Where Middle Age and The Internet Collide

I've written before that one of the interesting aspects of an Executive MBA program is the challenge that student face between pursuing that "next big idea.." and existing obligations to family, debt, etc. In more cases than not (unfortunately), people tends to stick with something comfortable, a known entity. Forget the fact that the world doesn't reward people for security, and that the world moves faster now than ever before, but it seems to be the nature of many people to take the safe path.

In watching the drama at NBC unfold over their late-night schedule (Jay Leno, Conad O'Brien, Jimmy Fallon), it's interesting to see a similar set of decisions being made. On one hand you have the incumbant, NBC, acting like a middle-aged adult that doesn't want to deal with the new rules of life. Being protective, being predictable. On the other hand, you have newcomer Jimmy Fallon understanding that "Time doesn't matter to me...We're in a different age now." (reference to Internet video, DVRs, etc), being willing to explore the new rules of the game and accepting that things don't need to match the old behavior to be successful.

In a parallel thread, I've just started reading "Linchpin" by Seth Godin. I've written about Seth's influence on me during my MBA many times, but this book is really hitting home for me. The theme of the book is that greatness is the only thing that matters in business anymore. Everything else will be repeatable, and hence replaceable. So each of us need to look at ourselves and find that area of greatness, of passion, or uniqueness and pursuit is with reckless abandon. If you don't, then any short-term security you think you have is probably flawed and could disappear when the next down economy forces your company to rethink your role.

At times I think we all get lulled into thinking that security is good, and that only the little guys need to really be great or innovative. This is a dangerous trap and one that needs to be avoided in order to survive. The Internet only accelerates the pace at which that false sense of security can turn into non-competitive or non-innovative weakness. And besides, life is too short to not be passionate about the things that comsume so much time in our life.

Making Innovation a Process/Culture within your Company

After 13 months in the program, I'm convinced that experience is the greatest enemy of entrepreneurs. People get comfortable. People change their approach to work/life after one bad experience. People constantly seek balance, or risk mitigation. People get cynical.

This weekend was an interesting microcosm of how E-MBA's see change. It wasn't completely surprising, because the older you get the more data you have to reference, the more past successes you try and emulate.

Dr.Baliga showed us a video (circa 1998) of Gary Hamel giving a presentation at Stanford. The focus of the talk was how business cycles are radically compressing. If companies want to survive they need to stop thinking about innovation as the next great project/product, but rather learn how to make innovation a core part of their business culture. In essence, re-engineer their process for fostering innovation just like they spent the 1970s-1990s re-engineering their operational processes to reduce costs or streamline efficiency.

A couple of quotes from Hamel stood out to me (paraphrased):

• Speaking with a hotel CEO, he asked why they didn't allow people to rent the rooms in a more flexible manner. The CEO responded that Hamel didn't understand the hotel business. Hamel responded, "And that's exactly why I have a valuable viewpoint on this subject". He explained that in this new economy, 90% of all innovation will come from outside your industry. Companies have to be willing to look for non-industry analogies.
• Following up on those comments, which might have been considered a "dumb question", Hamel stated that, "It's only from "dumb" questions that new value will be created. That new rules will be created. And new rules are what allow companies to gain advantage in any industry."

Following the video, the class discussed the concept. Asked for their thoughts, they responded with things like:

• He didn't give out the "how to do it" answers because he's a consultant looking for new business.
• He dismissed operational efficiency, but that's still a valuable way to create better profits for a company.
• I could never go ask my CEO to start a project like the ones he recommends, I'd get ridiculed for going against the grain.

Granted, Hamel did point out that maybe 3% of businesses today (circa 1998, although probably still true today) have the type of culture that he discussed, so it's not surprising that so many people responded with skepticism. Most companies still attempt to compete in a model that defends their existing business, extends their current models, and exploits their past loyalty from customers. People don't comprehend this because they don't believe they have experienced it. But the reality is they have experienced it, just from the other side of the fence. Their company's competition have implemented it in banking, telecommunications, manufacturing, media, consulting and high-tech.

It's difficult to be a mid-level (or even executive-level) manager and listen to people like Hamel speak, because you can see the future and yet it feels so difficult to obtain because of all the change needed (inside your company) to get there. It might impact your current role, it might impact your future salary/bonus, it might impact your status within a group. But more importantly, and this is the difficult concept to grasp, is that it's not a matter of "if" but rather a matter of "when" a lack of action will result in value destruction by your company. It's a near certainty that failing to implement an innovation culture within your company will result in failures on a massive scale. So if people are worried about risk, this isn't the risk to be worried about (it's almost 100% certainty - "no risk"). The risk to manage or exploit is how to become part of the upside when the innovation culture (that you're driving) takes off and your company starts creating new value for your customers.

As Hamel points out, sometimes it's good to take an "outside the company" (or industry) viewpoint on change. Here's a good quote from VC Fred Wilson's most recent blog:

"Bliss McCrum, one of the two VCs who taught me the venture business early in my career always said, 'if you are going to put more money into a company that is not working, make sure to change the strategy, team, or cost structure, or all three'. It's good advice. You will not get a different result doing the same thing."

"Plenty" currency in Pittsboro, NC

Innovation can come from anywhere, even tiny Pittsboro, NC (just outside Raleigh, NC). This story talks about how the local community has come up with a creative way to encourage the local residents to shop locally.

If you work out the math behind it, it's essentially just store owners giving a 10% discount to the customers. The trick is in the packaging. If they just printed coupons, residents may just throw them away. But by giving them 10% extra ($100 USD buys 110 "Plenty" dollars), they are incentivized to spent the dollars they have exchanged. The emotional connection and the transactional connection is made. 90% of something is far better than 0% of nothing.

Who knows how long this currency will stay in existence, but it's a nice example of a community pulling together to create something greater for the overall community. I think I'll take the family down to the Pittsboro Soda Shop this weekend and spend a few Plenty dollars.

Invention vs. Innovation (and thinking differently)

One of the topics we've discussed recently in our Global Strategic Mgmt (GSM) course is Innovation and how that differs from Invention (or Discovery). Having worked in the technology industry for years, and having been lucky enough to work on innovation-centric teams most of the time, I've seen my fair share of both sides of the discussion.

Several years back, I worked with a group of people looking to radically change the way that companies collaborate (internally & externally). So we kicked off a project called "Emergent Collaboration", focused on how we take all the sources of knowledge that are floating around a company and morph that into something that is useful to huge numbers of people. There are some remnants of the project in these videos:

Part I

Part II

Part III

Ultimately, the project got cancelled because we couldn't sell the concept to our internal business units. Looking back on the project, it's very clear that not only did we not target the "pain points" of the customers clearly enough, but we also got too caught up in thinking about the problem through old lenses. Too often, we used concepts that existed in the previous problem instead of coming up with new paradigms

Recently, Google announced the planned launch of a new product called Google Wave. Not only does it appear to solve many of the same problems that we focused on with Emergent Collaboration, but more importantly, they constantly bypassed previous concepts and came up with new innovate ways to solve customers problems.

Who knows how well Google will do with Wave, they've struggled to monetize some previous non-search projects. But no matter what happens, it is an excellent example of how to think innovatively.

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.

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?

Disruption vs. Shareholder Maximization - Part II

[With our Global Strategy course this semester, I'm going to highlight a bunch of interesting business models and strategies]

"What's very dangerous, is not to evolve.", Jeff Bezos. In a recent interview with Fast Company, Bezos once again talks about how Amazon is using aspects of their core business to disrupt an existing business model (publishing). This time their Kindle eReader is threatening to reinvent the publishing business.

But Amazon is an online store, a reseller of other company's stuff. Why is it trying to compete in the consumer electronics business with a device? Without a massive quantity sold, how can they possibly achieve the same level of margins that the online business does?

Once again, letting NPV's dictate the business can be dangerous to a company's long-term health. Kindle is an enabler. It enables Amazon to make buying books (from Amazon) easier than ever before. It enables Amazon to potentially disrupt the publishing value-chain. It enables Amazon to accelerate the pace at which costs associated with supply-chain for physical reading materials are reduced or eliminated. And it ultimately enables the on-going evolution of Amazon's strategy to be a critical player in the digital economy.

The Kindle may or may not ultimately be the dominant eReading device. It may fail to pass any litmus tests for success (long-term positive NPV; etc.) but the paradigm it has enabled will position Amazon to be a significant influencer in the digital life of consumers for the next decade. That's a position than shareholders of many other companies would highly desire.

The "E" in EMBA does not stand for Entrepreneur

I really enjoy the WFU MBA program. The level of learning and discussion is excellent, and the quality of the people (classmates & faculty) is outstanding. But the conservativeness of the majority of the group is one aspect that frustrates me every time I drive back to Raleigh on Saturday evenings.

I understand the root of it - a bunch of successful people that have gotten to a decent level in their companies, have families and mortgages, and are happy with where they are today. So they bring their conservative mindset into the classroom, and it shows in many of the discussions we have about company strategies or business models. From talking to friends in other programs, I don't believe these characteristics are unique to the WFU MBA program.

The white elephant in the room is that almost all of my classmates have another 20-30 years of work left in their careers. And on top of that, most of their companies and industries will either not exist or be radically changed in the next 5 years.

I can't tell anybody else how to think or act. But it seems to me that the classroom would be the perfect place to experiment with thinking about innovation, business disruption, new business models, and new forms of risk. Maybe the downturn in the economy will push some people to consider looking at ways in which they can adapt to the changes that will confront us over the next 20-30 years.

Follow-Up: Failure & Growth in China

In previous posts, I've written about growth and failure in China and the role that both of them play in their economy and culture. One of the things that Americans tend to do when confronted with the thought that China or India will potentially (or eventually) overtake them as an economic power is to point to their lack of innovation. Mike Lord referenced this during our International Business course this past weekend, but then reminded us that many of the early American settlers made copies of everything they knew from their homeland in Europe. The easiest way to gain expertise in a new area is to copy what others have done. What you do with it from there really determines if you will create a culture of innovation, and hence a culture that can create sustainable value over the long-term.

Maybe another data point to consider is the Israeli technology markets and their level of innovation. He is a highly-educated population, that has expertise in various areas of technology, and considerable need to solve economic and cultural challenges. Put they haven't been nearly as successful as their American counterparts in creating sustainable new businesses. One proposed reason for this is their "failure is not an option" mentality in the Israeli culture. I bring this up not as a way to highlight American success, but to highlight another culture that punishes (or discourages) failure, similar to what has been discussed in the past with China.

The US still has challenges to overcome in their education systems to remain competitive in the global economy, and we should not rest on our past success. But I believe innovation and the culture we have that encourages success, failure and resulting innovation is the strength that we need to enhance. The foundation still needs to be there via math and science and creative thinking, but the culture also needs to be encouraged. It is the strength that we have which gives us the ability to overcome the population numbers that are in India and China's favor (at least in some aspects).

Business School is like Business Books - Useful in Snippets

Let me preface this by saying that some (or much) of this may not make sense to many people reading it. I have a strange way of processing information. I'm sure there is a psychological name for it, but I've never found it. It essentially goes like this.

• Read a lot, almost anything you can get your hands on, in all formats (newspapers, blogs, magazines, books, etc.). Sometimes read the entire piece, and sometimes scan it.
• Listen a lot, to people from many of different backgrounds and social levels.
• Ask questions that sound broad, but are typically only looking for a partial answer.
• Do not consciously coordinate the things you read or hear or ask.
• Periodically have a whole bunch of facts, ideas, concepts, quotes and other relevant pieces come together into ideas or pictures. Scratch your head wondering how they all came together.

This piecing together sometimes happens on purpose, like when it's time to finish a paper or analysis. And sometimes it just "clicks" in the middle of a sentence as I'm talking to someone. The latter are the ones that I can never quite figure out, but occasionally I let it flow and it sounds like a reasonably intelligent set of thoughts (note: that's not bragging...I honestly don't know how it pieces together).

So what's the point? So what? Hang on a second, I'm getting there.

As I mentioned before, I read quite bit. Since I pay my mortgage by doing things that are semi-business related, I often read books on business. I'm currently reading Made to Stick, Innovation that Fits, and Free. I'm also reading Serve the People and The Blue Sweater, not so much for their business content but rather as a way to gain some inside into foreign culture to help augment this semester. Each one of those books is sitting on my nightstand, and each one is somewhere between 10% and 60% finished. I rarely seem to finish the books, but I always find a few interesting snippets from one that relates to one of the others. It's my favorite part of reading these various types of books, when one snippet connects to another and seems to create something new. A new idea, or a bigger concept.

As we've moved farther into our MBA program, we're now at that stage when more and more snippets from various courses or experiences are piecing themselves together in my head. The broader concepts these create are becoming interesting, useful and fostering a bunch of ideas for new businesses.

I'm not sure if this is the case for many (or any) of my classmates, as I often get blank stares when I try and explain some of these conjoined snippets. I'm not sure if they don't see things the same way, or if I still needed to work on explaining the new concepts, or if I'm just off base. Many of them are incredibly knowledgeable about specific topics, so it's quite possible that it could be the latter.

Either way, more and more pieces are starting to connect with each other or are at least in each other's gravitational field. For me, this is when fun stuff happens. Now the challenge becomes not over-thinking things.

Why China isn't the next Silicon Valley!

This is an interesting article by Sarah Lacy. I'm not sure how many times she has been to China, nor do I claim to be an expert with my visit count at a whopping "1". I find her viewpoint interesting, but not surprising. How could anyone but America, and especially our innovation mecca of Silicon Valley not be the home of the next great invention? I'm ashamed to admit that before our trip a few weeks ago, I would have thought the same thing. China is great at copying stuff. They are great at completing tasks that the brilliant and creative Americans assign to their low-cost workers. They all skipped the creative classes in school to take an extra math class.

Boy was I wrong about that. Its hard to explain without visiting, but there is definitely a culture of innovation in China. You can't build the cities that dominate their landscape without some creativity and strategy. You can't create business models that allow your companies to grow, when faced with a copied product within 90 days, if you don't have creativity and innovation. At this stage the innovation may not all be about new technology, but it is definitely about operational excellence, business model creativity, and a good bit of raw determination. Call it survival innovation. It's what motivates you to move from $1/day to $40/month to a high-rise in Xi'an, to a 100M RMB villa outside Beijing.

I'm looking forward to seeing if China becomes another Silicon Valley. But from the little bit I learned about Chinese culture, I doubt they want to become another anything. They will want to create a uniquely Chinese mecca of technology and innovation, or maybe a half-dozen. I'm hoping to find some ways to be part of that growth. I that for the next 5-10 years (or more), it will be a partnership play for those willing to create win-win situations in both countries. I don't believe it will be a zero-sum game with only one winner. As we've seen from the current econalypse, neither current can succeed if there is only one winner.

btw - kudos to Ms. Lacy for working on her Mandarin. I've been trying for a few months and not having as much success as I'd like. If she needs a study partner, please let me know. Or if she learns any tricks to learning it faster, I'd welcome those as well.

Interesting Business Models & Selling Techniques

While classroom studies are interesting, the real value comes in the translation to real world activities. I periodically go through my list of interesting business models or sales techniques to see how they leverage learnings from the classroom, or break the traditional rules to create new opportunities.

Here's a few that I recently found interesting:

Tats for Tees - Interesting approach to reducing the concerns that people have about spending too much on a "want" (not a need) in a challenging economy.

3/50 Project - Powerful concept; Shared concern for 1000s of people; Explained in a simple way that many people can understand and take action.

Threadless - Redefining how a basic product (T-Shirts) is designed, forecasted, and manufactured. Embracing community on a whole new level.

Etsy - Leveraging the long-tail of the market for hand-made goods. A simple way for companies to get access to a huge market, that previously would have been expensive and cluttered.