The innovation deficit

Google CEO Eric Schmidt published an article in the Washington Post yesterday (the 9th of Feb 2010), entitled “Erasing our innovation deficit” (click here to view).  In this article he states that a much smaller share of worldwide innovation now originates from the US than had been the case in the past.  He also states that regaining the leading innovator position is key to restoring US jobs and future competitiveness, and that “We can no longer rely on the top-down approach of the 20th century, when big investments in the military and NASA spun off to the wider economy.”

At the time of writing this post the article has attracted 53 comments, ranging widely from full agreement with Mr. Schmidt’s points to blaming government and big business for all of our problems – and lots of other diverse views.

I’d like to share some of my fundemental views about innovation:

Innovation isn’t just about gadgets, hardware and software – it’s about witnessing change; anticipating further change; envisioning the impact down the road, and how things might be better; and acting to drive the change in that direction (rather than just waiting for others to do it.)  Both governments and companies have driven innovation top-down for a long time.

While individually we may not be able to change government or society, we can start by looking at whether we want to lead or want to be led, and by forgetting our egos so that we can embrace someone else’s good idea when see it.  Large companies are now able to adopt new processes and tools to benefit from ideas that originate anywhere and evolve through the contribution of all interested parties (employees, customers, partners…) – rather than relying primarily on the “Innovation Department”.  This doesn’t take away the need for some top-down investments – but it does enable many more worthy ideas to compete for them.

So, erasing the innovation deficit begins with each of us understanding that change is inevitable, and then deciding to be a catalyst for change and to take a role in shaping it – hopefully in a positive direction.  The first active step does not involve deciding what to change – it is about listening and exploring.  Once we’ve done that we can move into the other three roles (as outlined by Roger von Oech) the Artist – to give our basic ideas a creative twist; the Judge  – to figure out which of them are worth pursuing; and the Warrior – to go out there and make them happen!

From $1 million to $100 million…

From $1 million to $100 million – a conference sponsored by “The Marker” - Israel’s leading financial publication, and Pelephone – one of Israel’s mobile communications providers.

I attended this conference, held yesterday (15 Nov 2009), and thought I’d share some of the more interesting snippets and insights from the opening and first panel session.  The main focus of the conference was on what it takes to grow a startup company from its initial revenue-generating stages to a substantial player, making more than $100 million in annual revenues.

How many Israeli startups are there, and how many of them become big players?  Why?

Gil Sharon, the CEO of Pelephone quoted the following interesting figures:

• Of 1,600 startups that were created in Israel during the last 15 years, only 9 grew to become independent players making $150 million or more in annual revenues;
• Of 900 startups created in Israel during the preceding 15 years, 17 grew to become such large players.

According to Gil Sharon, the top three critical aspects for becoming a large player (and the reason so many Israeli startups don’t) are:

1. Marketing, marketing, marketing;
2. A production process, organization and infrastructure that is planned and built for growth; and
3. A funding / capital structure that supports long-term growth over (smaller) short-term gain.

What’s THE key learning offered by Sir Ronald Cohen about the most important factor in the ability to lead a company to significant growth?

It’s the “ability to anticipate the second bounce of the ball.”  The capability to make money out of uncertainty by anticipating the changes that will happen – more than just one step ahead.

Sir Ronald also mentioned the importance of recognizing that the role of the startup’s leader changes with the growth of the firm, requiring the CEO to empower his/her team to take decisions autonomously.

My Take: This ability to relinquish some of the leader’s control is a requirement for leaders at all levels of the organization.  Too many companies I know suffer from an over-reliance on key individuals, including industry / functional / technical domain experts.

What attitudes are inhibiting Israeli startups from growing to become large companies?

Zohar Zisapel: “Israeli entrepreneurs have a tendency to exit relatively early, when they can make a few millions of dollars, rather than aiming for much greater levels of success.”

Dr. Orna Berry: “Venture capital firms will have to change their investment mix.  Things cannot continue this way.” (referring to the reluctance of VCs to invest in late growth stages)

Dr. Yossi Vardi: “I recently participated in an un-conference of 200 young game developers… Maintaining the energy and entrepreneurial spirit I’ve witnessed there is much better for all of us than striving to get all of them into one massive company“; and “We shouldn’t strive to have an Israeli Nokia!“

My take:

1. I think all of the abovementioned panelists are right, but I’m with Dr. Vardi – we ought to leverage our strengths rather than trying to force ourselves to wear someone else’s shoes…
2. Notwithstanding the above, I think startups do need to cross the chasm between the $1 million revenue level and the $100 million revenue level.  Only those who are able to move from a focus on “innovator” and “early adopter” customers to “early majority” customers will really have a major impact on their industry.
3. By now, there’s a lot of experience from which startups can learn.  There are pragmatic ways to cross this chasm without losing the spirit of innovation and without drowning in beurocracy!

“The New Media Making Tomorrow” – thought provoking panel session

“The New Media Making tomorrow” is the title given to the mid-day plenary session of The Israeli Presidential Conference 2009 – Facing Tomorrow, which took place last week in Jerusalem.  The session featured a panel of distinguished international media leaders who presented their personal viewpoints and responded to questions from the moderator.

In this post I highlight some of the themes that came up and present some thoughts on the one that generated some controversy.

Panelists:

• Dr. Yossi Vardi (moderator) – leading high-tech entrepreneur;
• Dr. Mathias Dopfner – Chairman & CEO, Axel Springer AG;
• Tom Glocer – CEO Thomson Reuters;
• Max Levchin – Chairman & CEO, Slide, and co-founder / former CTO of PayPal;
• Maurice Levy – Chairman and CEO of the Management Board, Publicis Groupe;
• Josh Silverman – President, Skype;
• Jimmy Wales – Founder, Wikipedia; and
• Dr. Ruth in a special guest appearance.

Everyone agreed:

• The growth rates in both availability and speed of distribution of digital media generated and uploaded by on-line users is just staggering!  It’s hard to understand and assimilate what’s going on with this pace of change.
• People expect content generated by other people on-line to look and feel personal.
• Context has become, in some ways, even more important than content as a factor that determines what gets consumed.
• Traditional media is not dying, but transforming to embrace change, adopt new ways, and thereby become the new media.  Those who are dying are those who are not able to make this transition.

Controversial topics:

• Who’s going to ensure content quality? Is Crowd Wisdom wise enough?
• Does the deluge of available content hurt democracy?
• Do people need commercial compensation to encourage quality content creation?
• Does electronic communication negatively affect meaningful human contact and relationships?

See below for sample panelist quotes and my 2 cents on each topic.

Pace of change – exponential growth rates in availability and speed of distribution

One of the panelists said that his 8 year-old daughter has 3 blogs, communicates via instant messaging and Facebook, and does not watch broadcast TV at all.

Dr. Mathias Dopfner: “Change is good, but what is going to remain?“

My 2 cents: There is a strong ingrained human need for stability, affecting many aspects of our life. While today’s youngsters grow up and learn to deal with constant fast-paced change, I don’t believe that this basic human need for stability is going away – at least not in anywhere near the current speed at which technology, information, communication and jobs are changing.  Isn’t this going to channel our need for stability to other aspects of our lives?  Are loved ones, family, friends, core beliefs and values (e.g. religion), hobbies and favorite places going to become even greater anchors of stability for people?

Expectation that content should look and feel personal

Panelists agreed that there is an overall expectation that content generated by individuals and distributed via social networks should at least appear to be more personal than content that is sourced from companies, news agencies etc.  This is because your friends on the network have chosen to listen to you – not to just anyone…

Maurice Levy said TV will stay with us the longest, but it become totally irrelevant in 15 years.  This is because people will find the video content they want in real-time, when they want to consume it.

My 2 cents: I think that this expectation applies not only to individuals in their personal capacity but also brands, individuals in a professional or public role, news agencies, experts and the like. The biggest difference is that what used to be a course-grained categorization of a relatively small number of information sources (e.g. Le Figaro as a conservative daily French morning newspaper) has become a very fine-grained “persona” of a humongous  selection of available sources.  Personalization is therefore not just about “pushing” information assumed to be of interest to an individual, but also about each individual electing to give a slice of his/her time to very specific information sources, selected based upon this fine-grained persona.

Context more important than content

Josh Silverman: “Video is only a little less than actually being there“. Well, I think that also depends on the context…

My 2 cents: It’s not one or the other, but the degree to which they match. To me, the content – delivered from & within the context of the source – actually has to appeal to the reader’s context.  Whether or not content is relevant really depends on what the reader is trying to do, i.e. “what they’re seeking to take away”, as put by Larry Brooks in his recent blog post Why Content is No Longer King (And Who’s Taking His Place).

Traditional media is not dying

Dr. Mathias Dopfner: “It’s a mistake to talk about the newspaper industry as dying“.

Jimmy Wales: “Print magazines aren’t dying – just traditional magazines“.  Reportedly he had recently signed a cooperation agreement with HP’s printing on-demand service, saying that this will allow communities to “produce print magazines of higher quality, and of a more timely and customized nature than traditional print magazines can.“

Tom Glocer mentioned Reuter’s increasing use of photos and news reports originating from the general public in order to cover events in real-time that could not otherwise be covered on time.

My 2 cents: It’s the vision of the traditional media company and it’s determination to get there which will decide its future.  Lots of people will continue to like to read papers, magazines and books for a long time.  However, the companies that produce them have to become new media companies at the same time.  The underlying need to identify and use trusted sources will remain, and so will the incentive for those distributing news on-line to maintain the integrity of their brands.

Content quality – is crowd wisdom wise enough? Does the deluge of available content hurt democracy?

Tom Glocer: “The question is if you trust the source that gives you the news? We need to find the way to combine the old and new media.“

Jimmy Wales: “35% of the Internet users in Israel use Wikipedia.  Only in Norway the usage ratio is higher.“

Maurice Levy: “Having too much information hurts democracy.“

My 2 cents: No – it does not hurt democracy, but “crowd wisdom” is not enough. In democratic societies, the quality of many types of products and services we consume is safeguarded either through self-regulated professional associations or through national / state-appointed regulatory bodies.  While such quality controls certainly have their flaws, they do provide a fairly consistent and universally-understood level of protection to the consumers of such products and services, including the ability to complain, investigate and pursue legal action or other sanctions against violators when this becomes necessary.

In many cases, such safeguards either don’t exist or become totally ineffective on the Internet.  A false piece of news can travel lightning-fast through social networks – convincing millions of people that it’s true, like the recent “baloon boy” disappearance.  Anybody’s views on topics usually requiring official certification or licensing can become more influential than the opinions of acknowledged experts.  In Wikipedia this issue is resolved by a combination of the fact that the system highlights opinions lacking justification to warn readers; and the fact that errors are likely to be quickly corrected by people who care and who know about the topic – and there are enough of them on the web.

Moreover, in many cases quality is in the eyes of the beholder.  If you select information sources you know personally; sources whos associations and connections you are aware of; sources that are popular with groups of like-minded people; or sources whos “persona” matches your context and style preferences – then your finding sources that meet your own personal quality measures.  It’s up to you to decide how to find and screen them, and search engines will continue improving on their capability to match results to what each individual is actually looking for – though there’s still a long way to go.

Do people need commercial compensation to encourage quality content creation?

Tom Glocer: Reuters pays people for news-worthy pictures and information it’s unable to gather there and then.  Glocer sees this trend expanding, and more people being encouraged to contribute in exchange for micropayments.

Jimmy Wales (if I recall correctly): Says micropayments are not needed.  Millions of people contribute loads of content today because they want to share their expertise; want to express themselves; want to help others; or simply care about a certain cause.

My 2 cents: I think it depends on the type of content in question, although there’s no question that much more detailed and high-quality content is available for free today than one could have ever imagined only a few years back.

Does electronic communication negatively affect meaningful human contact and relationships?

This was Dr. Ruth’s main concern.

Max Levchin: met his wife on ICQ.

One of the other panelists asked: what sounds better – meeting your spouse physically after many electronic exchanges sharing views, likes & dislikes, experiences etc; or meeting your spouse in the campus bar?

My 2 cents: a great guest appearance that livened up the session!

Congratulations, if you read all the way to here – you’re a true warrior!

Can you afford [not to do] R&D that doesn’t deliver commitments of paying customer projects?

“We can live with customer project-based evolution of our product and service offerings.  Right now we can’t afford any R&D initiatives that are not directly geared towards satisfying our contractual customer commitments.”

I’ve heard this type of argument numerous times from CEOs and board members of medium-sized software and services companies companies.  They say that they recognize R&D is important, yet feel that financial constraints leave them no choice but to bring all of their investment in the medium-to-long term to a halt.

Numerous studies have shown that new customer acquisition is several times more expensive than current customer retention.  Customers expect product companies to continuously enhance and evolve their products over time, and do not expect to have to pay for every such enhancement that they may request or find valuable.  With this in mind, there is a fine line to be drawn between functionality within the product roadmap – which customers expect to receive as part of their support & maintenance agreements – and functionality required by the customer which represents a new revenue opportunity for the product company.

While some companies have a good level of “lock-in” once solutions based on their products have gone live, recurring business tends to come from customers who feel they are being treated fairly.  Meeting the majority of product roadmap commitments in spite of challenging times contributes significantly to the customer’s feeling of fair treatment.  Moreover, being a product leader or fast-follower requires new product capabilities to be available in sufficiently reliable form (i.e. at least in beta) as soon as customers are willing to pay for them.  A practice of waiting for paying customers before commencing new developments will therefore result in dissatisfaction within the current customer base, as well as a competitive lag as far as major new capabilities are concerned.

Since satisfied customers and competitive products are both key to securing new business – one should not view proactive investments in product and service offering evolution as the easy choice for cost reduction.  John F. Kennedy once noted: ”in Chinese, the word ‘crisis’ is composed of two characters. One represents danger, and the other represents opportunity.”

The global crisis has presented an opportunity for innovative, forward thinking companies to get ahead of the competition by continuing to invest in their offerings while their competitors stop investing.  CEOs and board members take note: now that there seem to be some early signs of a recovery – it is imperative to invest in the future before it gets too late.

IBM’s new CIO Survey provides valuable framework but needs to be made actionable

IBM recently released a new Global CIO Study entitled “The New Voice of the CIO”, based upon individual one-on-one interviews with “more than 2,500 CIOs from over 75 countries and 15 industries.”

Much of the analysis and commentary in IBM’s research report relates to attitudes, biases and the balancing of conflicting priorities (in IT resources as well as the time & attention of the CIO.) I feel the findings are valuable, but while the report is quite long, much of the analysis and commentary is presented at the “slogan” level. In this I mean that they do not provide much actionable input on what those who wish to do something based upon the findings should do “on Monday morning”.

Nevertheless, I find the way IBM modeled the various roles of CIOs within their business organizations very useful.  I also found the initiative priority list and a few other pieces of information very valuable.

Clearly there is even more value in some of the underlying information, as it can provide a very targeted set of statistics for a specific target audience of a software & services company – segmented by industry / geography and company type (high-growth / low-growth.) The published results (and underlying database) can also form the basis for an individual assessment service – which can help turn them into specific actions for a given company.

One of the interesting findings is the level of importance associated with the CIO acting both as an “Insightful Visionary” and as an “Able Pragmatist” – a need I can wholeheartedly agree with.  Figuring out how to interpret the analysis results in a given company’s case and how to turn them into actions is all about bridging that gap.

Management misconceptions: “changing the way we work will cause too much distraction”

“Changing the way we work will cause too much distraction to our key personnel.  We can’t afford this right now.”

This excuse for not driving change when change is needed is likely to be heard even more these days than before.  Lou Gerstner, former IBM President & CEO, once said that “you have to be fast on your feet and adaptive or else a strategy is useless.”  Well, if you’ve updated your strategy to be able to thrive in a changing market, or if you’ve realized than certain operational processes must change to become more effective – you’ve gone part of the way towards reaching your objective.

However, being adaptive is about executing the strategy and implementing innovation – not just about realizing that change is needed.  Innovation and change cannot be done to people – it must be done by them.

Change programs can often be implemented in staged, incremental steps, starting with the highest priority changes.  Such plans can take into account the level of pressure faced by key employees on their daily routine. For example, project managers some times tend to estimate the amount of effort required to complete a project by deducting the effort to date from the original effort estimate.  This practice is deficient, as the knowledge and experience gained on the project at the time of status reporting by the project manager may dictate a change in estimates for future project work.  Getting project managers to think about what they’ve learned to date before they communicate their “estimate to complete” is a simple measure that can easily be implemented without major disruption to the work practices that are in place.  Of course the project manager is now required to proactively think about his/her future project effort – but experience shows that the little time required to do this saves significantly more time in the future, in addition to helping avoid future surprises and issues relating to budget overruns and non-delivery of customer commitments.  Surprisingly, even established companies do not always ensure that such simple measures are consistently applied when needed.

Depending on size and complexity, change programs may be defined as special projects and assigned both executive owners and external consultants, some of which may be full-time.  For these programs to succeed, key personnel related to each change must be engaged in its design, communication and implementation.  It is up to the executive owner to minimize the disruption to regular business activities while still achieving the objectives of the program.  As key employees are almost always busy, deferring the changes till “there’s enough time” is generally akin to deciding that it’s not going to happen at all.

Gartner underestimates the impact of Microblogging and Twitter

Gartner published they updated 2009 Hype Cycle white paper on 11 August.  Having read a post on this from ReadWriteWeb, http://www.readwriteweb.com/archives/gartner_hype_cycle_2009.php, I’d like to say the following:

I believe that Microblogging will indeed have a bigger impact than what Gartner seems to imagine. The massive number of recent Twitter users are just beginning to play around with it and to find out how it might benefit them. Some will abandon Twitter after a single tweet, and some will find ways to get value out of the real-time aspects of it. Just yesterday I participated for the first time in a live Twitter-originating discussion thread, courtesy of the new service created by Joshua Schachter – a.tinythread.com. The ability to have a live (real-time) discussion with anyone who’s interested gives rise to collaborative ideas and interaction that would never have taken place before. Check out the discussion that took place about this new service and the types of new features that would be useful in it, started by Robin Good: http://a.tinythread.com/qkHvAGTyX6.