INNOBLOG

In the past few days there’s been a lot of buzz surrounding the announcement of Google’s new touch-screen handset, Nexus One. The handheld device, which Google is calling a “superphone,” has a beautiful 3.7-inch display, an ultra-thin body, a long-lasting battery, and of course Google’s heralded Android operating system. Google has obviously produced a nifty device, and it’s given rise to expected debates and chatter  over how the Nexus One matches up against and poses a threat to Apple’s iPhone.

But there is much more to this story than just a slightly improved sustaining technology.  What’s most noteworthy about the Nexus One is not necessarily the phone itself, but rather the disruptive potential of Google’s new business model. The real story here is that the phone will be sold exclusively through a new Google-hosted Web site. Highlighting this point, Google announced the Nexus One not as “a new phone by Google” but rather as “the first phone we'll be selling through this new Web store.” Riding high on the wave of superphone euphoria, Google is more subtly but strategically positioning itself to go direct to consumers through online retailing. With nearly five million unique visitors viewing a link to the phone (and thus the Web store) on Google’s homepage each day, plenty of people will get a chance to experience the new Web store firsthand.

But is the risk really worth it? Last time I checked, it seems that Google has a pretty healthy business. And isn’t selling ads really the core of its business anyway? In this sense what sets Google apart is how demonstrably willing it is to innovate its own business model in times of healthy success. Google is displaying courage and dexterity similar to IBM and especially Amazon, which has gone from book retailer to consumer goods retailer to brokerage services provider to Web services provider to original equipment manufacturer.

Google’s brave move illustrates a point Mark Johnson makes in his new book Seizing the White Space — “To thrive in today‘s marketplace, to be built to last, every business now must be built to transform.” Aware of the likelihood that, as Harvard Business School Professor David B. Yoffie has noted, the new paradigm-to-be is mobile computing and mobility, Google has seen this change coming for years and is fearlessly preparing for it.

So is the risk really worth it? After all, not even Google has a flawless record of success in new business ventures (when was the last time you used Google’s Orkut or Knol?). But in an era of shorter business cycles and increasing competition, risk is inevitable, and being built to transform has become the new imperative. The surest path, then, is to not be bound by doing merely what you’re good at or what you’ve always done, but to vigilantly identify new ways to address customer jobs more simply, conveniently, and affordably, regardless of how this may or may not fit with your current business model.

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.

 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.

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).

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.

On June 1, the new book by Innosight's Scott Anthony, The Silver Lining: An Innovation Playbook for Uncertain Times, will be released. As Scott says in a post on his Harvard Management blog, Innovation Insights, "the book's central theme is that today's turbulent times make mastering innovation a competitive necessity. I hope that the book provides corporate innovators and entrepreneurs with practical guidance to seize the ample opportunities that still exist in today's markets."

To help leaders do just that, beginning today Scott is running a 10-part series on his blog, each part describing a piece of a checklist of actions for innovation leaders looking to realize those opportunities. In each post, Scott will describe why each item is important, provide an example of a company that has put the concept into action, and describe "Monday morning" actions to implement the item. We will continue to run excerpts from these on InnoBlog, but you may want to bookmark Innovation Insights now so you won't miss any of this series.

Here's an excerpt from the first checklist item:

In today's tough times, companies may feel like they have a choice: focus on innovation or survival. It is a false choice. Innovation has gone from a nicety to a corporate necessity. After all, remember what legendary trial lawyer Clarence Darrow — clearly channeling Charles Darwin — said: "It is not the strongest of the species that survives, nor the most intelligent, but rather the one most adaptable to change."

It's tough to get started unless there's a common understanding of the challenge. As such, the first item on the Seizing the Silver Lining Checklist is: Does your organization recognize today's transformation imperative?

In today's hyper-competitive world, competitive advantage that takes years to build disappears seemingly overnight. Constant change is the new normal. Companies can't win through operational excellence alone. They have to master the ability to fundamentally transform what they do and how they do it.

However, a lack of common understanding around the transformation imperative can doom well-intentioned efforts. One of the biggest innovation killers is the "sucking sound of the core." Common understanding of the need to change can help to ward off this sucking sound.

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

Change, recession, failure, silver linings. All of these and more were touched on by the major speakers at Day 1 of the World Innovation Forum. The day kicked off with futurist and Stanford professor Paul Saffo, who shared a framework for thinking about the context in which innovation is going to happen over the next decade.

The key to this moment in time, he said, is appreciating how profound the uncertainty is and not allowing our anxieties to arbitrarily narrow possibilities. Uncertainty is also opportunity. Step back and get context, and things start to make sense. At Innosight we often say that innovators should look for patterns when looking for where new innovationsmight come from. Saffo quoted Mark Twain in saying we should “look for things that ‘rhyme.’ ”

Echoing some of Scott Anthony’s thinking from The Silver Lining, Saffo told us that we should cherish failure because of its silver lining — the fact that progress is built on previous failures. Take a look at the S curve that describes innovation adoption, he said. The flat spot in the S curve is paved with the corpses of early innovation failures. “You’ll stand at the start of the curve and be convinced that takeoff is just around the corner,” but you should “never mistake a clear view for a short distance.”

So, if you are looking for success, he said, find something that’s been failing for 20 years. The first web companies were founded by refugees from failed interactive TV companies. We must not be afraid to fail.

Economies are done in by their successes, he said. They do themselves in because they do things so well. We moved from a producing economy to a consuming economy in the 1950s, when the time clock was surpassed by the credit card. The Consumer Economy ended on Sept. 14, 2008, with the bankruptcy of Lehmann Brothers.

Saffo called our current economy the Creator Economy, whose participants consume and create simultaneously. This is not a new thought, but he took it some interesting places. Google is the real indicator of the Creator Economy, he said, because it taps the smallest unit of a creator act: the search string.

Don’t fear change, embrace it, he urged. The new thing will not support the weight of the old thing. Better to start a lightweight small thing and build on it.

• Game-Changing Management Ideas - BusinessWeek

  Package of stories highlighting ways businesses are seeking breakthrough management ideas to spark growth during the recession; includes a story about innovations that are now trickling up from emerging markets instead aof the more traditional trickle-down effect innovation has had in the past.

• Attacking_Recession: How Innovation Can Fight the Downturn

  Report from UK-based NESTA puts forward a "total innovation strategy" the UK should use to fight the recession.

• Local Economies Seek Own Revival - WSJ.com

  Some cities are putting together their own "stimulus packages" to help their own economies.

• Pushing the Limits of Crowdsourcing - BusinessWeek

  Crowdsourcing continues to grow as social networking grows.

There's a great deal of talk now about the need for companies to innovate through the recession and to be able to transform themselves in order to continue to grow. But are “transformation” and “innovation” interchangeable concepts? We don't think so. As Scott Anthony writes in this week's feature, mastering transformation requires mastering innovation. Innovation fuels the engine of transformation. And in these difficult times, companies can't afford to cut back on fuel. Read more, including results from our annual transformation survey, here, but meanwhile, here's an excerpt:

A growing realism is setting into corporations around the world. Times aren't getting better any time soon. Times aren't getting more stable any time soon. So the question turns from, “When will things return to normal?” to “What do we do now in the face of the ‘new normal' of constant change?” Charles Darwin serves as a useful guide in today's tough times. Darwin noted that the species that survived weren't necessarily the strongest or the smartest, but the ones that are most adaptable to change. Similarly, a recent annual survey Innosight conducted in conjunction with Forbes magazine highlighted how managers increasingly recognize the new corporate imperative: transformation. A huge majority – almost 80 percent of respondents – said that their organizations recognized the need to transform. Close to 70 percent of survey-takers reported their companies had already committed to transformation. Today's tough economic climate hasn't dampened the desire for transformation; both figures were virtually unchanged from the last annual survey Innosight administered in 2007. Further, close to 80 percent of this year's respondents reported that today's economic environment has increased the need for transformation.

In Innovators' Insight: Thinking Outside the Box — of Wine, Taylor Owings asks, what causes roadblocks in the up-market march of disruptive innovations like boxed wine? An excerpt:

In a down economy and in the midst of a “green” movement, there is good news for oenophiles: high-quality boxed wines are on the rise. Both cheaper and more environmentally friendly, wines packaged in cardboard instead of glass make perfect sense for people who are willing to give up the elegance of the bottle. Boxed wines have had great success disrupting the low end of the wine market, and are now beginning to make the march upward. The question is, will this march continue until the entire wine market has been transformed?

In December, Innosight and Forbes administered a survey to get a field-based perspective on transformation. We're still crunching through the results, but on Inauguration Day here in the United States, there was one emerging finding that seemed worth highlighting.

The survey had an open-ended question, "What organization do you think is best positioned to transform itself over the next 3-5 years?" The almost 500 survey respondents flagged close to 75 different organizations. The most named organization? Google. The second-most named organization? The U.S. Government.

I think the survey responses are another indication of the general hope around the Obama administration, hope that of course will dissipate if it isn't translated into action.

Organizational transformation is a tough task. Just about everyone has lived through a failed effort to transform a team, unit, or broader organization. Done well, however, a transformation can set an organization up for decades of success. ...

Read the rest on Scott's Harvard Management blog.