Tuesday, August 25, 2020

It's the end of the world as we know it, and I feel fine

 For those of you who were listening to radio and, yes, buying compact discs back in the 1990s, you may recognize the headline of this post as the title to an R.E.M song.  It also depicts what innovators and entrepreneurs should be thinking in the middle of this COVID epidemic.

Don't get me wrong - we cannot celebrate as thousands of people are dying and perhaps millions are contracting the diseases associated with the Corona virus.  But at the same time we should recognize that virtually every industry will be changed, some for a short time and some forever.  And in those impacts and changes live innovation opportunities.  For some businesses and organizations, this could quite literally be the end of the world.  But, as Schumpeter said, there is little new creation without requisite destruction.  Just in this case what is getting destroyed is outdated business models.

It's the end of...

Well, I could make a list, but lets look at a few examples.

Residential College

COVID is drawing attention to the high cost of residential college.  If you have to pay the same price to live at home and watch your professors (or in many cases adjuncts) teach classes as you would if you were on campus and in person, then what's campus life for?  And, more importantly, since some online universities like University of Phoenix and Southern New Hampshire University, and, yes, Liberty University, know how to educate people online, isn't a really credible four year online degree that costs less than say $20,000 a reality?  At a time when even state universities are seeing rising costs and questionable returns on residential campus programs, COVID has exposed the fact that there are a lot of overhead costs and inflation in the system that aren't adding value.  

Physical retail

Already under great strain before COVID, most retailers are facing a really difficult time because no one wants to go into stores, everyone can compare products and prices online and can often get a better price online.  Plus, free shipping.  The future of retailing will focus on very narrow niches, luxury items and goods that require a lot of in-person choice.  The larger and more diverse the retailer - with perhaps the exception of Wal-Mart or Target - will come under tremendous pressure.  Thanks to Amazon, you may be a bit late to this opportunity, but contrary to what many believe, Amazon still controls less than 5% of retail sales.  There is an opportunity in online retailing still.


Where will fashion go, when we can all work from home in our pajamas?  Of course we won't all stay at home forever, but as many fashion trends go, I think that many people will question why they spend so much on clothes, whether they go to work or stay home.  Just as fashion trends evolved - for example, men wore hats quite frequently in the 30s, 40s and 50s, only to move to a more hatless approach in the 60s and 70s - we will see new fashion trends and opportunities emerge.  One I am waiting for is the integration of the face mask into our fashion.  Just as the cravat and necktie have evolved over time, I think we'll see some morphing of the mask into a component or regular aspect of a garment.  Not to mention that gloves for both men and women may come back into fashion, for health reasons if not for appearance.

Fancy dining rooms and large entrance ways

If we are going to be spending more time at home, we will be spending more time on the house and more specifically the outfitting of the home.  More homes now need more office like equipment, more places of solitude for people packed in at home, and less formality and more usability.  We'll do more cooking at home, we'll consume even more content at home, and we may even bring back an idea from the 1960s and 70s - the wet bar - so we can mix our own drinks at home and pretend we are visiting the location establishment.  We already know that alcohol consumption is up during the pandemic, so many people may be developing man caves or locations in the house more conducive to making, mixing and drinking all that alcohol.

There's a huge opportunity for ...

Disease prevention

I saw a photo of students walking on campus at UNC in a medieval getup, dressed like plague doctors with long robes and a mask that included a beak.  While we may not go this far, I think there will be many products and services that address how to prevent the transmission of the disease. One idea in particular is a box at home, just outside the front door, to receive packages.  You may be thinking to prevent theft - which it could do, but I was thinking of a box equipped with UV light or some other means of disinfecting the box before it comes in the house, or wrapping shipping boxes in some sterile wrap or fabric to neutralize anything on the surface.

I think there may be a demand for products and services that help us transition from "outside" the house - whether that's people or equipment or purchases - to inside the house, much like astronauts returning to Earth.  

There will be an opportunity for more interactions to go "touchless" - for example, why can't I speak to my ATM rather than have to touch all the buttons that thousands of other people have touched?  Our aversion to touching surfaces in restaurants, ATMs, restrooms and so on will be far more profound than it is today, and there will be a lot of opportunities to address this.  Already we have touchless faucets and towel dispensers in restrooms.  Can touchless ATMs and gas pumps be far behind?

Medical services and information delivered beyond the doctor

In just a few years, you'll spend far more time at the pharmacy than you will at the doctor's office.  First, that's because going to a doctor is difficult and expensive, and increasingly many tests and simple procedures (flu shots) are available in the pharmacy.  As more and more tests become commoditized, WalGreens, CVS and others will be your first stop in the healthcare system.  And, since they have all the food, vitamins and health supplies right there in the store, you will often save a trip.  Insurance companies will encourage this because the services will be delivered in a low cost way, drug stores and pharmacies will see this as a loss leader to get you in to offer you products at higher margins.

In the midst of uncertainty is opportunity

I've just touched on a few ideas, but with the right incentive and good problem spotting, I think we'll see a wealth of new product, service and business model ideas emerging in the fall.  Some will solve the problems that are current, and some will identify trends and solve for shifts in consumer behavior and sentiment.  For example, when I received a "phone washer" as a gift a few years ago, I chuckled.  A nice gimmick but I rarely used it.  Since COVID, my wife and I use it every day.

What's even more interesting is that there is a fair amount of money out there looking to invest in good ideas.  The time is right for innovation, and innovators who can spot ideas and bring good solutions to market will have a good opportunity.  Strange as it may seem, this is a great time for innovation, however, I think only entrepreneurs and smaller organizations will be able to take advantage of the window.  Larger firms are simply trying to understand what's happening and cut costs to stay in business.

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posted by Jeffrey Phillips at 1:55 PM 0 comments

Wednesday, August 19, 2020

Innovation is a harsh mistress

I'm a big fan of science fiction.  There's really nothing more interesting to me than to think about how the future will unfold, and science fiction is a great way to project what may happen with society and technology in many different future settings.  I guess this is also why I always advocate for trend spotting and scenario planning.  If we can begin to understand how the future will unfold, then we can spot new needs and create new products before markets and consumers are even aware - skating to the place where the puck will be, as Gretzky would say.

All of which is a long introduction to my post for today.  One of my favorite authors is Robert Heinlein, who wrote a number of good Sci-Fi books, each of which had technical but more importantly societal considerations.  One of my favorites by Heinlein is The Moon is a Harsh Mistress, from which I've obviously borrowed much of my post title.  The book revolves around the idea that the Moon was populated as a prison colony, and over time an entire society grows up to the point where the Moon is somewhat autonomous and gaining power, and Earth isn't happy with the outcome, so Earth flexes its muscles and the Moon fights back the only way it can - by launching rocks into space that fall on the Earth.  Read the book - it's also one of the first places where "There ain't no such thing as a free lunch" or TANSTAAFL, was popularized.

What we learn about the inhabitants of the Moon is just how treacherous their lives are.  The Moon is a harsh mistress because it is an exceptionally difficult place to live.  One small mistake can kill you, and hundreds of other people.  Air is at a premium, water initially imported and then mined as ice.  Atmospheric pressure is maintained by pressure walls.  Unlike on Earth, where a simple mistake may cause a small injury, on the Moon a pierced suit or a gap in a pressure wall could cause catastrophic death.

OK, interesting, but what's this got to do with innovation?

Innovation work is a lot like living on the moon

Ok, so we aren't astronauts.  We don't require pressurized suits to do innovation work, but in many ways innovation faces the same amount of risk and uncertainty that life on the moon creates.  Let me explain some of the similarities.

1. Getting into orbit.  On Earth we live in a gravity well.  The physics are clear - you either give the rocket enough energy to clear the well and get into orbit, or it crashes.  There are no other options.  Anything less than enough energy to get into orbit is fatal.  The same is true when starting an innovation project.  There is a specific amount of energy and support necessary from senior management and the innovation team.  Anything less than that amount of support and energy will end in an innovation failure.

2.  Living in space or on the Moon.  While we take for granted our access to free air, available water, and an electromagnetic barrier that keeps harmful rays from hitting the Earth, none of those factors exists in space, or on the Moon.  The only way to sustain life on the Moon is to carry much of your provisions with you, and burrow under the surface to avoid harmful rays and terrible cold.  In an innovation project, this is also true.  You are undertaking an exercise into the corporate unknown, where decision making, policies, corporate culture and investments are scarce.  You'll need to pack it all in with you.  What's more, on the Moon and in an innovation activity, even a small, innocuous problem can kill.

3.  There's no quick fix.  On the Moon, if you run out of a key resource, there's no quick fix.  It takes time and costs money to send more supplies.  Think of the astronauts on Apollo 13 who needed to make an air filter from random parts just to survive.  And they weren't short of oxygen - just had too much carbon dioxide.  The same is true with innovation.  Due to the way we plan and staff innovation work, you'll get less people and funds than you need, and money and additional resources can be hard to acquire.  If something goes wrong with corporate innovation, the quick fix is to kill the project or reduce the scope.

4.  It's difficult to "return".  Astronauts who leave the Earth routinely describe the re-entry to the atmosphere as one of the most harrowing events.  A miss of just a few tenths of a degree means that the capsule will burn up on re-entry or bounce off of the Earth's atmosphere and continue on into space.  New ideas have the same challenge.  Even really good new ideas must run a gauntlet of timing, project priorities, favorite products, successful existing products and other issues simply to get accepted, much less implemented.  New ideas have a difficult time entering the existing product development process.

For those of you who have experience in corporate innovation, I think most of you will nod at my description of innovation work and its similarity to a trip to the Moon and back.  Anything other than a simple incremental change to existing products presents challenges and difficulties that make innovation difficult - but not unrewarding.

What's required for success is a strong Mission Control - a group of supporters who are convinced in the success of the mission, and who provide the right resources, governance and support necessary.  What's also required is a group of innovators who are dynamic and flexible, who can adjust to swift changes and shortages, who can adapt to circumstances while keeping the goals in mind.

I think innovation can be a harsh mistress, one we approach with care and planning, with the full support of a management team that understands the costs and risks.
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posted by Jeffrey Phillips at 6:06 AM 0 comments

Thursday, August 13, 2020

The important gap between capability and need

 I'll be writing occasionally for my friends at the Collective - a group focused on autonomy, mobility and the use of drones.  I think this group has an excellent opportunity to create new solutions and influence new products.  I've learned a lot this summer, especially about drones, because I bought one and started flying it, and my son interned with a drone company.

What we learned flying drones and viewing the imagery was the range of opportunities and solutions that could be created.  From being able to hover in place in very tight windows, looking down at (for instance) a roof mounted HVAC, or flying along a pipeline and inspecting for damage, drones promise a significant opportunity in many industries.

In my family, we discovered a new use for drones when we found that a contract logger, who was supposed to cut timber on an old family farm, had logged land that was "out of bounds" and damaged a creek bed as well.  Using a drone, we were able to record where the logger had illegally cut timber and share that with the Forestry Service and eventually use the video in a case against the logger.

But with all of this promise, there is still a big question.  The drone technology, its ability to fly almost anywhere, and increasingly fly autonomously, to carry items or record video, promises almost unlimited capabilities.  Which are important to customers, and which are customers willing to pay for?

The difference between a capability and a need

This is a classic issue in marketing and innovation.  Companies create new technologies that have a lot of capabilities.  A new product outstrips a previous product or service in key features.  A drone can fly down a pipeline at far less cost than a manned airplane or a driver in a vehicle.  These are "capabilities" that may drive benefits for the user.

What the drones haven't yet proven is if the markets actually need a better solution, and if drones are the "best" solution for needs that are currently met, or emerging unmet needs.  Here we start to address the ideas of the "jobs to be done" model of Clayton Christensen.  What "jobs" do loggers, pipeline companies, HVAC maintenance teams, mapping agencies and others need done?  When we combine the jobs and their "whole product" solutions in these specific industry needs, we can begin to ask - what can the drone do, what other capabilities are necessary for a whole product solution, and most importantly, is the drone solution and its whole product requirements as efficacious, as safe and less expensive than what people do today to solve these issues.

Note that even if the drone can do everything that existing solutions can do, there will still be the friction of change.  People who are used to a specific solution and have been using a solution for years are often slow to change, no matter how technologically superior a new solution is.  And, frankly, the drones offer a lot of promise, but much of their capabilities are still in the future.  In Raleigh, at WakeMed, there's been a program to examine using drones to fly drugs and possibly organs between hospitals.  While it has been a measured success, the drones are still limited in the distance they can fly and the weight they can safely carry, not to mention concerns of people on the ground who may fear items falling on them.  Regulations and human behavior often form a significant barrier to new technologies.

Innovators must cross the chasm

Drones and mobility have significant promise, but they must cross the chasm from early adopters in the market who are willing to accept limitations and service gaps.  The early majority on the other side of the chasm - the chasm between the 15% or so of the market that will adopt new technologies and the 80% or so that want whole products - are watching and waiting for whole product solutions, which will be tailored to industries and specific needs.  Capabilities are great, and will continue to evolve.  What's needed now are solutions that address very specific needs, and ready and willing regulatory and legislative bodies willing to take risks to advance new ideas.

The Collective will be part of the group that helps shift drones from early adopters to the early majority, based on standards, testing, whole product development and work with regulators and legislators.  I look forward to watching what they can do to develop the capabilities of drones into real solutions.

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posted by Jeffrey Phillips at 2:55 PM 0 comments