In “The Time Has Come For Business Model Innovation,” Mark explains how business model innovation relates to disruptive innovation and why it’s so important. Here is an excerpt:

Q: In your book, you say “disruptive innovation and business model innovation are opposite sides of the same coin.” How did you get started thinking this way, and why is it important?

A: We start with the work of disruptive innovation, which says that when you get into a new market that offers an opportunity for new growth, you should come in with a simpler, low-cost approach. This way you can offer products or services the incumbent’s not going to be motivated to match, because it’s either too small a market, the margins aren’t interesting, or it doesn’t further the company goals. Now, why doesn’t the incumbent go after the entrant who does something disruptive?

His articles “A New Framework for Business Model Innovation” and “When Should You Innovate Your Business Model?” drill down further into aspects of his business model framework.

Finally, his “Why Systems Thinking, Rather Than New Technologies, Will Jump-Start the Clean-Tech Economy” discusses the type of business model innovation that will be needed as the energy industry transforms. Here is an excerpt:

Whether they focus on wind power, solar power, clean coal, geothermal, biofuels, or something even more exotic, most efforts to wean the world economy from its dependence on oil view the challenge in technological terms. And the bulk of both public and private-sector investments have been made in companies using conventional business models aimed at fitting clean technologies into existing systems. Sadly, history shows that this rarely works.

Read Strategy & Innovation articles here.

The other week, two of my colleagues were engaged in a fierce debate about whether a particular business was or not in fact "disruptive." When they asked my opinion, I surprised them by answering, "I don't really care."

"But we're all about disruptive innovation aren't we?" one of them asked.

"Well yes," I replied, "but we're all even more about building successful, sustainable, scalable businesses."

It's natural to think that our sole raison d'??tre is disruption. Innosight's co-founder Clayton Christensen coined the term "disruptive technology," and we've built a business around putting Christensen's and related academics' work into practice.

But the academic research and our applied field work really isn't about disruptive innovation, business model innovation — or even innovation. Disruption is a means to an end. The goal is to build a sizable business with defensible competitive advantage that earns attractive returns. It just so happens that the disruptive innovation models and tools provide a great means to foster the creation of businesses that transform companies and markets, unlocking substantial value for shareholders, employees, and customers.

Adapting a disruptive mindset allows you to see opportunities that would otherwise be hidden. The suite of business model tools that my colleague Mark Johnson describes in his book, Seizing the White Space, allows you to blueprint and build a sustainable model to seize that opportunity.

These models and approaches don't change the fundamentals of business.

Read the rest at the Havard Business The Conversation blog.

Having trouble? That wouldn't surprise me. In reality, there isn't really any consensus about what the term "business model" even means. Suggestions range from the all-encompassing, everything-in-your-value-chain approach to the reductionist "A business model is nothing else than a representation of how an organization makes (or intends to make) money."

That latter definition is from Peter Drucker. And while I applaud his attempt to reach for the essence of the idea, I think he went too far. A business model has to specify more than just how a company intends to make money. It also needs to include some information about why a customer would ever want to give the company any money.

As something of a middle ground, I've proposed (in both an HBR article and in more depth in my book Seizing the White Space) a framework meant to be specific enough to overcome the reductionist problem but selective enough to overcome the unwieldiness of the kitchen-sink camp. I've broken it out into four boxes that answer the following questions:

1. Why would someone want to buy something from you?
2. How will you make money selling it?
3. What, exactly, are the important things you need to do to pull off the plan?

(I know that's three questions, but the answer to that last question comes in two parts, so the model requires four boxes.)

Read the rest at the Havard Business The Conversation blog.

More than 3,000 individuals nominated close to 300 different organizations or individuals (a few may have been less serious, such as the three nominating my mother).

I sifted through the nominations, and identified the most frequent nominations in three categories: established high-technology companies, established non technology companies, and emerging companies (at least as of 2000). I then turned to a handful of disruptive experts to get their perspectives. Without further ado, the results:

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

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.

My colleague Vijay Raju went on a vacation in the last week of December that took him to the jungle areas on the border of the states of Kerala and Karnataka in India. He noticed a new advertising approach from many mobile operators that that made their advertisements even more ubiquitous than soft drink companies.

If a picture is worth 1,000 words, Vijay's excellent photo essay (which you can download either as a PowerPoint or a PDF) is worth a Stephen King novel (in length at least).

It's an interesting hidden disruption. Companies can use the approach to drive brand awareness in areas with low literacy and television penetration. Villagers can benefit by accessing an affordable way to upgrade their houses.

As my feet get more firmly settled in Asia (we're moving in the next couple of months), I hope to send more of these kinds of postcards. Thanks to Vijay for sharing his story!

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

While at that conference I got the chance to meet and speak with Ric Merrifield, business architect at Microsoft and author of Re-Think: A Business Manifesto for Cutting Costs and Boosting Innovation. I had interviewed Ric by phone back in the summer when the book came out, and meeting him reminded me to dust off the interview and publish it. He has a lot of interesting things to say to innovators, particularly about questioning assumptions. Here's the interview:

Q. Tell me about Re-Think.

A. The unifying principle of Rethink is the fairly simple notion that companies are so attached to “how” they go about doing everything from day-to-day activities to work that it can be very difficult for them to see really obvious opportunities for changing something, whether it’s innovation or cost-cutting or what have you. So, for example, they associate the route they take to their favorite restaurant – how they get there – with the outcome of arriving on time. So much so, that when somebody drives a different way, they say well, why are we going this way? But it usually doesn’t matter how you get there as long as you get there on time.

So framing it that way is a totally human condition. If you walk up to somebody at the fax machine and ask them what they’re doing, they’ll probably look at you a little funny and say “Well, I’m sending a fax.” And if you use conventional productivity tools and analysis you’ll often say, “Is sending a fax part of a necessary workflow or step in your job that you have to do to accomplish whatever it is you’re trying to accomplish,” and they’ll probably say yes. So if you’re doing a business requirements document, you’ll write down that sending a fax is a necessary step for whatever function that person does.

Whereas, I would go in and, not knowing anything about the industry, I can say definitively that sending a fax is not the requirement. The requirement is going to be more like “communicating the status of something” or “confirming an order.” If you then go back and say, “OK. What you’re doing is either communicating a status or confirming an order, or something along those lines,” and have a discussion about exactly THAT what, and note that HOW the person is doing it today is with a fax machine. The person will say “oh, OK, that makes sense.”

And what you’ve done there is disentangle this “what” from the “how” in a way that’s very non-threatening to the end user. I don’t know anything about their business, but I’ve led them to open up this opportunity to separate the “what” from the “how,” and then asked the question, “Is it really relevant to use the fax machine? Could you use email, could you automate it, could you outsource it?” All of those “how” questions could then emerge, and from there we can get into more value discussions, such as, “what would be the value to you of doing this differently? Is one of our competitors doing this so differently from us that maybe we should think about innovating in it?” And it goes from there.

Q: So I want to go back to the part where you get the people to focus on the “what” rather than the “how.” You did that by essentially asking them what they were trying to do. Does that work?

A. It does, as long as you can get to the “what” discussion quickly. It’s more important to start to get into the value and performance discussions, so you can find out where it makes sense to ask cost-cutting questions, outsourcing questions, innovation questions, which will also obviously inform strategy. “How” verbs have a very common thread to them, like faxing, emailing, phone, truck, all those things are what I call “trap” verbs. The “untrap” verbs, which are more like communicate, confirm, are lighter weight and don’t have any of the “how” baggage.

Another example: checking in at the airport is really encumbered with some language that doesn’t add any value in the sense that you’re talking about airlines and airports. The three “whats” really going on there are confirming an order, completing a survey, and doing some logistics if you’ve got luggage. When you sort of open that up, you go, wow, if we’re really looking at reservation surveys and logistics, you can look across a whole range of industries for best practices and best process steps and different technology opportunities, whereas you get a much, much narrower focus if you start by saying, let’s look within the airline industry for best practices. Which is not necessarily going to give you bad answers, but it can be really limiting. If something like innovation is what you need to do, a lot of the best innovations come from other industries and seemingly improbable places. Stripping this “how” language away makes it a lot more obvious.

Q. Can you say more about using this approach to innovate?

A. A lot of people don’t have a definition of innovation, but just throw the word around like everybody knows what it means. Innovation to me is changing something so radically that it doesn’t resemble what it was before. So, Netflix has an innovative marketing model for renting videos. They don’t have a store, anymore. The videos come through the mail, there are no late fees, all kinds of really innovative ways for people to have the video rental experience. Innovation can happen at the operating model level, in the case of Netflix, or at the very tactical level, like outsourcing the bank teller in the case of the ATM. That was really innovative. That’s a pretty tactical thing in the retail banking world. Same thing is true of airport check-in.

Nobody has something like continuous improvement on their to-do list in a given day. It’s not something you can check off. Innovation’s different in the sense that every time you evaluate a piece of work you should say, let’s look at it. What is the problem or opportunity? Is it too expensive, do we need to cut costs, and if so maybe innovation is a way to do that. I think a lot of people make the mistake of seeing cost-cutting and innovation as mutually exclusive. That’s a huge mistake because a lot of the biggest opportunities for cost-cutting *are* innovation. Again, it’s the “how are we going to get there?” discussion. If it’s innovation, what does that mean to us and how different does it need to be to accomplish the outcome that we need to get to? Either from competitive pressure, a response to competition, or acting on an opportunity that’s untapped at this point.

Q. So you’re looking at creating efficiencies, but you’re also looking at spotting opportunities.

A. Right. It’s “what outcome do we want to achieve overall?” And, does that require a minor modification in day-to-day operations to get to that, or does it require a radical shift in the work that will be innovative that would be so different than what was there before that we won’t recognize it? I talk about ING Direct in the book as having some great innovations. The fact that they eliminate the ability to write paper checks eliminates the entire department that handles bad checks. So that whole cost is gone in their model.

Q. So nowadays people are primarily focused on cost-cutting it seems, and your Rethink method is a definite way to do that. Where do people go wrong when they start cutting costs?

A. Especially today they’re going wrong in some big ways. One I’ve mentioned already is they think about cost-cutting and innovation as mutually exclusive, which is a big mistake. A second is that so many people have been in growth mode for so long that the muscles we’ve built up have been in keeping up with the growth of the business and we’ve sort of here and there done some cost-cutting, but have been too busy chopping wood to stop and sharpen our axe. We’ve allowed or been tolerant of a certain amount of fat and inefficiency to grow in our models just because we’re so busy keeping up we can’t also do this cost-cutting. When people go into it now they think, oh we can do some nip-and-tuck sort of cutting. But there’s so much fat that’s grown in organizations. Twenty to 40 percent of the operating budget is fat, either from unnecessarily repetitive and redundant processes or just unnecessary work. I tell people to expect to find that level of cost-cutting as an opportunity. If they’re not then they’re probably looking at it the wrong way.

The other piece that in this specific situation as we see organizations retracting and seeing flat growth at best, what that means is that instead of being in this growth mode where you’re trying to attract as many different segments of customers as you can, and you’re sort of trying to be all things to all people, organizations have to decide who is and is not their most valuable customer. And to do that you have to turn your back on some customers. That really means the management team has to sit down and say, who are we, what is our brand and identity, and how are we going to Lego-block that to a specific set of customers.

In the face of all of this change, one question I have been pondering is: Who is the "Disruptor of the Decade"?

So I've decided to enlist your help. We have set up a very short survey to get user nominations for companies that did the best job of driving growth through disruption —: transforming what exists or creating what doesn't through simplicity, convenience, affordability, and accessibility. I'll short list the most popular nominations and turn to the community and a select group of experts to crown a winner.

So click here to cast your vote, and let's see what happens.

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

In this issue we also feature another Mark W. Johnson article, this one focused on the ideas in his upcoming book, Seizing the White Space: Business Model Innovation for Growth and Renewal. Johnson discusses why business model innovation is critical to master, and why some companies won't be able to master it.

Also featured is a lighter piece from Julia Silverman, applying the lessons she learned as an Innosight intern to her startup venture, sOccket. Here is an excerpt:

My time as an intern at Innosight this past summer was uniquely illuminating, since I myself am an entrepreneur. I have been working for the past year with a team of four Harvard undergrads to develop a business around a portable generator device called the sOccket. It’s a soccer ball with a little something extra: the capacity to harness the kinetic energy from game play for later use as electrical power. An outlet lies flush with the ball’s surface so that users can plug appliances directly into the ball.

The sOccket is aimed at the developing world where electricity is unreliable, if not totally absent. So, before I even knew what “disruptive innovation” really meant, our sOccket team was already gunning to serve nonconsumers – those who don’t have financial or logistical access to even the most basic version of a product.

From the Innoblog, Innosight's Krystin Stafford discusses what it takes for companies to effectively "borrow" a successful business model and apply it to another industry in "It's like Netflix for..."

Four short years later, however, MySpace's shine has dulled. Upstart Facebook has blown past MySpace to claim dominant leadership in the social networking space. MySpace's market share has dropped from 66 percent of all social networking users in 2008 to 30 percent in 2009.

An article last week in the Financial Times describing MySpace's malaise highlights important lessons for managing disruptive innovation.

When News Corp acquired MySpace (technically, MySpace's parent company Intermix), it sought to give its new venture a high degree of autonomy. However, it had MySpace report to an executive — Ross Levinsohn — whose vision for the company differed from the founding team. Levinsohn hired a team to speed integration and begin to upgrade MySpace's underlying technology.

According to the Financial Times, MySpace's founders continued to encourage rampant experimentation, which frustrated the News Corp executives who were used to more disciplined execution. "Every time we tried to professionalize the place they resisted," Levinsohn said.

In 2007, News Corp told analysts how the business was poised to get to $1 billion in revenue by 2008. How was MySpace going to hit that number? It had tremendous amount of traffic that looked attractive to advertisers. So it naturally increased the number of advertisements per page and shut down innovation efforts that would reduce page counts, even if they increased user loyalty.

Growing advertisements, however, began to irritate users who felt inundated by ads. They began fleeing MySpace and joining Facebook.

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

The conversation at the Copenhagen climate conference is all about policy. But regulation won't stop global warming by itself. Nor will simply spending money on clean technologies. In the US, President Obama has earmarked a half billion dollars of initial funding for a breathtaking array of renewable technologies. This looks like bold action, but it isn't nearly bold enough. We need to be thinking on a far, far grander scale. With its financial and intellectual resources, the U.S. needs to lead this charge. But instead of backing individual technologies, the country should build a whole city of technologies.

What if we were to go into an area of our country that's seriously in need of reinvention — the Midwest — and build a city that would offer a living, breathing opportunity to create an entire clean-tech infrastructure? That's not nearly as utopian as it sounds. Here's why.

Moving from an oil-based economy to one fueled by sustainable, clean power requires more than a technology shift. It requires an infrastructure shift — a concept we explored in a recent Harvard Business Review article. Technologies don't replace technologies — systems replace systems. Fossil-fuel powered transport isn't a technology; it's a system comprising countless interconnected businesses (and business models), markets, government policies, and, yes, technologies. Replacing gas-powered cars with electric ones isn't a matter of simply swapping in new engines. It requires building the entire system that will make electric transport economically viable. Entrepreneur Shai Agassi is, at this very moment, building a comprehensive electric-vehicle infrastructure in Israel that encompasses not just the cars but the charging stations and cutting-edge power management grids and software such an infrastructure requires — a system.

Back to the green city. In the United Arab Emirates, the government of Abu Dhabi is building a clean-tech system of its own: Masdar. It's a city entirely powered by sustainable technologies, and it's their effort to create the Silicon Valley of clean tech. Masdar is being built on government-donated land, bolstered by business-friendly tax incentives and buoyed by $15 billion in government funds. It is slated to complete its first neighborhood by year's end, which will be anchored by a clean tech-focused university that just launched its inaugural class. The first commercial tenants are set to arrive in 2012; General Electric has already signed up.

In the scheme of things, $15 billion isn't an outrageous amount for a government to pony up to launch what figures to be one of the primary industries of the 21st century. Indeed, the Obama administration has pledged more than $100 billion to clean tech efforts; China, which is also making its own forays into eco-cities, is spending $200 billion; and the G20 industrialized nations have pledged upwards of a combined $400 billion.

The U.S. should take a small chunk that $100 billion and apply it to a Masdar-like
effort of its own. Imagine what a focused, coordinated effort among the government, private sector, and academic institutions could do. Rather than build from scratch, the government could use this grand-scale opportunity to revive a declining industrial city. What if the U.S. set up a smaller version of Masdar in the Midwest, say within Detroit, with the aim of creating its own Silicon Valley of clean tech?

Read the rest at the Havard Business Conversation Starters blog.

For those who don't know, Via is Starbucks' recently launched brand of instant coffee. A three-pack of Via costs about $3, and a 12-pack costs $10. Via is available at Starbucks stores and online.

The company allegedly spent more than two decades developing Via, focusing on creating instant coffee with a taste profile that at least reasonably approximates in-store coffee. CEO Howard Shultz said, "We took a lot of time with it because we knew it could undermine the company if we didn't do it right."

The product's name pays homage to researcher Don Valencia who began the Via quest but passed away before its completion.

I wouldn't say that Via was as good as a cup of coffee brewed at Starbucks (and truth be told, I prefer Dunkin' Donuts coffee anyway). But in classic disruptive fashion, Via delighted me by substantially out-performing the other options available in my parents' house. It is a great example of a company finding a powerful way to "love the low end."

There are three specific things to like about Starbucks' approach:

1. Starbucks consciously built an affordable solution. Via is substantially cheaper than buying a cup of coffee brewed in Starbucks (though it is more expensive than other instant coffees).
2. Via enables Starbucks to bring consumption to new contexts. I am now going to buy Via to stick in my briefcase so I can enjoy it in hotel rooms or other contexts where good coffee isn't available.
3. By offering Via within its stores, the company isn't shying away from the potential conflicts that low-end loving approaches can encounter. While there is some risk that Via will cannibalize higher-margin items, it is more likely that by attracting nonconsumers ̬ Starbucks fans who don't regularly buy instant coffee — will lead to consumers spending more money in aggregate on Starbucks products.

Loving the low end isn't easy. A recent article in BusinessWeek highlighted how some baristas are balking at pushing Via. You see, Starbucks has such high hopes for Via — instant coffee is a $21 billion market after all — that it is pushing aggressive sales tactics that some feel run counter to the Starbucks "vibe."

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

This sounds like a technology problem. After all, using technology to create the opportunity to sell to nonconsumers — that is, people who have been totally shut out of a market — is a classic way to build substantial new growth. But in reality, this is a business challenge.

To crack this nut, the technology needs to be delivered to market with the appropriate business model — and there's no guarantee that the right business model is the one IBM is currently using. The business problem confronting IBM, then, is whether it needs a different model to realize this opportunity. If so, IBM must figure out a way to seize what I call its "white space beyond" — that is, its opportunity to open up an entirely new market with an entirely new business model.

IBM has done this before many times, having successfully moved, for example, from the leasing model it used to sell its fabulously costly mainframes in the 1960s to a purchase model for its lower-end mainframes and minicomputers in the 1970s, and — far more radically — to a retail model for its personal computers in the 1980s.

IBM took a lot of flack for being something of a technology laggard in the PC market, preferring to be a fast follower; it didn't get nearly enough credit for being on the cutting edge of business model innovation.

Here was a company that owned more than half the computer market setting up a renegade operation in Florida full of young employees in polo shirts (far from its headquarters in cold, formal, famously white-collar Armonk, New York), building what Ken Olsen, CEO of then-number-two computer maker Digital Equipment Corporation, thought of as little — and unprofitable — toy computers.

But IBM understood that this new technology could be profitable if the company developed an innovative business model to go along with it — one that offset the radically smaller profit margins with much greater volume, generated through a lower cost, retail sales channel. For both DEC and IBM, the PC represented a tremendous growth opportunity, but only IBM understood that the real challenge was business model innovation, not technological innovation. And where is DEC now?

As we come out of the Great Recession facing the possibility of permanently lower demand in the credit-deflated West and look for growth to the millions of nonconsumers in India, China, and the rest of the developing world, I would argue that every multinational finds itself in the same position as IBM was in 1980. That is, every company needs to ask itself: Can I reap those opportunities with my current business model?

I'll go out on a limb here and predict that for most western multinationals, the answer will be no. Developing economies will not support the margins that most of their current business models require. These opportunities will be squarely in their white space beyond.

The question is, Will they be just "beyond" these companies' markets — or will they also be beyond their imaginations?

Read the rest at the Havard Business Conversation Starters blog.

The Netflix model is a great example of business model innovation, which disrupted the entire movie rental market by providing customers with convenient, inexpensive entertainment. The model has resulted in numerous imitators, renting children’s toys, audio books, dresses, magazines, and beyond.

One of the big risks that many “it’s like Netflix for…” companies take is that they have borrowed some of the processes (e.g. creating rental queues online and home delivery of products) without thinking of the business model as a whole. The success of the business model depends on the integration of the customer value proposition (CVP), profit formula, and key resources and processes (see the Four-Box Business Model Framework). At the heart of the Netflix model is the customer value proposition: convenience and cost savings. Careful consideration should be given to what the benefit to the customer really is, in terms of what important and unsatisfied jobs are being addressed. For instance, if not convenience or cost-saving, is the value in time-saving or variety?

A big red flag that a model is being misapplied is if there is a weak customer value proposition, because the tradeoffs for the target customer are too high. Think for a moment about something that you own that you would hate to rent, or about something that you would want to select in store, not select over the Internet. Chances are the things that first come to mind are likely not a good fit for the Netflix model. When it comes to borrowing business models, it simply is not enough to think that because it worked in one industry it will work in another.

Could these interpretations of the Netflix model work for some of these companies? Sure. It’s too early to say whether these businesses will individually or collectively succeed, but here are a few questions that entrepreneurs looking to borrow a business model should think about:

1. Is whatever you are borrowing going to help fulfill your target customer’s important and unsatisfied jobs-to-be-done?
2. Will this model be unique to your industry? If not, are you at risk for becoming just another “me-too”?
3. What are you really competing against? Will your would-be-customers be willing to accept the tradeoffs your model presents?

If done properly, drawing from business model analogies in different industries can be a way to spur business model innovation. Consider which aspects of a business model you are borrowing and whether those fit with your vision and the customers for whom you are trying to create value.

A quick recap. The New England Patriots led the Indianapolis Colts by six points with two minutes to go. It was fourth down, the ball was on the New England 28 yard line, and the Patriots needed just two yards for a first down that would almost certainly have sealed a victory. Conventional wisdom called for a punt, but Coach Belichick decided to go for it. After the Patriots fell just short of the first down, the Colts marched into the end zone and won the game.

Reaction was swift and almost universally negative.

But there's statistical evidence that Belichick followed the right approach, that his move marginally increased the odds that the Patriots would win the game. Of course, the Patriots didn't win the game, but had the situation played out hundreds of times, a coach using Belichick's tactics would win more frequently than one who didn't.

What does this have to do with innovation?

First, the "Belichick incident" highlights the challenges facing a leader who makes the hard, right choices.

If Belichick had punted and the Patriots lost, no one would have complained. Following a seemingly non-conventional approach opened Belichick up to criticism. Successful innovation requires similar bravery. It isn't easy to go after non-existent markets or follow non-obvious approaches when analysts and investors are grilling you over minute-by-minute results. After all, naysayers tend not to criticize risks you don't take.

The other important implication relates to rewards. People moaned about Belichick's decision because the result was negative. Just like companies reward people who hit their numbers and penalize those who don't.

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

"But look around," I said. "That family will surely flock to an affordable car that projects social status and provides a safe, comfortable ride."

I pointed to the husband, wife, and two children who were precariously perched on a scooter zooming in between cars to make my point. Even as I did so, though, I could begin to sense where my colleague was heading.

Anyone who has driven in India knows there is a remarkable efficiency on her chaotic streets. Every square inch of road gets used as scooters sneak in between gaps between cars. Dangerous? Sure. But it maximizes people per square mile in a way that boxy automobiles never could. Turning all of those scooters into Nanos would create a traffic nightmare.

"Here's the thing," my colleague said. "These consumers could already get a reasonable used car for the price of a Nano. And they choose not to."

He went on to detail how in the late 1990s he bought a used Maruti 800 for about Rs 1,05,000 (about $2,250). The car had features the base Nano lacks like a cassette player and air conditioning. He sold it in 2001 for Rs. 95,000 (or about $2,000).

"Most of the Nanos are being purchased as second cars or by the upwardly mobile that want to show off, "my colleague said. "People aren't buying the basic version .They are buying an upgraded version with air con and power windows. The Nano might do ok, but that's no 'people's car'."

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

Tesla’s cars are pretty wired – a central computer monitors all systems and produces diagnostic reports – which should make on-the-spot service easier. Furthermore, electric cars are much simpler machines than their gas-powered brethren; the powertrain is much cleaner and more streamlined. There is no need for oil, spark plugs, hoses, pistons, etc, so there is less that can go wrong and less need for a full-on garage for many repairs. Finally, unlike the established automotive companies, Tesla is not encumbered by a pre-existing dealer / servicer network and therefore has the ability to innovate its maintenance model in interesting ways like this one.

Taking a step back, this is another in a series of intriguing moves by Tesla to go beyond simply providing a very cool but very expensive electric car to focusing on the customer’s entire experience of use. In addition to this servicing concept, the company has also started providing charging stations to its customers. We have long touted the comprehensive system of electric mobility that Better Place is constructing (most recently in the Harvard Business Review, here) as a key step towards enabling the electric vehicle revolution, and we have issued warnings about Tesla’s strategy of targeting the high end of the market out of the gate. But if Tesla can continue moving towards a Better Place-lite comprehensive value proposition, and if it can successfully launch lower-priced models as it promises, Tesla may find itself making an awful lot of house calls in the years ahead.

Strategy & Innovation: The current cultural change has begun to shape innovation efforts, new businesses, and so forth, which goes along with Innosight’s theory that constraints drive innovation by defining the box within which you need to innovate. The green mandates – sustainability, using clean energy, and trying to keep as small a footprint as possible, environmentally – how are those things driving innovation?

Mark Johnson: In Innosight’s language, we’d say that these constraints have the effect of creating new jobs-to-be-done related to sustainability: “Make my environmental footprint smaller,” for instance, or “Let me run my business profitably using clean energy.” Innovative technologies will be developed and adopted to fulfill those jobs, but only through equally innovative new business models.

In this issue, we also feature another article in our experimentation series, “Through the Looking Glass: Experimenting with the Future of IT,” by Kevin Bolen, who explores why technology companies should experiment as part of their innovation processes. Here is an excerpt:

“Please review the document in detail and sign if you are comfortable with the terms. Those who do not sign will not be permitted on the tour.” I received this greeting back in 2005 as I embarked on two separate visits to the future. At every pre-determined stop on our tours – one of Microsoft’s Home of the Future and the other at Deutsche Telekom’s Future Center – we were given a chance to hear a well-rehearsed description of an engineering marvel, and see and experience these wonders for ourselves. And not clunky prototypes scattered around a lab, either – we were interacting with products and form factors that looked ready to ship, all collocated in high-gloss environments designed to show us mere mortals what the engineering gods at these two technology powerhouses were preparing to bestow on us. Because I know those confidentiality agreements had no expiration date, I will not divulge in detail what I saw those days. Rather, I will share what I didn’t see, as I feel there are far greater lessons there.What I didn’t see on either tour was any type of experimentation.

From the Innoblog, Renee Hopkins reveals new advances in implantable device technology, silicon-silk electronics, in this issue’s emerging technology watch. Also, Andrew Laing analyzes Eventbrite’s potential for disruption in the online ticketing industry and Allen Stoddard discusses Google’s new, free navigation services and its effect on the industry.

Ticket sales and event promotion are sets of jobs-to-be-done that the Internet enables very well. Individuals can send waves of spam event-promoting notices over Facebook, and of course the 800-pound gorilla of "high-end" ticket sales is Ticketmaster. One startup, however, believes there's space in between: Eventbrite, backed by $6.5 million from Sequoia Capital, is seeking to provide a lower-end, less-expensive Internet-based ticketing and event promotion solution for the masses. But can they successfully disrupt Ticketmaster and find space in a crowded market?

One potential hurdle Eventbrite faces is what one might call "ease of imitation." An event-promotion website isn't terribly difficult to set up, and a model that targets less-demanding customers would in theory be very easy for Ticketmaster to replicate. Of course, Eventbrite's willingness to charge much less than Ticketmaster does, and its focus on less-enormous events (Ticketmaster's home page promotes everything from U2 to the NFL to Cirque Du Soleil) may protect it if Ticketmaster sees that segment as too unattractive and unprofitable to bother with. But the catch-22 is that if Eventbrite succeeds, Ticketmaster will strike.

Eventbrite faces significant less-sophisticated competitors as well: simple solutions individuals organizing small events might turn to, from handwritten notes to Excel to Craigslist. A statement from one of Eventbrite's backers, Roelof Botha, is telling: "Most of the people who use Eventbrite didn't switch from anything else. These are people who organized events using spreadsheets, pen and paper. They never had a solution before." Of course, spreadsheets and pen and paper are solutions, and if many of Eventbrite's target customers are happy with them, what will motivate them to go online and pay a third party a fee?

Again, the Internet can be a terrific tool, and sites and applications built on it can do an ever-expanding array of jobs, but it's a mistake to assert that something people aren't doing on the Internet is something people aren't doing well. Using something as low-tech as a notebook to track ticket sales for your garage band or your small company's annual forum doesn't mean you need something electronic and "better." Eventbrite will only thrive if a niche truly exists between people for whom low-tech is "good enough" and higher-end customers for whom Ticketmaster will aggressively compete.

Applications could include "silk-silicon LEDs that might act as photonic tattoos that can show blood-sugar readings, as well as arrays of conformable electrodes that might interface with the nervous system," according to the article. The same research group is currently designing electrodes built on silk as interfaces for the nervous system. Such electrodes could integrate much better with biological tissues than existing electrodes, which either pierce the tissue or sit on top of it. Electrodes built on silk could be wrapped around individual peripheral nerves to help control prostheses.

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.

Here's the thing — these kinds of commitments paradoxically can make it harder for organizations to achieve their aim. In other words, the very act of making a serious financial commitment to solve a problem can make it harder to solve the problem.

Why can large commitments hamstring innovation?

First, they lead people to chase the known rather than the unknown. After all, if you are going to spend a large chunk of change, you better be sure it is going to be going after a large market. Otherwise it is next to impossible to justify the investment. But most growth comes from creating what doesn't exist, not getting a piece of what already does. It's no better to rely on projections for tomorrow's growth markets, because they are notoriously flawed.

Big commitments also lead people to frame problems in technological terms. Innovators spend resources on path-breaking technologies that hold the tantalizing promise of transformation. But as my colleagues Mark Johnson and Josh Suskewicz have shown, the true path to transformation almost always comes from developing a distinct business model.

Finally, large investments lead innovators to shut off "emergent signals." When you spend a lot, you lock in fixed assets that make it hard to dramatically shift strategy. What, for example, could Motorola do after it invested billions to launch dozens of satellites to support its Iridium service only to learn there just wasn't a market for it? Painfully little. Early commitments predetermined the venture's path, and when it turned out the first strategy was wrong — as it almost always is — the big commitment acted as an anchor that inhibited iteration.

These ingredients are a recipe for sustaining thinking — trying to leap-frog over existing incumbents with cutting-edge technologies. Research shows that market leaders tend to beat back these kinds of attacks, resulting in a lot of squandered resources.

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

In their article, Johnson and Suskewicz write:

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

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

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.

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.

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

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

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

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

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

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

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.

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

A tough challenge, right?

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

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

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

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

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

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.”

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

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

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

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

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

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

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).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The bad news for media companies? It’s never been easier for entrepreneurs to launch new businesses that threaten your core business. The good news for media companies? It’s never been easier for you to fight back. While many industries have felt the Internet’s disruptive impact, media truly is the epicenter of disruption. For decades, major media companies took advantage of scale economies to build profitable businesses. The Internet blew away many of those scale advantages. Today an entrepreneur can launch a viable media business for peanuts. Competitors now number in the millions, if not billions.

The second feature in this issue is an article Scott contributed that describes why emerging markets are such a hotbed for innovation. Here is an excerpt:

When Bob McDonald took over as Chief Executive Officer of Procter & Gamble earlier this year, he used simple math to demonstrate the importance he was going to place on emerging markets. In his first call with analysts, he described how if the consumer products titan could just grow per capita consumption of its products in India and China to the levels of per capita consumption in Mexico, it would represent 50 percent growth (or an incremental $40 billion in revenue). Just about every company needs to step up efforts to compete in emerging markets. Want proof? Eighty percent of the world’s population and 40 percent of the world’s economy (adjusting for purchasing power parity) constitutes just 10 percent of revenues for S&P 500 companies.

From the InnoBlog, Renee Hopkins uncovers a new way to cool computers and engines in the emerging technology watch. Also, Kathleen Poe discusses the effectiveness and overall potential of Internet-based psychotherapy.

• 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."

Netflix announced its contest in 2006. Teams had to develop a technological solution that provided 10 percent more accurate movie recommendations than Netflix's internal engine. The challenge literally came down to the wire — as two teams provided indistinguishable results, the prize went to the team that submitted its final algorithm mere minutes before the runner-up.

There's a lot to like about Netflix's approach. It focused on a "modular" problem (that individual teams could solve independently) with "measurable" results. It provided 100 million anonymous movie ratings to contestants to help them crack the problem. Thousands of teams from around the world tried to crack the problem, with the winning team ultimately constituting a merger of two other teams.

Netflix now plans to replicate the contest approach, creating a $500,000 prize for a team that develops the best algorithm to turn demographic and behavioral data into a "taste profile."

The seemingly low success rate of Netflix's first contest — less than 0.2% of teams hit Netflix's goal — carries a hidden lesson. If you are inside a company, and you have a single team working on a tough problem, what are the odds that you can beat the dozens or hundreds of groups working on related problems outside your company?

Many companies will tell me they just don't have sufficient resources for innovation. My first reaction to this statement is to ask the company to carefully assess how it currently is allocating its results. Further investigation often highlights that a scarily high number of resources are working on "zombie projects" that really have no hopes of succeeding in any meaningful way. Reallocating those resources can dramatically increase a company's innovation capacity.

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

The authors conducted a randomized trial of online, real-time cognitive-behavioral therapy in which each patient was assigned to a single therapist and communication took place via typed free text. At eight months, 42 percent of the intervention group had recovered from depression compared with 26 percent in the control group.

That online therapy can be effective is good news, as this approach can overcome barriers of convenience and access for the patient. Web-based counseling might also minimize the stigma of going to a public setting for mental health care and could cut down on a provider’s overhead costs. But a disruptive innovation? Not so fast. Unless online therapy is offered by a less-skilled provider at a lower cost, I’d wager that some current consumers of care will transition to this new channel but few non-consumers of therapy will be swayed to partake. My assumption is that cost and stigma are the biggest barriers to consumption, and that the largest portion of care costs derives from the compensation required by highly-educated providers. In the online model, these provider costs remain high. Additionally, the stigma of therapy that comes from simply participating in mental health care, regardless of the location, is not addressed by the online approach.

A truly disruptive offering might look more like the model employed by Cogito Health (full disclosure: the founder is a classmate and friend of mine … but that doesn’t make the business any less wicked cool). Using voice-recognition technology to identify and monitor the progress of people who could benefit from behavioral health support, the company improves diagnosis while cutting out the cost of a psychologist in screening people for depression. Lower-cost, decentralized care without the involvement of an expensive expert? Now we’re talkin’.

• 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.

In this issue we kick off a series of articles on experimentation. Disruptive innovation is often fraught with unknowns and assumptions, but the risks of disruption can be lowered by utilizing an emergent strategy approach that relies on experimentation. Innosight Partner, Julie Sequeira, explains why and shows how leveraging the power of experimentation can turbocharge innovation. Here is an excerpt:

Ever felt overwhelmed by the number of unknowns to be figured out in your innovation project plan? Not sure where you’ll ever get the data to fill in the holes? Or, worse yet, ever get that nagging feeling that you don’t even know what you don’t know? Disruptive innovation is often fraught with unknowns and assumptions. But, that doesn’t mean it has to be “risky business.” By utilizing a different type of approach – an approach that systematically attacks the most critical unknowns with tailored, low-cost experiments – innovators can systematically “de-risk” their strategies and thereby increase their chances of success while lowering the associated investment cost. This type of approach is generally most critical when data doesn’t exist in market research or other reports, but rather exists in behavior that hasn’t yet happened or outcomes that can only be learned in market. In other words, if you can’t GET the data, then CREATE it through market experiments.

In the second featured article on experimentation, Julie Sequeira discusses how to run market experiments in the consumer packaged goods industry. Here is an excerpt:

As discussed in our article above, “Not-So-Risky Business: Leveraging the Power of Experimentation to Turbocharge Innovation,” experimentation is an important element of emergent strategy that offers innovators the opportunity to test key assumptions early and get the information needed to move forward more efficiently and effectively. When working in the world of consumer products, key assumptions often fall in the domain of the consumer. Will this concept resonate with target consumers? Can we convince them to shift well-established behavior patterns?

In the Innoblog, Renee Hopkins applies constraint-driven innovation to football and Innosight Analyst, Brighton Mudzingwa, discusses Microsoft's OneApp software and how it's disrupting the emerging market. Also, Senior Associate, Kathleen Poe, writes about the shift away from hourly billing by law firms and how this change calls for business model innovation.

As always, thanks for reading Strategy & Innovation! All issues are available and free with registration here.

A year later, it is clear that innovation has never been more important. And, in a strange way, the scarcity forced on many companies has been a hidden accelerator of efforts to systematize innovation.

Certainly companies like General Motors faced such critical operational issues that innovation efforts had to be de-prioritized, if not shut down. Arguably the struggles of these companies highlighted how very important it is for companies to get ahead of the innovation game by investing in innovation before they need to invest in innovation.

More and more executives have come to terms with the fact that the "new normal" of constant change necessitates developing deep competencies around innovation.

The increasing pace of change is not really new. Long-term research by Innosight Board member Dick Foster shows how the pace of "Creative Destruction" has been accelerating for some time.

One simple way to demonstrate this increase is to look at the turnover in Standard & Poor's index of leading U.S. companies.

The S&P index goes back to 1923. Foster's research found that in the 1920s (when the list contained 90 companies), when a company got on that list, it would stay on for about seventy years. That meant that people who joined an S&P company might be joining the same company their parents worked for and might expect their children to work there as well.

In the 1960s, a company that entered the S&P index could expect to stay on it for about 40 years -- long enough for one career at least.

Today, a company that enters the S&P 500 index will stay on it for less than 20 years. That means if you join an S&P 500 company today, it most likely won't be an S&P 500 company by the end of your career because it will have failed, shrunk, or been acquired.

Increasingly, companies that buck the trend and last 30 or more years will do so only by mastering the ability to perpetually transform themselves. As Foster notes, "It's an entirely different world where the balance between continuity and change has moved to change."

Companies that continued to focus on innovation in the midst of the downturn, such as Amazon.com, IBM, and Procter & Gamble, are very well positioned to create substantial distance between themselves and their competitors. Their success will provide further fuel to arguments that innovation isn't a nicety, it is a necessity.

The good news for companies evaluating their innovation investments is that innovation is one area where less truly is more.

For example, time and again resource-constrained entrepreneurs have won disruptive battles to transform existing markets and create new ones against large companies with hordes of talented employees, great brands, and deep pockets.

The root cause of large corporate struggles, ironically, is abundance. Too much patience. Too much investment. Too many people. Abundance leads companies to lock into bad strategies early. It leads to overly slow decision-making processes.

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

Besides financial resources, there are two main constraints driving innovation in football. One is talent. High school coaches have the least amount of choice over their players. They don't draft players as the pros do, and they don't generally recruit as colleges do. The play with who they have. And many of the wackiest and most creative offensive schemes in football are designed to level the playing field, so to speak, to make a team that has fewer talented players competitive with teams that do.

The second major constraint driving football innovation is the set of rules that governs the game. If you can come up with something that exploits a loophole, it has the added advantage of initial surprise, until other teams begin to adjust for it. Over the off-season I came across a mention of the A-11 offense being practiced since 2007 in some California high schools. A-11 exploits a couple of loopholes: in scrimmage-kick formation, every player on the offense is eligible to catch the ball. And if you have no offensive players wearing numbers 50 to 79, there can be no ineligible receivers on the offense. After last season, in an effort to take some of the sting out of the A-11, the National Federation of State High School Associations added a rule mandating at least four players on the line of scrimmage wearing numbers 50 to 79.

But the A-11's creators simply tweaked the offense, noted the Oakland Tribune last week: "True innovators don't concede to roadblocks. Not surprisingly, they're still going around, through and over them at Piedmont, executing wacky double-reverse flea-flickers with two quarterbacks in the backfield, three men up front and six players split wide." The A-11's creators suit up those "ineligible" receivers, but just push right out to the edge of what they are elegible to do: they can still carry the ball, throw it, catch screens, and block. They just can't go downfield to catch passes.

In other words, these players can still mess with the minds of the defense, which was a big part of the original point of the A-11 and part of the point of all innovations that push at rules. Noted the Washington Post, "Throughout football's history, offensive innovation has been based on misdirection and deception, from Knute Rockne's box shift at Notre Dame in the 1920s to the spread option of today. But [the A-11] spurred a debate about the sport's tradition and rules of play."

The other main point of A-11 is to add randomness to the offense that results in many more scoring opportunities, as Scientific American pointed out: "In a standard formation with five fixed linemen, a play can unfold with 36 different scenarios for who receives the snap and who ends up with the ball — including a quarterback sneak. In the A-11 offense, because the receivers and linemen (and even quarterbacks) are interchangeable, the number of different possibilities for what can happen on a given play skyrockets to 16,632."

Innovation in the offense hasn't completely sidestepped the pros. Seibert's article discusses the rise of the Wildcat offense in pro football, noting that "Even the biggest and most heavily favored juggernauts can on any given day be suddenly undone by a group of scrappy upstarts with a wealth of passion and a well-wrought stratagem: some riotous, rhythm-ruining array of timely defensive blitzing packages, or a stunningly inventive attack formation such as the new Wildcat offense."

Image from Chicago Sun-Times Sports Pros(e) blog

• 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.