A PRESCRIPTION FOR BUSINESS INNOVATION – PART ONE

Introduction:  Why I’m Here

My modest objective in this presentation is first, to tell you some new, interesting and useful things about innovation, and, second, to persuade you that innovation is the most important determinant of every business’ success, and perhaps even the quality of our lives. I want to convince you that in your business, whether it employs one person or one million, innovation is probably the solution to whatever is currently keeping you awake at night — whether that be sales growth, cost control, customer satisfaction, employee retention, or maximizing shareholder value.

And if you, like me, spend some of your sleepless hours worrying about things more altruistic than your personal and business success, I want to convince you that innovation is probably also the solution to most of the problems that have befallen our suffering planet, in part because past innovations have created many of these problems.

And finally, if I’m successful in this evangelical task, I want you to leave today not only with renewed hope about the future of your company and our world, but with some new tools to make innovation happen in your business.

I would like to ask you to listen to these ideas with an open mind, suspend briefly your disbelief, and give this your full attention. If this was that easy to explain, someone much smarter than I would have done it years ago.

One: Learning from our past: How Need Drives Innovation

The advent of a new millennium has recently given many business, political and economic thinkers pause to consider what will be, as most put it, the ‘Next Big Thing’:

• A New Economy Forum sponsored by Credit Suisse First Boston attempted to develop a ‘synthesis’ of leading thinkers’ innovation models that might answer that question.
• Forward-thinking publications like Fast Company and Wired have presented alternative visions of the future from some extraordinary minds in many different disciplines.
• And conferences of world political, social and business leaders like the Davos World Economic Forum try to grapple with the bigger questions of how the holders of power can make the world a better place, while helping out their particular stakeholders in the process.

The catch-phrases of these business-driven thought leadership events are not new: competitive advantage, sustainable development, the connected knowledge economy, globalization, convergence, digitization, moving at the speed of thought. What is new is that there are now three divergent models being used to predict our future, fighting for audience attention (the names assigned to them are mine):

1. Acceleration Model: The future will be a continuation of the recent past, only much faster
2. Chaos Model: The future will be utterly unlike the past, driven by radically new and discontinuous events
3. Evolutionary Model: The future will be, like the past, a continuous series of mostly predictable changes

From the perspective of business innovation this matters because almost everyone agrees that the successful businesses of the future will be complex, adaptive, agile, proactive, and creative — they will not wait for market demands to change them, but will instead continuously reinvent their companies, anticipate future demands, and make strategic, risky, value-creating investments and decisions, what John Kotter calls Leading Change. In order to do this — to make intelligent decisions and investments before demand is articulated, to view risk-taking and the creation of future options for action as essential, not foolhardy — requires at least some consensus about ‘where the future is headed’. Selecting one of the above three theories about the future is an important start in doing so.

Technophiles who favour the Acceleration Model tend to be infatuated with artifacts of the last thirty years: more digital, faster, smaller, lighter. Advocates of the Chaos Model, on the other hand, believe there are no rules for our brave new world of the 21st century. Their advice for business and other leaders is to be opportunistic and think short-term.

I lean towards the Evolutionary Model. I believe that using an understanding of the past, with the right perspective, can help businesses anticipate the future with exceptional clarity and probability of success. There are two reasons I hold this belief, and they form the basis for much of the rest of this presentation:

1. Technology is Not Evil: Technology was, is, and always will be, about improving the quality of human life (though it has had some disastrous, unintended consequences), and
2. People Change Reluctantly: People change much more slowly than technology, and ultimately won’t accept, adopt, or pay for any technology that they aren’t yet ready for, or which doesn’t fill a real human need.

The report of the 1999 Credit Suisse First Boston New Economy Forum draws together some very powerful innovation models, into a single synthesized model that can be used to explain how technologies have impacted society and civilization since it began about thirty millennia ago:

 Figure One: How Fundamental Needs spawn Innovations & Technologies
(Adapted from Credit Suisse First Boston New Economy Forum 1999 Synthesis)

According to this model, innovations like crop cultivation, the printing press, and the harnessing of solar energy, have always arisen in response to an urgent human need — overcoming the sudden food scarcity after the Ice Age, bringing literacy to the masses, and solving the energy crisis respectively in these three examples. Technologies are applications of these innovations. The intriguing organic-looking ovals for each technology are also from the Credit Suisse Synthesis, which proposes are technologies are best developed using the following process:

 Figure Two: Development Process for Technologies
(from Credit Suisse First Boston New Economy Forum 1999 Synthesis)

Let’s now take a look at this synthesis model in more detail, to test whether it represents the way in which historical innovations have occurred, and then what this might tell us about innovations of the future.

Two: Man’s Earliest Innovations: A Brief History of Technology

The first humans to walk on our planet, according to most anthropologists, were not the mighty hunters most of us might picture. In fact we were particularly disadvantaged, lacking both keen senses and a hide adapted to changing climates and weather. As a result, early humans were scavengers, ignominiously surviving off the leftovers of creatures with better innate hunting ‘equipment’. In the first scene of 2001: A Space Odyssey, Kubrick & Clarke hypothesize that a carrion bone was the first human tool. Marshall McLuhan explained in his book Understanding Media that this early human was using the bone, this very first tool or technology, as an extension of his hand, giving it strength, reach and durability his hand alone did not have. McLuhan argued that all technologies are extensions of the human body and the human senses, and it is these technologies that have allowed the poor, badly-pelted, sensory-deprived human species to buck Darwin’s odds and survive.

So picture our poor shivering proto-human looking among the bones of a wolf’s recent meal for new tools beside the greasy bone, and thinking, in true McLuhanesque and 20th century economics terms: ‘If the bone as an extension of my hand helps me to compensate for my competitive disadvantage in the hunter-gatherer marketplace, why can I not use other tools similarly? Then, lacking the appropriate scientific training but still intoxicated over his first innovation, he or she comes across a dead wolf and considers the following applications of this technological insight:

1. If I put the wolf’s head on my head, will I gain the wolf’s acute senses, wiles and powers? (Not that different from the thinking applied many centuries later by the Ford Motor Company in the naming of cars and design of hood ornaments after various fierce animals)
2. If I eat the dead wolf, will I gain the wolf’s acute senses, wiles and powers? (Many cultures still eat powdered horn and animal genitalia based on this ‘logic’)
3. If I strap a live wolf to myself, will the wolf and I become one creature, with both the wolf’s senses, wiles and powers and my brilliant and innovative mind?

Of course, the correct answer is (c), which, except for the use of a leash or harness instead of a tight strap, remains one of the most important technologies in our short human history: animal domestication. Interestingly, the development of a non-choking animal harness, and a stirrup for riding larger animals, took centuries, according to a review in the Economist of the last millennium’s greatest inventions. What’s more, it occurred first in China, possibly enabling their civilization to develop much more quickly than Western civilization, until, for reasons only hinted at in the Economist , China suddenly stopped developing new technologies in the 15th century.

Without animal domestication and crop cultivation, we as a species might well not have survived to come up with newer and more sophisticated innovations like the wheel, paper and the computer.

Three: Six Principles about the Innovation Process

The first humans used precisely the process shown in Figure Two to develop and ‘commercialize’ the technology applications of the innovations of animal domestication and crop cultivation. It is the same commercialization process taught in business schools today. However, the success of the process is only as good as the idea, the innovation, that lies at its front end. Business schools are actually very good at explaining the recipe, but they, and most educational and business institutions, are absolutely terrible at teaching people how to find the essential new ingredients — the ‘grey matter’ at the left side of Figure Two, the ideas & innovations that make the recipe work. The problem isn’t a scarcity of good ideas either — it is the lack of rigour and investment in infrastructure to surface, capture, develop and qualify new ideas prior to commercialization.

Figure Two also recognizes that many innovations and technologies are derived from other innovations and technologies, and often come from applying an idea or a technology from one application domain, or from nature, to an unrelated application domain. The BBC/Discovery program Connections made this point very powerfully, and its author James Burke continues to develop both examples of such non-obvious connections, and exercises to help us learn to discover more — in essence, to become more innovative. Burke’s latest book explains how a problem with the irrigation of Italian gardens led to the invention of the carburetor, for example.

Furthermore, Figure Two acknowledges the importance of the story in the successful commercialization of innovations. It is hard to pick up a business book or attend a business conference these days without being lectured on the importance of story-telling, but the idea is neither new nor complicated: Stories convey the context for the application, they explain how it can be used in the user’s or developer’s day to day life. Knowledge transfer is an essential precondition to commercialization. The easiest way to transfer knowledge, i.e. to explain or persuade, is to do so in a way that lets the learner internalize what they are hearing i.e. to fit it into their own mental models of how things work. And the simplest way to enable internalization is by telling a story, be it a Utopia or Future State Vision, a parable with a built in lesson, or a simple recounting of processes and events that lets the learner relive the teacher’s experience as if it were their own.

From all this we can derive six basic principles about the Innovation Process (again, the names given to them are mine), to add to the two espoused earlier about cultural resistance to innovation:

3. Need Drives Innovation: Necessity is the mother of invention, and as the fundamental human needs listed in the top row of Figure One above illustrate, the important innovations and technologies of human history have addressed the greatest human needs of their age. Without an urgent human need, a burning platform, a Business Case, there will be no innovation, since the preconditions for it, as John Kotter explains in Leading Change, do not exist. An obvious corollary of this principle is:
4. Innovation Starts with the Customer: If successful innovations must address an urgent human need, then the front-end of the innovation process should be situated at the point of contact with the humans expressing that need, i.e. the sales and customer service people in businesses, not the R&D laboratory or the marketing department. With some notable exceptions where the need for the innovation was only identified later, innovations coming from R&D tend to be solutions in search of problems, and those coming from Marketing tend to be solutions for which needs need to be artificially created through advertising.
5. Innovation Drives Technology: The solutions developed by companies’ products and services are all technologies that apply one or more innovations.This is equally true of pregnancy test kits, tax preparation software, satellite-and-computer-based learning courses, futures options, automobiles and corn (whether genetically modified or not). So-called ‘competitive advantage’ comes either from offerings that better satisfy human needs (faster, better, cheaper etc.), or from new technology applications of new innovations that render the old offerings obsolete i.e. ‘reinvent’ the market. But as much as business would like to turn the model on its head (develop the offering, then use technologies and marketing to create a need for it), real needs like the ones at the top of Figure One cannot be created. They can be recognized, and they can change as more fundamental needs are solved, but they cannot be created. Need drives Innovation and Innovation drives Technology.
6. Innovations are Interconnected: Innovation is not a mystical creative process, explains Edward de Bono in Serious Creativity. It is a learnable, repeatable process. Great minds and great companies can learn to ‘see the connections’, provided they don’t narrow their scan (across time and across different disciplines of business and thought) too much. Here’s a great example of how broad scanning engenders innovation, an example which also shows how many innovations exist in nature awaiting our discovery, if we don’t destroy them first:: Scientists have recently discovered that butterfly wings contain no pigment. They are covered by overlapping ’tiles’ 50 times thinner than a human hair. Each tile contains multiple layers of cells, separated by air gaps. When the light bounces off the tiles, the layers reflect colors with an iridescent sheen. There is a whole industry of thin-film coatings, whose products are used in everything from spacecraft hulls to anti-counterfeiting devices on paper currency, that may be revolutionized by application of this innovative colouring technology.
7. Stories Transfer Knowledge: If you want to teach, or if you want to set up a killer database that everyone will contribute to and use, make sure your subject-matter is stories. Distilling stories to ‘lessons’ destroys the essence of their value by disabling the learner’s ability to internalize, digest, and learn from, the contextualized experience of the teacher.
8. Innovation Requires Discipline & Patience: The strange fish-like organism pictured in Figure Two is the process by which almost all successful ideas are commercialized. It is a journey that, even for most great ideas, is rarely completed. It is essential to have the discipline, patience, and courage to follow this process rigorously.Without such rigour, a great idea can easily be buried by premature skepticism, unscientific criticism, dangerous complacency and fear of risk. The process works.

(Next Tuesday: Part Two: Innovation & Society, and The Structure & Culture of Innovative Organizations (with six additional Innovation Principles to add to the eight above); The Following Tuesday: Part Three: A 15-step Prescription for an Innovative Organization, with some examples.)