Inside Innovation

The latest issue of Business Week’s Inside Innovation is available on line. Looks like a good set of stories: Innovation at HP, Design at Ford, How the Presidential candidates view innovation, to name a few. More comments on the individual stories later.

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Some things never change

I recently came across a book written over a hundred years ago by the English journalist William Thomas Stead, entitled The Americanization of the World, Or The Trend of the Twentieth Century (available through Google Book Search). Stead was a popular writer of his time, who later perished on the Titanic. The core argument of this book was that Britain could only guarantee future glory if it re-united with the United States (essentially on the US’s terms). Quite a remarkable thing to say in 1902, at the height of Britain’s hegemony.
Most of the book is about how American culture, products and influence is spreading across the entire globe. A few comments caught my special interest. The first is this statement:

In the Twentieth Century there seems to be ample ground for believing that the Americans will distance us in science more decisively than in almost any other department of human activity. The reason for this lies, not only in the genius of the people, but because of the provision made for scientific research by the munificence of American millionaires is infinitely in excess of anything that is provides in the British Empire.

The second point was this:

Our patent laws, instead of encouraging invention on the part of those who have brains but no money, absolutely handicap the poor man, and leave him helpless to profit by his own inventions.
. . .
The American patent law secures a patentee protection for seventeen years for a total cost of ₤8. To secure a patent for fourteen years in this country requires an expenditure of ₤99. The American Patent Office makes a fairly thorough examination of a patent, and, if required, the applicant is assisted to put his application into proper shape. With this stimulus to invention, it is not surprising that the inventive genius of the American has outstripped that of the Old World. Fortunately this can be remedies, for our Patent Office is one of those institutions which can be Americanised with the greatest ease.

In other words, the policy agenda is funding of basic research and patent reform. Sound familiar?
Two other quick points. Stead makes much of the American educational system as a source of our success. That too sounds familiar. But he also points out this factor:

Not only do the Americans equip all their universities with magnificent apparatus and adequate endowment, but they send their ablest student abroad to study with the best experts in every branch of science. They tap the brains of the world, and keep themselves fully abreast of the latest results of modern research.

That ability to absorb information and knowledge from where ever it may be found is something that has been lacking at some times in our recent past. The not-invented-here syndrome and the belief that we were the pinnacle of knowledge have been all too familiar as well.
Happily the US innovation system as currently evolving is embracing the open innovation process – restoring that ability to “tap into the brains of the world.” Unhappily, travel restrictions and immigration policies are making it more difficult. One step forward, one step back.
Some things never change.

Consumer Electronic Show awards – and not green

Business Week has this story on this weeks’ announcement of the Consumer Electronics Show innovation awards – CES Awards: A Push to Innovate:

This year, the judges lauded pared-down designs which focused on blending functionality with panache. The Bowers & Wilkins Zeppelin iPod dock, for instance, is an audacious form which still promises high quality sound projection. The Drop cellphone handset, by fuseproject, is an exercise in radical chic, with a form based on the shape of a water drop.
Of more concern to eco-watchers was this year’s apparent lack of focus on issues of sustainability. Last year’s awards were clearly green-themed, with winners including Herman Miller’s (MLHR) eco-aware, LED-clad Leaf lamp and Intel’s (INTC) energy-efficient Core 2 Duo processor. Despite the judges’ insistence that green criteria make up an important part of the judging process, the lack of a statement could signal the environmental train is running out of steam.

Either that, or the designers are still struggling between cool design (panache) and functionality (as characterized by eco-sustainability). Or maybe it is a continuation of the clash between performance and eco-sustainability.
In any event, designers need to move beyond this either or. Designs shouldn’t win because they are eco-sustainable. Eco-sustainability should be an integral part of all designs. Eco-sustainability should be a threshold criterion – not something that you give bonus points for.

Consequences of information overload

Sticking with the theme of information overload, I ran across this quote from columnist Jeffrey Shaffer back in February (A drawback of the Information Age | csmonitor.com):

The old saying that knowledge is power still holds true, but how does anyone with a thirst for knowledge avoid being drowned by the tsunami of information that crashes over us each day? My fear is that many Americans are sliding into a narrow groove that includes a few topics of personal interest, and everything outside the groove is simply ignored.

A serious concern — but not a new one. There seems to be two conflict impulses in human beings. One is to retreat into narrow grooves – something that we seem to have done since the dawn of time. The other is the hunger for information/gossip. The impact of TV news was to shake up those grooves for a while by playing to that hunger. For a while, I think we got the balance right. Not perfect, but close. We will see whether the new media will be able to find its own balance.

Is it all just noise?

One of the reoccurring themes on this blog is the problem of information overload. Apropos that theme, I found this interesting comment in the most recent Economist’s story on social networking (Conversational marketing: Word of mouse):

Yet another problem, says Paul Martino, an entrepreneur who launched Tribe, an early social network, is that the interpersonal connections (called the “social graph”) on such networks are also of low quality. Because few people dare to dump former friends or to reject unwanted friend requests from casual acquaintances, “social graphs degenerate to noise in all cases,” he says. If he is right, social-marketing campaigns will descend into visual clutter about the banal doings of increasingly random people, rather than being the next big thing in advertising.

I sense “the next big thing” here: services/tools/applications to sort through all the noise created by the last “next big thing.”

Falling off the Flat Earth?


















Read this free online


Norm Augustine has written a new book, Is America Falling Off the Flat Earth?
Much of the book is an expansion and elaboration of the topics covered in the report he Chaired – Rising Above the Gathering Storm. Like that report, these essays should raise concerns.
One quibble: I think he overstates the “death of distance” argument. There is still a strong need in many areas for tacit knowledge and “being there”. But he certainly does not overstate the impact of the telecommunications revolution and the impact it has had (and will continue to have) on US based employment:

It thus appears highly likely that the United States will suffer a substantial wage disadvantage for many years to come and that some means will have to be found to offset that fundamental tilt of the flat earth away from America.

To produce such great accomplishments, our economic system, evidencing its version of what has been called creative destructionism, destroys 29 million jobs each year while generating 31 million new jobs. In fact, about one-sixth of all jobs in the United States are destroyed in any given year. Mathematicians would describe the process as encompassing the most hazardous of calculations in that it concerns relatively small differences between relatively large numbers, and economists would say that the job market is highly volatile. But if one assumed a 10% adverse change in both job creation and job destruction, it would result in the disappearance of twice as many net jobs as are now being added. Such is the tenuousness of life in a modern economy.

For me, one of the most instructive sections of the book is entitled “Welcome to the 21st Century Board Room.” Augustine knows of what he speaks. As the CEO of a Fortune 100 company and member of numerous Boards, he has been there.
He hones in on one of the key questions:

it is instructive to ask, What is an American firm? For example, one respected company with which I have been associated as a director for 18 years was founded in the United States well over 170 years ago and maintains its headquarters in the United States, but some 10% of its owners (shareholders) are foreign; over half its customers are foreign; over half its employees are foreign; and not long ago its CEO was foreign. Is that an American firm, or is that a global enterprise? And even if it were judged “an American firm,” the most disastrous thing a CEO could do for any firm’s employees and shareholders alike would be to make business decisions designed to protect the interests of a few if those decisions are harmful to the competitiveness of the organization as a whole and thus endanger the prosperity, even survivability, of the enterprise itself—and the jobs and profits it sustains.

But that outlook extends beyond the Boardroom:

In the case of most large US employers, it is quite probable that a substantial majority of their shares are owned by institutional investors, and the primary, if not sole, interest of that set of shareholders is financial return—preferably near-term financial return—and certainly not the matter of preserving jobs. In fact, announcements of job layoffs in times of prosperity are almost always greeted favorably on Wall Street. Ironically, the institutional investors who own those companies often are fiduciaries for the pension funds of American workers—workers who, for their own part, have seldom displayed any great reluctance to purchase foreign-made cars, television sets, and DVD players if they thought doing so was in their immediate interest as consumers.

He also points out that universities are becoming global:

Not atypically, the University of Chicago states, “We educate the next generation of the world’s leaders, not just United States leadership,” and a few years ago, 260-year-old Princeton University changed its motto from “In the Nation’s Service” to “In the Nation’s Service and in the Service of All Nations.”

Also of interest was his take on the work ethic – or lack there of:

Gilman Louie, the Silicon Valley entrepreneur and former CEO of the high-technology firm In-Q-Tel, tells of attending a lecture by an industrial leader in Japan at which the student audience spontaneously began chanting in unison the Japanese word for innovation. Some businesses in India outfit work cubicles with cots for employees who elect to work late and remain overnight. On a visit to Bangalore, I was told that the young engineers and computer scientists writing software were so committed to their tasks that if an employer simply provides them pizza (yes, in India!) for dinner, “the kids will work all night.” In contrast, in a recent survey of 431 US business leaders, nearly three-fourths cited a lack of work ethic and professionalism as a characteristic of US high-school graduates. (As a case in point, I recently had difficulty gaining the attention of a clerk at—where else?—the customer- service desk of a local computer store because of her ongoing telephone conversation with a boyfriend. When the clerk finally appeared in front of me, I, rather amused by the ridiculousness of the situation, smilingly remarked, “You know, if you worked for me, I’d fire you!” The clerk returned my smile and replied, “That’s why I don’t work for you!”

He goes on:

USA Today reports one US business executive as saying that “[organizations] are realizing it’s less risky to [employ] internationals because they’re more coachable, more socialized, have no posses, and have not been Americanized.” That executive predicts that in his field, by about 2010, foreigners will fill 50% of all the jobs available, compared with the roughly 25% they fill today. The article goes on to assert that US youth are “lacking the fundamentals.”
The executive being quoted was not whom one might expect. It was not the CEO of some high-technology company, such as IBM, Microsoft, or Dell. Rather, it was George Raveling of Nike—speaking of basketball players in the National Basketball Association!
Raveling’s remarks are echoed by Red Auerbach, legendary coach of the Boston Celtics: “All those years I traveled overseas and held clinics, I said to people, ‘You know what? There’s going to come a day when these countries are dangerous for us because these guys are listening. You look at the foreign kids who come over and everyone of them is solid fundamentally. Not our guys. No one can teach them because they all think they are stars when they’re 15.” As if to punctuate his observation, the United States had just finished in sixth place in the world basketball championships.
Former NBA executive Jerry Colangelo could easily have been referring to America’s free-enterprise system and our system of higher education rather than basketball (or baseball, for that matter) when he lamented, “We invented the game, we taught people how to play the game, and they came back and knocked us off the perch.” The two teams in the 2007 NBA finals, San Antonio and Cleveland, had half and one-fourth of their players from abroad (including the tournament’s Most Valuable Player), respectively. Their players came from Argentina, France, Slovenia, Netherlands, Lithuania, Serbia and Montenegro, Brazil, and the Virgin Islands. No fewer than 28 countries were represented on the rosters of playoff teams. NBA Commissioner David Stern is reported in the above mentioned USA Today article as being “startled at how fast the rest of the world has come along.” To take an example from another sport invented in the United States, fully 44% of the starting lineups in last year’s major league baseball all-star game were foreign-born. This trend is being replicated in many fields other than basketball and baseball in which, ironically, other nations are successfully adopting our own proven but oft-ignored practices. In the case of economic competitiveness, the nations posting the most remarkable gains in recent years have to a large extent been doing so simply by copying the attributes of our systems of higher education, business management (pre-Enron era), and free enterprise and in many instances implementing them more effectively than we.

On how we can compete:

Given the immense population disparities among nations, America cannot reasonably hope to produce the same number of engineers as, say, China or India. Nor does it need to do so. What is needed is not more engineers capable of performing relatively routine engineering functions—those jobs have already been commoditized and will continue to move abroad—but more engineers capable of creative, innovative thinking, engineers who can challenge the status quo and “see around corners,” engineers who are entrepreneurs, and engineers whose ideas are bounded only by a solid understanding of the fundamental physical laws of nature.

On Wall Street and innovation:

But before condemning industry, consider the following incident that occurred a few years ago at the company where I was employed. Motivated by an unusually large stable of highly promising research opportunities, the company’s management conducted a briefing for Wall Street analysts to inform them of a planned increase in investment in research and the promise this would offer for the company’s future growth and profitability. At the end of the briefing by the company’s president, most members of the audience ran from the room and sold the firm’s stock. The company’s share price dropped by 11% during the next few days, then gradually declined for nearly 2 years before the tide could be stemmed. When, shortly after the debacle on Wall Street, as the event became known in the company’s research laboratories and executive suite, I asked one of the attendees at the briefing what had been said that was wrong, the analyst impatiently responded, “You should know that it takes 10 or 15 years for research to pay off . . . if it does at all. Your average shareholder owns your stock for about 18 months, doesn’t care what happens to you 10 or 15 years from now, and certainly doesn’t want to pay for it. In fact, by that time the investor will probably own one of your competitors’ shares and would be just as happy if your firm were not competitive.”

On finding our niche:

Even when undertaking all reasonable steps to remain competitive in science and technology, it is unlikely that on the flat earth any nation, even one as wealthy as the United States, can maintain a position of such broad prowess as the United States has enjoyed in recent decades. A few areas can undoubtedly be singled out in which to seek prominence, more areas can be pursued wherein a nation can be a “fast follower” in applying new knowledge, and still more will simply have to be monitored or even forgone.

On the patent system:

The US patent system is in many respects antiquated. In the words of Michael Splinter, CEO of Applied Materials, Inc., “Those of us who are patenting inventions are becoming hostages to those who are inventing patents. The current system is an invitation to litigation.” It seems that the jobs that our patent system is creating are largely for lawyers, not scientists, engineers, and entrepreneurs and those they serve.

On market forces:

It is tempting, especially for people who are disciples of Adam Smith (a group that includes myself), simply to dismiss the untidy competitiveness matter that results from this drift by saying, “Let market forces solve the problem.” But, unfortunately, that is the problem—at least from America’s perspective. Indeed, market forces are solving the problem. They are solving it by moving jobs outside the United States and by reducing or limiting compensation and benefits for employees who remain in the US workforce.
. . .
The irony is that “American” companies may well survive, and their owners even prosper, but market forces will cause this to be at the expense of America’s workers. In such a scenario, America could evolve into a nation comprising a number of extremely wealthy shareholders (fully 55% of Finland-based Nokia’s shares are owned by Americans) and a few corporate headquarters (at least for a time) mired in an enormous sea of unemployment. That is not a formula for stability, national security, or quality of life for most of America’s future citizens.

I especially like his 7 intangibles of the innovation ecosystem:

The first is an environment that provides researchers and inventors the freedom to explore—an environment that offers creative, inquisitive people the opportunity to pursue promising new avenues that may appear unexpectedly in their research and to be rewarded for their successes.
The second element is an atmosphere wherein disruptive ideas are welcomed, not discouraged or dismissed.
Third is an environment that is tolerant of risk—not irrational, injudicious, intemperate, or “overly exuberant” risk but rather prudent risk based on considered judgments that offer commensurate payoffs.
Fourth is an understanding that failures must not be unreasonably punished.
Fifth is an environment that produces and facilitates the search for discontinuities.
Sixth is an interactive environment wherein creative people can identify and pursue synergistic cross-cutting technologies.
Seventh is the acceptance of the notion that those responsible for managing the innovation process must not run around pulling up the flowers, as the saying goes, to see whether their roots are healthy. Patience, continuity, and their close relative perseverance are all fundamental catalysts of successful innovation.

Those are some of the insights I’ve taken away from the book. I’m sure you will find your own.

Standardizing ads

Much of the new economic focus these days is on creativity and customization: “right now and just for me.” But even in the I-Cubed Economy, the allure of standardization is great (and profitable). This is especially true as services attempt to increase productivity. One technique is the standardized template — think Microsoft’s document templates. Here is another example from the one of the most creative of industries – advertising – and one of the most personal forms – the political ad. Web Start-Up Offers Canned Campaign Ads – washingtonpost.com:

For $499 plus the cost of airtime, Spot Runner will plug your photo and personalized narration into a generic ad and air it on television in about a week. By comparison, traditional ad agencies can charge thousands of dollars, and the creative process can take months.
. . .
Spot Runner’s political-ad division, which launched this year, is a small part of the online agency’s “ready-to-air” ad business. A handful of young Web companies — Spotzer, Pick-n-Click Ads, Cheap TV Spots — offer similar template ad services to car dealerships, jewelers, fitness clubs and other businesses that don’t have big advertising budgets.
The ads aren’t for those looking to be unique. Templates are created mainly from stock footage and file photos, which eliminate the high costs of camera crews and filming.

However, there are limits to the holy grail of standardization: scalability —

Spot Runner promises clients that their ads will run exclusively in a given market to ensure that viewers don’t see the others using the template.

Do the ads work? Well, that begs a larger question as to whether any political ads really work. In the most recent election in Virginia, one candidate who used the ads won and one lost. What TV ads like this is promote name recognition and awareness. So don’t expect the big boys and girls to be using these services anytime soon. In those races, uniqueness is a major factor.
But for local races where getting your name out is half the battle, these low-cost ads may be a way to have a big time splash. As Del. Robert G. Marshall (the winner) is quoted as saying:

“I was in Costco walking down the aisle to get some maps,” he said. “A guy stopped me and said: ‘You’re Delegate Marshall. I saw your ad.’ “

And for a political candidate, that is a gold mine – delivered through a low-cost standardized product.
So, as services expand, look for this paradox: standardization and uniqueness running in parallel. Both are important factors in the I-Cubed Economy.