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There Really Is Nothing that Cannot Be Innovated

Credit: Damjan Stanković

Credit: John Chuckman

In a recent post, Four Quadrants of Innovation, I described one type of innovation as leveraging existing technologies, serving existing customers. In popular culture, this type of innovation is..well, frankly it’s boring. No cool new advances, no new stuff you haven’t tried before.

But what is compelling about this type of innovation is how well it fits Clayton Christensen’s focus on understanding the “job” your product has been hired to do. Companies need to stay on top of their products, and changes in customer behaviors. Sometimes that’s sexy new technology advances. Mostly, it’s not. Rather, it’s good ol’ roll-up-the-sleeves and innovate to meet changing customer needs and expectations.

SlideShare CEO Rashmi Sinha wrote a great post recently where she asked Is it time to reimagine your product / service? She makes the point that many web services reflect their vintage year. They fail to evolve as the market does, ultimately falling further behind the curve of customer expectations.

Rashmi Sinha’s post very much reminds me of Clayton’s Christensen’s point of view. Your customers have:

  • Requirements you have not yet discovered at any given point in time
  • Changing requirements over time that you need to decide whether to meet

On top of that, there’s something deeper in the Sinha’s post. There are times you need to push need innovations, even if your customers aren’t yet asking for them. Let your customers catch up to you.

These points don’t just apply to web services. They apply to all manner of products and services. Everything can be innovated. One key is to understand that sometimes innovation comes in service delivery or business models, not just product features.

Even things you wouldn’t expect to be innovated, can indeed be innovated.

In line with this, I came across a great post by Jake Kuramoto of Oracle AppsLab. In Unexpected Innovation, Jake notes two recent innovations he has seen with…

traffic lights. Of all things.

Yes, Traffic Lights Can Be Innovated

The first innovation is actually not all that surprising, and really is the application of existing technology. New lights use energy efficient LED bulbs. They have some issues to be worked out in terms of their ability to melt accumulated snow. But they make a lot of sense.

The second innovation is one that really speaks to a deeper understanding of what’s going with traffic lights. See the pictures at the top of this post? Designer Damjan Stanković came up with a concept where a timer is added to stoplights. Stanković posits these benefits of such a timer:

  • Less pollution. Drivers can turn their engines off and cut carbon emissions while waiting for the green light.
  • Less fuel consumption. Turning off your vehicle while waiting on the traffic light can lower fuel consumption in the long run.
  • Less stress. Since you know exactly how long you have to wait you can sit back and clear your head for a while.
  • Safer driving. With the Eko light both drivers and pedestrians can be fully aware of how much time they have left before the light changes and that way reduce the chance for potential traffic accidents.

That last bullet is the benefit that intrigues me most, in terms of the job I want a stoplight to do: safer driving. Here in San Francisco, we have walk signals at intersections that include countdowns. When the WALK signals appears, you can see how many seconds are left to cross the street.

Both Jake Kuramoto use these walk signal countdowns in a different way. When you are driving, you can see the countdowns. If you’re, say 50 meters out, this gives you something of an advantage in how you approach the intersection. When there are only a few seconds left, you know the light will be yellow well before you get to the intersection. With kids in the car, I slow down to be ready to stop for what will be a late yellow light by the time I reach the intersection.

Now if someone had asked me, I wouldn’t have come up with a requirement for traffic lights to have timers. But because someone put those countdowns on the walk signals, I’ve found myself using them in my driving when they are available. And Stanković’s design makes me realize that, “hey, I want those timers on traffic lights.”

Which goes to show you. Everything can be innovated upon. Even the most…uh…pedestrian of products and services.

Finally, I love this quote from Amazon’s Jeff Bezos in a Newsweek interview:

There’s a tendency, I think, for executives to think that the right course of action is to stick to the knitting—stick with what you’re good at. That may be a generally good rule, but the problem is the world changes out from under you if you’re not constantly adding to your skill set.

Markets are always shifting. Don’t think that anything is immune from innovation.

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My Ten Favorite Tweets – Week Ending 010110

From the home office in the future, where I’m currently reviewing all these 2010 predictions with a skeptical eye…

#1: How Companies Increase Innovation – WSJ.com #innovation http://post.ly/GubP

#2: RT @chuckfrey Amazon’s Jeff Bezos on two ways to approach customer-focused innovation: http://ow.ly/QIbl #innovation #strategy

#3: RT @briansolis Ideas Connect Us More than Relationships (video interview) http://bit.ly/8wPTzf

#4: Outstanding, detailed post on Enterprise 2.0 adoption from @ITSinsider & the @20adoption council: http://bit.ly/516Cv4 #e20

#5: Designing For Social Traction by Joshua Porter #design http://post.ly/GoE6

#6: Intellipedia anyone? “Preventing the Terrorist Attack: Massive Failure in Collaboration” http://bit.ly/6AQgPV #e20 #gov20

#7: 2010 Predictions from @jkuramot of Oracle AppsLab: http://bit.ly/7ainDr “Reputation will be all the rage in 2010.” > Agree

#8: RT @matthewemay Six years ago this USAToday essay by Jim Collins changed my entire view of the world. http://is.gd/5HPPu

#9: RT @davewiner: Anil Dash, an upper-caste Twitterer, explains to low-life scum like you and I, what it’s like up there. :-) http://r2.ly/yxbt

#10: My 5 1/2 y.o. son on why he didn’t see a friend’s kindergarten girl from the sister school in his coed class: “All the girls look alike.”

The Four Quadrants of Innovation: Disruptive vs Incremental

I recently wrote up a post, Most Dangerous Innovation Misperception – The Silver Bullet Approach. In it, I discussed the issue of organizations myopically focusing on only disruptive innovations to the exclusion of more incremental or sustaining innovations.

In doing more research on the subject, I began thinking about the dynamics that apply when a firm pursues different kinds of innovation. A post by Venkatesh Rao, Disruptive versus Radical Innovations, was very useful for distinguishing between disruptive and radical innovations.

Building on that, I wanted a framework for delineating innovations based on their technology and business impacts. Because they’re not necessarily the same. The four quadrants below describe the dynamics for innovations according to their technology and market impacts:

technology vs market innovations - disruptive or incrementalIn each quadrant, there are different rationales and issues that apply. Let’s take a look.

Existing Tech, Manage Existing Market

The lower left quadrant represent innovations that leverage existing technology, and service existing customers. This is every day innovation. The block-n-tackle innovation that keeps companies nimble and operating at rates above industry averages.

Example? See how Walmart improved the fuel efficiency of its vehicle fleet:

Wal-Mart has taken a number of steps, including the installation of diesel Auxiliary Power Units on all its trucks, and applying aerodynamic skirting. On the tire side, Wal-Mart is working with super single tires. and is testing nitrogen-filled tires and an automatic filling process to maintain constant tire air pressure.

Improving the customer experience is also a critical opportunity. In an era of social-media empowered customers impacting your brand, the consequences of failing to improve the customer experience are higher than ever.

But this quadrant is the one often pooh-poohed by many in innovation. I like the way PriceWaterhouseCoopers puts it in this blog post:

An unintended consequence of the Innovators Dilemma has been that companies have begun believing that unless they were pursuing a strategy of seeking disruptive innovations, they were somehow losing out.

Walmart’s efforts have paid off. The retailer has held relatively strong during the Great Recession, as seen in its stock price. And Toyota famously gathered over million ideas a year from its employees to emerge as a global leader in the automotive industry.

Existing Tech, Create New Market

In this quadrant, existing technology is leveraged to create a new revenue streams. This is the quadrant where the following phrase applies:

Good artists borrow. Great artists steal.

The simple application of a technology that serves one purpose toward a different purpose can be disruptive from a market perspective. It’s not a large technological leap. It’s the intelligent application of what’s already at hand.

Twitter is a great example. The technology itself is…simple. Web form. Subscription model. Limit to 140 characters. Yet it’s revolutionized the way people share and find information, causing Techcrunch’s MG Siegler to compare it to a modern day Walter Cronkite. All for a simple little web app. Here’s what WordPress founder Matt Mullenweg says about Twitter:

Whether the Twitter team intended it or not, they’ve built a killer and highly addictive reader platform with dozens of interesting UIs on top of it.

The thing with these innovations is that they are very much a market-determined disruption. This isn’t some sort of EUREKA! the moment the technology is rolled out of the labs. It takes the market to say that it’s disruptive.

Clayton Christensen (Innovator’s Dilemma) types of innovation will often fall in this quadrant. Existing technologies applied in new ways to address the lower end of the market.

Venkatesh Rao has a great perspective on this quadrant:

In fact, in most documented cases of disruption, the disruptive innovation was a minor/incremental change and well within the technical capabilities of the incumbent (and was often taken to market by a renegade spin off from the original company).

This quadrant is the best one for producing organic growth for companies. It has lower risk, but produces meaningful revenue growth.

Radical Tech, Create New Market

If any one quadrant defines the popular view of innovation, it’s this one. And that’s not without good reason. In the previous quadrant, existing technologies are applied to new markets. Well, existing technologies have to come from somewhere. That’s this quadrant.

This is the cool stuff that the press writes about. Check out AT&T’s Technology Showcase for a great example of some of these new technologies.

Amazon’s Jeff Bezos has done well in this quadrant. His latest innovation, the Kindle, is an example. It includes a new “electronic ink“. Ability to read text aloud. It’s incredibly thin profile.

And it’s paying off. Amazon reports that the Kindle set a new sales record this November. Which points to the Kindle as a strong new revenue stream down the road, and a new source of sales for Amazon’s book sales. A home run in this quadrant.

These types of innovations are important for maintaining the long-term growth rates of companies. They provide needed growth, replenishing changes in existing markets.

Which leads us to the final quadrant…

Radical Tech, Manage Existing Market

There are times a company’s business is under attack, and it needs to address changing behaviors in its market. Innovations in this quadrant share the high risk profile of the previous quadrant, but they have a defensive nature to them. They don’t seek to find new opportunities, they seek to address changes in customer behavior.

Hulu strikes me as an example of this. A joint venture of NBC, Fox and ABC, Hulu lets users view shows on computers. This initiative addresses the emerging market shift away from televisions to viewing on all sorts of devices. It’s a better answer for this shift than the music industry initially had for the proliferation of MP3 songs on various P2P sites.

Gary Hamel has noted the increasing volatility of markets across the globe. Customers have better access to information about new options, and are willing to shift their spending more quickly. With this dynamic, expect some increase in activity for innovations in this quadrant.

Companies Need a Portfolio of Innovation Opportunities

In a recent Accenture survey, 58% of executives said their organization is looking for the next silver bullet rather than pursuing a portfolio of opportunities. When I hear that, I think first of the upper right quadrant (radical tech, create new market). These types of innovations are incredibly important, and should be part of a company’s innovation efforts.

But there’s really a good basis for expanding that view to look at the other types of innovation: technology vs. market, disruptive vs incremental.

I’m @bhc3 on Twitter, and I’m a Senior Consultant for HYPE Innovation.

Kindle Breaks Record for Sales in a Single Month During November

My Ten Favorite Tweets – Week Ending 072409

From the home office in Sacramento, CA…

#1: AMZN CTO: RT @werner Was asked for definition of real-time web: to go f/ innovator to homophobic censor or book-burning nazi in 60 seconds.

#2: Reading: A First Look at SharePoint 2010 http://bit.ly/15y1tT Includes a great visual mapping of SharePoint 2007 to 2010

#3: Innovating innovation: An Interview with Scott Anthony of Innosight http://bit.ly/5pXbb Disruptive #innovation needs senior mgt support

#4: RT @VMaryAbraham Host a Failure Party http://tinyurl.com/oh99zc #innovation #KM Celebrate the journey, not just the destination

#5: Gary Hamel to keynote Spigit’s Customer Summit Aug 13-14, 2009 http://bit.ly/4wRljR #innovation

#6: The Potato as Disruptive Innovation http://bit.ly/4gqzQa “the potato explains 22% of the observed post-1700 increase in population growth”

#7: I generally avoid following the celebrities. But I’m so impressed with @KevinSpacey that I had to follow. His films and acting rock.

#8: RT @mattcutts A Google easter egg for people who know what recursion is: http://bit.ly/URa8U :)

#9: Rick Astley is playing on the radio here. We’re all being rick rolled.

#10: Working with my son on his Snap Circuits Jr electronics kit http://bit.ly/bRsJQ He wants to build his own nightlight.

My Ten Favorite Tweets – Week Ending 020609

From the home office in Victoria, Australia…

#1: Interesting convo w/ colleague. Is there any risk to tweeting that you’re traveling on vacation? Burglars searching for such tweets?

#2: Guy was turned down for a job because he switched majors his freshman year of college. Say what? Details: http://bit.ly/23yHBT

#3: FriendFeed continues to roll out the powerful features. Latest? Much more granular search options, very helpful: http://bit.ly/VNYX

#4: I’m impressed w/ Yammer’s hustle. If you’re doing an internal preso on it, they’ll help you with the preso. Smart. E.g.: http://bit.ly/PR1A

#5: RT @beccayoungs I really do think the Amazon Kindle will be a game-changer. Check this out – Kindle to be a $1B product http://tr.im/eflz

#6: RT @barconati Oh no! Yahoo briefcase is closing. Believe it or not I still use it. More out of habit than anything else http://tr.im/e88z

#7: Mike Gotta on the rise of employee social profiles inside companies: http://bit.ly/135Vz Benefits and advice w/ nice Connectbeam shout-out

#8: Check out http://www.socialwhois.com/ Lets you search for people on based on keywords in their lifestreams. Very cool.

#9: RT @lehawes w00t! I made the Wall St. Journal today! Page A11 in print edition or online at http://bit.ly/iRcH

#10: After the WSJ coverage…@lehawes blogs about being included in a recent WSJ article: Taken Out of Context http://bit.ly/17aRy

The Migration of Web Techniques to In-Store Retail Practices

Via ralphbijker on Flickr

Via ralphbijker on Flickr

Think about the companies doing the most technologically advanced stuff. Amazon. Google.

Grocery stores.

Say what…? The place where oranges sit in piles in the produce section. Boxes of cereal lines the aisles. The frigid ice cream aisle.

Well, they’re not in the league of Google and Amazon. But grocers are more than those aisles of food and ceilings of fluorescent lights you see. Two trends in the industry borrow heavily from the advancements on the Web:

  1. Website optimization
  2. Recommendations

I’m not talking about monitors with web pages inside stores. I mean the shopping experience has been affected by these developments. Here’s how.

Website Optimization => Store Layout and Merchandising

E-commerce sites live and die by their conversion rates. A key piece of the conversion rate puzzle is effective navigation and presentation of items to site visitors. One company that helps with that is  Tealeaf, which records and analyzes visitor behavior to help site owners optimize conversions and return visits.

In a physical space, you can’t record people’s clicks and actions. Or can you?

As reported in a recent Economist article, retailers are starting to video record shoppers’ behavior in the aisles. For instance, here’s how one supermarket used technology provided VideoMining to understand visitor behavior in its juice section:

Another study in a supermarket some 12% of people spent 90 seconds looking at juices, studying the labels but not selecting any. In supermarket decision-making time, that is forever. This implies that shoppers are very interested in juices as a healthy alternative to carbonated drinks, but are not sure which to buy. So there is a lot of scope for persuasion.

These are exactly the kind of metrics that e-commerce sites track to improve their conversion rates. Use of cameras in-store to do the same thing is analogous to tracking visitors to your website.

Personalized Recommendations

Amazon.com really led the movement to provide effective recommendations to existing customers. One report I’ve seen says that Amazon derives 35% of its sales from these recommendations. Amazon’s recommendations are generated from your shopping history, compared to others via collaborative filtering. The success of these recommendations has inspired others to build recommendation engine services, including Aggregate Knowledge, Baynote, MyBuys, RichRelevance and others.

The same thing is happening in-store as well. You know that loyalty card you present to your grocer to get discounts? It’s used to record your shopping history. Historically, grocers have done little with that information. It was more of a device to keep you coming back to the store.

But in the past few years, grocers have been getting hip to the idea that their customers’ shopping history can be used to personalize the shopping experience.

Once, I was product manager for just such a system, called SmartShop. Pay By Touch’s SmartShop used a Bayesian model to compare your purchases against those of other shoppers, and determine whether you exhibited stronger or weaker preferences for a category or product than the overall average. A set of 10 personalized item discounts were then selected for you based on your specific purchase preferences.

On a website, returning customers are presented with a set of recommendations as they shop. In-store, what’s the analog? Kiosks. Kiosks are the in-store interaction basis with customers. SmartShop notified you of discounts via a print-out from a kiosk at the front of the store. This was key – get you the discounts right at the point of decision, when you’re shopping. Not unlike e-commerce recommendations.

Prior to Pay By Touch’s demise, SmartShop was getting good traction among grocers, who were looking for ways to increase basket size, increase loyalty and differentiate themselves. And it wasn’t just SmartShop. Price Chopper and Ukrops use a recommendation system from Entry Point Communications. UK-based Tesco is the granddaddy of personalized recommendations, provided through Dunnhumby.

Teaching Old Dogs New Tricks

While e-commerce benefits from being all-digital and various identification mechanisms, grocery historically lacked these. But that’s changing. Retailer have picked up the best practices of their online brethren. Things are now much more measurable and personalization is no longer the province of the online players.

Looking forward to grocers introducing Twitter into the shopping experience…

*****

For reference, here’s a white paper I wrote about SmartShop when I was at Pay By Touch:

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Supply-Demand Curves for Attention

The basic ideas behind the Attention Economy are simple. Such an economy facilitates a marketplace where consumers agree to receives services in exchange for their attention.

Alex Iskold, ReadWriteWeb, The Attention Economy: An Overview

The attention economy. It’s a natural evolution of our ever-growing thirst for information, and the easier means to create it. It’s everywhere, and it’s not going anywhere. The democratization of content production, the endless array of choices for consumption.

In Alex’s post, he listed four attention services, as they relate to e-commerce: alerts, news, search, shopping.  In the world of information, I focus on three use cases for the consumption of information:

  1. Search = you have a specific need now
  2. Serendipity = you happen across useful information
  3. Notifications = you’re tracking specific areas of interest

I’ve previously talked about these three use cases. In a post over on the Connectbeam blog, I wrote a longer post about the supply demand curves for content in the Attention Economy. What are the different ways to increase share of mind for workers’ contributions, in the context of those three consumption use cases.

The chart below is from that post. It charts the content demand curves for search, serendipity and notifications.

micro-economies-of-attention-3-demand-curves-for-content

Following the blue dotted line…

  • For a given quantity of user generated content, people are willing to invest more attention on Search than on Notifications or Serendipity
  • For a given “price” of attention, people will consume more content via Search than for Notifications or Serendipity

Search has always been a primary use case. Google leveraged the power of that attention to dominate online ads.

Serendipity is relatively new entry in the world of consumption. Putting content in front of someone, content that they had not expressed any prior interest in. A lot of the e-commerce recommendation systems are built on this premise, such as Amazon.com’s recommendations. And companies like Aggregate Knowledge put related content in front of readers of media websites.

Notifications are content you have expressed a prior interest in, but don’t have an acute, immediate need for like you do with Search. I use the Enterprise 2.0 Room on FriendFeed for this purpose.

The demand curves above have two important qualities that differentiate them:

  • Where they fall in relation to each other on the X and Y axes
  • Their curves

As you can see with how I’ve drawn them, Search and Notifications are still the best way to command someone’s attention. Search = relevance + need. Notifications = relevance.

Serendipity commands less attention, but it can have the property of not requiring opt-in by a user. Which means you can put a lot of content in front of users, and some percentage of it will be useful. The risk is that a site overdoes it, and dumps too much Serendipitous-type content in front of users. That’s a good way to drive them away because they have to put too much attention on what they’re seeing. Hence the Serendipity curve. If you demand too much attention, you will greatly reduce the amount of content consumed. Aggregate Knowledge typically puts a limited number of recommendations in front of readers.

On the Connectbeam blog post, I connect these subjects to employee adoption of social software. Check it out if that’s an area of interest for you.

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See this post on FriendFeed: http://friendfeed.com/search?q=%22Supply-Demand+Curves+for+Attention%22&who=everyone

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