Technology innovation awards — and beyond

Today, the Wall Street Journal published the winners of its Technology Innovation Awards.
[One pet peeve: unfortunately, the shorthand version they use for these awards is just “innovation” — which continues the misplaced notion the innovation = technology and only technology.]
While the title was “technology innovation,” at least one winner was more about a business method than a technology. The e-commerce division winner was Receivables Exchange LLC, based on its online marketplace for small businesses receivables:

Receivables Exchange aims to make it much easier for a company to tap the cash locked in its receivables. A company posts its unpaid invoices on the exchange, which screens the seller to make sure it has a certain minimum revenue and has been in business for at least two years. The screening can be completed within 24 hours and the invoices can be posted the next day. Bidders offer to buy some or all of the posted receivables, and the exchange takes commissions from the buyer and seller.

Not a new technology– but the application of existing technology to a new market.
Maybe next year they can expand the categories or the nature of the award itself into a real “innovation” award — covering all the aspects of innovation.

Branding U

Every university has its own identity — as any proud alumnus will tell you. And the universities carefully market that brand — just look at the “identity ad” from each of the opposing schools on every televised collegiate sporting event. Here’s a quirky new effort in University branding – from today’s Washington Post (American University, now home to the ‘American Wonk’):

New York has financiers. Las Vegas has gamblers, and Austin has slackers.
Washington? Washington has wonks.
That’s the inspiration behind a new American University effort to distinguish itself among a crowd of local colleges competing for attention by branding the campus as the home of the “American Wonk.”
The school has handed out 3,500 free T-shirts imprinted with 18 slogans, including “Legal Wonk” and “Arts Wonk.” Ads have begun appearing at Metro stops and in local newspapers. And during alumni weekend in October, there will be a “Wonk of Fame” exhibit.

Now, every school in the DC area touts its connection with the policy world. But it seems that they all also try to maintain a broader brand. It will be interesting to see how the other schools react (if at all) to this very target attempt to corner the “wonk” brand.
As a self-proclaimed wonk, I may have to get one of those t-shirts. And add the University of Michigan logo (Go Blue)!

Is "design thinking" about design?

Yesterday’s posting illustrated the design process from the 1960’s. My point in posting this was to highlight the range of skills involved. However, there is another point: the process itself.
The example given followed a very linear process – ideation, prototyping, consumer testing of final options. The same exact process is the standard linear model of innovation.
There is a different process however called design thinking. As I noted in a posting a number of years ago:

Design thinkers must set out like anthropologists or psychologists, investigating how people experience the world emotionally and cognitively. While designing a new hospital, IDEO staff stretched out on a gurney to see what the emergency room experience felt like. “You see 20 minutes of ceiling tiles,” says [Tim] Brown [CEO of the design firm IDEO], and realize the “most important thing is telling people what’s going on.” In a completely different venue, IDEO visited a NASCAR pit crew to come up with a more effective design for operating theaters.

Wikipedia uses this definition:

Design Thinking is a process for practical, creative resolution of problems or issues that looks for an improved future result. It is the essential ability to combine empathy, creativity and rationality to meet user needs and drive business success. Unlike analytical thinking, design thinking is a creative process based around the “building up” of ideas. There are no judgments early on in design thinking. This eliminates the fear of failure and encourages maximum input and participation in the ideation and prototype phases. Outside the box thinking is encouraged in these earlier processes since this can often lead to creative solutions.

Key to the process is involving the client in the design process – which is made possible by rapid-prototyping. As the Deputy Chief Executive of the UK Design Council (Trust me, I’m a Designer: How Design Research Can Influence Businesses, Governments and Policy Makers?) put it:

More and more business leaders and policy makers also see design as a strategic business process that helps to identify and meet real user needs.

However, designers are still ambivalent about “design thinking.” Last March, the Economist held its Big Think 2010: Rediscovering imagination: competing on ideas. Core 77 — a major design magazine — posted the following musings on the meeting, Design thinking: Everywhere and Nowhere, Reflections on The Big Re-think:

There’s something odd going on when business and political leaders flatter design with potentially holding the key to such big and pressing problems, and the design community looks the other way.
To understand this paradox, we need to look back at why business and political leaders have become so enamoured with design, and why so many designers struggle with the concept of Design Thinking.

Unfortunately, their exploration of the question was all about what makes good design — rather than the process. From my point of view, I think the discussion of “design thinking” has terminally confused two concepts: 1) how good design creates a competitive advantage – i.e. the iPod, and 2) how the process developed by designers of can be utilized to improve innovation.
We need a way to separate out the concepts. The Core 77 blog posting ended with this: “How does thoughtful design sound?” For the good design part of the discussion, I agree. But what about the process part? Since “design thinking” keeps falling back into the “design” part of the phrase, how about a stress on the “thinking” part? Maybe “creative thinking”? But that doesn’t quite sound right either.
Any suggestions?
[For more on this see Roger Martin’s essay last year in BusinessWeek, The Design of Business.]

The range of intangible intensive work

One of the important features of the I-Cubed Economy is its range of skill-intensive activities. It is not just a bunch of folks thinking great thoughts or the classic BOGSAT (bunch of guys sitting around a table) — although there is some of that.
Here is a wonderful example from the early 1960’s:

Design story: The Decanter from Landor Associates on Vimeo.

What strikes me about this story is not just the “high-end” intangible work — the original design and the back end consumer testing. The tacit knowledge and skill level of the model makers is quite outstanding. The prototypes are not mass produced, machine made goods but carefully crafted one of a kind objects.
Thanks to Tim Brown’s blog Design Thinking for info on this.

HP & Oracle case: follow the money

Litigation over intangible assets — especially proprietary information and IP — is a fact of corporate life. But sometimes it is hard to know if intangibles are really the issue or just the pretext. A perfect example was yesterday’s settlement of the HP – Oracle case on Mark Hurd. As you may remember, HP sued Oracle and Hurd when Hurd (former HP CEO) took a top job at Oracle. HP claimed that Hurd would bring valuable proprietary information over to Oracle.
According to the New York Times:

in a filing with the Securities and Exchange Commission on Monday, H.P. said it had modified its separation agreement with Mr. Hurd. He effectively waived about half the compensation owed him. Mr. Hurd agreed to give up his rights to the 330,177 performance-based restricted stock units granted to him on Jan. 17, 2008, and to the 15,853 time-based restricted stock units granted on Dec. 11, 2009.

Was it all just about the money — punishing Hurd by forcing him to give back some of his severance? Or was HP really interested in guarding their intangible assets? Or some combination – where the size of the give back was calculated to the potential damage?
We will probably never know. But my guess is that given the difficulty HP probably would have had pursuing the case, the protection of intangibles was secondary to the money.

More on that valuation problem

HP is at it again. According to a story in Business Week – HP Shows Proclivity for High Premiums With ArcSight:

Hewlett-Packard Co. outbid at least two rivals to clinch its acquisition of ArcSight Inc., two people familiar with the $1.5 billion transaction said, underscoring HP’s willingness to offer high prices for growth.

In my earlier posting, I raised the question of why HP would buy a company for 3.5x the pre-bidding war market value (and why Dell would have offered almost 2x pre-bidding market value to begin with). The answer, at least according to Sam Palmisano of IBM, is “they had too.” Palmisano’s view is that since HP has cut internal R&D, they have to buy innovation from outside.
That raises an interesting question. What are the benchmarks for valuation? Remember that there are three basic methods of valuation: actual cost, replacement value and market comparables. In this case, we generally look at market comparable. But HP’s benchmarks for its acquisitions, if Palmisano is right, is replacement cost. What would it cost me in R&D to create what 3PAR and ArcSight already have. And, of course, since time to market is critical in these technology-intensive areas, how much would it cost to create this capability before my competitors do it.
Thus, this might be a perfect case of the value to the buyer being extraordinarily greater than the value on the general market. This information asymmetry is a standard problem in economies. So, how do we figure that into the calculations of intangible values?

Anti-trust and hiring employees

Here is an issue that I’m not really sure how I feel about. According to a story in the Wall Street Journal – DOJ, Tech Firms Near Deal in Hiring Probe:

Several of the U.S.’s largest technology companies are in advanced talks with the Justice Department to avoid a court battle over whether they colluded to hold down wages by agreeing not to poach each other’s employees.
The companies, which include Google Inc., Apple Inc., Intel Corp., Adobe Systems Inc., Intuit Inc. and Walt Disney Co. unit Pixar Animation, are in the final stages of negotiations with the government, according to people familiar with the matter.

As a side note, I note that this list does not include Oracle and HP — reference their ongoing war over the hiring of Mark Hurd.
My ambivalence on this issue is whether such restrictions help or hinder innovation. The companies are arguing that such agreements are needed to reduce the risk of company collaboration — i.e. that having employees from different companies working together increases the likelihood that one of those companies may identify one of those other employees as a target for recruitment. On the other hand, worker mobility has been an important part of the Silicon Valley success story. In fact, some have argued that the lack of non-compete agreements in California as been an important part of the employee mobility and the subsequent positive information flows. (See earlier postings about an Oracle/IBM fight on a top hire).
At least the action show that folks in at least one part of the government are taking seriously the idea that employees are a resource. As Mary Adams points out in her piece Are Workers a Cost or a Resource in Your Organization?, a lot of companies still don’t get it. It would be interesting to see the DOJ economic analysis after it is all finished.

And the manufacturing transformation elsewhere

Just a note to reinforce the importance of transforming manufacturing (see earlier posting), there is this story as well in the New York Times – China Shifts Away From Low-Cost Factories:

Companies here in China’s industrial heartland are toiling to reinvent their businesses, fearing that the low-cost manufacturing that helped propel the nation’s economic ascent is fast becoming obsolete.

These companies are moving into everything from manufacturing related services (e.g. inventory management) to higher-value added product development.
Bottom line: manufacturing is being transformed from low-cost mass production to a higher-valued process. America needs to keep up with that transformation. And we need government policies to help companies and workers make that transformation.

The coming manufacturing revolution

I have long argued that manufacturing has become a knowledge intensive activity. Part of that transformation is a techniques of 3-D printing. Up until now, much of the technology was used for rapid-prototyping. A company could “print” a three dimensional version of a part or a product — which would speed up the design and development process.
But now, the techniques has moved beyond use in the product development stage to actual production. According to a story in the New York Times, 3-D Printing Is Spurring a Manufacturing Revolution, some companies are using the technique to create finished products. These include exotic furniture, iPhone cases and prosthetic limbs.
As the story notes, however:

Moving the technology beyond manufacturing does pose challenges. Customized products, for example, may be more expensive than mass-produced ones, and take longer to make. And the concept may seem out of place in a world trained to appreciate the merits of mass consumption.

On the other hand, the story notes that “printed” prosthetic limbs can be made for about a tenth of the cost of a customized handmade version. As Scott Summit of Bespoke Innovations noted:

“We want the people to have input and pick out their options,” he added. “It’s about going from the Model T to something like a Mini that has 10 million permutations.”

That is the future of the I-Cubed Economy.

Further update on 3PAR bidding war

Over at M•CAM’s blog Patently Obvious, they have done an analysis of the 3PAR deal from the point of view of the patents – and the finding is enlightening:

In the frenzy of attempting to place the winning bid, neither HP nor Dell fully considered the potential liabilities associated with owning 3PAR’s intellectual property. For $2 billion, HP may have purchased the right to settle over $3 billion of new patent lawsuits.

As the full report goes on to state:

By bringing 3PAR’s intellectual property into HP, the litigation risk to HP has gone through the roof – an observation that is not currently priced into the market.

Once again, it will be interesting to see how they handle the this in the financial statements. I’ve commented before on the question of how they will value the acquired intangible assets. Will they also discuss the litigation risks in the MD&A section?