Some interesting thoughts via Harold Jarche on the changes we might see in the next 20 years. In just twenty years, between 2000 and 2020, some 75% of our lives will change dramatically. We know this because it happened once before. Between 1900 and 1920, life changed.
Nine Shift explores the uncanny parallels between today and 100 years ago, examining the changes between the two transition periods and the forces that restructure society in the new economic era.
What Nine Shift Means?
The term "nine shift" is used to describe the great changes taking place in our lives right now. What we are experiencing in how we use our time and how we experience life derives from the phenomenon that nine hours in your day will be spent entirely differently in 2020 than they were spent in 2000.
There are 24 hours in a day. We have no real discretion with roughly 12 of those hours. We need to eat, sleep, and do a few other necessary chores in order to maintain our existence. That hasn't changed much through the centuries, so far.
That leaves approximately 12 hours a day where we, as individuals, do have some discretion. That includes work time, play time, and family time.
Of those 12 hours, about 75%, or 9 hours, will be spent totally differently a few years from now than they were spent just a few years ago. Not everything will change, but 75% of life is in the process of changing right now.
The same kind of change occurred between 1900 and 1920 as well. Frederick Allen called it "the big change" in his 1952 book by the same title.(1) We call it a nine shift.
What this means is that nine hours in your day will be spent entirely differently in 2020 than they were spent in 2000. That is an enormous change. That is a nine shift.
Here are the predicted shifts from Nine Shift
People work from home.
Intranets replace offices.
Networks replace pyramids
Trains replace cars
Dense neighborhoods replace suburbs
New social infrastructures evolve.
Cheating becomes collaboration.
Half of all learning is online.
Education becomes web-based.
This is an audio interview with Jay Townley and Russell Wright of Theme Zoom LLC about the concept of Nine Shift.
Sunday, December 14, 2008
Sunday, December 7, 2008
The Venturesome Economy
President-elect Obama's commitment to maintain America’s technology leadership in the world, through an increase in public funding of basic research, has coincided with the publication of a new book on innovation, The Venturesome Economy, which questions the value of such an approach while in Ireland, billions of euros continue to be spent on university research in pursuit of the goal to become a "world class knowledge economy" by 2013
Amar Bhidé, an Indian-born professor at the Columbia Business School, argues in The Venturesome Economy, that while innovation typically comes from scientists and engineers, the obsession with the number of US doctorates and technical graduates compared with the rising numbers in China and India, is misplaced because the “high-level” inventions and ideas cannot be easily contained within national borders and Asia cannot prevent America from capitalizing on their inventions with better business models.
Bhidé says when breakthrough ideas know no borders, a nation’s capacity to exploit cutting-edge research regardless of where it originates is crucial: America's venturesome consumption—the willingness and ability of its businesses and consumers to effectively use products and technologies derived from scientific research—is far more important than its share of such research. In fact, Prof Bhidé says a venturesome economy benefits from an increase in research produced abroad: the success of Apple’s iPod, for instance, owes much to technologies developed in Asia and Europe.
Many players—entrepreneurs, managers, financiers, salesmen, consumers, and not just a few brilliant scientists and engineers—have kept the US at the forefront of the innovation game. As long as their venturesome spirit remains alive and well, America need not fear advances abroad. The Venturesome Economy explains why—and how it can keep it that way.
Bhidé says his study shows how mid-level players combine and extend higher-level innovations. The VC-backed businesses use different people and procedures than the typical lab doing high-level research: They employ a much smaller proportion of PhDs in their technical staff, and their overall workforces contain a larger proportion of managers and sales and marketing staff. In contrast to the physicists who developed the modern transistor inside the precincts of Bell Labs, the development teams of many of the VC-backed businesses he studied had a close, ongoing relationship with users. Communication and persuasion were as crucial as technical virtuosity, and the technical tasks themselves involved more ad hoc improvisation than classical scientific experimentation.
Amar Bhidé, an Indian-born professor at the Columbia Business School, argues in The Venturesome Economy, that while innovation typically comes from scientists and engineers, the obsession with the number of US doctorates and technical graduates compared with the rising numbers in China and India, is misplaced because the “high-level” inventions and ideas cannot be easily contained within national borders and Asia cannot prevent America from capitalizing on their inventions with better business models.
Bhidé says when breakthrough ideas know no borders, a nation’s capacity to exploit cutting-edge research regardless of where it originates is crucial: America's venturesome consumption—the willingness and ability of its businesses and consumers to effectively use products and technologies derived from scientific research—is far more important than its share of such research. In fact, Prof Bhidé says a venturesome economy benefits from an increase in research produced abroad: the success of Apple’s iPod, for instance, owes much to technologies developed in Asia and Europe.
Many players—entrepreneurs, managers, financiers, salesmen, consumers, and not just a few brilliant scientists and engineers—have kept the US at the forefront of the innovation game. As long as their venturesome spirit remains alive and well, America need not fear advances abroad. The Venturesome Economy explains why—and how it can keep it that way.
Bhidé says his study shows how mid-level players combine and extend higher-level innovations. The VC-backed businesses use different people and procedures than the typical lab doing high-level research: They employ a much smaller proportion of PhDs in their technical staff, and their overall workforces contain a larger proportion of managers and sales and marketing staff. In contrast to the physicists who developed the modern transistor inside the precincts of Bell Labs, the development teams of many of the VC-backed businesses he studied had a close, ongoing relationship with users. Communication and persuasion were as crucial as technical virtuosity, and the technical tasks themselves involved more ad hoc improvisation than classical scientific experimentation.
Friday, December 5, 2008
Canadian CIO's Upbeat on Market Conditions
Last night, I had the pleasure of speaking to the CIO Toronto Association which had about 30 members out last night to an evening to discuss the challenges of the current economy as well as the options organizations have in play - ie: Creating Value or Cost Cutting.
We did a poll with the help of IBM using rapid decision making toolkits and learned with this small sample group of Canadian CIOs that their focus currently is on these areas:
* 64% have been taking a balanced cost cutting and growth approach to the economic crisis, vs 21% focusing primarily on cost cutting, and 14% focusing on innovation and growth.
*Relative to their company's innovative culture, 35% felt that they have been "moderately successful" while 36% felt that their companies were either complacent or in the infancy stage.
*40% felt that they would likely see an IT budget cut next year.
*Nobody felt that they would be getting a budget cut of 15% or more next year (while in the European study, 29% felt they would have a budget cut of more than 15%).
80% felt that the regulatory frameworks (like SOX/Basel) would not help them to identify and measure risk.
*And about 2/3 of the audience felt that the financial crisis would: Add more importance to IT Governance,Give more prominence to long term IS investments, and
Confer more weight to the IT function.
The Canadian CIOs at this session remain confident about 2009 adn their IT budgets, increasing, vs remaining flat. However, everyone appreciates and recognizes that if the market collapses further in Q1 with further risks in the manufacturing, automotive, and financial services sector that the outlook could shift rapidly. But Q1 is off to a positive outlook by this group of Canadian CIOs.
We did a poll with the help of IBM using rapid decision making toolkits and learned with this small sample group of Canadian CIOs that their focus currently is on these areas:
* 64% have been taking a balanced cost cutting and growth approach to the economic crisis, vs 21% focusing primarily on cost cutting, and 14% focusing on innovation and growth.
*Relative to their company's innovative culture, 35% felt that they have been "moderately successful" while 36% felt that their companies were either complacent or in the infancy stage.
*40% felt that they would likely see an IT budget cut next year.
*Nobody felt that they would be getting a budget cut of 15% or more next year (while in the European study, 29% felt they would have a budget cut of more than 15%).
80% felt that the regulatory frameworks (like SOX/Basel) would not help them to identify and measure risk.
*And about 2/3 of the audience felt that the financial crisis would: Add more importance to IT Governance,Give more prominence to long term IS investments, and
Confer more weight to the IT function.
The Canadian CIOs at this session remain confident about 2009 adn their IT budgets, increasing, vs remaining flat. However, everyone appreciates and recognizes that if the market collapses further in Q1 with further risks in the manufacturing, automotive, and financial services sector that the outlook could shift rapidly. But Q1 is off to a positive outlook by this group of Canadian CIOs.
Wednesday, December 3, 2008
Canadian Firms Shun Social Media Tools - UGH!
Canadian firms shun social media toolsThough Canadian firms agree that social networking tools bring benefits, they still lag in embracing them.
WHILE CANADIAN COMPANIES ARE FULLY AWARE THAT SOCIAL MEDIA TOOLS CAN IMPROVE CUSTOMER SERVICE AND INCREASE SALES, such tools continue to remain absent in the business space, according to a recent study commissioned by global IT consultancy Avanade.
The survey found that 68 per cent of Canadian companies view social networking as the next step in collaborative activities and technology for a business, while about 40 per cent fear that they will lose customers to companies that are embracing the use of social networking technology.
Roughly 78 per cent of Canadian companies surveyed believe social media tools are beneficial for improving feedback and reducing customer support time; 89 per cent feel such tools create the perception of a positive, forward-looking company.
Canadian companies also feel that social media tools will inevitably enter the workplace, whether welcomed or not. Of the companies surveyed, 87 per cent agree they will be “forced to increase the use of social networking media and technology” in order to meet the needs of younger employees. And 83 per cent say social networking, if not proactively managed, will “come into the business by stealth.”
Yet companies continue to resist incorporating them into the workplace. “Most companies have no formal plans to manage the adoption of social media (such as instant messaging, blogs, wikis and social networking) or leverage its benefits,” the survey reports. Only 16 per cent of Canadian companies “have a fully implemented strategy for integrating social computing for employees.”
Security (83 per cent), apathy (50 per cent) and unproven technology (61 per cent) are the top three reasons Canadian companies are resisting social media tools, according to Stéphane Gagnon, Business Solutions Advisor, CRM, Avanade Canada.
In a recent study on Web 2.0 tools used at Canadian enterprises for internal employee communication, Robert Half Technology also found the majority of companies surveyed do not use or have any plans to use social media tools in their workplace.
WHILE CANADIAN COMPANIES ARE FULLY AWARE THAT SOCIAL MEDIA TOOLS CAN IMPROVE CUSTOMER SERVICE AND INCREASE SALES, such tools continue to remain absent in the business space, according to a recent study commissioned by global IT consultancy Avanade.
The survey found that 68 per cent of Canadian companies view social networking as the next step in collaborative activities and technology for a business, while about 40 per cent fear that they will lose customers to companies that are embracing the use of social networking technology.
Roughly 78 per cent of Canadian companies surveyed believe social media tools are beneficial for improving feedback and reducing customer support time; 89 per cent feel such tools create the perception of a positive, forward-looking company.
Canadian companies also feel that social media tools will inevitably enter the workplace, whether welcomed or not. Of the companies surveyed, 87 per cent agree they will be “forced to increase the use of social networking media and technology” in order to meet the needs of younger employees. And 83 per cent say social networking, if not proactively managed, will “come into the business by stealth.”
Yet companies continue to resist incorporating them into the workplace. “Most companies have no formal plans to manage the adoption of social media (such as instant messaging, blogs, wikis and social networking) or leverage its benefits,” the survey reports. Only 16 per cent of Canadian companies “have a fully implemented strategy for integrating social computing for employees.”
Security (83 per cent), apathy (50 per cent) and unproven technology (61 per cent) are the top three reasons Canadian companies are resisting social media tools, according to Stéphane Gagnon, Business Solutions Advisor, CRM, Avanade Canada.
In a recent study on Web 2.0 tools used at Canadian enterprises for internal employee communication, Robert Half Technology also found the majority of companies surveyed do not use or have any plans to use social media tools in their workplace.
Tuesday, December 2, 2008
Younger Generation of Customers Less Loyal to Banks
Banks Must Shift Gears to Attract and Retain Gen X and Gen Y
Banks’ most loyal customers are their oldest customers, while Gens Y and X are the retail banking customers of the future. They’re also the least loyal and hardest to please, according to a recent Maritz® Poll. The results revealed more than half of Gen Y (61 percent) and Gen X (53 percent) respondents have considered changing or actually have changed their primary banking institutions in the past two years, compared with 20 percent of Silent Generation and 37 percent of Baby Boomer customers.
“For the most part, the current customer experience model at banks caters to the Silent Generation and Boomers, who more frequently bank in-person at branches. But, younger generation customers are much more mobile and rely more heavily on online interactions,” says Thad Peterson, division vice president, sector strategy and solutions for Maritz’ financial services sector.
“The banks’ most unstable relationships exist with younger customers, because younger people often haven’t settled into a stable financial pattern yet,” explains Peterson. “Banks looking to build long-term relationships with Gen Y and Gen X customers need to think about three basic steps:
#1) Attracting Gen Y and Gen X as customers in the first place – Locational convenience has always been the primary tool for attracting new banking customers. That’s no different with Gen X and Y, but the definition of locational convenience is changing. Now it includes online and mobile and they expect anytime anywhere banking. Banks need a strategy to attract and retain prospective customers who rarely step into a banking office.
#2) Identifying and offering products and services that give young people roots at the bank – like providing incentives for online bill paying services and debit rewards programs.
#3) Treating them the way they want to be treated. Ensure that the customer experience is appropriate for Gen X and Gen Y, and consistent at all major bank touch points.”
In general, the survey results show that younger people can be more impatient, less tolerant and just plain harder to please than their Baby Boomer and Silent Generation cohorts. The survey, which looked at customer satisfaction and loyalty among retail banks, found that younger customers also are more likely than older customers to find fault or have problems with their primary banking institutions:
• 37 percent of Gen Y and 36 percent of Gen X believe they would get better customer service at a different bank, compared with only 24 percent of Boomer and 16 percent of Silent Generation respondents.
• 22 percent of Gen Y and 21 percent of Gen X reported being upset in the past year about high fees, whereas only 14 percent of Boomer and six percent of the Silent Generation respondents reported the same.
• 18 percent of Gen Y and 17 percent of Gen X reported being upset about a lack of ATM locations, compared with only 11 percent of Boomer and three percent of Silent Generation respondents.
So How Do You Woo the Gen X and Gen Y Customer?
It is no longer uncommon practice for businesses to reach out via social media in an attempt to attract these younger customers. Even companies like American Express and Bank of America are using social media networks like Facebook to try to connect with Gen Ys. Peterson advises companies against relying too heavily on social media as a way to initially reach younger customers.
“Using Facebook to attract new customers is like standing in a corner passing out business cards at a cocktail party,” says Peterson. “If you don’t have a genuine relationship with them, all you are going to accomplish is to diminish the value of your brand to that individual.”
If social media isn’t the way to the “promised land” of Gen X and Y’s loyalty, then what is? Peterson has some suggestions:
• Be the source for their first primary debit card – Gen X and Y comprise the debit card generation.
• Highly incent them to migrate to online banking with a significant reward for paying bills online.
• Make sure front-line employees are treating Gen X and Y the way they want to be treated and can solve problems on the spot – a key to securing lifelong patrons.
• Stay in tune with how younger customers want to connect – online banking, bill pay and mobile banking are three customer touchpoints that must be state-of-the-art and part of every bank’s overall customer experience.
Peterson notes that Washington Mutual is one institution that successfully caters to the needs of younger customers. WaMu no longer requires a signature to open a checking account. The bank simply uses the first signed check as the authorization signature – incenting new customers to do business with the bank by simplifying the process and eliminating a trip to the bank. It appeals to the Gen X and Y customer desire to just “get it done,” says Peterson.
“Banks need to listen to the younger generations,” says Peterson. “It’s critical for them to stay ahead of the curve and build good relations with younger customers. After all, they’re the future of the bank.”
Banks’ most loyal customers are their oldest customers, while Gens Y and X are the retail banking customers of the future. They’re also the least loyal and hardest to please, according to a recent Maritz® Poll. The results revealed more than half of Gen Y (61 percent) and Gen X (53 percent) respondents have considered changing or actually have changed their primary banking institutions in the past two years, compared with 20 percent of Silent Generation and 37 percent of Baby Boomer customers.
“For the most part, the current customer experience model at banks caters to the Silent Generation and Boomers, who more frequently bank in-person at branches. But, younger generation customers are much more mobile and rely more heavily on online interactions,” says Thad Peterson, division vice president, sector strategy and solutions for Maritz’ financial services sector.
“The banks’ most unstable relationships exist with younger customers, because younger people often haven’t settled into a stable financial pattern yet,” explains Peterson. “Banks looking to build long-term relationships with Gen Y and Gen X customers need to think about three basic steps:
#1) Attracting Gen Y and Gen X as customers in the first place – Locational convenience has always been the primary tool for attracting new banking customers. That’s no different with Gen X and Y, but the definition of locational convenience is changing. Now it includes online and mobile and they expect anytime anywhere banking. Banks need a strategy to attract and retain prospective customers who rarely step into a banking office.
#2) Identifying and offering products and services that give young people roots at the bank – like providing incentives for online bill paying services and debit rewards programs.
#3) Treating them the way they want to be treated. Ensure that the customer experience is appropriate for Gen X and Gen Y, and consistent at all major bank touch points.”
In general, the survey results show that younger people can be more impatient, less tolerant and just plain harder to please than their Baby Boomer and Silent Generation cohorts. The survey, which looked at customer satisfaction and loyalty among retail banks, found that younger customers also are more likely than older customers to find fault or have problems with their primary banking institutions:
• 37 percent of Gen Y and 36 percent of Gen X believe they would get better customer service at a different bank, compared with only 24 percent of Boomer and 16 percent of Silent Generation respondents.
• 22 percent of Gen Y and 21 percent of Gen X reported being upset in the past year about high fees, whereas only 14 percent of Boomer and six percent of the Silent Generation respondents reported the same.
• 18 percent of Gen Y and 17 percent of Gen X reported being upset about a lack of ATM locations, compared with only 11 percent of Boomer and three percent of Silent Generation respondents.
So How Do You Woo the Gen X and Gen Y Customer?
It is no longer uncommon practice for businesses to reach out via social media in an attempt to attract these younger customers. Even companies like American Express and Bank of America are using social media networks like Facebook to try to connect with Gen Ys. Peterson advises companies against relying too heavily on social media as a way to initially reach younger customers.
“Using Facebook to attract new customers is like standing in a corner passing out business cards at a cocktail party,” says Peterson. “If you don’t have a genuine relationship with them, all you are going to accomplish is to diminish the value of your brand to that individual.”
If social media isn’t the way to the “promised land” of Gen X and Y’s loyalty, then what is? Peterson has some suggestions:
• Be the source for their first primary debit card – Gen X and Y comprise the debit card generation.
• Highly incent them to migrate to online banking with a significant reward for paying bills online.
• Make sure front-line employees are treating Gen X and Y the way they want to be treated and can solve problems on the spot – a key to securing lifelong patrons.
• Stay in tune with how younger customers want to connect – online banking, bill pay and mobile banking are three customer touchpoints that must be state-of-the-art and part of every bank’s overall customer experience.
Peterson notes that Washington Mutual is one institution that successfully caters to the needs of younger customers. WaMu no longer requires a signature to open a checking account. The bank simply uses the first signed check as the authorization signature – incenting new customers to do business with the bank by simplifying the process and eliminating a trip to the bank. It appeals to the Gen X and Y customer desire to just “get it done,” says Peterson.
“Banks need to listen to the younger generations,” says Peterson. “It’s critical for them to stay ahead of the curve and build good relations with younger customers. After all, they’re the future of the bank.”
Monday, December 1, 2008
Perspectives on Disruptive Innovation
When I read this recent article in 'Disruptive Innovation'November 12, 2008 in Knowledge@Wharton - I knew I had to ensure this PDF file content was shared on my blog. This one really resonated with me. Enjoy the great read!
While globalization has witnessed the decline of U.S. dominance in manufacturing, energy and even finance, one thing had long been presumed unassailable: Good old American ingenuity.
Now it appears that's not safe, either. China, whose industries have been envied in the West more for their tenacity than their ingenuity, has established a multi-year framework to become more innovative and, therefore, competitive. So has Singapore. Finland is merging its top business school, design school and technology school to create a multi-disciplinary "university of innovation" next year.
Council members of the National Academy of Sciences and the National Academy of Engineering have "expressed concern that a weakening of science and technology in the United States would inevitably degrade its social and economic conditions and in particular erode the ability of its citizens to compete for high-quality jobs," according to a 600-page report from the National Academies published in 2007 and titled, "Rising Above the Gathering Storm."
The wild card these days is what will happen to innovation -- the advance of progressive ideas in science, technology and business -- now that the world economy is in a tailspin.
The conventional wisdom might suggest that business, government and academia will be less willing to invest in the risk-taking and short-term costs that come with the territory of innovating. Yet Paul J.H. Schoemaker, research director for the Mack Center for Technological Innovation, suggests that, for some companies, the economic crisis can actually provide an innovation platform. "The crisis has multiple impacts," Schoemaker says. "Loss of revenue and profit will at first instill a cost cutting mentality, which is not good for innovation. But if the patient is bleeding you need to stop that first.
Then, however, a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention."
He also cautions against too much caution -- over-reliance on incremental innovation versus transformative, or "disruptive," innovation. In innovation circles, the two have come to be differentiated as "little i" and "Big I" innovation. "The largest gains in business come from more daring innovations that challenge the paradigm and the organization," Schoemaker says.
The Business of Being Disruptive
While "disruptive innovation" has enjoyed office buzz-phrase status for only about a decade, the idea is quite old: Austrian economist Joseph Schumpeter had it in mind when he borrowed the phrase "creative destruction" to describe his theories of how entrepreneurs sustain the capitalist system.
So just how does an entrepreneur or business go about being "disruptive?" How does one convince investors or top brass of a radical idea's worth?
One person who knows something about bringing disruptive innovations to market is Jeong Kim, president of Bell Labs at Alcatel-Lucent and a successful tech entrepreneur. He offered some suggestions in a recent presentation titled, "Paving the Way for Disruptive Innovation," that was part of the Executive Master's in Technology Management (EMTM) program's ongoing lecture series: Aligning Emerging Technology and Business.
Among the most critical assets one can possess, he says, is company-wide recognition that disruptive innovation is actually important. In a company that's already successful -- or one with layers of bureaucracy that hinder new ideas -- this can prove difficult. The firm also mustcommit itself to research. "Disruptive research is absolutely critical, especially in the technology space." Furthermore, it is not enough to simply have brilliant engineers. Without competent management on the business side, the most elegant technology can wind up on the scrap heap of business history, or even worse, usurped by a competitor: "Disruptive innovation is not sufficient," says Kim. "You can [cite] numerous examples of companies that came up with [new] technology but eventually were displaced by somebody else."
In the innovator's lingo, these "somebody elses" are known as "fast followers" -- that is, companies with better funding or sharper management who were able to exploit a technology more quickly and effectively in the marketplace than the original creator. "You like to be the first to develop technologies," Kim says. "But the more flexible, the more innovative in terms of business model that the company is, the longer you can maintain advantage."
That point gives rise to the question: What is the best business model for fostering innovation? As it turns out, numerous decision-making tools exist to help firms systematically manage an innovation program, says Schoemaker, co-author of a book titled, Wharton on Managing Emerging Technologies.
According to Schoemaker, when it comes to innovating, the analogy is to firing a shotgun, not a rifle. Given the high failure rate of innovative projects, companies are smart to develop an array of possible situations and contingencies, rather than pin all their hopes on one plan. "Sticking to our knitting" might appear to be a sound business cliché -- it worked for a lot of companies that survived the dot.com era. But Schoemaker and other innovation gurus advocate looking at areas adjacent to one's main business as fertile soil for innovative breakthroughs.
Why an Economic Crisis Could Be the Right Time for Companies to Engage in 'Disruptive Innovation': Knowledge@Wharton
Old-fashioned, linear approaches that rely on standard measurement schemes are often outdated if relied upon solely. "By examining a company's growth gap, developing scenarios, exploring adjacencies and venturing more into blue oceans, companies can reap greater benefits," Schoemaker says.("Blue ocean" is innovator-speak for unrealized, and therefore uncontested, markets.)"The investment approach,however, has to emphasize more of an options and portfolio strategy rather than static NPV (Net Present Value valuation method)."
Wharton management professor Mary Benner sees the "stick to our knitting" syndrome as impinging on large companies' ability to react to competitive threats. "I find that firms' innovation into radically new technologies or new markets can seem to shareholders and securities analysts like too great a departure from their expectations for these firms. Investors and analysts often prefer that firms maximize shareholder value by 'sticking to their knitting.'
The result is that large firms, particularly those expected to have stable, predictable earnings and dividend payments -- i.e., "income stocks" -- are not likely to be rewarded by the stock market for entering new technologies or undertaking radical innovation, and instead may be punished by reductions in stock price and market value."
A prime example she has found in her own research, she noted, is Verizon Communications, the giant telecommunications firm. Stock analysts questioned Verizon's large capital outlays on FiOS, a high-volume fiber-optic network intended to counter a "triple-play" threat to its business posed by Comcast's cable television, high-speed Internet and voice-over-Internet phone service."Recent research suggests the stock market is not good at valuing intangibles, uncertain innovation or technological change," Benner says. "What this means for large, publicly traded firms is that they may face a disadvantage in engaging in radical innovation, and this innovation may instead take place in venture capital-funded startups."
Indeed, outsourcing of innovation itself could turn out to be the wave of the not-so-distant future. "Particularly in the pharmaceutical area, there has been a focus on how firms acquire innovation that has been undertaken by small, privately funded firms such as biotech startups," Benner says. "It may be that the locus of much really radical innovation is shifting outside of the large organizations to small start-ups."
That points to a "big trend" emerging in product development, so called "Open Innovation," according to Wharton marketing professor George S. Day, co-director of the Mack Center for Technological Innovation and co-author of Wharton on Managing Emerging Technologies. Open Innovation, also known as "crowdsourcing," entails collaborating with partners to solve business problems.
The archetype of that model is Waltham, Mass.-based InnoCentive. It matches corporate "seekers" who have science, engineering and business problems with amateur "solvers" worldwide. The "solvers" then compete -- for bragging rights and often token rewards -- to provide the best answers to the corporate problems. "Most companies are not looking for a big innovation they can knock out of the ballpark," Day says. Rather, they want a relatively quick fix for a specific piece of a larger puzzle.
For firms that want the "secret sauce" to always come from in-house, previous success can present a huge roadblock to innovation, according to Kim. The problem is that success creates a virtual construct, a paradigm of "How to Do Things," inside of which new thinking cannot flourish. Kim calls it "The Curse of Knowledge." Cross-discipline teaming "is one way of breaking the Curse of Knowledge," he says. Anotheris "experience pairing," or matching a senior employee with an individual who has considerably less experience, but a fresh perspective on how to solve problems.
An incredible opportunity to innovate disruptively lies in the problem of information overload, says Kim. Knowledge is being created at a far faster rate than any one human can ever hope to assimilate. The flip side is that we constantly filter out vast stores of data because we are bombarded with information like never before in history.To prove his point, Kim showed audience members a movie clip that repeated an old psychology experiment. Two teams, one dressed in white, the other in black, dribbled basketballs and passed them back and forth. Audience members were told to count the number of passes made by the black-shirted players. A few of the students missed the person in the gorilla suit who nonchalantly walked through the middle of the scene, because they were not looking for it. "I can assure you that all of you saw the gorilla. But some people processed it, stored it, some people missed it. You were looking for a particular thing."
Seven Hours of Whitewater Rafting
The term "disruptive technology" went viral in the late 1990s after the release of Harvard Business School professor Clayton Christensen's book, The Innovator's Dilemma. But in practice, Bell Laboratories has served as an incubator of paradigm-shifting, "disruptive" innovations since its creation in 1925 as a joint venture of AT&T and Western Electric. Researchers at northern New Jersey-based Bell Labs have won six Nobel Prizes and take credit for an inventory of innovations: The photovoltaic cell, the silicon-based transistor, statistical process control, the UNIX operating system, the C programming language, digital cell phone technology and wireless local area networks are just a few of the better-recognized innovations that have taken shape there.
Today, Kim said, Bell Labs researchers are working on similarly ground-breaking technologies. They are developing, for instance, a liquid sensor that can be transformed to any shape by applying voltage -- Kim envisions it being used as a zoomable lens. The division is also using nanotechnology to create 3-D images. "You have seen, in science fiction movies, 3-D holographic movie images? It can be done.
It can bedone using these technologies today. It's just not very cost effective."
Kim offered a case study from Alcatel-Lucent -- Lucent Technologies at the time -- on how to inject a spirit of disruptive innovation into an existing and stagnant culture. Lucent's optical networking division was severely underperforming and the company fired the unit's top managers. "I was really convinced that the reason I was put in there was that nobody else would do it, and they needed somebody to blame," says Kim.
The division was moribund: Financial results were disappointing and morale was low. Kim shook up the management team and took the survivors to an off-site retreat that featured whitewater rafting. "First thing they do is say, 'Why are we doing this ...?' After a while, they get really bored." The exercise, intended to foster teamwork and cooperation, was designed with the help of a psychologist. Instead of cooperating, the managers began splashing one another with their oars, "like little kids."
But the exercise-psychology experiment wasn't over at the end of the rafting run. "After six or seven hours of whitewater rafting like this,they were tired." That evening over dinner, people let their "at-work" guardedness down and spent time learning about one another.The next day included all the off-site strategizing and white board sessions one might expect, but Kim says the interaction was more genuine and productive than if they had met as they were previously, a grouping of near strangers. In the first quarter following that meeting, he says, the group posted revenues of $510 million, $560 million the next quarter, then $730 million, then $970million. The point, he adds, is that "teamwork is so critical for the success of a company."
Kim's advice for jumpstarting disruptive innovation is not exactly revolutionary, though it can seem exceedingly rare when many companies still think quarter-to quarter and employees take a similarly short-ranged view.
Not even storied Bell Labs, it seems, is immune from the pressure to produce quickly exploitable technology. In a shock to the science world,Alcatel-Lucent all but shuttered its funding for the Lab's basic physics research over the summer. Company officials said the move was done to align the Lab more closely with the parent company's commercial pursuits in wireless, optics, networking and computer science. Or, as Alcatel-Lucent spokesman Peter Benedict told Wired Magazine in August, "In the new innovation model, research needs to keep addressing the needs of the mother company."
Basic research investigates the most fundamental of scientific questions and has no direct commercial application. At the same time, it has laid the groundwork for most of the modern technological conveniences we enjoy today, including commercial aviation, the GPS system and lasers.
"You have to make an investment in capital, human knowledge and networking," says Kim. "That's the way to get ahead."
While globalization has witnessed the decline of U.S. dominance in manufacturing, energy and even finance, one thing had long been presumed unassailable: Good old American ingenuity.
Now it appears that's not safe, either. China, whose industries have been envied in the West more for their tenacity than their ingenuity, has established a multi-year framework to become more innovative and, therefore, competitive. So has Singapore. Finland is merging its top business school, design school and technology school to create a multi-disciplinary "university of innovation" next year.
Council members of the National Academy of Sciences and the National Academy of Engineering have "expressed concern that a weakening of science and technology in the United States would inevitably degrade its social and economic conditions and in particular erode the ability of its citizens to compete for high-quality jobs," according to a 600-page report from the National Academies published in 2007 and titled, "Rising Above the Gathering Storm."
The wild card these days is what will happen to innovation -- the advance of progressive ideas in science, technology and business -- now that the world economy is in a tailspin.
The conventional wisdom might suggest that business, government and academia will be less willing to invest in the risk-taking and short-term costs that come with the territory of innovating. Yet Paul J.H. Schoemaker, research director for the Mack Center for Technological Innovation, suggests that, for some companies, the economic crisis can actually provide an innovation platform. "The crisis has multiple impacts," Schoemaker says. "Loss of revenue and profit will at first instill a cost cutting mentality, which is not good for innovation. But if the patient is bleeding you need to stop that first.
Then, however, a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention."
He also cautions against too much caution -- over-reliance on incremental innovation versus transformative, or "disruptive," innovation. In innovation circles, the two have come to be differentiated as "little i" and "Big I" innovation. "The largest gains in business come from more daring innovations that challenge the paradigm and the organization," Schoemaker says.
The Business of Being Disruptive
While "disruptive innovation" has enjoyed office buzz-phrase status for only about a decade, the idea is quite old: Austrian economist Joseph Schumpeter had it in mind when he borrowed the phrase "creative destruction" to describe his theories of how entrepreneurs sustain the capitalist system.
So just how does an entrepreneur or business go about being "disruptive?" How does one convince investors or top brass of a radical idea's worth?
One person who knows something about bringing disruptive innovations to market is Jeong Kim, president of Bell Labs at Alcatel-Lucent and a successful tech entrepreneur. He offered some suggestions in a recent presentation titled, "Paving the Way for Disruptive Innovation," that was part of the Executive Master's in Technology Management (EMTM) program's ongoing lecture series: Aligning Emerging Technology and Business.
Among the most critical assets one can possess, he says, is company-wide recognition that disruptive innovation is actually important. In a company that's already successful -- or one with layers of bureaucracy that hinder new ideas -- this can prove difficult. The firm also mustcommit itself to research. "Disruptive research is absolutely critical, especially in the technology space." Furthermore, it is not enough to simply have brilliant engineers. Without competent management on the business side, the most elegant technology can wind up on the scrap heap of business history, or even worse, usurped by a competitor: "Disruptive innovation is not sufficient," says Kim. "You can [cite] numerous examples of companies that came up with [new] technology but eventually were displaced by somebody else."
In the innovator's lingo, these "somebody elses" are known as "fast followers" -- that is, companies with better funding or sharper management who were able to exploit a technology more quickly and effectively in the marketplace than the original creator. "You like to be the first to develop technologies," Kim says. "But the more flexible, the more innovative in terms of business model that the company is, the longer you can maintain advantage."
That point gives rise to the question: What is the best business model for fostering innovation? As it turns out, numerous decision-making tools exist to help firms systematically manage an innovation program, says Schoemaker, co-author of a book titled, Wharton on Managing Emerging Technologies.
According to Schoemaker, when it comes to innovating, the analogy is to firing a shotgun, not a rifle. Given the high failure rate of innovative projects, companies are smart to develop an array of possible situations and contingencies, rather than pin all their hopes on one plan. "Sticking to our knitting" might appear to be a sound business cliché -- it worked for a lot of companies that survived the dot.com era. But Schoemaker and other innovation gurus advocate looking at areas adjacent to one's main business as fertile soil for innovative breakthroughs.
Why an Economic Crisis Could Be the Right Time for Companies to Engage in 'Disruptive Innovation': Knowledge@Wharton
Old-fashioned, linear approaches that rely on standard measurement schemes are often outdated if relied upon solely. "By examining a company's growth gap, developing scenarios, exploring adjacencies and venturing more into blue oceans, companies can reap greater benefits," Schoemaker says.("Blue ocean" is innovator-speak for unrealized, and therefore uncontested, markets.)"The investment approach,however, has to emphasize more of an options and portfolio strategy rather than static NPV (Net Present Value valuation method)."
Wharton management professor Mary Benner sees the "stick to our knitting" syndrome as impinging on large companies' ability to react to competitive threats. "I find that firms' innovation into radically new technologies or new markets can seem to shareholders and securities analysts like too great a departure from their expectations for these firms. Investors and analysts often prefer that firms maximize shareholder value by 'sticking to their knitting.'
The result is that large firms, particularly those expected to have stable, predictable earnings and dividend payments -- i.e., "income stocks" -- are not likely to be rewarded by the stock market for entering new technologies or undertaking radical innovation, and instead may be punished by reductions in stock price and market value."
A prime example she has found in her own research, she noted, is Verizon Communications, the giant telecommunications firm. Stock analysts questioned Verizon's large capital outlays on FiOS, a high-volume fiber-optic network intended to counter a "triple-play" threat to its business posed by Comcast's cable television, high-speed Internet and voice-over-Internet phone service."Recent research suggests the stock market is not good at valuing intangibles, uncertain innovation or technological change," Benner says. "What this means for large, publicly traded firms is that they may face a disadvantage in engaging in radical innovation, and this innovation may instead take place in venture capital-funded startups."
Indeed, outsourcing of innovation itself could turn out to be the wave of the not-so-distant future. "Particularly in the pharmaceutical area, there has been a focus on how firms acquire innovation that has been undertaken by small, privately funded firms such as biotech startups," Benner says. "It may be that the locus of much really radical innovation is shifting outside of the large organizations to small start-ups."
That points to a "big trend" emerging in product development, so called "Open Innovation," according to Wharton marketing professor George S. Day, co-director of the Mack Center for Technological Innovation and co-author of Wharton on Managing Emerging Technologies. Open Innovation, also known as "crowdsourcing," entails collaborating with partners to solve business problems.
The archetype of that model is Waltham, Mass.-based InnoCentive. It matches corporate "seekers" who have science, engineering and business problems with amateur "solvers" worldwide. The "solvers" then compete -- for bragging rights and often token rewards -- to provide the best answers to the corporate problems. "Most companies are not looking for a big innovation they can knock out of the ballpark," Day says. Rather, they want a relatively quick fix for a specific piece of a larger puzzle.
For firms that want the "secret sauce" to always come from in-house, previous success can present a huge roadblock to innovation, according to Kim. The problem is that success creates a virtual construct, a paradigm of "How to Do Things," inside of which new thinking cannot flourish. Kim calls it "The Curse of Knowledge." Cross-discipline teaming "is one way of breaking the Curse of Knowledge," he says. Anotheris "experience pairing," or matching a senior employee with an individual who has considerably less experience, but a fresh perspective on how to solve problems.
An incredible opportunity to innovate disruptively lies in the problem of information overload, says Kim. Knowledge is being created at a far faster rate than any one human can ever hope to assimilate. The flip side is that we constantly filter out vast stores of data because we are bombarded with information like never before in history.To prove his point, Kim showed audience members a movie clip that repeated an old psychology experiment. Two teams, one dressed in white, the other in black, dribbled basketballs and passed them back and forth. Audience members were told to count the number of passes made by the black-shirted players. A few of the students missed the person in the gorilla suit who nonchalantly walked through the middle of the scene, because they were not looking for it. "I can assure you that all of you saw the gorilla. But some people processed it, stored it, some people missed it. You were looking for a particular thing."
Seven Hours of Whitewater Rafting
The term "disruptive technology" went viral in the late 1990s after the release of Harvard Business School professor Clayton Christensen's book, The Innovator's Dilemma. But in practice, Bell Laboratories has served as an incubator of paradigm-shifting, "disruptive" innovations since its creation in 1925 as a joint venture of AT&T and Western Electric. Researchers at northern New Jersey-based Bell Labs have won six Nobel Prizes and take credit for an inventory of innovations: The photovoltaic cell, the silicon-based transistor, statistical process control, the UNIX operating system, the C programming language, digital cell phone technology and wireless local area networks are just a few of the better-recognized innovations that have taken shape there.
Today, Kim said, Bell Labs researchers are working on similarly ground-breaking technologies. They are developing, for instance, a liquid sensor that can be transformed to any shape by applying voltage -- Kim envisions it being used as a zoomable lens. The division is also using nanotechnology to create 3-D images. "You have seen, in science fiction movies, 3-D holographic movie images? It can be done.
It can bedone using these technologies today. It's just not very cost effective."
Kim offered a case study from Alcatel-Lucent -- Lucent Technologies at the time -- on how to inject a spirit of disruptive innovation into an existing and stagnant culture. Lucent's optical networking division was severely underperforming and the company fired the unit's top managers. "I was really convinced that the reason I was put in there was that nobody else would do it, and they needed somebody to blame," says Kim.
The division was moribund: Financial results were disappointing and morale was low. Kim shook up the management team and took the survivors to an off-site retreat that featured whitewater rafting. "First thing they do is say, 'Why are we doing this ...?' After a while, they get really bored." The exercise, intended to foster teamwork and cooperation, was designed with the help of a psychologist. Instead of cooperating, the managers began splashing one another with their oars, "like little kids."
But the exercise-psychology experiment wasn't over at the end of the rafting run. "After six or seven hours of whitewater rafting like this,they were tired." That evening over dinner, people let their "at-work" guardedness down and spent time learning about one another.The next day included all the off-site strategizing and white board sessions one might expect, but Kim says the interaction was more genuine and productive than if they had met as they were previously, a grouping of near strangers. In the first quarter following that meeting, he says, the group posted revenues of $510 million, $560 million the next quarter, then $730 million, then $970million. The point, he adds, is that "teamwork is so critical for the success of a company."
Kim's advice for jumpstarting disruptive innovation is not exactly revolutionary, though it can seem exceedingly rare when many companies still think quarter-to quarter and employees take a similarly short-ranged view.
Not even storied Bell Labs, it seems, is immune from the pressure to produce quickly exploitable technology. In a shock to the science world,Alcatel-Lucent all but shuttered its funding for the Lab's basic physics research over the summer. Company officials said the move was done to align the Lab more closely with the parent company's commercial pursuits in wireless, optics, networking and computer science. Or, as Alcatel-Lucent spokesman Peter Benedict told Wired Magazine in August, "In the new innovation model, research needs to keep addressing the needs of the mother company."
Basic research investigates the most fundamental of scientific questions and has no direct commercial application. At the same time, it has laid the groundwork for most of the modern technological conveniences we enjoy today, including commercial aviation, the GPS system and lasers.
"You have to make an investment in capital, human knowledge and networking," says Kim. "That's the way to get ahead."
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