Survival of a business or an economy requires constant changeImage: show (Greek-looking) cargo boats morphing into modern day cargo ships and then being sucked up into bytes of data, data in the cloud (tornado? Vacuum?)To Innovate is to SurviveFrom looking at hundreds of thousands of years of evidence dating back as far as our means allow us to see, we have learned that to survive is to adapt. Microbes mutate to develop resistance to harmful substances; living organisms adapt and learn new methods of survival in response to changes in their environments. So too must a business adapt in order to survive. Survival of an economy requires constant change. Now more than ever the physical and virtual worlds are colliding. We are undergoing a transformation from physical shipping of goods (in Greece’s maritime economy and all over the world) to transportation of bits and bytes.
The Digital World is inexpensive and accessible to the massessThe opportunity to participate in this digital world is greater than ever today because compute power has shrunk from mainframes to iPhones enabled via cloud services. Inexpensive and accessible.
We are entering the “post-PC Era” which will be defined by machine-to-machine communication and increasingly rich connections between each other and the world around usImage: mesh network, wireless sensors, M2M RF transceiver The Point: The ability to monitor and manage environments and processes through sensors and connectivity will create new forms of value creation, new services, new categories and new uses. (Machine to machine)
We are becoming constantly connected to the “internet of things”The Point: We will be constantly connected to the internet of things as any device that costs 10 Euros or more will be connected to some network in the next 5-10 years
There is a heightened focus on innovation todayThe Innovator’s Dilemma in the Global EconomyThanks to the rapid pace of change enabled by this transformation, there is a heightened focus on innovation today. In one quick pass over the Business Bestsellers section in any bookstore, you will find shelves of books on innovation, expanding your business model, and exploring new, global markets.
Wipro and Nokia succeeded in total corporate transformation and innovation by taking a businesses that was built around the manufacturing of basic goods (e.g. tires, goulashes, sunflower oil) and transforming their businesses to participate in the transformation of their countries’ economies and the global market placeIt’s a Great Time to be an Entrepreneur – India and China are taking advantageIndia and china are leading the drive toward wealth creation in 21st century - these guys benefit from it being a great time to be an entrepreneurWipro and Nokia - nokia used to make rubber, Wipro used to make oil and consumer products. Successfully reinventedthemselves.
Flexibility and innovation by new intrants threatens the foothold of incumbentsIt’s a Great Time to be an Entrepreneur – flexibility to innovateNew companies are springing up every day and introducing new ideas, new business models, and new cultures of innovation. Because they lack a prior model of success, these companies have the flexibility to innovate fearlessly, and some have become a game-changing threat for many incumbents. Two recent examples include the way Skype has transformed consumers’ expectations for free telephony service and video conferencing capabilities;, and how Netflix’s online library of digital media streaming catalogue is changing the consumer appetite for traditional cable and satellite television. For established businesses, the problem with the Innovator’s Dilemma is that their past successes often hinder the potential impact of their new business ventures.
The point: This focus on innovation is in large part due to saturation within existing markets: roughly 86% of the world’s goods and services are consumed by less than 20% of the world’s population. As established markets saturate, businesses have begun to turn their focus to unexplored markets. In fact, in a recent IBM study, global CEOs expect revenue from new sources to double over the next five years. Another major driver for the current heightened focus on change, growth and innovation is the ease with which businesses can reach a global consumer base and a global talent pool. However, in spite of the market forces uniting to encourage innovation, many established businesses struggle with the practical implications of change and innovation. Some leaders are unwilling to push for change for fear of failing, or disrupting a current (successful) business, or losing their jobs. Other leaders are willing to take a chance, but are unable to do so because they lack the resources and backing necessary to build momentum around change and innovation.
Low startup costs and barriers to entry make it a great time to be an entrepreneurIt’s a Great Time to be an Entrepreneur – low startup costsbarrier to entry/startup is low for new companies, allowing lots of companies to spring up and challenge the incumbents. New businesses today benefit from incredibly low business startup costs. Hardware costs have come down almost as quickly as processor speeds have increased in last ten years, the victory of commodity Intel-based PCs and low cost software, over expensive, proprietary hardware and software. As a result, today there is often more compute power in a car than what it took to put a man on the moon in 1969. Furthermore, open-source versions of all kinds of business and consumer software are freely available for use. Viral marketing and social networking has virtually eliminated conventional sales and marketing costs for many start-ups. In addition, access to global labor markets allows complex tasks, like software development, to be done for much less, or specialized skills to be more easily outsourced. In addition to all of this, you do not even have to be big to be successful in today’s global economy; application developers with good ideas can take their home grown (or increasingly dorm room) ideas from concept to production for a few hundred dollars. With all these factors on the side of today’s entrepreneur, established companies are falling farther and farther behind in the race for innovative ideas that can sustain their businesses in the 21st century.
How to become more nimble and survive in a hyper-innovative economyThe Point: Deliver the thesis of argument. The slide needs to show all three facets of argument: Bottom-up culture of creativity, out-of-the-box thinking for gathering VOC, and institutionalization of failureIdea:(Playing off Athens), Greek-looking structure with pillars, each pillar represents one of our principles of innovation. Modification of the below imageHow to Survive in a Hyper-Innovative EconomyAlthough the Creative Destruction of companies like Skype and Netflix is the life blood of growth and survival in an economy, no established, successful business is willing to surrender without a fight. Given the low cost of taking an idea from inception to market, it seems that any successful business with a mind toward innovation would be able to put aside some budget to support an initiative to foster new and innovative ideas. One reason that so many businesses struggle with innovation is that the roots of an innovation-focused company are deep and systemic. In an effort to mitigate risk, businesses often develop an “innovation arm” that operates almost completely separately from the rest of the organization. Even if that innovation arm successfully adopts the culture and principles of an innovation-focused company, the arm remains separate and is subject to the policies, politics, and principles of the parent organization, which often stifles the group’s creative potential. As a result, successful evolution and survival in this hyper-innovative economy requires a fundamental shift in the principles and values of the core business. The remainder of this article will outline three fundamental changes that established businesses must be willing to undertake to plant the seeds for innovation at the core of their business: First, foster a culture of creativity that is both top-down and bottom-up. Second, try entirely new approaches to understanding your customers’ needs and behaviors. Finally, institutionalize failure, and recognize that failure is a necessary step toward success.
Argument 1 of 3: Fail and Fail Fast – It’s not failing, it’s learning what does not work. DiagnosisJust because an idea or product fails, it does not mean that the process of creating and trying the idea was a failure. It means we learn what does not work. We need small failures to help determine those boundaries between what will work and what will not work.
. Edison was not the only one to look at failure as an educational investment. Upon losing around $10 million on a failed experiment, a former Vice President at IBM prepared his resignation letter in anticipation of his firing. However, legendary former president of IBM Tom Watson Jr. refused to accept the resignation, saying “Why would we want to lose you? We’ve just given you a $10 million education.” Experiment was around shrinking foot print of mainframe computers and ultimately went on to play an important role in the early proof of concepts for the PC platform
Failure helps us identify the boundary between what works and what does notIt is difficult to generate a winning idea without first generating hundreds of duds. When Thomas Edison invented the light bulb, he created roughly 10,000 failures before finding one that worked. When asked why he continued to try, Edison explained that he had not failed 10,000 times, but rather he had learned 10,000 things that definitely did not work. We diagnose issues with our cars and our bodies in much the same way: by testing things to rule out potential sources of the problem, we eventually reach the right diagnosis. Edison was not the only one to look at failure as an educational investment. Aside from the educational benefits of failure, our business history is littered with stories of failed ideas resulting in remarkable success. For instance, 3M invented a type of glue that did not stick, which became the compound used in Post-it Notes. Pfizer’s Viagra was created to relieve blood pressure, and although it failed it became one of the most successful failures in history thanks to its side effects. The message for business leaders is simple: rather than stigmatize failure and make leaders fear for their jobs when they take chances, institutionalize failure and accept it as a necessary step toward success.Sloane, P. 2004. Failure is the mother of innovation. http://www.innovationtools.com/Articles/EnterpriseDetails.asp?a=158Sloane, P. 2004. Failure is the mother of innovation. http://www.innovationtools.com/Articles/EnterpriseDetails.asp?a=158Sloane, P. 2004. Failure is the mother of innovation. http://www.innovationtools.com/Articles/EnterpriseDetails.asp?a=158
Argument 3 of 3: Fail and Fail Fast – Crises occur because of a lack of small failuresCrises occur because of a systematic lack of proactively managing and learning from small failures. If you doubt this statement, just consider the collapse of hundreds of financial institutions that granted adjustable rate mortgages to subprime borrowers over the last few years across the United States. Creating a corporate culture that tolerates failing often and failing early in the creative process is healthy when we learn more (and more quickly) from failure than if we had not failed at all. Today’s most successful organizations are able to quickly learn from early stage failures in their innovation processes, and these lessons enable a company to correct course before too much time and energy has been invested.
As more consumers connect to the internet of things, understanding customer needs becomes an even greater challengeArgument 2 of 3: Try New Approaches to Understanding Customer Needs The point - This is This is Part A of Argument 2 of 3 (try new "out of the box" approaches to understanding your increasingly diverse pool of customers). Part A’s point is that as a larger and more diverse pool of consumers becomes connected to the internet of things, understanding customer requirements becomes an even greater challenge.The fundamental building block of the sale of goods and services is an understanding of what the customer needs and wants. In fact, IBM’s global study of CEOs revealed that 95 percent of top performing organizations identified getting closer to customers as their most important strategic initiative over the next five years. As existing markets saturate and companies look to expand their horizons to emerging markets to capture new sources of revenue, gathering the voice of the customer becomes an even more difficult and more important challenge. As a larger and more diverse pool of consumers becomes connected to the internet of things, understanding customer requirements becomes an even greater challenge.
Innovate around constraints for the masses, rather than for the eliteArgument 2 of 3: Try New Approaches to Understanding Customer Needs – frugal innovationOur point - This is Part B of Argument 2 of 3 (try new "out of the box" approaches to understanding your increasingly diverse pool of customers). Part B is about frugal innovation as a way to approach emerging marketsTypically, in established markets, the most innovative goods and services are consumed initially by the wealthiest. Then, over time, these goods become more of a commodity. In emerging markets, some companies have flipped this pattern of adoption upside down, in a process that has become known as “frugal innovation,” or “constraint-based innovation.” With frugal innovation, companies innovate by identifying the most basic needs of a population and working backwards. For example, because India struggles with contaminated water, Tata Chemicals is building an inexpensive water filter that uses one of India’s biggest waste products – rice husks – as a filter, which will enable Tata to provide clean water to many people at a very low cost. Similarly, General Electric is currently manufacturing a hand-held electrocardiogram (ECG) known as the Mac 400, which is small, simple, and can run on batteries. The device delivers the same results as its more expensive counterparts, but it can be obtained for 40 percent of the cost of a traditional ECG. Its’ portability and price make it a perfect match to service the needs of emerging markets.
Take an ethnographic approach to understanding customer needsArgument 2 of 3: Try New Approaches to Understanding Customer Needs – corporate anthropologyThis is This is Part C of Argument 2 of 3 (try new "out of the box" approaches to understanding your increasingly diverse pool of customers). Part C’s point is about using corporate anthropologists to aid in market research.Another new and creative approach that has arisen as a method to understand entirely new and emerging markets is a formalized, anthropological approach to gathering the voice of the customer. Some companies have begun to employ corporate anthropologists to aid in their market research efforts. Under the direction of these corporate anthropologists, businesses are sending members of their team into the field for days, weeks, or longer to study the behaviors and needs of a new population. These team members hand out products and record observation on how the people react to and use the products. Through the insights from corporate anthropologists, mobile phone manufacturers have learned that rural communities in emerging markets often share a single mobile phone. This resulted in the development of low cost mobile phones that can store multiple user identities, each with their own address books and voice mail boxes. Corporate anthropology and frugal innovation are just two examples of the many opportunities that can be explored for companies to apply a new analytical lens to customer experience research in order to capitalize on the tremendous revenue potential of emerging markets.IBM Global Business Services. Capitalizing on Complexity: Insights from the Global Chief Executive Officer Study. 2010. Download the complete report at http://www.ibm.com/ceostudyThe World Turned Upside Down: A special report on innovation in emerging markets. April 2010. The Economist
Argument 3 of 3: Foster a Culture of Creativity – creative leadersThis is Argument 3 of 3 (culture of creativity), Part A (creativity starts with creative leadership). The implied message is that these companies should place more value upon creative approaches and creative attitudes amongst their executive/leadership team
Global CEOs see creativity as the most important 20th century leadership quality A culture of creativity starts with a creative leader who is not risk-averse. In a recent IBM study, over 1,500 CEOs across the globe voted that – above integrity, influence, openness, dedication, and other well-established characteristics of successful, 20th century leaders – creativity will be the most important leadership quality in navigating the complexity of our global economy. “Creative leaders expect to make deeper business model changes to realize their strategies. To succeed, they take more calculated risks, find new ideas, and keep innovating in how they lead and communicate.” Without a bold, outspoken, creative-minded leader at the top, a business will struggle with innovation because the leadership below will be less certain that that their creative ideas will have support from above. Consequently, fostering a culture of creativity takes more than just a lone creative leader; it requires that this creative torch is handed down through the ranks. Or, as the Harvard Business Review puts it, “creative leaders excel at creating creative leaders.” IBM Global Business Services. Capitalizing on Complexity: Insights from the Global Chief Executive Officer Study. 2010. Download the complete report at http://www.ibm.com/ceostudyRadjou, N., Prabhu, J., Kaipa, P., and Ahuja, S. 2010. How to Ignite Creative Leadership In Your Organization. Harvard Business Review. http://blogs.hbr.org/cs/2010/05/how_to_ignite_creative_leaders.html
A creative culture must also be built from the bottom upArgument 3 of 3: Foster a Culture of Creativity –Bottom-up creativityThis is Argument 3 of 3 (culture of creativity), Part B (need to generate a creative culture by drawing on the creative minds of your employees and customers - bottom-up).Creative culture must also be built from the bottom-up. Fortunately, the bottom-up part comes naturally to us; people like to offer their ideas because doing so plays upon our inherent psychological motivations, such as the desire to feel competent, satisfied, fulfilled, and proud, as well as external incentives like prizes and public recognition. Companies that excel at bottom-up innovation reach internal and external sources of creativity using open innovation platforms and participatory techniques, such as leveraging the collective opinions from social networks or crowdsourcing. With these techniques, businesses create incentives for employees, customers, or other bystanders to submit their ideas or provide suggestions. Using this information, businesses can identify unmet needs and develop solutions to address those needs. This approach has grown in popularity in recent months, and programs like My Starbucks Idea, Dell Ideastorm, IBM InnovationJam, Motorola Motofwrd and many others have started to catch the eye of the public.
Open innovation can solve problems in the later stages of the innovation process tooOpen innovation programs like those of Dell, IBM, and others generally target the early stages of the innovation process (idea and concept generation). Companies like InnoCentive have recognized an even greater potential of open innovation and have taken it one step further. InnoCentive has created an online market place that allows businesses to anonymously post very specific challenges to the web, making it possible to generate complex solutions to all kinds of obstacles that arise in the later stages of the innovation process. Using this portal, businesses can tap into the creative potential of people all over the world. All a business has to do is sign up, post a challenge, and sit back while the solutions of the creative genius of the world flow in. Companies like InnoCentive show the business world not only that innovation via crowdsourcing and previously unaffiliated third parties can be done effectively, but also that the infrastructure for open innovation already exists and can be used at very little cost and investment on behalf of the business.
Welcome to the Post-PC era where technology is opening up new ways for us to interact with each other and the world around us
The lines between the digital and physical world are blurringThe Point: Along with the shift from mainframe to cloud, we are entering the Post-PC era. The internet of things is emerging: Every electronic device that costs 10 Euros or more will be connected to the internet in 5-10 years. real power of internet is not the 5bn people, its when we have a trillion things on it. physical and virtual worlds fully collide.
Transcript of "Ideas for the Innovation Economy by Theo forbath"
Ideas for the Innovation Economy<br />Theo Forbath<br />
“Only the extremely ignorant or <br />the extremely intelligent can <br />resist change.”<br />Sokrates<br />