Mel Horwitch - Diversity and paradox: Managing modern innovation


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Mel Horwitch - Diversity and paradox: Managing modern innovation

  1. 1. Diversity and Paradox:Managing Modern Innovation Mel Horwitch Dean & University Professor CEU Business School September 30, 2011
  2. 2. Importance of Innovation: An Emerging Stark Choice−Pervasive Innovation & Value Creation vs. a Zero-Sum WorldOne Type of Another Type of Heritage:Heritage: Steam Power and theFrom Malthus (19th Indus Revolution; theCent) to Limits to Railroad & Telegraph (19thGrowth (1960s) to Cent), the Green―Peak Oil‖ (Today) Revolution in Agric, theNatural Resource Internet, Wireless, etc.Intensity Creating:Reflecting: •An Innovation-Rich,• A Zero-Sum/ Resource-GrowingResource- • Knowledge- IntensiveConstrained World World, &• Not an Attractive • A More AttractiveFuture Future: Needs A Planet Comprising Intelligent Communities © Mel Horwitch, 2011
  3. 3. Key Characteristics of Modern Innovation: Beyond R&D and Entrepreneurship A Distributed & Diverse Future Innovation Ecosystems Dynamic, Increasingly Complex & Multidirectional The ―New Geography‖ of Modern Innovation Revitalized Corp. R&D & Technology Strategy Increasing Global Importance ofGlobal Innovation ―Intangible Capital High Value & Diverse Services Innovation
  4. 4. Key Characteristics-1An Increasingly Distributed & Diverse Future: Primacy, Cyclicality, Dynamism & Emergence (Re-Emergence) of New Key Centers of Gravity• 19th Century: Britain and Later Germany• 20th Century: Germany, US, Russia andJapan•21st Century: New Geographic Centers(Especially Cities as Loci of Innovation); NewLinked Innovation Models--Distributed &Connected; Globalization of InnovativeCapabilities; Innovation of Innovation © Mel Horwitch, 2011
  5. 5. Key Characteristics-2: MODERN INNOVATION NOW IS NOT EASY OR SIMPLE— IT’S DYNAMIC, INCREASINGLY COMPLEX & MULTIDIRECTIONAL From Mfg Services (80%)/Know-Intensive Innovation The New Sophistication: Tension/Variety in Innovation Management– Prof. Mgmt vs. Creative Destruction 1950s 1960s 1970s 1980s 1990s 2000 9/11 2002 2011 Internat. R&D Glob. Tech Strat Distrib. Glob. Innov Silicon Valley et. al.High-Tech Entrepreneurialism Technology a Distinct Domain ―Reverse & Industrial R&D Dot-Bomb/NASDAQ Innova- Large-Scale Corporate a Distinct Function tion‖ Crash/(9/11/2008 Meltdown R&D and Innovation: Technology Big Government Again: Becomes Strategic Security/Global Terrorism; (Physical Space) Global Warming & Forgotten Legacy: Environment; Energy; Big Government and the Cities; Disease/Health; etc Cold War: Some New DOD, NASA, DARPA Digital-Based Innovation Ingredients: (Hardware, Software, Glob.Rivalry/ Design, Content, etc.)—E- Competitive- Business (―Silicon Alley‖) ness, BRICs ―Hybrid‖ Forms et al, Energy, of Innovation Mega-Cities- (Physical & Digital) Regions Emerging ―Platforms‖ of Bus. © Mel Horwitch, 2011 Innov./ (e.g. mobility, broadband, soc. networks, etc)
  6. 6. Key Characteristics-3Revitalized, Opened, Linked & Transformed: Modern Global CorporateR&D & Innovation Strategy
  7. 7. Samsung’s Global R&D Network Office in Tokyo SDS SDS China SDS America Europe Tokyo Office in JapanLondon Europe IT Germany IT CenterCenter New Jersey e- Data Center Tijuana e-Data Center Gwacheon & Gumi e-Data Center India R&D Center China Office in Shanghai R&D Center Singapore Asia IT Center Beijing China IT Center ● Overseas Branches (USA, UK, China) ● Overseas Offices (Japan, Germany, China) ● Overseas R&D Centers (San Jose, NJ, Japan, China, Russia, Israel, India) ● Data Centers (Gwacheon, Gumi, London, Singapore, Beijing, Tokyo, Tijuana, New Jersey) ● Global Networks (250 nodes in 64 countries)
  8. 8. The Trading Floor of the NYSEWall Street/NYSE
  9. 9. Key Characteristics-4Increasing Global Importance of “Intangible Capital”• Natural Capital: 5 % of Worldwide Value• Produced Capital: 18 % of Worldwide Capital• Intangible capital: 77 % of Worldwide CapitalSource: World Bank, Where is the Wealth of nations? Measuring Capital for the 21 st Century; Reason, Aug-Sept, 2007
  10. 10. Key Characteristics-5 Resulting in Increasing Variety of ServicesRise of Value-/Knowledge-Intensive Services Within services a major transition is occurring: from “traditional” services (emphasizing low cost, economies of scale, etc.) to value- and knowledge- intensive services (emphasizing knowledge, customization, integration, analytics, etc.) Then (Traditional Services) Now (Value- and Knowledge- Intensive Services) Standardization Customization Transactions Relationships Focus on Goods Focus on Service Cost Reduct. Via Mfg Effec Revenue Expansion Through Service Mass Marketing Marketing to Indiv. Customers Limited Ability Vastly Improved Ability To Commun, Store, Process Info To Commun, Store, Process Info (Source: Rust & Miu, 2006)
  11. 11. Key Characteristics-6 Rise of ―Global Innovation:‖ Building Blocks & Forces at Work• Globalization of IT and Transportation Infrastructure• Rise of High-Tech Regions Around the Globe (More on this Later)• Rise of Modern Sophisticated Supply Chains• Emerging Globalization of Entrepreneurship (So-Called ―Born Global‖)• At Least ―Semi-Globalization‖ of Production and Especially Markets• Talent Everywhere…and Globalization of Professionalization – Increasingly Higher Value ―Outsourcing‖ – Globalization of the ―Business School Industry‖ – Globalization of R&D – Migration of Professional Services, e.g. Consulting, to Emerging Economies* * ―Heeding Their Own Advice, Consulting Firms Head East,‖ WSJ, 10/11/10 © Mel Horwitch,2010
  12. 12. Key Characteristics-7 The ―New Geography‖ for Innovation & Changing High-Tech Clusters:•Starting Point: Advanced Economies (Route 128, Silicon Valley, Cambridge, UKetc.)•Later: in small/medium size knowledge-intensive advanced economies: e.g. Finland, Israel, Singapore, Taiwan, Korea, etc.•Rise of BRICs and ―Mini-BRICS‖ & Further Shifting of Centers of Gravity forInnovation Russia China India Brazil South Africa Vietnam GhanaMexico Costa Rica Colombia TurkeySome Other Key Dimensions: Hungary?• Pervasive Entrepreneurship & Startups• Ingredients: Universities, Magnet for Talent, ―Culture‖ of Innovation, IndustrialBase, Core Industries, ―Amenities,‖ ―Complements‖ (Support Services, VCs, etc.)• Sometimes Governmental Support• Resilience and Adaptation of Such Clusters © Mel Horwitch, 2011
  13. 13. Key Characteristics-8 Rise of Worldwide ―Innovation Ecosystems‖What are ―Innovation Ecosystems? A network of actors (e.g., firms or individuals) whose differing interests are bound together in a collective whole for purposes of promoting business development through innovation.Key Features:• Exist in the physical, digital and “blended” worlds of modern knowledge and value creation.• Can be Configured as ―centralized: and ―decentralized‖ networks• Can be dynamic, organic and non-linear network, i.e. multi-nodal and multidirectional, with a changing set of strong and weak ties.• Function, often to access high-value talent and ideas from practically• Populated with an increasingly diverse array of talent and sources of new value creation, including users and other outsiders.• Inter-linkages can be malleable, adaptive.• Flows of ideas and knowledge within the linkages are multidirectional on a global scale.• Core & Periphery: Links are increasingly diverse and comprise globally dispersed sources, developers and users of innovation (possibly “reverse innovation”)
  14. 14. Illustration-1: Reverse Innovation at GE: One Way to Conceptualize Cycles of Global Innovation: Example Portable MRIs• Phase One: Globalizing Market Presence (1950s-60s)• Phase Two: Globalizing the Resource Base (1970s- 80s)• Phase Three: Glocalization (1990-2005) – Winning market share by adapting global offerings to meet local needs)• Phase Four: Reverse Innovation (2005-?) – Develop products ―in country, for country‖• Phase Five: Bringing Innovation Home (2005-?) – ―In country, for the world’ Source: Vijay Govindarajan, “The Case for „Reverse Innovation,” BusinessWeek, 10/26/09
  15. 15. Illustration-2: Smart Grid Innovation Ecosystems for GE, IBM, & Cisco, Circa 1/10From: Ari Ginsberg, Mel Horwitch, Subhendu Mahapatra, & Chhavi Singh, Ecosystem Strategiesfor Complex Technological Innovation: The Case of Smart Grid Development, Paper Presented atPICMET 2010 Conference, Phuket, Thailand July 22, 2010
  16. 16. Mapping this Illustration: Comparing Smart Grid Innovation Ecosystems for GE, IBM & Cisco, Circa Jan. 2010 GE IBM CiscoFrom: Ari Ginsberg, Mel Horwitch, Subhendu Mahapatra, & Chhavi Singh, Ecosystem Strategiesfor Complex Technological Innovation: The Case of Smart Grid Development, Paper Presented atPICMET 2010 Conference, Phuket, Thailand July 22, 2010
  17. 17. Illustration-3: Radically Expanding & Scopeof Global Innovation Ecosystems for Innovation Strategy: Leveraging Social Networking
  18. 18. New Arenas: Innovation-Based Opportunities-ENERGY The Myriad Cleantech-Innovation Connections• Supply—”BelowGround” −Redefining Cleantech &•—Geologists-The Catching the Next Wave“Peak Oil”Perspective RISING ENVIRONMENTAL• National Security Gov’t Policy: CONCERNS• New Sources of Jobs, •Global WarmingEnergy Stimulus, Etc. •Other Concerns• Management “GREEN”: BASIS OF NEW INDUSTRIALGlobal Competition: REVOLUTION? MAYBE-BUT NOT JUSTThe EU; China, India, “RENEWABLE ENERGY”JapanThought Leadership SECTOR-LEVEL-TOPICS: FINANCIAL MELTDOWN(From the Gloomy ‘06 •Automobiles (A “Substitute” for FinancialStern Report to Stern’s •Alternative Energy Services?)Emphasis Now on the •Cities“Next IndustrialRevolution”
  19. 19. Cleantech-Innovation Opportunities: Linking SmartGrids & Microgrids-An Emerging Opportunity Globally The Global Embracing of Smart Grids• Smart Grids permits an electricity network to uses a wide array of information technology to monitor and manage the flows of electricity & energy usage. They can be configured on a massive scale, regional and continental.• Smart grids are globally a huge opportunity, with smart grids being proposed throughout the world, including the US, Australia, Northern Europe, the UK, India, China, Taiwan, etc. (According to IBM, China is the Biggest Market for Smart Grids• (Over Next 10 Years: In US $36 Billion vs. in China $208 Billion on Renewable Energy; Current Announced Smart Grids allocation: US: $4.5 Billion vs. China $7.3 Billion; IBM is Establishing Energy & Utilities Solutions Lab in China)• Source: “IBM’s Chinese Smart Grid Ambitions,‖ earth2tech, 3/4/10
  20. 20. Further Cleantech-Innovation Opportunities: Linking Smart Grids & Microgrids Introducing Microgrids• Microgrids are also intelligent & they utilize advanced IT. They represent small- scale power supply networks. The can provide power for small areas, such as rural, a campus, neighborhood or factory. Energy sources include a portfolio of decentralized energy technologies, often connected at a single point to the larger utility grid.*• The benefits of microgrids include: more Community control to manage its energy generation & distribution and connect to the utility grid as a single entity (allows a community to be less dependent on a national grid); greater flexibility & more options in planning energy source strategies; more experimentation due to lower size & capital requirements; decrease of energy losses due to lower transmission distances; utilizes space more effectively; promotes energy awareness; adapts more easily to local conditions.* Note: An Opportunity for Leapfrog: Linking Smart Grids & Microgrids*Adapted from Jaise Kuriatkose, Distributed Generation, Smart grid & Micro grid, Centre for Alternative Technology, circa June, 2010, (accessed on Sept. 3, 2010)
  21. 21. Further Opportunities: Barrowing from Another Innov.Infection Point: From Pure Energy Perspectives toIncorporating Intelligence Cleantech: An ―EnergyInternet‖ Convergence Data Smart Appliances, Power Monitoring, Smart Grid Communication Energy Media Internet Standards and Website, Companies BlogsTwitter, technology Facebook Energy Utility Companies Power TransmissionSource: MBA-ITM Team Presentation on 4/18/09 in NYC
  22. 22. An Energy Internet Viewpoint: “The goal in the next six or seven decades should be to produce „squanderably abundant,‟ cheap and clean energy.” -Bob Metcalfe, 2008 -Speaking about the energy internet in Scientific AmericanSource: MBA-ITM Team Presentation on 4/18/09 in NYC
  23. 23. Startup Manifestations of “Energy Internet” Startups Leveraging Mobile Smart Phone Innovation in Cleantech: e.g. iPhone Apps for Remote Home Power MonitoringSource: MBA-ITM Team Presentation on 4/18/09 in NYC
  24. 24. Increasing Varieties of Modern Innovation Beyond Technology: Business Model Innovation19th Century 20th Century 21st century Manufacturing Innov. High Technology Innov. Services Innov. Business Model Innov. Innovation of Innovation
  25. 25. A Contribution from the Field of Management: Providing a Language for Better Understanding and Implementing Business Model Innovation•Subscription – [Economist, WSJ (so far)].•Leveraging Power of Networks – [CNN’s iReport].•Disintermediation & Analytics– [Amazon].•Collectives & Communities – [Commune Buildings in Brooklyn;Public Wifi, Green Maps].•Optimizing Efficiencies in Services – [McDonalds, Wal-Mart].• Becoming Services for Previously Physical-Based Products – [IBM, Xerox]•Competing on Cost [EasyJet, Southwest, Chinatown BusCompanies-Fung Wah].•Compelling Content – [WSJ, ]•Open source – [Linux, Apache].•Traffic, Leverage Analytics, Smart Advertising – [Google].•Ecosystem Innovation – [Smart Grids]Source: Based Partially on Neely, 2007
  26. 26. The Commerce Bank in NYC• ―No Stupid Fees‖• Burger King to Banking(Retailers, not Bankers)• Lollipops• ―Saturation is Good‖?• Dog Biscuits?• Sundays & Holidays Are for Banking (7 Day Lobby/Drive Through Hours)• ―Penny Arcade‖ Coin Counting Machines ("We are writing to commend the outstanding service we received from your team, enabling us successfully to close on our new house in Westport, CT under an extremely tight timetable.‖ Evan, Connecticut ( Canadas TD Bank Financial Group Acquires Commerce Bank for $8.5B7/23/08: Commerce Bank & TD Banknorth change the brand name for combinedoperations to “TD Bank, Americas Most Convenient Bank,” in place of “TD
  27. 27. Continually Evolving State of the Art: Ongoing Stream of Concepts Expanding Modern Innovation• Leveraging Shock and Intensive Rivalry: ―A crisis is a terrible thing to waste‖• Increasing Ambiguity & Greater Difficulty inDefining Innovation • Not R&D; Not Simply Technology or Invention; & Hard to measure• New Centers of Gravity for Innovation (A New Innovation Arms Race: Purposeful Clustering)• New Corp Structures (Modularize, Localize)• Open Innovation vs. ―Beacons‖ vs. Users?• Concurrent Innovation• Forces: Globalization/IT• Globalization of Entrepreneurship• Clusters vs. Firms (Resilience)• ―Real breakthroughs require and the ability to absorb failure and large organizations are incapable of such risk.‖ (P. 4)• ―Mass Innovation‖• Instilling an ―Innovation Culture‖• Difficult to Control: ―Information Wants to Be Free‖ (p.14)• ―Innovation Labs;‖ Purposefully Designed ―Incubators;‖Sources: Economist Special Section, 10/13/07; HBS Press Releases in 2011; NYC-ACRE Incubator at NYU-Poly
  28. 28. Some Key Implications for Modern Innovation Management Past leadership is no guarantee for the future, especially since valuable knowledge is scattered, sophisticated, & sticky; new sources of differentiation exist, latent needs are everywhere; Thus, modern innovation offers continuously opportunities to create unique advantage; • Don’t Fight Last War−Focus on Present & Future• Go Beyond Simple IT & Even Broadband & Aim to be Strong in Newer Sets of Technologies and Associated Capabilities • Leverage Partners of Diverse Kinds, e.g. Firms, NGOs, etc.• Technology is Necessary But By No Means Sufficient−Education & Human Networking are a key Components for Modern Innovation Clusters (The Role of Modern Business Schools as High Value Neutral Zones) • Aim to be a Participant in Best Practices--Not Settling to be a Second Mover—Leap-Frog Opportunities Exist Throughout the Globe • Learn from Best in Class—Don’t Be Limited By Geography(Again, the Role of Modern Business Schools as High Value Neutral Zones) • Meaning of Innovation “Periphery” & “Core” Changing in Fundamentally
  29. 29. Observation Based on Perspectives of Strategy & ManagementThe Paradoxical Impact of Innovation’s Primacy in the 21st Century: The Resuscitation of the General Management Tradition (Previously Prominent in the 1950s Through the Late 1960s) due to the Imperatives of Modern Innovation: – The Importance of Multifaceted Leadership – Adaptive and Strategic Direction Without Rigidity – View the Firm as a Whole – Universal Managerial Characteristics – Optimism & Fun – The Universal & Adaptive Professional Manager – Human Talent: A Key Resource – Importance of Hard-to-Define ―Implicit‖ Strategy – A Sense of Purpose (From ―Organization‖ to ―Institution‖)