IT has quickened the pace of creative destruction in business. To stay ahead, some companies will have to adapt their business culture to encourage rapid experimentation and decision-making based on evidence.
Studies within the software industry show that ideas most people support intuitively actually fail half the time when they are evaluated through controlled experiments.
Trusting Data, Not Intuition : Is the left or right version of this home page for a previous version of Microsoft Office more likely to produce sales? The right version might seem appealingly uncluttered. But when subjected to tests with actual Web users, it performed 64 percent worse than the left. Credit: Microsoft.
Four Principles for Crafting Your Innovation Strategy
Think big, start small, fail quickly, and scale fast.
Netflix is an example of a business that thought big–in its case, about streaming video. As far back as 2001, CEO Reed Hastings spent $10 million exploring streaming.
Hastings initiated (and junked) small projects with streaming while continuing to build the DVD rental model of Netflix. Finally, Hastings found a winning model to stream video and was able to scale it quickly to his customer base.
Some analysts argue that open innovation, or sharing ideas outside your company, can benefit you.
Implementing solutions developed outside your company can reduce time to market for a product, says Henry Chesbrough, a professor at the Haas School of Business at the University of California, Berkeley.
Chesbrough argues sharing ideas can lead to new revenue streams through licensing or spin-offs.
Open Innovation at GE Smart water: The Intellih20 water meter design won $100,000 from General Electric. Credit: Capstone Metering
In July 2010, GE started a competition called the “ecomagination challenge” to find the best innovations to move toward a “smart” electric grid.
GE got 4,000 submissions in the contest, gave $100,000 cash awards to five young companies and formed strategic partnerships with 12 others.
Leveraging Academic Labs Laser on a chip : Funded under an HP Innovation Research Award, this chip, fabricated by Professor John Bowers and his group at the University of California, Santa Barbara, uses a new technique to integrate a 50-micron laser on a silicon photonics platform. Credit: HP
For the past four years, Hewlett-Packard has embraced “open innovation” strategies to boost R&D on projects five years into the future or more. Rather than turn to contract work for basic research, HP’s Innovation Research Program writes $50,000 to $70,000 grants to university researchers.
“ If you bring outside things into your organization, you reduce your time to market, because you can work with things that have already undergone some level of development. You can also share some of the costs of development,” says Henry Chesbrough.
Henry Chesbrough, a professor at the Haas School of Business at the University of California, Berkeley Credit: Alexander Kjølstad, Smart-Media AS
Normal business operations generate a wealth of IT data, from phone logs, e-mail traffic, or Web servers.
However, many companies have yet to see the value in this data, or that it generates a comprehensive picture of their business.
Consultants and business software companies now offer ways to mine this IT data for insights on customer relationships and internal business operations.
Crowd wisdom : Software that scours blogs, Twitter, and message boards can identify clusters of conversation related to particular topics. Here, bubbles represent discussion about Comcast. Credit: Collective Intellect Finding Business Insights in Text
Collective Intellect offers clients software that scours the Web for meaningful conversations about their product.
The software is trained to search for a particular meanings related to a term – for example, so it can tell whether people are curious about apple the fruit or Apple the company, or Crocs shoes versus crocodiles.
The software will send regular, detailed reports of online discussions related to the defined topic. An online dashboard shows posting activity over time and the volume of positive, neutral, and negative posts.
Getting More Value From Cell Phone Data Phone Spy : An experimental software program that uses smart-phone activity to determine productivity tells a user that he is more active than others in the experiment, but also less on-task. Credit: Alex "Sandy" Pentland
The proliferation of smart phones presents a prime opportunity to measure unseen behaviors and social interactions. For instance, MIT professor Alex Pentland has been able to show how peers influenced a group of students’ political opinions, eating habits or illness–all through tracking digital traces such as SMS patterns, Bluetooth connections and call logs.
Software companies like Splunk are offering businesses an easy way to mine that IT data for valuable business insights -- everything from Web server and phone logs to internal network traffic to the e-mail system.
Malice mapped: Canadian telecom operator SaskTel uses Splunk to track people using their cell phones for file sharing, breaking the company’s terms of service. This map shows the location of people who use extremely large amounts of data, often an indicator of file sharing. Credit: Splunk