INNOBLOG

Kevin Bolen co-authored this post.

It seems that everyone wants to know what the automakers will do differently in the increasingly unlikely event that they receive a massive Congressional bailout. Leaders suggest they'd like automakers to "be more innovative" and "reinvent their business model." But what exactly does that mean? And how would government officials monitor progress against these goals to see if the bailout is being well spent?

First, let's look at what it would take to "be more innovative." Our research and field work suggests watching whether automakers:

1. Place the customer at the heart of the innovation process: Firms that succeed in innovation are obsessed with learning more about the customer and, more specifically, the jobs they need to get done. Clayton Christensen likes to describe how millions of people use their car as an office, but no auto manufacturer has designed a car with desk space, power options for laptops and phones, Wi-Fi connectivity, and other features that would help get this job done. Looking for important, unsatisfied jobs-to-be-done could help auto manufacturers identify attractive growth segments and avoid commoditization. One sign that auto manufacturers have appropriately shifted their attention: an increase in the ratio of market research spending to advertising spending.

 

2. Have senior leaders actively engage in innovation: Leaders in many of the firms we work with and admire participate daily in innovation efforts. And this is not passive involvement. They join focus groups, observe behaviors, review project plans, help set prioritization parameters, evaluate funding requests, and develop and oversee unique organizational models to incubate the best concepts. Innovation is not simply a budget item for these leaders; it is second only to talent development on their personal to-do lists.

 

3. Create a diversified portfolio of ideas: No one can accurately predict what market demands will be five to 10 years from now. No one knows what the energy situation will look like. No one can predict the economic climate. No one knows precisely which early-stage ideas will take off and which will stagnate. Pinning a firm's future on a single breakthrough is unrealistic. A broad, diversified innovation portfolio can help companies withstand shocks and respond to market shifts. The freedom to fail in one area because of emerging opportunities in another is the hallmark of an effective innovation program.

Second, what would it really mean for the U.S. automakers to "reinvent their business model"? Our colleagues Mark Johnson and Clayton Christensen have an article with this very title in the latest Harvard Business Review.

One of the fundamental problems the article highlights is that many companies are held captive by their capabilities....

Read the rest at Scott's Harvard management blog.

Who is your competition? The question seems so simple, but a company that defines its competitive set too narrowly can miss disruptive attackers and high-potential growth opportunities.

Take, for example, a recent article in the Wall Street Journal describing Apple's surprising entry into the video game market. A few short months ago, Apple launched the "App Store," where iPhone and Touch users can download a wide range of applications. Some applications are free, others cost a few dollars.

A recent visit to the App Store showed that seven of the top 10 applications are games. More than 2,000 games are available in the App Store. Developers are taking advantage of unique features in Apple's products--like an accelerometer that tracks motion--to develop engaging, entertaining games.

One video game manufacturer--Nintendo--is watching this development closely. One of its executives told the Journal, "Whether you chose to play on your DS [Nintendo's handheld console] or listen to music on your iPod, we're already in the same competitive space for time."

In the very next paragraph, a Sony executive displayed a different perspective, noting that Apple isn't a threat because "the consumer is using the mobile gaming on the iPhone and iPod Touch as a time waster."

Anyone who has tracked this industry over the past couple of years would find these answers predictable.

Read the rest on Scott's Harvard Management blog, Innovation Insights.

Yesterday’s panel discussion at MIT offered what moderator Jim Poterba, former head of the MIT Economics Department and current NBER president and CEO termed “a real treat.”

Bob Solow (MIT) and Greg Mankiw (Harvard), two world-renowned economists who also hold opposing political philosophies, met to offer and discuss their perspectives on the most pressing economic topics the 44th president of the United States has to consider.

The numerous topics included the current state of the U.S. economy, income inequality, healthcare, foreign trade, energy, unions, and immigration. Yet despite pronounced differences in their political views, Solow and Mankiw were aligned in two major points.

First, they agreed that the grievous financial situation needs concerted action right now. The good news is that the U.S. is not experiencing a productivity shock; i.e., no part of our industrial base is destroyed physically. Recovery will thus happen with almost perfect certainty, even if the time horizon is unclear at this point.

Second, both researchers agreed that two sectors of the economy are of much more long-term importance: healthcare and energy. These two fields demand dedicated attention, since they directly affect the U.S. social safety net and national security. These two sectors also show enormous potential for growth.

Even the more conservative-leaning Mankiw recognized that President-elect Obama not only has access to a pool of highly-regarded economic advisors, but that he is in fact very likely to actually listen to these economists – which both Solow and Mankiw can also agree is a good thing.

So, if you are an innovator coping today with the imponderability of the current state of the economy, don’t get entirely caught up in it. Focus on healthcare and energy as two spaces where tremendous opportunities lie ahead.

The holidays are here. Get within 500 feet of a mall and you will be bombarded with sales signs, overwhelmed with Christmas carols, and swallowed by crowds of seasonal shoppers. While all of this may be overwhelming, there is one very good thing that comes with the hustle and bustle of the holidays – cookies.

I love cookies and there is no time of year more cookie-centric than the holidays. I have many fond memories of baking cookies with my mom, gleefully squishing Hershey’s kisses into the center of peanut-butter cookies and carefully painting icing on sugar cookies. This is why I was so fascinated by Arrowhead Mills’ “Bake with Me,” a line of baking mixes designed to encourage interaction between children and their caregivers. In addition to the baking mix, each box contains a promotional item, such as a cookie cutter or decorating stencil, to carry the interactive element from the box to the baking sheet.

Like most other baking products, there are sumptuous shots of sugar cookies, brownies, or cupcakes on the packaging, but what makes this packaging stand out on the shelf is that it also features a photo of a child in a chef’s hat happily mixing a bowl of batter. “The idea behind the package design was to develop a look that would really stand out on shelf to deliver the unique proposition; a fun activity for mom to do with their kids...,” explains Martha Seidner, a vice president at Smith Design, the agency responsible for design of the “Bake with Me” packaging.

All baking companies target functional jobs around taste, attractiveness of the food, nutritional value, and preparation time required. Arrowhead Mills has nailed the emotional jobs of parents, such as:

• Feel like a good parent
• Establish/reinforce my relationship with my kids
• Create lifelong memories with my kids

By targeting emotional jobs, “Bake with Me” effectively overcomes traditional resistance to baking mixes as less authentic (and lower quality) than baking from scratch by satisfying other (and arguably more important) jobs related to the parent-child relationship.

Well done! Now, let’s gather the family and friends and start baking some cookies.

In conjunction with Chuck Frey from InnovationTools.com, I am compiling a report on how and why to keep innovating during the economic crisis. We would love to hear from practicing innovators.

In essence, we would like to know how would you answer this question: What strategies should organizations use to maintain or expand their innovation initiatives, despite the current global economic downturn?

Please post your thoughts in the comments or email to me at rcinnosight -at- gmail.com. Replies will be compiled into a report and posted on innosight.com and on innovationtools.com. We'd like to get replies by Wednesday, November 19.

The Nov. 12 issue of Strategy & Innovation has been posted, featuring these stories:

• Are You Ready for the Next Generation of Innovation? by Stefan Lindegaard explains that the move toward open innovation requires a new mindset and a new set of skills; it is no longer enough to just be a good project manager, researcher, engineer — or leader. What skills are required for this “next-generation mindset”? In his article, Lindegaard discusses these skills: collaboration, relationship-building, stakeholder management, and communication.
• Innovators' Insights:  Sick Economy Visits Doctors by Krystin Stafford discusses the affect that the economic downturn could have on physicians' practices and what innovations they might consider to minimize a drop in their revenues while ensuring that their patients get quality care.
• Disrupt-O-Meter: RingCentral Digital Line vs. Microsoft Office Communicator by Renee Hopkins Callahan describes the competitive struggles in the business VoIP space. Is tiny start-up RingCentral better positioned for growth in the enterprise than Microsoft, which historically has owned the enterprise?

 With thisi issue we are once again making the full Strategy & Innovation issue available as a .PDF download (you will need to register before downloading). The previous four digital issue sof Strategy & Innovation can also now be downloaded in .PDF format.

About a week ago, my wife let out a contented sigh while browsing the Internet. She was visiting Amazon.com, and saw an announcement that the company was experimenting with hassle-free packaging. Amazon's move illustrates one of the important advantages that entrants have over industry titans.

Anyone with children (we have a three year old and a one year old) knows that gift-giving times go through a predictable cycle. It starts with ebullience as children open their presents. Then frustration sets in as you have to deal with seemingly dozens of small, twisted wires that take forever to untangle. You grumble about evil, profit-minded corporations, and your children just wonder if they'll ever get to play with their new toys.

Amazon hopes to do away with this hassle. It has worked with manufacturers over the past few years to develop packaging for 19 popular products that is easier to open and more environmentally friendly. If experiments with more hassle-free packaging succeed, Amazon plans to extend the program to other products.

It's a winner all around: less hassle for parents, cheaper shipping for Amazon, and less environmental degradation.

Don't expect this movement to spread to toys sold in Wal-Mart or other traditional retailers any time soon. It's not that retailers hate their consumers. They don't. They do hate shoplifters. Difficult-to-open packages are a critical shoplifting deterrent.

Amazon's direct-to-consumer model is shoplifting resistant, so it can design a solution that maximizes its profits and consumer satisfaction....

Read the rest at Scott's Harvard Management blog, Innovation Insights.

This New York Times article describes the positive fallout that resulted after Ph.D. candidate Johnny Chung Lee posted a YouTube video last December showing how the Nintendo Wii remote controller could transform a normal video screen into a virtual reality display (an idea I also referenced in this Emerging Technology Watch article). So far, the video has been seen more than six million times, helped Lee get a job with Microsoft and helped him get listed in this year's MIT Technology Review Young Innovators Under 35.

Lee's choice of YouTube to disseminate information about his invention was perhaps more innovative than what he actually invented. Sais the Times: "Contrast this with what might have followed from other options Mr. Lee considered for communicating his ideas. He might have published a paper that only a few dozen specialists would have read. A talk at a conference would have brought a slightly larger audience. In either case, it would have taken months for his ideas to reach others."

Also, demonstrating his invention in a YouTube video allowed Lee to not only reach millions of people, it allowed for him to receive feedback and essentially test his ideas — an illustration of one of the prime uses of social media: listening to others. Those others might be your customers if you are using social media as a marketer. If you are an inventor, listening to others gives you valuable information on how your idea works and how it might be tweaked — which essentially is the value of a prototype.

Mr. Lee himself told the Times, “ 'Sharing an idea the right way is just as important as doing the work itself. If you create something but nobody knows, it’s as if it never happened.' "

The Wednesday-morning quarterbacking has begun in earnest as people pick apart the campaign strategies of the winners and losers. Jack and Suzy Welch chimed in at Business Week with their disappointment at McCain's loss as well as some high-level views on what business leaders can take away from the successes and failures of the two candidates: 

Listening to the analysts during last night’s televised election results shows, I too was struck by what we can learn from the two efforts — more specifically how the principles of innovation were so cleary in evidence in this election.  Let’s look at how a few of the key models we advocate to drive corporate growth were applied by the Obama camp to generate a significant win: 

1. Target nonconsumers — when a company is able to connect with a segment of the population who are not buying a product or solution and convert them, growth follows.  The Obama team embraced this, looked beyond the Democratic “base” and even the registered Independents and sought to engage first time voters.  The result?  The highest voter turnout (64.1%) since 1908 (65.7%) with 68% of first time voters going for Obama.
2. Look for opportunity at the bottom of the pyramid — instead of seeking big ticket donations and endorsements from key party pundits by aligning his message to their narrow needs, Obama sought support from a very broad base and raised a record amount of funding from first time donors through small, internet-based donations.
3. Rethink your business model — Obama used technology to reach and engage a younger voting community and encouraged others to do the same. Who can forget Obama-girl at the top of the YouTube charts?

By contrast, McCain did everything we would expect from one about to be disrupted:

1. Focus on your best customers — for this campaign McCain moved away from his popular bi-partisan approach and played to the conservative base. His selection of Sarah Palin as his running mate was widely regarded as a move to bring his ticket back to the “right” and appease long-time critics of his in the Republican party.
2. Ignore the threat — McCain secured the Republican nomination in March, but was largely quiet during the balance of the hotly contested Democratic primary through the summer.  By not using this time to develop his own grass-roots support network in all 50 states, he yielded valuable ground to the Democrats who used the free news cycles to generate additional momentum for their eventual nominee.
3. Cramming — running a new solution through the traditional business model. McCain was not a typical Republican. This was a large part of his appeal and likely one of the reasons he did so well in spite of the economic climate and general distaste for his party at the moment. However, he took his non-traditional approach and crammed it into a very traditional campaign. He engaged the same leaders who had run Bush’s campaigns, he cut himself off from the media, and became the Republican candidate instead of John McCain. Utilizing traditional campaign tactics smothered his unique qualities instead of bolstering them.

Of course, there were a lot more forces at play that helped determine the outcome of the election but nevertheless, these contrasts were clear to me as I watched the map get filled in last night. 

Enough talk of recessions, silver linings, and stock swoons. Let's have some fun.

Over the weekend, I was watching an episode of Seinfeld featuring a chance encounter at a video store ("The Smelly Car," from 1993). The 15-year-old episode felt instantly dated, because with Netflix, Video on Demand, Hulu.com, iTunes, and YouTube, who actually goes to video stores anymore?

It got me thinking. What are small, everyday things today that will feel dated 15 years from now? Here are a few that hit me:

Getting lost. Planning a car trip to an unknown destination used to be a somewhat complicated activity (particularly for those of us who live in Boston!). You'd dig out the maps, talk to people who had made the voyage, and document your planned attack. If you had an appointment at a specific time you'd leave early to make sure you made it in time. Your greatest fear: getting lost somewhere unfamiliar.

For many people today, driving to an unknown destination involves getting precise directions from a Web search or punching an address into a Global Positioning System device, and going. As GPS technology becomes increasingly ubiquitous, we'll smirk at old television shows where key plot points revolve around the compound impact of making a wrong turn. Of course, we'll all gradually lose our sense of direction, but that's another point.

Parallel parking stress. Back when I was learning to drive, I spent an inordinate amount of time getting tips from friends and family about parallel parking. Today, many of us will pass a prime parking spot because of the fear of parallel parking.

The increasing sophistication of automobiles obviates much of this fear. ...

Read the rest on Scott's Harvard Management blog, Innovation Insights.

Andrew Laing wrote about Dash yesterday here. Scott Anthony offers another take from his Innovation Insights blog:

When a startup company sharply shifts its strategy, does that mean the company is in trouble? That's a natural question after Dash Navigation, a startup in the GPS space with a novel business model, announced a sharp shift this week. These shifts can actually be good news--if the shifter has the time and ability to iterate towards a successful business model.

Dash introduced its first product--the Dash Express--earlier this year. The device mimicked many of the features of devices sold by companies like Garmin and TomTom, with an interesting service model. Customers pay a modest monthly fee to have access to real-time traffic information. Even more interestingly, the real-time traffic information comes from aggregating data from Dash devices. Further, Dash created open protocols to allow developers to create "mash-ups," such as a way to find the cheapest gas near a driver at a particular time.

Dash's approach certainly had a disruptive feel to it (as highlighted in Innosight's Strategy & Innovation publication).

Clearly Dash's business model would have its greatest chances of success if Dash were able to get its device in the hands of tens of thousands of consumers in a particular market. Unfortunately, Dash has struggled.

User reviews suggest that Dash's device didn't do a good enough job with the basics. Of 161 reviewers on Amazon.com, 65 gave the product three stars or lower. A typical review contains language like, "It frequently thinks I'm exiting the freeway, even though I'm not. When driving down the street it will all of a sudden decide to reroute me around a block of houses, as if it believes I turned, when in fact I'm still going straight."

It's tough enough to be a late entrant into a field populated with big companies. If your device doesn't cross the "good enough" bar on critical dimensions, you are in real trouble. ...

Read more at Scott's Harvard Management blog, Innovation Insights.

In September, Renee Callahan wrote in Strategy & Innovation about the appealing GPS unit Dash Express, which distinguished itself in a very crowded field with its ability to aggregate data about users’ positions and speeds to generate real-time, accurate traffic information. However, Dash is now undergoing a complete overhaul of its business model: it will no longer sell its own branded devices and will focus instead on business-to-business sales of its software platform. If nothing else, this rapid death of a new device serves as a further warning of the dangers faced by new entrants with great ideas seeking to improve on existing offerings in sustaining ways.

This is a welcome change, and as Renee’s original article indicated, it was a foreseeable one. Dedicated GPS navigation devices from a few large incumbents have continued to become more ubiquitous and more affordable, while at the same time GPS has rapidly become an increasingly common feature in phones. After the Dash Express was introduced, it quickly became clear that positioning it among other devices with extremely similar features would be an ineffective strategy, as demonstrated by series of price cuts evidently driven by weak demand that brought the price from $600 to $399 to $299, not counting a monthly service fee.

Essentially, the Dash Express was positioned as a device that does what other devices do, only a little better and more accurately. Unfortunately, viewed from this perspective the Express was a sustaining play, and market entrants tend to do very poorly when attempting to one-up established players.

Dash’s new strategy, however, is substantially more promising. As a restructured business-to-business software platform developer, Dash is entering fairly new territory: GPS device manufacturers use their own closed, proprietary operating systems, and generally speaking mobile devices like phones run on an enormous variety of proprietary software platforms that have only recently shown some potential for standardization. Within this new, less-cutthroat competitive landscape, Dash may flourish. Of course, it’s also worth noting that the piece of Dash’s software that makes it truly compelling – its use of users’ data to provide extremely accurate traffic data – will only work better as it is made available in and gathers data from a wider variety of devices.

At the end of the day, the demise of Dash as a device maker demonstrates the difficulty of penetrating a mature market with established incumbents and fierce competition. The “new” Dash may also run into trouble, but from our perspective Dash’s new business-to-business model seems to be a safer, faster-moving road to success.