Innovation Should Be Elegant

The Elegant Solution is what Mathew May says companies should be after when they innovate based on his work over a 10 year period with Toyota. Simple is better. Elegant is best. There is an excellent executive summary of this book on ‘Change This’, if you want to get the key concepts, but I have summarized some of the items I felt where most influential. Also having worked at Toyota myself, I can attest to the forward thinking nature of this amazing company.

According to May, the elegant solution is one in which the optimal outcome is achieved with minimal expenditure of effort and expense. It is about value, not gadgetry, and it is about not losing site of the why behind the what.

Some other key thoughts to consider about elegant solutions:

• People don’t want products and services. They want solutions to problems.
• Elegant solutions embrace an overarching philosophy of doing far more with much less
• An elegant solution is recognized by its juxtaposition of simplicity and power.

Toyota has 3 primary principals of innovation that drive toward elegant solutions:

Ingenuity in craft: Ingenuity means free thinker. Companies don’t innovate, people do. How have you changed the way you work in the past week?
Pursuit of Perfection: The pursuit of perfection is not focused on achieving perfection, its focused on chasing it. Imperfection drives innovation.
Fit with Society: “Great innovation is great in large part because of context. Context separates invention from innovation. Context is like the frame in art. If the canvas doesn’t fit the frame, the whole thing doesn’t quite work well."

10 Ways identified to put these principals into practice

1. Let Learning Lead: To what degree is experimentation built into your core work processes?
2. Learn to See: How well do you understand the problems your customers face?
3. Design for today: Focus on clear and present needs. If your idea became a reality today, how well would it do?
4. Think in pictures: What opportunities exist to use images and visual references?
5. Capture the intangible: How do you connect emotionally with your customers?
6. Leverage the limits: Innovation demands exploiting limits. Which goals will stimulate new thinking?
7. Master the Tension: How can you generate creative tension?
8. Run the Numbers: What patterns can be investigated to challenge convention?
9. Make Kaisen Mandatory: Continuous improvement always. How do you sustain a steady flow of ideas?
10. Keep it Lean: Complexity destroys value. What elements of complexity would you customers love for you to remove?

If you find this interesting, I encourage you to read the manifesto and or buy the book to look for applications in your organization.

Marketing is Social

I was reading through a slide presentation posted by Stowe Boyd that he presented recently on social media . Although I didn't see/hear the actual presentation, one of the slides in the deck really jumped out at me, and I thought it would be worth posting here as we rethink the way business works in the new economy.
In essence, make marketing a social experience with your customers to build better, stronger relationships instead of focusing on how to sell them more of your product offering through gimics. In todays economy consumers have more choice than ever before. This choice coupled with decreased brand loyalty and ever faster comoditization will drive companies to become better listeners. Treating customers like partners through authentic interactions will create lasting relationships and company longevity.

Innovation and the Pace of Change

The term futurist sometimes seems strange to me with the ever increasing pace of change. the future used to be about decades into the future, and now it may only be months or years. Futurist, Jim Carroll's often has thoughts on the future of future of business. He has recently listed 10 truths about the future of business, however given the pace of change, these are actually trends that you need to consider now!

(I have trimmed down some of Jim's commentary and added a bit of my own.)

• It’s incredibly fast: Product life cycles are collapsing, and comoditization happens faster than ever.
  
• It involves a huge adaptability gap: Change management will cease to be an topic for projects or workshops, but a constant reality.
  
• It has a huge instantaneity: The average consumer scans 12 feet of shelf space per second. Most news becomes old hat within 36 hours of emerging. We live in the era of the rapid idea-cycle.
  
• It hits you most when you don’t expect it: Every organization must deal with two realities: the rapid emergence of new technologies, the sudden adoption of old-hat ideas.
  
• It's being defined by renegades: Industry expatriates are redefining and innovating through their own startups. See my post on thrill seekers.
  
• It involves partnership: Think 'business ecosystems' - not just 'my' business.
  
• It involves intensity: Running your business at video-game intensity. (Thanks Jim for the great metaphor!)
  
• It’s bigger than you think: Don't just think inside the boundaries of your industry - be prepared for competition from companies that you had never thought would be in that space.
  
• It involves innovation intensity: With rapid change, everyone in an organization must innovate. Innovation is no longer a responsibility for the few.
  
• It comes from experiential capital: Learn and relearn. Corporate equity isn't just money: it's the cumulative experience and knowledge of the team.
  

After reading these, do not dwell on how they will impact your current business. It is much more prudent to simply being thinking about how and when you will shift your business model, strategy and processes to handle these. Turn them into opportunities instead of threats.

Twitter For Marketing

On a previous post about Twitter, I stated that people would begin to come up with ways to utilize this tool for business purposes, and today I came across a post on the blog Influential Interactive Marketing discussing 4 interesting ways in which twitter could be used for marketing.

1. Capture the live pulse of an event
2. Deepen a static experience through live commentary
3. Facilitate collaborative watching
4. Add a new dimension to promotions

To me, rethinking the use of Twitter for specific applications such as these will help it move from being a passing fad into something that will provide enjoyment, community and business value.

Citizen Marketing

The concept of citizen marketing is born out of a desire for connection and sharing coupled with the complete democratization of production tools, which has created an amateur culture according to Ben McConnell who spoke today at an annual entrepreneur week event called Kickstart, as part of his Citizen Marketers book tour. Overall it was an interesting and lively discussion on the changing face of marketing which has obviously been kept current as the tour has progressed due to the incorporation of recent events and videos.

After the book first came out talking about the 4 F categories of citizen marketers (Firecrackers, Filters, Fanatics and Facilitators), I sensed a likeness to the categories identified in the Tipping Point (Maven's, Connectors and Salesmen). I blogged about it here. Although the book is still on my 'to read' list, after today's talk I still feel these parallels are interesting and applicable.

Besides an interesting discussion on the 4F's a few other key learnings I took away from today's talk:

• Build Word of Mouth marketing into the DNA of your business
• You are your Google results
• The importance of the 3 V's when you think about your customers - Voice, Vote, Vocation
• Google is more than a Search Engine - It is a reputation management system
• New media is now a picking grounds for traditional media to find stories, instead of the other way around.
• Ben is a pillar of fashion with his cool shoes and sweet t-shirt:)

Thanks Ben for a great talk today and it was a pleasure to meet you in person. Good luck with the rest of the tour!

Cultural Markets

I was forwarded an interesting article today from the New York Times on Cumulative Advantage in marketplace success. Its an interesting read about social influence on creation of 'hits'. It is based on a a study done that claims that reliable hit prediction is impossible, no matter how much you know.

Conventional marketing wisdom holds that predicting success in cultural markets is mostly a matter of anticipating the preferences of the millions of individual people who participate in them. From this common-sense observation, it follows that if the experts could only figure out what it was about, say, the music, songwriting and packaging of Norah Jones that appealed to so many fans, they ought to be able to replicate it at will. And indeed that’s pretty much what they try to do. That they fail so frequently implies either that they aren’t studying their own successes carefully enough or that they are not paying sufficiently close attention to the changing preferences of their audience.

The common-sense view, however, makes a big assumption: that when people make decisions about what they like, they do so independently of one another. But people almost never make decisions independently — in part because the world abounds with so many choices that we have little hope of ever finding what we want on our own; in part because we are never really sure what we want anyway; and in part because what we often want is not so much to experience the “best” of everything as it is to experience the same things as other people and thereby also experience the benefits of sharing.

The concepts discussed in this article have a very similar ring to the concept of social epidemics put forth by Malcolm Gladwell in his book The Tipping Point, however, the interesting part about this study is how 'hit' outcome would never be the same if repeated due to changing conditions and the and the influence of the (cultural) market itself.

If markets not only reveal our preferences but also modify them, then the relation between what we want now and what we wanted before — or what we will want in the future — becomes deeply ambiguous.

For business's it doesn't mean we should stop trying to predict future results or measure information from the past, but it is important to be aware of cultural market effects and the relative impact on your product or service.

Change is Inevitable

Amazing video entitled 'Shift happens' . This is why 'Kinetic shift' is is important. Shift the way you and your business move.

Stealth Disruptive Innovation

Clayton M. Christensen and Michael E. Raynor describes two types of innovation in their book "The innovators Solution": 'Sustaining Innovation' and 'Disruptive Innovation'.

Sustaining innovation is an innovation that brings to market a product or service that a company in the market could sell for higher margins to its best customers. In other words, sustaining innovation brings a better product into the market.

A disruptive innovation brings to market a product not as good as the products in the current market, and so it cannot be sold to the mainstream customers. But it is simple and it is more affordable. It takes root in an undemanding portion of the market, then improves from that simple beginning to intercept with the needs of customers in the mainstream later.

the authors contend that the odds overwhelmingly favor the incumbent leaders of the industry in battles of sustaining innovation, whereas the entrants have the upper hand for disruptive innovation.
(if you find this concept interesting, I recommend reading the book. You can also get a short overview in this interview with the author.)

As an entrepreneur this would naturally steer you towards creating disruptive innovations, because if you agree with the concepts in the book, you have a high likely of getting clobbered if you try and build a business with a sustaining innovation. The problem with focusing on disruptive innovations is that often entrepreneurs often miss the mark about what customers needed often due to a lack of knowledge of a particular business/industry or issues that customers face in that space. Obviously by having members of your team that have a background in that space will help (and it is unlikely you will get much credence/funding/support anyhow without industry knowledge on your team), but this still does not guarantee success.

However in some cases it might be possible to do both and this could be a very successful path. Going to market as sustaining innovation to build out the right feature set, and then ultimately turning to a disruptive model for growth. Takes whats happening in the housing market. Internet companies are creating all sorts of tools and services that are currently sustaining innovations for real-estate agents/companies. Solutions help agents post houses (information, pictures, movies), find houses faster and more efficiently for their clients, set up agreements between buyers and sellers etc. These solutions aren't perfect, however through usage the products are being refined, improved and integrated until ultimately a large majority of consumers will begin to wonder why they really need a real estate agent? (Early adopters already thing this) Now a sustaining innovation has become a disruptive innovation.

Often I think this happens somewhat by accident, but the creative entrant might be able to drive this path from the start, depending on the industry/space they are playing in. Industry, and more importantly how forward thinking the members of that industry are will impact greatly on the success of this strategy. If, however you can make it work, it will ensure an efficient focus of your resources on building/embedding the right product initially before shifting to a disruptive model for growth.

Delivery vs Discovery

The past couple weeks have been difficult in terms of getting blog posts up:) I have a bunch of ideas queued up with handwritten notes etc, but not time to type them. One of my colleagues is in India visiting our offshore team, and so evenings are prime time for work discussions, leaving little time for blogging. However I have still been sifting through my feeds and came across this post by Tim Haskins on Content Discovery vs Delivery Systems.

He defines 7 key aspects of content discovery systems:

1. Content discoveries looks like solutions in the eyes of the customer
2. Content discoveries come at a perfect time
3. Content discoveries serve the context of the customer
4. Content discoveries get shared by the customers
5. Content discoveries involve an adventure
6. Content discoveries put emphasis on how the content is used
7. Content discoveries transform the customer's experience

Like all aspects of business we need to transition from archaic models where we deliver something 'to' a customer to ones where the customer drives the transaction, and ultimately is more satisfied with the result. Are you a delivery company or a discovery company?

When Information is Endless...

A thought I had...

Advertising has much higher influence when there is no other way to gather information about a product or service. Finding information is no longer an issue in todays hyper-connected world, so where does that leave advertising?

How VC's Make Money

For all the entrepreneurs out there. A magnificently simple quote on how VC's make money, from Peter Rip, General Partner at Cross Link Capital:

"VC's have always made money at finding the ideal point of friction between the Present and the Future. Profits accumulate in the gap between What Is and What Is Possible".

Brilliant!

This quote was made in reference to his view on the decline in Web 2.o investment. Its not that Web 2.0 companies and services aren't valuable, but that Web 2.0 is now "firmly in the category of What is".

Service Innovation?

Business week has put out an article on concept being called Service Innovation. The general concept of service innovation isn't new, but now that there is a consortium of top tech companies (IBM, Cisco, Oracle etc) creating what will be know as the Service Research and Innovation Initiative. Jim Spohrer, the director of Service Research at IBM uses a classic example to describe this hidden and not widely recognized term:

"The average person knows the story of Thomas Edison, the inventor and innovator who came up with the light bulb. People don't tend to think of the related service innovations—getting light bulbs into houses and schools, setting prices for the electricity services to keep them lit. That's all service innovation."

Most people equate innovation with production innovation. There are in fact several categories, or ways to classify innovation, however, to me the concept of service innovation seems like just a specific type or slice of business model innovation. I read through the article and found more information about the consortium but not a lot on the title concept of the article, so I thought I would put some thought into it.

First reset your thinking on the concept of a business model. There are many definitions, and miss-uses for the term but the best description I have found is from Alex Osterwalder at Arvetica. There is also a great diagram. In short Alex defines a business model as:

A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams.

Next, you need to understand what business model innovation is. Here is a nice short description of business model innovation from Business Innovation website.

In some cases the innovation rests not in the technology or product or service, but in the business model itself. Business model is a broad-stroke picture of how an innovative concept will create economic value for the ultimate user, for the firm and its shareholders and partners. It considers the infrastructure required to move the product/service to the market in a manner that it both easy and convenient for customers and profitable for the firm.

If you want to understand more about business model innovation, here are a couple more excellent (free) resources: Global CEO Study from IBM, Permanent Innovation e-book by Langdon Morris at Innovation Labs.

Where business model innovation focuses on many aspects across the entire value stream service innovation seems to focus in not only on specific components of the business model focused on delivering value to the companies customer. So is it yet another new concept - likely not, but is it important in the new economy? Definitely!

After thinking about how they (vaguely) described service innovation, I tried to think about experiences I have had in this space and came up with one while working at Toyota Financial Service.

For a period of time a few years back, I was part of a representative team in the early stages of what I would call a competitive consortium service innovation initiative. The official name for the initiative was/is Route One. It was a partnership agreement between financing arms of the top 4 auto manufacturers in North America. (GMAC, Ford Financial, Chrysler Financial and Toyota Financial Services). Think about this for a moment and you will understand the magnitude and difficulties with something like this. The goal was to create a single interface for auto dealerships to finance with not only the big 4 but with any other Financing agency that wanted to join. The dealer could send financing applications out to any participating members through a single interface. The system was to also interface with their internal/in-house dealer management systems, and also help manage the application all the way through contract once a financier was selected.

A great win for dealers but also for participating members. The founders of course split the cost of building the app. (much less than if they tried to build some or all of the components themselves), and would actually receive revenues from the application at a point when the initiative was revenue generating. All participating members would gain from having potential access to new financing deals, and financiers would be forced to compete based of service and finance offerings rather than forcing the dealers to choose upfront. Ultimately it would mean a better deal for the end customer.

To me this felt like a great example of service (and business model) innovation. I always find working through my own examples helps me evolve my thinking on a specific topic. I would be interested in hearing other examples of how readers felt they were involved with service innovation.