innovation playground Idris Mootee

Warren Buffet Is Betting His Farm Investing In A 190 Years Old Innovation Platform.

I love trains. I remember how happy I was when my Dad bought me the first expensive German made Minitrix train set (I was about 8). I was fascinated for months by different freight and passenger trains and had the catalog under the pillow going bed every night dreaming about them. Whenever I see trains, I think about him even sadly he is not around anymore. It is funny how toys can have so much sentimental value.

Anyone know when the railroad was invented? It depends on how you look at it. The invention of the steam engine was critical to the invention of the modern railroad and trains. In 1803, a man named Samuel Homfray decided to fund the development of a steam-powered vehicle to replace the horse-drawn carts on the tramways (it is a performance-driven innovation).

Richard Trevithick (1771-1833) built that vehicle, the first steam engine tramway locomotive. On February 22, 1804, the locomotive hauled a load of 10 tons of iron, 70 men and five extra wagons the 9 miles between the ironworks at Pen-y-Darron in the town of Merthyr Tydfil (Wales) to the bottom of the valley called Abercynnon. It was a two hours trip and was a slow train. Then in 1821, an Englishman Julius Griffiths first patented a passenger road locomotive – another great British innovation!

Almost 20 decades later Warren Buffett sees the same opportunity and decided to invest heavily in railroad; he is paying US$44 billion for a 19th century innovation the railroad that moves things from one place to another. (I don’t want to bet against him, given his track record, Its stock is up 84% over the past decade, while the S&P 500 is down by 18%). He is smart. Doesn't matter what innovation coming next, people still need to move goods around in the most energy (and cost) efficient means. At least before some one crack teleporting.

Why the railroad? It is not because of nostalgic reason that the train was one of his favorite childhood toys. I am sure that’s not the reason. It is not toy money. "It's an all-in wager on the economic future of the United States. I love these bets," said Beffet "Railroads are among the most energy-efficient modes of mass transportation to date. And also due for a major upgrade". What is Mr. Buffet betting on? He is betting on three things:

1. Oil pries will remain high. If oil prices regain its upward momentum, trains will be more productive then trucks in that environment when oil is king, rail is queen. His money can fuel a massive upgrade of the railroad with the most advanced innovative technologies.
2. US economy will recover and that demand will resumes for transportation. According to Buffet: I basically believe this country will prosper and more people will be moving more goods 10, 20, 30 years from now and the rails will benefit."
3. China economic progress will continue at a fast pace. Commodities fuel such as coal powers the  economic engine of China (the factory to the world). US coal and goods are shipped via rail to Pacific ports and then shipped to China. Buffet believes China will further integrate with the US economy.

The Sustainability Challenge Is Complex. Is Ecolabeling The Answer Or Just Another Greenwashing Tool?

No one will disagree that today’s customer is empowered like never before. With social media and other connectivity, they care able to acquire more detailed information about brands, products and services in order to make smarter decisions; everything is a just a few clicks away. Any green-washing or eco-washing can last only for a few clicks. Customer can access new knowledge about the behavior of companies and can more readily question and challenge this behavior.

Many CSR initiatives are of limited success. It is pretty simple, for a retailer to have some green products available as a choice is worse than not having them. If they are doing what they supposed to do, there would be no reason for greenlabels in the first place. Because everything should be green. For a shoe company to offer 10 green SKUs over 3000 total designs, it is not acceptable at all. No surprises that many retailers struggle with green as consumers ask the question if it makes sense given what may be construed as a conflict of interest—what retailer wouldn’t want to label every product on its shelves with a green label to make it sell faster? I think what they should do is a big sign showing what percentage of products are becoming green and the index should move upwards until more than 90% of products are green to a reasonable level.

Taking a deeper look many retailers' eco programs may not be too effective—the Home Depot’s Eco-Options, Staples’ EcoEasy, and the Office Depot Green Depot. Is ecolabeling the answer? There is a much needed gap here as no one really knows what qualify as “green”. It is too complicated to just label a product’s degree of greenness. Some are pushing a bill which would empower the Federal Government to create a multi-attribute eco-label much in the spirit of the ecolabels generated by 25-plus other countries in the world.

Walmart is developing a universal rating system to help consumers determine which products are truly sustainable. The rating system would scrutinize a product's entire life-cycle by focusing on broad factors, rather than the usual marketing gibberish that extolls isolated virtues.

For the index, here are three examples. the most common one covers four main areas, including: 1/ energy and climate 2/material efficiency 3/ natural resources, and 4/ people and community.  Nike's sustainability group has developed a framework or index (see photo above) which they use for product design that includes 1/ environmentally preferred materials 2/ waste 3/ solvents, and 4/ innovation (see photo). At Idea Couture, we use a slightly different framework (see photo below) to evaluate product innovation which also included social and transport footprint as those are sometimes ignored. It is a little more effective as we take into consideration of the supply chain impact as well as the job creation or other social impact.

Ecolabelling is useful in a limited way but still a big step forward, at the end of the day the most potent sources of credibility and purchase influence comes from the voices of consumers amplified through social networks. Transparency is still a long way until we have full access to process classification, ingredient classification and disclosure, and access to the farmers growing whatever the raw material. In the end, the power may rest with the people and the Twitterverse.

All Nippon Latest Innovation - Pre-Boarding Toilet Monitors

Can design change the world? Or at least let’s try to change healthcare. Or shall we start with our education system?  There are plenty to change and no shortage of ideas. Do we need more new and cool products? Or we just need products that last? Or products that that are cheap to repair and not throwaways that are costing our environment? We will still be dealing with the problems case by the last 50 years of accelerated industrialization and electronics are the worst.

For me, I really wish I could redesign air travel experiences. It is so bad today. They are like flying prisons except they don’t give you the orange uniform (I like the old black and white ones than the orange one, not sure why they change it). Cost savings measures are making the experience ridiculous. Here is one good example. Japanese airline All Nippon Airways (below photo of myself flying All Nippon) has started asking passengers to make use of the toilet prior to boarding in a bid to reduce aircraft weight.

The airline has announced that “toilet monitors” would be located by the boarding gates in departure lounges to ask waiting passengers to relieve themselves before boarding the aircraft. The airline is under the belief that empty bladders will equate to lighter passengers, which will ultimately mean lighter aircraft and fuel savings. They started the policy this month (as an experiment) and hope to achieve a reduction of five-tons in carbon emissions over one month. The question for passengers is what if you don’t? I guess they can charge you for the weight you drop or if you are a Start Alliance gold, you will get an allowance for that. This is so crazy.

The best-loved engineering design projects of the century must be the Concord (1976-2003) and that’s a rare example of successful international collaboration. Its Anglo-French designers produced the world’s first supersonic commercial passenger aircraft which at its fastest flew from NY to London in less than 3 hours. How I wish if that was popularized and we can fly from New York to Shanghai in 6 hours.

Concord, exceeded even the most optimistic expectations. Routinely flying faster than twice the speed of sound with a take-off speed of 250 mph (400 kmph) and a cruising speed of 1,350 mph (2,160 kmph) at an altitude of up to 60,000 feet, twice the height of Mount Everest. At its fastest on 7 Feb 1996, Concorde flew from New York to London in just 2 hours, 52 minutes and 59 seconds. It takes me longer than that to get from mid-town to LaGuardia.

I travel almost every week and I just hate the idea of being cramped in an airplane. The design of airplane assumes people are cargo. Well actually they are designed like a bus, that’s why some are called Airbus. When most frequent travelers are for business, air-craft manufacturers and airlines need to rethink to make cabins double as mobile offices and provide email and Internet access. Since the 70s, Boeing's 747 (seating capacity of 524) has dominated the aircraft market. They are more comfortable that previous design. In the 90s Airbus began development of the double-decker A380, designed to give 50% more floor space than the next largest airliner (capacity increases to 800 passengers).  So how do we redesign the aircraft experience? To start with, we need think office, theater or even casinos or pub.

"Elegant" Is Often Reserved For Use In The High Design World. So What Does It Mean For Engineering, Interface Or Business Models? Can Business Learn From This Design Principle?

El·e·gant, an adjective and define or characterized by or exhibiting refined, tasteful beauty of manner, form, or style. Mark Jacob? Chanel? Jil Saunder? Hermes? All are elegant by design. What about Amazon Kindle? Apple iPhone? Or GE? Or P&G? Are they elegant? It is word reserved for the design world. That world likes to use words such as “elegant”, “simple” and “user friendly”, many designers understand how to subtract in creating simple and elegant design solutions. Human factors usually subtract more than add. Good designers take away complexity in objects or interfaces. Can business learn from this design  principle? Can a business strategy be “elegant”? Or can a particular management style be described as “elegant”?

Anything elegant is often simple; not everything simple is elegant. Everything simple is often user friendly, not everything simple is user friendly. Sometimes complexity us needed. Simplicity has different meanings. Good businesses need to be simple and easy to understand, and that’s the investment criteria for Warren Buffet. Business are getting too complex these days and most executives let alone the CEO knows all the moving pieces and have any idea of their risk exposure. And some rely on SAP to manage the enterprise and that’s unrealistic. 

There are many different kinds of simplicity, sometimes in form and sometimes in function or both. Oliver Wendell Holmes Jr. once said, “I wouldn’t give a fig for simplicity on this side of complexity, but I would give my life for simplicity on the other side of complexity.” Elegance is “far side” simplicity that is emotionally engaging, profoundly intelligent, and artfully crafted to be two things at once: simple and powerful. Why elegance? Is it an elusive target? Does it only applicable to design?

Are there always simple answers to even the most wicked problems? Do we have to reduce complexity so we can understand it or do we need complex solutions to solve complex problems?  Scientists, engineers, mathematicians, system thinkers, economists research for theories hoping to explain highly complex phenomena in simple ways.

Business executives and strategists are dealing with more and more complex business models. I don’t think that a simpler solution is necessarily superior than a complex one. If you consider a particular business as a system, the business model corresponds pretty exactly to the function of that system. The business in operation is a combination of architecture, function and performance. As with many complex systems, it can sometimes be difficult to distinguish between the three.

A business model includes the raw function of what we (economist) refer to as its "industry" (it's a bank or a retail chain or a newspaper, for example), but can also include particular ways of operating the raw function (a branchless bank or low-cost airline, a discount retailer or free online social network, for example). Thus the business model "function" can shade into "performance" when particular approaches to types of customer, levels of service and brand ethos are considered. The architectural side of the business model is how the core components are stack together and that impacts the function as well as the performance. It can be simple and elegant, and can be complex and elegant.

Elegant doesn’t have to simple.

Happy 60th Anniversary China! When Are We Seeing A Parade Of Chinese Global Brands?

Happy Birthday China! China is celebrating its rise to a world power over 60 years of Communist rule today, showing the world their capabilities in its biggest-ever parade of state-of-the-art military hardware. It has come a long way and still has a long way to go. I attended a cocktail party this evening and talked to many China observers on what this means to the world. And for multi-nationals?

This week I’ve been busy working on developing our China footprint or more precisely Shanghai is our beachhead office. I am excited but at the same time well aware of the challenges operating in that environment. Everything you know can be wrong overnight. No experts can tell you what's your market is like today and how it is changing tomorrow.

China's rapid urbanization will further change the social architecture of the country and causing pains. According to some McKinsey research, in 2025-2030 one in five of the global city dwellers will be in Chinese cities. Based on current trends, China in 2025 will have 221 cities with more than one million people compared to Europe with 35. 25 of China's cities will have more than 5 million people China's cities in 2025 will generate about 95% of its GDP (versus 75% today) Of the 350 million people added to Chinese cities by 2025 (about the population of the USA) 240 million will be migrants

Asia’s emerging economies are already leading the way for a recovery, or was there a recession at all? It depends on how you look it at. Chinese societies are just taking a baby step to transform to a consumer society. As many US consumers are transforming out it (not sure if it possible at all). Are the largest global consumer companies ready for this momentous shift?

McKinsey’s advice is that even the most sophisticated multinationals must change significantly to realize Asia’s growth potential. The region is as diverse as it is vast. Its markets come in a bewildering assortment of sizes and development stages, and its customers hail from a multitude of ethnic and cultural backgrounds. Their tastes and preferences evolve constantly. The speed and scale of change in Asian consumer markets can surprise even experienced executives. To meet the challenge, global companies will have to organize themselves regionally to coordinate strategy and use resources in the most efficient way while at the same time targeting the tastes of consumers on a very local level.

The structural changes required by China's entry into the World Trade Organization (WTO) and the broader demands of economic globalization and the information revolution will generate significantly new levels and types of social and economic disruption. China has proven politically resilient, economically dynamic, and increasingly assertive in positioning itself for a leadership role in Asia. And becoming a global power.

For those Chinese brands, they are all gearing up to play the global game and most are not well prepared. China’s domestic market is becoming ever more crowded and a strong domestic market will power up Chinese brand for international expansion. There is an urgent call for Chinese companies to master new skills that traditionally reside with non-Chinese multinationals such as marketing, branding, talent development, customer service, M&A management etc. It is not an easy path.

Take Lenovo for example, they are facing challenges both domestically and internationally. Lenovo is losing ground to rivals and Yang is replacing Amelio as CEO. Liu Chuanzhi, the company founder who stepped aside after the IBM deal, will return as chairman. It is a big setback. Despite a $93 million profit in domestic sales, overall results were hit by the losses in overseas sales and admitted that Lenovo was a "weak competitor" in the US and Europe. Weak is not a strong enough word to describe their marketing, pricing as well as distribution strategies. They still need to go global. Liu said in a press release. "But at this important time we want to pay particular attention to our China business as it represents the foundation of our global business and growth strategy."

The first problem is there is simply a lack of real global strategy and I don’t mean just a product strategy. Lenovo’s second challenge is a flawed sales and marketing strategies. They overrated their brand power and there aren’t much outside China. Replace the Thinkpad logo too fast. Lenovo failed to understand that blurry branding and not giving enough thoughts to pricing strategy.

Going global is not so simple. It is even more complex today with the Internet making information transparent, geo-politics and diverging consumer tastes. The most common mistake is companies see globalization as taking a superior (usually by false assumption) business model, product platform, branding and quickly adapting to another country. Oh yes it is about scale and that alone is not strategic.

The right approach is to rethink your business model globally, not taking an existing business model and adapting it to China or India. First step is to identify key differences in customer needs (often opposite) and understand how to answer to those needs. Not stripping down of an existing product line and call it localization. The real strategic focus should not be on the tension between global scale economies and local considerations as it blinds companies to the very real opportunities. Instead, spend plenty of efforts to exploit the differences and in their rush to exploit the similarities across borders, multinationals have discounted the original global strategy: arbitrage, the strategy of difference and design your business around those differences.

As more and more companies like Lenovo are slowly emerging on the global stage, they should put more thoughts on what strategies are available (Chinese firms prefer to spend money on feng sui consultants and not strategy consultants) and what implications do they pose for their more-established competitors from developed markets? How are these companies building marketing talent (a big limitation), leveraging low costs, and market access in their home countries? How do they approach global market entry, organizational development, and mergers and acquisitions? What opportunities do such companies present to Western multinationals? A feng-sui man cannot really give you answers on those strategic questions.

Innovation, Strategy And Leadership? It Means Leading With Purpose And Imagination.

Innovation, strategy and leadership are so closely interrelated and to succeed you need all those three. Innovation is the ability to different options in the future and develop a set of perspectives to guide them into the future. Strategy is the ability to connect customer needs and wants to the corporation’s core capability. Leadership is the ability to instill a sense of purpose for the organization and to mobilized those to work towards the goal.

What is the difference between leadership and management? Leadership is setting a new direction, creating a purpose and/or vision for everyone in an organization to follow. Management develops, controls or directs human and capital resources according to the policies, principles or values that have already been established.

What about “accountability”?, is that part of leadership or management? Well the answer is both. Warren Bennis once defined vision as "a target that beckons." Or we referred to it as “a shared destiny” or "a preferred future." It is that powerful and compelling dream about where we want to go that mobilizes people to help us get there.

Every organization needs a clearly articulated vision and purpose and it is the responsibility of leadership to provide it. Deborah Ancona, Professor of Management, MIT Sloan, outlines a framework for leadership under uncertainty that includes the following components:

First it’s “Sensemaking” which is a term coined by Karl Weick. It is about making sense of everything happening. In the very process of mapping the new terrain, you are creating it. Building on the work of Sutcliffe and Weick here are some tips for Sensemaking:

• Seek many types and sources of data;
• Involve others in your sensemaking;
• Do not simply apply your existing frameworks and overlay them on the situation;
• Move beyond stereotypes; Learn from small experiments; and Use images, metaphors, or stories to try to capture and communicate critical elements of your map.

The second one is “developing relationships within and across the organization”. Leadership is not an individual sport, and in our networked age the ability to connect and build trusting relationships is a key competency. While leaders try to create trust, optimism, and harmony, they often get anger, cynicism, and conflict instead. The core capability of relating centers on the leader’s ability to engage in inquiry, advocacy, and connecting. Inquiry and advocacy are terms coined in the pioneering work of Chris Argyris and Don Schon , as well Peter Senge. In order to enable effective interpersonal relationships, both practices are necessary.

Inquiry means the ability to listen and understand what others are thinking and feeling. It also involves trying to understand how the other person has moved from data to interpretation to assessment, rather than simply reacting to the assessment itself. It requires the leader to suspend judgment and to listen without imposing his/her personal point of view. And yet leadership requires having opinions and taking a stand.

The second area of relating is advocacy. This involves taking a stand and trying to influence others of its merits while also being open to alternative views. It means taking responsibility for your own biases and leaps to judgment while being able to say, “I was wrong, I jumped to conclusions based on insufficient data and overreacted.” Yet often in business there is a great deal more advocacy than inquiry. Sometimes we are so busy trying to push our own ideas that we do not really listen to what others are saying. The third area of relating is connecting. It is the ability to build collaborative relationships with others and to create coalitions for change. Tips for effective connecting are:

• Understand the perspective of others within the organization and withhold judgment while listening to them;
• Encourage others to voice their opinions; Be clear about your stand and how you reached it;
• Think about how others might react to your idea

The third one is “create a compelling vision of the future”. While sensemaking creates a map of what is, visioning is a map of what could be. Visions are important because they provide the motivation for people to give up their current views and ways of working in order to change. Perhaps most importantly, visioning provides people with a sense of meaning about their work. It answers the question “why am I doing this?” Thus good leaders are able to frame visions in a way that emphasizes their importance along some key value dimensions. Tips for effective visioning are:

• Develop a vision about something that excites you or that you think is important;
• Frame the vision with an ideological goal; Use stories, metaphors and analogies to paint a vivid picture of what the vision will accomplish;
• Practice creating a vision in many arenas; Enable co-workers by pointing out that they have the skills and capabilities needed to realize the vision;
• and Embody the key values and ideas contained in the vision— “walk the talk.”

The Future Of Enterprises Will Be "Social". What Exactly Does That Mean?

It started as new media, then interactive media, then consumer generated media, then web 2.0 and now social media…. How different are these definitions? Is social media the new new media? At the end of the day, it is about connectivity that facilitates dialogue and encourages co-creation and conversation. The signal-to-noise ration is high, no question. What about the potential for mining knowledge from heaps of noise and clutter?

Can social media transform the enterprises? Or goverment? Social media can bypass hierarchical structures (generally) established to manage and protect now-antiquated and quaint information flows. The hierarchy is flattened for internal communication, but more often, social media permits external access (inbound, outbound and crossbound) of information and experts whose credibility is established by the social media and, perhaps more importantly, would have been an unknown without social media.

Smart companies can imagine the benefits if they can successfully utilize social technology and media to engage their customers, customer advocates, partners, employees and suppliers in an open and transparent dialog.  Every organization whether banks or governments need to rebuild trust with their public. Many of the trust and credibility that organization used to enjoy were wiped out completely. Can you still trust your bank? Social media not only impacts external customers, it also drives internal change too. By adopting a freeform social media model based on entirely on grassroots populism is anarchy and anarchy is not the same as flexibility and agility. Social media can disrupt hierarchies and very often those hierarchies that are disrupted by inputs brought in from the outside should be broken, but goals, accountability, and processes are required to maintain forward momentum in any organization. In short, social media can transform organizations and accelerate change.

Social media will be used as a platform to reinforce an organization’s purpose and mission, whether it is a business unit or enterprise. It will used to energize and engage employees. All enterprises need to be social, people are social, customers are social, and businesses are social. It is not about point solutions to improve current information systems and processes, but new ways of connecting, competing and creative collaborating. In a wold without trust, social enterprise is the answer. It is Twitter vs SAP.

Charles Handy wrote “technology without trust is just traffic“. I believe technology without trust is just noise.  Handy may not have used twitter or blog or other social media, but he gets it. It is all about trust, a social enterprise is best poised to do that.

Have a great weekend.