Innovation Tribune eng

"What it takes to innovate"

Fortune magazine last issue (March 7th, 2005) is dedicated to "The world's most admired companies". Fortune took the opportunity to ask Hay Group to conduct a special survey on innovation. Hay Group polled 160 companies on the subject of innovation, which is one of the nine attributes on which the world's most admired companies rankings are based.

The three best rated companies on the innovation topic are :

• FedEx
• Procter & Gamble
• Alcoa

"Innovation is not something you can simply invoke or turn on or off" says Hays Group vice president Mel Stark. Hays study suggests instead it takes a stable environment made of discipline and organisation.

Full article can be read at : www.fortune.com/fortune/mostadmired/articles/0,15114,1032462,00.html

Startups: The Next Wave

An interesting data from Business Week: half the startups funded during the 1999-2000 period are still alive! Half of them! So contrary to what many believe, this period wasn't all wasted time and money, but allowed for the launch of real businesses. Now that the burst of the bubble is behind them, it's take-off time. Of course, everybody talk about Google, the poster child of this period, but behind Google are a host of smaller players that are lining up for the IPOs in 2005 and 2006. Future stars are called TellMe Networks (voice application software), Vonage (Voice over IP), as well as Force10 Networks, Peribit Networks, and Calix in network equipment; of course the security business is hot and startups such as Fortinet, CipherTrust, and ArcSight are thriving. This "surviving" rate illustrates the old VC saying that the best startups are built during the bear market.
Read the BW article: http://www.businessweek.com/magazine/content/05_10/b3923117_mz020.htm

Financial Times - Mastering innovation

If you're not a subscriber, the Financial Times can hardly be read on the web ; probably 90% of the articles are for subscribers only. Those of us who share a special interest for innovation are all lucky, because ALL of the articles of last fall "Mastering Innovation" report are available for free !So if you've missed it, there's no excuse for not reading it yet...

Let us give you an overview.

Tim Thorne's article on "The dark side of innovation" (or the traps which prevent companies to deliver on innovation), is a must read. Tim's company (Edengene) interviewed 62 European large businesses (turnover in excess of £1billion) and his first-hand anecdotes are terrific, and sometimes terrifiyng... and tell a lot about how far we still have to go regarding innovation management. One of the CEO they interviewed said : "My innovative products don't need a marketing budget - after all, a good idea sells itself" ! Another admitted he had spent £1 BILLION the previous year on acquisitions - with mixed results - but doubted he had spent £1 MILLION on funding new innovations ! Another quote explains why companies focus on incremental innovations : "Everything we do must have a payback within 12 months" !

Donald Sull and Alejandro Ruelas-Gossi ("The art of innovating on a shoestring") will let you discover how a few developing country companies excelled at innovation ; a wise reading for adepts of "technology-push" only.

John Bessant's article "More than the sum of its parts" is a good introduction to Henry Chesbrough's concept of "open innovation" ; you will discover why Procter & Gamble uses "Connect and Develop" for what the rest of the world calls "R&D". An article to post on the wall of companies who suffer the NIH syndrom (Not Invented Here).

And finally, from Daniel Muzyka's article ("The search for opportunity"), a quote from Winston Churchill for companies who still have difficulties tolerating innovation failures : "Success is the ability to go from one failure to another with no loss of enthusiam"...

The "Mastering Innovation" articles can be read at :

http://news.ft.com/cms/6f0b3526-07e3-11d9-9673-00000e2511c8.html

"Innovation squared"

On the 9th of December 2004, we already mentioned Jim Collin's bright article "The ultimate creation", published by the Drucker Foundation in "Leading for innovation", probably the best collection of articles on innovation, with a list of authors which looks like the "who's who" of management academia ; Clayton M. Christensen, Henry Mintzberg, Rosabeth Moss Kanter, Charles Handy, Arie de Geus... Jim Collins does not have the audience he deserves in France, and we suspect in Europe as well, although his last book, "Good to great" sold at more than 2 millions hardcover copies, and is still #1 on the long-running best-sellers list of Business Week (books which have been on the best-seller list for more than two years...). As Philippe worked last year at Insead on his next book, you can count on us for a few additionnal posts on Collins work !

What is Jim's point in "The ultimate creation" ?

Jim Collins makes the distinction between "product innovation" and "social innovation", which he also calls "innovation squared". "Product innovation" implies your company either is a start-up trying to push a new concept, or is an etablished company trying to launch the next "big innovation". Jim Collins examples show that the first category (pionner status) does not mean sustainable economic success ; Diners Club, Visicalc are well known examples of companies which had trouble going beyond the pionner status, and to keep the leadership on the market they created. Second category is not in an easier situation ; companies looking for the next "silver bullet" seldom make it ; Apple's i-pod is an exception, and Apple's previous attempt, the Newton failure, make Apple a perfect example of a company focusing on product innovation.

For Collins, only "social innovation" can garantee a regular, and much more powerful, economic success. Discovering that the world most read management author thinks of "social innovation" as "the ultimate creation" will probably come as a shock to our French readers, but that's the way it is ! It's 3M people getting 15% "bootleg time" to work on the topics they like, Edison creating the concept of R&D lab, Procter & Gamble introducing employee ownership at the end of the XIXth century, or Henry Ford revolutionnizing owners/workers relationships.

If you try to understand 3M successes, you might think its innovation capabilities have a lot to do with luck. Art Fry, the co-inventor of the post-it explained that he had a creative moment in 1974 while singing in a church choir ; he struggled to mark the pages with slips of paper (which of course flew away at the wrong time) and though of bookmarks with adhesive. At that time already, 3M had a longstanding pro-innovation culture, and it translated into the "15 percent rule" which allows all technical people to devote 15% of their time on projects of their own choosing. So Art Fry was able to spend time on his idea, and he discussed with Spence Silver who had invented the right kind of adhesive. The post-it bestseller came out of this process ; it was the "15% rule", the social innovation, which made the post-it a reality, not really sheer luck.

Another time, another industry ; cars at the beginning of the century. Although the case is not mentionned by Jim, we trust he would follow us on this one. Some people think of Henry Ford as the inventor of the car, which is quite generous, as cars were already an old story at the beginning of the XXth century (the first successfull attemp of a motorised vehicle dates back to 1760, even if it used a different energy source). Others think Ford was successful because he mastered the "process innovation" ; by introducing the assembly line, he triggered the car industry economic breakthough. Henry Ford was the first to produce a car with a price tag of $850 in 1908 at a time when most other vehicles sold at around $2000. They're closer to reality, but the ultimate explanation of Ford's success is somewhere else. The assembly line at its beginning was a failure ; by the end of 1913, there were only 100 workers left at Ford factory for 964 people hired ! The key of Ford's success was a social innovation. On January 5th 1914, he called three reporters to his Detroit plant and had his long-time partner James Couzens read the following statement : "The Ford Motor Company, the greatest and most succesful automobile company in the world, will, on January 12, inaugurate the greatest revolution in the matter of rewards for its workers even known to the industrial world. At one stroke, it will reduce the hours of labour from nine to eight, and add to every man's pay a share of the profit of the house. The smallest to be received by a man 22 years old and upwards will be $5 a day". The average worker's pay at the time was less than half that amount, and the Wall Street Journal called Ford a criminal.

Let's avoid misunderstanding here ; we do not support hopeless approaches such as paternalism (which tries to assimilate employees as physical assets), or uniform state-led social innovation (which triggers no improvment for company-employee relationships, because companies are forced by an external agent to implement new rules).

3M, Ford, and many other companies (Procter & Gamble, Siemens...) went beyond product innovation ; they implemented social innovation and sent a powerful message to the men and women who took part to its successes. This message was ; "You're more than employees".

Probably the contrary of today's quoted companies ; on one hand they desperatly need ambition and growth, but on the other hand the management regularly sends the same message : "You're disposables".

When is the last time you've talked to a friend who told you "My company's management is great" ?... If a company cannot rely on its employees dedication, going for genius product innovations (silver bullets) is fine, if the company can reach it one day... But if you want to build an "innovation clock", such as 3M, an organisation which relentlessly comes up with innovations again and again, you have to go for social innovation, which is first about getting the best out of the men and women who devote a part of their live to the organisation.

Innovation diffusion

In the December issue of Technology Review (MIT's magazine of innovation) was the last column of Michael Schrage. Michael is co-director of the MIT Media Lab's E-Markets Initiative and a senior adviser to MIT¹s Security Studies Program.

As he puts it, he started the monthly Technology Review column to "explore the real guts and viscera of the innovation process - not the polite entrepreneurial fictions about how brilliant ideas ultimatly charm the reluctant marketplaces". After three years, Michael's conclusion is simple, but bright : "innovation isn't what innovators do ; it's what customers and clients adopt".

Although Michael does not mention it, I cannot help but think that the internet fits exactly into this approach. What a difference between the DARPA's original purpose (to secure exchange of information through a computer network) and today's World Wide Web !

On the failure side, a good example is the WAP (Wireless Application Protocol) ? In 1997, when Unwired Planet, Motorola, Ericsson and Nokia creates the WAP forum, they envisioned millions of users shortly after the introduction. Mobile manufacturers and telecom companies pourred billions to grow WAP services as a mass market. But WAP services were poorly designed, and they never really took off.  It took another three years to fix all the problems and see successful WAP mobile services.

But Michael Schrage's approach is not valid for human-friendly innovations only. There's a dark side to innovation, and Michael is unfortunatly right when he claims that "the ability of tiny groups of fanatics to kill large groups of innocents has grown by orders of magnitude over the last fifty years".

Schrage leaves us with a wise conclusion : "The diffusion of innovation is about the diffusion of choice - both good and bad. The more choices you have, the more your values matter".

The column can be read at http://www.technologyreview.com/articles/04/12/mag_toc.asp but you have to be a subscriber). Michael Schrage's page can be found at http://ebusiness.mit.edu/schrage/.

When R&D creates start-ups

Do you know what is the characteristic shared by companies such as Yahoo, Google, Silicon Graphics, Kelkoo, Ilog, Lycos, Digital Equipement, Genetech, Chiron, Biogen, and Soitec ?

All these companies grew up out of universities or R&D centres (Yahoo, Google and Silicon Graphics started at Stanford, Kelkoo and Ilog at the Inria (the French IT research center), Lycos at Carnegie Mellon, Digital Equipment at the MIT, Genetech and Chiron at the San Francisco University of California, Biogen at Harvard, and Soitec at the Grenoble CEA (the French Atomic Energy organisation).

In a special issue of Expansion Management Review, a leading managerial review, titled "The unknown entrepreneur" (December 2004), Philippe Mustar, professor at the Ecole Nationale supérieure des Mines in Paris presents his findings regarding the research-generated start-ups. Available studies converge and show an ever increasing number of spin-offs from academia. A crucial stake for developed economies, and Philippe Mustar helps us to understand how it works.

Jim Collins "The ultimate creation"

The article mentioned here appeared in a book published by the Peter F. Drucker Foundation ("Leading for innovation", Josey-Bass 2002). In this chapter, Jim Collins stands aloof from a quite ordinary managerial practice : focusing all the company resources on the "next big innovation", the "silver bullet" which is going to strike the competition dead.

To defend his case, Jim Collins reminds us of all the innovation pioneers who fill the corporate graveyards ; Burroughs computers in the 60s were far more innovative than IBM's, the civil aircraft was not invented by Boeing, but by De Havilland, the first spreadsheet was called VisiCalc, not Excel, and so on…

For Jim Collins, the ultimate form of innovation, or "innovation squared", is managerial innovation, which he even calls "social innovation". It's Procter & Gamble which initiates employee profit sharing as early as the end of the 19^th century, approximately one century before the practice becomes common. In the end, the options raised by Collins are "Are you focusing on the next big innovation", or "Are you trying to build an organisation which stimulates innovation" ?

Under internet pressure three centuries of mass media vanish

In Enjeux-Les Echos (December 2004), a fascinating interview of Jay Rosen, professor of journalism at New York University, and the man behind the blog "PressThink – Ghost of democracy in the media machine" (http://journalism.nyu.edu/pubzone/weblogs/pressthink/). Jay Rosen was invited at Davos 2004 to talk about the weblog revolution.

Before the Internet, newspapers, radio and television emerged and found their place without threatening each other. But Jay Rosen thinks that two major changes are under way :

• the end of the financial barrier to entry: anyone today can produce his own music/video/written content and make it available over the internet;
• the end of the editorial barrier: chief editors who acted as media temple key holders do not control anything anymore when bloggers can publish freely and instantly.

For Jay Rosen, weblogs represent a huge challenge for media groups, but the latter still ignore them. Since 2002 for instance, the New-York Times has more readers through its internet version than through the paper version, but the newspaper still thinks of itself as a paper media with an Internet extension.

Seen from France, how could such thesis not remind us of the financial troubles of historic media such as Le Monde or Liberation ?