Archive for the ‘Innovation’ Category

Amazon Changes the Game

May 20th

So what are the implications of Amazon’s moves to deliver their own products?

First, lets be clear.  This is not about delivery alone.  Second, Amazon is dead serious.

In January 2014 Amazon filed a patent application illustrated by this graphic.

 

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With this illustration Amazon describers a world of forward positioned warehouses and rapid fulfillment of eCommerce orders.

For those who don’t shop on the Amazon site, the company has long ago earned the title of The Everything Store as described in the recent book by Brad Stone.  You can buy everything there – from books and music to televisions to lawn furniture.

Some of these goods are more likely to be purchased if the consumer can get them the same day or the next day.   And for the retailer, the knowledge of who who will want which product when they can get it immediately is more valuable than the return from the sale itself.

What’s more, the market is not limited to the impulse end of the online eCommerce market that you can see today.   When you can fulfill products overnight, the scale of the marketplace expands to the Consumer Package Goods market – a multi trillion dollar marketplace.

Walmart knows this and they are experimenting with delivery themselves.  Soon every retailer in the Consumer Package Goods market is going to be confronted with the reality of the change that Amazon has anticipated.

The picture above anticipates another point as well – for those competitors who can reshape themselves as collaborators in a radically changing market, there may be new opportunities that have not been factored into the conventional forecasts.  No one should miss, for example, the fact that the U.S. Postal Service’s Sunday delivery volume from Amazon is exploding.  Where will Amazon deliver its own products and where will it rely on competitor-collaborators?

The answer to the question of where will the future of delivery be? will depend on a larger picture than one that is limited to the supply chain.  The future is going to be defined by seeing the whole board.

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Crafting Innovation for a Transparent, Interactive Marketplace

April 26th

While there is widespread acceptance of the idea that in times that demand transformational change innovation has become an important, even critical management capability.  And the notion that innovation needs to anticipate both investments in sustaining technologies and investment in new disruptive business models – the ideas first advanced by Professor Clayton Christensen of Harvard Business School in his book, the Innovator’s Dilemma – have received widespread support as well.  But the approaches that are often suggested for engaging the forces of disruptive change may need to be revised to anticipate the age of social media.

The problem is not a surprising one.  No one is in favor of disruptive change when it undermines them.  Long-time line managers who have developed their careers in a business model  favoring one kind of profile are naturally likely to resist investing in a new business model that will put them at a disadvantage and possibly even bring in leadership from a new generation or new group with a different skill set. S it’s not surprising that an old-line institution such as the Postal Service might have managers who would resist a new era of digital media. But what might be even more surprising is the subtleties within the disciplines inside the institution – those who have made their careers improving the delivery of letter mail, resisting new patterns that would emphasize parcel delivery and integration of the traditionally independent institution with new e-commerce providers.

But if the customers are going to act as Christianson suggests that they will in his exposition of the shift too disruptive technologies, then there’s a need to refine strategies for him bracing the disruptive future.

Christianson suggests three models in an article written in Harvard business review quote “on innovation”, a Harvard business review paperback copyright 2001, “meeting the challenge of disruptive change”, Clayton M Christiansen and Michael Overdorf first there’s the skunk works that develops the new technologies in a laboratory set apart from the traditional enterprise. Second there’s the division within the company that said apart from others and finally there’s the strategy of acquiring the technology that allows for disruptive change.

Each of these three strategies might be seen as a “sequestering strategy” where the new investments are protected from interference from the traditional line managers. The problem with relying on sequestering strategies alone is that organizations are increasingly transparent and services require integration. Both features of the network economy are likely to make it almost impossible to protect the alternative vision of the future from the traditional enterprise. This is good news for entrepreneurs but it is going to be challenging for large complex organizations. How do you invest in alternative visions of the future without being stopped?

One pathway that’ worth a new look may be to revisit the notion of open innovation. Clayton Christianson writes about open innovation in his blog (Wednesday, September 19, 2012) he relates his experience at the annual meeting of the Academy of management (AoM). He describes a session on open innovation featuring Allan Afuah from Carnegie Mellon, Karim Lakhani and Michel Tushman from HBS, and Todd Zenger from Washington University in St. Louis.

“Open innovation is a method of innovation that has arisen in recent years which allows companies to essentially source some of their innovation efforts to outside parties, often through contests where individuals compete to develop the best solution to the innovation challenge the company has set forth,” Christensen writes.

He describes the way in which such challenges work and notes the work of InnoCentive to help companies to “clearly define the innovation challenges they are facing” and develop platforms where challenges can be held.  And Christensen notes the way that the changing marketplace has played a key role in this development,

“The rise of social media in recent years has been a significant enabler of open innovation, as it allows firms to develop strong communities of external innovators eager to solve problems.”

What’s interesting about Christensen’s review of the open innovation panel is that he both acknowledges the benefits of open innovation that offer some promise to work past the obstacles to the sequestering strategies that are created in transparent interactive enterprise and at the same time he recognizes some of the limitations,

“Open innovation can be an excellent means for innovating around specific technical challenges.  In contrast, open innovation may be a less effective means for bigger architectural or business model innovations.”

Opening the innovation process but at the same time given the challenge and the intended solution precise definition offers an important potential path around difficulties that will become increasingly apparent in the future enterprise.

Your Personal Brand

April 15th

You need to be ready with your own concept of your personal brand because it anchors your mission.  In the modern market, where everyone can be their own publisher, no one will have time to wait for you to think it up; nor can you sustain authenticity if you shoot from the hip and aim haphazardly. 

I learned the hard way.

We were at the high-end British Columbia ski resort, Whistler, at a conference on the global postal industry. In retrospect, I should have been more appreciative of my surroundings. This was living large. But at the time it just seemed as though it was a nice dinner at another economics conference.

Some friends and colleagues and I got up to leave to go back to the hotel. Others were going to move to the bar.  Suddenly a colleague from Swiss Post for whom I have great respect looked up and said,

“Are you leaving? We haven’t gotten a chance to talk this week.  Tell me, what’s your brand?”

I must’ve looked puzzled.

“…So that I can tell others about what you’re doing these days,” he explained. It didn’t help. I didn’t have an elevator pitch about my brand.

Of course I knew what he was talking about. At Harvard Business School the marketing professors used to talk about brand management as one of the great breakthrough management innovations that has come from the American marketplace.  And when I was at Market Opinion Research, we used to talk about the rise of new brands, especially in political policy analysis.

And I knew the concept of having a personal brand.  I remember Tom Peters (of In Search of Excellence, Tom Peters, Robert Waterman. 1982) talking about personal brands and personal mission statements in the 1980s.  But the point was that here I was being asked for my brand and this was probably exactly the setting and exactly the questioner that I would have chosen to illustrate the need to have a personal brand.

The Triumvirate

The Eiger, the Monk and the Jungfrau

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 Not only was this  a respected colleague, an executive with Swiss Post, but he was also collaborating in setting up a Center on Innovation in Lausanne.  You could not have picked a questioner who would have been closer to the heart of my work and interests.

I have watched as the concept of personal branding has moved from the self help section of the book store to a central concept among the leadership books in the on-line book store.  In these times, there is a practical necessity to communicating with brands, a concept that’s not far from SEO (search engine optimization).  But even more importantly, if you are going to communicate in symbols, you need to connect the short hand to your moral compass or you will consign yourself to living in the froth.

For me, the symbol of the Eiger the Monk and the Jungfrau anchors the recognition that my work on the growing activism of the stakeholders and their constituencies was in fact illustrating an emerging dynamic that will be especially important to future leaders of transformation.

Figure 1 The Transformation Model

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It’s important to see that in the successful, thriving enterprise,  points of Strategic Inflection will be replaced by the innovation that is traced by a second curve.

But the constituencies are going to have significantly different agendas on the upslope and on the down slope.

Leaders have spent their careers learning how to advance with one set of assumptions and then, one day, while colleagues and forecasters are telling them that the change is not really coming, it does.

In the transformational setting, there will be a need to rethink the givens.   Far smoother transformations will come for those who can anticipate the way that expectations and priorities will change as growth is replaced by decline and then replaced again by new growth.

 

Amazon and the Future of Retail

March 15th

There have been industry sources talking about Amazon’s plans for revolutionizing fulfillment for some time.  Amazon’s founder, Jeff Bezos, contributed to the hype and speculation when he appeared on 60 Minutes and said that the future of delivery could easily include drones.  I would have ignored, or at least discounted the speculation until I saw the following from Amazon’s Patent filing.

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Amazon Patent Filing

Seeing the seriousness with which Amazon is working on anticipatory shipping, reopens a series of questions:

  • What will be the demand for same day and next day delivery from Amazon’s 55 fulfillment Centers?
  • Is Amazon on the edge of making major acquisitions in the delivery and fulfillment business?
  • Is the “demand/shipping” algorithm a critical competitive concept?

There’s no question that the dynamics of the future of the fulfillment market are describing a potential sea change in the nature of retail.  The question is whether the predictive analytics and the anticipatory shipping are simply the latest nuance in the commerce market or do they represent something more fundamental in the creation of a utility like structure.

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Centering Transformation with Innovation

February 14th

Triumvirate

PART II:

Innovation 

The vision of a new future is essential to transformation. In fact, the transformation process is, at its core, the journey from one state that is facing decline to a new and better existence.

Innovation is the process that you have to rely upon to create a focal point for such a vision of the future. For it to be reliable, your innovation process has to become a proven method where you have confidence that you can invest resources and produce expected results in a predictable timeframe.

Yet, even as innovation is being discussed more frequently by the leaders of colleges everywhere and its dynamics are becoming better understood, many leaders have come to recognize that innovation often must be disruptive. Incremental changes that are made to sustain the traditional enterprise and the traditions of the past are not likely to be equal to the scope of the transformation that will be needed. In many organizations, as stakeholders gain greater voice, disruptive innovation will be difficult to manage unless it is crafted through open dialogue that brings all the stakeholders into the conversation.

➢ Do you have a shared vision of an innovative future?

➢ Is the innovation process a trusted and reliable one that will produce predictable outcomes in the time that you need them?

➢ Will the innovation process that you have today produce results that will be equal to the scope of the challenges that you face?

➢ Is the innovation likely to be broad enough? Is it going to be disruptive of the traditions or distressful for the stakeholders who will have to support it?

In the modern transparent enterprise, it’s unlikely that disruptive innovation can be kept secret and sequestered—more likely it will have to be open and the stakeholders will have to be invited to participate in order to let it proceed at all.

NEXT:

FORMULATING SUCCESSFUL STRATEGY BY FINDING THE CREATIVE BALANCE

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How Will You Measure Your Life?

September 15th

Professor Clayton Christiansen of Harvard Business School virtually created a mini industry with his books and articles and media following the success of his book, The Innovators Dilemma. He may not have anticipated that he would have another powerful impact nearly a decade later when he wrote blog posts, an article and then a book entitled how will you measure your life? In both cases is timing was extraordinary.

As a professor at Harvard Business School, Christiansen was interested in the question why do successful managers, those who do all the right things and listen to their customers, run into trouble and often move from success to failure in changing markets?

What his research showed was that listening to your customers may be a virtue in normal times but in competitive technology driven industries it often leads to the fallacy of continuing to improve a traditional product by investing in sustaining technologies while competitors may be investing in nurturing disruptive alternatives. His insights lead the iconic technology pioneer and head of Intel, Andrew Grove to radically alter his direction. The head of GE wrote about disrupting himself.

Christiansen had a message for the leaders of big, complex organizations like Intel and GE at a time when technology was forcing them to rethink their fundamental directions. His strategies offered a pathway to those who saw the need for innovation and investing in disruptive futures but who faced all of the normal resistance from traditionalists.

But interestingly, his second message a decade later that everyone needed to think about how they were going to measure their lives came at an equally powerful time. Just as technology revolution stress tested the best management teams in the late 90s, a decade later, the world had begun to recognize that organizations had ceased to maintain their patterns of lifetime employment and individuals were far less loyal to careers in one enterprise – even the seeming lifetime employment of places like the Postal Service began to seem far less secure.

If success would not be defined by ascending the corporate, or law firm ladder, Individuals needed to revisit the traditional ways in which success would be measured. Christensen was speaking to many who were beginning to explore the existential uncertainties of such a marketplace.

Christianson teaches a course on innovation at the Harvard business school. In his last class, after studying models of successful entrepreneurs, he turns the focus around and asks the class to consider how they will measure themselves. In his articles, he tells several poignant personal stories about how his values and his professional and personal life have interacted at key points in his life.

He tells the story of having to miss the last basketball game of the tournament well he was a Rhodes Scholar and playing basketball at Oxford. He had made a personal commitment to his faith and the game had been scheduled for a Sunday. By refusing to play on Sunday he was clearly letting his team down and yet to this day he believes that his decision not to play (his conscience was eased when the team won without him) was one of the most important of his life. He had committed to the importance of standing by principle.

Later, as a Professor and increasingly famous business writer, he was invited by Andrew Grove to come and present his thinking at Intel. Grove said:

Look, stuff has happened. We have only 10 minutes for you. Tell us what your model of disruption means for Intel.” I said that I couldn’t—that I needed a full 30 minutes to explain the model, because only with it as context would any comments about Intel make sense. Ten minutes into my explanation, Grove interrupted: “Look, I’ve got your model. Just tell us what it means for Intel.”

Christiansen writes

I’ve thought about that a million times since. If I had been suckered into telling Andy Grove what he should think about the microprocessor business, I’d have been killed. But instead of telling him what to think, I taught him how to think—and then he reached what I felt was the correct decision on his own.

This experience that grew from standing by his principles was a defining moment for him in which he came to recognize that his personal capacity to have an impact in the world would be through teaching and influencing others to through his insights bringing them to act on their own.

What has become interesting to me in studying change settings has been the importance of clarity in the leadership message. The new media has created a 360 degree perspective on leaders. Apart from the way that Christensen’s question touches on the core insecurities of changing times, it also serves as a challenge to future leaders to define their personal leadership statement and to sustain it in the face of challenge.

The Chief Innovation Officer

May 19th

In April of 2012 the Senate passed a bill (S. 1789) after two days of floor debate that would seek to reform the broken business model of the U.S. Postal Service.  The bill contained an interesting proposal to create a Chief Innovation Officer.

At a Conference on Research into Regulated Industries I presented the attached paper that argues that this is a good idea that will be rendered ineffective by the current thinking that would seek to “regulate” innovation initiatives on a case by case basis.  To ask a government regulator such as the Postal Regulatory Commission to review market research that sought to “prove” that a new product or service was in the public interest or that the public wanted to have the USPS deliver the service in advance is a standard that even the great innovators of Silicon Valley could not meet.

To give innovation a chance, there is a need to think about it more broadly, to see its interconnections and to better define the mission of the USPS in the modern marketplace.  If the purpose of the postal service is to “bind the nation together”, as the law says, and to “provide service to all communities” there will be a need to give the institution the opportunity to pay for this service.  Innovation should be a core part of this aspiration, but the vehicle should be opened up to public-private partnership and restructured to make it successful.

The Power of Co-Creation

October 17th

After shutting down communications to take the time to focus on writing Democratizing Transformation: New Rules for 21st Century Leaders, I knew that it was time to go live again and to share what I have learned.  But where to draw the line? When do you stop reading and writing and start sharing?  Then I spent the morning with Francis-Gouillart and his sponsors from PRTM, a consulting firm that has specialized in operational consulting.  PRTM is well known to those who specialize in subjects like supply chain management and strategic sourcing.

Francis Gouillart and his co-author Venkat Ramaswamy of the Michigan Business School have written an interesting book on the Power of Co-creation. The co-creation of value is a concept that has been given increasing attention since it became clear that Web 2.0 was one of the products of the Internet revolution.  Just as some media were declaring an end to the Internet bubble, it became clear that eBay and uTube and Google maps were something new.  Platforms were being created where the users were creating the value through their contributions to the collective good.

So the early spotters of new trends such as Charles Firestone at the Aspin Institute organized conferences.  But of course, as well-informed professionals gathered to consider the new value of co-creation, some of its problems became apparent.  Motivation is not often symmetrical.  Intellectual property is ambiguous when two parties are creating it.  The list of problems with co-creation goes on.

In the pendulum swing of ideas, co-creation of value had come and receded before many people had the opportunity to think about what it might mean for them.

What Francis Gouillart and PRTM have seen however is that co-creation offers the opportunity to open the value chain to new partnerships an alliances.  So motivation is asymmetrical.  Buyers and sellers may not have balanced motivation.  There may be other opportunities in a world in which handoffs don’t go from hand to hand.  A time for right brain thinkers if there ever was one!  Time to come back on-line.

Jumping the Shark

April 28th

So I was talking to a postal aficionado friend about the issues that the USPS is facing.  We were having one of those conversations that would have been intelligible to a about 50 people involving the timing of regulators, the implications for policy proposals, the effect on rates, the result for markets, the unintended consequences…then we would change an assumption and cycle through the variables again.   Scenario planning for wonks.

This particular colleague and I have been having these conversations for 10 years.   The problems of the posts are only getting worse.  Much worse.

I always listen to him carefully.  I had asked him the most baffling question of all about 5 years ago.  “Don’t the customers understand what they are going to do to the postal service, the drive train of their livelihood, if they keep going with these retirement payments?”  I had asked.

He said “well you saw it in the reaction to your talk”

[This was a then recent speech about putting the phrase “the regulator shall” into a law.  I was arguing that the customers should be careful about what they wished for.  If you start a regulator down the path of killing an agency, as the British and others have found, you eventually succeed.  And then what?]

He said.   “Maybe they don’t care,” to which I replied, “no one is that mad.”

“Maybe you are thinking about this wrong,” my friend suggested.  “Maybe they know what’s going to happen and they don’t want to be the last man holding the bag.  Maybe risking killing off the institution on which they depend is less of a problem than having it die slowly with enormous debts that they will have to pay off.”

I remember stopping in my tracks with one of those “of course…” thoughts.

So I always listen.

I was explaining that the Senate Governmental Affairs Committee had asked the Postmaster General what he would do with the $75 billion dollars and he answered that if they got the money “they would be OK for a long time.”

I explained in defense of his answer that various Senators had asked him a lot of the same questions and it was late in the afternoon.   I knew he had a better answer and he was being more polite than I would have been able to be.

“Do you think that Snailmail has just jumped the shark? “ he asked and I knew that I was at one of those moments of recognition again, but not for the reason that he might have had in mind.

Jumping the shark refers to the exact moment when you know that something (your television show or anything else) has gone past the peak and its all downhill from here.

Fonzie

From Happy Days

Paramount Pictures

In a 1977 episode that began the fifth season, Henry Winkler (“Fonzie”) water-skis in Santa Monica and encounters a shark.  The critics and the fans found this moment to be such a lame effort to save the franchise that they have agreed for years that this was the moment when they knew it was all over.

There is an argument to be made that when an industry can no longer envision how it would spend a windfall, (even if it deserves the windfall) it may well have jumped the shark.

For the record, it’s useful to note that it wasn’t over for Happy Days by a longshot. The studio owned Happy Days and once it ended its prime time run it made the real money in syndication.

Congress and the FCC had sought to protect “local access” by allowing local stations to have prime television time (technically the time just before prime time under what were called the “Broadcast Rules.”)  Local affiliates of the Nntworks discovered that they could buy rights to show favorite television shows like Happy Days as “counter programming” to the network television news and make a fortune in advertising sales.  The studios may have preferred to have a show end once they had enough episodes of a popular franchise to make serious money in syndication.

The result of this regulatory scheme (the Financial Interest and Syndication Rule’s multibillion dollar syndication market) was no doubt not exactly the consequence that had been intended.  But it was in it’s own way a market solution to the question of what should local television affiliate do for the citizen/viewers?

Is the lesson that there is life after jumping the shark and perhaps it’s time to get on with finding out what it is?  We can see that the current business model is not likely to be sustainable.  The postal service is already going through rapid, even radical change.  But so far, all with an effort to preserve the way things have “always been.”  Whether they have always been the same is beside the point.

Perhaps its time to anticipate what kind of a national institution we want to see, what services we want it to provide for our democracy and how we will pay for them; especially now that we have seen the shark.

Design Thinking and 21st Century Leadership Skills

April 16th

Garth Saloner, the Dean of Stanford Business School was interviewed by Lenny Mendonca in the McKinsey Quarterly and explained that at Stanford Business School, as they think about educating the next generation of business leaders, that their focus in a world without borders has moved from the hard skills of accounting, finance and supply chain management to the softer skills related to leadership.

In a world without borders, where the management of global enterprise or even global projects is taken as a given, there is a growing need to train managers who are skilled in encouraging collaboration.

The harder skills are a given. Saloner refers to them as a type of “hygiene.” His focus has turned to leading groups in collaboration where analytic thinking is critical, to communications (especially writing) and to education in the global marketplace. Stanford requires students to work abroad in countries where they have no prior experience.

Innovation is especially prized in a world that is inventing new ways to do things.

The thing that is starting to blossom as an approach and as an idea in universities with business schools as a partner is a whole area of what folks call design thinking. And that’s really the creative process of identifying a need but then working with the customers, through a process of rapid prototyping, to figure out how to develop a product or to solve their needs.