Friday, August 17, 2018

The future belongs to whoever creates it

You know something has become passe when you see it used as a meme on Twitter frequently.  That's actually what prompted this diatribe.  I doubt there's any meme I dislike more than "The future belongs to...".  In recent years we've been told that the future belongs to the swift, the smart, the agile, and more recently to the digitally transformed.

Not that long ago we were told that the future belonged to Nokia, because before 2000 it was the king of the hill in handsets.  Then along came Apple.  Then we were told the future belonged to the Newton, except the Palm and then the smartphone generally won the day.  The fact is that the future doesn't belong to anyone.  Given the rapid pace of change and the emergence of new technologies and solutions, you can't say with much certainty who will win the future.  In fact, as William Gibson likes to say, "the future is already here, it's just not very evenly distributed".

Who "owns" the future?

The best we can hope for is to understand the future and prepare for it, or attempt to create the future we want.  The other options - waiting to see what happens and then responding, or worse, hoping that nothing changes at all - are not viable alternatives.  These options are choices that lead to the fast road to obsolescence.  Santayana said that those who cannot remember the past are doomed to repeat it.  I think the corollary to that statement is:  those who ignore the future are doomed to extinction.

If we can't ignore the future, and it's clear few firms or organizations "own" the future, this means the future should be malleable to some extent, and we have the capacity to discover it.  Therefore it's incumbent on us to try, rather than end up as an afterthought, or an overused metaphor like the buggy whip manufacturers who didn't change as automobile ignitions changed.

Nobody "owns" the future but if we try just a bit we can understand what's likely to happen and in some instances perhaps even influence it.  However understanding the future requires doing work to identify emerging trends in the environment and understanding how they might unfold.  Understanding the future requires you to ascertain what 'could' happen, not simply depend on what  you want to occur.  Understanding the future requires understanding that the future is not determinant, but that there are multiple possible futures.  Once you understand these things, you can begin to see how you might influence the future.

Future chaos

If a weak definition of chaos theory is "a butterfly flaps its wings in Tokyo and it rains in New York" then the idea of small changes now influencing the future isn't so far fetched.  Microsoft influenced an entire industry at a time when Microsoft was very small, convincing IBM to license its operation system.  That one decision had ripple effects that we still experience today.

We are too often far too passive and too convinced that the future will happen to us, rather than becoming more proactive and at least more prepared to act as the future emerges or, better yet, trying to shape the future.  But what is good innovation other than an attempt to shape the future?  Innovation is a current bet on future outcomes - so any innovation is an attempt to change the future.  Why not invest in understanding the future and even influencing the future as part of any innovation activity?

Trend spotting, scenario planning, roadmappping, future forecasting - these are all tools that can help determine what may occur in the future.  Doing this work isn't enough however, because the knowledge will simply prepare you for what may happen.  Taking action on the insights, investing in innovative ideas meant to fulfill unmet customer needs or targeting emerging segments will shape the future, and perhaps allow you to create it and own it.
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posted by Jeffrey Phillips at 6:42 AM 0 comments

Thursday, August 09, 2018

What unicorns and narwhals tell us about innovation

My lovely wife and I were returning from a long car trip, having one of those wide-ranging conversations about everything and nothing that consumes time during long periods of interstate driving.  The topics were shifting and free-flowing, when suddenly she asked the question:  what's the difference between a unicorn and a narwhal?  After all, they both seem a bit mysterious and they share the uncommon attribute of possessing only one horn.  I liked the question so much I promised on the spot to write a blog post about her question.

The answer, as it turns out, is relatively easy.  Unicorns combine features like a single horn, fantasy and equine nature in a single package that is meant to appeal to a defined population - young people who enjoy fantasy.  Would the unicorn work without the horn?  Probably not, because then it's just another horse.  Narwhals are almost as rare as unicorns of course, and have a single horn (really a tooth), but there the comparison ends.  Narwhals seem more like walruses or large seals, relatively large, amphibious animals that few people have seen or understand.  Narwhals lack fantasy and aren't featured in many stories. You won't find too many stories of magical narwhals flying in to save a damsel in distress. They don't seem to have large fan clubs or venture capital companies describing startups using their name.

The real difference between unicorns and narwhals?  I think it's in the packaging.  Unicorns combine a number of features that appeal to a segment of people and incorporate fantasy or magic.  Narwhals don't.  So ends the lesson.

But it's the features

But there's an interesting perspective to take away from this.  Both unicorns and narwhals share an important and rare trait - they have a strange single horn (or tooth).  This makes the unicorn look fierce and the narwhal look slightly ridiculous, but that's beside the point.  Both have a singular feature that makes them unique in their environments.  And as we all known, features matter.  After all, nearly every product you buy is presented not as a solution, but as a long list of features.  Better screens, faster processors, lower emissions. 

This is what so many innovators get wrong about new products and services.  They focus on the solitary feature - faster processors, better user interface, more application support - and lose sight of the fact that consumers appreciate features (as far as they understand them) but value a total solution much more.  A "unicorn" feature - one that really stands out and is unique in the market - is great, but in the grand scheme of things it may make a product more difficult to use or more difficult to adopt, even though it seems differentiated.  What people love about the unicorn is the total package - the mystique, the fantasy, all of which is augmented by the horn.  When you stick a horn on a small whale, no one really cares.  It's the entire package that matters.

Solutions and Benefits

Unicorns and narwhales are also illustrative of the difference between market pull and technology push.  Innovators who follow a market pull strategy, using innovative methods and tools to understand the needs and desires of customers to help shape a product, discover wants and needs and try to fulfill them.  On the other hand, innovators who follow a technology push strategy often highlight specific capabilities and features they believe a customer needs, whether they've asked or not.

In this regard, a unicorn is like market pull - finding out that people love magic and fantasy, and adding just a few unusual features (a horn on a horse) to make it seem unusual.  A narwhal is like technology push - sticking an outsized horn on a rarely viewed and mysterious sea creature, that few people understand or care about.  In most successful innovations, it's not the features that win the day.  Most consumers don't understand nuances like operating system versions or processor speeds.  They care about the total solution and how it fits into their lives.

Who knew that two mysterious and potentially magical creatures could tell us so much about innovation?

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posted by Jeffrey Phillips at 4:52 AM 0 comments

Friday, July 27, 2018

Societal and demographic signals are more influential than technology trends

As innovators, we are constantly entranced by the idea of signals in the marketplace.  Signals that indicate new opportunities, shifts in consumer demand, emerging technologies.  But so often it's easy to get captivated by the new technologies.  This is happening right now, as concepts like "digital transformation", artificial intelligence and blockchain are all top of mind.

The problem?  No one really knows what the long term impact or implications of any of these emerging technological solutions is or will be.  I have a hard time getting a good, clear definition of what 'digital transformation' is.  It seems to differ based on the potential adopter and the company making the offer.  Right now, firms are entranced by what emerging technologies like blockchain or artificial intelligence could mean for their businesses, and are ignoring sweeping changes that may be harder to quantify.  But these other changes I think can be shown to have greater impact.

The simple drinking straw

For years, billions of us have accepted a plastic drinking straw with our happy meals, at restaurants, at the convenience stores where we buy our oversized soft drinks.  Drinking straws are ubiquitous - they are provided at every fast food restaurant, most dining establishments and plenty of convenience stores.  Not to mention all the straws sold at grocery stores.  For decades we've used them and tossed them away.  Yet in a virtual blink of an eye, they may disappear.  Why?

Societal pressure.  People are becoming more conscious of small items like straws that are produced and thrown away in such volume.  New laws are  being introduced to eliminate or outlaw straws, based primarily on the health of sea life and the amount of trash that items like straws produce.  Never mind that straws are about one tenth of one percent of the plastic trash we generate.  Public opinion is shifting against plastic straws, and when public opinion shifts, politicians often act right behind the shift in public opinion.  When Starbucks and other national chains start eliminating straws, laws against straws can't be far behind.

We can argue about the value of the "straw ban" and its effect on trash and marine life, but there's a larger point here.  An entire industry is on the verge of collapse, not based on new technology, not because of blockchain or AI, but because a vocal minority of people moved against straws. 

Paying attention to societal and demographic signals

Straw manufacturers are in a world of hurt, and the damage has been inflicted rather rapidly.  Societal pressures and demographic signals are probably the most powerful signals about how the future will unfold, yet we spend less time listening and understanding these trends and signals than we should.

The straw ban is a good example - much of the data behind the ban is suspect.  Many media outlets reported the statistic that 500 million straws are used and thrown away each day, but further investigation revealed those numbers were based on a guesstimate by a child.  No matter.  Once the public gets behind a cause or an idea, and the cause takes root, consumer behavior and attitudes can change rapidly.  If you aren't paying attention to these signals, or worse are downplaying them or ignoring them, your entire value chain can collapse.  Retailers react to pressure to remove straws, and suddenly your best customers are actually your opponents.

Why don't large corporations pay more attention to societal and demographic trends and signals?  First, the data is qualitative and can be difficult to aggregate and interpret.  Most corporations like quantitative data.  Second, it can be movement or emotion based, which can have negative connotations.  Many corporations don't want to be leading political or legislative change, they'd rather wait to see what happens in the public sphere and then respond.  Third, some changes are challenges. If straws go away, how do we replace the task that they filled?  Do people bring their own re-usable straws?  Do we create disposable cups with a funnel or some other mechanism?  Finally, corporations often ignore or discount societal or demographic signals because they can conflict with the investments and emphasis on existing products.  No company and certainly no manager tasked with meeting quarterly revenue goals wants to think that their markets and consumers are likely to rapidly shift away from products they've used for decades.  It's easier to discount these signals than to incorporate them and consider the implications.

Looking further

But let's go further and make a prediction:  the humble straw is simply, forgive the pun, the first straw.  As millennials become a larger buying group, and the generations after them as well, their mores and purposes will come to the fore.  It won't just be straws that will be an issue, but we'll see acceleration of long standing trends toward reuse and recycling.  Takeout boxes, plastic forks, spoons and knives, foam cups, basically anything you can take away from McDonalds or 7-11 will become a focus for reduction or elimination.   You read it here first, but you already knew this - all that stuff you get in your Happy meal or buy in your snack run is going to go through dramatic change or it will be eliminated in the next few years.  Society will demand it, and technology will have to figure out how to make it happen.  This is why societal and demographic trends almost always trump technology trends.
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posted by Jeffrey Phillips at 7:44 AM 0 comments

Tuesday, July 10, 2018

You need a chief disruption officer, not a chief innovation officer

In older times, when kings ruled countries with little input from their subjects, it was easy for the king to exhibit some hubris.  After all, the king's family and retinue encouraged the idea of divine coronation - the sense that the king had his power from a divine source and that everything under his domain should pay homage to him.  Given this power, it wasn't hard for kings to become a bit deaf to other ideas or suggestions, or the idea that he could be fallible.  To compensate for this, some kings employed jesters, who were people who could actively question the king's decisions.  Jesters of course are an outgrowth of slaves who rode with generals returning from major conquests in ancient Rome.  The slaves were employed to constantly remind the general that he wasn't a god.

I bring up this history lesson to illustrate a key point.  Today's executives are very powerful, but are beholden to markets that demand exceptional financial precision.  Anything that deviates from delivery on promised financial results can be easily called into question.  Since everything in a business is focused on core products and services, delivering the results on a quarterly basis, someone, it seems, needs to act as a 'jester', constantly asking to expand thinking beyond the next quarter.  The fact of the matter is, cultural attitudes, efficient processes, reward systems and other factors make the job of a "chief innovation officer" difficult, often turning the role into a chief incremental officer.  What major corporations need is a senior executive who's only job is to focus on the future, on disruption, on what's emerging and how the company can win.  What I'd call a chief disruption officer.


OK, so far I've given you the history of the jester and related the importance and power that they had - the ability to question a king's decision - to a new role.  That new role is the Chief Disruption Officer.  When everyone in the company is focused on maintaining and defending the status quo, someone or some team needs to be looking over the horizon, seeing what's next and planning for emerging opportunities and emerging threats.  There is simply too much change underway to ignore this or to pay lip service to understanding what may disrupt your business, or what you can disrupt.

People will agree that insight into emerging opportunities and potential disruptions is important.  However, they will try to distribute the activity across a number of people or teams, and as the role is disseminated this way it loses importance.  Further, the role becomes an observer role rather than a proactive role, requiring the company to react to factors the observer identifies rather than move proactively into the marketplace.  To win the future, to be a good innovator, you need a fully functional CDO.

Supporting features

To make the CDO really work, you need more than a corporate figurehead.  The CDO needs a mandate from the CEO to win the future.  Beyond this mandate the CDO must align to corporate strategy and be accountable for specific revenue goals (ie 20% of revenue from newly released products or services).  This means that beyond a mandate and specific goals and measurements, the CDO needs funds that will allow them to obtain internal staff for key roles and/or partner with external agencies when internal staff are too busy doing incremental stuff.  Further, they need the ability to realize good ideas as new products and services, either within the internal product development process or developed externally or acquired.

If at lot of this sounds like what we expected a Chief Innovation Officer to do, you are right, but too often the CIOs are co-opted by existing models and practices and become proficient at building innovation methods and processes that simply augment existing models.  They become, in effect, the Chief Incremental Officer.  With all the pressure to sustain existing models and methods, we need a jester who has real power to create real difference in the organization.

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posted by Jeffrey Phillips at 12:25 PM 0 comments

Wednesday, June 20, 2018

Two answers you need to improve innovation success

I was talking recently with a colleague who had been working in corporate innovation for quite some time.  He was discouraged because he felt his innovation activities were really insightful, and had resulted in a product offering that had great value for customers.  But in the end the business decided not to commercialize his idea.

As we dissected the opportunity and the outcome, two issues became clear.  First, while the customer need was undeniable, eventually it proved to be outside of corporate direction and strategy.  The need was just far enough outside the bounds of what the company defined as its scope that he struggled to get executives to buy in.  While they had been happy to explore the market and need, they weren't convinced enough to enlarge their offerings. That decision was probably influenced by the second issue:  while the need was easily defined, the customers were dispersed and difficult to serve, and the business couldn't amount to more than $10M a year if everything went well.  While $10M in revenue sounds like a lot to a small business, to a larger business starting up a new product or business that can't exceed $10M in revenue at its peak isn't interesting.  It is a distraction.

Aligning innovation to strategy

Perhaps the first mistake that executives and innovators make when it comes to innovation is imagining that the exploration and discovery that is encouraged in the early stages of innovation will be recognized and scaled in the latter stages.  Most executives are more than happy to encourage some amount of fiddling around the edges of a business, exploring adjacencies and seeking out "white space".  That exploration is relatively inexpensive and may produce insight or knowledge to form future decisions.  The fact that innovation teams are allowed to conduct that exploration does not mean that any ideas created are going to become new products.

Significant investments in new products or services will be made as those new products or services fit squarely within a strategic direction or goal.  Exploration is useful and reasonable when the costs are relatively low.  Investments in new products and services are expensive, and must be carefully aligned to strategic needs and imperatives.  Innovation teams need to understand this.  Innovation teams must understand their remit:  discover and explore some interesting spaces, and give the executive team more insight and knowledge, and/or create some compelling new products based on that insight.  Ask yourself:  what is your executive buying from you?  Insight, or new products?  Scaling a new product is a risky investment, so many innovation activities may only be intended to produce insight.  Understanding that from the start is very important.

Minimum Viable Threshold

I think I'll coin a new acronym today:  the Minimum Viable Threshold or MVT.  The MVT is simply the size that a new business must achieve to be interesting to the existing business.  In a small business, generating $10M of new revenue may be very interesting and important.  At GE, Jeff Immelt set the MVT at $100M.  Understanding what the minimum viable threshold of revenue, profit, margin or other metrics is exceptionally important.  Even if you can dominate a market, even if there is no other competition, even if your new innovation is head and shoulders above the other competitive offerings, if you can't achieve the company's MVT within a few years the innovation simply won't get funded.

Understanding the MVT seems obvious, right?  But it is one of those informal metrics that some people understand but are rarely discussed.  Innovators can fall in love with their ideas, not recognizing that executives have yardsticks and metrics they'll use to measure new innovations.  Some of those metrics may be overt or obvious, others, like MVT probably won't be.  As an innovation team leader, your job is to know what the MVT is, or at least understand its parameters.  If you cannot achieve the MVT, rescope the innovation or rethink your focus.

Recognize that small investments to discover new insights may be all that your executive team wants from your innovation activity, and understand the difference between dominating a $10M market and owning 10% of a $1B market if you hope to convert your ideas into new products or services.
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posted by Jeffrey Phillips at 6:34 AM 0 comments

Tuesday, June 05, 2018

Scale gives way to speed

With apologies for the use of a tired phrase, there is a new game in town and it will dramatically impact how, why and where you do innovation work.  The new game, as demonstrated by a number of emerging disrupters, is captured in the book Unscaled and discussed at length in this nice blog post - one I wish I could have written.

There are a couple of overlapping points here, but the main idea is that scale as a competitive weapon is increasingly passe.  As more and more of what we consume becomes virtual, scale doesn't matter.  As more and more of the supporting infrastructure (HR/IT/Finance/etc) can be acquired as a service, companies don't need to achieve scale to achieve profitability, or to crowd out other competitors.  Scale is giving way to agility, speed and customer experience.  We can see this playing out with firms like Uber and AirBnB, which are far smaller from a scale or headcount perspective from their competitors.  Size - at least the size of the corporation - doesn't matter as much anymore.  Speed, agility and insight matter more.

Overcoming the legacy of scale

In the article I linked to above, the author is detailing the importance of the ecosystem over the importance of technologies like BlockChain.  His point is that big businesses routinely trip over themselves to understand the technologies that are emerging without thinking through the impact on the existing business models or the new business models that may emerge.  To a great extent, large corporations are prisoners in a jail of their own making.  For years they've built large and somewhat inflexible companies and cultures, and now, they find themselves unable to innovate or rework those structures and cultures.  They are stuck with what the author calls a "heritage of scale" that is hard to escape.

What does this shift suggest about innovation?

As virtually any company can enter almost any market in little or no time, relying on outsourced IT, Human Resources and other services, new companies will be able to explore and experiment with widely different business models.  When we combine that flexibility with the vast amounts of money being invested in AI, Blockchain, IoT and big data we can imagine that a significant number of new companies will emerge that will disrupt existing business processes and business models of existing corporate giants.

For the larger companies, it's time to completely rethink your strategy and what innovation can do to help you.  Rather than worry about scale, your innovation efforts should focus on what makes your organization fast, nimble, agile and focused on customer experience.  Don't try to solve everything, but select key opportunities and markets to experiment with new models, new processes and test new scaling experiments.  You may need to cannibalize your own offerings to do this, but given the minimal investments to enter many market sectors it makes sense to try.

For midsized companies, stop thinking about scale and start thinking about flexibility.  Getting bigger is less and less attractive.  Getting closer to the customer and creating new experiences and business models, and leveraging an emerging ecosystem is far more important.  Don't try to create everything - create new products, services and business models that are complementary to other offerings in the ecosystem.

I'll leave it to others to explain what this all means for startups, because how you look at an industry and where you find value will vary enormously.  Just know that the future will be won by those that are fast, agile, innovative and more open to working with an ecosystem, rather than those that try to own everything.

Corporate innovation must change

For far too many corporate innovators, innovation is about extending an existing product or service or perhaps creating a new, disruptive product or service.  Increasingly it's clear that corporate strategy must embrace an increasingly unscaled world where size matters less and speed and agility matters more.  This means that corporate strategy must change and more closely inform innovation strategy, so that more innovation effort goes into overcoming the legacy of scale, more innovation efforts go into working with an ecosystem and into changing the existing business model.

Exploring these ideas

The new book Unscaled deals with some of these ideas - illustrating the fact that scale is no longer a guaranteed advantage.  I co-wrote OutManeuver with a good friend, which explains why speed, agility, insight and innovation are the key competitive advantages in the future.  Thinking about emerging ecosystems and realizing that the cost for entering almost any market has fallen, it's clear that speed and agility will matter more than scale, and working with an ecosystem will matter more than trying to lock in a specific set of customers.

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posted by Jeffrey Phillips at 5:35 AM 0 comments

Friday, June 01, 2018

Innovation and the rapidly changing world of photography

We've reached a couple of interesting milestones in a very short period of time, and it behooves us to pay attention to the changes in what has been an important industry - photography.  For innovators, it's been easy to kick Kodak around, for having missed the transition to digital photography while owning many of the patents.  However, Kodak by itself isn't the whole story in the world of photography.

Today, Canon announced that it will no longer sell cameras that require film.  If the stories I've heard are true, they actually stopped making cameras that require film several years ago and have simply been selling off their inventory.  This of course follows on Kodak's decision to stop manufacturing film for most cameras, which occurred in 2009. 

The rapid advance of technology

Both Canon's exit and Kodak's exit from film are examples of the ever-accelerating pace of technology.  Canon has been manufacturing cameras for over 75 years, but the exit from the film camera business was rather sudden, tied to Kodak's exit from the film business.  Both companies had long and profitable runs from these original products, and both experienced a sudden and rapid transition.  Canon was able to shift from film cameras to digital cameras without too much damage, but Kodak struggled.  And here's an interesting point about both innovation and strategy.

Canon was concerned about capturing and reproducing images.  They weren't necessarily tied to a specific technology - firm or digital, either was fine for them.  Kodak was concerned about making as much profit as possible from film, and found it difficult to innovate away from the cash cow, even while they were developing patents around the digital camera.  This is a lesson about strategic intent and its opportunities or limits on innovation.  Strategy can either inform innovation or it can limit innovation.  Canon saw an opportunity to take its photography business from film to digital - and followed consumer preferences and technology advancement.  Kodak dug in its heels and paid the price.

Jobs to be Done

While I use a number of customer insight tools to discover needs, the Jobs to be Done model seems to be very relevant in the story of Canon and Kodak.  Canon understood the "JTBD" issue pretty well.  Clearly the job people wanted to do is to be able to capture images of family and friends quickly, and to share them quickly and easily, at a low cost.  Kodak interpreted that job in the framework of "film".  Canon interpreted that job in the framework of "flexibility" and created options for consumers.

With the advent of iPhones and then apps like Snapchat, it's clear that most photography has moved in an interesting direction - it has become more amateur in nature and more immediate.  People don't seem to care much about high definition photos as much as they care about taking a photo "now" and sharing it on social media "now", and that's not a job for film.

Two takeaways about Canon and Kodak

We can learn a lot about innovation from thinking about what's happened to film and the film camera, but two important innovation lessons are:
  1. Your strategy either accelerates innovation or it limits innovation.  Understanding how strategy is communicated and the scope or barriers your strategy creates for innovation is vital.  This is a big missing link in many organizations - aligning innovation to corporate or business line strategy.
  2. Understanding the job that the customer wants to do, and how that job is changing, is vital to sustain a competitive advantage.  Polaroid was probably closer to the right idea - take a photo and develop it on the fly - than we thought at the time.  If only they could have imagined how to make their photos digital and shareable. 
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posted by Jeffrey Phillips at 6:25 AM 0 comments