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My Ten Favorite Tweets – Week Ending 052909

From the home office in Pyongyang, North Korea…

#1: Twitter may add some FriendFeed features to the service, is what @scobleizer heard today at #140tc http://bit.ly/d87Av

#2: Business Week includes the Cisco fatty story in its article about managing corporate reputations online: http://bit.ly/3ZCG9

#3: @justinmwhitaker I take a broader view on innovation. The perception is that it’s all Clay Christensen disruptive. Most will be incremental.

#4: You know what I like about working at Spigit? Plenty of competition out there. Fun to see them laying the smack down on us. Love it.

#5: Four of the most damaging words to corporate innovation an employee can say: “Aww, forget about it” #innovation

#6: Great post on critical distinctions in #e20 use cases, and ‘collaboration’ vs. ‘participation’ by @johnt http://bit.ly/12umLp

#7:  @dhinchcliffe Very keen to hear enterprise perspectives on Google Wave. Will it compete w/ SocialText, Socialcast, CubeTree, Yammer?

#8: When does a company need a dedicated product mgt function? $1.5-$3.0 mm in revenue and/or 20-25 employees: http://bit.ly/C2CTr

#9: Dara Torres sets a new record in 50 meter butterfly http://bit.ly/lsRER And sadly, I find myself wondering how a 42 y.o. is setting records.

#10: Just looked at my E*Trade account for the first time in months. Less bad than I thought.

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What is Innovation Management?

Innovation “Management” as a term, doesn’t sit well w/ me. Just like Knowledge “Mgmt”. KM failed in part b/c of the inherent controls

Sameer Patel, April 22, 2009

I thought this was a good comment by Sameer, as it reflects a couple things:

  • Nascent field of technology tools that specifically facilitate and improve corporate innovation is just becoming understood
  • Concern that the unpredictable and rough-edged aspects of idea generation will be smothered by ham-handed managerial controls

Seeing what’s happening with customers at Spigit, I can safely say that the field of innovation management is much richer and collaborative than the term might connote. It’s not so much “control” management as it is “optimization” management. It’s a recognition that companies have significant margin for improvement in their innovation processes and outcomes.

With that in mind, I wanted to put forth eight elements that help describe “innovation management”. This list is by no means exhaustive, but it should give you a feel for what the field is about today.

#1: Innovation benefits from a range of perspectives

For most of our industrial history, innovation has been the province of an internal R&D team. Those smart geeky types who labored to create the next generation of products for big concerns. Fast forward to where we are today. With the rise of the Information Age, more people have a knowledge-based relationship with their employers.

Contributing what you know has become the dominant part of work in Fortune 2000 companies. Leveraging this trend into the innovation realm is a natural extension of employees’ work. And indeed, once done, it becomes apparent that so-called “line workers” have a lot of valuable knowledge, experience and ideas as well. You don’t need an advanced degree to understand a glaring customer issue or a better way to manage field operations.

Studies show that exposing ideas to a wider range of perspectives significantly improves them. In terms of management, the change for companies is elevating the importance of sourcing ideas from throughout the enterprise, as well as outside of it. One example: in this video on how it approaches innovation, Pfizer notes that “Ideas aren’t just sitting at headquarters. There are fantastic ideas all over the company.”

#2: Four of the most damaging words an employee can say: “Aww, forget about it”

What If I Fail cartoonIdeas come in various forms: disruptive, product and operational. And they hit employees at varying times as they do their work. Sure, a lot of these ideas won’t be feasible. But a lot will.

The problem for companies is that employees self-censor, either because (i) culturally they’re not encouraged to post ideas, even potentially bad ones; or (ii) there’s no way to easily capture these.

The recognition that there is valuable intellectual capital in the ideas that emerge from employees’ knowledge and activities is core to improving corporate innovation. Changing organizational focus to foster more ideas from all quarters, and providing the resources to capture these are core to what innovation management means.

#3: Create a culture of constant choices

Jim Collins spoke recently at the Front End of Innovation conference. A key theme from his speech was that great companies enable constant choices. By this, he means that external markets are constantly changing. Companies that are maintaining a good velocity of ideas are the ones that succeed long-term in industries.

This is actually a pretty significant cultural dynamic. Companies can be quite adept at execution, and throwing choices in front of everyone can disrupt that strength. So figuring out “their way” to create a culture of constant choices is really the hard work.

This is part of what is meant by innovation management.

#4: Looking at innovation as a discipline

Innovation is a Top 3 priority for companies, reports Boston Consulting Group. Indeed, BCG notes that innovation leaders generate 430 basis points more in shareholder returns than do average companies. So how does a company systematically address innovation as a discipline?

Companies apply resources and attention to a number of other disciplines: sales, customer relationship management, supply chain management, managerial accounting, etc. Looking at innovation from a similar perspective is emerging as an important strategy.

A number of large corporates have established internal innovation-focused executives. These aren’t employees who are supposed to dream up all the ideas. Their work is on establishing innovation as a discipline. Their charge is wide-ranging, including HR, executive attention, focus areas for innovation, internal communication, processes and selection of technology to facilitate. While I wasn’t around in the rise of the CRM era, presumably there was similar work by earlier generations of employees.

The work of making innovation a discipline is part of innovation management.

#5: Focus employees’ innovation priorities

Each of us knows a lot. From a variety of activities and interests. Work. Hobbies. Family. Locale. Life. I’ll bet you come up with ideas and encounter problems to be solved for a wide variety of things.

For corporations, this wealth of experience is an asset, but it does require some tuning. For ideas, you never know when someone’s personal church activities might have relevance to a product idea for the company. You want that variety of perspectives to inform and improve ideas.

At the same time, there needs to be a channeling of where employees’ ideas are focused. If executives don’t lay down directional areas for innovation, employees’ time on innovation will not be as valuable as it could be. Of course they’re going to have a range of ideas. But which ones are most pertinent to the company’s success in the market?

Channeling employees’ innovation focus is part of innovation management.

#6: Recognizing innovation as a funnel with valuable leaks

When one views innovation as not just game-changing disruptive ideas, but including incremental ideas, it becomes clear that innovation is fundamentally a funnel. Start with a large, ongoing quantity of ideas drawn from employees, customers and partners. As discussed in #2 above, you really want to get as many of these ideas as you can.

Ideas must then go through a winnowing process. Some will get stronger, and advance to projects. Some will fall away as not feasible.

And from all this intellectual activity around ideas, new ideas will emerge. It’s natural. Once employees are in the mode of generating and assessing ideas, it nwill be natural for new ones to emerge. Really, this arguably is the case for a lot activities that foster interaction among employees. But in this case, the social object around which they’re interacting is an idea. In terms of instilling a culture of constant choices, interaction around ideas promises to be a key part of achieving that.

Managing the funnel is part of innovation management.

#7: Establishing a common platform for innovation is a revolutionary step forward

Consider how employees innovate today. You have an idea, what are you going to do with it? Certainly you’ll sound it out with peers, which is illustrative of the fact that innovation is a social activity. Then what? Tell your boss. Email it. Enter it into a customer service database. Put it in a PowerPoint. Try to schdule meetings.

When you consider what employees must do today to move an idea forward, it’s really pretty daunting. Under this system, corporate innovation requires phenomenal acts of heroism to get anything done. Ad hoc, siloed applications make companies the poorer for the ideas they’re missing. Existing idea management processes don’t allow cross-enterprise visibility, which means collaboration among interested parties is limited. An unfortunate outcome is that the pace of innovation falters as ideas lose share of mind.

Creating the common community space for innovation is a dramatic leap forward in how companies foster innovation. The same mechanisms of departmental outreach and email are certainly still available. But now, ideas can get an audience of thousands, allowing them tap different reservoirs of experience and perspective. Senior executives csn see ideas that previously would languish in lower levels of the organization.

Creating this common platform is part of innovation management.

#8: Innovation must be more than  purely emergent, disorganized and viral

Innovation management today draws heavily from the themes of Enterprise 2.0. Key to the power of social computing is letting employees’ activities and knowledge apply itself naturally where it’s needed throughout an organization. For purists, this means get rid of oversight and managerial prerogatives.

To create ongoing, sustainable innovation, there needs to be a programmatic approach. Riding the pure emergent form of Enterprise 2.0, or continuing the current ad hoc, siloed approaches to idea management, is insufficient. Employees will be busy with projects and tasks they need to execute. Perhaps culturally, innovation hasn’t been a focus. There will need to be a push to raise the awareness of innovation. And some organization to channel it where it’s needed.

There will also be ideas that are valuable, but which may not resonate with a broader section of the employee base. Leaving the emergence of these ideas purely to viral dissemination means leaving some of them buried at the departmental level. Companies need ways to ensure valuable ideas are caught and surfaced systematically.

Combining bottom-up emergence with top-down priorities and organization is part of innovation management.

Wrap-Up

As I said above, innovation is a multi-faceted activity, with many moving parts and ways of approaching it. What I’ve listed here represent my way of clarifying what the field of “innovation management” is about. If you think I’m off or missed something, let me know in the comments below.

Thanks.

Under this system, corporate innovation requires phenomenal acts of heroism to get anything done

Three Reasons You Need to Be on FriendFeed *Now*

FriendFeed Triple PlayFriendFeed has got to be one of the most innovative companies around these days. It seems every week, it’s hatched something new with its service. That alone makes it worth being there.

Then there’s the interactions. When those are rocking and rolling, it’s a lot of fun. Even a few Likes and comments are worth the experience. Of course, not everyone is engaged enough on the service to fully benefit from that. Which is something I completely understand, by the way.

I’ve got three reasons you should be on FriendFeed now. Not for the conversations. Not for the real-time experience. But three reasons that will be valuable to you personally.

The FriendFeed triple play.

#1: Google Juice

You likely know the background of much of the FriendFeed team – Google. Yeah, these guys know search. Even more importantly, they know something about how Google manages search.

So it comes as no surprise that FriendFeed can rank pretty highly in Google search results. Here’s a favorite example of mine.

Alex Scoble (yes, Robert’s brother) is planning his wedding reception. One candidate location for the reception was the Hillsboro Cultural Arts Center. But the managers of that location were not very flexible in working Alex and his fiance. On FriendFeed, Alex posted about the Hillsboro Cultural Arts Center, with some comments explaining why he was not going to use them. It’s not a flattering portrayal of the Center.

Well, check out what a search on the Center’s name returns: Alex’s FriendFeed entry is the #6 result.

Not something that Center wants in their search results, but a great way for Alex to let others know about his experience with the Center.

FriendFeed’s Google prowess shows most strongly in name search results.

On this FriendFeed discussion, Mark Trapp noted that his FriendFeed account always ranks higher than his personal site. Well, if you run a search on mark trapp, you’ll also see that his FriendFeed account is ranked #1, ahead of some attorney named Mark Trapp. Without FriendFeed, that attorney would own the #1 search result.

And FriendFeed member Brian Chang noted this back in January: “I just discovered that my FriendFeed comes up on the first page of Google search results for my name. I think that’s the first time something of mine has actually done that.” A quick search on brian chang reveals he’s not on the first page, but he’s still there, among a lot of brian chang sites.

FriendFeed shows up #3 on a search of my own name.

#2: Personal Content Database

Let’s assume you participate in more than one social media site. Maybe Twitter, Del.icio.us, blog and Flickr. FriendFeed, of course, lets you pipe all of that into its site. If nothing else, having one place where you can search for all your content easily is reason enough.

Returning to the search pedigree of the FriendFeed team, there’s a really good reason to have your Twitter account piped in. It makes it easy to find your tweets. As Louis Gray noted last week, it’s much easier to find tweets in FriendFeed than it is with Twitter’s search. On FriendFeed, you’ve got an archive of all your tweets. On Twitter, you don’t.

Here’s an example. I’ve tweeted a few times about “friendfeed” and “search”. On Twitter, I get one result when searching my tweets for those words. On FriendFeed, I get many, as I’ve actually written those two words in a number of tweets. See the screen shots below, which show only a portion of the FriendFeed search results:

FriendFeed vs Twitter search

Remember when the bookmarking service Ma.gnolia lost all its users’ data? If you had saved your bookmarks there, you were out of luck. There was no recourse to getting that data out. In a post here, I noted that bookmark service Diigo lets you save to De.licio.us simultaneously. The idea being that you needn’t rely on just one service, in the wake of Ma.gnolia’s data loss.

Well, that same notion of mitigating your risk carries over to FriendFeed as well. I pipe all my Diigo bookmarks into FriendFeed. So now I have my bookmarks in three places: Diigo, Del.icio.us and FriendFeed. And when I need to look up one of my bookmarks, where do I usually search? FriendFeed.

#3: Tracking Web Content about What Interests You

Probably my biggest use case for FriendFeed is as a tracking platform for various topics I care about. I’ve got a room to track Enterprise 2.0, which I augment with following 70+ individuals from that world. I’ve got a room for tracking my company Spigit, its competitors and the innovation management field.

The importance and value of tracking the Web this way is something I’ve discussed here many times. You can visit those prior posts for greater detail on how and why.

But I’ll say this. Whenever I need to get up to speed quickly on something, setting up these FriendFeed Rooms and Lists is one of the first things I do. You’d be amazed at how effective they are. And unlike a lot of social media monitoring programs, FriendFeed doesn’t cost you a thing (although some would pay for these features).

Wrap-Up

Those are three powerful reasons you should be on FriendFeed. Right now. They don’t require you to get in there and apply Likes and comments to entries if that’s not your thing (that’s powerful in its own right, but more the province of social networks). But you will immediately start benefiting from what the service offers.

Know anyone holding out or just unaware of FriendFeed? Send ‘em this post.

My Ten Favorite Tweets – Week Ending 052209

From the home office in Cleveland, Ohio…

#1: One thing I like in what FriendFeed is doing…they’re thinking in terms of business use cases. See Tudor’s comments: http://bit.ly/BEXQd

#2: FriendFeed provides better tweet search than does Twitter, notes @louisgray http://bit.ly/WFyYA

#3: Reading: Nine worst social media fails of 2009… thus far by @mediaphyter http://bit.ly/vvKS0 Two girls, one sandwich? Really?

#4: Bit.ly’s lead developer @nathanfolkman provides insight as to why bit.ly’s click counts can be significantly overstated: http://bit.ly/IgImp

#5: WSJ – Look at This Article. It’s One of Our Most Popular http://bit.ly/Era5b Problem w/ simple popularity – may not mean merit or relevance.

#6: Post on the Front End of Innovation blog: General Mills 5-Step Innovation Program http://bit.ly/ghqhr #feiboston

#7: Post on the Front End of Innovation blog: Great Companies Enable Constant Choices – Jim Collins http://bit.ly/RFWWM #feiboston

#8: This is hilarious – Tweeting Too Hard: A site for shaming the twitteringly self-important http://bit.ly/PCzTD

#9: Anyone remember the 70s song, Escape (The Pina Colada Song)? Happened in real life to one married couple: http://bit.ly/171wjg

#10: Took my 5 y.o. son to a pet store today, where he saw his first chameleon live. Damn thing zapped a cricket w/ its tongue. My boy loved it.

Something Is Very Wrong with Bit.ly’s Click Counts

I love the URL shortening service bit.ly, as I’ve written before. It’s a tremendous service, provide wonderful analytics along with the basic URL shortening feature. The service recently moved to make click counts much more visible, which is really helpful to see at a glance what got the interest of people you shared the link with. Search Engine Land’s Danny Sullivan has a nice write-up about it.

But something isn’t right with the counts I’m seeing from bit.ly. That, or something is seriously wrong with WordPress.com’s traffic stats.

Here’s what I mean. On May 19th, I tweeted this:

Tweet about newsletter

The first bit.ly URL is to Dennis Howlett’s blog post. The second bit.ly URL links to my post Newsletters Are Still Viable? How I Approached My First Newsletter Email. This post was from last November.

Fast forward. Bit.ly dutifully tracked the clicks on my shortened URL. Total count? 125 in the past week:

Bit.ly click count - Newsletter Post

Hey…that sounds pretty good, doesn’t it? Plenty of clicks to the ol’ blog.

But then check out the number of views WordPress.com recorded for this same blog post the past week:

WordPress.com view count - Newsletter Post

Say what?!!! Bit.ly is telling me the post got 125 hits. WordPress.com is saying it got 11 hits. Let’s do the math:

125
- 11
114

How can the numbers be so far apart?  I mean, that’s not a rounding error. That’s a canyon of difference.  Is bit.ly borked? Is WordPress off? This isn’t the first time I’ve seen these kinds of differences.

If you’ve got any hypotheses or have seen this yourself, I’d love to hear about it. Particularly if you’ve seen the same thing for a different blog platform, like Blogger or Typepad.

Update: There’s a discussion of possible causes on FriendFeed.

I’m @bhc3 on Twitter.

LeadLander – Great Traffic Referral Tracking Service

Leadlander logo

Here’s a quick post about a service we use at Spigit, and that I’ve been digging a lot: LeadLander. LeadLander tracks hits to your website. And I love the data.

I’m not exactly a website SEO expert…OK, I’m not one at all. I see some pretty nice stats for this WordPress.com blog. That’s about the extent of my awareness.

So seeing what data is available is a revelation to me. And as I journey further into my marketing role, I’m coming to appreciate these stats tremendously.

Here’s what LeadLander gives you:

  • Name of companies that visit your site
  • How they got there
  • What pages they clicked
  • Most frequent search terms
  • Country counts for visitors
  • IP geolocation
  • Contacts

It’s that first item up there, the name of the company where the traffic came from, that is most addicting. You can see which companies are interested in what you offer, and how they found out about you.

As I said, I’m relatively new to this website analytics world. But LeadLander has proven to be highly valuable to us in terms of B2B marketing.  For a discussion about LeadLander, and other providers, check out this LinkedIn thread.

Tapping Communities to Accelerate Corporate Innovation

Jim Collins related a story back in 1999 that well-describes the problems with and opportunities for innovation inside organizations. In a Harvard Business Review article, he wrote about Phil Archuleta, a materials manager at a U.S Marines recruiting depot in San Diego.

The Marines would issue new enlistees a uniform on their first day in the service. After two weeks of intensive training, these recruits needed a new uniform because the initial ones no longer fit. Marine policy was that the recruits original uniforms were to be destroyed. That’s right, thrown away.

Archuleta thought that policy was daft, and that the uniforms could simply be washed and used for the next class of recruits. He asked his superior, and was told, “No. It’s against regulations. Forget about it.” Eventually, Archuleta got a new supervisor who thought he had a good idea, and promoted it up the military chain. The idea was well-received at the higher levels, and implemented across the Marines. It resulted in annual cost savings of half a million dollars.

How many ideas by the likes of a Phil Archuleta are buried inside organizations?

Tapping Communities to Accelerate Corporate Innovation

The presentation below is one that I gave for recent webinar with Oliver Young of Forrester. The webinar focused on deriving ideas from organizations’ communities: employees, customers, partners.

The presentation is built around four themes:

  1. Strategic importance of innovation
  2. Email <> community
  3. Corporate innovation is more than a popularity contest
  4. You can’t manage what you can’t measure

Strategic value of innovation

Certainly this qualifies as an obvious notion. Innovation is important to companies. It’s the source of organic growth. But in many ways, companies are not treating it as important as other processes, such as supply chain management and cost accounting. Thus, it is important to reiterate the obvious.

Boston Consulting Group analyzed the shareholder returns for companies in its Top 50 innovators list. It compared these returns to markets averages, and found that best-in-class innovators generated 430 basis points more in returns than did the market. Aberdeen Group surveyed 280 manufacturers, and characterized their innovation capabilities as best-in-class, average and laggard. Best-in-class innovators, who far more consistently hit new product revenue targets and launch dates, were 4.7 times more likely to create specific processes for idea generation.

No surprise then that senior executives rank innovation as a top 3 priority.  Accenture well-describes the goals and aspirations of companies: create repeatable and ongoing improvements in business performance.

Key, of course, is to consider innovation among the disciplines in which a company should excel. And create a program for it accordingly.

Email <> community

I’ve worked for large companies. I know how it goes when you have an idea. Jot it down somewhere. Talk it out with someone. Then email someone else about it. If you’re lucky, someone in that email will pick it up. Maybe.

More often than not, interesting ideas just sort of lie there, buried in the minutiae of the daily grind or not catching the interest of a particular individual. Which is what happened to Phil Arhuleta’s idea about the Marines’ uniforms.

Rather than rely on ad hoc, siloed forms of communicating ideas (like email), social networks provide a new way to tap communities. The diagram below shows the process by which innovation is fostered with a social innovation platform:

Ideas are the social objects for community interaction

Ideas are the social objects for community interaction

On the top left, it’s important that companies understand: ideas can come at any time, in any form. They’re rarely subject to scheduling. Once you have an idea, there’s needs to be an easily accessible, and easily usable,  site for the posting of those ideas. No more silos!

Creating a common site is critical aspect #1 of creating an innovation program. Employees, customers and partners should have a single place where each community can go to post the ideas that occur to them.

Critical aspect #2 is the ability of the community to provide feedback on an idea. Separating the good from the bad, and refining ideas to help them take shape are the heavy lifting of emergent, social systems.

In the upper right, the refinement of good ideas takes shape. This includes the feedback from the community, as well as offline activities around the idea, such as design work, marketing plans and financial analysis. Finally, in the lower right, the company selects an idea based on community feedback and refinement.

Aside from the benefit of actually knowing about a lot more valuable ideas, there’s another benefit to community-driven innovation management: ideas get better when they’re subject to diverse points of view and knowledge. See the earlier post What Enterprise Social Networks Do Well: Produce Higher Quality Ideas to understand that effect.

Finally, the graphic below describes the community innovation cycle:

Bottom-up innovation requires top-down support

Bottom-up innovation requires top-down support

I think the concepts of expand community and pipeline of ideas are relatively self-explanatory. And I just discussed the engage, access, refine, select part of the cycle. The other two are the top-down support needed to ensure the community feels their efforts matter.

Keep in mind that when people suggest ideas to companies, these aren’t just conversation starters with their fellow community members. People want to know that companies listen to good ideas and take action. That’s quite clear to a community when its ideas are actually implemented, and there is a reward and recognitions for its members.

Executives go a long way, particularly with employees, when they make the company innovation program a focus point. Employees will take their priorities from senior management, and executive sponsorship is an important factor for creating an ongoing, sustainable innovation program.

Corporate innovation is more than a popularity contest

The most common notion of community innovation is the principle of: one person = one vote. An idea that receives a lot of votes clearly is more useful and valuable than an idea receiving fewer votes. This “rule” works well with products that exhibit these characteristics:

  • End buyer requests
  • Lower complexity features
  • No concentration of buying power

That last bullet needs a little explaining. Dispersed buying power means that basically you can consider each vote to be the equivalent of one product purchase. If you have a few customers that generate a significant amount of your sales, their votes should carry more weight.

There are going to be plenty of ideas that require stronger stuff than basic popularity. I like the way Microsoft’s Haddow Wilson put it:

There are times when the collective wisdom is what we need. But what about those times when we need to make a strategic decision and only a few in the crowd have the necessary background and insight to help? How do we separate the knowledge from the noise? How do we know to whom to listen? How do we find them?

Innovation communities need a way to identify those whose opinions should carry greater weight. They essentially need reputation systems to identify members with greater standing among the community. This stature can be assigned or earned.

You can’t manage what you can’t measure

The ethos and value of Enterprise 2.0 focuses on the emergent, authentic nature of employee contributions. It’s historically been hard for employees to apply knowledge in a timely fashion. In this culture, “management” is often a loaded word, with connotations of over-processing and controlling the ways in which employees collaborate.

But that should not stand in the way of measurement. You can have measurement of outcomes, and inputs, and use that to guide the community generally in the direction you’d want to take an innovation program. On the flip side, if a community continues to generate ideas that aren’t squaring with the company’s vision of where it wants to go, it’s porbably wise to listen to them.

Either way, measurement provides a view into the health of the community (posts, comments, views, etc.), the sources of the ideas (groups, categories, product lines, etc.) and the traction that ideas put on the platform are getting (stages, implementations).

Measurement is also the basis for analytics used to surface the best ideas from the rest. One other thing measurement does is this: it positively affects the culture of companies.

Performance and Culture

Breed performance, change culture

The transparency that measurement on an innovation management platform provides is healthy. Everyone can see the bases by which ideas advance. Everyone knows how their own ideas are faring, and can do something about it. This happens because of measurement.

It’s about creating ongoing, sustainable innovation

Companies will benefit greatly once they establish an ongoing program of innovation. It’s too often takes phenomenal acts of heroism to get an idea through the ad hoc channels and processes that dominate corporate innovation today.

Time to treat innovation as a discipline worthy of its own resources and focus.

My Ten Favorite Tweets – Week Ending 051509

From the home office in Pleasanton, CA…

#1: Fast paced start-up seeks Project Manager – Spigit job opening (posted to Craigs List) http://ff.im/2WcXy

#2: Spigit customer Pfizer is in today’s 24 Hours of Innovation (http://bit.ly/rkQiO). Preview their upcoming video: http://bit.ly/Rg6u0 #24hoi

#3: Why Do So Many Big Companies Suck at Innovation? asks @BobWarfield http://bit.ly/1qkRW

#4: Reading: 56 Reasons Why Most Corporate Innovation Initiatives Fail http://bit.ly/3lw6Ju

#5: Annals of Innovation: How David Beats Goliath http://bit.ly/1aikhU by Malcolm @Gladwell, The New Yorker (via @dpritchett)

#6: Webinars are a lot of work. Much creating and researching. Then practice and deliver it. After you do it, lots of work putting it out there.

#7: Digging the new NYT real-time feed. As soon as a story or opinion piece is published, it hits the timeline: http://bit.ly/19cj3P

#8: Smart post: Are you building an everyday app? (the LinkedIn problem) http://bit.ly/sa1IV via @louisgray

#9: Fun with Wolfram Alpha. Type in pi. One of the options lets you look at more digits, then more digits, then more digits…

#10: Playing Candyland with the kids on this Mothers Day. Key is to draw that Ice Cream Cone pink card. Sure path to victory.

When Being Rational Kills Your Business – Clayton Christensen

Clayton ChristensenLast week, I attended the World Innovation Forum on behalf of my company, Spigit. One of the speakers was Clayton Christensen, Harvard professor most famous for his book The Innovator’s Dilemma. His talk was one I really looked forward to, and he didn’t disappoint.

The theme of his talk was Disruptive Innovation as a Platform for Growth. A good all-purpose title, but one that really didn’t do justice to the range of topics. Clayton delivered a lot of good knowledge and analysis. I tweeted most of his talk, and I wanted to pull it together in a blog post here. So let’s get to it.

Big Steel vs. Mini Mills

He opened with a discussion that one can find in The Innovator’s Dilemma. It’s the tale of how big traditional integrated steel mills lost market share to upstart mini mills over the course of several decades. To the point where the integrated steel mills have for the most part been shuttered.

Key to the story is this: The steel market could be segmented into different segments, from low-grade to high-grade steel. And profit margins improved as you sold into the higher grade markets. The big integrated mills produced all grades of steel, which meant the profit margins for the different segments averaged out.

Cue the disruptive technology, mini mills in this case. The mini mills initially were too small to utilize the then-current technology to produce high grade steel. But they could produce low-grade quite well, and at a much lower cost. This meant they could easily underprice the big integrated steel mills, and they gained market share in the lower end of the steel market.

Ultimately ceding the low-end seemed OK to the big mills. It meant dropping the lowest profit business, which made margins look better, as the graphic below demonstrates:

Improve Margins by Exiting Low-Margin Businesses

In the short term, this strategy was quite beneficial to the integrated mills. The next part of the story is where the disruption really kicks in. The low grade mini mills’ technology got better, so that they could produce increasingly higher grade steel at lower costs. This forced the big integrated mills to retreat to ever higher margin segments, until there was no place left to hide.

Disruptive technology. Steel in this case, but it happens everywhere.

Why Do Companies Allow this to Happen? They’re Being Rational

This is a wide open question, and it’s one that cannot be answered completely here. But Christensen provided some valuable points.

In pursuing the higher margin business and jettisoning the lower segments, companies are being eminently rational. Fighting it out over low-margin business is generally not considered a good application of corporate capital. Why? Here’s my personal take on Christensen’s disruption model:

  • Existing customers are not clamoring for your low-margin business
  • Current manufacturing and installed base do not support lower cost production or delivery
  • Return on capital for protecting the low-margin business is poor
  • Low-margin business is not strategic to customers, and does not fit long term company goals

Indeed, all of the above are rational and generally the right approach to the problem. Spending large dollars pursuing low-margin commodity businesses is something most of us would view as folly. Christensen, in describing the big integrated steel mills’ management, noted that he never uses the word “stupid”. They’re actually being rational.

In being rational, companies encounter a significant problem when it comes to innovation:

A business model hijacks an idea and forces it to change to conform.

The existing business model rides on a set of processes and principles. Anything new must work with that “innovation infrastructure” to get anywhere internally. But often, this requires changing an idea so fundamentally that it no longer works like it’s originator thought it would. Innovation takes a hit.

Who’s Next for Disruption? Oracle and Toyota

Christensen mentioned some specific companies at risk for disruption.

Oracle, the ever growing enterprise software behemoth, is at risk for disruption from Salesforce.com. I get that. Salesforce clearly has lower cost applications that can target Oracle. In databases, Oracle seems to have prevented disruption by MySQL by acquiring it.

Toyota was a surprise pick for disruption…by the likes of Kia and Hyundai. As Christensen explained it, Toyota has been putting resources into higher margin luxury cars and pick-up trucks. Meaning they’re vulnerable at the lower end.

That’s one thing with these disruptive technologies. It’s really hard to believe it before it happens.

Key Strategies for Addressing Market Insurgents

Christensen offered three pieces of advice to companies in dealing with market disruption:

  1. Create separate units to deal with insurgents
  2. Frame the problem correctly
  3. Understand the job your product was hired to do

Separate business units. This advice is in his book, but it still makes sense. Essentially, the best way to handle disruptive technologies is to tackle them in a separate division outside the main corporate focus. Keys to this division:

  • Separate sales force
  • Leverage new technologies for cost-advantage, performance benefits
  • Be willing to cannibalize existing sales

Most companies do not do this. In the computer industry, Christensen cited IBM as the only company to successfully navigate disruptive technologies: Mainframe -> Mini computers -> PCs. Of course, they’ve jettisoned the PC business. I wonder if the next wave will be the mobile platforms emerging, like the iPhone.

Frame the problem correctly. Christensen believes the root cause for the inability to innovate is not framing the problem correctly. Companies do not understand what is happening with their customers as they use new technologies:

Expensive failure always results when disruption is framed as technological rather than business model terms.

There’s a tendency to view market competition through a technology lens, not a business one. A company will see a new technology, and note its obvious inferiority to what current leaders offer. It then becomes easy to dismiss it.

That’s the mistake.

Companies should think in terms of the business context for changes in their industry.Best way to do this?

Customers hire your product for a job. This was an intriguing way to put things. Christensen advises thinking in terms of “the job your product has been hired to do”. I heard this, and my initial instinct was…huh? But it really is a powerful way to understand how your customers use your products and services.

The crux of his point is that segmenting the market on demographics – e.g. urban hipsters, suburban soccer moms, etc. – is a way of performing marketing. But it’s not useful as context for product roadmaps or assessing new competition for your customers’ wallets.

Christensen referenced a Peter Drucker quote to bring this home:

The customer rarely buys what the company thinks it is selling him.

There’s an enormous amount to be learned when you consider your company’s product in the hands of a customer. In understanding the uses of the product, the  job of the product, you increase the likelihood of framing diruptioon in business terms, not technology. One example he gave is Ikea. Ikea’s not a low-priced furniture store. It’s integrated to get a job done – to get your place furnished fast.

The Disruptive Potential of Green Tech

Green technology has emerged as an important driver of our future economy. There’s a lot of investment in the sector. Here’s where Christensen put forth an interesting observation.

He traveled to Mongolia to see his kid who was on a mission there. While walking through a market, he came across some cheap solar-powered TVs. They were miniature, and the solar panels were low-cost materials. The quality wasn’t great, but they functioned well enough for that part of the world.

He compared these little cheap solar devices to the larger green initiatives underway today. And in his view, disruption of the traditional power industry is more likely to come from things like cheap solar TVs than from big heavy investments.

Those TVs are closer to the job people are hiring for.

Electric cars are often in the news today. The biggest challenge for them is that currently technology requires a heavy battery onboard. This causes them to be slow, and they don’t go very far on a charge. So who might be interested in “hiring” heavy, slow cars that can’t go too far? Parents of teenagers.

The Power of Employee Ideas

I’ll close out this post with this note. Christensen was engaged by Intel to talk to its employees about disruptive innovation, and framing the problem correctly. Led by then-CEO Andy Grove, the company held a series of employee meetings to discuss new ideas for their markets.

Last year, ideas coming from those employee ideas amounted to $18 billion for Intel. Not bad, not bad at all.

My Ten Favorite Tweets – Week Ending 050809

From the home office in the Nokia Theater, Times Square…

#1: Twitter is working on a reputation ranking for users, to be part of how search results are returned: http://bit.ly/hu3yX

#2: Seeing a number of enterprise 2.0 vendors moving hard into the idea/innovation management realm. Good place to be.

#3: CapGemini – companies that batten down the hatches & stop innovation during the recession will find themselves behind on the upswing #wif09

#4: Christensen – Intel did $18 billion in revenue from ideas generated by employees in breakout groups organized by Andy Grove #wif09

#5: Christensen – Strategy problem for companies. A business model hijacks an idea and forces it to change to conform. #wif09

#6: Christensen – Expensive failure always results when disruption is framed as technological rather than business model terms. #wif09

#7: Saffo – a Stanford colleague says that by 2030, half of all miles driven will be by robots. #wif09

#8: Saffo – you can always tell when a new tech is hot. Single males in that field can actually get a date. #wif09

#9: Nice article in the @latimes about the iconic California fast food chain – In-N-Out: Can perfection survive? http://bit.ly/sZUfb

#10: iPhone effect: my 5 y.o. son was pressing his finger on my laptop screen to navigate on a web page.

——-

You can find me on Twitter at http://twitter.com/bhc3

Google, Yahoo, Microsoft Want to Legalize For-Money Prediction Markets

$500 on the U.S. economy turning positive in the first quarter of 2010!

Wouldn’t it be great if you could put money down on your predictions of future events? If Google, Yahoo and Microsoft get their way, you just might be able to do that.

Money $20sBack in September 2008, Google and Yahoo, united under an organization called Coalition for Internal Markets (CIM), wrote a 28-page letter articulating their support for the legalization of small stakes prediction markets. On April 9, 2009, Microsoft added its support to Google and Yahoo’s letter. Here’s an excerpt from the CIM letter:

CIM believes that small-stakes event markets of the kind first developed by the Iowa Electronic Markets have the potential to provide significant public benefits and recommends that the Commodity Futures Trading Commission propose regulations under which such markets may operate, both as internal markets or as public markets.

I learned of all this through Oddhead, Midas Oracle and Bo Cowgill’s blogs. This has the potential to be quite powerful as a forecasting tool, and a way for people to profit from their prediction acumen.

Just how did this come about?

Commodity Futures Trading Commission Wants Input

The Commodity Futures Trading Commission (CFTC) is the government body that regulates the sale of commodity and financial futures and options.

In May last year, the CFTC put out a public notice that it was soliciting comments on the regulatory treatment of financial agreements offered by prediction markets. So apparently the idea of legalization is on the Commission’s mind. The CFTC distinguishes prediction markets as not including financial agreements on market prices (stocks, cotton, etc.) or broad-based measures of economic or commercial activity. Rather, they define them as:

Event contracts may be based on eventualities and measures as varied as the world’s population in the year2050, the results of political elections, or the outcome of particular entertainment events.

“Entertainment events.” Think American Idol, and putting your money down on who you predict will win. That Adam Lambert?

The CFTC notes that its staff has received “a substantial number of requests for guidance” on the propriety of prediction markets’ use. Sounds like a pretty healthy interest in this sort of thing.

Getting Ahead of the Regulatory Curve

In the CIM letter, Google’s Hal Varian and Yahoo’s Preston McAfee develop three themes:

  • CFTC has the right to regulate these markets
  • Prediction markets provide substantial benefits
  • Propose a set of sensible rules for regulation

Google states that it started operating internal prediction markets in April 2005, and that now it runs 25-30 prediction markets per quarter. The purposes of the markets include forecasts of product demand, internal performance (e.g. product release dates), company news and external business environment factors. Google also uses the prediction markets to assess the strength of relationships between different teams.

Yahoo operates internal prediction markets. It also operates public events, such as the Yahoo!-O’Reilly Tech Buzz Game, in which participants predict which technologies will be popular, and which ones lack merit.

The two primary benefits discussed in the letter for predictions markets are: (i) Generation of useful information by aggregating the opinions of individual participants; and (ii) Hedging exposure by making predictions related to some position an individual holds.

The two companies then smartly propose some rules that would govern the small stakes prediction markets:

  • Total exposure per market of $2,000
  • Maximum loss at $2,000 over the course of a year
  • Non-intermediated, electronic markets
  • Trading could be matching bids and offers, or there could be an automated market maker
  • Program to monitor trading
  • Maintain trading histories for five years

Generally, the letter asks for a fairly flexible approach to the markets, with adherence to core operating principles to ensure fair, open trading.

An Inevitable Question: Gambling?

Perhaps as you’ve read this, the thought occurred to you…isn’t the same thing I can do in Las Vegas? Bet on sports teams? What distinguishes this from gambling? Indeed, in its solicitation for comments, the CFTC asks this:

What objective and readily identifiable factors, statutorily based or otherwise, could be used to distinguish event contracts that could appropriately be traded under Commission oversight from transactions that may be viewed as the functional equivalent of gambling?

The CIM letter notes that gambling is generally associated with sports events and games of chance. It recommends the CFTC develop a definition of permitted markets based on a set of examples, and expand the list on a case-by-case basis.

This question will likely receive the most attention from the public. What will be interesting is how Obama’s administration views this versus Bush’s.

Count Me In

Add my YES vote to this. I think it’d be great to buy and sell positions based on predicted event outcomes. The example I led this post off with, the economic rebound, is a great way to tap public sentiment about the economy. We’ll have to watch how this unfolds.

How about you? Do you favor small stakes prediction markets?

I’m Heading to the World Innovation Forum

world-innovation-forum-logo

I’m heading out to the World Innovation Forum in New York on Monday, May 4. I’m really looking forward to this conference. It has a lot of wattage and great attendees.

Spigit will be there to take in the discussions and meet folks.If you’re going to be there, shoot me a DM or @reply on Twitter. I’d love to catch up. On Twitter, the hash tag for the event is #wif09.

Here’s the speaker list for the World Innovation Forum:

  • Clayton Christensen – Disruptive Innovation as a Platform for Growth
  • Vijay Govindarajan – Strategic Innovators: From Ideas to Execution
  • Fred Krupp – Untangling the Future: Why Innovations Never Follow a Straight Line (eco focus)
  • Dan Ariely – Changing Focus: Why Human Behavior is the Hunting Ground for Insight & Innovation
  • CK Prahalad – The New Age of Innovation
  • Paul Saffo – How Today’s Technology is Defining Tomorrow’s Creator Economy
  • Padmasree Warrior – Cisco CTO

There will case studies discussed as well. Media partners are the Wall Street Journal and Business Week. Dozens of large corporations will be there too.

There will be a number of specially designated people blogging and tweeting about the vent. Some details about this were put together by EMC’s Stuart Miniman in this presentation:

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