Strategy. Innovation. Brand.
Innovation: Ideas That Generate Ideas
It’s not a reef. It’s a platform.
I’ve spent the past several days in the Minnesota woods at a client’s executive retreat. The client is a software company that has made a number of acquisitions over the past few years. A good portion of the discussion at the retreat focused on how to build a platform that can: 1) integrate the various acquisitions; 2) deliver a common interface; 3) simplify the support load; 4) provide a foundation for developing new functionality more quickly.
The discussion got me thinking about platforms — innovations that generate innovations. I’ve written a lot about innovation over the past year and especially the role of serendipity and mashup thinking. I’ve generally focused, however, on innovations as an end result. In other words, we adopt certain behaviors and modes of thinking and the result is an innovation. We then repeat the process and (hopefully) get another innovation. Creating the innovation essentially ends the process.
Platform thinking, on the other hand, can lead us to innovations that spawn innovations. As Steven Johnson points out, platforms abound in the natural world. Johnson builds an extended metaphor around the coral reef — a platform for unimaginably rich plant and animal life. Once the process gets started (in an otherwise barren sea), the reef builds a virtuous circle that attracts and facilitates multiple life forms. Part of the secret is collaboration. The CO2 that one animal gives off as waste becomes the building block for another animal’s home. Similarly, oxygen is a waste product for some reef denizens but the lifeblood of others.
In the human world, the Internet is probably the best recent example of a platform. The Internet creates both serendipity (we get to meet lots of people) and mashup thinking (we can easily find lots of new ideas to mash together). The Internet also takes care of a lot of the dirty work of information sharing. Just as the coral reef makes it easy for many animals to find a home, the Internet makes it easy for people like me to create websites and share information. We often hear the metaphor of researchers standing on the shoulders of giants. My website is standing on the shoulders of a very rich (and essentially free) technology stack.
Platform thinking is innovation taken to the next step. We think about how to create something that creates something. I’m generally a proponent of free markets, but Johnson makes as strong argument that the most fundamental platforms come from public agencies. Certainly, the Internet did not come from market-driven competition. Rather, it resulted from the collaboration of many specialists from many disciplines in an open environment. That’s pretty much like a coral reef.
So, what’s the next platform? I’m guessing that it’s a mashup of: 1) the human body, 2) secure communications, and 3) Internet sensors. We already have millions of Internet sensors monitoring the environment — everything from air pressure, to ocean salinity, to volcanic pressures. The next frontier could well be sensing human health conditions. We already have wearable condition monitors. For instance, friends of mine run a small company in Denver called Alcohol Monitoring. They provide a wearable device, with secure communications, that alerts probation officers when one of their wards has been drinking. Within a decade, I’d guess that health condition monitors will migrate from outside the body to inside the body. They’ll provide critical data that can help us foresee — and forestall — health crises. They’ll also provide a platform for a huge wave of new ideas, services, and fortunes. Sounds like a coral reef.
Will Sweden Ever Build a Las Vegas? Not On Your Lagom.
You wanted to see a Swedish supermodel?
Suellen and I lived in Stockholm for three years and generally loved it. The winters are long and dark but the people are sunny and positive. Taxes are high but services are great. And they write some of the best murder mysteries in the world. Here are some things we’ve found out about Sweden, Scandinavia (Sweden, Denmark, and Norway) and the Nordic countries (Scandinavia plus Iceland and Finland).
They’re innovative — Sweden produces more patents per capita than any other country. Finland is second; Denmark is sixth. The U.S is ninth. In the Bloomberg Survey of Innovative Countries, the U.S. is first. Finland in fourth; Sweden is fifth; Denmark is ninth.
They’re happy — The Danes are the happiest people in the world. Finland is second; Norway is third; Sweden is seventh. The U.S. is 11th.
They’re free (from prison) — Sweden has about 70 people in prison per 100,000 population. The U.S. has 700.
Women are close to equal — Sweden is widely considered the best place in the world for a woman to pursue a career. Iceland usually ranks first in surveys of overall gender equality. Even in the Nordics, however, men still make more money than women.
They’re healthy — On the Bloomberg Survey of the World’s Healthiest Countries, Sweden ranks ninth. Finland is 22nd and Denmark is 26th. The U.S. is 33rd.
They get great vacations — typically six weeks of paid vacation plus various national holidays. If you want to take four weeks in a row, your company is obligated to permit it.
They’re egalitarian — the Nordic countries rank among the most egalitarian in the world in most measures of income distribution.
They’re well governed — according to The Economist‘s ranking of the best governed nations in the world, the top four are: Sweden, Denmark, Finland, and Norway. The U.S. is eighth.
What explains all this? I think some of it is the Swedish concept of lagom. We have no equivalent word in English but lagom is usually translated as “just enough” or “just the right amount, not too much”. Here are two examples:
The Swedish soccer (football) team played another nation and won by a score of 5 to 0. The Swedish coach worried aloud, saying, “I wish we had won by 2 to 0. We humiliated them. It’s not lagom. They’ll be looking for revenge the next time.” Have you ever heard any coach, anywhere in the world wishing they had won by less?
Suellen got into a long conversation with some Swedish friends about public education. Somehow, the subject of special programs for gifted and talented kids in the U.S. came up. The Swedes were dumbfounded. “Why on earth,” they asked, “would you invest extra money to help kids who already have all the advantages? If they’re so gifted and talented, they’ll figure out how to succeed.” The Swedish way would be to invest more in kids who are below the norm to help them come up to the middle. That’s lagom.
Could lagom explain Sweden’s (and the Nordics’) successes? Probably not all of them. But it does provide a sense of balance and fair play that lubricates the country’s society and economy. It also prompts a questioning attitude — Why are we doing what we’re doing? What does it lead to? What do we hope to achieve? The answer is not just more. It’s more balance. Perhaps that’s why this week’s issue of The Economist claims that Sweden is leading a “quiet revolution”, “thinking the unthinkable”, and fundamentally re-inventing capitalism. It’s a great read — just click here.
Social Media for Business Leaders
As a marketing guy, I understand (sort of) the marketing aspects of social media. If you can start a conversation — and keep it interesting — you can engage your market in ways that are impossible with “interruption marketing”. You can exchange ideas, gather suggestions, support charities, and engage in positive social activities. Along the way, you can mention your products. You offer something of interest (or utility) and the products tag along for the ride.
But social media is not just about marketing. Executives should be able to use social media to enhance both internal and external communication. Yet, I haven’t found many examples in the literature. Fortunately, McKinsey just published an interesting case study based on GE’s experience. The authors, who are GE leaders themselves, point out that GE is not a “digital native” and its experiences may, therefore, be relevant to a wide range of organizations. They then outline six social media skills that all leaders need to learn. The first three are personal; the last three are strategic or organizational.
Producer — creating compelling content. Digital video tools are now widely available and easy to use. Even busy senior executives can weave them into their communications. As compared to traditional top-down communications, the emphasis shifts from high production quality to authenticity. The goal is to invite participation and collaboration. Speaking plainly and telling stories in an authentic voice invites participation much better than a highly produced video.
Distributor — leveraging dissemination dynamics. Instead of sending a message and expecting it be consumed, you now send a message and expect it to be mashed up. A successful social message will be picked up by people at all levels of the organization, commented on, “recontextualized”, and forwarded along. You want this to happen which means giving up a significant amount of control — not always an easy concept for executives. You also want to build up a followership within the organization long before you need it.
Recipient — managing communication overflow. We’re already drowning in information. Why take on social media? Because it’s more credible than top-down media. By learning to use filters effectively, you can also use social media to manage the flow of information to and from your desk. You should practice when and how to respond to postings and tweets. You don’t need to respond frequently but you do need to respond thoughtfully.
Advisor and orchestrator — driving strategic social media utilization. Fundamentally, executives need to promote the use of social media and guide it to maturity. Your company may be enthusiastic but inexperienced. Or you may have leaders who wish to avoid it altogether. A good leader can harness the enthusiasm of “digital natives” and even use them as “reverse mentors” to build capabilities within the organization.
Architect — creating an enabling organizational infrastructure. On the one hand, you want to encourage collaboration and free exchange. On the other hand, you need some rules. It helps if you have well-established values of integrity, collaboration, and transparency. If your company hasn’t established these values, it’s time to get started. Social media will arise in your organization whether you’re ready or not.
Analyst — staying ahead of the curve. As your organization masters social media, something new will emerge. Perhaps, it’s the Internet of Things. As I’ve noted before, this could help us reduce health care costs. It could also have huge implications for your organization — both good and bad. Better stay awake.
And what do you get if your company’s leaders master these skills? The authors say it best: “We are convinced that organizations that … master … organizational media literacy will have a brighter future. They will be more creative, innovative, and agile. They will attract and retain better talent, as well as tap deeper into the capabilities and ideas of their employees and stakeholders.”
Want to Be More Innovative? Move to Boulder. Or Sweden.
In an earlier post, I pointed out that cities generate much more than their “fair” share of innovations. The reason is simple: there’s more opportunity to run into new ideas, concepts, and people. It turns out that innovation is even more concentrated than I thought. Just 20 of the America’s 370 metropolitan statistical areas — accounting for 34% of the population — produce 63% of the nation’s patents. The top five patent-producing metropolises in the U.S. (in order) are: San Jose, CA, Burlington, VT, Rochester, MN, Corvallis, OR, and Boulder, CO. These areas account for 12% of the U.S. population but 30% of American patents.
The finding comes from a new Brooking’s Institute report on patents. Some other highlights:
- The pace of patenting in the U.S. continues to climb. The growth of patent applications slowed after the IT bubble burst but is now at an all time high.
- Though the pace has increased, the U.S. ranks ninth in the world in terms of patents per capita. The countries ahead of the U.S are (in order): Sweden, Finland, Switzerland, Israel, the Netherlands, Denmark, Germany, and Japan. (Those pesky Scandinavians are at the top again).
- The average patent is worth about $500,000 in direct market value — and much more as it diffuses through the economy.
- The last period of great patent growth in the United States fell between the Civil War and the early 20th century. We “democratized” invention during that period — with many patents coming from blue-collar workers who were not professional researchers. Today, patents are more complicated, more difficult and expensive to obtain, and require more education. The ability to create patents is concentrated in fewer organizations in fewer places.
- The price per patent is rising in the U.S.. From 1953 to 1974, $1.8 million in R&D spending generated one patent. Since 1975, the cost has been $3.5 million (in inflation adjusted dollars).
- Almost half (48%) of the patents granted in the U.S. from 2006 through 2010 could be grouped into the Big Ten categories: Communications, Computer Software, Semiconductors, Computer Hardware, Power Systems, Electrical Systems, Biotech, Measuring & Testing, Information Storage, Transportation. The top five categories account for slightly more than 30% of all patents.
- Patent ownership has become broader and more competitive. Of the top ten patent producing companies from 1976 to 1980, only four were in the top 10 in 2011-2012: IBM, GE, GM, and AT&T.
- The federal government dominated R&D spending up to approximately 1970. By the late 1970s, the federal government share fell below half. In 2009, the government share of R&D spending was about one-third. Roughly 60% of federal R&D spending goes to private companies, 30% goes to universities (including university-administered national labs).
- Metropolitan areas that lead in patent production also lead the nation in terms of of productivity growth. They also enhance local employment opportunities and generate a disproportionate number of initial public offerings (IPOs).
The Brooking Report provides ample evidence that the research and innovation that lead to patents has a dramatic impact on local economies, employment, and growth. Bottom line: if you want your city to grow, don’t build a football stadium. Build a research university. Or move to Boulder.
Circuses and Oceans
Red Circus or Blue Ocean?
The first time we went to Cirque de Soleil, we took Elliot and a bunch of his 12-year-old buddies. After all, circuses are for kids, right? As it turned out, Suellen and I enjoyed the show just as much — maybe more — than the kids did. I didn’t expect that.
Cirque de Soleil is an excellent example of a mashup innovation. Traditional circuses were for kids. I remember going to Ringling Brothers with my folks. I was dazzled by Uno — the man who could do a handstand on one finger. My parents were troupers but I don’t think they were dazzled. They took me because … well, circuses are for kids.
On the other hand, Broadway musicals are from grownups. They have a bit of a story to follow, they have some conflict, perhaps some mushy stuff, and a resolution. Most of all they have singing. This is where young kids start squirming. I mean, really … how many seven-year-olds want to know that when you’re a Jet, you’re Jet all the way?
The genius of Cirque de Soleil is that it mashes up the traditional circus — get the kids — with Broadway musicals — bring the grownups, too. There’s enough of a story to appeal to Mom and Dad and enough cool (and weird) stuff to appeal to seven-year-olds. It’s family entertainment for modern city dwellers.
While Cirque is a great mashup story, it may be more than that. According to W. Chan Kim and Renee Mauborgne, it’s also a great example of a Blue Ocean Strategy. For Kim and Mauborgne, there are red oceans and blue oceans. A red ocean is full of the blood of competitive strife — it’s red in tooth and claw. The red ocean represents a market of a given size. It’s not going to get any bigger so the only way for one company to grow is to make another company shrink. Strategy is all about defeating the competition rather than winning the customer. As Kim and Mauborgne point out, the market for traditional circuses was very much a red ocean.
A blue ocean, on the other hand, allows you to jump beyond the competition. You create something new and, in doing so, you create a new market where your traditional competitors are irrelevant. The authors offer some great examples of blue ocean strategies and some intriguing and very instructive tips for how to develop one. For Kim and Mauborgne, the genius of Cirque de Soleil is that they have leapt out of the red ocean and into a blue ocean where they rule the waves. Indeed, they’re the only ship in sight.
I’ll report on more blue ocean examples in future posts. At the same time, however, I have a nagging feeling that a blue ocean is not that different from the classic marketing strategy of creating a new category. Once upon a time, for instance, sedans were practical but not much fun to drive. (For my British readers, what Americans call a sedan, you call a saloon). On the other hand, sports cars were fun to drive but not very practical. Then BMW mashed up the two categories and created a sports sedan — practical yet fun to drive. Was the BMW sports sedan a new category or a blue ocean? I’ll report more on that in the future. No matter what you call it, however, mashups are a great way to get there.
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