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I picked up an iPad in late April when I was swinging through the States. The Anthony family has been experimenting with it during the last six weeks in Singapore. I have five reflections on the device:

•  Magazine companies hoping that the iPad will "save" the industry could be disappointed. I downloaded the Wired magazine app, but have largely found the experience to be disappointing. Sure, there are a couple bells and whistles, but for the most part I find it to be a worse experience then reading a magazine. You never want to give consumers something they consider worse than existing solutions. What job do people "hire" a magazine to get done? I use magazines to browse, discover, relax, and unwind. A hard copy magazine gets these jobs done very well. Of course, magazine companies find it more economical to distribute content digitally, but they have to make sure that the experience doesn't disappoint readers.

•  The tablet format will transform education. It is utterly amazing to watch my kids use the simple, intuitive device. They have been reading books, playing number games, learning the alphabet, and so on. It's pretty easy to envision next-generation interactive textbooks with ties to customized tutoring solutions (conflict alert — we are an investor in such a solution, called Guaranteach). And Apple does have a strong historical connection to education. I can also see the tablet format becoming a big deal in healthcare and for salespeople.

•  The iPad is rugged. The device survived a tantrum from my two-year-old daughter Holly and an effort by my four year-old-son Charlie to use it as a surfboard!

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

So Apple's iPad arrives this weekend, and the reviews have started to pour in. I've ordered mine and will pick it up the next time I swing through the United States.

I suspect the Anthony family will use the iPad to browse magazines, watch videos, and waste time with applications, with the laptop reserved for "real work" and the Kindle for "real reading." Interestingly, even as manufacturers gear up to create 3-dimensional televisions, the TV is the one screen that will increasingly become marginalized in our home.

Only Apple can inspire a fierce debate — before launch! — about the degree to which the iPad is going to meet almost un-meet-able expectations. From my perspective, it's just too soon to tell.

You see, I'm waiting for the twist.

Let's not forget that when the iPod launched, there was no iTunes, and certainly no $0.99 songs. When the iPhone launched, there was no AppExchange, and certainly not one with more than 150,000 applications. Yes, the iPad will facilitate the creation of improved applications, and yes, it does have a bookstore, but assessing its real disruptive potential requires waiting to see whether Apple introduces an iTunes — or AppExchange-like — twist.

I suspect that twist will tie into the moves Apple has been making in the advertising space recently, such as its $275 million purchase of Quattro Wireless in January, several prominent hires, and the unveiling of its "iAd" platform next week.

Google has created a $180 billion behemoth with its innovative search-based advertising program, but there remains room for substantial disruption in the advertising world. I've said before that even search is still in its early days, with companies and consumers still facing significant hurdles that stand in the way of solving the real problems in their lives.

Further, massive potential for mobile advertising hasn't translated into massive dollars — estimates suggest the mobile advertising market in the United States was less than $500 million in 2009. Meanwhile, Google makes $500 million in profit a month.

The iPad could be a great vehicle for Apple to take a run at a number of different business-oriented solutions. One interesting thing to watch will be the degree to which the company consumers absolutely love can maintain that goodwill as it serves businesses. I certainly wouldn't bet against it, but it will be a tricky line to toe.

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

Google made big news last week when it announced that it will offer free navigation service for mobile phones as part of its new software, Android 2.0. The service will initially only be available on Motorola’s new Droid phone (on sale beginning Nov. 6), but will eventually be expanded to more phones in the near future.

Unsurprisingly, the day the announcement was made, shares plummeted for GPS giants Garmin and TomTom, with Garmin’s shares dropping by 16 percent and TomTom’s closing around 21 percent lower. This amounts to a combined loss of $1.7 billion for the companies, with Garmin losing a fifth, and TomTom a third of its market value. To be sure, stock prices for both companies have been nothing to gush over throughout the economic crisis, but before Google’s announcement there had been some positive momentum with TomTom’s GPS app created for the iPhone and Garmin’s GPS/smartphone (Nuvifone).

It is too early to know how Garmin and TomTom will recover from and respond to this announcement, but at present their future does not appear to be filled with sunshine and smiles. True, Motorola’s Droid is not necessarily the perfect solution for every customer, and some will still be more comfortable with a dedicated GPS device—it tends to display maps faster, has a bigger screen, doesn’t need to be in cellular range to function, doesn’t come with the annoying two-year commitment of a cell phone plan, and allows the driver to talk on his or her cell phone while simultaneously following a GPS course.

But for many consumers, Google’s offering will be more than good enough. While GPS units cost an average of about $177, customers who commit to a two-year contract can purchase a Motorola Droid for $199. For a $20 difference, customers get a sleek, supercharged smartphone whose navigation features—thank you Google—may even trump those of a standard GPS device. With response to simple voice commands, visual display of Google’s street photographs, point by point directions, and possibly even free traffic data, its navigation features alone make the Droid an attractive product.

So how did TomTom and Garmin fall behind? How did the mighty fall so fast? The answer may have less to do with technology than it does with business models. While the tech industry is obviously moving at a rapid rate, the pace of destruction and transformation of business models in the navigation business is blinding. Instead of making sustaining improvements to their existing products (i.e. Garmin now makes 82 different GPS units) perhaps the GPS giants should have been, and should now be, thinking about how they could transform their respective business models to reach new or existing customers in fundamentally different ways. It may not be too late.

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.

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.”

• The Promise (and Perils) of Open Collaboration by Andrea Gabor | Strategy + Business

  Article looks to the quality movement for clues as to how open innovation, particularly open collaboration, can find wider adoption and greater success.

• Is This the Light Bulb of the Future? by Eric A. Taub | NYTimes.com's Gadgetwise Blog

  Phillips is the first company to enter the U.S. Department of Energy's $10 million contest to create a viable LED-based alternative to a 60-watt light bulb. Article discusses how the DOE plans to use the contest to come up with a technology that will address the faults of the launch of CFL bulbs.

• InnoCentive: A Market for Ideas | The Economist

  Discusses the initial success of Innocentive's partnership with the charitable Rockefeller Foundation to use Innocentive's approach to help solve problems posted by non-profits working in poor countries.

• Netflix Awards $1 Million Prize and Starts a New Contest by Steve Lohr | NYTimes.com's Bits Blog

  Article details the collaborative nature of the Netflix contest whose goal was to identify technology to better predict movie matches among users: "The way teams came together, especially late in the contest, and the improved results that were achieved suggest that this kind of Internet-enabled approach, known as crowdsourcing, can be applied to complex scientific and business challenges."

Purdue University researchers have made a breakthrough in designing cooling systems with highly efficient heat-transfer rates, reports CNet News. These researchers have developed and tested new mathematical formulas concerning the properties of boiling liquids in "microchannels," which are tiny channels through which fluid is directed in some types of high-power electronic cooling systems. The idea is that "allowing a liquid to boil in cooling systems dramatically increases how much heat can be removed, compared to simply heating a liquid to below its boiling point," according to the researchers' report. "Boiling occurs differently in tiny channels than it does in ordinary size tubing used in conventional cooling systems," lead researcher Dr. Suresh Garimella said in a statement. The results of this research could be used to improve cooling systems for computer chips and hybrid cars. 

• Reversing Assumptions Can Often Lead to Innovation by David Mork | Examiner

  While a bit simplistic, the article makes a great point that reversing assumptions about your business is often the best way to uncover possibilities for new growth. However, benefits are not just limited to reversals -- all questioning and examination of assumptions is likely to lead to new ideas.

• Why Solving Other People's Problems Is Easy by Mark McGuinness | Lateral Action blog

  Article discusses the phenomenon of psychological distance in solving problems: "even minimal cues of psychological distance can make us more creative." Researchers discovered that subjects found it easier to solve problems when they were told that the questions had been devised by an institute 2,000 miles away as opposed to 2 miles away."

• Patent Auctions Offer Protections to Inventors by Steve Lohr | NYTimes.com

  "A flurry of new companies and investment groups has sprung up to buy, sell, broker, license, and auction patents...The arrival of these new business-minded players, according to patent experts and economists, could lead to a robust marketplace for patents, where value is determined not so much by court judgments but by buyers and sellers, perhaps, someday, like eBay."

• Amazon Is Selling Designs of Its Own by Geoffrey A. Fowler | WSJ.com

  "For the first time ever, Amazon's second-quarter North American sales of 'general merchandise' -- which includes everything from patio furniture to TVs -- were larger than its sales of media, such as books, movies and videogames." The author attributes much of this growth to growth in Amazon's private-label business.

• The Wall Street Journal 2009 Technology Innovation Awards | WSJ.com

  Innosight's Scott Anthony served on the judging panel for this year's awards, which looked at business that were "truly groundbreaking and whether their application would be particularly useful in a time of economic hardship."

• Will 'The Jay Leno Show' Reinvent Network TV? by Alan Sepinwall | NJ.com

  Critic wonders whether new Jay Leno show is the first instance of a legacy network retooling to be as nimble as a cable network: "What if NBC's fall to rock bottom allowed management to see things more clearly than its more successful competitors? What if 'The Jay Leno Show' isn't a desperation move, but the wave of the future?"

• The Good Enough Revolution: When Cheap and Simple Is Just Fine by Robert Capps | Wired

  Wired explores Clayton Christensen's concept of "good enough": "Customers would sacrifice lots of quality for a cheap, convenient device."

• What Will Be Disrupted Next? by Jeffrey Phillips | Innovate on Purpose blog

  Good blog post and comments about how to scan the possibilities and see where disruption might happen next.

Microsoft’s recently launched OneApp software has the developing world talking. The application ‘smartens’ standard, basic phones — technically known as ‘feature’ phones — by allowing users one-stop access to applications like Windows Live Messenger, Twitter, and Facebook. Given that billions of people in the developing world do not own computers or smart phones, the feature phone is their only computing device. By allowing feature phones to tap into apps, Microsoft is bringing both convenience and access to the developing world. The addition of applications to phones is stale news for smart phone users. Yet, for those with cheap, crummy phones, OneApp has exciting disruptive potential.

For a number of reasons, OneApp is quite special. The product is as easily downloadable as a ringtone, which drastically reduces unnecessary installation time while enabling processing within meager memory capacity. Unlike apps on ‘smart phones’ like the iPhone that are accessed through app stores, OneApp software is offered through network operators who pre-determine the bundled set of offered apps. Such a configuration allows operators to centrally store and update the apps, increasing convenience for users. Under such an arrangement, users would have no concern for the local storage of their apps and would not have to comb through a store in search for an appropriate app. Also conveniently included is cloud service, a feature that improves overall performance and assists by offloading processing and storage to the Internet.

Equally intriguing is OneApp’s potential to “trickle-up.” Traditionally, sophisticated products are created in rich countries and later de-featured and repackaged for the emerging markets. Recently, a few products have reversed this process. One example is GE’s $2,500 echocardiograph machine. Initially designed for Indian and Chinese doctors who typically travel long distances to see their remote patients, the device is now making inroads in developed countries due to its effectiveness, compact size, energy efficiency and very low retail price. With similarly profound market potential, OneApp could be a major coup for Microsoft.

Although Microsoft eventually intends to unveil OneApp to the rest of the developing world, the application is currently only available in South Africa. Microsoft offers OneApp through a partnership with Blue Label Telecoms, a “mobile wallet” offerings company that is already revolutionizing the South African payments space. In a country where carrying cash is very dangerous because of high crime rates, mobile wallet allows customers to access and transfer money using their handsets. With this application, and the help of BLT, Microsoft has taken a step towards turning every phone in the developing world into a sophisticated, cost effective and user friendly device.

Microsoft’s OneApp software is highly attractive to markets in the developing world by virtue of being simple, convenient, affordable and accessible. By sacrificing raw performance in order to give customers something that is more accessible and more affordable, OneApp holds true disruptive potential. Of course, the ultimate success of the product depends on Microsoft’s execution, and competitor’s reactions. But for now, courtesy of OneApp, that $20 phone just got a lot smarter.

On Tuesday, Sony announced plans to introduce an intriguing new e-reader in time for the Christmas season. Analysts immediately asked: Is the device a Kindle killer?

That's actually the wrong question. The right question is whether Sony can create a viable growth business with its new reader. I suspect it can — if its device delivers on the features it promised earlier this week.

It's been painful to watch Sony's struggles in the e-reader space. It entered the category in 2006 with an elegantly designed device that sold slowly because actually getting reading material onto the device was cumbersome and slow.

Then Amazon brought out its Kindle product.

The first generation Kindle was not the most beautiful of products. But Amazon nailed the business model. It partnered with Sprint so customers could get content delivered to their device wirelessly. Not only did it take me less than a minute to download The Silver Lining onto my Kindle for my television interview on FOX, I now use my Kindle to review Word documents and PDF files.

Amazon's position as the world's leading online retailer certainly helped its sales efforts. While Sony spent more to advertise its products, Amazon had the benefit of showing the Kindle on the front page of its storefront to millions of potential customers.

The 2000s really have been a rough decade for Sony. There's no reason it couldn't have created the iPod, Wii, Flip Video Camera, and Kindle. Instead the company has always seemed to be a step behind.

That's why Tuesday's announcement was so encouraging. Sony finally realized the importance of a simple business model. Its new device (called the "Sony Reader Digital Edition") will access AT&T's wireless network to simplify content delivery. Sony has formed partnerships with a number of content providers to help customers find great material. Its device features a touch screen (a feature missing in Amazon's device).

If Sony delivers on the promised feature set, it has a chance of creating a nice e-reader business.

Will it "kill the Kindle?" Who cares. Remember, the e-reader category is still in its infancy. Analysts estimate that only three million devices will have been sold by the end of 2009. Other companies like Plastic Logic have plans to introduce devices; everyone expects that Apple will jump into the market as well. Amazon surely has more innovations up its sleeve.

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

The AP reported this week that Toshiba Corp. is joining the Blu-ray Disc Association. Why is that such a big deal? Because until last year in the U.S., Toshiba Corp.’s HD-DVD was battling it out with Blu-ray in a standards war.

Across industries, standards wars often accompany the emergence of new technologies, as players pit their proprietary technologies against one another. We’ve all likely experienced this at some point and have had to make the decision of whether to buy now or to hold off until a standard is established. Think Betamax versus VHS or iTunes’ formerly DRM-protected music versus DRM music from other providers.

When there is a highly fragmented market without an established technology standard, consumers have to recognize that what they purchase may become obsolete in the short term if a different technology becomes the standard and the product stops being supported. When a victor is about to be declared in a standards war, an opposing company has a few options: 1) they can march on and fight what is likely a losing battle, 2) they can ally themselves with others (‘the enemy of my enemy is my friend’ mentality), or 3) they can cede to the competing technology. Depending on the situation, different paths should be taken.

If the company’s foothold is weak, marching on can lead to wasted resources that could be better used developing or acquiring other technologies. Allying with others can help to fight a strong market leader, but defeating the enemy will mean sharing the market with those allies. Ceding to the competing technology may be favorable if there are few players in the market and there is an upside that can be gained.

Thinking to the future, what kind of standards conflicts might we expect? How about eBook readers that have associated stores with proprietary formats preventing the use of those purchased books on other eBook readers? In the healthcare world, standards wars may play out in hospitals, as a fragmented marketplace offers electronic medical records (EMR) to a wider user base. Will there be a clear winner for EMR adoption? Alternatively, consider the auto industry. The U.S. government just granted billions of dollars for the development of batteries and parts for electric cars. Instead of engaging in a standards war over the charging plugs they use, companies have banded together to create a standard for charging electric cars, which may help adoption of those vehicles.

The fight to become a standard and a leader is all around us. When you consider new or emerging technologies, the competition to establish dominancy is incredibly important. When you don’t become the standard, your options are to join the competition or to come back, alone or with allies, with something bigger, stronger, faster, newer, etcetera. It will be interesting to see how all these technologies evolve — and who knows, these could be the B-school case studies of the future.

• The Disruption of Scientific Publishing, by Bruce Sterling | Wired's Beyond The Beyond blog

  Description of a new "flourishing ecosystem of startups that are experimenting with new ways of communicating research, some radically different to conventional journals" and the "gradual rise of science blogs as a serious medium for research."

• The New Media Crisis of 1949, by Terry Teachout | WSJ.com

  A look back at 1949, at the start of the television era, in which TV disrupted other forms of media and entertainment. Author notes that CBS and NBC, which had been big radio players, also came out on top in TV by the 1950s: "The old media of today have a similar chance to prosper tomorrow if they can survive the heavy financial losses that they're incurring while they develop workable new-media business models."

• Start-Ups Are Poised For Latest Space Race, by Andy Pasztor | WSJ.com

  With its budget eroding and virtually certain not to keep pace with stated space exploration goals, NASA is increasingly turning to outsource portions of its programs that have never before been outsourced. Smaller firms and "scrappy entrepreneurs" are expected to win contracts.

• How to Build a Culture of Innovation, by Jessie Scanlon | BusinessWeek

  Description of the top-down innovation culture at Tata, including the Tata Group Innovation Forum (TGIF), a 12-member panel of senior Tata Group executives and some CEOs of the independently run companies.

   

• Hey, AP: Here Are 7 Money Making Ideas for You, by Erik Sherman | BNET Technology Blog

  Is the Associated Press doomed in an Internet age? Some have suggested this, and their increasingly protectionist stance seems to indicate they think so too. Business blogger Erik Sherman disagrees, offering seven ways AP can make money on the Internet.

• Stressed Brains Rely on Habit, by Jeff Akst | The Scientist

  "Rats that had been stressed repeatedly and unpredictably for three weeks were more likely than unstressed animals to continue performing habitual behaviors, even when it no longer made sense to do so." These findings have implications for innovation, since innovation requires an ability to break free of pre-existing patterns.

• Too Much Networking? by Alan Boyle | Cosmic Log Blog on msnbc.com

  "An overabundance of connections over which information can travel too cheaply can reduce diversity, foster groupthink, and keep radical ideas from taking hold" says the journal Science, citing that as a reason why most open-source software shows only incremental improvements from version to version. The article stops short of blaming the Internet and social networking for groupthink, probably because the Internet also fosters the kinds of weak ties that lead to breakthrough thinking.

• Vendor Sparks Art Concepts by Sarah Junek | The Southlake Journal

  A hand-restored cigarette machine rescued from the scrap metal pile after legislation banished them in 1997 now vends cigarette-pack-size art in a Keller, Texas, art gallery for an accessible price of $5.

Microsoft and Google's increasingly captivating competitive dance took another turn on July 29 with the announcement of a search partnership between Microsoft and Yahoo. The deal could create a viable competitor to Google--or even more enticingly build very different kinds of growth businesses.

The move is a clear attempt by Microsoft to intrude on Google's core search business. Greater Bing usage will allow it to further optimize its search offering. But Google has been eyeing Microsoft's business as well. The other week Google announced plans to introduce an operating system in the netbook market in fall 2010.

Some pundits think that Microsoft should just admit it has decisively lost the search battle to Google. Indeed, Microsoft is investing billions fighting against Google (analysts estimate it has already blown through more than $100 million marketing Bing), and our research suggests that trumping a powerful, well-resourced competitor in its core market is incredibly difficult.

But I disagree. The search game is still in its infancy. While it is hard to see another company one-upping Google with superior search algorithms or better search-based advertising, today's offerings are still pretty blunt instruments for information-seeking consumers or business-seeking advertisers.

What's more, when you reframe the issue around advertising instead of search, the competitive lens shifts completely. After all, Google isn't really a search company. It is a company that sells advertising, with search as a proven, effective way to drive advertising revenue. However, search-based advertising still doesn't really get the advertising job done for companies who remain frustrated by their inability to precisely target and track their advertisement, or predictably run campaigns that achieve their business objectives.

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

• Retailers Cut Back on Variety, Once the Spice of Marketing by Ilan Brat, Ellen Byron and Ann Zimmerman | WSJ.com

  Will this affect the increased pace of incremental innovation in consumer packaged goods? "In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15%, industry executives and analysts say. This is a challenge for manufacturers, who have grown accustomed to churning out incremental variations on popular products to maintain shelf space and keep their brands fresh in consumers' minds."

• IBM Aims for a Battery Breakthrough by Steve Hamm | BusinessWeek

  Article points out the GE, among others, is also making a play in batteries. "Industry leaders have called for just this kind of concerted effort amid concern that the U.S. will miss out on one of the most important technology shifts in history—the switch from gasoline to electricity as the primary power source for light vehicles. The worry is that the U.S. will trade its current dependency on the Middle East for oil with a new dependency on Asia for vehicle batteries. 'We lost control of battery technology in the 1970s,' laments Andy Grove, former chairman of chip giant Intel. 'Battery technology will define the future, and if we don't act quickly it will go to China and Japan.' "

• The 99-Cent iPhone App That Kills Print Journalism by Ray Richmond | The Wrap

  I have it. And it's good enough that it's hard to imagine how a publication could sell online access if it was also available via this iPhone app. Media disruption continues.

• MediaBugs Rethinks Corrections by Taking a Page from Programmers by Zachary M. Seward | Nieman Journalism Lab

  In a move borrowed from open source programming, startup MediaBugs purports to offer an improved, centralized method for media corrections. "Improved" partly because many media sites have no well-defined path for users to point out corrections, nor prominent place to publish corrections for readers to see.

• Google Wave Drips With Ambition. A New Communication Platform For A New Web. by MG Siegler | TechCrunch

  Description of the plans for Google's new uber-portal, Wave: "Wave offers a very sleek and easy way to navigate and participate in communication on the web that makes both email and instant messaging look stale." 

• Google Wave: Big Potential for Innovation Teams, by Chuck Frey | Innovation Weblog at InnovationTools

  First thoughts on what Google Wave could do for innovation teams: "Group brainstorming; collaboration around pilot projects or prototype products and services; industry intelligence gathering – identify and discuss “weak signals” and industry trends that could lead to new innovations."

• Paradigm Mechanics: Fundamentals for Learning and Innovation, by Chris Jones | Paradigm 101, sourcePOV

  "We need to understand our paradigms so that we can ‘un-learn’ the assumptions of the past, forcing a collective new look at potentially every aspect of the way things are done. To accomplish innovation for large ecosystems, we need to master the process of system definition and creation that are inherent in a paradigm shift. If you’re talking about frameworks, models, systems, abstractions or ground-rules, there’s likely a paradigm to be found. And if you’re a practitioner of information technology or engineering, bringing your understanding of design concepts and 'specfications' to the table will help."

• How to Make the United States Innovative Again, by Derek Thompson | The Atlantic Business Channel

  "What are innovators doing wrong? And how do you design a macroeconomic policy to unleash ideas? ...answers range from rescuing engineers from the clutches of the military, to hosting a big national innovation contest, to changing the way we tax companies." 

• The Mossberg Solution Reviews Logitech Vid, by Katherine Boehret | WSJ.com
  Review of new good-enough videoconferencing-software aimed at non-techies: "If this was a free download for all, Logitech Vid would be a slam dunk for the consumer. But as of now, it is free only for people who use Logitech Webcams....For everyone else, the software expires after 30 days, with no option to pay for continued use. This means Logitech misses out on the growing number of people whose laptops and desktops have built-in Webcams, but who don't want to buy a Logitech camera just to use Vid (and shouldn't have to)." 

• Is Gen Y teamwork killing creativity? by Rebecca Thorman | Modite
  The group-forming inclinations of Gen Y aren't good for creativity, but "reverting back to a command and control structure is obviously not the answer, but decentralized leadership doesn’t mean we all have to hold hands. We can’t let the pendulum swing so far from one extreme to the other that we miss that happy medium where innovation soars." 

• In Recession Specials Small Firms Revise Pricing, by Dana Mattioli | WSJ.com
  Small businesses innovating during the recession by inventing ways to go after the low end. 

• Interview with Retired President X, by Braden Kelley | Blogging Innovation blog
  Report from a lunch with the recently retired president of a multibillion-dollar company. Nuggets include: "When people have an idea, they often just jump in and start developing the idea...often reinventing the wheel and repeating many mistakes...consider having people submit a short research paper...to show that they have researched those that have gone before them. At the same time, somehow we have to find a better way of capturing the learnings from failed efforts for those undertaking new projects to learn from." 

Massachusetts Institute of Technology researchers have patented a new acoustic shielding technology that will allow for private conversations in open office settings. The technology is reminiscent of the purpose, if not the look, of the "cone of silence" from the 1960s Get Smart television show. According to New Scientist, the solution includes a sensor network to work out where potential eavesdroppers are, and speakers to generate a subtle masking sound. Acoustic shielding is not a new concept, but workable solutions have been slow to emerge, perhaps because of the difficulty. Current solutions include portable devices that emit white noise and a device that masks certain speech frequencies within a specific range of distance. The MIT-developed technology, in contrast, is more complicated and meant to track people as they move around a space. The New Scientist article describes the technology this way: "The walls of the room must be peppered with light-switch-sized units that include a microphone, a speaker, an infrared location sensor and networking circuitry connected to a server. When somebody wants to activate what the MIT researchers call the 'sound shield', they do so on their desktop computer. Knowing the position of the computer, the sensors identify the person and map out the locations of people around them. Software assesses who is so close that they must be participants in the conversation, and who might be a potential eavesdropper. The array of speakers then aims a mix of white noise and randomised office hubbub at the eavesdroppers. The subtle, confusing sound makes the conversation unintelligible."

The most recent issue of Wired featured a great article dissecting the ascendancy of small, simple portable computers called netbooks. Everything about the story feels disruptive ... except for the fact that market incumbents seem to have caught the trend.

The netbook revolution started a couple years ago when MIT Media Lab visionary Nicholas Negroponte started the "One Laptop Per Child" project. The notion was to use open source software and off-the-shelf technologies to make laptops affordable enough for children in developing nations.

While the OLPC project itself hit some roadblocks, the concept of simple, cheap laptops surged. A Taiwanese company called Asustek, which had done outsourced design for many leading personal computer manufacturers, introduced a $300 computer called the "Eee" a couple of years ago.

The company designed the device to be "good enough" to perform simple tasks like email and surfing the Web, hence the name "netbook." It sacrificed speed and the ability to run more complicated software to hit the radically low price point.

Netbook usage has surged, particularly in Europe. Consumers have found the devices more than adequate for the tasks most people do on their computer — e-mail and basic word processing.

Willy Shih, a Harvard Business School Professor who teaches a section of Innosight co-founder Clayton Christensen's "Building a Sustainably Successful Enterprise," told Wired, "netbooks are a classic Christensenian disruptive innovation for the PC industry."

Yet ... there's one strange part to the story. Usually when a wave of disruption hits an industry, the market leaders get caught flat-footed. Either they wait too long to respond, or they bungle their response. But in this case, Dell, Hewlett-Packard, Acer, Lenovo, and other laptop leaders seem to have successfully "caught" the disruption. ...

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

Any time a barrier prevents consumers from satisfying an important job, the market is ripe for disruption. Consider the significant barriers keeping physicians from adopting electronic medical record (EMR) systems, or expanding on those systems they do have. In a study published in the New England Journal of Medicine, 88 percent of physicians without electronic medical record (EMR) systems and 80 percent of physicians who already have EMR systems cite “cost of capital” as a barrier to adoption or expansion.

Who can blame them? Widely published estimates cite the costs of electronic medical record (EMR) systems as ranging from $15,000 - $50,000. However, this does not take into account the costs of hardware, implementation, training, and ongoing support, which can easily take the full costs of an EMR system to $250,000 - $300,000 for the first year.

So who will enable the disruption for which this market is ripe? Enter WalMart. Long known as a purveyor of cheap toothpaste, toilet paper, and televisions, WalMart announced this week that it has partnered with Dell and EClinicalWorks to offer physicians a package of hardware, software, installation, maintenance, and training for the everyday low price of $25,000 for the first physician and $10,000 for each additional physician in the first year.  While WalMart’s announcement is significant (especially to incumbents in the healthcare IT space), it is also significant, and important, to note that they are entering healthcare IT in a classically disruptive manner: 

1. Understand the important and unsatisfied jobs of key stakeholders: Physicians today are not just caregivers, they are businesspeople forced to deal with the bureaucracy of managed care and the headaches of managing an office. Any solution that enables them to spend more time with clients and less time on paperwork without a significant impact on the bottom line will be quickly embraced.
2. Create an innovative business model: With its understanding of physicians’ important and unsatisfied jobs, it was likely easy for WalMart to create a solution with an appealing value proposition. However, they likely realized that additional resources would be needed (or at least helpful) to execute the strategy. Enter Dell and EClinicalWorks. Each brings its unique experience and reputation to the solution creating something greater than the sum of its parts: 
   • WalMart claims that its role is one of an integrator. While this is true, largely because of their purchasing scale, it does offer three other key resources: widely recognized expertise in logistics and coordination, an existing physician customer base of approximately 200,000 physicians, and an existing distribution network through its 600 Sam’s Club stores. 
   • Dell supplies the hardware – either a desktop or tablet PC – and the installation services. While WalMart could likely have partnered with another hardware vendor, Dell’s experience in supply chain management and reputation for good customer service likely gave it an edge over cheaper but less well-known hardware companies.
   • EClinicalWorks supplies the Internet-based electronic medical record and practice management software, training, and maintenance. Already used by 25,000 physicians, EClinicalWork brings credibility in the healthcare IT space.
3. Use an emergent strategy: This is neither the beginning nor likely the end of WalMart’s foray into healthcare. In 2007, it partnered with the University of Arkansas and Blue Cross Blue Shield to conduct research on how to improve healthcare IT in the US.  In February 2008, it opened co-branded clinics with a common EMR platform operated by EClinicalWorks (surprised? You shouldn’t be), and in September it promised to provide all employees with access to electronic health records. It’s reasonable to assume that each of these activities were small steps to resolve assumptions related to IF and HOW WalMart should enter the EMR space. 

Supported by the Obama administration’s $19 billion investment in healthcare IT via the Recovery Act, WalMart’s foray into EMR is likely to be yet another successful step in its journey into the healthcare space. In the short term, WalMart is likely to benefit from sales of the system and the ability to influence patients and physicians to fill their prescriptions at WalMart’s pharmacies or to buy medical supplies and durable medical equipment at Sam’s Club. In the long term, its savvy use of the principles of disruptive innovation positions it well to successfully disrupt incumbents.

• Innovate Like Chris Rock - Conversation Starter - HarvardBusiness.org

  Emergent strategy illustrated in Chris Rock's approach to comedy.
  

• Free Newspaper Venture Depends on Local Blogs - NYTimes.com

  More business model innovation in media.
  

• Cisco Plans Big Push Into Server Market - NYTimes.com

  Cisco plans to release a server equipped with virtualization software, a product that "threatens to shake up the technology industry and put the company on a collision course with traditional partners like Hewlett-Packard and I.B.M. ... [this] is a bold but risky move by Cisco into an unfamiliar, intensely competitive market that typically produces far lower profits than Cisco makes from network gear. ... Cisco’s push into the server market...could cause an all-out war among the tech titans for one another’s customers.
  

• Asleep at the Wheel of Creative Destruction - Umair Haque - HarvardBusiness.org

  Wall Street's moral hazard has a mirror image.. The perverse irony of the collapse of industrial-era capitalism isn't just that Wall St ended up being massively risk seeking, taking bets it never should have. It's also that venture capitalists ended up being risk averse - never making the bets they should have. ... Venture investors have been free to take hidden action that maximizes their own near-term returns - underinvesting in radical innovation.
  

• The New Reality: Constant Disruption - The Big Shift - HarvardBusiness.org

  John Hagel, John Seely Brown, and Lang Davison argue that "equilibrium is a thing of the past" because "Today's core technologies--computing, storage, and bandwidth--are not stabilizing. They continue to evolve at an exponential rate. And because the underlying technologies don't stabilize, the social and business practices that coalesce into our new digital infrastructure aren't stabilizing either. Businesses and, more broadly, social, educational, and economic institutions, are left racing to catch up with the steadily improving performance of the foundational technologies."

• Cisco Plans Big Push Into Server Market - NYTimes.com

  Cisco plans to release a server equipped with virtualization software, a product that "threatens to shake up the technology industry and put the company on a collision course with traditional partners like Hewlett-Packard and I.B.M. ... [this] is a bold but risky move by Cisco into an unfamiliar, intensely competitive market that typically produces far lower profits than Cisco makes from network gear. ... Cisco’s push into the server market...could cause an all-out war among the tech titans for one another’s customers."

  
  

• Asleep at the Wheel of Creative Destruction - Umair Haque - HarvardBusiness.org

  "Wall Street's moral hazard has a mirror image.. The perverse irony of the collapse of industrial-era capitalism isn't just that Wall St ended up being massively risk seeking, taking bets it never should have. It's also that venture capitalists ended up being risk averse - never making the bets they should have. ... Venture investors have been free to take hidden action that maximizes their own near-term returns - underinvesting in radical innovation."

  
  

• The New Reality: Constant Disruption - The Big Shift - HarvardBusiness.org

  John Hagel, John Seely Brown, and Lang Davison argue that "equilibrium is a thing of the past" because "Today's core technologies--computing, storage, and bandwidth -- are not stabilizing. They continue to evolve at an exponential rate. And because the underlying technologies don't stabilize, the social and business practices that coalesce into our new digital infrastructure aren't stabilizing either. Businesses and, more broadly, social, educational, and economic institutions, are left racing to catch up with the steadily improving performance of the foundational technologies."

  
  

Could the fun of texting help kids to lose weight? Indirectly, perhaps, but not simply due to the technology or the act of texting itself.  A recent study out of the University of North Carolina found that children between the ages of 5 and 13 who used text messaging to record food diaries were almost twice as likely to comply with the program than those who recorded their intake and activities using old-fashioned paper diaries.

The first conclusion drawn from the study is that kids who text their diaries demonstrate higher rates of compliance because texting is fun. People who keep records of their consumption and activities have been shown to lose more weight and to keep it off. “If people enjoy [texting], they’re more likely to do it and more likely to lose weight,” according to study author Jennifer Shapiro.

But is it really just the pure joy of texting that increases compliance? Worth noting is that the children who reported in by text message received an immediate reply about their progress relative to their goals. Pencil-and-paper kids experienced a week of lag time between writing in their diaries and meeting with a nutritionist for feedback on how well they had done.

Seen through the lens of the jobs-to-be-done approach, the success of the texting group may have more to do with the response that participants received from others than with the texting itself. “Jobs” are problems that customers need to solve in their lives for which they hire products or services as solutions. “Feel joy in reporting my food intake” is unlikely to be a job held by many people. However, immediate feedback fulfills important social and emotional jobs such as “Feel responsible” and “Know that someone is paying attention to me.” Flashing a cell phone to send a text message may fulfill jobs such as “Feel cool.” Many of these jobs may be particularly important for children and pre-teens, along with jobs such as “Connect with others like me” or “Fit in.” Insight about these underlying jobs that drive behavior could lead to further innovative efforts to increase compliance with diaries and diets, such as text feedback from peers or information on one’s performance relative to a peer group.

So, texting technology is an enabler of success here. Ultimately, however, the success of a technology in the market or in creating behavior change is driven by the technology’s ability to better meet functional, social, or emotional jobs-to-be-done than existing solutions.

MIT chemistry professor Daniel Nocera (pictured at lower right) and post-doc Matthew Kanan recently unveiled a discovery that may represent a major energy breakthrough: a new compound that promises to enable large-scale adoption of truly decentralized, at-home solar power. The researchers focused on harnessing solar energy, since it enables clean, carbon-free power generation and is abundantly available. In this video clip on the discovery, Nocera puts the promise of solar in context: “In around one hour, the amount of sun that hits the face of the earth is what we use in an entire year globally for our energy.” (See the MIT Technology Review cover story on Nocera's research here.)

Until now, however, solar has been constrained by its inherent intermittency; power is only generated when the sun is shining, and storing any excess power produced during the day has been prohibitively expensive for at-home use. Batteries are costly, and solutions such as compressed air storage do not represent feasible options in small-scale applications. In places where the energy infrastructure allows it, excess power can be sold back to the grid, but this stop-gap solution is still reliant on the relative inefficiencies of our 20th-century energy system.

In contrast, the catalyst Nocera and Kanan discovered represents the crucial new component of a simple, inexpensive, and reportedly highly efficient water electrolysis system with negligible maintenance and replacement costs.

How does it work? Excess solar energy is used to split water molecules into hydrogen and oxygen for separate storage and subsequent re-combination in fuel cells when energy is needed.  As Nocera points out in the video linked above, the researchers are hoping that their discovery will lead to homes that capture solar energy themselves by using their efficient process to convert sunlight into chemical energy for use when the sun is not shining.

While the electrolysis of water is a well-known process, it has traditionally been expensive due to reliance on noble metals and the inefficiencies of oxygen extraction in non-benign environments. The new catalyst that extracts oxygen consists of cobalt and phosphate covering a conducting material such as glass or graphite. These materials are widely available and thus cheap. Placed in water, cobalt and phosphate ions form a thin film on the electrode when a positive potential is applied and produce oxygen gas.

The new catalyst works well in neutral water at room temperature and under normal atmospheric pressure – in contrast to the traditional industrial water electrolysis process. The solution looks to create precisely the benign, inexpensive, and easy-to-set-up environment preferable for at-home use.

Scientists have been able to extract hydrogen from water easily for a long time, but only the simultaneous extraction of oxygen avoids the production of undesired hydroxide. Hydrogen is typically produced using platinum-based electrodes, but Nocera also announced plans for a full system design that includes a replacement for the noble metal, which would decrease the price of the energy storage system further.

Two additional aspects make the technology even more elegant. First, the cobalt and phosphate ions on the cathode exhibit a “self-repair” interaction that allows for repeated use. Second, the inputs – energy and water – ultimately yield energy and water again. Since this water can then be reused, an entire closed-loop system might be within reach.

The impact of Nocera and Kanan’s discovery can only be forecasted at this point. James Barber, professor of biochemistry at Imperial College London, gushes: “This is a major discovery with enormous implications for the future prosperity of humankind. The importance of their discovery cannot be overstated since it opens up the door for developing new technologies for energy production thus reducing our dependence for fossil fuels and addressing the global climate change problem.”

Notwithstanding, as with any emerging technology, this energy storage enabler needs to be vetted in further research and prove its economic potential for scalability. Also, the storage of hydrogen and oxygen and their recombination in fuel cells needs to become safer for reliable at-home use.

Nocera, though, is convinced: “This is the nirvana of what we've been talking about for years. Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon.”

Indeed, this technology could be the final link in an emerging energy system that includes distributed photovoltaics and fuel cells, electric cars, and new regulation that favors at-home energy generation.  Commercializing this system will be a challenge (though we have theories on the best way to do this – see this article and chapter 5 of The Innovator’s Solution), but true clean energy decentralization, which promises enormous efficiency and environmental benefits, could be closer than commonly assumed.

One of Innosight's core principle is that while many companies have no shortage of innovative ideas, they face challenges bringing them to market in large part because predicting the ideal market for a truly novel idea is no easy task. The ideal approach we advocate is typically an emergent strategy, a process that allows flexibility and rapid learning around finding the right market without exhausting a company’s resources. Since final markets for disruptive innovations are so difficult to predict in advance, a capacity for emergent strategy is critical for repeatable success in innovation.

This is particularly the case in disruptive innovation because no technology is guaranteed to be disruptive — the business model and roll-out strategy are equally important in determining if a disruptive phenomenon will take root. Accordingly, a mindset of emergent strategy allows the flexibility in positioning and marketing decisions that are critical to overall success.

This idea is a familiar one to entrepreneurs, and it’s well-known that successful start-ups typically go through many iterations. But this mindset can be more difficult for large, established companies. However, there are companies, even 100-year-old ones, who have fostered the culture and processes that promote an emergent strategy approach. Case in point: Hitachi Senior Chief Researcher Kazuo Yano recently shared with me one example, finger-vein authentication technology (similar to digital fingerprint scanning) (link in Japanese). Initially, Hitachi’s plan was to market the product for building entry control, but it was discovered later that the ideal market was actually for use in ATMs. Dr. Yano explained that this latter market was not originally evident, but that the company was able to reorient itself and react to changing realizations about the market.

The insight and ability to course-correct is extremely valuable for most companies, but even more so for firms like Hitachi that put enormous value on being innovative leaders (consider their slogan “ Inspire the Next” and their sponsorship of the MIT Media Lab).  Hitachi will have many upcoming opportunities to flex its emergent strategy skills on products coming right out of the pipeline, such as their new Business Microscope/Sensor Badge (link in Japanese), which is a device to measure behavior and productivity within a business or other organization. The winning applications and business model for this emerging technology have yet to be pinned down, but it’s a safe bet that they will be well-served by a similar emergent strategy. It’ll be a very interesting technology to watch.

The “most exciting phone in the history of phones” was just released on Tuesday, September 23. The HTC G1 will be available through T-Mobile in October, and it will wield Google’s relentlessly hyped Android operating system. So is this the next “Jesus Phone”? I think that while the phone may be successful, it’s nothing groundbreaking. The operating system at its core, however, has the potential to lead to truly trailblazing advances in mobile computing.

I recently argued in this space that Google’s new Chrome Internet browser doesn’t pose much of a threat to Microsoft’s Internet Explorer on its own, but that when Chrome is viewed as a small piece of Google’s larger strategy to make it easier for us to do more of our computing jobs online in the “cloud,” the disruptive possibilities begin to take shape.  I see Android as something very similar: a product that, in its current incarnation, may not do much to the dominant incumbents, but has the potential to function as part of a broader disruptive strategy.

The G1 phone is not yet available to consumers, so hard facts about the Android’s quality are difficult to come by. That said, Android does not appear to be superior to the iPhone or significantly better than other incumbents and may need to fill in a number of gaps in its features (for example, it offers connectivity to Amazon’s MP3 store but unbelievably lacks a headphone jack).

The G1 enters an extremely crowded, competitive, and continually evolving market. I have no doubt that Google’s ability to deliver high-quality software will enable it to improve Android and add to its features, but right now Android is not a game-changer, and it does not offer any especially compelling or novel sustaining innovations in the mobile phone/Internet device space.

Nevertheless, I think Android is an exciting new development. As a mobile operating system (an open source one that allows software and hardware developers access to its innards), Android may very well find its way into the broader mobile computing space. If that happens, Android may (finally!) bring some standardization to the rapidly growing variety of devices that connect to the Internet, including set-top boxes and potentially cars, computers in televisions, and other products (as this blog post explains).

If Android appears in other devices it could target Internet nonconsumption. Many devices that could be usefully connected to the Internet aren’t yet (or are, but have mediocre operating systems and/or very limited functionality), so there could be a great disruptive opportunity for Google to make Android available in them.

Of course, one might reasonably wonder how Google plans to generate revenue from Android, since it’s being given away and is open source. I would imagine that, given Google’s dominance of search and the plethora of advertising revenue-generating applications it offers, the more people it can connect to the Internet more of the time, the happier (and more profitable) it will be.

How do you sell more computers to more people when almost all of us already own one? Recent and ongoing innovations in the computer industry provide a fascinating answer to that question: rethink the idea of nonconsumption.

In The Innovator’s Guide to Growth, Scott Anthony, Mark Johnson, Joe Sinfield, and Elizabeth Altman describe a presentation for a major cable broadcasting company during which an audience member said of nonconsumption, “More than 90 percent of U.S. households subscribe to cable television. I don’t see how this concept applies to us.” The speaker replied, “How frequently do people watch your programs when they aren’t sitting at home in front of their television?” Instead of conceiving of consumption narrowly and focusing on bringing cable TV to more houses, the authors suggest, the company might consider offering video in new contexts such as PCs or mobile phones.

In other words, considering consumption in terms of people (am I a consumer or not?) can be much less informative than considering it in terms of contexts (are there circumstances in which I could be consuming but am not?).

Although the vast majority of people in the developed world own (or at least have access to) a personal computer, there is still a great deal of nonconsumption in the computing space. Until fairly recently we were all nonconsumers of computers and Internet access in places like airport terminals, taxis, and sidewalks. Innovations expanded consumption: smartphones and netbooks are making the Internet and productivity applications available not necessarily to new consumers of computers or new segments of the computer market but rather are making them available in new contexts.

A nascent project may soon expand consumption to public spaces and group settings in which computer use (a generally solitary activity) rarely occurs today. Microsoft’s Surface project was famously mocked when it first became public, but now the – ahem – tables have turned as the massive touchscreens are being introduced as part of a pilot program in Sheraton hotels in five cities.

It is easy to imagine an enormous variety of other applications: Surface computers installed as interactive product displays in retail outlets; as automated ordering devices in tables at restaurants; as game-playing and Internet-accessing time-passers in transit stations; as board games, message centers, and media consoles in homes… Some of these ideas may turn out to be optimistic or unrealistic, but broadly speaking Microsoft is on the right track as it prepares a device designed to bring interactive computing to nonconsuming contexts.

These and other products are strong evidence of both established manufacturers’ and new entrants’ willingness to explore and tap into the circumstances in which computers are not yet being used. This understanding – that nonconsumption is contextual and highly relevant even in markets that appear to be saturated – should continue to lead to robust growth in the computer industry.

The recently christened “netbook” market has exploded over the past year as new entrants and established computer manufacturers have released a bevy of new, inexpensive products into the disruptive category.

Netbooks, relatively small and very inexpensive notebook computers designed primarily for mobile Internet connectivity and useful for little more than browsing, e-mail, and running productivity software, fit nicely in a niche for consumers who have been simultaneously overserved by traditional laptops and underserved by high-end smartphones.

If this niche seems familiar, it should. Manufacturers have struggled to shoehorn attractive products into this niche for years, but until recently they tended to be unwilling to aim low enough on features or on prices.

Some have sought to fill that gap by focusing primarily on size and producing ultra-slim laptops with feature sets (and price points) comparable to those of larger computers. Lenovo’s X Series and the $1799 MacBook Air, for instance, actually charge a hefty premium for providing features similar to those of a midsize laptop in a more portable package.

Microsoft, on the other hand, was more willing to limit features and provide a “good-enough” product when it developed its “Ultra-Mobile PC” platform (known as Origami), but Origami-powered devices failed to catch on as high prices (not to mention horrific usability problems) turned potential customers away.

Netbooks, however, seem more attractively positioned than these products, and they have great potential to disrupt the laptop industry. Consider, for example, Acer’s new Aspire One, now widely available for $379. It’s hopelessly outgunned by pricier laptops: its screen is small, it runs Linux instead of Windows, it comes with relatively little RAM, its processor is slow, and its solid state drive is Lilliputian.

But those shortcomings aren’t terribly important to consumers when their goals are simply portability, connectivity, and productivity at a low price; an ultra-portable that can run Crysis is ludicrously overwrought in comparison.

It seems very likely to me that there's much more expansion in store for this segment of the computing market as manufacturers introduce still more products, the cost of computing power continues to decline, and consumer awareness of these options grows.  I'll be curiously watching as the low-end disruption develops.

Earlier this year on InnoBlog, Natalie Painchaud discussed the ASUS Eee Surf's potential to be used as a second computer for families.

One of the excellent editors at Harvard Business Publishing forwarded me a link to a BBC article in an email with the subject line: "Could Windows by Disrupted?" I didn't have to click on the link to know the answer is yes.

You see, everything could be disrupted. The important question is will disruption play out in a way that favors or kills the incumbent market leader? The real interesting question is "Will Microsoft disrupt Windows?"

The forces of disruption are at work in every industry. It can happen more quickly in some industries than others, but the potential is omnipresent. And as Clayton Christensen pointed out in his seminal book The Innovators' Dilemma, market leadership isn't just an insufficient buffer against disruption, in some cases it is the root cause of failure.

Consider the management classic In Search of Excellence. While some of the companies featured in the book continued to excel after it was published, companies like Amdahl, Atari, Data General, Digital Equipment Corporation, Eastman Kodak, and Kmart all encountered serious difficulties. In fact, an analysis by IMD Professor Phil Rosenzweig in his worthwhile read The Halo Effect found that the average "excellent" company from In Search of Excellence generally under-performed the stock market in the years after the book's release.

What about Microsoft? ...

Read the rest on Scott's Harvard Management blog.

On Tuesday, Michael Arrington from TechCrunch.com had a fascinating post about his experience playing around with a startup called YouNoodle, which tries to do for start-up funding what credit scoring did for personal lending.

Before the 1950s, lending depended on the wisdom and judgment of loan officers. Then, a company called Fair Isaac developed a way to use four simple variables to develop a credit score that reliably predicted the risk of lending to an individual. Using the approach could allow any individual to meet, if not exceed, the accuracy of a loan officer, whose judgment might be clouded by extraneous factors.

Further refinements to the credit scoring methodology fueled disintegration and disruption in the banking industry, spurring the rise of credit cards and specialist providers of auto loans, home mortgage loans, and small business loans.

Likewise, YouNoodle has developed a database that it claims can predict the valuation of early-stage startup companies. It developed the database by assessing 3,000 startup companies. The model relies on four basic areas: the team, financial factors, the concept, and advisors. A startup comapny fills in a survey with detailed questions focused on these four areas, and out pops the valuation.

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

The iPhone 3G hogged its share of the spotlight over the weekend. The “twice the speed, half the price” phone sold upwards 1 million units over the weekend. But while most of the spotlight was focused on the new phone itself (and the difficulties experienced during the launch), I believe time will show the iPhone App Store — a iTunes-integrated online store that allows consumers to easily install a seemingly endless variety of games, utilities and other applications — was the Apple release most deserving of the weekend spotlight.

The new features (3G antenna, standard headphone jack, etc.) are improvements, don’t get me wrong. But they are the sort of sustaining improvements that customers expect, and they don’t exactly break new ground. I doubt whether these features alone can propel the iPhone to the level of success that Apple’s other “i” product has achieved. (If they could, you’d see a lot more buzz about the LG Dare and the Samsung Instinct).

It is the App Store that adds features in a disruptive way that other phones can’t match. With it, the Apple finally gives consumers a way to conveniently add third-party programs to their phones. (I’ve used both Palm OS and Windows mobile devices and can testify that until now this has been neither a quick nor a convenient process). In the same way that the iTunes music store made the iPod much more than another digital music player by allowing the consumer to easily buy, organize, sync and play music, the App Store makes the iPhone more than another smartphone. It turns it into a computer in your pocket, ready to be customized with the applications that you want.

How significant will the effect of the App Store be? Well, if the history of the iPod before and after iTunes is any guide, the effect will be enormous.

Prior to the release of iTunes in April, 2004, no more than 1 million iPods has been sold during any quarter. After it was released for Windows in October of 2004 (it was a Mac only release for the first few months), at least 4 million iPods (and as many as 22 million!) have been sold every quarter.

Of course, there are differences. Consumers already had well-established habits relating to buying and listening to music that the iPod + iTunes could build on. Similar habits relating to the use of third-party applications on mobile devices may not be as prevalent. And this time, the competition isn’t as far behind. Google is hard at work pushing its own mobile platform, Android, with headset makers and application developers (and might even be developing a Google phone). Also, incumbents like Nokia, which acquired Symbian recently, aren’t sitting still either. Both may be able to offer consumers devices that are as flexible and application ready as the iPhone in the near term.

In the face of these challenges, it will be interesting to see whether Apple will be able to repeat the success of the iPod. It is doing plenty right. But will it be enough?

Stuttgart is “going green.” The German city recently signed a letter of intent with Ultra Motor to implement an infrastructure to support eco-friendly scooter-bikes. Launch is expected in 10 months and the idea is catching on; according to BusinessWeek, Ultra Motor is currently in negotiations with 12 other major European cities.

Driving this effort is Ultra Motor’s new A2B Light Electric Vehicle (LEV) — a scooter-bike with a conscience. The tagline even has an anthropomorphic ring to it: “The heart of a bicycle. The soul of a scooter.”

Experience LEV technology: Hop on a comfortable seat surrounded by a lightweight, aluminum frame. Enjoy as much exercise as you choose by pedaling or cruising at 20 mph. Want to ride further? The standard range of 20 miles can be extended to 40 with the addition of a lithium ion battery pack. New technology provides one-third more force than electric motors; helpful when ascending hills or darting through traffic. A dashboard indicator signals energy remaining. Dwindling charge? Simply plug in.

Current customers of the A2B vehicle include commuters, students, employers, fleets, and local authorities. However, through our lenses, jobs define the marketing strategy and are linked to attributes:

Social job: “Have a positive impact on the environment”
The A2B is a zero emissions mode of transportation, powered by a lithium ion battery. The vehicle efficiently functions at approximately one-tenth the running cost of a gas-powered scooter.

Emotional job: “Allow me to enjoy my commute”
The rider is able to enjoy the outdoors and a quiet ride. The extended driving range provides freedom and the vehicle is easier to handle than a gas-powered scooter. Modular storage options are also available.

Functional job: “Provide a way for me to reduce transportation costs”
Savings are self-evident — no gas required. The A2B model is currently available in 20 states across the U.S. for about $2,200. In Stuttgart, a monthly subscription will cost $23; a mass transit pass costs $84.

In the spirit of business model innovation, Ultra Motor is exploring new networks of transportation, one of which will be utilized in Stuttgart. The “LEV City Initiative” outlines this potentially disruptive system featuring charging stations; purchase a subscription, locate a station, swipe your card and enjoy the ride.

We applaud Ultra Motor for encouraging consumers to “go green” in new ways. Learn more from the source at www.ultramotor.com. You’ll notice as the website loads, the screen cleverly notes: “Charging up.”

Attendees of the Mobile World Congress in Barcelona earlier this year might have easily overlooked what could become a huge success. Modu, an ultracompact cell phone launched by the Israeli technology start-up modu mobile, might be the first truly modular phone – a technology with significant disruptive potential in the mobile communication devices category. However, highly relevant questions on consumers’ jobs-to-be-done and the business model need to be thoroughly considered for modu mobile to be successful in the marketplace.

The technology

In essence, the 1.41 oz., 2.8 x 1.4 x 0.3 inch device is a no-frills cell phone with a small screen and just a few buttons that can be wrapped in one of multiple “jackets” to become a more advanced cellphone (e.g. with a full QWERTY keyboard, a bigger screen, or individualized design). When merged with a “mate,” the modu becomes the core of an entirely different compound device with different performance dimensions such as a portable music player, a car radio, a GPS-system, a bike computer, a camera, or an alarm clock with a docking station that displays incoming text messages. The modularity of modu’s hardware and software allows its processor, memory, and wireless technology to run the compounded devices. 

The job

The modu is set for success only if it precisely targets consumers’ jobs-to-be-done and does not get distracted by the technological possibilities. Instead it should focus on specific circumstances consumers face during their day where the modu could be a winning solution: “Help me enjoy my commute” when getting to work and back, “help me access my emails while on the go” during the work day, and “help me become available for communication” when going out at night might be examples. Now, each of these jobs is already addressed separately by illustrious products such as Apple iPod, RIM Blackberry, and small form-factor cell phones by Nokia, Motorola, Samsung and others. 

At the moment, modu mobile’s answer to these competitors seems to be a lower price. The anticipated price of $200 for a modu bundled with two jackets that range in price from $20 to $60 each might differentiate modu from its respective nonmodular competitors. Yet, competitors could simply decide to sell for less, cutting their margins to outcompete modu.

The true power of modu’s technology lies in its modular architecture. Modu mobile can create a competitive edge by translating the device’s customizability into two distinct performance dimensions. First, modu's modularity can facilitate the individualization of consumer electronics -- a trend that predates its most common and unfortunately popular example, the personal ringtone. The second performance dimension follows the broad job “help me make my daily life easier.” This might sound more straightforward than it actually is, but figuring out how precisely to align communication technology with cross-architectural usefulness will be key for modu to challenge the iPods, Blackberrys and Nokias of this world. In this context, swapping the modu between multiple jackets and mates per day needs to be as quick and easy as its teaser suggests.

The business model

Modu mobile plans to launch its device with support from major cellphone carriers in Italy, Israel and Russia this October, followed by the U.S. and other European countries in 2009. Modu's business model focuses on selling the phone while licensing the technology to third-party manufacturers, who will build jackets and mates on their own. Manufacturers could profit from licensing modu’s technology by launching their products without a slow and relatively expensive licensing process with the Federal Communications Commission, because the modu is already a phone.

Modu mobile, in turn, keeps full control over the core component of what they hope will become as standard as flash data storage devices, the last undertaking of modu founder and CEO Dov Moran, who was formerly CEO of msystems inventor of flash data storage devices that was acquired by SanDisk Corp for $1.6 billion in late 2006). The two main advantages of licensing technology to other manufacturers for modu mobile are that with an increasing number of jacket and mate manufacturers the modu would be more and more cemented as a standard, and as other companies also strive for success, modu mobile hedges its risk of failure by potentially not getting the job quite done for consumers.

The future

Modu mobile has the potential to disrupt the mobile communication devices category. It can target overshot and/or nonconsumers (an interesting occurrence of a potential low-end and new market disruptive innovation), if it is able keep the low-price promise along with increased ease of use, or by introducing a new performance dimension around the device’s modularity and striving for increased customizability. The business model appears promising, if the self-reinforcing mechanism of initial success results in a large base of third-party manufacturers.

These are all big ifs, and I am really curious to see what the future will bring for modu. 

Lillian Zhao

When I first was told that Mocospace was getting VC backing in early 2007, I skeptically thought: “Who’s going to use another social networking site?!”

Eighteen months later Mocospace has grown to become the leading mobile social networking site in North America. With more than one billion mobile page views per month, it’s holding its own against incumbents like Facebook (which has more than 300,000 mobile page views per month).How did Mocospace become so popular?

What I didn’t realize when I first heard about Mocospace was that it has a powerful, disruptive business model that has successfully targeted a new distribution channel (the mobile phone) and a new customer base (non-consumers of existing social networking sites). This disruptive business model has propelled it to a leadership position in mobile social networking.

New Channel

Mocospace was one of the first to create a social networking site specifically designed the mobile phone. There is a subtle though distinct difference in how people use social networks on the PC vs. the mobile phone that stems from the basic differences between the PC and the mobile phone –- the PC is a static, multi-function device, whereas the mobile phone is an always-on, always-connected, communication device.

Mocospace realized this early on, and optimized its features for the jobs-to-be-done of a mobile phone user: instant communication, quick entertainment, killing time, and staying socially connected. Mocospace offers every type of communication (chat, IM, mail, messaging, micro-blogging and even voice-messaging) in one place. Other entertainment options include games, rating other people’s photos, watching videos, contributing to forums (my personal favorite are the ‘yo mama jokes’ in the jokes forum). Mocospace’s “friend finder” application also serves members’ job-to-be-done of meeting new friends and staying connected with existing friends.

Mocospace’s strategy is different from the incumbents, Facebook and MySpace, which emphasize content rich user pages and graphic-intensive applications –- all awesome features that work great on a PC’s screen, but are too cumbersome to navigate on the phone. As such, they’ve naturally chosen to use the mobile to extend a subset of their online features. However, MySpace’s initial strategy was to charge users an annual monthly subscription, shared with the carriers, to use their mobile site. That strategy was not overly successful and has now been de-emphasized.

In contrast, Mocospace’s site is extremely mobile-phone user-friendly, as all functions have been optimized for the small screen and numeric keypad input. For example, it leverages icon-based navigation and limits the amount of words and excess visual distractions per page. The results are clean, easy-to-navigate pages.

Meeting the needs of nonconsumers

Mocospace’s functionality serves the jobs-to-be-done of a previously untapped market: nonconsumers of existing social networking sites designed to be accessed on the PC. A large portion of the US population doesn’t have constant, private access to a PC with a broadband connection, for a variety of reasons that could include on-the-go lifestyles, economic limitations, and/or remote locations. However, most of these users have a mobile phone. Some use unlimited data plans from carriers like Leap Wireless and MetroPCS, in lieu of a PC. This eclectic group of urban youth and mobile workers were the early adopters of Mocospace. They didn’t have PC access 24/7; but they had mobile access 24/7.

While Mocospace has clearly done extremely well to date as a mobile social networking site, I still wonder if it can sustain its leadership position. Despite impressive monthly growth, will it be able to continuously grow its user base to solidify its dominance in the mobile social networking sector? Or will incumbents Facebook and MySpace, or even a new start-up, take the mobile lead away from Mocospace? If so, how will Mocospace’s strategy’s change?

Time will tell. And, I am scheduling an interview with the founders of Mocospace soon, and I'll be sure to ask about these issues.

Watch for the “Voices of Disruption” interview with Mocospace co-founder, Justin Siegel, in the July/August edition of Strategy & Innovation. 

One of the paradoxical things about disruptive innovation is that incumbent companies get into trouble by doing exactly what they are supposed to do. They listen to their best customers, innovate to meet their needs, produce the best products on the market and seem to get blindsided by a disruptive innovator armed with a simple, cheap, convenient offering.

Incumbents almost always see the disruption coming. But making the down-market move often required to master disruption is challenging.

Take, for example, Microsoft's recent move to offer versions of its productivity software over the Internet. Pundits have noted the disruptive potential of Web-delivered application software like Google Apps, whose users can access free spreadsheet, word processing, instant messaging, and calendaring software over the Internet. Google Apps doesnt have all of the features packed into Excel, Word, and PowerPoint, but it is "good enough and it is free.

Down-market moves are incredibly difficult. First, the moves seem economically unattractive. Would Microsoft rather sell one additional copy of traditional packaged software with 80 percent gross margin or get one additional customer to use online services for free? At the margin, the choice is obvious.

With no core software business to worry about, Google doesn't face this dilemma...

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Read the rest at Innovation Insights

Google recently acquired Writely, a free, online-only word processing tool that has been described as a "web word processor", or a "wiki with permissions". The current version of Writely appears to have about 90% of what you would find in something like Microsoft Word. Regardless of how you describe it, its an XML, internet based word processing system that may open up a completely new way of composing and sharing information.

Initially, our thoughts are that Google will launch this free tool where it is good enough, starting at the low-end by focusing on improving the interface and web capabilities for creating and editing web-based documents such as email and blogs. It is an improvement over current methods " such as drafting documents off-line in MS Word for editing and then moving the text online. It is possible that it will take root as more and more collaboration and communication migrate to online settings.

One of the features of the XML based word processing program is that it will allow users to create as well as store documents online. It is also conceivable that this product could easily take on off-line functionality making it a direct threat to Microsoft. The real value of an offline Google word processing tool becomes apparent when you take into account that having created your document in XML, it is immediately publishable to the web and immediately searchable. The end result is the ability to publish anything to the web quickly and easily from your desktop or the web leveraging Googles processing power and internet reach.

Dont worry about advertising around your new article, Googles ad sense has that taken care of as well.