Fouryears ago I wrote a well-received paper entitled A Prescription for Business Innovation: CreatingTechnologies that Solve Basic Human Needs. This substantially rewritten and updated version was written in April, 2004.

Introduction: Why I’m Here

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

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

And finally, if I’m successful in this evangelical task, I want you toleave today not only with renewed hope about the future of your companyand our world, but with some new tools to make innovation happen inyour 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. Ifthis was that easy to explain, someone much smarter than I would havedone 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 mostput it, the ‘Next Big Thing’:

  • A New Economy Forum sponsored by Credit Suisse First Bostonattempted to develop a ‘synthesis’ of leading thinkers’ innovationmodels that might answer that question.
  • Forward-thinking publications like Fast Company and Wiredhave presentedalternative visions of the future from some extraordinary minds in manydifferent disciplines.
  • And conferences of world political, social and businessleaderslike the Davos World Economic Forum try to grapple with thebigger questions of how the holders of power can make the world abetter place, while helping out their particular stakeholdersin the process.

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

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

From the perspective of business innovation this matters because almosteveryone agrees that the successful businesses of the future will becomplex, adaptive, agile, proactive, and creative — they will not waitfor market demands to change them, but will instead continuouslyreinvent their companies, anticipate future demands, and makestrategic, risky, value-creating investments and decisions, what JohnKotter calls Leading Change. In order to do this — to make intelligentdecisions and investments before demand is articulated, to viewrisk-taking and the creation of future options for action as essential,not foolhardy — requires at least some consensus about ‘where the futureis headed’. Selecting one of the above three theories about the futureis an important start in doing so.

Technophiles who favour the Acceleration Model tend to be infatuated with artifacts of thelast thirty years: more digital, faster, smaller, lighter. Advocates of the Chaos Model, on the other hand, believe there are norules for our brave new world of the 21st century. Their advice forbusiness and other leaders is to be opportunistic and think short-term.

I lean towards the EvolutionaryModel. I believe that using anunderstanding of the past, with the right perspective, can helpbusinesses anticipate the future with exceptional clarity andprobability of success. There are two reasons I hold this belief, andthey form the basis for much of the rest of this presentation:

  1. Technology is Not Evil: Technology was, is, andalways 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 moreslowly than technology, and ultimately won’t accept, adopt, or pay forany 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 Forumdraws together some very powerful innovation models, into a single synthesized model that can be usedto explain how technologies have impacted society and civilizationsince it began about thirty millennia ago:

Fig 1a
 Figure One: How Fundamental Needs spawn Innovations & Technologies
(Adapted from Credit Suisse First Boston New Economy Forum 1999Synthesis)

Accordingto this model, innovations like crop cultivation, the printing press,and the harnessing of solar energy, have always arisen in response toan urgent human need — overcoming the sudden food scarcity after theIce Age, bringing literacy to the masses, and solving the energy crisisrespectively 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 followingprocess:

 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 testwhether it represents the way in which historical innovations haveoccurred, and then what this might tell us about innovations of thefuture.

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

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

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

  1. If I put the wolf’s head on my head, will I gain the wolf’s acutesenses, wiles and powers? (Not that different from the thinking appliedmany centuries later by the Ford Motor Company in the naming of carsand design of hood ornaments after various fierce animals)
  2. If I eat the dead wolf, will I gain the wolf’s acute senses, wilesand 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 onecreature, with both the wolf’s senses, wiles and powers and mybrilliant and innovative mind?

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

Without animal domestication and crop cultivation, we as a speciesmight well not have survived to come up with newer and moresophisticated 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 todevelop and ‘commercialize’ the technology applications of theinnovations of animal domestication and crop cultivation. It is the samecommercialization 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 atexplaining the recipe, but they, and most educational and businessinstitutions, are absolutely terrible at teaching people how to findthe essential new ingredients — the ‘grey matter’ at the left side ofFigure Two, the ideas & innovations that make the recipe work. Theproblem isn’t a scarcity of good ideas either — it is the lack of rigourand investment in infrastructure to surface, capture, develop and qualify new ideasprior to commercialization.

FigureTwo also recognizes that many innovations and technologies are derivedfrom other innovations and technologies, and often come from applyinganidea or a technology from one application domain, or from nature, to anunrelated application domain. The BBC/Discovery program Connectionsmade this point very powerfully, and its author James Burke continuesto develop both examples of such non-obvious connections, and exercisesto help us learn to discover more — in essence, to become moreinnovative. Burke’s latest book explains how a problem with theirrigation of Italian gardens led to the invention of the carburetor,for example.

Furthermore, Figure Two acknowledges the importance of the story in thesuccessful commercialization of innovations. It is hard to pick up abusiness book or attend a business conference these days without beinglectured on the importance of story-telling, but the idea is neithernew nor complicated: Stories convey the context for the application,they explain how it can be used in the user’s ordeveloper’s day to day life. Knowledge transfer is an essentialprecondition to commercialization. The easiest way to transferknowledge, i.e. to explain or persuade, is to do so in a way that letsthe learner internalize what they are hearing i.e. to fit it into theirown mental models of how things work. And the simplest way to enableinternalization is by telling a story, be it a Utopia or Future StateVision, a parable with a built in lesson, or a simple recounting ofprocesses and events that lets the learner relive the teacher’sexperience as if it were their own.

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

  1. Need Drives Innovation: Necessity is the mother ofinvention, and as the fundamental human needs listed in the top row ofFigure One above illustrate, the important innovations and technologiesof human history have addressed the greatest human needs of theirage. Without an urgent human need, a burning platform, a Business Case,there will be no innovation, since the preconditions for it, as JohnKotter explains in Leading Change, do not exist. An obvious corollaryof this principle is:
  2. Innovation Starts with the Customer: If successfulinnovations must address an urgent human need, then the front-end ofthe innovation process should be situated at the point of contact withthe humans expressing that need, i.e. the sales and customer servicepeople in businesses, not the R&D laboratory or the marketingdepartment. With some notable exceptions where the need for theinnovation was only identified later, innovations coming from R&Dtend to be solutions in search of problems, and those comingfrom Marketing tend to be solutions for which needs need to be artificially created through advertising.
  3. Innovation Drives Technology:The solutionsdeveloped by companies’ products and services are all technologies thatapply one or more innovations.This is equally true of pregnancy testkits, tax preparation software, satellite-and-computer-based learningcourses, futures options, automobiles and corn (whether geneticallymodified or not). So-called ‘competitive advantage’ comes either fromofferings that better satisfy human needs (faster, better, cheaperetc.), or from new technology applications of new innovations thatrender the old offerings obsolete i.e. ‘reinvent’ the market. But asmuch asbusiness would like to turn the model on its head (develop theoffering, 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 needsare solved, but they cannot be created. Need drives Innovation andInnovation drives Technology.
  4. Innovations are Interconnected: Innovation is not amystical creative process, explains Edward de Bono in SeriousCreativity. It is a learnable, repeatable process. Great minds and great companies canlearn 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 engendersinnovation, an example which also shows how many innovations exist innature awaiting our discovery, if we don’t destroy themfirst:: Scientists have recently discovered that butterfly wings containno pigment. They are covered by overlapping ’tiles’ 50 times thinnerthan a human hair. Each tile contains multiple layers of cells,separated by air gaps. When the light bounces off the tiles, the layersreflect colors with an iridescent sheen. There is a whole industry ofthin-film coatings, whose products are used in everything fromspacecraft hulls to anti-counterfeiting devices on paper currency, thatmay be revolutionized by application of this innovative colouringtechnology.
  5. Stories Transfer Knowledge:If you want to teach, orif you want to set up a killer database that everyone will contributeto and use, make sure your subject-matter is stories. Distillingstoriesto ‘lessons’ destroys the essence oftheir value by disabling the learner’s ability to internalize, digest,and learn from, the contextualized experience of the teacher.
  6. Innovation Requires Discipline & Patience: The strange fish-likeorganism pictured in Figure Two is the process by which almost allsuccessful ideas are commercialized. It is a journey that, even formost great ideas, is rarely completed. It is essential to have thediscipline, patience, and courage to follow this processrigorously.Without such rigour, a great idea can easily be buried bypremature skepticism, unscientific criticism, dangerous complacency andfear of risk. The process works.

Four:Innovation & Society: How Technologies Limit Freedom, Human NatureConfounds Innovation, and Consumer Decision Tools Doom Marketing

Innovation ProcessThoseof you with HR backgrounds are probably wondering why I have not spokenabout non-individual, community aspects of civilization and why and howthese arose if the innovative individual is perfectly able to do it allhim- or herself. These issues are relevant because of the role ofteams, organizations and other social constructs in the process ofinnovation.

Let’s take another look at our proto-human, now equipped with the sixbasic types of manually powered machine (lever, wheel, screw, pulley,plane, and wedge — the latter in the form of flint-head arrows), plusother early innovations like controlled fire, animal domestication andcrop cultivation. Like other creatures he’s adopted the family unit asa social convention, but now he’s experimenting with a moresophisticated social construct, the tribe.Question is, why? Is it Darwinian — Did humans that banded togetherhave a higher likelihood of survival than loners? Or is it purelysocial — Do humans, like other creatures, have a basic need for socialcontact with others that goes beyond family? Whichever it is — asurvival need or a social need, it required innovations to make itwork, innovations like a code of laws and behaviours to prevent andresolve disputes between individuals, and shared language.

At this point, in the view of some anthropologists, a tug-of-war beganbetween our essential individual, autonomous nature and the perceivedbenefits of increasingly advanced, abstract and restrictive’technologies’ like division of labour, specialization, private andcommunal property, governments and other hierarchical socialorganizations, including the modern corporation. All these social’technologies’ limit individuals’ freedom, and much of our civilizationhas been about trying to find a delicate balance between individual’rights’ and the apparent benefits afforded by technologies thatcompromise them. This tug-of-war continues to play out today, in oursuspicion of government, the existence of ‘militias’, libertarianmovements, evolution of privacy laws, and struggles over propertyownership. The battle is far from over, with slavery, one particularlyextreme social construct favouring hierarchical efficiency overindividual liberty, still practiced in many countries, and women,children and animals treated as property with no rights or freedomswhatsoever in many others.

This tension also plays out in the modern corporation, itself a feudalsocial construct which is neither egalitarian nor democratic. Corporateefficiencies have produced technologies that have massively improvedmaterial wealth and (most believe) quality of life in the few centuriessince they were invented. But these advantages have come with a hugecost of personal freedom — In many countries employees are virtualslaves of their employers, with no hope of realizing their fullpersonal potential. In many companies promotion and remuneration havenothing to do with performance or competency.

Here are some of the consequences for innovation of this individual/collective tension, in today’s companies:

  • Employees hoard rather than sharing knowledge, includingknowledge that could yield innovation, to protect their position andrank in the company
  • Employees rarely volunteer new ideas, fearing ridicule,retribution, being ignored, or having credit for the idea stolen bytheir boss if it succeeds
  • Managers safely and instinctively squelch innovative ‘crazy ideas’ of subordinates
  • Managers, fearing the wrath of shareholders (today’s’absentee owners’), are risk averse, preferring to buy ideas once theyhave been successfully developed by others, over incubating thecompany’s own ideas, even though the latter is cheaper and moreeffective
  • Employees compete for credit rather than sharing it
  • Employees, since they are rated on their individualperformance, consider teamwork and collaborative activities lessimportant than individual, solitary ones
  • Managers instinctively delegate tasks in a project toindividuals rather than teams (since it’s easier that way to placeblame if something goes wrong), and individuals usually prefer beinggiven individual rather than team assignments as well

If people are social by nature, why are corporations so unable to tapinto this to leverage the power of teams to enhance innovation? Theanswer may be simple. In The Hidden Life of Dogs,author Elizabeth Marshall Thomas explains that most animals have aninherent desire to socialize with their peers, that seems totallyunrelated to survival needs. In fact, dogs that wander from homes wherethey are well-fed and cared for appear to be looking for social contactwith other dogs for its own sake, just as children like to hang outwith others doing things they can do just as effectively alone. At thesame time, both dogs and children often become extremely jealous,competitive, possessive and unsociable when these same fellow creaturesimpose on their personal ‘territory’: family, toys, food bowl, andmembers of the opposite sex.

Perhaps this is a universal trait that we need to consider whendesigning innovation programs: Everyone loves to engage in socialactivities that are fun, challenging and unthreatening, but when thesocial activity impinges on individual ‘territory’ or property, or onscarce resources, social and collaborative behaviour ceases andconfrontational, competitive behaviour takes over.

But isn’t competitive behaviour exactly what business thrives on?Doesn’t the rush of adrenaline and testosterone in the quest forcompetitive advantage and ‘winning’ yield high productivity, sharpenedcustomer focus, and more new ideas?

I would argue that competition is at best a neutral factor inengendering innovation, and may in fact be detrimental. Most of thebooks on teamwork, such as The Wisdom of Teams, stress two essential preconditions to effective team behaviour:

  • A specific, defined problem agreed to and shared by all team-members, and
  • A sense of urgency that imposes a short-term deadline that the team-members can work towards

There are other factors that affect a team’s success, of course, suchas the competencies and access to knowledge of the team members, andthe effectiveness of the processes by which the team works. What isimportant here is that nowhere is a competitive threat, competitivechallenge or competition of any kind considered essential to teameffectiveness. Even in sports, the best teams focus on what they dowell (the attributes of their team’s excellence) and the achievement ofspecific objectives (like scoring points) rather than being distractedby competing with the other team, ‘winning’ and exploiting the otherteam’s weaknesses. Good teams usually take solace in having played welleven in a losing cause, and are alarmed when they play badly but stillmanage to win. In fact, a major competitive tactic in business is toforce one’s competitors to shift their focus to your agenda, to taketheir eye off their team’s goal to instead compete with you.

Furthermore, many businesses are now reaching out to involve customers,alliance partners and even competitors in their problem-solving teams,because they help bring different points of view to the creativeprocess, and because these external partners share both the definedproblem and the sense of urgency with the internal team. In a world ofaccelerating change, no competitive advantage is sustainable –innovations and new technologies can almost instantly reinventindustries, products, services, and offerings, and eliminate anycompetitive advantage the old ones may have had. Despite massive andsustained oligopolistic efforts to prevent it, customers are beginningto wrest absolute control of business direction and success from almostevery industry’s producers, management strategists and marketers, andnow set the agenda and reward companies that respond to theirneeds and build new serving capability, not those that bash thecompetition, sue their customers, or create barriers to competitiveofferings. The Bush regime’s corporatist agenda has been only atemporary setback in this inexorable trend.

A side-note about branding: Many marketing people, lamenting over thepassage of market control from producer to consumer, cite theincreasing importance of branding as an organizational strategy, and ofbrand loyalty as a success factor. For this reason, they argue,aggressive, proactive marketing is not dead. They fail to appreciatethat consumers, faced with the severe scarcity of (a) time to assessproduct alternatives and (b) objective comparative analysis likeConsumer Reports, tend to use ‘brand’ as an unsatisfactory surrogatedecision-making tool. If you as a consumer want to buy a car, or selecta television program to watch, the ideal decision-making process would be:

  1. Find an analytical tool that identifies all of the relevantselection criteria, rates all of the available alternative productsagainst these criteria, and allows you to identify and ‘weight’ thecriteria that are important to you. This tool would ‘remember’ andstart with the criteria and weightings you used the last time you madea similar decision.
  2. Use the tool to generate a ‘first cut’ list of alternativesranked by your personal criteria, and show the sensitivity of theranking to changes in your criteria weightings (some days you may liketo watch a thought-provoking program, and on others you may prefersomething light and funny; one year you may want a practical car, andthe next something sportier).
  3. Find a tool that uses ‘neural network’ technology to drawupon your past choices for these and other products, correlate themagainst the choices of other people whom you trust or who have ahistory of making similar choices to yours, and generate a second listof alternatives, ranked by the collective consensus of your peer group.This tool would ‘learn’ from past choices and from your evaluations ofthem.
  4. Integrate the two lists and use subjective overrides to make your final selection.

In the case of a big-ticket selection like a car, you would probablyinvest significant time in making the final decision. In a small-ticketselection like a television program, the final decision could begreatly simplified or even fully automated, so your television wouldautomatically go to the highest-ranked program in the two lists, andsignal to you a ‘score’ showing the computed probability you will likeit (since your ultimate decision may be not to watch anything).

Tools like these exist today (Consumer Reports is an example of theformer; the Recommendations Lists of Amazon.com are an example of thelatter), but they are not yet very robust or reliable. In theirabsence, brands and brand loyalty are the surrogates: ‘I always buyChrysler products’ or ‘I usually watch CSI on Thursday nights’ is yourbrain’s way of substituting brand for the more ideal tools noted above.Once these tools exist (and the Information Age is ripe for them),product brands will simply become community-identification brands (‘Idrive Chrysler products because they reflect who I am and I want othersto see that and associate with me, or not, because of thatidentification’). At this point, brand community-association becomesmerely one more selection criterion of the analytical tool. With theadvent of the near-perfect consumer information these tools provide,traditional marketing has no remaining role, and the knowledge-driventransition of power from producer to consumer is complete.

Five: The Structure & Culture of Innovative Organizations: Business Gets Feminine and Consumers Seize Power from Producers

It is now accepted wisdom thatthe organization of the future must be flatter, more empowering, lesshierarchical and more networked, in order to be sufficiently agile andresponsive to the ever-more-powerful customer’s needs. Much has beenwritten about organizational ‘ecology’ and the ability of communitiesof practice to self-organize to solve identified common problems morequickly and effectively than command-and-control driven organizationalstructures. There is a growing awareness that self-organizingcommunities operate best when their leadership uses what are usuallyconsidered ‘female’ modes of operation rather than the traditional’male’ ones:

  • Decisions are made by democratic consensus rather than by fiat
  • Persuasion and change occurs by engaging decision-makers inthought processes and finding shared mental models, rather than thewielding of power and authority
  • Problem-solving teams select (and when necessary, change) their own leader(s) rather than having one imposed on them
  • Problem-solving teams form themselves, drawing onindividuals’ networks, and disband themselves when the problem has beensolved, much the way the human body’s immune system organizes itself tofight infection
  • Rather than formal permanent roles, positions, and’up-or-out’ career paths, individuals move laterally from project toproject, wherever their skills and experiences are best suited, andoften wear multiple hats on simultaneously-running projects, ratherthan having a single title
  • Rewards and remuneration are based on the depth ofdeveloped skills, experiences and networks, the things that have valueto the organization in the future, rather then on past performance(which is rewarded with one-time bonuses at the completion of aproject) or on seniority or title
  • ‘Management’ at the top is replaced by ‘Improvisational Strategizing’ at the centre of the organization

The real contention over this new organizational culture is whether itis efficient enough to justify a new organizational structure tosupport it, or whether instead some kind of balance betweenhierarchical and autonomous structures is needed. Is it empowering, oris it naive, to believe that if an organization sets specificstrategies and goals and then ‘gets out of the way’, the employees willeffectively figure out the best way to achieve them? Can the tools, theinfrastructure of technologies, knowledge-bases and equipment, neededto achieve organizational and project objectives, be left up to projectteams to develop as needed and ad hoc, or must they be rationalized andinventoried and efficiently ‘managed’? Who controls the purse-strings,and approves allocation of budgets and resources for each project –can project teams really do this themselves or do these resources alsoneed to be centrally ‘managed’?

These issues are important to the future of business innovation. Wemust decide whether an organization saddled with the structures andcontrols of an old ‘management’ style can hope to be sufficientlyagile, responsive to customers, creative and focused on new productdevelopment, to survive when that survival depends on strategicimprovisation and continuous innovation.

There are two huge and contradictory trends occurring in organizationalstructure today: globalization and fragmentation. Globalization isoccurring because small organizations cannot achieve the scale andresource capacity needed to be viable, and fragmentation, the spinningoff and incubation of small, narrowly focused ‘best of class’companies, is occurring because large organizations are too unwieldy,inefficient and inflexible to be innovative and respond to customers’rapidly evolving needs. So we have today the worst of both worlds:large, fat, unresponsive global companies and emaciated unscalablesmall ones. Furthermore, because of today’s concentration of money andpower in the hands of increasing global corporate giants, this systemis in disequilibrium, with dysfunctional non value-added consequencessuch as these:

  • Once-innovative companies like Microsoft are being besieged by antitrust authorities
  • Companies acquire other companies simply to break them up and close them down
  • New start-ups are designed expressly to be bought out before they actually produce anything
  • Investment analysts claim that synergies from corporateacquisitions create new value, and that subsequent break-ups into morefocused and specialized companies also create value
  • Large organizations are rewarded for cruelly exploitingweak social and environmental laws in their subsidiary companies’countries and simultaneously creating unemployment at home, when they’offshore’ production to those countries

The recent macro-economic review by Credit Suisse First Boston, echoingthe prognostications voiced by many economists at recent economicsummits, foresees the evolution of today’s corporate structures intothree new, prevailing types of enterprise, which could fix the abovedysfunctions (since different economists use different names for these,I’ve used my own):

  1. Global Utilities: Large organizations that provideworld-class large-scale communication, asset management anddistribution infrastructure.
  2. Producers: Small organizations that assemble resources and’build to spec’ technologies, tools, products and offerings, forentrepreneurs, project teams and consumers.
  3. Innovators: Small organizations that study human problems and needs and create, discover and design solutions to them.

The Global Utilities would be either publicly owned or tightlyregulated, operated on a not-for-profit basis. They would be measuredon efficiency. The Producers and Innovators would be entrepreneurialpartnerships, very project focused. Producers would be measured onagility, quality and customization, and Innovators on creativity,quality and quality-of-life improvement. All three types of enterprisewould be measured additionally, of course, on customer satisfaction.None would be hierarchical, and few would spend an entire career with asingle organization. I have argued elsewhere that, in fact, withtoday’s technologies there is no need for any of us to have to workmore than a few hours a week to provide a high level of well-being foreveryone anyway — the fact that we do work so unnecessarily hard andlong is a function of the sustained myths of our modern Western cultureand the extravagant and unsustainable wastefulness of our civilization.

Those with an entrepreneurial bent would form, or join, one or moreProducer or Innovator enterprises over their working life. Those with aproductivity bent would gravitate towards the Global Utilities. Manyothers would be self-employed, providing niche advisory services to allthree types of enterprise.

You may think this is a very idealistic view of how ‘organizationsshould be reorganized’, but it is also a very logical one, and one thatcould easily be achieved today because of growing dissatisfaction withthe dysfunctionality of today’s organizational structures, and theability, thanks to the Internet and other powerful new ‘organizing’infrastructure technologies, to bring this ‘reorganization oforganizations’ about. Only a poverty of imagination, opposition fromelite vested interests, and the inequitable distribution of power andresources, all of them well within human capability to rectify, arepreventing us from realizing this potentially liberating, perhaps evenEarth-saving, reorganization. In fact, this customer-driven revolutionis already happening, quickly, quietly, and non-violently, its firstmanifestation being what Shoshana Zuboff in her best-seller calls The Support Economy: Why Corporations Are Failing Individuals and The Next Episode of Capitalism.

The advent of a New Economy, with Innovators focused intently andexclusively on solving real human needs and problems (and not on thehyper-marketed, artificial incrementalism and ‘copycat’ and ‘sequel’new product development that today’s risk-averse oligopolies have ourmost creative minds fruitlessly working on) offers the potential ofastounding acceleration of innovation and resolution of seeminglyintractable human problems: pollution, over-population, unemployment,inequality, human and animal suffering, disease prevention, war andcruelty, biodegradation, mental illness. Some would say it’s not amoment too soon.

What does all this mean for today’s company looking to jump-start itsinnovation programs and processes, and today’s individual looking toparticipate in making his or her own, or his or her employer’s,enterprise more innovative? From the discussion above we can add sixprinciples of innovation strategy to the eight principles developedearlier:

  1. Hierarchy and Autocracy are the Enemies of Innovation:There is a strong creative tension between individuals and thecommunities they elect to or are asked to be part of, caused bydivergent needs, drivers, and behaviours. Each individual and eachcommunity needs its own space. Flat, small, responsive, democraticorganizations are inherently more innovative.
  2. Innovation Needs an Urgent Problem:True innovation only occurs where there is consensus that there is animportant problem to solve and a sense of urgency to solve it.
  3. Cooperation is Replacing Competition:Competition is now dysfunctional, a vestige of earlier times ofresource scarcity, and cooperation is now essential to effectiveinnovation.
  4. The Customer Rules:The customer is now king and needs only better decision making tools tobecome the sole driver of economic activity, rendering obsolete theneed for marketing, branding, and other producer-driven mechanisms ofinfluencing customer actions.
  5. Female Organizational Style is More Innovative Than Male:As shown in the table below, organizational structures, processes andbehaviours more commonly associated with businesses run by women aregaining traction in the New Economy, and that bodes well for innovation.
  6. The Emerging New Economy Will Accelerate Innovation:Despite the current waves of globalization, corporatism and increasedconcentration of wealth and power, the Internet and other newtechnologies will inexorably break the strangle-hold of riak-averseoligopolies and unleash a new age of astonishing innovation.
Attribute Female Organization Male Organization
Organizational Structure Networked Hierarchical
Decision-Making Process Consensual Command-and-Control
Team Operation Process Self-Selected, Self-Directed Appointed, Managed
Leadership Selection Process Self-Selected Imposed
Leadership Style Unassuming, Demonstrative, Responsive Dictatorial, Self-Aggrandizing, Condescending
Employment Model Project to Project Up or Out
What Gets Rewarded Potential Value of Skills, Experiences, Relationships Past Performance
Who Makes Enterprise Decisions Small, Improvisational ‘Centre’ Disconnected ‘Top’
Key Advantage Flexible Efficient

Attributes of ‘Female’ versus ‘Male’ Organization Structures
(Adapted from Imperato & Harari, ‘Jumping the Curve’)

So now we have fourteen principles to guide us in creating innovative organizations.

Six: Prescription for anInnovative Organization

Innov ProcessThefirst four years of the century have seen some serious setbacks inbusiness innovation. The corporatist-backed Bush administration hasintroduced legislation to reduce corporate liability to consumers, andhas been extremely lax in enforcing social and environmental laws.Organizations like the RIAA and Nike have showed that the courts willallow large corporations great latitude to sue customers (includinginfringing on their privacy rights) and to lie to customers in theiradvertising (about sweatshop operations, offshoring etc.) Corporationslike Enron have abused public trust and destroyed thousands offamilies’ livelihoods and life savings. And massive defense andsecurity expenditures have siphoned off funds that might have beeninvested in innovation, and have made corporations and lenders nervousabout any investment while governments and corporations are soseriously overextended and exposed to interest rate fluctuations. Theresult is a climate of great animosity between corporations andcustomers, and unprecedented risk aversion.

At the same time, recent surveys indicate a growing corporate awarenessthat “you cannot cut (or offshore) your way to greatness”, that thelimit to improving profitability by reducing costs and margins has nowmore or less been reached, and that innovation must again move to theforefront if corporations are to have any hope of sustaining thatprofitability.

So corporations are looking for low-cost, effective ways to develop newproducts, new processes, new delivery channels and new technologiesthat will meet important human needs, provide real value to customers,and be affordable by those customers. This challenge occurs at a timewhen the distribution of wealth among customers is massively skewed,both within and between nations, towards a tiny elite, when manygovernments and most corporations and individuals are buried under acrushing debt load, and when the need for innovation to solve criticalenvironmental, social and political problems has never been higher.Simply put, we are living in an age when we cannot afford innovation,and cannot afford to be without it. Perhapsthe most critical innovation need therefore is for creative mechanismsto finance, price and pay for the costs of innovation itself. Funding, pricing, and cost management are now inseparable parts of the innovation process.

The prescription I propose draws on a wide variety of innovationprocesses that have been advanced by thought leaders on the subject,especially during the 1990s when the appetite for investment ininnovation peaked, including Peter Drucker’s, Cap Gemini’s, CreditSuisse’s, Gary Hamel’s, and others listed in the bibliography below.This prescription draws as well from several innovation processes thatI am personally aware of from my years working with Ernst & Youngand its clients, and some lessons from how nature, which has beeninnovating since long before we appeared on the planet, goes about it.

This prescription has eighteen steps in eight stages illustrated in the chart above: Listen, Understand, Organize, Create, Experiment, Listen Again, Design, and Implement. The three stages shown in blue — Understanding, Organizing and Implementing — are analyticalprocesses, well-suited to the left-brained deductive thinkers whopredominate in most organizations. The three stages shown in green –Creating, Experimenting, and Designing — are creativeprocesses, better suited to right-brained inductive thinkers who arerelatively scarce in most organizations. The two Listening stages shownin red are communicationprocesses, that need to involve customers and other stakeholders, andeveryone in the organization involved in the innovation process.Assigning (or contracting) the right people for each stage in theprocess is essential to its effectiveness, and to its affordability. Ifit’s done well, it can draw on the strengths of everyone inside andoutside the organization who has a stake in a successful innovationeffort.

Here are the eighteen steps. They are in reasonably sequential order,but are somewhat recursive: For example, as part of creatingalternative solutions (step 12) it may be necessary to go back and scanfor some additional ideas (step 1). Whoshould do each step depends to some extent on the industry and size ofyour organization: Large organizations may benefit from having adedicated Innovation Team responsible for this, while in a very smallorganization it may be a scheduled part-time task of the wholemanagement team, drawing as well on the diverse backgrounds and ideasof an informal Advisory Board.


1. Listen broadly for ideas: Appoint your Innovation Team and have them set up an ‘environmental scan’ that systematically looks for innovations andconnections not only in your industry but also outside it, outside your country, outside ofbusiness entirely. Have the Team read about, learn about,and meet with people from the broadest possible spectrum of humanenterprise and natural discovery. Subscribe to journals likeInnovation, and the RSSfeeds of periodicals and websites that report ideas and newtechnologies from a wide range ofdisciplines. Reward members of the Team for serendipitous readings andmeetings, debrief with them promptly and regularly, filter, refine andinventory their ideas and learnings for consideration at the Understand, Create and Design stages of the innovation process. Inputs: readings, newsfeeds, conferences, interviews, meetings. Outputs:a manageable inventory of ideas and insights (categorized andcontextualized appropriately so that they can be simply understood andpractically applied).

2. Listen to ‘pathfinder’ customers, competitors, and colleagues: Plug yourself in to the ‘voice of the customer’. Set aminimum time quota for everyonein your organization to spendface-to-face with business customers, or with customers’ customers orend consumers. Identify ‘pathfinder’ customers — those  who are mostattuned to their organization’s future direction and its need tochange. Employ a ‘Think the Customer Ahead’ program that engenderseffective listening, elicitation skills, story-telling skills, andcreativethinking skills , a capacity explained in Imparato & Harari’s bookJumping the Curve. Often thecustomer isn’t able to articulate his or her needs in a waythat lends itself to quick technology solution development. Listeningto the customer is an iterative process, that entails learning aboutthe customer’s business, understanding the things that keep themawake at night, suggesting a lot of ‘what if’s’, profferingopportunities, points-of-view andpossibilities, not just asking baldly about needs and offeringoff-the-shelf solutions. Connect with customers indirectly as well,using all the media at your disposal — phone surveys, e-mail, websitesurveys, customer satisfaction surveys (with lots of open-endedquestions), self-diagnostic tools, videoconferences, etc., to captureas much information as you can about your customers, their customers,and their markets. Inputs: conversations, interviews, surveys. Outputs: needs, ideas, stories, industry future state visions, five-forces and SWOT analyses.

3. Listen to the front lines:Talk with the people who hear directly from customers and otherstakeholders every day — people in sales, customer service, evendelivery and reception staff. Ask them what they’re hearing, and what theythink most needs improvement or rethinking. Create ‘space’ — physicaland electronic — where everyone in the organization can surface,discuss and advance problems, needs and ideas collaboratively. Letanyone ‘subscribe’ to the inventory of news and ideas created in step 1above. Consider maintaining a running list of the company’s Top 10Challenges to encourage focus and creative thought from everyone in theorganization. Make sure top-level executive sponsorship for innovationis visible to everyone on the front lines.  Give people time off their’regular work’ to focus on organized innovation projects, and tools andprocess guidance to use that time effectively. Reward front-line peoplefor new product and other innovative ideas that they surface from theirconversations with customers and others. Inputs: conversations, idea & collaboration spaces, interviews. Outputs: needs, ideas, stories.


4. Understand who your actual and potential customers are: Study companies like The Body Shopthat know their customers, their needs, their buying preferences andcriteria intimately. These are companies that spend a lot of face timewith customers and have rigorous processes in place to capture whatthey learn, probe what they need, and explore the potential market fornew innovations. And identify and get out and meet with potential customers as well, to understand why they’re not alreadycustomers and what could change that. And then have your InnovationTeam cast a wider net and ask who might be customers that are currentlynot served by either your company or your competitors. Learn thelessons of Christensen’s The Innovator’s Dilemma and The Innovator’s Solution— how disruptive innovations can (sometimes inadvertently) transformwhole industries, and how that presents your company with both threatsand opportunities that could completely change the profile or evendefinition of your customers. Inputs/Outputs:list of actual and potential customers and what they currently buy,could be buying, and will and won’t be buying in the future, and why.

5. Understand and respect what end-consumers want and need: and based on that
6. Understand what immediate customers will need:Start with the end-consumer of your products and services, and theend-consumer of the products of your immediate customers. Their buyingpatterns, needs and preferences will determine the success of yourcustomers, and that will in turn determine theirbuying patterns, needs and preferences. The end-consumer has theultimate power, and, unlike corporations’, their buying decisions arebased on broader and more subjective criteria than business need andaffordability. They buy things they want,not just things they need. If you sell to the auto industry, you needto understand why consumers, against all logic, buy SUVs. And if yourcompany is making money from sweatshop labour or old growth forests,better come clean now. Business needs to end its abusive relationshipwith consumers — overcharging them, misleading them, suing them, andselling them inferior, imported merchandise and services. Onceconsumers realize their true marketplace power, they will get back atadversarial suppliers with a vengeance. Business needs to respect them,respond to them, and be responsible members of the communities in whichthey operate. The Reputation Economy isn’t here yet, but it’s coming.If you cause consumers to dislike you or distrust you, you’ll soon bedead. Inputs/Outputs:current state analysis and future state vision of wants and needs forboth current and future immediate customers, and end-consumers, and aresultant future state vision and emerging needs profile for yourindustry.

7. Understand why these wants and needs aren’t already met:Here’s the hard part. Things are usually the way they are for a reason.You know there are wants and needs that aren’t being met. The challengeis not to throw in the towel when you find out why. The technologydoesn’t exist? The solution would be very costly or risky to develop?The solution is not affordable to customers? The solution is tooradical for customers to accept or too complex for them to understand?The organization currently lacks the capacity or competencies toproduce the solution? That’s what innovation is about. Take up thechallenge with your eyes open about what must be overcome, but take upthe challenge. If it was easy someone else would have already done it. Inputs/Outputs: list of challenges.


8. Organize those with a stake in solving the problem:Now you know what needs to be done, the next step is to organize thetroops. Who can help solve the problem, assess the alternatives,provide the needed resources? Outputs:project team member list, including ‘pathfinder’ customers and otheroutsiders. (Note that the project team is responsible for solving aspecific problem or need, while the Innovation Team has oversight overthe entire innovation effort of the organization — they aren’t thesame group).

9. Organize the program for solving the problem:There are a lot of techniques and methods that you can use to breakthrough a problem and come up with solutions. The bibliography below isreplete with them. In my experience, creative minds need a very broadframework (schedule, budget, high-level process) and a lot of freedomto figure out how to solve the problem within that framework.Self-organizing, self-managed innovation project teams seem to workwell in some organizations but not in others. If you insist on imposingmore discipline on the process, more hoops to jump through, controlpoints and early-stage go/no-go filters, make sure the people you’reimposing it on see the value in these constraints, and that they don’tsqueeze the boldest and potentially most successful ideas out in theprocess. Outputs: project schedule, budget, program.

10. Organize the resources needed to solve the problem:The project team needs sufficient tools and knowledge to be able tounderstand the problem, the customer need, and the variables that couldimpact the potential solutions. Inputs: all the Outputs from steps 1-7 above, redrafted into a cogent and digestible form.


11. Create an environment and capability for innovation:Give the Innovation Team and the project teams permission to fail, andteach them how to fail early and inexpensively. Prevent executives frompushing their ‘pet’ projects to the detriment of others. Don’t let the’black hats’ deep-six good, hairy, audacious ideas prematurely, andensure that ‘black hat’ behaviours are not rewarded by seniormanagement. Help the team avoid slipping into excessive caution orincrementalism. Keep the marketing group from unduly influencing theprocess with antiquated ideas for ‘creating market demand’ andlaunching products with press releases and self-serving promotional andadvertising campaigns — In the emerging customer-driven market thesetechniques will no longer make a mediocre product a success. Providerewards and incentives for team members, and for other contributors tothe innovation effort. Don’t tolerate hoarding of ideas and knowledge,or inter-department ‘charges’ that block knowledge transfer andcross-functional collaboration. Share credit for good ideas andsuccesses, and don’t make innovation an area of internal competition.Help bright, creative, quiet people find their voice, and let peoplepromote ‘crazy’ ideas without fear of ridicule. Teach the InnovationTeam and the project teams (and others in the organization who showinterest) techniques that will enhance their creativity and improve theinnovation process, and give them time and resources to discover othertechniques and try them out. Invest adequate, patient capital andresources for innovation. Give ideas sufficient time to find theirmarket but don’t throw good money afterbad, no matter how well-intentioned. Understand sunk costs and learnfrom failures. Consider letting those involved in the innovation’invest’ personally in return for a share of the ultimate revenues orprofits: Having some ‘skin in the game’can be very motivating and empowering. Inputs: time, training, tools, space, sponsorship, leadership and resources. Outputs: people who are inspired, capable and encouraged to contribute productively to the innovation effort.

12. Create lots of alternative solutions:Don’t put everything at risk on one option. Use scenario planning andother techniques to identify and assess alternatives. Don’t reject thereally far-out alternatives prematurely — cost/risk/benefit decisionsusually can’t be properly made until the customers have had the chanceto say their piece again in step 15 below. Outputs: alternative solutions.


13. Experiment: Try many things, learn fast from failures, tinker, iterate, combine, transfer:Try several alternatives simultaneously in different markets to speedup the assessment process. Use rapid prototyping and other iterationtechniques to expose as many alternatives to the market as possible. Outputs: test results.

Listen Again

14. Listen to potential customers and help them imagine:Use prototypes and stories to make the innovative product, service,channel or technology as concrete as possible. Beware customers’propensity to say ‘yes’ at this stage when there’s no requiredcommitment. Go back to what you learned from customers in steps 1-7 andrecite what you heard back to the customers for confirmation,explaining how the innovation addresses the need articulated by thecustomers. Listen objectively for confirmation or dissonance. Outputs: customer evaluations

15. Listen to acceptance criteria — the ‘ifs:If the product appears to meet the need, the next task is to assess thecustomers’ buying criteria: price and affordability, convenience,options, delivery time, upgradability etc. Some of these criteria maybe show-stoppers that will require re-invention or other creativebrainstorming, while others may be able to be addressed in the designstage below. Outputs: customer buying criteria

16. Listen to ‘what could go wrong’:Here’s where you let the ‘black hats’ say their piece: What competitivethreats exist or could arise? Is the innovation vulnerable todisruptive innovation from unexpected sources? Are there unforeseenproduction, quality control, political, regulatory, financial,marketing, or servicing landmines? What’s the shelf-life? Could itbecome a commodity prematurely? Will it be prohibitively expensive toproduce or to buy? Will it cannibalize existing product sales? Is it astrategic fit for the organization? Some of these ‘what could gowrongs’ may require re-invention or other creative resolution by theproject team, while others may be able to be addressed in the designstage below. Outputs: list of threats and risks, and resolution plan.


17. Design: consider customer-valued attributes, cost, intuitive ease of use, ease of change, ease of enhancement:The greatest idea in the world can still be torpedoed by bad design.The designer has to be told, in no uncertain terms, what attributes areimportant to the customer, how much at most the solution can cost, andthe trade-off between ease-of-use and power. Technology productsespecially are often over-engineered because additional functions andfeatures are easy and inexpensive to add, but they add complexitydisproportionate to the benefits of the additional functionality, oftento the point of turning off potential customers. And in this age ofconstant upgrades and inter-operability requirements, the solution mustbe easy to change, redesign and enhance. Inputs: specifications based on Outputs from steps 12-16 above. Outputs: completed designs.


18. Make the final go/no-go decision, then implement:If there are still several alternatives on the drawing board, whittlethem down to a manageable number. If necessary, send the idea back forreinvention (step 11), re-testing (step 13) or redesign (step 17). Ifthe previous steps have been done properly, this step should be theeasiest. Once the decision has been made to go, the set-up, production,viral marketing, sales, distribution, employee and user training,partnering, after-sales service, success measurement and continuousimprovement should be problem-free, since the ‘what could go wrong’possibilities have already been considered and addressed, and peoplefrom all functional areas of the organization should have been involvedand consulted during the Create and Design stages.

Seven: Applying the Prescription: Some Examples

Togive you a flavour for how this prescription could work in practice,hereare eight fundamental business problems from different industries, andsome innovations that have recently been (or are currently being)successfully commercialized to solve them. In each case, the solutionshown could reasonably have been derived using the principles andprocess in the prescription above:

Customer Problem / Need Innovation / Technology Solution
Car and computer buyers can’t get exactly what they want, and hate haggling with dealers. Web sites let you designyour own car or computer, find the closest model to your design, findthe best price for that model, accept payment and deliver it to yourdoor. Some will even take a completely custom order.
Television watchers find most fare awful, TV guides complicated, and VCRs even more complicated. The new TiVo technologyasks for and monitors your preferences, pulls e-schedules off the net& satellites, and automatically records and indexes your preferredshows, commercial-free, onto a hard drive.
Although newspapers are aterrible waste of paper, and hard to read on the commuter train,reading from a computer screen doesn’t work either due to poorlegibility and awkwardness. Two innovations areconverging on a solution to this: Erasable paper, which allows you toprint out each day’s newspaper onto the same recycled pages; andultrathin large screens with memory, that allow you to read one page ata time on a crisp viewing device smaller than a paperback.
Clothing that gets torn or stained is cheaper and easier to replace than repair. A new organic clothingtechnology has been developed, modelled after human skin, that healsand itself. There is even a ‘spray-on’ version that can help burnvictims to heal without scarring.
Banks are facing ‘spread’squeezes, forcing them to generate new revenues from user servicecharges instead of interest charges, but consumers hate service chargesand see little value for money in them. Progressive banks areoffering customers a ‘menu’ of alternative ways of ‘subscribing’ tobank services, including variable rate (pay-per-use), fixed rate,’frequent-flyer’ rate (lower or no service charges for users who usemany of the bank’s services), and free-if-you-handle-it-yourself rates.They are also offering a variety of new services that use the Internetto ignore geography (offering mortgages and business loans on-lineworldwide) and exploit existing infrastructure and knowledge (e.g.accounting and tax services, insurance, financial planning, creditmanagement).
Retailers are caught in asqueeze between low-cost Power Centers and consumers’ dissatisfactionwith (and cost of) the ‘retail experience’. Car companies haveinvented the concept of ‘try on’ centers, where competitors share alow-cost, do-it-yourself space where consumers can try out competingmodels, and then place orders electronically that are delivered, totheir specs, from a low-cost warehouse to the consumer’s home. Wherethe ‘retail experience’ requires more than just try-outs, companieslike Home Depot have created value-add services like education (how-tosessions) and adventure (rock climbing walls at some sporting goodsstores) that now draw customers more powerfully than their products.
Audit firms have foundtheir ‘product’ commoditized and vilified by regulators for notmeasuring what is now important to stakeholders. A US University isexploring whether ‘fraud insurance’ would be cheaper than audits andjust as satisfactory to stakeholders and regulators. Meanwhile, somefirms have invented a variety of new ways to measure the value of acompany, including EVA, Balanced Scorecards, and Social ResponsibilityReporting.
Many people are intriguedwith, and want, the benefits of computer and Internet technologies, butdon’t have the time or comfort with the technologies to use them. High tech companies areinventing computer and Internet ‘appliances’ that perform a single taskautomatically, simply and transparently e.g. refrigerator that sends amessage when items are out-of-stock, past their ‘use before’ date, ortoo cold or too warm.


This presentation was itself theresult of addressing an unmet need: After readingdozens of books on innovation, I was unable to find one source thatexplained in clear terms what innovation is, in a businesscontext, conveyed the urgent need for businesses to become moreinnovative, and provided an actionable prescription for doing so. Thispaper was initially developed to provide the Core Innovation Team ofErnst & Young with background on the history, current state andleading practices in business innovation, and I am now using it todevelop part of a core curriculum on entrepreneurship, of whichinnovation is a critical element.

I hope this analysis hasgiven you a better understanding of the subject and its importance, andsome useful tools and ideas that you can use to make your organizationmore innovative as well. I would welcome the opportunity to continuethe discussion on this subject, by e-mail or through the comments thread below. You can find more of my writings on business innovation in this index.

While I’m optimistic that this prescription will work within businessand other organizations, large and small, I am less convinced that itwill work to solve some of the more deep-seated human needs andinexorable problems that plague us today, such as global warming,pollution, the energy crisis, biodegradation, endemic war, violence,mental illness and disease, animal cruelty, urban sprawl and decay,crime, unemployment, and the inequitable distribution of resources,income, wealth and power. While the process should work in principle,it is unlikely that this process can be followed with sufficient rigouror resources without (a) a willingness by governments to spend muchmore money (paid for by taxes) to solve these problems, (b) a politicalwill to solve such problems creatively and by consensus, rather thanleaving it to private interests to address them or dealing with them bybrute force, and (c) a much greater awareness, commitment and sense ofresponsibility by the body politic of the urgency and opportunity tosolve these problems. But just as business will be driven once again toinvest in innovation in the search to sustain profitability, it islikely that private citizens and public institutions will ultimately bedriven to invest together in innovation in the search for a liveable,sustainable world. The process they then use will probably look a lotlike this prescription.


  • Boston Consulting Group — Innovation to Cash (annual survey of executive priorities), 2003
  • Cap Gemini — The Adaptive Imperative, in Perspectives on Business Innovation, 2002
  • Chen, Eric and Ho, Kathryn Kai-ling — Demystifying Innovation, 2002
  • Chesbrough, Henry — Sometimes Success Begins at Failure, in HBR Working Knowledge, 2003
  • Chomsky, Noam — Manufacturing Dissent, 1995
  • Christensen, Clay — The Innovator’s Dilemma, 2000
  • Christensen, Clay — The Innovator’s Solution, 2003
  • Credit Suisse First Boston — New Economy Forum, synthesis report, 1999
  • De Bono, Edward — Serious Creativity, 1992
  • Dertouzos, Michael — What Will Be, 1999: Although the idea of ‘find a need and fill it’ is hardly new inbusiness, an article by MIT’s Michael Dertouzos in the December1999 Technology Review on the pillars of innovation reinforces theconnection between need and innovation. Building on ideas in his bookWhat Will Be , he says: Perhapsthe most important ingredient of successful innovation is thecreative technological idea that serves a pressing human need. Thiskind of creativity, in turn, requires a schizophrenic combination ofrationality and insanity that’s outside our ordinary experience.Imagine that all current inventions in the world and all their possiblelogical extensions and uses are inside a huge balloon. People arepretty good at extending these ideas further, using logic and commonsense. But their results, being logical extensions of what’s alreadythere, stay within the balloon. To escape these old ideas and come upwith something that is radically new, the balloon must be puncturedwith something that defies reason — an [innovation] has been born.Successful innovators apply their drive and flexibility toward lookingfor and blending these two forces [market and technology] wherever theycrop up, always striving to zero in on the key ingredient — a creativeidea that serves a pressing human need.
  • Dixon, Nancy — The Organizational Learning Cycle, 1994
  • Drucker, Peter — Innovation & Entrepreneurship, 1993
  • Drucker, Peter — Management Challenges for the 21st Century, 1999
  • Fast Company magazine — various online and hard-copy articles on Innovation, 1999-2004, notably the Business at its Best series
  • Gehl, John and Douglas, Suzanne — Innovation (weekly e-magazine)
  • Gladwell, Malcolm — The Tipping Point, 2003
  • Hamel, Gary — Leading the Revolution, 2000
  • Handy, Charles — Age of Unreason, 1998 and Age of Paradox, 1995
  • Ichimura, Elliott — Virtuous Cycle of Innovation, 2001 (unpublished)
  • Imperato, Nicholas & Harari, Oren — Jumping the Curve, 1996
  • Kelley, The Art of Innovation, 2001
  • Leifer, Richard et al — Radical Innovation, 2000
  • Leonard-Barton, Dorothy — Wellspring of Knowledge, 1995
  • Meadows, Donella — Places to Intervene in a System, in Whole Earth magazine, 1997
  • O’Mara, Kevin — Five Innovation Best Practices, in ZDNet, 2003
  • Payne, Cyndy — WL Gore & Associates, Case Study in Innovation, in Foundation for Enterprise Development online magazine, 1998
  • Peters, Tom — The Circle of Innovation, 1999
  • Robert, Michel — Product Innovation Strategy, 1995 suggestslooking for innovative ideas where there are: unexpected successes,failures or events; process weaknesses; changes in market structure,demographics, and perceptions; high growth areas and convergences; newknowledge or technology; changes in economic, political, regulatory,legal or social environment; changes in markets, customers, resourcesor delivery channels.
  • Schrage, Michael — Serious Play, 1999
  • Senge, Peter — The Fifth Discipline, 1990
  • Tucker, Robert — Five Steps to Business Innovation, Business + Strategy Magazine, February 2003
  • Von Hippel, Eric — The Sources of Innovation, 1997
  • Wheatley, Margaret — Leadership & The New Science, 2001
  • Zuboff, Shoshana et al — The Support Economy, 2003