
May 26, 2022 | Change, Innovation, Leadership
Opportunities abound, and are hard to ignore.
They emerge to consume resources, distract attention, divert investment, obscure the focus on strategy, and generally disrupt operations.
How do you ignore, or better still, systematically, and quickly assess them, learn, and then execute or walk away?
- Relentless focus on the long-term objective, and the framework that is the strategic plan and supporting operational plans that will deliver that objective.
- Consistency between the long-term objectives and the activities that are shorter term, tactical choices.
- Have a bias for action, coupled with the discipline that any action needs to move the enterprise towards that long term goal.
- Never underestimate the power of the status quo to water down and divert the bias for strategically oriented action.
- You need the right people, those that will measure every decision against the agreed strategic objectives. This is not to remove any opportunity to divert from the strategy, it just requires more short-term agility to take advantage of tactical situations as they occur.
- Make sure you have all the facts and are working from first principles.
Strategy is all about making choices, and making a choice for option A precludes also choosing option B. This cascading of choices becomes a Bayesian decision tree as the choices cascade through the organisation from the top to the points of tactical implementation.
Apr 6, 2022 | Change, Innovation
‘Go back to first principles’ is an often-heard expression. At least as often, those uttering it have no real idea of the meaning, beyond ‘think again’.
Twenty-six hundred years ago, Greek philosopher Aristotle defined it as: ‘The first basis from which a thing is known’
Application of ‘first principles thinking’ requires you to dig and dig into a situation until you are left with only a few foundational facts that cannot be disproved. You can then rebuild from the ground up.
Elon Musk is often cited as the current guru of this discipline, particularly as it related to the creation of what became SpaceX. Rather than buying a rocket at an astronomical price, he broke down the costs of the materials necessary, and set about assembling a team to do it for himself. The result was SpaceX, which reduced the costs of launching a rocket by 90%, while still making a profit. The same thinking was been used to create both Tesla cars and batteries, each relying on the other as a means to the end of replacing fossil fuels with renewables.
John ’40 second’ Boyd similarly broke the development and performance of fighter jets down to first principles, arriving at the OODA loop. He took it further with his thought experiment that led to the snowmobile.
These examples have something in common: they all combine ideas from different fields into a new solution to an old problem. How do you think the first suitcase with wheels came about? Engineer Bernard Sadow had a patent issued in 1972 after seeing the solution to his ‘luggage-lugging’ in an airport in 1970. However, real credit should go to a Croatian artist with a colourful background, Joseph Krupa, who stuck some wheels on a suitcase in 1954.
The key is to be able to see things from a functional perspective, rather than as a continuation and improvement of what you currently have. We have flying cars already, called aeroplanes, different form to what most might imagine, but the function is as we imagined, movement by air. The light bulb was not a result of continuous improvement of the candle, and the internet did not appear as just another significant improvement on Guttenberg’s printing press.
Thinking from first principles requires that you put aside all the accepted wisdoms, conventions, and forms in order to get back to the core truth. It is in effect another form of the lean ‘5 why’ tool, so useful in removing waste from processes.
The header photo is of Joseph Kruppa and his wheeled suitcase taken about 1954
Addition: This article by Michael Simmons has many more examples of situations which required the application of first principles to come to light, and the blindspots that prevent that happening..
Mar 31, 2022 | Change, Innovation, Strategy
Management over the last 50 years has been driven by strategic planning. Sometimes it has been done well. Often it is little better than a good chance to catch up with peers, have a few sherbets, and get away from the office for a few days.
After the session, the production of a new plan, and articulation of targets nobody really believes in, life gets back to normal.
Familiar?
The fundamental flaw is that we expect to be able to plan for a future we cannot predict.
This is in no way to ridicule the process of gathering information, generating ideas and views about the way forward, and the means to measure the success or otherwise of the efforts.
Those efforts are essential, they provide the intellectual fodder necessary to at least avoid some of the bigger potholes, and make informed and sensible decisions.
However, they miss the essential truth that planning for a future you cannot predict is bound to miss the mark.
The solution?
Instead of looking for the answers to questions thrown up by analysis of the data we can collect, look instead for questions that need an answer.
Setting out to answer a big question, go exploring the unknown, is way more powerful than figuring out how to change the status quo.
You do not have to be a Steve jobs or Elon Musk to see a big problem that needs solving, they are around us every day at a local level, we just have to see them.
A client of mine is busily solving the dual problems of poor acoustics and heat insulation of our windows and doors using European technology adapted to local environments. I watched a presentation last week by a local franchisee of ‘Bark Busters’. This is now an international business aimed at managing the behaviour of dogs, specifically dogs that bark. Perhaps neither are solutions to global problems like global warming, but both are big problems to those who are in contact with them.
Look for problems to solve, rather than extrapolating the present to a bigger version of itself.
