INNOBLOG

Over on the Harvard Business Review Editors' Blog, Gardiner Morris takes a look at the money that President Obama and US Energy Secretary Stephen Chu have been promising to spend on energy research projects and innovations in the energy sector. Morris argues that while this money is necessary, it's not sufficient to get the clean-tech economy up and moving. He cites the recent HBR article by Innosight's Mark Johnson and Josh Suskewicz, "How to Jump-Start the Clean-Tech Economy" as he discusses the need for the systems that will make this sector take off -- the "infrastructure, business models, and regulatory regimes that clean technologies will need. 

In their article, Johnson and Suskewicz write:

Edison didn't just invent a light bulb. He created a coherent commercial system to support it. He designed a technical platform that included generators, meters, and transmission lines; he piloted the project in an ideal test market (lower Manhattan, teeming with enthusiastic early adopters); and he used his clout to get the regulatory support he needed, fighting off the lamplighters' union, among other things. In short, he imagined the business ecosystem his light bulb would need and set about methodically creating it. 

The HBR article itself is still (as of this posting) free at the link above. We invite you to read it and join the conversation: what do you think it will take to get the clean-tech economy jump-started?

I picked up an interesting vibe at the Magazine Publishers Association Innovation Conference the other week. For the most part, the industry has had a tough year as it grapples with recession, changing consumer behavior, and a range of disruptive technologies. Yet signs of economic recovery and a sense that the magazine industry could learn from missteps from cousins in the music and newspaper business produced an unexpected sense of optimism.

One point I made in my remarks is that the forces at work in the magazine business — increased competition, rapidly shifting technologies, and emerging disruptive business models — are the forces that are reshaping many parts of the global economy. In other words, the challenges of the magazine industry are the challenges of industry, period.

What does it take to respond to these challenges? I jotted down three thoughts on the train ride back to Boston after the conference.

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

On October 14, Walmart sent shivers down some spines and a bolt of excitement up others when it announced plans to offer nationwide cellphone and mobile data service. Developed in cooperation with TracFone Wireless, the service (called Straight Talk) will offer two wireless plans, one providing unlimited voice, data, and texts at $45/month and another allowing 1,000 minutes, 1,000 texts, and 30MB of data at $30/month. Some quarters quickly labeled this development disruptive. But is it so?

For an offering to be disruptive, it has to provide superior performance along new dimensions (and, likely, worse performance along some existing dimensions) when compared with existing innovations. Disruptive innovations either create new markets by bringing novel features to nonconsumers or offer more convenience, better access, and lower prices to customers at the low end of an existing market. Let’s see if Straight Talk fits the bill.

At $30 and $45 a month, the service will send many smiling all the way to the bank. According to Nielsen Mobile Bill Panel Data, the average U.S. adult spends $78 per month for 1,000 minutes. The $30 Walmart plan would save that customer $576 per year and the $45 plan would save them $396. There is no doubt that the plans offer cell phone service at a substantially discounted price relative to existing mobile calling packages. Available exclusively at more than 3,200 Walmart stores, the service is accessible to many nationwide. Given that the service is offered without a contract, Straight Talk is certainly convenient for those tired of the conventional two-year agreement.

These elements seem to suggest that Walmart’s offering is disruptive. But the ultimate disruptive effect is contingent on a number of additional factors.

One of those is how incumbents will react to Straight Talk. Historically, many incumbents have, to their detriment, ignored offerings that cannibalize the low end of the market, instead opting to concentrate on the high-end where the margins are more attractive (think Sony PlayStation’s initial response to Nintendo’s Wii gaming console). One may assume that the incumbents in this case would be companies such as Verizon and AT&T, but the story is more complicated.

Here, it becomes prudent to mention that there’s some very interesting complexity behind Walmart’s offering. Through TracFone, Walmart is acting as a Mobile Virtual Network Operator, or an MVNO, which uses an existing carrier’s network instead of building its own – in this case, it’s Verizon’s. This isn’t a new strategy. In fact, many mobile companies failed because they struggled to nail down a winning MVNO strategy. For example, in spite of having pretty cool phones, Amp’d Mobile failed because its young, hip subscribers were massive credit risks who failed to pay their bills. XE Mobile also bit the dust after facing stiff competition from Virgin Mobile USA, which had the targeted college-going market firmly under its control.

That said, I think MVNOs that offer cheap plans with cheap phones can succeed. Specifically, a successful company would need to have a clear target customer, address key customer jobs-to-be-done through a compelling product/service offering, and develop a viable way to make money while doing so. One good example is Sprint’s own in-house brand, Boost Mobile. Launched in 2002, Boost Mobile has done relatively well by offering a wide range of quite slick handset options, dependable roaming capabilities and availability in more than 17,500 cities nationwide. Therefore, it would appear that unlike the previously unsuccessful MVNOs, Boost made some incredible headway in addressing the issues critical to success.

For these reasons, the disruptive potential of Walmart’s offering will continue to hinge on how the company works to address a number of issues: 

• JOBS to-be-done: some MVNOs struggled partly because they offered inferior handsets that failed to address the social and emotional jobs of crafting a hip identity for their customers (imagine a hefty 4.6 ounce, 1-inch thick flip phone fighting to win the hearts of consumers fiercely attached to the iPhone or the Blackberry). While Straight Talk seems to have addressed the “I don’t want to pay a lot for my wireless service” functional job through low prices, will it have a line-up of phones trendy enough to attract a huge customer base?
• Target customer: the current offering will largely attract those in the low-margin, low-end of the market – many likely plagued by high debts and high risks of default. Will it be the Amp'd story all over again? Will Walmart’s prepaid model help where Amp’d tried to go without a contract? What strategy does Walmart have to move up-market where margins are more attractive?
• Business model: unlike Boost Mobile, Straight Talk is dependent on another carrier for its network making it very vulnerable, just like many fallen MVNOs. How will Straight Talk create value for itself? Will its business model be unattractive to market leaders? How will its distribution channel fit into the model? Will market leaders such as Boost Mobile flee or will they fight?

The management at Straight Talk must flawlessly execute its strategy in dealing with these issues. Then, and only then, will Walmart’s powerful distribution channel prove to be a disruptive spoiler for many incumbents.

If nothing else, developments in the e-reader market provide substantial fodder for online commentary. It seems that every week features a story in a mainstream publication about the latest "Kindle killer" followed by endless chatter and eager speculation in blogs and on Twitter.

This week's discussion centered on Barnes & Noble's "Nook" device. It's not hard to see why this particular device sparked such discussion. The slick-looking device has unique features, such as the ability to "lend" books that friends can view on multiple platforms for 14 days, use of Google's Android operating system, and a small color touch-screen.

I very much like Barnes & Noble thinking outside its business model box. The company has been aggressively seeking to find new paths to revenue and growth, an appropriate approach given the challenges facing its core business.

So will the device be a huge success? Will Amazon's early e-reader success with its Kindle offering end up looking analogous to early success by Rio and Creative in the MP3 market before the emergence of Apple's iPod?

The answer to both questions could be yes. But in reality, those questions are simply impossible to answer for three reasons:

1. No one knows what consumers will do until they actually do it. Barnes & Noble's device will appeal to some consumers for sure, but will it lead early adopters to ditch their Kindle? Does it have enough features to attract the next class of potential customers? As a Silicon Alley Insider commentator wrote, "Amazon is obviously designing to real user needs and covering the gameboard. B&N is fiddling around with goofy stuff that might just be crazy enough to work."
2. No single device will "end" e-reader battles, whether it's from Amazon, Barnes & Noble, Sony, Plastic Logic, or another competitor. Amazon is quite likely to have further devices in its production line. Does Barnes & Noble have anything else up its sleeves?
3. No one is quite sure what Apple will do in the space. There's significant speculation that Apple will introduce a $500-$700 tablet early next year. The company's history in the computing, music device, and smartphone market suggest watching this development carefully.

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

 During my week of conferences a couple of weeks ago, I attended one day of the two-day BIF-5 conference put on by the Business Innovation Factory in Providence. BIF conferences are much like the famed TED conference – each presenter or “storyteller” gets 15 minutes to tell their story, and they are encouraged to tell a story rather than simply making a presentation.

Reviewing my notes and others’ notes (from blogs and Twitter) from this conference, I see that a theme from this conference might be “fostering serendipity.” I talked to a couple of people about this at the conference and via Twitter, where one exchange with a fellow conference attendee went like this:

If we're treating innovation as a discipline, where does "fostering serendipity" fit in?

A way to foster serendipity is to avoid coming to closure. Leave options open for serendipity to happen.

The theme played itself out through a number of the second-day BIF5 talks Science writer Jonah Lehrer, author of How We Decide, described neurobiological research that proves that the mind needs to be quiet and in a state of relaxation to produce insights. In a crisis, he said, “your fear won't save you. You should learn to relax and hear quiet voice of creativity in face of fear.” His research has shown that insights come from the right hemisphere, and you can drown them out by too much focused, by the very attention you pay to the analytical act of problem solving.

Bill Buxton, principal scientist for Microsoft Research, said that creativity and invention are always context-critical and therefore social. We must be able to observe what’s going on around us to be able to create insights. He makes note not just of new ideas he gets, but of the circumstances in which he got them, so he can more easily replicate them. He also said that an applied approach to research rather than a curiosity-driven approach actually reduces productivity. Another reason why curiosity rules, he said, is that innovation doesn’t have a long tail, but rather a long nose. “Any technology that is going to have significant impact over the next 10 years is already at least 10 years old,” he said. The first prototype of a computer mouse appeared in the early 1960s. Success at innovation will be had by those who are able to spot good ideas and develop and nurture them.

Fast Company founder Alan Webber, now author of Rules of Thumb: 52 Truths for Winning at Business Without Losing Yourself, suggested that serendipity can be fostered by paying attention. Keep two lists, he said, one of the things that get you up in the morning, and one with the things that keep you up at night. Pay attention to these things and pay attention to people as well. The key to “making things happen and creating value is to pay attention to other people. There are teachers – and, presumably – lessons everywhere.

Babson College President Leonard Schlesinger talked of the need for all of us to become more “intellectually ambidextrous” and proficient at the moving from “knowing” to “doing” – the hallmark of the entrepreneur “What if we took seriously the notion that we're all entrepreneurs?” he asked. He didn’t mean we are all going to go out and start businesses, but rather we are all in control of our ideas and what we choose to do with them, how and whether we choose to develop them and act on them. He talked about co-creation, which often requires a bit of serendipity to pull off. His very career – moving back and forth between academics and business – if not his talk at BIF5, was a testament to taking ideas from one context and seeing how well they might work and how they change when you apply them in a different context. That’s a lesson in serendipity as well – can you create the conditions of possibility for serendipity to happen by consciously looking at things from different angles?

One of the things we at Innosight often tell clients is that in order to innovate it’s important to question assumptions. Once you start questioning assumptions, that fosters serendipity as well. Former George Washington University president Stephen Trachtenberg discussed that very thing when he talked about innovating the university calendar. Why the agrarian model of summer off? Why four years, or three years for law school? If you start questioning those assumptions, what new ideas can you uncover about how to innovate the university?

I’ve only focused on a few of the talks from a very full day at BIF-5 here. Many of the talks were also about innovating to change the world for good. All in all, BIF conferences provide a very inspiring experience that you can share as well – like TED, all the talks are captured on video and will be posted on the BIF Innovation Story Studio site in the weeks to come.

Yesterday I facilitated a discussion at the Magazine Publishers Association annual Innovation Conference with Melanie Healey, the Group President of North America for Procter & Gamble. She told a story with some important innovation implications.

The story dates back to the 1990s, when Healey was a brand manager in Brazil. She was responsible for growing P&G's Hipoglos brand of diaper rash ointments. The problem? The product already had 99 percent household penetration.

A tough challenge, right?

Healey did what good P&G people do — she went out to talk to consumers to find out what they thought about the product, the problem it addressed, and so on.

People claimed they used the product regularly to prevent diaper rash. If that were true, however, Healey knew consumers would buy much more Hipoglos than they did today.

So, she dug deeper. By probing when consumers used the product, she found that parents applied it when early signs of rash began to appear. Of course, that's too late if you truly want to use a product for preventive purposes.

Healey had a critical insight. Consumers weren't actually realizing all of the benefits of the product, resulting in cranky babies and sleepless nights. P&G began running advertisements showing how applying the cream to an already emerging rash was too late to prevent the rash from occurring. Not surprisingly, sales soared.

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

One of the most enjoyable sessions I saw at the World Business Forum was an interview with filmmaker George Lucas. Quite striking was the degree to which both serendipity and fate were intertwined in his education and early career. Also striking was seeing film clips of one after another scene showing a way in which Lucas has innovated.

And beyond the obvious – that he’s an extraordinarily creative filmmaker – Lucas has innovated the very business of filmmaking in a variety of ways:

• Lucas was among the first to insist on getting merchandising and sequel rights. He then created the kind of move-related merchandising we know today, and created the sequel-as-franchise idea with Star Wars
• Rather than limit himself to contractual obligation as a way of keeping control, Lucas simply formed his own studio
• Lucas saw digital moviemaking coming and started Industrial Light and Magic to experiment with digital filmmaking techniques that pioneered an industry.
• Lucas innovated the very sound of movies when he created THX Sound, paving the way for a day when enhanced sound became part of every entertainment experience from car stereo to mp3 player earbuds to video games with surround sound and a DVD player in your living room.

While Lucas has made his mark pushing the technological envelope, he described himself as not particularly technologically oriented. He writes in longhand and when developing filmmaking technologies often seems to cast himself almost in a “lead user” role, directing others as they do the technological work of creating the user interface. He focuses on the goal and lets others actually do the work.

Lucas seems to be unusually adept at spotting the overall direction indicated by trends, and is unusually fearless and clear-thinking as he goes about inventing ways to capitalize on new trends and technological innovations without regarding to protecting what he already has. This is a trait shown by almost no incumbent whose businesses and products are under attack from potential disruptors.

For example, although Lucas said he “never imagined people would go through Star Wars frame by frame, and tweet their friends about its cinematic tricks,” he embraced DVD technology when it came out. He has embraced every type of medium, and said during his World Business Forum interview that not only has he made films for all kinds of screens, he’s now focused on learning to make films for mobile phones.

Yet he also seemed quite humble, acknowledging others’ innovations and at one point saying that he had thought that due to its complexity the Lord of the Rings saga couldn’t be made into movies, and that he thought Peter Jackson had done a great job at that.

Running as a theme throughout Lucas’ story was that you should keep trying, keep experimenting, move on when the experiments don’t work, and build on them when they do. He quoted one of his most famous characters, Yoda, saying “be careful what you hate – you may become it,” which is one way of saying don’t focus on negativity and failures. Another Lucas aphorism appropriate for innovators: “Nothing is a lost cause, unless you give up.”

Over the course of two days at the World Business Forum we heard from four speakers who particularly focused on the economy: David Rubinstein, co-founder and managing director of private-equity firm The Carlyle Group; economist Jeffrey Sachs, New York Times columnist and 2008 Nobel Economics Prize recipient Paul Krugman, and former President Bill Clinton (pictured).

Rubinstein started by teeing up a list of all the problems and challenges facing us: “debt, deficit, inflation, taxes, unemployment, Social Security, Medicare, Medicaid, the dollar, savings, interest rates, and energy.” Not on this list was perhaps the biggest challenge of all – complex and rapidly shifting global politics that mark a shift from a world in which the United States was the biggest power to a “multipolar world not organized around any one particular power.”

Sachs continued the bad news while focusing his comments on the enormous challenged of climate change and the potential it brings for loss of economic growth.

Krugman discussed the economic politics underlying the financial crisis we are now in. None of these speakers highlighted the opportunities to innovate hidden in the descriptions of the challenges we are facing. Opportunities await innovators who can navigate the new multipolar political world and who can bring new ideas to the table for positive change in areas like healthcare and energy, while still successfully doing business in the post-Lehman, credit-tightened economy.

A sense of optimism about the future came from former President Clinton, who was the conference’s last speaker. His vision of how we can pull out of the financial mess and solve problems involves helping the poor, particularly in developing countries. If we reach out to help those less fortunate then we are, he said, we will create a rising tide that will lift our boats along with theirs. Further, helping others is not just right but brings security. “You can't run away from consequences of things that happen a long way from you -- inequality, instability, unsustainability,” he said.

Another point Clinton made is that there is no such thing as a solution without an unintended consequence, which I believe makes a good point for an experimental, test-and-learn strategy. Experiments are good at exposing unintended consequences.

Ultimately, Clinton issued a challenge that should resonate with innovators: How do you make the most of whatever it is that you propose to do? 

This past week I attended the World Business Forum in New York as one of a group of bloggers. My real-time comments were posted to Twitter and can be found at search.twitter.com/wbf09. Here’s a longer post synthesizing some of the learnings from the first day.

Bill George, former Medtronic CEO and currently a Harvard Business School professor, opened with a dynamite talk on “Leadership in Times of Crisis” taken from his book, 7 Lessons for Leading in a Crisis. You can’t deal with any problem by putting Band-Aids on it, he said. You must deal with root cause of problem In crisis, set aside financial plans made before, and think about getting it right for the long term.

By looking at root causes in the current financial crisis, he said, we can find the universal lessons that are common to all crises. Some of these included: CEOs should admit their own mistakes because that gives others permission to see their mistakes and increases integrity; develop personal habits such as jogging and meditation that give you resilience; dig deep for the root cause because it allows you to question assumptions that may now be wrong; get ready for the long haul; never waste a good crisis (which he noted should not be attributed to Rahm Emanuel, as it has been lately, but to Machiavelli); be ready to take the leadership role and step up to the real problem; withstand the pressure to be someone you’re not and stay true to yourself; and don’t play defense, play offense -- execute rigorously so you will be ready to go when the time comes.

What will be your legacy? George asked. “Never doubt the power you have as an individual to make a difference. I hope you have the passion to see this crisis as an opportunity to change the world.”

Former GE executive Bill Conaty then spoke about talent, explaining the four critical elements in developing and nurturing leaders: Attract, develop, assess, retain. His pint: the majority of companies put most of their effort into attracting, when they should pay more attention to the latter elements, especially to developing and retaining leaders.

Patrick Lencioni, author of Five Dysfunctions of a Team, knocked us out with a very engaging and entertaining talk on teamwork, amply illustrated with anecdotes from his life as a father to four boys.

Most notable to me about what Lencioni presented were his comments on trust. Trust is huge problem is organizations, he said. When there’s no trust there’s no feedback. And instead of the organization being able to capitalize on people’s individuality, that individuality gets lost and brings no value.

Trust, he said, is also a key to handling conflict, which is very important: “Conflict without trust is politics. Conflict with trust is a search for the truth.”

People need to be able to disagree with ideas, because if they can’t, they will then begin to disagree with each other personally. Conflict then ferments around people and destroys relationships, and of course also destroys effectiveness and destroys innovation.

Said Lencioni: Consensus is a 4-letter word. But when people weigh in they buy in. They need to have the ability to disagree and then still commit. Great relationships built on ability to disagree, as anyone who's ever been married knows. People passively sabotage an idea or a plan when they don’t have a voice.

Lencioni offered an interesting idea: When he assembles a team to work on a problem, he gets them to share this information first: Where did you grow up, how were many in your family, what was your biggest challenge growing up? This gets people to open up and gets them to understand each other as people, so that they’ll focus on disagreeing with the ideas and not each other, avoiding the fundamental error of attributing other people’s negative behaviors to their characters, while attributing our own negative behavior to environmental issues (such as being stressed).

I’m participating in the Post2Post Virtual Book Tour for Exploiting Chaos: 150 Ways To Spark Innovation During Times of Change by Jeremy Gutsche. You can read the previous review and interviews of the book here. Exploiting Chaos covers some of the same ground as Scott Anthony’s Silver Lining, specifically the idea that chaotic times breed innovation. Jeremy Gutsche graciously answered these questions by email:

Q: I was interested in your take on the pattern of disruption. What do you think is the one most important thing managers can do to spot potential disruption and innovate an approach to it?

A: The most important thing is to avoid being dismissive of radical business models and smaller entrants. In almost every example of big companies getting toppled, the little guy didn't stand up and start fighting on day 1... New entrants creep up the value chain by offering innovative products and services to customers that incumbents typically ignore. They build strong customer insight and maverick brands. They slowly get stronger until the day they make a big alliance that enables them to compete at a higher level and topple the bigger incumbents and their outdated business models.

There's an urban legend about boiling a frog that suggest if you drop a frog into a pot of boiling water, he'll hop out right away. In contrast, if you drop a frog into lukewarm water and crank up the heat, he'll be boiled alive. Like us, the frog is more sensitive to shocking change. We need to find a way to take the smaller entrants more seriously, and decide whether or not these are companies are in areas where we should be competing, or acquiring smaller brands that we can foster (while letting them have the space they need to grow). Don't expect to be shocked. Find a way to experiment with new ideas and blossoming new entrants.

Q: Is that different from the one most important thing a small company can do to spot potential disruption and take advantage of it?

A: If big companies need to act small, small companies need to act big. Especially in times of chaos. Disney, Microsoft, Hyatt, GE, Apple, Sun, and HP were all founded during times of economic depression. The reason why is that people still buy things, but they become more conscious of what they need and why. They experiment with new things. Consumer needs evolve. Fortunately for small companies, larger incumbents are typically too slow-moving to detect these changes and act upon them. They focus on their core business and attempt to preserve profit margins. By moving quickly, small companies can identify disruptive opportunities and experiment with the business models that exploit that satisfy evolving consumer needs.

Q: You say in the book “Visualize disaster and opportunity.” In order to do that, it looks like you need to visualize the mistakes and unexpected things, and rehearse a strategy for dealing with them. But what’s a good strategy for understanding exactly what to visualize? Is there a way to visualize what you’ll do if you’re completely blindsided?!

A: When the world changes, and outdated business models topple, it's typically not from being completely blindsided. It's something more similar to the boiling-frog analogy described above. The challenge, then, is to identify some of the plausible ways that your industry could evolve, or be disrupted.

In the book, I talk about the way that you cannot predict the future, but you can develop scenarios and capitalize on what happens if those scenarios come true. Here's an excerpt:

In the 1970s, Pierre Wack was planning for the future at Royal Dutch Shell. For nearly three decades, oil prices had been relatively steady, but now the world was changing. Demand for oil had increased, US oil reserves were drying up, Middle Eastern countries grew stronger, and most of these countries resented the West, especially after the 1967 Arab-Israeli war.

Weaving this information together, Wack realized that Middle Eastern countries could spark an energy crisis. That fear led him to develop two potential scenarios.

The first scenario was based on the conventional wisdom that oil prices would remain relatively stable.

The second assumed an oil crisis, which he conveyed in detail with vivid storytelling. The potential impact was so severe that Wack’s managers were inspired to prepare for the worst.

In 1973 the world did encounter an oil price shock, but Royal Dutch Shell was ready. Once the weakest of the “big seven” oil empires, the company emerged as the most profitable and second in size.

In The Art of the Long View, Peter Schwartz refers to Wack’s example as one of the first modern uses of scenario analysis in business.

By developing multiple scenarios, you can avoid the certainty of being incorrect, and instead prepare for disruptive change.

Q: Your book talks about ideation. The hardest part of that is building on ideas. What are your rules of thumb for building on ideas?

A: Basically, start off by realizing that there is no point innovating if you think you already know the answer. We tend to enter brainstorming meetings with pre-existing ideas - especially if we are senior - and then we listen to other ideas and in our heads we reinforce our original idea. Instead, you need to throw away your favourite idea and build upon the ideas of others. Truly successful ideation happens when we springboard off the ideas of others.

In another excerpt from Exploiting Chaos, here are some ways to prevent ideation from sucking:

Set the stage: Invite the best people, create a useful space, and review the rules.

Crank it up: Get people out of their boxes. Start with a challenge like how to sell more pantyhose to men. Let sparks fly: Structure (create very specific questions). Seek flexibil¬ity (push for range and variety in the ideas suggested). Keep it fun (create group energy and encourage humor).

Add some salt and pepper: Reshape the question. Take an idea and dive deep. Contribute a crazy idea. Encourage physical movement.

Challenge with specific problems: For example, if you are trying to sell more pantyhose to men, try to answer the question, “How do we rename the color ‘pantyhose brown’ to make it more masculine?”

Wrap it: Get people to vote for their favorite ideas. Circle the room to see if there are any important comments.

What would you suggest people do who are working for a company that doesn’t move quickly and doesn’t embrace the ideas in your book? How can they develop a track record as an innovator?

I would say that right now, more than ever before, people stuck in those companies can wave a crisis flag to push the company to try new things. Now, more than ever before, it is possible to use the external credit crunch to cut through red tape, try new ways, and enhance our knowledge of evolving consumer needs. 

Blog posts on the conferences I am attending this week will be coming soon. Meanwhile, my live notes on the past two days of the World Business Forum and today's Business Innovation Factory BIF5 an be found at www.twitter.com/renee_innosight. Go to http://search.twitter.com and enter the search term (hashtag) #wbf09 to read notes from everyone who was tweeting at the conference. BIF5 tweets are at the hashtag #BIF5. Tweetchat and Tweetgrid are also good ways to view Twitter search streams, but require a Twitter account to access.

I'll be blogging live from the World Business Forum conference in New York the next couple of days, part of a group of bloggers whose aggregated coverage can be found here. You can also follow us using the hashtag #wbf09 on Twitter. With speakers ranging from Bill George to Patrick Lencioni to Gary Hamel to President Bill Clinton, just to name a few, I'll be able to share many insights that will be of interest to innovators. Stay tuned!

In a chat last week, Boston Red Sox General Manager Theo Epstein explained why he wasn't bothered by J.D. Drew's relatively low number of runs batted in (quotes from Joe Posnanski's blog):

"When you're putting together a winning team, that honestly doesn't matter. When you have a player who takes a ton of walks, who doesn't put the ball in play at an above average rate, and is a certain type of hitter, he's not going to drive in a lot of runs. Runs scored, you couldn't be more wrong. If you look at a rate basis, J.D. scores a ton of runs.

And the reason he scores a ton of runs is because he does the single most important thing you can do in baseball as an offensive player. And that's NOT MAKE OUTS ... Look at his runs scored on a rate basis with the Red Sox or throughout his career. It's outstanding.

You guys can talk about RBIs if you want ... we ignore them in the front office ... and I think we've built some pretty good offensive clubs."

Business managers can learn a lot from how baseball general managers build and manage their talent portfolio by drawing on the findings of baseball's Sabermetrics revolution. And the same is true for business managers trying to balance their innovation portfolios: how can they focus on the metrics that really matter?

According to the old-fashioned metrics, the run-batted in is a vital statistic. But smart general managers like Epstein recognize that the RBI is not a valuable measure of performance (it actually correlates with the on-base percentage of the hitters earlier in the lineup).

Innovation managers, too, need to look beyond "obvious" but potentially misleading statistics like first-year revenue, first-mover advantage, and leveraging core competency to hidden drivers of success, such as targeting non-consumption and minimizing first year losses.

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

Clayton Christensen is a wise man. Back in 2002, Erik Roth and I were having a discussion with Christensen about how we should approach the writing of what became Seeing What’s Next.

“Don’t start by writing,” Christensen advised. “Instead give a bunch of talks. That’s the only way you’ll learn the best way to communicate your ideas.”

Six months after Seeing What’s Next came out and I gave about my 10th speech on the topics in the book, I realized how right Christensen was. Condensing a complicated argument in a compelling way provided vital (and, sadly, unusable) guidance on how to write the book.

It’s no surprise then that I learned this lesson again the other week when I gave about my tenth speech on the topics in The Silver Lining and the gears in my brain finally clicked.
The book’s core argument is that innovation is possible no matter how dark the times, innovation has moved from a strategic nicety to a strategic necessity, and innovation can be mastered. To drive the transformation that today’s times require, companies need to do six things:

1. Prudently prune your portfolio based on potential, not performance. In his 2001 book Creative DestructionInnosight Director Dick Foster noted that sometimes you have to destroy before you create. Companies need to make sure they stop some ongoing efforts to ensure their innovation efforts are focused in the right places. Future potential, not past performance, should drive pruning efforts.
    
2. Take an outside-in view to inform cost cutting and opportunity creation. When times get tough, the “more with less” drumbeat starts. But you can’t deliver more with less unless you know what more means. And you can’t know what more means unless you invest in deep market understanding. That same outside-in bias helps companies to identify the highest-potential opportunities and to develop the instinct to share the innovation load with third parties that are all too happy to help.
    
3. Build a minor-league system for innovation. My article in this month’s Harvard Business Review noted how major league baseball teams rarely bring highly touted prospects straight to the major leagues. Instead prospects start in the minors where competition is less intense, teams can provide more hands-on coaching, and gather data to determine which prospects really have it and which ones don’t. Companies need to create an innovation minor league to address the critical strategic issues behind their innovation efforts.
    
4. Create an innovation factory. Today’s leaders face a conundrum. The increasingly transitory nature of competitive advantage demands increased innovation. But a popular perception that innovation is risky and expensive makes innovation investments difficult to justify. An “Innovation Factory” that more reliably churns out new growth businesses breaks this conundrum. Companies that craft an innovation strategy, implement an innovation process, create innovation structures, and invest in innovation systems can dramatically increase the returns on their innovation efforts.
    
5. Learn to love the low end. In the dark days of October 2008, shining corporate stars included noted low-end lovers like McDonald’s, Southwest, and Wal-Mart. Companies have to figure out how to connect with value-conscious customers in existing markets and still elusive customers in emerging markets. Doing so requires mastering business model innovation.
    
6. Help drive personal reinvention. The current generation of business leaders is largely unprepared for the challenges it now faces. Leaders need to master paradoxical demands, such as pushing for precision in core businesses and embracing uncertainty in emerging businesses. Leaders have to go back to innovation school to build the muscles required for today’s times.

It only took 340 days since I pitched the idea of The Silver Lining to Harvard Business Publishing for these ideas to crystallize to the degree that I could describe them in fewer than 700 words (and don’t get me wrong, I’m plenty happy with The Silver Lining, particularly since the book was written in less than 90 days to make sure it hit shelves while it was still necessary!).

As long as the next book – whatever it is – doesn’t involve responding to a crisis I swear I’ll heed Christensen’s advice.

A central argument of this blog is that every company must grapple with the reality that their current business model has a finite life, which means seeking reinvention and transformation.

Leaders, too, need to constantly think about how they can reinvent and transform themselves.

My own transformation begins this month as I transition from running Innosight's consulting operations to head up Innosight Ventures, Innosight's incubation and investing arm, in Singapore. This is a wonderful opportunity for me to move from advising companies on issues of disruptive innovation to the true front line of disruption.

Innosight Ventures has proven the most promising of Innosight's experiments. We set Innosight Ventures up a few years ago as a separate entity to incubate and invest in disruptive growth ventures. We very intentionally kept the business separate because of its distinct business model.

In that time period Innosight Ventures created close to 100 business plans, tested about a dozen ideas in markets, and has gained traction with four ventures: a laundry services business in India, a men's grooming business in India, an online education business, and a unique funding partnership with the Singaporean government.

Innosight Ventures' mission is to use the principles and patterns of disruptive innovation to foster the creation of booming growth businesses that improve the lives of unserved and underserved customers around the world. We do so by incubating and investing in the disruptive business models that venture capitalists ignore and corporations fumble.

There's a heavy emerging market focus to the business, with small offices in Singapore and India. The focus is consistent with a perception that the odds are very high that the West's innovation leadership will decrease, if not disappear in coming years. I plan to spend substantial time in Asia throughout the remainder of this year and move to Singapore in early 2010.

This kind of transition of course carries substantial risks. I will face new challenges that are completely different from what I have encountered on the consulting side of our business. On the flip side, using our tools in different ways will drive new learning that will increase our overall ability to make innovation more predictable.

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

There is something about travel writer and TV host Rick Steves’ earnest dorkiness that makes him endlessly endearing. His Europe through the Back Door travel philosophy mixed with cringe-inducing puns and awkward asides disguised as humor are the reason his guidebooks are my go-to source for planning and enjoying trips to Europe. 

Recently, he added podcast tours of various sites in Rome, Florence, and Venice to his product line, and the chance to have Rick in my pocket was enough to motivate me to buy a new iPod hours before leaving for a 2-week trip through Italy.

As my husband and I sat in the Sistine Chapel, staring up at the ceiling and gladly accepting the neck cramps that are inevitable when listening to a 45-minute “tour” of Michelangelo’s work, I couldn’t help but think about all of the products and services I was in the midst of disrupting:

• Organized tours – I was saving money (the podcasts are free), free to move at my own speed, and never had to jockey for position to hear my tour guide. I was giving up the opportunity to ask questions, but 45 minutes on any topic is usually enough to satisfy my curiosity and, if I want to know more about something, I can always look it up.
• “Free” tours – It’s not uncommon for “tour guides” (college students, professors, locals) to linger outside of major tourist sites and offer “free” tours (tips are expected at the end, but not required). These tours are usually quite good but have all the drawbacks of organized tours.
• Travel books – Again, the podcast saved me money – the iPod is a lot lighter than a book (this is very important when you spend 12 hours walking around a city), and I didn’t have to worry about bumping into people, falling down steps, or getting pick-pocketed because I had my nose in a book.

I basked in the joys of this disruptive solution – good enough on information, delightful on price – for several days. Until we went to the Roman Forum. That’s when the Disrupted (i.e. a “free” tour guide) struck back.

As we were navigating our way from the Temple of Remus to the site where Julius Caesar was assassinated, we were confronted by a woman. “On a leash!” she screamed at us, “I never saw anyone wander around with earphones in until 2009!! I have lived in Rome for 30 years and I don’t understand why people would want to visit and be on a leash!!!”

History suggests that those being disrupted are usually unhappy with their plight, but this was the first time I’ve had a face-to-face confrontation with one of the Disrupted. I wanted to explain the theory of Disruptive Innovation to her, teach her about gives-and-gets and “good enough,” and help her figure out how to join the Disruptors or even disrupt them.

But it was safer to back away slowly and mentally log another give-and-get: get a crazy tour guide screaming at you for 15 seconds, give up the risk of spending 90 minutes with her on a tour.