Innovation Leadership Network

What doesn’t kill you makes you more innovative

Posted by John in innovation on 3 February 2012

Most of you would know the Nietzsche quote “that which doesn’t kill is makes us stronger” (or it could be a Kelly Clarkson quote, depending on your age). My main point for today is that quote also applies to innovation and this has far reaching implications for anyone trying to make a firm or industry more innovative.

Last year I was talking with Narelle Kennedy, CEO of the Australian Business Foundation, who has done a great job in connecting businesses, research academics and politicians to get a sensible and informed debate on innovation and growth in Australia. With colleagues at the University of Queensland Business School we have been running a large longitudinal survey of innovation and performance in Australian firms. One of the consistent patterns in the survey is that firms are far more likely to innovate when they are in a tough competitive environments. When I explained this to Narelle her response was something along the lines of “that makes sense, you need to experience pain to innovate”.

Narelle is exactly right! The list of evidence that innovation comes out of hard times and challenges is very long. For example, this is a central message in Michael Porter’s classic work “The Competititive Advatage of Nations”. To quote Porter:

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers.

And this is also the reason why protecting industries from competitive pain and providing public funds for pain relief rarely makes a business more competitive. With mainly good intentions, millions of dollars have been spent supporting the Australian car industry and yet it continues to die a slow and painful death. Like a billion dollar game of Russian Roulette, each government hopes that they can provide enough support so that the big collapse will occur during the life of the next government.

A good case in point for the ‘benefits of pain’ is a pretty amazing chart from Business Insider of the efficiency gains in the airline industry. I use the airline industry as an example of cut-throat competition in my MBA strategy class and Warren Buffett’s famous quote is particularly good:

If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

This is the kind of environment that produces the cummulative innovations that result in chart below (taken from Alan Kohler’s Eureka Report).

While traffic has increased 45%, fuel usage has increased 3%. To stay alive in this industry, firms need to continually find ways to improve pricing power and reduce costs and fuel efficiency is a big part of that.

If you want to be more innovative, embrace pain and challenge yourself.

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How to Think About the Future

Posted by Tim in complex systems, experiments on 2 February 2012

Imagine that 100 of us have gathered together in a room somewhere. It’s a social event, but I want you to think about a couple of numbers.

If we took the average height of all of us, it would be somewhere around 1.76 meters. What happens to this average if we’re joined by Sultan Kösen, the tallest man (2.51 meters) in the world? Our average height goes up to 1.767 meters. In other words, the average increased by about 0.4%.

Now think about our average wealth. The stats vary, but average net worth in the US is around $120,000. What happens to this average if we’re joined by Carlos Slim, the richest man ($63.3 billion) in the world? Our average net worth goes up to $745,544. In other words, the average increased by 521%! And that’s after Slim lost $11b due to the GFC.

The difference between 0.4% and 521% is the difference between normal and complex.

Height is distributed normally, and in a normal system, the average dominates the extremes. The economy is a complex system, and in a complex system, outliers matter.

That picture is from The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Moneyby Carl Richards.

Here is what he says about the importance of outliers:

[O]utliers matter. In fact, they matter so much that they almost make the average meaningless. Because most of our lifetime return is determined by how many of these outliers we experience, it is time we stop ignoring them.

If we’re trying to innovate, our job is to invent the future. So the fact that the economy is a complex system is important.

First off, it’s important because returns to innovation follow the kinds of returns that we see in the wealth distribution. The average return to executing a new idea is small, but a small number are gigantic. This is why it’s important to manage innovation as a portfolio.

Secondly, this has a big impact on how to think about the future. Complex systems are impossible to predict. This is a problem, since we don’t like uncertainty.

Here is how Martin King frames the problem:

The problem with long term developments are that they are subject to exponential and combinatorial factors – chaotic things that we are not good at understanding at the best of times. To compound things change cycles themselves are becoming faster.

Instead of thinking of the future as something to predict, we should think about it as part of a pattern. Greg Fisher wrote an outstanding post (read it!) discussing the importance of pattern recognition in complex systems. Here is part of his prescription:

There is a relationship between patterns and prediction. In fact, I would note that not only do patterns exist and persist, we must rely on them in every day life. We make decisions in the present assuming the persistence of some patterns e.g. I will withdraw £50 from a cash machine today for spending over the next few days. I do not expect everyone else in the UK to switch to the Thai Baht during that period. Furthermore, it is particular patterns – many of which we might call institutions – that are responsible for our civilised society and a relatively high standard of living.

But – and this is to assert the point further – it is important to emphasise that the world will change and so too will the patterns around us. By “expect to persist” in my definition of patterns I was referring to making reasonable judgments that some patterns will remain broadly the same over a particular period.

How should we respond to this? Geoffrey Morton-Haworth has written an excellent post on Learning From Patterns. First he talks about the most common example of a complex system: the weather. And he says:

We cannot control the weather but if we recognize its patterns we can manage around them. And we can do the same in complex relationships.

He then discusses the work that Edward Tufte has done on effectively assessing complex data. Morton-Haworth includes this worksheet from Tufte:

Here is how he concludes:

Tufte argues for good method. That is “a shrewd intelligence about evidence, a clear logic of display and analysis, placing data in the appropriate context for assessing cause and effect”. In short, he talks about the need for “a coherent architecture for organizing and learning from images”.

A complex relationship outlasts its components, just as the ant colony outlives the individual ant, and in so doing develops a purpose of its own greater than the free will of its parts. While individuals may only be involved for a matter of months or just a few years, a complex relationship can learn, change, grow and adapt over five, ten, fifteen or more years. Nevertheless, because our lives take place at lower levels, we frequently don’t know the contribution we make to complex relationships. But we can help its intelligence to emerge.

This is why it’s important to think about inventing the future. Another important feature of complex systems is that the systems co-evolve with their parts. In simple terms, small changes among the parts can cause large changes within the system.

These are the small number of innovations that end up having big impacts. And how can we find these? We can’t predict which innovations will hit big – knowing this is one of the important outcomes of thinking about the economy as a complex system.

Harold Jarche does a nice job of framing some of the issues here:

When we move away from a “design it first, then build it” mindset, we can then engage everyone in critical and systems thinking. Workers in agile workplaces must be passionate, adaptive, innovative, and collaborative. Autonomy is the beginning.

Instead of innovating based on prediction (design, then build), which leads to big bets, we need to innovate based on experiments. This leads to little bets.

In a complex economy, the way to think about the future is this:

We can’t predict the future.
But we can learn about the patterns from which the future will emerge.
In fact, while we can’t control the future, we can influence it.
The best way to influence the future is by innovating through experiments.

What experiment can you try today?

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So Where Do Good Ideas Come From?

Posted by Tim in book riffs, connect, networks on 1 February 2012

I ran across an outstanding post today by John Battelle reviewing Where Good Ideas Come From: The Natural History of Innovation.by Steven Johnson.

It’s one of my favourite books from the last couple of years, and Battelle does a great job of highlighting the key points in it. He also reminded me of a table that Johnson put in towards the end of the book. It looks at the genesis of what he thought were the most significant ideas of the 19th and 20th centuries. He then assessed whether they were developed in commercial firms or non-commercial organisations, and whether they were generated by individuals or by networks of people.

Here’s the table:

This illustrates several important points:

It’s never either/or, it’s both/and. Are individuals or networks more innovative? Networks – there’s plenty of research to back this idea up. Nevertheless, individuals still generate plenty of big ideas. It’s the same with market vs. non-market – lots of great ideas come from both. More come from non-commercial environments.
It’s really easy to argue black and white statements (“Only small firms innovate!” “No – only big ones do!”). But they’re never true. In order to support innovation, we need to look at these dichotomies and figure out which circumstances favour one approach over the other. And then we need to support both. This is true for market vs. non-market, for individuals vs. networks, for big firms vs. small firms.

Black and white thinking is dangerous.
Networks are a critically important source of great ideas. The lone inventor idea is still with us. Here is what Johnson says about networks:

Ideas rise in crowds, as Poincaré said. They rise in liquid networks where connection is valued more than protection. So if we want to build environments that generate good ideas—whether those environments are in schools or corporations or governments or our own personal lives—we need to keep that history in mind, and not fall back on the easy assumptions that competitive markets are the only reliable source of good ideas. Yes, the market has been a great engine of innovation. But so has the reef.

The second part of that quote leads to the next point:
Non-market organisations are critical components of the innovation ecosystem. Many of the ideas that led to you being able to read this blog post came from non-market networks – the computer and the internet being chief among them. But just to illustrate the first point, smart phones, which aren’t in the table, came from a market network. Nevertheless, it’s important to understand how crucial non-market organisations are to generating big ideas.
Most big ideas get turned into innovations by the market. Here is what Battelle says:

This doesn’t mean those ideas don’t become the basis for commerce – quite the opposite in fact. But this is a book about how good ideas are created, not how they might be exploited. And we’d be well advised to pay attention to that as we consider how we organize our corporations, our governments, and ourselves – we have some stubborn problems to solve, and we’ll need a lot of good ideas if we’re going to solve them.

Effectively connecting non-market organisations with market-based firms is one of the most important roles of government. In regions that innovate well, these two sectors interact more effectively than in less innovative regions.

Invention and innovation are two different things. However, we still need to start with a great idea to innovate well. Understanding how good ideas originate is an important part of doing this.

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Replace Fear of the Unknown With Curiousity

Posted by Tim in book riffs, design, innovation strategy on 31 January 2012

The Shift Index 2011 is out now, and as with the previous two editions, it is a must-read.

I am always skeptical of “everything is different now” type arguments, but in this series of reports, John Hagel, John Seeley Brown and a number of other contributors have done a fantastic job of documenting exactly what is changing. It might not be everything, but it’s a fair bit.

Here are the four key points that they make in the summary of this year’s report:

ROA (Return on Assets) performance continues its long-term decline due to deteriorating firm performance
Layoffs and other short-term measures taken by firms are not a sustainable solution to improving long-term firm performance
Connected individuals, not companies, are the ones harnessing flows and have more power because of it
Firms have untapped opportunities to reverse their declining performance by embracing pull

Hagel and Seeley Brown have a number of recommendations about how to deal with this in their book The Power of Pull
(discussed here and here). It’s one of the best books of the past couple of years, and I recommend it.

Another book that deals with these issues is Futuretainment: Yesterday the World Changed, Now It’s Your Turnby Mike Walsh.

The book is interesting. Here is one of the key points that Walsh makes in it:

Sometimes the best way to win a game is to question why you are even playing it. The rules that govern industries are rarely made in advance – they evolve in periods of rapid change until eventually they themselves become restraints on innovation. But there is one thing you can be sure of: when consumer behavior changes, sooner or later business behavior must follow. The future is already here, you just need to know where to look.

The book itself is a great example of trying to invent the future. Walsh has deliberately made a book that only works as a physical thing. It has a gorgeous set of photos taken by Walsh (including the one above) as the background on each page. Then it has series of insightful chapters discussing the implications of the big shift. Here is how he describes the approach:

The first question my publisher asked me was why a book and not a blog? Three years ago when I started working on Futuretainment, that was already a tough question to answer. With eBooks now on the crest of critical mass, it hasn’t got any easier. Last week, my book hit the shelves. Although you can buy it on Amazon, you can’t read it on a Kindle. In fact, with 300 pages of illustrations, original photographs and custom designed typography – it is about as Kindle friendly as a bathtub. That was a deliberate decision on my part, but it comes at a time when the very concept of a book is changing.
…
There are two aspects to any book. First, there is the book as an informational construct. Put simply – an arrangement of words, sentences, paragraphs and chapters. However in our attention drained world of 140 characters, this construct increasingly boils down to a simple image – the long tail, the tipping point or the black swan. Despite fervent claims to the contrary, the vast majority of people don’t actually read books. They consume metaphors and debate in status updates.

Fortunately, there is also a second aspect of books – ‘thingness’. Whether a Sumerian stone tablet, an Egyptian papyrus, an illuminated Medieval manuscript or just a pulp paperback – there is a physical side of books which has its own life.
…
Because, as much as I love my Kindle, it is a marriage of convenience. My true mistress will always be books. The smell of print, and the sensual touch of high quality paper will never fail to seduce me. And I can only hope that my book might elicit the same response in you.

Unlike Jonathan Franzen, who recently discussed why books need to be physical without offering much more of a reason than “because I like them”, Walsh has made a book that demands to be instantiated physically.

eBooks are a great response to the informational side of books that Walsh discusses. Seth Godin wrote a great post yesterday about how to deal with this.

But to deal with the ‘thingness’ of books, you need a new business model. You need to create value not just in the words, but in the physical object as well. Walsh has succeeded in both aspects of his book.

What should the rest of us do? Maybe it’s time to heed Jorge Barba’s advice and get an MBA in curiousity.

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Innovation Problem: New Ideas Spread Slowly

Posted by Tim in book riffs, complex systems, evolving economic entities on 30 January 2012

There’s a big problem with innovation: ideas spread much more slowly than we expect them to.

Ideas follow an S-Curve as they spread that looks like this:

They pick up steam very slowly, until they either die off or hit a tipping point and take off. The slow build-up is the time I’ve indicated as X in the drawing.

The idea for the S-Curve is based on the great work by Everett Rogers on innovation diffusion.

Based on his research, the population of users is divided into groups he called innovators, early adopters, the early and late majorities, and the laggards. In the populations that he looked at, the percentages of people in each group look like this:

You can see these numbers in the survey that Sophos Security released last week on the reactions of Facebook users to the new timeline feature:

This is being presented as a big problem for Facebook, but if you look at the numbers, they’re actually better than the stats from Rogers would lead us to expect. The survey doesn’t include the laggards, who probably still aren’t on Facebook, but the rest of the numbers map onto Rogers’ pretty well.

All of the people that hate the new timeline want to go back to the News Feed, another feature that had even worse approval numbers when it was introduced. And now people love it and don’t want it to change.

That’s the way that ideas spread. People resist, a small number adopt, and eventually over time, the idea wins. If you’re lucky.

There was another story over the weekend about the diffusion of Edison’t incandescent lightbulbs that tells the same story.

Here is what they say about adoption of electrical lighting:

By 1910, more than 30 years after Thomas Edison invented the incandescent bulb in 1879, only about 10 percent of American homes had been wired. Even in the glittering Roaring Twenties, only about 20 percent of homes had electricity — not because of a lack of electrical contractors, but because of a lack of consumer enthusiasm.

Advertisers proclaimed that homes with electricity would be brighter, cozier and happier, but the public wasn’t buying.

And this is for a product that was demonstrably better, cheaper and safer.

Again, the value for X was much longer than expected.

This is an issue that is addressed extremely well by James Gardner in his excellent new book Sidestep & Twist: How to create hit products and services that people will queue up to buy.

The book is excellent and Gardner does a great job of explaining the S-Curve and its implications. One of the key outcomes of this is one that makes a lot of the people that have encountered Gardner’s ideas uncomfortable: breakthroughs don’t pay.

The long X shows us why. It takes so long for new ideas to spread that whoever introduces them is not always set up to capture the value from them.

This is kind of scary, because those of us that generate ideas want to think that a great idea will win. But they don’t automatically. One point that he makes is that you work around this by building on existing ideas:

A lack of genuine originality is a feature of almost every category-defining product in the last decade. Was Facebook the first social network? Certainly not: MySpace, Friendster and a host of others preceded it. In fact, the first real social network was a site called SixDegrees.com, and it was founded a decade before Facebook’s meteoric rise began. Was it Google that created web search? Of course not: the company’s contribution was to improve what Alta Vista and the other web search engines that had pioneered the field were doing already.

I could spend pages and pages going through examples like these, and will do so later on in this book. But one thing unites all these products and services: they’re built on something that was working well somewhere else.

Gardner has more good suggestions about what to do about this, and I’ll discuss these more later this week. But for now, I just wanted to take the Facebook and Edison examples to illustrate the problem that we are trying to address. If you are trying to get ideas to spread, you must develop a good understanding of the idea diffusion S-Curves and what they mean.

The fact that ideas spread slowly is crucially important to understand. It is part of what makes it difficult to win through innovation. This is why we must manage innovation as a process.

It’s dangerous to think of innovation only as generating new ideas. That’s not enough. You also have to get the great ideas to spread. They spread through S-Curves, and we have to include these when we develop our innovation strategies.

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Two Great Innovation Misquotes

Posted by Tim in book riffs, design, evolving economic entities on 27 January 2012

There are two popular quotes that often get used when discussing innovation that were never actually said or written by the people to whom they are attributed. Despite the fact that they are fake quotes, there are still things that we can learn from them.

The first common quote is attributed to Henry Ford:

If I had asked people what they wanted, they would have said faster horses.

This quote usually comes up when people are discussing focus groups, or design-driven innovation. However, there’s no evidence that Ford ever said or wrote it.

Even though it’s not a real quote, it raises some interesting points. You can interpret it as meaning “you should ignore customers,” or some people even seem to think it means “customers are stupid.”

But that’s not really what it’s saying at all. People do have limited vision if you ask them open-ended questions. And as innovators, our job is to invent the future. Nevertheless, there is useful information in the faster horses idea.

If people really had told Ford that they wanted faster horses, what would that mean? If you frame it in a jobs-to-be-done way, it means that the main job that they’re trying to do is to get somewhere fast. That actually is a pretty good argument in favour of automobiles.

In his HBR post on this topic, Patrick Vlaskovits sums up the issue well:

An innovator should have understanding of one’s customers and their problems via empirical, observational, anecdotal methods or even intuition. They should also feel free to ignore customers’ inputs. Because by now it should be clear that Ford’s adherence to his vision of the mass-market car and how to materialize that vision was instrumental in both his early success in growing Ford Motor Company as well as his later failure to respond in a timely and effective manner to rapid innovation in the marketplace.

The real lesson learned was not that that Ford’s failure was one of not listening to his customers, but of his refusal to continuously test his vision against reality, which led to the Ford Motor Company’s failure of continuous innovation, resulting in a catastrophic loss of market share from which it never recovered.

So the quote is useful, even if Ford never said it.

The second quote is a bit more problematic – this one is frequently attributed to Charles Darwin:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.

As with the Ford quote, Darwin never actually said or wrote this (he never wrote “survival of the fittest” either – that was Herbert Spencer building on Darwin). This one is a bit more problematic too, because it is actually a major misinterpretation of Darwin.

Consider the Large Ground Finch, one of the species from the Galapagos Islands described by Darwin:

In a remarkable research project that has spanned nearly 40 years now, Peter and Rosemary Grant have studied the evolution of Darwin’s Finches in the Galapagos (the work was beautifully described in The Beak of the Finch: A Story of Evolution in Our Time by Jonathan Weiner – a terrific book).

Here is their key finding. When times are good, there is wide variation in the beaks of the finches. However, the Galapagos are subject to the El Niño/La Niña weather cycles, which means that they have frequent droughts. In times of drought, the finch populations dive. In the case of the Large Ground Finch, the individuals that survive these events have the biggest beaks. Why? Because the bigger beaks enable them to crack larger seeds, which would be ignored as too hard to crack when there are plenty of seeds around.

In other words, it is precisely the strongest of the species that survives.

The fake Darwin quote is completely wrong with regard to which individuals survive. But it might tell us something about which species survive. The reason that Large Ground Finches have been around for as long as they have is that there is enough variation in the species that whenever conditions are extreme, some individuals in the population will be able to adapt to the change.

If we apply this to innovation, you might think of it this way: products are like individuals and organisations are like species. To do well, products need to be the best at getting some job done for some group of customers.

However, for an organization to do well over time, it needs to be adaptable. This means that unless its environment is unusually stable, it needs to generate variety. Even though economic evolution is directed by the choices that people make, we still don’t have much control over which ideas work and which don’t. Or over which take off, and which never really click.

To maintain variety, to improve responsiveness to change, we must experiment.

Why have these two quotes become so widespread? It’s not the internet – both incorrect attributions were made in books. Both quotes are catchy and short, and they capture ideas that seem like they reflect what Ford and Darwin thought. Even though the Darwin quote is not very Darwinian, it reflects a very common misinterpretation.

The catchiness is one thing, but also, we like to argue from authority. If we don’t want to run focus groups, it’s easier to get Henry Ford to make the argument than it is for us to do it ourselves.

I wanted to think through these quotes for a couple of reasons. One is that they do offer some useful lessons. The second is that we need to figure out how to make compelling arguments ourselves. This is the key to getting our own ideas to spread – not by arguing from authority.

(The superb Large Ground Finch photo is from flickr/Steven Bedard under a Creative Commons License)

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Please Reinvent the Wheel

Posted by Tim in innovation on 26 January 2012

How often have you heard someone say something like “No need to reinvent the wheel”?

It’s such a common phrase we don’t even think twice when we hear it. The thing is, a lot of the time there is a huge need to reinvent the wheel.

If we didn’t reinvent the wheel on a regular basis, we’d be driving using cars, bicycles, wheelchairs, shopping trolleys, vacuum cleaners, and an almost infinite number of other things using wheels that look like this:

That wouldn’t be so good.

If we never reinvented the wheel, we wouldn’t have things like the Osmos Orbital Wheel:

In addition to looking really cool, the Orbital Wheel has significant advantages over regular wheels in performance, reliability and safety.

Clearly there are good reasons to reinvent the wheel. How do we know when to do so? Here are some guidelines for wheel reinvention:

Innovate in Your Core: you don’t need to be good at everything. In response to this statement “Leading practice companies need to follow leading practice for water management,” one of our research partners once said:

I disagree with that. Leading practice companies can’t be leading practice in everything. They need to be leading practice in the things that are critical for them, but for everything else they just need to be fit-for-purpose. For example, I don’t want to be leading practice in payroll – there are other people that I can outsource that to – we just need to be fit-for-purpose.

It’s probably smart to avoid reinventing the wheel in the parts of your operation that just need to be fit-for-purpose. However, in the operational activities that are critical, it can be highly profitable to reinvent the wheel. This is where new business models often originate.
Explore related areas: a lot of fruitful wheel reinvention has come from looking at how the wheel might be applied in related areas. That is how we ended up using wheels in all of their various applications. This is what Steven Johnson talked about as “exploring the adjacent possible” in Where Good Ideas Come From: The Natural History of Innovation.
Saul Kaplan has expanded this idea very well in a number of posts. Here he discusses how to create space for wheel reinvention:

The trick is to explore and test new models while at the same time continuing to live within current ones. This requires establishing adjacent innovation platforms with the freedom to explore new ways to create and deliver value, especially approaches that are disruptive to the current model. Adjacent innovation platforms must have the freedom to experiment with different rules and financial models. Connected adjacencies require senior leadership sponsorship, support, and protection or they will fail. They must be free to recombine and connect capabilities in new ways unconstrained by the existing organization. Those working in the adjacencies must be empowered to borrow and flexibly deploy capabilities and technologies from inside and outside the organization in novel ways.
Find areas of poor performance and innovate there: if you look at where the Osmos Orbital Wheel is being used, it is showing up primarily in racing applications. This is where its performance advantages show up the most. A lot of important wheel reinvention happens at the extremes – when we are trying to meet the needs of the most advanced (or the most reluctant) users.

I’m pretty happy that I’m not using crude wooden wheels everywhere these days. Reinventing the wheel is how we move forward. In many cases, the biggest innovations are not completely new ideas, but rather something that already exists being repurposed. That’s what reinventing the wheel is all about.

So by all means, please reinvent the wheel.

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Three Signs of Business Model Innovation Opportunities

Posted by Tim in business models, evolving economic entities on 25 January 2012

How can you tell when there is an opportunity for business model innovation?

Recent events in higher education might give us a good indication.

There are a few issues in university education these days. The main one is that education is information based, and over the past 20 years we have seen nearly every single business model based on control of scarce information get disrupted. This has played out dramatically in the U.S.A. recently with the battle over SOPA/PIPA.

There are three signs that the business model for higher education provides real innovation opportunities right now. These probably apply to any industry approaching an inflection point:

Everyone starts asking if your business model is broken: people like David Tapscott and Seth Godin have started talking about problems with the higher education business model. Questions have started to come from the inside too – David Parry and Joshua Gans have both discussed this issue recently. Clayton Christensen has even written a book on it..
Where’s there is smoke, there’s usually fire.
Business as usual stops working: there are plenty of things that are currently broken in higher education. I’m lucky in that things in Australia are better (for now) than most everywhere else. But the trends are unmistakable. See the infographic at the bottom of the post from OnlinePhD for details.
Budgets are getting cut everywhere, it’s hard to find new staff, the journal publishing industry is under pressure, everything on the delivery side is looking a bit shaky. These are all signs that the higher education business model is under pressure.
Everyone starts experimenting (except for the incumbents): there are experiments happening all over the place:
- The post by Josh Gans talks about the alliance between Khan Academy and Vi Hart. Both have been testing out new ways to deliver material on video. Here is what Gans says about the alliance:
  
  The fact that these two are getting together demonstrates something important regarding online education. Experiments are happening and the successful ones are complementary to one another. In particular, both Kahn and Hart have evolved a particular style of video instruction. It is a style that removes the lecturer from the picture. Previous videos for educative purposes did not do that.
  …
  There are people out there, for the most part far removed from traditional education, who are experimenting and working out how to make modular, compelling content that can free teacher time. They are finding each other and that is great news for the future.
  
  That is great news for the future – but it might not be for universities.
- Apple is trying to reinvent textbooks – a part of the business model that rarely even gets mentioned when people discuss problems in higher education.
- There are lots of experiments with massive open online courses. George Siemens, one of the pioneers in this area, talks about the big news this week, which is the foundation of new group that will do precisely this. The group is called Udacity, and it was put together by Sebastian Thrun, who ran a big open course at Stanford last year. It was wildly successful.
  His response to that success: “I can’t teach at Stanford again.”
  
  Even the experiments that take place inside of universities aren’t staying there.
Experiments are a key part of innovation, and that is how we find out what works. New business models in higher education will come about through experiments. And the people that do the experiments will have a lot of impact on what the new business models look like.

If you were a university right now, wouldn’t you want that to be you?

Our job is to invent the future. When you start to see questions about what that future should be, major problems with business as usual, and a sharp increase in experimentation, that is a sure sign that there is a big opportunity for business model innovation.

If you’re in higher education, now might be a good time to start trying to shape that future, instead of letting the future happen to you.

Created by: Online PhD

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Innovation Mistake: Thinking Tools Will Fix Your Problem

Posted by Tim in book riffs, The Innovation Matrix on 24 January 2012

I had lunch a while back with two executives from an organisation that the Business School does a fair bit work with. They wanted to improve innovation and that’s what triggered our meeting.

We talked for a couple of hours about what was happening in their organisation. We talked about innovation as a process, the different forms of innovation, incremental versus radical – all the big topics. It seemed like we were making some progress towards figuring out how we might be able to work together.

Then at the very end of the lunch, the one that’s actually in charge of innovation there leaned over and said “Look, just tell me what piece of software to get and I’ll get it.”

I was dumbfounded, because it had seemed as though we were on the same wavelength. However, theirs is a common innovation mistake: thinking tools will fix your problem.

They won’t.

Tools are great, but to fix an organisational problem, you need to figure out how tools interact with people and processes. If you don’t address all three, you won’t fix your problem (see for example, this, this, this and this).

This is where The Plugged-In Manager: Get in Tune with Your People, Technology, and Organization to Thriveby Terri Griffith comes in.

Griffith is an expert on organisational design, and her book is very useful. She talks about how to integrate people, processes, and technologies. Her definition of a plugged-in manager is one that is able to perform this integration successfully.

The guys that I was talking with were connected, but not plugged in.

Here is how Griffith describes plugged-in managing:

… organizational success more likely occurs when all three critical dimensions – technology, organization, and human capabilities and dimensions – are taken into account concurrently. There are no silver bullets. Even excellent management actions, if restricted to a single dimension, can never have the same success as when all three dimensions are managed together. Fredrick Brooks, summarizing the issues in a classic 1986 article, notes “There is no single development, in either technology or in management technique, that by itself promises even one order of magnitude improvement in productivity, in reliability, in simplicity.

And here is John Hagel in the forward to the book:

In a world increasingly entranced with technology, this is a powerful antidote to the claims of technology evangelists who attribute miraculous powers to their favorite new technologies. The truth that Terri’s book drives home is that technology in isolation is useless and perhaps even dangerous. Only by integrating technology effectively into a specific social and business context can we release its latent power.

If Hagel likes the book, you probably don’t need my recommendation on top of it. Nevertheless, I will say that it is well worth reading, particularly the second half, which is filled with outstanding case studies of how to make this work. There is also a quiz to test how plugged-in you are, which you can also take online.

This interaction between technology, people and process is a big part of what I am trying to get at with the innovation matrix. Technologies usually come into the innovation process as part of an increasing commitment to innovation. This is why I was having lunch with those guys, and that is why they wanted to know which technology to use.

However, the skill at actually executing ideas comes from people and process. In order to improve innovation, you have to both increase your commitment to it, which often includes adding tools, but you also have to improve your processes and the skills of your people. You have to move up both dimensions of the innovation matrix.

Tools don’t solve innovation problems, people do. You can use the principles of plugged-in management to integrate tools, people and process more effectively. Doing this will help you avoid a common innovation mistake.

Disclaimer: I know and like Terri, and I received a free copy of the book. I also bought my own copy. I’m writing about the book because of its quality, not because of who wrote it or how I got it.

(Photo from flickr/AndyArmstrong under a Creative Commons License)

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Tools Should Be Invisible

Posted by Tim in business models, design on 23 January 2012

What is the most common mistake that I see when people try to implement management tools or frameworks?

By far the most common is mistaking using the tool for getting the outcome you are looking for.

I have been doing some consulting work recently where we are using the Business Model Canvas to develop a strategy for an engineering group inside a large organisation.

Read my previous post about this for a full description of the project. Today I want to focus on one particular part – the four ideal models that we built, and a tool that we used to conceptualise the models.

There are a couple of dimensions along which these models vary. In a couple of them, the team is responsible for identifying the problems to address, while in two others the they are working to specification as the problems are defined for them. The other source of variation is project management: how much of the solutions development process should the team be responsible for?

Manny and I took these two dimensions and mapped out the four possible roles for their Bespoke Solutions Team (BST). Here is the map:

In each quadrant, there is an indication of the project management responsibilities: I1 = problem identification, I2 = solution development, I3 = solution delivery to customers.

Last week, Manny made a revised version of that map. When he showed it to me, he said:

“I took out the I1, I2 and I3 indicators because they just seemed to confuse people.”

He was apologetic when he said because when we thought of that model, it gave us great insight into the project. But dumping it from the presentation that we give to people inside of the firm was exactly the right choice.

Here’s why.

This is a bed that my Dad made for me and Nancy as a wedding present:

He’s a very skilled woodworker, and the bed is gorgeous. But when he first finished the bed and brought it down to us, he didn’t set a saw on top of it to show us that he used that tool to build it. You can tell a fair bit about what he used just by looking at the final item. And in fact, the bed itself is what matters, not the process he used to put it together.

It’s the same with management tools. When you use tools, the important thing is the outcome, the conclusions that you reach and the actions that you take as a consequence. We don’t need to see the tools to understand that you’ve done good work.

Our I1,I2 & I3 construction was a very useful tool in developing the business models that their BST might adopt. It helped us identify the capabilities that they will need to have in each of the four scenarios we have sketched out.

But the important outcome will be the model that they decide to adopt, and the path they map out to build the skills that they need to execute this model. Even more important will be the business results that they obtain as they execute this model.

Don’t mistake the tool for the desired outcome. That’s mistaking the map for the territory.

Instead, figure out the outcome that you want first. Then think about what people and processes you need to achieve this, and identify the right tools to support your people last.

If you do this, your tools will be invisible. And that’s as it should be.

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