Change is coming.
Clark Fox, Solomon Kane and I decided to do this >>
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Clayton Christensen has passed on to a better world. We did not deserve him. I only ever met the Professor over the phone – in the early 2000s – when I did this interview with him >>
The Innovation Catalyst
“You never want to ever say: ‘Well those idiots failed because they had the wrong strategy.’
“You have to ask: ‘Why did they have the wrong strategy?’
“Almost always, they’ve used the wrong process to come with the strategy.”
— Clayton Christensen, author, The Innovator’s Dilemma and The Innovator’s Solution
What are your views on Nick Carr’s Harvard Business Review article, “IT Doesn’t Matter”?
Clayton Christensen: In chapters 5 and 6 of Innovator’s Solution, I talk about how you start out in the early era of an industry’s history when the functionality and reliability of the product aren’t good enough. The way you compete is to make more reliable and higher performing products. In order to do that well, you need to have an interdependent architecture that’s a proprietary system. You then get to the paint where you’ve overshot what customers can use.
At this point, a process of commodization begins to set in. It has two dimensions: First, having overshot you keep trying to improve the product. People will accept the improved product; however, they won’t pay much money for the improvements. Customers often don’t need all of the improvements.
The other dimension of commodization surrounds the argument of now having to compete differently. You’re faced with the need to market so that every customer gets exactly what they need when they need it. If you achieve this, you can responsibly market to smaller and smaller niches in the market. To compete at this level, you need to have the architecture of the product evolve from a proprietary interdependent one to a modular architecture. When you have a modular architecture where the product’s performance is really driven by the subsystem that you snap together, like your personal computer, then modularity finishes the commodization job. You can no longer differentiate your product from the others on the basis of product performance because everyone has the same modules.
In the first realm of commodization, the functionality and reliability are determined in the architecture of the product. The component themselves don’t make much of a difference. In the other realm of commodization, the components or the subsystems make all the difference and the architecture doesn’t make much difference.
In chapter 6, the very move in this direction at a stage of value added precipitates a reciprocal of decommodization of the adjacent stages. Usually, that where what’s not good enough gets resolved.
Carr’s point is a little bit consistent with this view. There was an era when you could gain a competitive advantage by having information technology that (1) others didn’t have, and (2) you had processes within your company to integrate that technology into your strategic planning, product development processes, and pricing better and faster than others. Now, the ability to capture that information, process it, and deploy it to the people who need it is almost modular, in the sense, any company can get it. Carr overstates this point a bit. Things are headed in this direction, and thus the information technology becomes a commodity you must have. You just can’t differentiate yourself.
Let’s talk about a specific example- about five years ago, StorageNetworks built an IT infrastructure from commercially available hardware, raised more than $200 million, and offered organizations a third-party source for immediate storage, likened to that of a public service utility. EMC validated the concept. StorageNetworks couldn’t make a go of that business and offered backup stores and eventually started licensing its software. StorageNetworks went Chapter 11 and couldn’t given find a buyer. What went wrong here?
Clayton Christensen: I haven’t really studied this company in depth. So, I can only surmise. With the caveat that I haven’t crawled inside, I will tell you some of the things I worry about as I watch that. First, Chapter 8’s key assertion is the only thing you know for sure at the beginning you don’t know what the right strategy is. Likewise, you don’t know who are the right customers, and what job are they trying to get done. You start out with a deliberate strategy where you think this’s the right thing. You almost have to know for sure you are wrong. Therefore, you have to get in the market quick with a little of this and then figure out what’s work.
In Chapter 8, I cite a colleague’s study of 400 Harvard Business School graduates who started new companies. Half have been successfully; half haven’t been. The half that succeeded didn’t entirely trust the strategy they used when they raised money. They ended up selecting another strategy that enabled them to succeed. Ninety percent of this group said they ended up doing something completely different from what they intended to do. The difference between the successes and the failures wasn’t the successful ones got it right the first time. They just had money left over after they got it wrong. They learned from their mistake in time to shift gears.
In Chapter 9, I talk about good money and bad money. Bad money is a lot of money flowed into something with the willingness to accept big losses. You have the expectation that the more you spend, the more you will earn later. The money is spent in the expectation your strategy is right.
We would be in error to say that somewhere in that space where StorageNetworks was there wasn’t a great business opportunity. It’s more accurate to say, like everyone else, there initial strategy wasn’t right. They spent a lot of money pursuing that strategy. The problem they employed a deliberate strategy aggressively from the beginning, and spent to get big fast.
How do you fix the disconnect between upper management’s ideas and what the market will accept?
Clayton Christensen: It is a combination of Chapters 8 and 9. Too much money is a huge curse. Enough money can get you into the market as quickly as possible. In Chapter 3 talks about segmenting the market by the job people are trying to get done. The faster you can get into the market and get people to pay real money for real products, then you need to figure you what were these people trying to get done for them when they hired your product. You can then begin to focus on helping them get the job done better and better. As you learn what works and how the customers are using your product, you reach the point where you can aggressively spend money to grow. It’s the premature outlay of huge amounts of money in pursuit of the wrong strategy is the thing to avoid. You need to have an experimental mindset.
In my own language, I try not to use innovative and non innovative. Most company’s are innovative, but in different ways. An established company is usually very good in the sustaining innovation track. Usually established companies pull off radical sustaining innovations. Some times they overshooting and flaming out. The disruptive innovation is a different kind. I would rather work for an innovative company. The question is which ones.
As I live with the ideas in the Innovator’s Solution, history might judge the concepts in Chapter 3 — segmenting markets in ways that cause us to fail – might judge this to be the most important chapter in the book.
We always have an overwhelming tendency to frame the market we are targeting by the boundaries defined by product categories, or product points, or the demographics of the customers. We think about industry verticals. When we target products that markets that are defined by demographics of customers or by the product characteristics, we are playing the crapshoot game of determining whether or not there is a valid customer need. We define our business as helping a customer get a job done – one that he is already struggling to get done and has no satisfactory means of doing it – the probability that product will contact with the customer is very high. You need to look at what is the customer trying to get done and does it help him or her get it done better. Or, does it make it easier for them to do what they aren’t trying to get done. The latter is a failure.
We give a little example in Chapter 3. It’s about investments in Internet-based or electronic learning technologies which are oriented as trying to help college students learn more. These technologies usually never work. If you think about what college students are really trying to do, they want to pass the course without really having to study. If the same effort was focused on crammed.com, making it easier for them to cram, you help them try to do what they are already trying to get done. This works.
Carr makes the comment about commodization (Oracle and SAP struggling to sell better products at higher and higher prices). If the IT industry has lost a bit of its luster, history will show IT vendors have cut to segment the market by product categories and by the attributes of customers, rather than the fundamental jobs people are trying to do in organization. An IT professional who wants to know should I join this organization or this organization I am working with have high potential. If there’s a deep of what the customer is trying to accomplish, then I would be excited about working there.
What are the symptoms of a business or an industry that’s ready for disruption? You mention companies that produce products with features no one uses. What are some of the other attributes to look for?
Clayton Christensen:There are two types of disruptions – low-end and new market. The possibility that a low-end disruption, which is covered in Chapter 2, might occur only if two conditions are met: There have to be customers at the low end of the market who don’t value and won’t pay for further improvement. The second condition for that to happen is that someone has to figure out a lower-cost business model that can be attractively profitable at the discount prices required to win the business of those customers at the low end. If these conditions are met, then a low-end disruption most likely will occur.
The new market disruption is based on an entirely new market sector. If there is a population who are trying to get something done but they can’t to do it for themselves satisfactorily because they don’t have the skills or money to buy the product, they have to rely on the expensive and inconvenient help of experts. If that population exists, that is the requisite condition for new market disreputability. The second reason for new market disruption is can I technologically come up with a market that is so afford and simple to use that I can enable this new population who are trying to get it done, but can’t. If these two conditions exist, then a market is a new market disreputable.
Your company- Innosight- is a disruptive company in the management consulting space. How do you differentiate yourself from the McKinsey’s and the Bains?
Clayton Christensen: The trajectory that the consulting firms are on is higher billings, per partner, per client. Partners make more money by putting more people on the ground. These projects tend not to be strategic related, but operations effectiveness type consulting in mergers and acquisitions and integration. That has become the bread and butter of those companies. The way we try top to help a company is to go in and spend a day going over theory. We have this conviction that theory is a very useful thing. It’s a statement of what causes what and why. Managers use theories every day. In a way, we give them virtual glasses so they can see these theories.
On the second day, we have them make a list of 20 or more of the new business ideas or growth product ideas that have been kicked around in this company. Let’s look at each one of those ideas through this lens. Almost always, there are three or four that just pop out and managers say we haven’t been giving this much thought because it is not a sustaining innovation. However, when you look at it through the theories lenses, the ideas have enormous potential. As we go through the day, we say it has enormous potential, but the way we’ve been thinking about doesn’t meet with what we say in Chapter 3. Most likely, they’ve been studying the wrong customers for that idea. You can take an idea and start to shape it so it conforms to the pattern of disruptive successful companies.
By the end of the second day, they have several products which they say could be successful. Then we have them go through a market study phase where we try to send them to market by the job customers are trying to get done. They need to answer how big is this market? It does involve finding some people to watch and then to ask them a unique set of questions. When you just hired that product what job were you trying to get done? And when you don’t hire that product, what else do you hire to get the job done? There’s a methodology for converting those insight into an estimate for how big is the job.
The third is to work with the team to create a business plan that can get funded and implemented.
When creating businesses to commercialize high-potential innovations, you have six questions, six decisions you ask people to make. Can you go over them with us?
Clayton Christensen: The questions are fairly simple:
1) Whether the new business should be set up to operate autonomously. Opportunities that require developing new skills and using new business models ought to be kept separate from the main business.
2) The activities the company should build versus the activities it should buy. The new business needs to control activities that allow it to improve performance along dimensions that matter most to customers.
3) How the new business should interact with “value network” participants, such as suppliers and channel partners. The new business must help its value network partners move up their own improvement trajectory. People don’t do what doesn’t make sense to them.
4) Which managers should be appointed to run the new business. Managers should have wrestled with challenges (attended “schools of experience”) they know they will encounter.
5) How the new business should set its strategy. In all likelihood, the new business needs to use an “emergent” strategy process that lets it experiment and learn from the marketplace.
6) Who should fund the new business. The new business needs investors whose prioritization criteria match the business’ needs. For truly disruptive innovations, this typically means being patient for growth but impatient for profits.
People assume an answer to these questions without really asking. They often don’t have a theory or strategic framework to think them through. You never have a one-size fits all answer. There are no best practices. Best practices is flawed thinking- it causes innovation to fail.
For example, should the business be autonomous or not? There is a model in Chapter 7 of resources, processes, and values. The organization needs to be autonomous if its normal processes of prioritizing things would place other priorities over this one. The organization can’t succeed if the responsible people are over prioritizing. You can do the same thing with processes. A process is designed to do a particular thing. If the process won’t facilitate success, then you need a different process. Then you need a separate team.
The concept of getting the right people is one of the most important ideas for an organization. You shouldn’t segment markets by the attributes of the product. You shouldn’t segment people by their personal attributes. You need, instead, to segment them by the way they solve problems during earlier times in their career. You make a list of what kinds of problems this management team is going to comfort. Once we know, we have to make sure we have people on the team who’ve seen problems like this before.
You never want to ever say well those idiots failed because they had the wrong strategy. You have to ask “Why did they have the wrong strategy?” Almost always, they’ve used the wrong process to come with the strategy. We show two fundamentally different processes: one is a top-down analytical project that is followed by implementation, and the other way is get into the market to try to experiment what works and what doesn’t.
Who should fund the business? During the era of being out in the market experimenting, then the money has to be patient for growth and impatient for profit. Once you have it figured out and you know what strategy is going to work, then the money can demand growth.
Christian Sarkar: Thank you so much.
Years later, I interviewed Clay again – still not face to face – for The Marketing Journal >> “Branding as a Job to be Done” – An Interview with Clayton Christensen
I am grateful for everything you did for us nerds, Prof. Christensen. We will not forget you. See this from Harvard Business Review >>
Why are leading brands turning to progressive Brand Activism?
How do brands align their values with the values of their customers, their employees, and society at large?
We offer the workshop in two locations:
(1) in Sarasota, Florida (workshop led by Professor Philip Kotler and Christian Sarkar)
(2) on your company’s premises (workshop led by Christian Sarkar)
WHO SHOULD ATTEND
Senior executives responsible for company/brand strategy and direction
The workshop introduces executives to the strategic power of Brand Activism done right.
- What is Brand Activism?
- How are leading companies stepping up? (NIKE, PUMA, Microsoft, Google, Unilever, Patagonia, The Body Shop, Kenneth Cole, and more)
- The role of Trust: local, national, and global
- What are the existing models for Brand Activism?
- An introduction to the Sarkar-Kotler Brand Activism Framework
- Understanding Brand Activism strategy
- The CEO as Brand Activist
- How do you find your authentic Brand Activism story?
- What could possibly go wrong?
- Aligning values and building movements
- Measuring the impact of Brand Activism (Return on Trust)
- Brand Activism Mapping
- The Brand Activism Canvas
According to PlainSite, Facebook has been lying to the public about the scale of its problem with fake accounts, which likely exceed 50% of its network. Its official metrics–many of which it has stopped reporting quarterly–are self-contradictory and even farcical. The company has lost control of its own product.
Fake accounts affect Facebook at its core in numerous ways:
- Its customers purchase advertising on Facebook based on the fact that it can supposedly target advertisements at more than 2 billion real human beings. To the extent that users aren’t real, companies are throwing their money down the drain.
- Fake accounts click on advertising at random, or “like” pages, to throw off anti-fraud algorithms. Fake accounts look real if they do not follow a clear pattern. This kind of activity defrauds advertisers, but rewards Facebook with revenue.
- Fake accounts often defraud other users on Facebook, through scams, fake news, extortion, and other forms of deception. Often, they can involve governments.
Recently, my dear friend and mentor – Professor Philip Kotler (yes, that Kotler!) got entangled in a squabble between Narendra Modi, the Prime Minister of India, and Rahul Gandhi, the dynastic leader of the Congress party.
The fun began when Professor Kotler presented the Prime Minister with the inaugural Philip Kotler Presidential Award, an award that recognizes Shri Narendra Modi’s leadership qualities on the global stage.
Because his physician had advised him not to travel, Professor Kotler chose his friend Professor Jagdish Sheth, an eminent marketer in his own right, to present the award on his behalf.
The award was presented by a delegation led by Professor Sheth on January 14, 2019. Also part of the delegation were representatives of the World Marketing Summit which had held a conference in Delhi in December of 2018.
The next day, this tweet from Rahul Gandhi poked fun at the award, seeking to undermine not just the PM, but, more importantly for me, the integrity of Professor Kotler as well:
I want to congratulate our PM, on winning the world famous “Kotler Presidential Award”!
In fact it’s so famous it has no jury, has never been given out before & is backed by an unheard of Aligarh company.
Event Partners: Patanjali & Republic TV 🙂https://t.co/449Vk9Ybmz
— Rahul Gandhi (@RahulGandhi) January 15, 2019
Almost immediately, the comments inspired by the post fell into two categories – insults and praise; insults from Rahul Gandhi followers and praise from PM Modi supporters. The tone of these comments was shrill, with many attacking Professor Kotler directly.
Professor Kotler and I were shocked. The article questioning the award was written by a leftist outlet which casts doubt on the award:
The government’s press release makes no mention of jury members, nor the exact organisation behind the new award.
The media pounced on the story and added to the controversy:
Tonight at 9: is the Kotler award legit ? pic.twitter.com/FyaF1Uu2gi
— Nidhi Razdan (@Nidhi) January 16, 2019
Even one of my literary heroes – Shashi Tharoor – piled on, going so far as to call the award a fake.
Questions & Answers
As questions were raised, I decided to collect and answer them:
Is the award real? (“…little information has been shared about the provenance of the latest award, or the organisation presenting it.”)
Yes, it is real. And why would people like Tharoor assume it was fake? The “journalists” in Rahul Gandhi’s tweet did not follow the first rule of journalism which is – check your facts with the source. How easy it would have been to Google Philip Kotler and contact him through his Northwestern faculty page.
Who is Philip Kotler? What qualifies him to give this award?
Along with Peter Drucker, Professor Philip Kotler is considered to be one of our greatest management thinkers. Who is the leading business scientist in history? According to the Hirsch-Index its Philip Kotler with an h-index of 163, followed by Michael Porter with 159.
Ask any MBA student anywhere in the world, and you will find that they have studied Professor Kotler’s books. He has received 22 honorary degrees from around the world, and published over 70 books. His 50+ years of work with the Kellogg School of Management has resulted in building the #1 Marketing department in the world.
Professor Kotler is a man with great integrity and openness. He is also one of the smartest thinkers to grace the planet. He is in the Thinkers50 Hall of Fame (2013), and is featured as a “guru” in the Economist.
Who chose the award? Why is there no jury?
Professor Philip Kotler made the final decision after a committee for the World Marketing Summit came up with a list of possible candidates.
Professor Kotler explains via a letter published on his blog:
Why is Kotler’s twitter account not verified?
Because Twitter has stopped verifying accounts, and Prof. Kotler never thought to ask. I messaged Jack Dorsey to ask him if he could make an exception for Professor Kotler.
Why was there no mention of the award on the Kotler website?
Professor Kotler’s site is not updated often. When the Indian press started questioning the authenticity of the Award, Professor Kotler tweeted about it:
I congratulate PM @narendramodi for being conferred the first ever Philip Kotler Presidential Award. He has been selected for his outstanding leadership & selfless service towards India, combined with his tireless energy. (1/2)
— Philip Kotler (@kotl) January 15, 2019
Why was the Indian site for the World Marketing Summit taken down?
After an event is over, often times the microsite that’s used to describe the event and/or register participants is usually taken down. The global site for the World Marketing Summit, Kotler Impact and Kotler Awards are still running.
What could Professor Philip Kotler possibly know about India?
Professor Kotler is not just the “father of modern marketing.” He is an economist and studied with some the greatest Economics teachers on the planet. His involvement with India began in 1955, when he spent a year working on his PhD thesis in India. If the journalists bothered to read My Adventures in Marketing, they might have known that. Since then he has visited India often to teach and speak.
What could Professor Philip Kotler possibly know about democracy?
Professor Kotler has published books and written numerous articles on capitalism and democracy. See: Democracy in Decline and Confronting Capitalism.
How to Argue
Bottom line, I’m disgusted with the trash-talking that I see from the left-leaning Indian journalists and social media participants.
Too many of our disagreements fall in the bottom two layers of Paul Graham’s Hierarchy of Disagreement:
If someone wants to question PM Modi’s track record, they would do far better through Refutation rather than Ad Hominem and Name-Calling. Let that be a lesson for you, young Rahul, and for all who would seek to look childish: focus on the substance instead.
Professor Kotler, please excuse the mess caused by this controversy.
DISCLOSURE: I have worked and continue to work with Professor Philip Kotler on several projects, including The Marketing Journal, ActivistBrands.com, and FIXCapitalism. We’ve written a book together titled Brand Activism: From Purpose to Action (the print version is forthcoming). No one asked me or paid me (in India, as elsewhere, paid-journalism is a thing) to write this. I simply felt compelled to stand up for a learned man of great integrity.
Professor Philip Kotler – the “father of modern marketing” – and I have co-authored a book: Brand Activism: From Purpose to Action.
Brand activism is driven by a fundamental concern for the biggest and most urgent problems facing society. The main idea here is that when government fails to do its job, business has a civic responsibility to stand up for the public interest. It’s what a good citizen does.
available in the following countries
The book introduces the reader to regressive and progressive Brand Activism, and shows how the best businesses are making the world a better place because their activism is a differentiator – for customers, for employees, and for society at large. We also examine the role of the CEO.
Here’s a look at the table of contents:
The book includes the Sarkar-Kotler Brand Activism Framework, a toolkit for business leaders looking to transform their companies and institutions.
The book also includes interviews with leaders from various fields:
- Scott Galloway
- John Elkington
- Raj Sisodia
- John Ehrenreich
- Christopher Davis
- Stephen M. R. Covey
- Hennie Botes
- Stuart L. Hart
- David “Dread” Hinds
- Clark Fox
Finally, we’ve launched a separate website to help individuals who want to learn more – www.activistbrands.com. We hope you find it useful.
I’ve been painting in a style I call abstract activism since 2012…
More at sarkarart.com >>
In his book The Great Good Place: Cafes, Coffee Shops, Bookstores, Bars, Hair Salons, and Other Hangouts at the Heart of a Community, sociologist Ray Oldenburg suggests citizens should live in a balance of three kingdoms: home, work, and social. The social space would be the third place – a great, good place.
This is what the local “community center” was supposed to be. Some community centers succeed because of their inclusivity and community roots. Senior citizens go to the community center not to play bingo, but to meet each other and talk. The same applies to the kids who hang out at malls. Libraries, bookstores, and bars serve the same purpose.
This is what Starbucks‘ Howard Schultz had in mind when he imported the idea of the Italian coffee house to the US. The only problem with the model is the cost of the coffee. In some ways, we could argue that Starbucks is exploiting our psychological need for community to make excessive profits.
In order for the city and its neighborhoods to offer the rich and varied association that is their promise and their potential, there must be neutral ground upon which people may gather. There must be places where individuals may come and go as they please, in which none are required to play host, and in which all feel at home and comfortable. If there is no neutral ground in the neighborhoods where people live, association outside the home will be impoverished.
Is there a “neutral ground” in your neighborhood? Why or why not?
Urban developers and designers must be held accountable for the lack of public space.
So how do we begin placemaking?
The attributes of a “great place” are also the attributes of community building.
So why do developers ignore these when they design neighborhoods?
Development policy must not be driven by developer profits, and yet this is the case almost everywhere. Our leaders are not interested in building healthy communities. Their interests lie with their sponsors.
The Founding Fathers didn’t envision corporate personhood, or Citizen’s United.
In fact, I wonder what they’d think about capitalism as an enemy of democracy and a grave threat to the very survival of life on Earth.
Is democracy doomed?
What must we do to save capitalism from itself?
Enter Phil Kotler. The legendary marketing guru is marketing a new sort of product these days. He is trying to fix Capitalism, a system he believes has helped create more wealth for more people than any other economic model.
Says the esteemed Professor Kotler (he’s taught at Northwestern for 50 years!) >>
“Capitalism must evolve to serve the needs of all citizens, not just the very affluent. Our goal is to discuss the 14 Shortcomings of Capitalism and systematically analyze the problems and potential solutions. We want to gather opinions and recommendations from everyone – and begin the process of saving capitalism from itself.”
It’s great to see one of the greatest capitalist minds working on reforming capitalism with a capital C.
According to Kotler, the current state of capitalism is falling short because it:
1. Proposes little or no solution to persistent poverty
2. Generates a growing level of income inequality
3. Fails to pay a living wage to billions of workers
4. Doesn’t create enough human jobs in the face of growing automation
5. Doesn’t charge businesses with the full social costs of their activities
6. Exploits the environment and natural resources in the absence of regulation
7. Creates business cycles and economic instability
8. Emphasizes individualism and self-interest at the expense of community and the commons
9. Encourages high consumer debt and leads to a growing financially-driven rather than producer-driven economy
10. Lets politicians and business interests collaborate to subvert the economic interests of the majority of citizens
11. Favors short-run profit planning over long-run investment planning
12. Should have regulations regarding product quality, safety, truth in advertising, and anti-competitive behavior
13. Tends to focus narrowly on GDP growth
14. Needs to bring social values and happiness into the market equation.
So that’s my latest project – helping Kotler and friends get the word out and make a difference.
Like the $300 House Project, I’m helping build an “ecosystem of concerned folks” to face the challenge.
We began by enlisting the Huffington Post as our media partner.
We now have a FIXCapitalism channel; we’re slowly beginning to get some attention with these articles:
The future is too important to leave in the hands of the corporations and their paid stooges – the politricksters in D.C.!
Can you help? Connect us to others who are interested – who may have a point of view they want to share – and can help move the conversation forward. Join us!
Help spread the word!
In McKinsey‘s latest survey on business technology, few executives say their IT leaders are closely involved in helping shape the strategic agenda, and confidence in IT’s ability to support growth and other business goals is waning. Furthermore, “executives’ current perceptions of IT performance are decidedly negative.”
This sort of criticism of IT is not new.
In fact, it goes all the way back to Nick Carr‘s 2003 IT Doesn’t Matter article in Harvard Business Review. At the time, Carr managed to infuriate the CEOs of numerous IT companies, including Craig Barrett, Intel’s CEO, along with Bill Gates and Larry Ellison.
“My point, however, is that it (IT) is no longer a source of advantage at the firm level – it doesn’t enable individual companies to distinguish themselves in a meaningful way from their competitors. Essential to competitiveness but inconsequential to strategic advantage: that’s why IT is best viewed (and managed) as a commodity.”
– Nicholas Carr
At the time, there were numerous rebuttals to Carr’s view, but none more powerful than the one from John Hagel and John Seely Brown. They argued:
- Extracting business value from IT requires innovations in business practices. In many respects, we believe Carr attacks a red herring – few people would argue that IT alone provides any significant business value or strategic advantage.
- The economic impact from IT comes from incremental innovations, rather than “big bang” initiatives. A process of rapid incrementalism enhances learning potential and creates opportunities for further innovations.
- The strategic impact of IT investment comes from the cumulative effect of sustained initiatives to innovate business practices in the near-term. The strategic differentiation emerges over time, based less on any one specific innovation in business practice and much more on the capability to continuously innovate around the evolving capabilities of IT.
According to JH3 and JSB: far from believing that the potential for strategic differentiation through IT is diminishing, we would maintain that the potential is increasing, given the growing gap between IT potential and realized business value.
So how does IT become more strategic?
The Wall Street Journal‘s Rachael King recommends:
CIOs also need to bring some transparency to their operations by sitting down with business leaders and going over the budget and setting priorities together. The CIO needs to also actively market how the IT department is driving value in terms that business can understand. For example, Intel CIO Kim Stevenson recently published an annual IT report where she detailed how her department implemented advanced data analytics that helped drive $351 million in revenue for the company.
The ability for Ms. Stevenson to demonstrate the value of her organization’s work in dollars and cents is changing how IT is perceived in the company. It changes the relationship from that of a service provider, a department that helps people set up servers or configure PCs, to one that uses technology to solve business problems.
CIOs must demonstrate and quantify the business value of IT.
What does this mean for the sales people of IT company’s trying to sell to CIOs? It means that the role of the CIO is often supplanted by business executives. (In my discussions with our clients, I often emphasize this point.)
IT is so strategic, one could argue, that it is no longer left to IT. Often it is CMOs and other non-IT business executives who are actively pursuing the mobile, social, and analytics strategies that are creating the organizational pull for new approaches to rapid application development, and as a by-product, the cloud services offerings needed to enable those strategies.
The new generation of IT will support new business strategies. This means that any vendor selling IT solutions will have to speak the language of business strategy. And most importantly, the vendor will have to show the client how to achieve the “promised” benefits of IT.
So here’s the takeaway: CIOs must work on getting a place at the strategy table. When they do, they are viewed as effective business partners. What must the CIO do to be viewed as a strategic partner?
– Does your company have a clear view of how advances in IT (Big Data, AI, IoT, Cloud Computing) is likely to reshape your relevant markets over the next five years?
– What areas of business growth can IT contribute to?
– Does your company have an equally clear view of the implications for the changes you will need to make to continue to create value?
– Are these views shared effectively among your senior managers across the organization?
– Does senior management recognize the risks and uncertainties as part of the decision-making process?
– Has your company been sufficiently aggressive in using IT to improve strategic areas of your operations?
– Are there opportunities to use IT to improve operations around existing products and services?
– Are their opportunities to use IT to significantly reduce costs and cycle time in existing work processes?
– What are the data sources? How will you monitor them? How do you trigger events based on the intelligence gathered from the data? Is there a profit or cost-savings optimization opportunity?
Why CIOs should be business-strategy partners Feb 2015, McKinsey
Most CIOs are Not Seen as Influencing Corporate Strategy: Report, Feb 2015, Wall Street Journal
Public Cloud a first choice for minority of projects: Gartner CIO survey, March 2015, ARN
How does innovation happen? Most company’s struggle to understand how innovation works, often confusing creativity with innovation. In today’s tacit, knowledge-based creative economy, innovation and differentiation rarely come from one distinct source. Rather, innovation evolves from:
- new ways of thinking,
- new business models,
- new processes,
- new organizations (or new collaborative inside/outside team structures),
- and new products (offerings including services)
- Research shows that the volume of ideas bouncing about make large cities disproportionately more creative than smaller towns.
- Having multiple hobbies allows your brain to subconsciously compare and contrast problems and solutions, forming new connections at the margins of each.
- Similarly, reading multiple books at the same time vs serially lets your brain juxtapose new ideas and develop new connections.
- Wandering minds are more creative.
- Studying a field “too much” doesn’t limit creativity — it does the opposite. More ideas banging about just produces even more ideas.
- The “accept everything” mantra of brainstorming doesn’t work. Debate is far more effective. Let those ideas fight.
- ADD and bipolar disorder are both associated with greater creativity. When you’re drunk or exhausted your brain is poised for breakthroughs.
- Even with teams, it’s better to mix up experience levels, familiarity with one another and other factors to keep things rough around the edges.
It’s all about positivity :
Surely Richard Scarry would approve!
There’s plenty of advice out there for UK-based TESCO’ s new CEO Dave Lewis as pledges to return to the core of Tesco’s business, “in price, availability and service.”
For me, there’s a critical question: what one change will deliver an 80% difference in results?
I think I know. I spent 6 months visiting TESCO at least twice a week when I was in Hertford, and all I can say is “wow.” If you just view TESCO with the eyes of a typical US customer, it’s obvious what that 80% difference is.
There really aren’t as many difficult calls as it seems.
So, what’s the one thing TESCO has to focus on? Restocking shelves to meet demand during and after peak traffic.
Every evening, right after after-work traffic died down, here’s what the TESCO produce section would look like:
And that’s not all, their soft drinks are not replenished either. So if you go buy a Dr. Pepper in the morning, and then come in the next day – guess what? No availability.
This was a problem all over England.
Dave Lewis, just fix it. Whatever it is they do here in the US to keep stocks replenished, copy it.
That’s it. The one thing that will save TESCO.
T.S. Eliot had his “social function of poetry” and we have social media – YouTube, Twitter, Facebook, etc. etc.
Could it be that what we celebrate as the art of our times is not Art at all? If so, What is Art?
At best, our culture has relegated Art to the dubious field of “entertainment” – hijacked from its true purpose, left to serve as a decoration on the public walls of high society museums and the private walls of wealthy collectors. At best, art is fashion.
Wait, wait, wait.
John Seely Brown’s latest newsletter takes us to task by raising an important point:
“Artists are not included in our debate on how we build
the economy for the future. They’re excluded in our nation’s emphasis on innovation which has been left to the STEM crowd. We’re not thinking about designing for emergence. Innovation is about seeing the world differently. Who is better at helping us see the world differently than the artists?”
Why is this? I can think of three reasons:
1) The “art” made by “artists” is irrelevant
2) The “artists” are not Artists
3) Art is generally devalued in a society polarized by Science, Fashion, and Politics
Alright, I’m being a bit silly, but here is someone who’s not: Ben Davis and his 9.5 Theses on Art and Class (h/t Doug Smith) serve as both an indictment and a wake-up call for artists everywhere. Have a look at this excerpt:
2.0 Today, the ruling class, which is capitalist, dominates
the sphere of the visual arts
2.1 It is part of the definition of a ruling class that it
controls the material resources of society
2.2 The ruling ideologies, which serve to reproduce this material situation, also represent the interests of the ruling class
2.3 The dominant values given to art, therefore, will be
ones that serve the interests of the current ruling class
2.4 Concretely, within the sphere of the contemporary visual
arts, the agents whose interests determine the dominant values of art are: large corporations, including auction houses and corporate collectors; art investors, private collectors and patrons; trustees and administrators of large cultural institutions and universities
2.5 One role for art, therefore, is as a luxury good, whose
superior craftsmanship or intellectual prestige indicates superior social status
2.6 Another role for art is to serve as financial instrument
or tradable repository of value
2.7 Another role for art is as sign of “giving back” to the
community, to whitewash ill-gotten gains
2.8 Another role for art is symbolic escape valve for
radical impulses, to serve as a place to isolate and contain social energy that runs counter to the dominant ideology
2.9 A final role for art is the self-replication of
ruling-class ideology about art itself–the dominant values given to art serve not only to enact ruling-class values directly, but also to subjugate, within the sphere of the arts, other possible values of art
OK. But why are artists banished from the Republic?
One can argue (via Ben Franklin) that the last artist was Jesus and before him Socrates. I’d add folks like Gandhi, Malcolm X, Mandela, Marley… The artist sees differently. Not just paintings on a wall, but society itself. Who paints our vision for society today? Lady Gaga or our lobbyists?
Walker Percy saw the artist (or writer) as a canary in the coal mine. The artist as prophet. But we are deaf to the canary. We’ve banned our artists from society – not by muzzling them with threats and jail time, but by turning them into designers of consumer and fashion goods.
For the first time in history, we’ve made art useful as a financial commodity- and killed it in the process.
Meanwhile, somewhere, hidden from the lights of Sotheby’s and Christie’s, art is still being made.
Here’s a new and important book that helps us make sense of the changing business landscape. It’s Big Bang Disruption: Strategy in the Age of Devastating Innovation by Larry Downes and Paul Nunes (from Accenture) – and it describes how so many businesses are disrupted overnight by big-bang innovations that come out of nowhere. The insights presented by the book add new perspectives to the work on disruptive innovation by Clayton Christensen and gang.
According to the authors, the big-bang disrupters may not even see you as competition. They’re not sizing up your product line and figuring out ways to offer slightly better price or performance with hopes of gaining a short-term advantage.
EXAMPLES OF BIG BANG INNOVATION
One of the examples is the GPS system. Do you even remember Garmin, or TomTom or Magellan? They were all disrupted by the smartphone – with Google Maps leading the way.
And the smartphone isn’t done yet. It has wiped out the wrist watch industry, threatens the digital camera market, the video camcorder market, and even the music and TV industries.
Other examples from the book include:
CampusBookRentals and Khan Academy in education, Pandora and Spotify in radio and recorded music, Skype and FaceTime in voice and video calling, and Square in mobile credit-card processing. These offerings’ lightning-fast adoption is a function of near-perfect market information. Wherever customers are, mobile devices let them search a wide range of specialized data sources–including online sites like Yelp, TripAdvisor, Amazon, and other free databases of user-generated reviews–to find the best price and quality and the next new thing.
What’s more, big-bang disruptions go far beyond information-based goods and services. Restaurants, for example, now depend on online reservations, customer-generated reviews, e-coupons, and location-based services to drive business.
THE SHARK-FIN PRODUCT ADOPTION CURVE
The traditional product development cycle has been radically compressed:
What this “shark-fin” curve means is that incumbents don’t have time to catch up. The crossing-the-chasm story is over. New products are perfected with a few trial users and then are embraced quickly by the vast majority of the market!
Here are some ways in which the world has changed:
The book introduces us to the folks known as truth tellers. These are industry experts with
profound insights into new technologies and customer behaviors, who can predict
earlier than anyone else when small tremors signal imminent earthquakes. Often,
they are people who spend their careers working in the industry, and share a
unique passion for its mission, its products and its customers. My term for these guys is thought-leaders, or if you want to be real – they’re the ubernerds.
Truth tellers are often eccentric and
difficult to manage (no, really?!). They may be
found outside your organization–they may even be customers. Learning to find
them is hard. Learning to listen to them is even harder.
THE 12 RULES OF BIG BANG DISRUPTION
Another reason to buy this book is the neat methodology they’ve come up with to introduce this Big-Band Disruption mindset into your company:
I personally don’t think our Fortune 100 companies can adopt this sort of thinking very easily, so I’m looking for a lot of them to get dinged severely by the Big-Bang Disrupters, some of which will come to us from India and China.
Still, the framework they present is compelling – especially the part about leaving the market before you get disrupted in the end.
THE POWER OF ECOSYSTEMS
Finally, one of the key elements of Big Bang Disruption is the replacement of the traditional supply chain by dynamic, ever-shifting ecosystems. Again, the culture of most traditional institutions can’t embrace openness or collaboration. I’ve had some experience in that department.
Keep this in mind; I’ll be back very soon with a blog post on ecosystem strategy.
One of the reasons why Houston will never get a shot at hosting the Olympics (not that we want it, at this point) is because we don’t have a world-class transportation system. So while Houston is the fourth-largest metropolitan area in the US, we’re not even close when it comes to public transportation (can you believe we’re behind Dallas?). According to the 2010 U.S. Census, we have a population of over 2.1 million people and a land area of 599.6 square miles (and that’s not counting the suburbs).
Houston is second only to New York when it comes to resident Fortune 500 companies.
So what’s the problem? Why doesn’t Houston have a world class transit system at this point in its history? And what can be done?
The traditional finger-pointing is political. Suburban taxpayers who supported referendums in 2003 and 2012 have demonstrated a desire for development, only to have officials shortchange them. The latest in line is John Culberson, but to be fair, past opposition has come from both sides of the political aisle.
And who is behind these politicians? You don’t have to look very far to see that Houston is an energy town – in fact it’s the “energy capital” of the world. Our energy companies are not interested in a world class transit system; for them, seems like widening the freeways is the only solution. This lack of civic leadership reflects poorly on our city and is going to be a burden going forward. Those Fortune 500 companies that call Houston home will find a better place to live.
To be clear: between the lack of leadership from business and the misleadership of our elected officials, Houston has a third rate transit system, used by less than 3% of the population.
There is no long-term plan in place. That, in itself, speaks to the magnitude of the problem. Furthermore, any plan we do get is probably going to be a constrained plan that does nothing to address the real challenge.
What can be done?
How can we bring our politicians and business leaders together? Or is Houston doomed to remain a third-class city when it comes to mass transit?
The reason I wrote this blog post was to highlight a third way. Let’s look at an example from a country and place where things are a lot harder than Houston. Delhi – the capital of India – is a city with 9.9 million, with horrible infrastructure problems. Over the years, like Houston, no real attempt was made to build an infrastructure equal to the needs of the citizens.
Then, in October 1998, ground was broken on a comprehensive metro system that had been talked about for over three decades. Today, the Delhi Metro is the world’s thirteenth largest metro system
in terms of length. The network consists of six lines with a total length of 189.63 kilometres
(117.83 mi) with 142 stations, of which 35 are underground, five are at-grade,
and the rest are elevated. All stations have escalators, elevators, and tactile
tiles to guide the visually impaired from station entrances to trains. It has a
combination of elevated, at-grade, and underground lines, and uses both broad
gauge and standard gauge rolling stock.
What can Houston learn from Delhi? At least three things:
1) build a METRO system worth having: don’t build a system that just clogs up already busy lanes to shuttle folks from one business hub to another. Focus on the real issue: mass transit, specially the mass part. We should aim for getting around 20-30% of our citizens on the METRO during rush hour, and that will only happen if we focus on real solutions.
2) use the right-of-way on existing freeways: the genius of the Delhi rail line is that it is elevated and runs along the main highways already in place. In Houston, this would mean our HOV lanes would be turned into METRO lines – elevated, above the traffic. Even the stations are elevated; which sounds weird, but actually it works very well. The image below is a METROstop along the line – well above the freeway:
3) mass transit is too important to be left to METRO alone: in Delhi, and you have to appreciate the extent of corruption in public office to understand this, a special purpose organization was formed called the DMRC. This cross-agency team was vested with great autonomy and powers to execute the gigantic project. In Calcutta where they did not have such a cross-agency team, the Kolkata
Metro was badly delayed and 12 times over budget due to “political
meddling, technical problems and bureaucratic delays.” The first
phase of the Delhi Metro project was completed in 2006, on budget and almost three years
ahead of schedule, an achievement described by Business Week as “nothing
short of a miracle”.
So can miracles happen in Houston? They can, if only our politicians and METRO folks would actually share some values – like putting aside their petty interests for the good of the city. I’m not holding my breath. Hey, maybe we can build some more public funded sports arenas; those projects seem to have no problem getting funded!
Here’s an interesting classification or segmentation of change makers (from Deloitte) along with some advice on how to make a difference via collaboration >>
Steady Supplier: Combine your contextual knowledge with the Public Value Innovators to create new value
Multirational Multinational: Engage with Citizen Changemakers to gain local insights and ideas
Investors: Connect Wavemakers to amplify impact
Public Value Innovator: Leverage the reach of the Multinationals to reach more communities
Citizen Changemaker: provide feedback to all in order to get to root issues
This is going to be a central theme in business going forward: what is our purpose?
Here’s William Cohen talking about Peter Drucker‘s perspective:
“…until Drucker came along most everyone believed the basic “fact” that the purpose of a business was to make money. That is, to make a profit. This belief leads to a corollary, another myth, believed by all–that is, that the goal of any business is profit maximization. In other words, whatever your business, your goal should be to make as much profit as possible. If you accept making a profit as a business’s purpose, the second part just follows naturally. This might even seem worthy to many. To quote Michael Douglas’s famous (or infamous) statement in his role as Gordon Gekko in the 1987 movieWall Street: “Greed is good.” Even today many “know” greed, or profit maximization to be the correct prescription for business success, even if it is amoral or shouldn’t be “good” from a moral perspective. Not so fast, Gordon. As Drucker so often said, whatever everyone knows is usually wrong, Hollywood films not excepted. Drucker told us first that profit is not the purpose of business and that the concept of profit maximization is not only meaningless, but dangerous.”
Now Ratan Tata and gang (myself included) have a similar message:
The problem with industrial capitalism today is not the profit motive; the problem is how the profit motive is usually framed. There is a persistent myth in the contemporary business world that the ultimate purpose of a business is to maximize profit for the company’s investors. However, the maximization of profit is not a purpose; instead, it is an outcome. We argue that the best way to maximize profits over the long term is to not make them the primary goal.
So what is to be done?
What is your company doing to create purpose beyond profits? The future of our planet depends on your answer.
Ever wondered what makes a video go viral?
There are several societal norms challenged in the video. The ad celebrates the second marriage of a woman and includes her daughter. And secondly, the woman is dark-skinned. In a society obsessed with fair complexion, the ad breaks an unwritten rule of Indian advertising. The emotional impact of the ad made it a viral hit, with politicians, citizens, and film stars talking it up on their social media accounts.
Arun Iyer, the creative director, says: “This is the thinking that most progressive people have. They may not be going through the same thing in their life, but the ad makes a bold, progressive, statement and people like to be associated with brands that make such statements.”
The company behind the ad is Tanishq, the largest retail jewelry brand (part of the forward-thinking TATA Group) in India with over 156 stores in 86 cities.
In the US, and specifically in Texas, we have slightly different reasons for emotional contagion: toilet humor.
I met Larry Keeley through a mutual friend several years ago. He’s the thought leader behind Doblin, the innovation consulting company that’s now part of Deloitte. At the time, Larry had come up with an innovation scanning methodology which looked across industries to identify innovations up and down the value chain. Larry was also kind enough to join the $300 House project as an adviser, and I’ve learned a lot from him – more than he can imagine!
Now, and this is a good read for the holidays, he’s written a book called Ten Types of Innovation: The Discipline of Building Breakthroughs.
You see, most companies focus on just one type of innovation – product innovation. Sure, some of us are looking at service innovation and business model innovation (thanks to Clayton Christensen and Alex Osterwalder), but we still suffer from tunnel vision. Time to wake up and look across the entire scope of our business activities. Where can and should we innovate?
How will your company build it’s business innovation portfolio?
Bezos raises the stakes in retail warfare: drone delivery… Are you worried Fedex?
What’s wrong with this picture?
According to the Global Innovation Index (GII) – co-published by Cornell University, INSEAD and the World Intellectual Property Organization (WIPO) – the most innovative countries in the world are:
3. United Kingdom
5. United States of America
7. Hong Kong (China)
Other than chocolate, watches, and secret bank accounts, I’ve never viewed Swiss innovation as leading the world. The same goes for Sweden (IKEA, Abba?) and the Netherlands (Shell).
Why are these countries being hyped as the most innovative countries in the world?
Let’s dig a little deeper. Firstly, the index tracks the wrong measures of innovation:
Swiss “innovation” looks like this:
The USA looks like this:
So, let’s look at three other “not-so innovative” countries: Brazil, China, and India – yes, they are “emerging markets”…
See the problem? Innovation cannot be measured by number of entries to Wikipedia, or number of papers, or patents, or YouTube uploads.
Rather, it should be measured in terms of innovation (and disruption) – by industry.
Brazil, is the first country where renewable energy accounts for more than 85.4% of the domestically produced electricity used. If that’s not innovative, I’ll go re-read Heidi.
China? Well, they’re China. Every product the Swiss used to make is now made cheaper and of comparable quality in China. Red capitalism rules the business world right now, so that’s something of a disruptive innovation, don’t you agree?
And India? They’ve got more scientists and engineers who are hungry to make something happen. India’s also the hot-bed for reverse innovation (which does not seem to be on the radar at the WIPO). And they just sent a mission to Mars…
So what’s wrong with this innovation survey?
Simply put, it’s not based on reality. And it’s not an accident that Switzerland is “so innovative,” according to this survey – which happens to be sponsored by INSEAD (in Lausanne) and the WIPO (Geneva). The innovation for Switzerland is its opaque banking system (ask China about that: Chinese government officials hold about 5,000 personal Swiss bank accounts with the Swiss global financial services company UBS. Two thirds of those accounts belong to high level central government officials.)
… Wait. There is one true innovation from Switzerland that does deserve a mention: the cap on CEO pay. Let’s see if it flies.
Companies and countries that are serious about innovation would do well to not pay attention to this survey, and focus instead on their schools, quality of science education, business transparency, social mobility, gini coefficients, and of course, governance itself (the Corruption Index). See also the Big Shift and A New Culture of Learning.
And if you want to measure creativity, that’s going to be something else entirely.
Elvis Presley and Bob Marley as they would look today (h/t these folks):
What can we learn from these lads? These, the young lions, who conquered the world like Alexander, but then had it all taken from them by Thanatos.
One thing you have they don’t. And if you escape the sword of Thanatos for a while, you still have to deal daily with his post-modern cousins: Boredom and Anxiety.
He realized now that to be afraid of this death he was staring at with animal terror meant to be afraid of life. Fear of dying justified a limitless attachment to what is alive in man. And all those who had not made the gestures necessary to live their lives, all those who feared and exalted impotence– they were afraid of death because of the sanction it gave to a life in which they had not been involved. They had not lived enough, never having lived at all.
― Albert Camus, A Happy Death
The man also said, “to have time was at once the most magnificent and the most dangerous of experiments.”
Every minute counts. Each year is 525949 minutes. How do you make every minute mean something? How do you escape everydayness?
When Apple announced its plans to bring a 100% renewable energy powered manufacturing plant to Arizona, we would do well to ask why?
The answer is partly to be found in the map below:
1) Proximity to Mexico
There’s a Foxconn manufacturing base in Juarez – just over the Mexican border – and it seems like the output from the Arizona plant will end up there.
2) Tax Structure
Over the past 15 years Arizona has demonstrated a “pro-business” mentality combined with a minimalist regulatory approach by reducing taxes and decreasing regulations:
- No corporate franchise of business inventory tax
- Low workman’s comp and unemployment insurance rates
- No income tax on dividends from out-of-state subsidiaries
- 80% sales factor on corporate income tax scaling to 100% option
- No worldwide unitary tax
- Aggressive depreciation schedule
- 90 day or less permitting
- Virtually all services exempt from sales tax
- No inventory tax
- No Sales tax on manufacturing equipment
- Ability to carry forward 100% of net operating income for twenty consecutive years
- Small businesses with less than $10 million in assets will not be required to pay capital gains taxes beginning in July 2015
- Right to Work State
Arizona also has aggressive tax credits to reduce state corporate income tax liability. This includes phasing in a corporate income tax rate from 6.9% in 2012 to 4.9% in 2017.
So what does this mean for neighboring states?
It’s too early to call this is a new wave of innovation, but it’s worth thinking about. How can states like California, Texas, and New Mexico join this solar-shift? Do they even want to?
C’mon, New Mexico!
Apple is to be applauded for bringing manufacturing back to the US. More importantly, they can still think different.
One of the primary reasons for the failure of development projects is that they cannot be sustained. Traditional approaches don’t always work; as soon as the development institutions (NGOs, agencies) leave, things fall apart. Soon the project is either abandoned or simply turned off. This happens all the time with water and energy projects.
One way to work around this and “make it stick” is to involve women in the project. This has been the secret behind the success of organizations like Grameen and the Solar Electric Light Fund. When women lead and control their own destinies, stuff happens. This is a lesson learned in the field, but overall the “development-through-empowering-women” movement is fizzling.
Is there anything else we can think of to make development changes stick?
How about the profit motive?
In his recent book The Solution Revolution: How Business, Government, and Social Enterprises Are Teaming Up to Solve Society’s Toughest Problems Deloitte’s William Eggers asks us to consider erasing public-private sector boundaries. According to Eggers:
In the book, Eggers presents four specific, scalable business models that are changing the world:
These business models are all very important because they bring the profits into the equation thus allowing them to scale.
But none of these business models solve the problem of scaling the $300 House or for that matter any of the public services the world is crying out for – sanitation, healthcare, water, energy, etc.
As I asked in a previous post on integrated development, why is it too much too ask that governments, NGOs and development institutions, and businesses work together with the communities involved to build integrated solutions?
Here’s how an impact innovation project might work:
Impact Innovation solves multiple problems simultaneously via integrated development
Because of the interrelated nature of the problems that drive the cycle of poverty, the only way to solve these problems is to employ an integrated development model which attacks several challenges at once: clean water, food, health, education, employment, and housing. Housing is delivery mechanism for a better life. This can be achieved using “whole village development” an approach proven by the Solar Electric Light Fund in sub-Saharan Africa. Thus a house is of little value without supporting infrastructure– clean water, sanitation, electricity, waste collection and disposal, basic health, education, and jobs!
Impact Innovation demands collaboration between communities, government, NGOs, and businesses
The key ingredient is trust and solidarity. For example, Partner In Health (PIH), one of the world’s most famous NGOs, believes it is essential to partner with the community. They hire and train local staff. They work with governments to reinforce national health services so more people receive services. They collaborate with other health workers such as traditional birth attendants and government health workers because together they can have a stronger impact. PIH has established a community-based model of care that is now viewed as a leading health-care delivery model in the developed world.
Impact Innovation requires total inclusivity
In the integrated development model, the NGO understands local community problems intimately, the government is responsive to the needs of the community through sound policy, land use arrangements and transparency, and businesses work with both to serve the poor as a customer, partner, employee and supplier. Activities and plans are coordinated, even synchronized. Inclusive growth is driven by inclusive business practices.
When we look at the state of current development
projects, we find a curious gap in execution. Because NGOs and
government institutions and agencies don’t think of business as a part
of the solution, they simply don’t include profit as part of the
So here’s what takes care of this gap:
Impact Innovation uses a hybrid or collaborative business model.
Can governments, businesses and NGOs work together to provide basic services for the poor at an affordable cost? To adopt an analogy from the world of cloud computing, we can think of this integrated model as a “lifestyle-as-a- service.”
Who pays for all of this? Instead of choosing 100% charity or 100% market-based solutions, I’m hopeful in a third alternative: the use of a collaborative or hybrid business model. I started thinking about this thanks to Ashoka’s Bill Drayton and Valeria Budinich (see their Hybrid Value Chain Framework).
So now let’s look at how a hybrid or collaborative business model might be designed to deliver “housing-as-a-service.” We start with a template which shows all the participants and the major process milestones in the service delivery process and adapt it to housing:
Different phases can be managed by different players. For example, a hybrid business model might include a configuration as follows:
In the Design phase, the community works with an NGO and businesses to develop a solution that works for them (this is the hybrid value chain approach from Ashoka!)
In the Build phase, the community works with the business to build the houses they designed in the previous phase. The government may subsidize or donate the land and cost of construction.
In the Finance phase, community members finance their houses with a lending bank that is now a for-profit scheme (under the watchful eye of a government panel).
The Maintain phase may include jobs for the community and training services from an NGO.
And finally, when the time comes to Upgrade, all players come to the table to develop the next solution.
Since infrastructure projects are implemented in phases, they can also be managed in phases. Governments, businesses and NGOs can collaborate to provide basic services for the community at an affordable cost. Imagine if this were to happen across all 638,000 villages in India.
And why should we stop at housing? All public services could be designed, built, financed, maintained, and upgraded using this hybrid business model concept:
I’m doing some research into finding out who is actually doing this already.
Impact Innovation has an employment effect leading to inclusive growth
The hybrid/collaborative-business model allows the community to be involved in each service as a consumer and as an employee or owner. A common enough idea is that building low-cost housing can help create an ecosystem of house builders and suppliers – often members of the community being served. The idea is to transfer that thinking across all the integrated services provided. The hybrid business model can pay for the ongoing employment of community workers for sanitation, energy, education, health, housing, of course, but even something like entertainment, where a member of the community becomes the entertainment entrepreneur, charging a micro-fee for movies or soccer games shown in the village community center, for example.
The Kodak story so far has been rather colorful, but as Kodak emerges from Chapter 11 bankruptcy, it looks like another company altogether. Will it ever shine again?
Gone is the document imaging business (spun off as Kodak Alaris; new owners = Kodak’s UK Pension Plan). Instead, the focus is on a new set of markets:
In short, the new Kodak ain’t the old Kodak. The key to survival is going to be professional services (watch out Xerox!) >>
Can they do it? How are they going to win? Do they have the capabilities they need?
The search for a new CEO is on. She‘s going to have to be a consultant’s consultant – a professional services expert. Good night, Kodak. Good night, moon. Good luck.
The disruptors are getting disrupted.
In Consulting on the Cusp of Disruption (Harvard Business Review),
Clayton Christensen, Dina Wang & Derek van Bever point out the coming disruptive changes in the world of management consulting.
And the big boys are getting ready. McKinsey Solutions, for example, is essentially a business model innovation that could reshape the way the global consulting firm engages with clients. It’s about “embedding software and technology-based analytics and
tools providing ongoing engagement
outside the traditional project-based model.” According to Christensen and friends, “McKinsey Solutions is intended to provide a strong hedge against potential disruption.“
So, will software robots replace the consultants?
No just yet, but the authors warn that the threat from smaller, more nimble competitors is real:
At traditional strategy-consulting firms, the
share of work that is classic strategy has been steadily decreasing and
is now about 20%, down from 60% to 70% some 30 years ago.
Wow. That’s some serious disruption, don’t you think? Clients are focusing on value-based pricing instead of per-diem billing. (And not a moment too soon!) If you’re engaged in any kind of consulting work, or even services, you would do well to buy the article. (As a bonus, you get to learn how the legal market got disrupted!)
Here’s a sample of their thinking: the three consulting business models observed and cataloged:
New upstarts like IDEO bring a collection of skills and capabilities not found in traditional firms. They bridge “the disciplines of
industrial design and innovation consulting… Its unique mix of talent
and strength in solving interdependent problems makes it hard to
Christensen, Wang and van Bever point to the model of IT services as a threat as well. Emerging market competitors like Tata Consultancy Services and Infosys. (I’m not so sure.)
IMHO, the big boys have been asking for trouble. By focusing on harvesting and/or fleecing clients, they left the doors open for nimbler and more insightful competitors. I think there’s one more business model that may have been overlooked: the individual, branded consultant.
Now, more than ever before, companies want to connect to the originator, the source of an idea – instead of going with organizational middlemen. Thought-leadership translates to market leadership. Some of the big firms are hiring these gurus to harness their I.P. but the list of independent, disruptive gurus is growing fast.
- Peter Drucker – The Original D-I-Y management consultant (R.I.P. Peter!)
- John Hagel III* – Big Shift + edge strategy (now with Deloitte’s Center for the Edge)
- John Seely Brown* – Education and Learning (he works part time for Deloitte’s Center for the Edge)
- Tom Davenport* – Competing on Analytics
- Stuart Hart* – Sustainability and B.O.P.
- Vijay Govindarajan* – Reverse Innovation
- Tammy Erickson* – Talent Management
- Marshall Goldsmith* – Leadership
- Dean McMann* – Customer Intimacy
- Mo Kasti* – Physician Leadership (see, it’s getting hyper-specialized!)
[* disclosure: these are clients or former clients of mine]
The list just goes on and on:
- Larry Keeley – Innovation (with Doblin, acquired by Monitor, then Deloitte)
- William Eggers – Government Solutions (with Deloitte)
- Jakob Nielsen – Usability
- Roger Martin – Strategy
- Alan Weiss – Pricing
- Seth Godin – Marketing
- Dan Kennedy – Entrepreneurship
- Perry Marshall – Internet Advertising
What’s interesting is that so many firms were founded or driven by thought-leaders: Monitor (Michael Porter), Innosight (Clayton Christensen), Ogilvy and Mather (David Ogilvy), so that the industry is well aware of the value of big-thinkers. Where they have failed is in nurturing them and allowing them to shine (e.g. where is Oliver Wyman hiding Adrian Slywotzky?). Deloitte seems to get it – they acquired Monitor, hired John Hagel and JSB, and encourage the building of the individual brands like William Eggers.
P.S. – here’s an interview with Clayton Christensen done over 10 years ago. We talk about disrupting the consulting industry in passing!
Discovered in an attic in Norway:
I showed my support by building Jim’s website.
The incumbent is a Republican guy who doesn’t believe in public health. He’s against child immunization, apparently.
After getting a few emails about this article in the Guardian, I went back to Professor Clayton Christensen‘s op-ed in the New York Times (h/t Derek Van Bever) and asked myself this question: What kind of innovation is the $300 House really?
I went through the “types” of innovation as described by Christensen:
Empowering Innovation: transforms complicated and costly products available to a few into simpler, cheaper products available to the many, thus creating jobs, because they require more and more people who can build, distribute, sell and service these products. Empowering investments also use capital — to expand capacity and to finance receivables and inventory.
Sustaining Innovation: replaces old products with new models, but creates few new jobs; such innovation has a neutral effect on economic activity and
Efficiency Innovation: reduces the cost of making and distributing existing products and services. Such innovations almost always reduce the net number of jobs, because they streamline processes, reduce capital investments, and eliminate waste.
So what about the Base of the Pyramid? What about the non-customer, the folks (generally poor) that are always under-served?
The result? Let’s define a new term: Impact Innovation – which like Impact Investing – seeks to make a difference.
Impact Innovations are innovations which:
1) solve a major problem (or several major problems simultaneously)
2) are sustainable
3) are affordable (may include hybrid business models)
4) serve the non-customer (new markets that did not exist before).
5) build an ecosystem of products, services, and experiences around the innovation
None of this is especially new, but the language we need to describe the problems we are facing is.
My point is simple: this is going to be the future of development. Governments, non-profits, and business will have to work together. Either that, or we’re in serious trouble.
On January 19, 2012, Kodak, the once iconic US company which had democratized photography, filed for chapter 11 in the U.S. Bankruptcy Court in the Southern District of New York.
To the millions of lives and memories touched by Kodak over the years, the news may have come as a huge surprise. But to those who make a living following companies’ growth or demise, there was zero surprise. Kodak’s ties with its customers had been weakening over the years – when Kodak was synonymous with amateur photography. Now, customers, both new and experienced, were choosing to bypass Kodak altogether. Simply put, Kodak had nothing to offer them; nothing valuable enough anyway, for them to stay.
So, what happened? How did a company that once owned the hill tumble down and lose its crown? Let’s see if we can understand what happened.
When George Eastman decided “to make the camera as convenient as the pencil” which is how he explained Kodak’s value proposition, he literally transformed our lives by introducing us to our personal “Kodak moments” – the memories that the individual captures as a way to celebrate, share, and communicate our most precious memories with our friends and families.
Kodak was the Apple and Facebook of its day because Eastman understood what customers valued. He realized that technology could change markets – overnight. And of course, that is precisely how he started Kodak – by creating the dry-plate technology which made photography accessible to all.
But Eastman could have easily failed to see the significance of the new. He could have stuck to his profitable business model, hypnotized by the massive profits his dry-plates produced for Kodak. He could have failed, but he did not. In fact, he bet the company not once, but twice, and both times he won because he kept stuck with his imagination – he clearly had the capability to envision how the right technology could transform the customer experience for the better.
The first time Eastman bet the company was when dry-plates were threatened by a new technology. Eastman gave up on his dry-plate business to pursue a promising new technology developed by Kodak – film. Eastman’s first simple camera in 1888 was a wooden, light-tight box with a simple lens and shutter that was factory-filled with film. Priced at $22.00, the world was forever changed.
Later, Eastman faced another existential Kodak moment when he again bet the company’s future on color film, which at the time was not as high in quality as the established black and white.
Eastman built the Kodak empire on a deceptively simple “razor and blades strategy,” selling inexpensive cameras and making money on the back end on film and printing.
So what happened?
The inexpensive business historian known as Wikipedia tells us that the problem with Kodak was that its “unassailable competitive position would foster an unimaginative and complacent corporate culture.”
In 1975, a Kodak engineer – Steve Sasson – invented the digital camera. But this time Kodak was no longer the Kodak of George Eastman. As Sasson desperately wandered around the company trying to convince senior executives of the potential of his discovery, he was met with the mindset of a company in love with the present. Sadly, there were no George Eastmans left at Kodak.
His presentations “met with a lot of curiosity, some annoyance.” According to Sasson, “Many times people talked about all the reasons why it would never happen. But there were many people that quietly looked at it and said, ‘Boy, it’s a long time, but I don’t see that it won’t happen.'”
As Kodak “fumbled the future,” Japanese firms like Sony leapfrogged Kodak, establishing a lasting reputation for inexpensive digital cameras.
At the time of its bankruptcy filing, Kodak gave several reasons for taking such drastic action: “to bolster liquidity in the U.S. and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the Company to focus on its most valuable business lines.” In the same release, Kodak also stated that they had “made pioneering investments in digital and materials deposition technologies in recent years, generating approximately 75% of its revenue from digital businesses in 2011.”
So while Kodak eventually got serious, and become the world’s leading seller of digital cameras, it had lost its profit engine. The “razor and blades” business model had evaporated. Without profits driven by the sales of film, Kodak was in a black hole of its own making.
Two other fatal flaws can be observed in hindsight.
The first was Kodak’s hubris in terms of marketing. As Adrian Woolridge wrote in his Schumpeter column, Kodak made the fatal mistake of “competing through one’s marketing rather than taking the harder route of developing new products and new businesses.” As we’ll see, its competitor Fuji Films – facing exactly the same predicament as Kodak – has managed to survive and thrive in the same business climate that drove Kodak to ruin.
The second fatal flaw was, in my view, the mindset of the executive team. In 1989, the board placed the wrong bet when they chose Kay Whitmore as CEO over Phil Samper. Whitmore was a hardliner – a veteran of the traditional film business. Samper (the digital “hope”) left to join Sun Microsystems. Three years later, the board fired Whitmore, and then went on to institute a revolving door policy which saw a line of CEOs fail one after the other.
To this very day, Kodak has an identity crisis: it does not understand who its customer is, and in its dithering, it no longer knows what Kodak is. The current Chairman and Chief Executive Antonio Perez is an HP printer executive, and has predictably steered Kodak toward consumer and commercial printers.
He says that the bankruptcy will help Kodak maximize the value of patents related to digital imaging. The final strategy? Litigation. According to Reuters, Kodak is trying to create new revenue streams using extensive litigation with rivals such as Apple Inc, BlackBerry maker Research in Motion Ltd, South Korea’s Samsung Electronics Co and Taiwan’s HTC Corp.
The failure of Kodak is a failure of management imagination. It is the failure of the executive mindset that no longer is connected to the customer.
The sad truth is when you take a photo today, Kodak is not part of the picture.
Kodak’s story is neither peculiar, nor unique. To attribute its crumbling relationship with customers to a single disruptive technology or market trend – example, digital transformation, would be overly simplistic. What happened to Kodak is a failing that repeatedly expresses itself in countless companies across the globe. They lost touch with their customers.
Cynthia Freeland‘s book – But is it art? – came out before Arthur C. Danto‘s – what art is – in fact he endorses it on the front cover (sort of) – but then he tries to one up her with a sincere form of flattery = his own take on the subject.
As a fan of Danto, I have to say his book is “pretty good and all,” but I’m embarrassed at what the publisher did to him (or perhaps he did it to himself) by copying the “look and feel,” to use the language of design, of Freeland’s remarkable book.
Maybe Danto/Danto’s publisher was reading this at the time:
Still, I think both books have their place.
Freeland’s book is more accessible (which is ironic since she’s a philosopher) and Danto’s book is pretty Hegelian and over-philosophical (but then he’s a philosopher too and an art critic).
Freeland sees art with the glasses of an aesthetic – she examines the various theories of art in an entertaining, non-academic, journey through time and space. What can we learn from how art is exhibited? How much it costs? Who or what is an artist? How do we assign meaning to art? etc. etc.
Danto insists that art is a trinity – meaning, embodiment, and interpretation. This is straight out of Charles Sanders Pierce, and while he hints at it, Danto doesn’t acknowledge it. Maybe he didn’t read Walker Percy‘s “Toward a Triadic Theory of Meaning” in The Message in a Bottle. Or maybe he did, but I doubt it.
What I find interesting that both books don’t mention the grave danger facing art – the mechanization/digitization of the process of production of art. In my view the danger is the same one Hundertwasser saw when he said that straight lines and photography are the end of art.
Everyone must be creative, said Hundertwasser.
Otherwise, I add, you will become a living, programmable machine. Most of us already are without knowing it. Our modern rituals – shopping, moviegoing, television, gaming, rob us of our creativity and make us passive consumers of machine optimized reality. Art and Big Data collide. Art loses. Profits win. Design destroys art.
Art is the fight to not be a machine. To not have to follow reason. To not have to be a consumer. To say no. The “artistic suspension of reason” lets call it. Or even: “the artistic rejection of profit.”
Art is what keeps us human. Irrational, yet human. Art is love. There, I said it.
The predictable, strategic failure of Nook is now on the front pages of dead-tree media. Despite Nook’s problems, Barnes & Noble Chief
Executive William Lynch said the company “remains committed” to the
Nook devices. He’s on his way out.
What Barnes & Noble needs to do is think.
Barnes & Noble has to remember what it is.
Here’s what it is not:
- a Christian book store
- a video-gaming parlor
- a coffee house
- a stationery store
- a toy store
Who will save Barnes & Noble for us? Watch your customers, B&N!
How’s it going J. C. Penney?