Aug 31, 2022 | Innovation, Marketing
Processes are the means by which things get done. From the simplest thing like cleaning the coffee machine in the lunchroom, to launching a major new product, it happens by way of a series of activities culminating in the objective being achieved.
It makes sense to do the same thing the same way every time, assuming you get the desired outcome. Doing so delivers stability, reduced errors, and makes the processes transferrable between people.
Process stability is a fundamental foundation of being able to scale a business.
However, processes do not innovate. They can replicate the past with great productivity benefits, they do not take risks. They squeeze out creativity, as it is variation to the process, and therefore not allowed.
Let’s look more closely at innovation, which can be broken down into a series of repeatable steps, and thus becomes a process.
There are two types.
Incremental. This is where there is continual improvement, the adjustment of processes to deliver benefit. The preconditions of incremental innovation are twofold:
- First, you need stability to be able to execute on CI, and
- Second, you need the culture of experimentation, continuous A/B testing to prevail.
Break-through. This second category is, to me, real innovation. It can create new markets and demand, of the type Apple deployed with iPod, iTunes then the iPhone, and Henry Ford did with the Model T. You need to be able to see where there is new potential, new markets, new demand, and be prepared to throw the baby out.
The culture and processes that support these two types of innovation are very different, effectively mutually exclusive, so you must make a choice. Trying to do both inside the same corporate ‘shell’ rarely works.
The former requires alignment, stability, continuous improvement, and several other popular management cliches.
The latter will die under these constraining circumstances, it requires insulation, a ‘skunk-works’ of some sort to succeed, a culture that enables experimentation and the attendant risk, giving the efforts immunity from corporate ‘sameness’.
Scott Adams reflects this pardox beautifully in this 2012 cartoon used for the header.
Aug 29, 2022 | Change, Innovation, Strategy
For some years academics have been mumbling to themselves about an observed phenomena they generally called ‘Flattening‘. The discussions have been centred around technology, but the impact can be seen in a much wider context.
The idea is that technology acts as the rising tide in the old saying that a rising tide lifts all boats. By rising the average level of the ‘water’ the differences between individual companies and industries are removed, that the offering becomes increasingly homogeneous until a new technology arrives, lifting the owner clear of the competitive debris.
There are numerous examples.
The emergence of the Internal combustion engine wiped out long established industries and companies in the horse drawn wagon, whip, and horse breeding and breaking industries of the time. As they disappeared the automobile industry and its supply chains emerged, now in the early stages of being ‘flattened’ in turn by electric vehicles.
Before the internet, information existed in small silos and did not move much, and then only slowly. Industries that relied on those characteristics were ‘flattened’ out of existence. Yellow pages, classified newspaper ads, and in their place emerged new industries. Google, Facebook, and the plethora of other communication and search platforms.
Let’s consider energy production.
For thousands of years people used wood or coal to heat their houses and water. In 1698 Thomas Savery patented a machine that drew water out of flooded mines by using steam pressure, then in 1784 James Watt patented the steam engine, which for the next 150 years powered most industrial development. In 1831 James Faraday created the first very simple electrical generator that converted mechanical energy to electrical energy.
So what you ask.
Look at the current environment with the concept of ‘Flattening’ in mind.
Internal combustion automobiles are in the early stages of being ‘flattened’. This has been initiated by Tesla, in parallel with the batteries required to run the cars, but which will have huge implications across the energy sector.
Coal, the dominant world source of energy has suddenly become a pariah. It is polluting the atmosphere with the attendant changes in climate, leading to rapid growth of renewables, both personal and commercial scale. New fossil fuel projects, especially coal, are now being locked out of capital markets as they see their investments being stranded. Only idiot governments with an eye to donors is keeping them alive via subsidy and barriers to entry of renewables.
The tide however is inexorable, and fossil fuel will be redundant soon. As Hemingway noted in the Sun also Rises, when one of his characters was asked how they went bankrupt: “Gradually, then suddenly’ was the response.
That is what is happening in power generation.
Renewables have been around for 25 years, slowly evolving as the technology improved. It seems to me we are at, or almost at, the ‘Suddenly’ point. In the absence of being in front of the wave of changes, we will be left behind in the technical race to build the new industries that will emerge, again.
Flattening is also happening in some way in your domain, it is the normal course of development. the challenge is to see the elephant and react to it in time.
Aug 19, 2022 | Innovation
Usually the term ‘gestation period’ the time between conception and birth, is used for mammals, but it is just as relevant for innovation.
In the animal world, it is a fixed and consistent period for each species, varying from the 12 days it takes the Virginian opossum, to 22 months for the Indian elephant.
The definitional complications of using the term for commercial innovation come from the uncertainty in fixing the time of conception and birth.
The best definition I have seen of innovation is the one used by Sir Ken Robinson: ‘Innovation is an original idea that has value’. It is however just one of many.
Is that new flavour of product ‘A’ touted by the marketing department really an innovation, or just a line extension?
Is that fascinating scientific phenomena observed for the first time an innovation, or just something interesting to scientists that is waiting around for a commercial use to be created?
I remember seeing for the first time in 2006 the TED presentation by Jeff Han of the multi-touch interface. He had fun playing with it on the stage, but seemed unsure of the direction to commercialisation. Since then, the technology has been incorporated in every smartphone. Was the gestation started when Eric Johnson published a paper and was granted a patent in 1969, when Bell Labs Bob Boie first created the transparent multi-touch interface in 1984, when the PhD student in Jeff Han’s lab mastered the maths to make images interactive, or when Apple decided to apply the technology to the first touchscreen iPhone in 2007.
The gestation of market changing ‘Innovation’ is typically long, much longer than is easily recognised when you look at the end product.
The angst created by the sudden emergence of mRNA vaccines for Covid is widespread. However, it is misleading when you know that the mRNA molecule was first theorised in the early fifties, isolated in the lab in 1961, and worked on continuously at a low level by some major players, particularly after CRISPR technology was developed. Covid was just the catalyst that enabled 70 years of work to be brought to market at a speed that appeared to be unprecedented.
On the other hand, the marketing team I led in the late 90’s brought ‘Dare’ flavoured milk to market in 12 weeks. While it was and remains a commercial success, there was nothing new involved, just a smart rearrangement of existing packaging and market positioning in the large and then undeveloped flavoured milk market.
Aug 10, 2022 | Innovation, Leadership, Strategy
When are the funds for an innovation initiative generally available?
At the beginning of a project.
When are the funds for an innovation project generally needed?
Increasingly towards the commercialisation, or completion of a project.
To me, this usual pattern of financial resource availability is arse about.
At the initiation of a project, the resource needs are peoples time, lab space, and the commitment from senior management., The need for financial resources is usually limited. However, it is this time that projects need to gather momentum, which means financial resources and forecast outcomes are included in budgets, and formal planning processes. The best way to ensure a project is supported is to ‘boost’ the promised returns and shorten the lead times.
Unfortunately, this locks in expectations that have impacts on the way projects proceed.
A project that promises 25% IRR in 18 months will almost always win the resources race over a project that forecasts 30% IRR in 5 years. This sort of financial analysis is how choices are usually made, ignoring the strategic implications of the differing projects. This is because we have not found a way yet to reliably tell the future, and immediacy is a powerful motivator.
On top of that you have the favouring of evolutionary ‘innovation’ over ‘revolutionary’ innovation.
Most successful businesses become successful by incrementally improving products and processes over time, and are prepared to spend money to keep the evolution going. The challenge of this is that it crowds out the revolutionary innovation, the ones that have the potential to change markets, rather than just do more of the same but just a bit better.
The examples of these abound.
When I was working for Cerebos in the early 80’s, we marketed a muesli under the brand ‘Cerola’. It was in the days when there were only a few breakfast cereals on the market, unlike today. Similarly, confectionary was less fragmented. We came up with the notion of a muesli bar, a ‘healthier’ snack than anything then available, with the convenience and taste of confectionary for kids lunch boxes. We did extensive product development, several pilot plant trials, and a little market research. In the early stages I had done a forecast profit and loss, timeline, and we had established the capital costs necessary for the changes to the existing muesli line. These were included in the Cerebos budgets as project ‘M’. The numbers were modest, but at the time, pushed as far as I felt comfortable. When it came to the final go/no go decision, the project was binned, as the forecast IRR based on my modest sales forecasts did not meet the hurdle. A year later, Uncle Toby’s came out with pretty much the same product and positioning, and did my annual sales forecast in the first month. Opportunity missed, and lesson learnt.
Kodak, that well known exemplar of the missed opportunity, not only invented the digital camera in 1975, they brought out the first viable digital SLR, the Kodak DCS-100 in 1991. While it was bulky, and expensive, it was the first. In 1994 Kodak supplied Apple with the ‘Apple QuickTake’ manufactured in China to a Kodak design. Also in 1994, Kodak brought out the NC2000 designed for photo-journalists.
So, Kodak did not miss the digital camera revolution, they led it, but simply failed to see beyond the boundaries of the photography business model as it had evolved over the previous century. They saw innovation as an evolutionary process, not revolutionary, as that carried the risk that their existing hugely profitable model would become redundant. None of the senior management over that time wanted to fund the risk of shooting the cash cow upon which they all depended.
Cerebos by contrast were shackled by a short-term focus on an unrealistic financial expectation that ignored the strategic value of the opportunity to generate sales, and also to open a new market that carried and solidified the Cerola brand.
In both cases, a huge opportunity that emerged from the fringes of their markets were subjected to a muddle headed and front-loaded financial calculation, ignoring the strategic implications of the opportunity.
Header source: The extensive StrategyAudit ‘slide bank’ built up over 30 years.
Aug 8, 2022 | Innovation, Marketing, Strategy
Black and white thinking is easy, there is right and wrong, you decide which side of the fence you are on, and stick to it.
Luckily, life is not like that. Life is a mass collision of colours, ambiguity built on ambiguity, built on uncertainty. That is what makes it interesting, and worth living.
Following the previous post that offered 9 strategies for more impactful decisions, it seemed appropriate to observe that the great advice in that post is useless in the absence of being able to see a problem from a number of perspectives.
In other words, see all the colours.
Most problems we face in strategy development are wicked ones, where there is no obvious right and wrong answer, where there are nuances on top of nuances, second order impacts, and where definitive data is hard, if not impossible to find.
Thinking in a binary manner means that you dismiss all these opportunities for creativity because it is somehow inconsistent with your existing views.
This also means you lose sight of most of the stuff from the alternative choices, which is where the richness usually hides.
Differences of opinion cause tension, discomfort, and room for conversation which become challenging for a binary thinker.
Thinking and then communicating in a nuanced way is an enormously valuable skill.
Relationships that last can accommodate the differences caused by the grey areas. It requires that you can hold seemingly inconsistent ideas in your mind at the same time.
Binary thinking means you cannot hold those conflicting ideas.
The question every time in a disagreement, is the extent to which the tension created by differences in opinion are healthy.
We are used to seeing things in a binary manner, it is the automatic response, but we need to find a way to manage the inconsistency and ambiguity. We need to be flexible, as well as being driven by the rules.
The biggest challenges we face have the need to be able to dance with the facts, what works today, may not work tomorrow.
Overdoing structure removes the flexibility, and the opportunity to see things that may become important.
We think most problems can be solved, that is the base assumption we always have, but the conventional wisdom does not always work.
As a kid I lived on the beach, surfed a lot. The water pushed into the beach by the waves needs to get back out somehow, so you have ‘rips’. The area that allows the water to return from the beach. When surfing, you go with the rip, it will take you out, try and swim against it, you will just get tired and make little or no progress. You need to be able to swim at an angle, use the rip to take you out, then move across towards where the waves are.
This skill works in problem solving, finding bits of a problem that are resolvable, like getting a single wave in a session in the surf, you get the thrill of that great wave, use the rip to take you back to catch the next one. It is a process
Tension between people who hold differing views is healthy when managed well. This is when there is a recognition that there is no right or wrong answer to a wicked problem, just the better choice at this point. Then the differences in opinion can better hold the outcomes of the decision to account, it will increase the opportunity to pick up the problem molehills before they become mountains.
Ambiguity and bias can be used constructively.
Embrace your opposites. It indicates you recognise there are differences, give permission to voice the unfamiliar perspective. This is the opposite to just having people with you that agree, then there is no tension, no opportunity to see the differing perspectives.
One side of any question is rarely completely right, and the other completely wrong, we must be curious to see the reasons that the others see it differently.
This is how we produce creative new options that reflect life.
Header cartoon credit: Tom Gauld in ‘New Scientist’ magazine.
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.
