Defining Innovation

One of the conversations we had this weekend in our Global Strategy course was around the definition of Innovation. In trying to define it, classmates threw out "new technology", "thinking outside the box" and other definitions that sounded close. But Dr.Baliga corrected them by highlighting the difference between Invention/Discovery and Innovation.

Invention / Discovery - these relate to the creation of something new, or expanded knowledge of something in nature.

Innovation - this is the application of that invention / discovery into a product that is successfully deployed to solve a market need.

He was quick to point out that most executives get those two definitions confused. While Invention might seem like the more difficult part (ie. synthesize a new molecule; create a new hybrid engine, etc.), the truly difficult part is creating the system around it (sales, marketing, distribution, etc.) that allows it to be successful deployed by people to solve their problems.

Innovation requires some many things to be aligned and to "go right", including being prepared to act when luck comes your way. That's precisely the reason that so many companies have difficulties trying to be innovative. They have plenty of ideas on the drawing board and in the lab, but they just can't figure out how to get them to market successfully.

Finding New Markets - From the Rest-of-World?

It's definitely an American bias, but we tend to think that new things get invented here (cars, computers, televisions, etc.) and then foreign markets open to accept those goods. Eventually they get copied for lower-costs overseas, and are exported back the US.

But the world becomes more global, I suspect that we'll see this model begin shifting and more things will take off overseas and then eventually make their way to the US. Not even market will be defined by the tastes or whims of Americans first.

I was listening to a podcast with Bill Simmons and Colin Cowherd from ESPN this morning, two American sportswriters that make their living talking about the Big 4 American sports (football, baseball, basketball and hockey). The conversation moved to HDTV and how soccer was so much more enjoyable to watch in HD, and how both of them were quickly converting into soccer fans. And not just ordinary soccer fans (since the US has had the MLS for many years now), but International soccer fans. They actually went as far as to predict that the World Cup would eventually become a bigger sporting event that the Olympics, and the International soccer (not US-based MLS soccer) would catch on big here too. Soccer! In America!!

I use this as an example because most Americans (up to a few years ago) would tell you that it could never catch on here. But the world is becoming more global. Technology (ie. HDTV, time-shifting DVRs) is having an impact that is shrinking the globe. It's happening in every industry.

So before you make that next assumption about where the next great concept or business model might come from (Silicon Valley, Cambridge, Shanghai), consider that it might just come from completely the opposite direction.

Entering New Markets - Gathering Ground Level Information

One of the areas that we've been focused on in our International Business course has been the challenges that many companies have when they attempt to move into foreign markets, often assuming that knowledge from their home country will translate into the new market.

As companies send people forward into a country to start doing market research, this is a simple way to get very raw reactions to your concept. The beauty of this is that it's incredibly simple, incredibly inexpensive, and doesn't hide the human element behind a bunch of summarized numbers (or biases). This could be collected and frequently sent back to the product or strategy teams to give them data points to make adjustments to their original plans.

It's Difficult to Focus on Multiple Things at the Same Time

As the Germans learned in WWII, after bombing Pearl Harbor, it is very difficult to fight a competitive battle on multiple fronts. Valuable resources get spread too thin. The best people aren't all aligned to a common strategy. Communications becomes more difficult.

The recent Google Chrome OS announcement is going to create an interesting battle for a number of reasons:

• Technology innovation (Desktop OS vs. an Internet OS)
• Freemium vs. Premium Pricing Models
• How many battles can either company sustain and still be successful in their core businesses?
• How much is Google willing to put into their non-search businesses in order to keep Microsoft from gaining traction in search?
• How much is Microsoft willing to put into Core OS (Windows) or the Internet version (lower margins) to maintain those cash flows?

And of course the most important question for MBA students - do each of these projects create a positive NPV? (ok, being sarcastic)

It must be fun to sit in the war rooms of either Google or Microsoft and plot how to block or take the other guys market (on a huge scale). Of course we do need to continually ask ourselves, are any of these actions add real value to their customers, or are they potentially opening themselves up to new competition?

Sign #1 that you work for a Big Company

We haven't gotten to the formal "How to Manage like a Big Company" course in the program yet, but we've analyzed plenty of case studies that highlight how to quickly identify that a company is in protection mode and no longer intends to add value to their market or for their customers.

Here's a perfect example from the PC / Netbook market, which we analyzed back in ITMgmt last semester. The model for unnovation goes something like this:

• New competitor comes out with a new product/concept/service, which initially seems radical or crazy (to your way of thinking).
• Big company immediately dismisses the product in public forums.
• Big company talks about how that model is bad for everyone in the industry. Essentially creating a negative-sum game.
• Big company internally creates a taskforce of people to explore if they could do it. They usually take existing people from their semi-competitive product line to evaluate it, biasing the results from Day 1.
• Internal taskforce can't figure out how to make something better, since they are using the new product as a template (to copy).
• Internal taskforce decides that it would be better to dumb down an existing product and claim market-share in the existing market.
• Company publicly announces that the new market is viable, and one of their growth areas.
• VP from a previously failing group gets internally promoted to SVP/GM of the "new" division, because he has experience in new markets. This is sort of like when losing head coaches get recycled in the NFL or NBA.

Hence the unnovation cycle begins and becomes the new strategy for the company. Ignore the fact that their cost structures, market analysis, distribution channels all probably need to change in this new market. Those can all be "fixed" later.

When will things get back to normal?

In the recent issue of Business Week, in the Welch Way column in the back, a question was asked about when the recession would be over and we'd get back to normal. Jack (or Suzy) responded with an answer, "sometime in 2010."

I understand why they gave this answer. It's vague, but not too vague. It sets reasonable expectations about a foreseeable date in the not too distant future. And it's simple. Unfortunately, it's also terribly misleading. Because what the person is asking isn't, "when will the recession end?", but what they are really asking is, "when will we get back to the normalcy that I had become used to in 2006-2008?"

This is a little bit like a New York Yankees fan asking when things are going to be normal again, with their definition of normal being 1998-2002, when the Yankees were winning all those World Series titles. The Yankees have been over-leveraged for the past few years, just like the US economy. The problem is that the previous normal doesn't exist anymore and probably isn't coming back. Sarbanes-AIG or some other set of new regulations won't allow the uber-leveraging that happened from 2005-2008.

What I can't understand is why so many people are standing still, waiting for the previous normal to return. I suspect it's because they desire to have the comfort and security they had back in 2008. In fact I know it is. But as the old saying goes, "a watched pot doesn't boil". Waiting isn't going to get anybody anywhere expect further behind the rest of the people that are pushing forward, making things happen on their own.

What I'm finding throughout this reseting is that more doors are opening when I go knocking than they might have in the past. People are more open to new ideas and new partnerships, especially if you add some creativity to the relationship (free work for a period of time in exchange for experience; lowering costs via social media; business models that share risk, etc.).

I'm having a lot of fun right now trying to find additional opportunities for classmates. Some of them are simple, such as guest blogger slots on popular websites to gain visibility. Others are relationship building to get new businesses into new markets. I never knew which one will end up being fruitful, but there are definitely opportunities to define the new normal if you're willing to step out and make some things happen.

"Freckle Pony" - American Stampede Mustang National Champion

Congratulation to classmate (and China trip companion) Wendy Perry and her family. They won 1st place in this weekend's American Stampede Mustang National Show in the Occasionally Driven/Trailered division. This was the first time they have entered "Freckle Pony" in a judged competition.

This 1966 Mustang was a sweet 16th birthday present that has been fully restored by Wendy, her father Buddy and brother Jeff.

Wendy had promised to bring the car to class one weekend and give some of us a ride, but now that it's a National Champion, I suspect that offer may not happen anymore. Cars like that tend to stay in the garage. Maybe we'll be able to talk her into it, if we promise not to let it get scratched or dinged.

The "Gap Theory" of Curiosity

At the top of my current non-school reading list is Made to Stick (Dan & Chip Heath). For an innovation and ideas junkie such as myself, it's almost impossible to put down. I highly recommend it to anyone that needs to influence people, or drive new ideas. I plan to buy one for each person on my team at work, and probably my MBA team.

[NOTE: I would have much preferred this book to the one we used in StratMktg last semester.]

On page 84 (hardcopy version), they introduce a concept called "The Gap Theory of Curiosity", which was created by George Loewenstein (Carnegie Mellon, 1994). It argues that gains in knowledge causes pain for intelligent people, and that they strongly desire to fill that gap. It's like having an itch that needs to be scratched. Heath & Heath suggest that purveyors of new ideas should use this human behavioral instinct to their advantage when presenting new concepts. The person with the concept should look for ways to present it such that it leaves the audience wanting to ask those questions that satisfy their need to have the gaps of knowledge filled.

I bring up this concept because at this point in the MBA program many of my classmates have reached a level where they have put together quite a bit of knowledge, but now the gaps are starting to become more important than the workload. This creates challenges within team projects, as interest levels vary based on how much of a gap each project fills for each person. Combine this with the willingness (or lack of willingness) of professors to fill gaps during classroom discussions, and you have a difficult situation for any team that is trying to motivate teammates to participate or complete projects.

Understanding (and misunderstanding) how to use Digital Media

One of the more interesting aspects of the latter stages of an MBA program is that you spend less time focused on the classroom details and more time discussing and applying them to elements of your life. You find yourself looking at even the smallest interaction as an opportunity to analyze and seek improvement. Here's an example from a recent interaction with my roommate from the China trip, Gregg Lewis.

Gregg and his wife work regionally out of Roanoke, VA. He has won national awards for his architectural work, and been recognized internationally for his efforts to push the Cradle to Cradle concept of environmentally sustainable design. Gregg's passion for combining great architecture with eco-friendly sustainability are the foundation for his long term goals to raise awareness of the challenges ahead, and drive the overall building industry to be more responsible.

Over the weekend, I received an email from Gregg saying, "hey - wrote this opinion piece for the Roanoke Times - it'll be published this week." The piece ran on Monday. Overall it was well written and provides some good connectedness between the ideas being fostered by several well known individuals. My comments back to him had little to do with the content and almost everything to do with how he planned to amplify this message.

1. Is the Roanoke Times offering you a regular column to discuss aspects of environmental issues?
2. How else do you plan to get this message out to more people?

We had some follow-up discussions about basic things like Blogging, Twitter and other ways to use low-cost digital media outlets to amplify his message and generate some new conversations with people from around the world with similar interests. For now, those are on hold and we'll see if he's willing to put in some time to cultivate those communities.

This afternoon, I finally got around to looking at the piece on the Roanoke Times website. My first search for "Gregg Lewis" turned up this counter-point piece. Opinions aside, it highlights all the reasons the newspaper industry is going out-of-business and clearly doesn't understand the new world we live in. I'll just highlight a few points:

• This is a digital piece of information. It is a counter-point piece. But yet it has no URL linkage to the original piece. It forces the reader to search for it, with marginal chance for finding it.
• It provides no URL linkage to the associated articles. One again, the reader has no easy way to add breadth to the piece they are consuming.
• It provides no mechanism for the reader to comment on the articles. How does the Roanoke Times plan to gather feedback from their customers on whether or not this content is interesting to them? Wouldn't this be helpful to them to better target advertisers? Might their readers enjoy the ability to be part of the discussion?
• It doesn't allow the readers to communicate back to the author (email address, Twitter account??), essentially making this a one-way conversation in a world where two-way or asynchronous conversations rule the day.
• It hides easy linkage (see "Share it" button at top, instead of icons) to share the piece with other users or services (Twitter, Digg, Facebook, Reddit, etc..). Are they only interested in readers that manually navigate to this page? Do they have no interest in free distribution and possibly national or international readers?

So here we have a global message, one that needs discussions and ideas from many sides to make progress, and the institution publishing the message doesn't seem to understand the fundamentals of facilitating the conversation. They are stuck in a world of local readers, local writers, and paperboys with papers slung over their shoulders in a canvas bag for early morning delivery. They have never been in the conversation business, so it's not surprising that they don't understand even cocktail-party basics.

I hope that my friend's message and future work is able to better take advantage of the digital economy that could allow it to grow and expand. I'm more than willing to help share my experiences.

"Free" - Business Model, Crossroads, or Jumped the Shark?

My StratMktg professor, Dr. Jim Narus, thought I was crazy to keep talking about strategies and concepts built on free or freemium. None of those fit into the existing models or textbooks, so they can't possibly be viable, correct?

I'm not sure what the world will look like in 5 years, but here are a few other opinions:

• Malcolm Gladwell - Priced to Sell
• Seth Godin - Malcolm is wrong
• The Financial Times - Free does not like up to its billing
• Mark Cuban - Free vs. Freely Distributed
• Mark Cuban - When you succeed with Free, you are going to die by Free
• Chris Anderson - Malcolm, why so threatened?
• Squidoo Lens on "Free" - Does Free make sense? (public discussion)
• Fred Wilson - Freemium and Freeconomics
• A recent digital business example - When SaaS hits Critical Mass, the Game Changes

Whatever the future holds, the concept begs us to ask ourselves if we are being competitive in the market and continuing to add value to customers. Just as I wrote about the impact that China will have on our world, the idea that digital assets, goods and services will change your world is inevitable.

It's now up to each person to decide how they will react to the new rules.