Archive for the ‘Innovation’ Category
Innovation
I occasionally speak on the topic of innovation to people from banks and, over time, I’ve gradually put together a set of speaking notes that I have on my iPad, ready to whip out at a moment’s notice.
Here they are, turned into a Prezi.
Can Groupon Pivot?
Last week, I wrote about the fact that the single largest threat to Groupon’s survival is a loss of confidence on the part of its merchants, in Groupon’s ability to pay its debts. Just as Lehman Brothers was brought down when other banks stopped lending it money because they feared that Lehmans wouldn’t be able to repay, Groupon could be brought down were merchants to stop supplying Groupon with deals if they feared that Groupon wouldn’t be able to pay up in 60 days time.
Since then, Groupon’s IPO has been delayed and news has emerged that Groupon employees are suing the company (credit to Eamonn Carey for bringing that last piece of news to my attention). Meanwhile, Groupon’s competitors continue to gain ground and Google has expanded the “beta” version of its Google Offers service to five more cities.
The bad news is piling up and one has to ask oneself: “Is this the beginning of the end for Groupon?”
A Tech City University?
UC Berkeley's Sather Tower, more commonly referred to as the Campanile
I’ve been openly skeptical about David Cameron’s plans to turn East London into a “Tech City” to rival Silicon Valley, blogging about the important role the California state government’s Master Plan for Higher Education played in supporting the development of Silicon Valley and opining that, instead of focusing on one tiny area, “Cameron should concentrate on doing his job (improving the educational system) and simply get out of the way of entrepreneurs by reducing taxes, red tape and other costs for all start-ups, not just the ones in East London.”
In late May, a poll conducted at London Business School’s Global Leadership Summit reinforced my opinion. Attendees were asked “How best can government stimulate entrepreneurship?” and given four options. The results were:
- By improving incentives (e.g. by taxing entrepreneurs less) – 33%
- By creating incubators, and other geographical clusters of entrepreneurial activity – 18%
- By preferential procurement from entrepreneurial start-ups – 5%
- By reducing red tape and promoting greater flexibility in the business environment – 44%
A few things have happened since then.
Firstly, the Treasury has begun an open consultation on plans to encourage seed investment by angels and word has emerged that the Tech City Launchpad concept is to be “rolled out nationally” (although what exactly that entails remains to be seen – with luck, it means that the kind of support offered to Shoreditch-based tech startups will be available to any startup, anywhere in the UK).
This is very welcome news. It indicates that the government is actually interested in doing more than just jumping on a bandwagon and generating a few positive headlines.
Goofing around at the Googleplex
Secondly, I’ve just spent a few days in Silicon Valley. I’ve spent a lot of time in California over the past few years but, this time, I made a point of deliberately hanging out in Silicon Valley for a couple of days. I went to a 106 Miles meetup, visited the Googleplex, hung out at the Coupa Café in Palo Alto (I can recommend the mango smoothies) and met, informally, with a couple of VCs.
Driving down Sand Hill Road (a mecca for anyone seeking to raise money from VCs) brought home to me the pivotal role Stanford University has played in the development of Silicon Valley. I knew, intellectually, that Silicon Valley had been built on an education master plan but it wasn’t until I was driving along, with the Stanford campus on my right and a slew of VC firms’ offices on my left that I really understood Stanford’s role as the focal point of Silicon Valley.
Last night I stayed in Berkeley, just a couple of blocks from the UCB campus. In fact, I can see the Campanile from my hotel room. Walking around downtown Berkeley yesterday, I could see the influence the university has had on the vicinity. Its left-leaning, libertarian culture permeates the local area – street vendors hawk hippyish jewellery and knick-knacks, the coffee shops’ noticeboards display posters for political and literature-themed events, there’s a bustling all-vegetarian café and a Tibetan souvenir store within a stone’s throw of the campus boundary, and the surrounding streets house various Centres for research into this or that.
You don’t really get the same degree of influence around the various schools and colleges of the University of London, probably because LBS, LSE, UCL, KCL and ICL are located within central London, while both Stanford and Berkeley are geographically removed from San Francisco.
Some people get embarrassed and/or defensive when they’re wrong. I like to think that I don’t (although I say “like to” because I’m sure that my friends and colleagues can cite many instances when I have, in fact, been both embarrassed and defensive when I’ve been proven wrong). I could write an entire blog post on the topic of being wrong (and I probably will, when I get the time) but the pertinent fact here is that I now believe that Cameron’s vision of building the British equivalent of Silicon Valley in East London may not be such a silly idea after all. However, I still think it’s going to take more than £200m and a catchy name to make it happen.
If I’m right and Stanford did (and continues to) play a pivotal role in the development of Silicon Valley, then the way to create a British Silicon Valley is to establish a British Stanford. It just so happens that, in the Olympic Park, we have the perfect site for a new campus for a University of London School of Technology, Innovation & Entrepreneurship, with plenty of space for commercial premises that can be leased by startups and joint ventures affiliated with the new university.
The opportunity to establish a new university, on its own, contiguous campus, is one that will probably not present itself again in our lifetime.
The importance of defining innovation correctly
I spent the day at London Business School’s Global Leadership Summit which, this year, focused on the topic of Innovation, which is one of those things that is universally desired but which most people (including many so-called “experts”) struggle to define or, ineed explain. Today, the audience was asked to vote on the best definition of innovation from a list of four. The Economist’s “Fresh thinking that creates value” was the winner, with 58% of the vote. Later in the day, Vince Cable offered his own definition: “Knowledge [and] ideas being turned into commercial application”.
I like to think of myself as knowing a thing or two about innovation. My stock in trade is enacting innovation through the application of technology and I’m occasionally asked to speak on the topic for organisations or companies who are struggling to innovate. When I do so, I like to define the term up front, using the dictionary definition: make changes in something established, esp. by introducing new methods, ideas or products.
People often focus on the creative side of innovation but, to me, that’s the easy part. Ideas are two-a-penny. Implementing them is the difficult part. For me, change is a very important aspect of the definition of innovation, because it points us towards what I consider to be the most common reason behind a failure to innovate: resistance to change.
Change is difficult. As organisations grow and mature, as systems and processes evolve over time, as people settle into a routine and become comfortable with what they’re doing, they become resistant to change. When I talk about how companies can become more innovative, I probably spend over half the time talking about how to overcome resistance to, and fear of, change.
In order to innovate, you must embrace change. Yet today, I barely heard the word “change” mentioned at all. One notable exception was Masahiko Yamada, the President of Fujitsu’s Technical Computing Solutions Unit, who asked the audience “When you wake up in the morning, are you changing the world or just getting through the day? Or just making money?” before going on to point out that “the best innovators’ primary motivation isn’t money. They just want to change the world.”
Some of the other key points I took away from the day were:
- Innovation is “discontinuous and stochastic, not linear and probabilistic.” – George W Buckley (Chairman & CEO, 3M. It’s worth noting that 3M is a business school case study in innovation – it’s part of their DNA. They’ve also been allowing their engineers to spend up to 15% of their time on personal projects since 1948, long before Google’s founders were even born!)
- Nick Hughes, who developed the M-Pesa mobile payments system while working for Vodafone, said that telcos were reluctant to step over the boundary into mobile financial services.
- Nick also stated that companies fear cannibalisation of their existing markets and revenue streams. My personal opinion is that it’s better to self-cannibalise than stand still while a competitor eats your lunch!
- 3M’s Buckley isn’t a fan of bringing in outside consultants to help drive innovation. He’s also reluctant to outsource because “things always go wrong at boundaries”.
- “The public sector accounts for 60% of all venture capital investment in the UK” – Vince Cable
- “Most entrepreneurs will say the best thing the govt can do is get out of the way. I’m not sure they’re right.” Michael Hayman (StartUp Britain)
- Philip Rutnam (Director General for Business and Skills at the Department for Business, Innovation & Skills) pointed out that, if designed properly, regulation can support innovation and cited Ofcom’s statutory duty to support competition as an example.
- Innovation is about new ideas but most new ideas are bad ideas. Challenge is how to cope with high failure rates. Instead of running 100 experiments and picking the winner Cisco let the market do the experiments and bought the winners. – Professor Phanish Puranam (LBS)
- “Some companies forget that their reason to exist is their customers.” – Antonio Horta-Osorio (the new CEO of Lloyds Banking Group)
- “Big companies, small companies must innovate … otherwise you become complacent and you die.” – Antonio Horta-Osorio
- Innovation is not about technology for its own sake. – Masahiko Yamada
- There are more transistors on the planet than grains of rice. – Stephen Leonard (Chief Executive, IBM UK and Ireland)
- We’re at an inflection point in the adoption of mobile devices and the explosion of Internet access from 2bn to 5bn people – Matt Brittin (Managing Director, UK and Ireland Operations, Google UK)
- Companies need to get comfortable with the fact that not every innovation will succeed. Google Wave is an example of unsuccessful innovation. Companies are more likely to die from too little innovation than too much. – Matt Brittin
- “I will bet that, within five years, a major multi-national corporation will base itself in Singapore.” – Sir Martin Sorrell (Chief Executive, WPP)
- Forget about ppl interacting via the ‘Net. Think about the millions of devices that can interact via the ‘Net. – Stephen Leonard
- WPP buys $1bn worth of advertising from Google annually. – Sir Martin Sorrell
- Different brands within the same company may compete with one another but it’s about the overall market share. – Sir Martin Sorrell, talking about competition within WPP.
- Two thirds of the companies on Fast Company’s 2009 list of the Most Innovative Companies weren’t on the 2010 list. – Professor Nader Tavassaloni quoting Gary Hamel.
- In a vote on the role of the CEO, 80% of the audience voted that the CEO is key to driving innovation but by providing top level support rather than being a source of innovation.
- Social innovation is fresh thinking that creates social value. Social enterprise creates social value by applying commercial principles.
- The first digitisation in history was the replacement of gas lighting with electric lightbulbs. – Shai Agassi (Founder & CEO, Better Place)
- Three years after the launch of Kindle, sales of digitised books exceeded sales of physical books on Amazon. – Shai Agassi
- Shai Agassi believes that the advent of cars powered by electricity alone represents the “digitisation” of cars and that we could end up treating cars in a manner similar to how we currently treat mobile phones (i.e. a low up-front cost for the device itself, then we pay for usage).
Google’s Big Tent
I went to Google’s Big Tent event today. It’s essentially a conference following on from the far more headline-grabbing Google Zeitgeist, that focuses on “the big issues facing the Internet today”. This year, it was organised in partnership with Privacy International and the Index on Censorship. There was a variety of speakers, including Eric “We view everything as a ranking problem” Schmidt, Jeremy “I’ll ignore the question you actually asked and, instead, answer the question I wish you’d asked” Hunt MP and Wael Ghonim, who unwittingly became one of the faces of the Egyptian uprising after being arrested in Tahrir Square, and held for 11 days.
It was an interesting change of pace from the commercial world I normally inhabit and gave me a lot of food for thought. Some of my takeaways were:
- Despite claims that legislating for online privacy would stifle innovation, nobody could actually cite an example of this happening. Ever.
- Privacy International’s Simon Davies pointed out that existing laws to protect people’s privacy (e.g. the Data Protection Act) are not being implemented anywhere near rigorously enough.
- “I did not want to assume a leadership role… [I believe that] We should always trust the wisdom of the crowds.” – Wael Ghonim speaking about his role in the Egyptian uprising.
- “We voted with our feet, we moved to Hong Kong. We were unwilling to be subjected to the laws of mainland China.” – Eric Schmidt, speaking about the perils of operating in countries with less-than-sparkling human rights records.
- Mr Schmidt also described a French law requiring that passwords be stored in cleartext as “foolish”.
- Google is building a dashboard to let people see all the information Google holds about them.
- Jeremy hunt’s two big predictions for the Internet in the UK: The Need for Speed and Must be Mobile. He spoke about the potential need for the government to get involved in ensuring the roll-out of high-speed broadband, so that the UK could reap the same benefits that countries like South Korea have.
- Google’s David Drummond pointed out that the more the West restricts free speech, the more repressive regimes will use that fact to justify their actions.
- UNOSAT’s Satellite Sentinel Project uses satellite imagery from commercial satellites to monitor places like the Sudan for signs of conflict, then leverages the high profile of celebrities like George Clooney to publicise the fact that atrocities are happening.
- Google’s Jared Cohen (formerly of the US State Department) averred that the rapid, viral spread of the YouTube video depicting the murder of Iranian protester Neda Soltan directly influenced Barack Obama.
Can Sony’s tablet repeat the success of the PlayStation?
Sony have announced that they’ll be releasing two tablets later this year – one is similar to Apple’s iPad while the other is a clamshell design, reminiscent of Nintendo’s DS. The tablets will run the Android OS. Music and video content will be provided through Sony’s Qriocity service (I assume the Qriocity service will be extended to support distribution of apps).
I can’t help thinking about how the Sony PlayStation gatecrashed the Nintendo-Sega party and ended up outselling the N64 three-to-one. The clamshell approach is a brave one and it’s interesting that Sony’s opted to go with the Android OS, given their track record of pushing their own formats (e.g. U-matic, Betamax, 3.5″ floppy discs, DAT, MiniDisc, Betacam, UMD, Memory Stick, Blu-ray), although not entirely surprising, given that Sony Ericsson has embraced Android for its mobile phones.
Sony’s most successful product was the Walkman which relied on the freely-licensed compact cassette. Could they end up exploiting Android in a similar fashion and knocking Apple off the tablet pedestal?
Ignore customer feedback at your peril
Recently, I’ve had occasion to use both Huddle (for organising Twestival) and Basecamp (for DEFCON). Unfortunately, Huddle doesn’t work well on the iPad. I moaned about this on Twitter (as one does) and Huddle responded, saying that they were working on it. So far, so good.
Fast-forward six weeks and today, over lunch, I’m asked for advice on what project management collaboration service is the best. I duly pull out my iPad and discover that Huddle still doesn’t work on it.
So guess who has a new 40-user client?
Obviously, you don’t want to be falling over yourself to cater to every whim of every user but support for a platform like the iPad is a fairly basic piece of functionality.
Big Company vs Startup
It’s a common fallacy amongst startup folks that large companies are incapable of being innovative or nimble.
Two words: Utter crap.
During the first five years of my career, I worked for small- to medium-sized companies, ranging from a small software house/systems integrator with about forty staff to a three-man dot-com start-up. Then, in the summer of 2000, as the dot-com bubble was collapsing (and after we’d shut down the aforementioned dot-com startup), I took a three-month contract consulting on e-commerce projects at Deutsche Bank, a 130-year old, multi-billion pound/dollar/euro bank that employed about 8,000 people in London alone, and over 100,000 people globally.
You’d imagine that this company would be a case study in Companies That Are Incapable Of Being Innovative Or Nimble but nothing could be further from the truth. At the time, Deutsche Bank had identified ecommerce as a key area for exploitation and it had a lot of very smart people working on a variety of projects that were aimed at giving it a head start on its competitors.What’s more, the company seemed to be very comfortable with the fact that not every project it invested in was going to be successful – an attitude that reminded me more of a venture capitalist than a massive financial services firm.
Individual business areas were allowed the scope and given the necessary support to explore new ideas, relatively free from bureaucratic constraint. Over time, I came to realise that, in the zero-sum game of the financial markets, companies like Deutsche Bank are fiercely competitive and that competitiveness leads them to react very quickly to opportunities (and, indeed, threats).
A firm’s ability to be innovative and to react rapidly to take advantage of market opportunities does not depend on its size. It depends on its leaders. More accurately, it depends on its leaders’ propensity for change and appetite for risk. (Note that when I talk about leaders in this context, I’m not referring to those at the top of the company, but those who run individual business areas.)
It’s no surprise that startups have a propensity to be innovative and nimble – it’s easy for a small, new company to change and pivot, and, after all, a startup wouldn’t have started up in the first place if its leadership lacked an appetite for change and risk. However, an appetite for risk is not the exclusive purview of those who found startups. An entrepreneurial approach can work just as well within a large company as it can for a small one, and many large companies seek to foster an entrepreneurial culture. At Morgan Stanley, I undertook a project to investigate what underpinned the entrepreneurial culture within the Commodities and Emerging Markets departments and whether the same approach could be replicated across the rest of the company.
I think that people in the startup scene sometimes get a big snobbish and look down their noses at big, established companies (possibly in part because they lack the cool factor possessed by startups) and there are lots of stories about large companies that failed to react to newer, smaller competitors. However, there are also lots of large companies that have continued to thrive although I suppose that “David Vanquishes Goliath” makes for a better headline than “Actually, Elephants Can Dance”.
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