innovation playground Idris Mootee

Strategic Innovation And The Quest To Reinvent Management.

I spoke at a number of conferences the last few weeks on the same topic of Strategic Innovation in the Age of Reinvention. Reinvention is the word as every individual, practicing professional, multi-nationals, non-profits, education institution and government ought to be thinking about “reinvention”. We desperately need to “totally reinvent ourselves” in order to transform our economy, organizations, politics and societies.

Corporations adopted strategies 20 years back to outsource their production and resulted in loss of ability to innovate and compete. Many corporations cannot even define their core and what they are really good it today, their perceived competitive advantage was merely channel assess and a warehouse of intellectual property and patent documents.

Business leaders and governments are also experiencing a profound crisis of trust and legitimacy and all these factors have triggered a loss of confidence in traditional ways of doing things. The new world of reinvented strategic management requires applied design thinking across all management functional disciplines.

Today the very core of many management theories are being questioned and “management” is close to a point of failure. Leaders are looking to find something new to grasp onto in order to make sense of what’s going on and are looking to organize for a future of unprecedented uncertainties. Companies that fail to make the transition and missing industry breakpoints will be forced to play catch-up or risk being irrelevant or extinction.

One of the problems is we are still training our managers (MBAs) based on theories developed in post-Wold War II which was adequate when there were very little competition and technology was not a key drivers of competitive advantage. The M-form organization design is functionally oriented and the idea is every manager should manage a piece of the business as if optimizing each function means optimizing the whole. They are specialists and as as a result everyone is sub-optimizing the whole. Resulting in turf battles, lack of collaboration and unhealthy internal competition that causes satisfactory underperformance.

The strategic process occurring when the organization already realizes that it is facing an immdiate crisis, usually leads to strategic plans in the way of drastic cost reducing changes - closing of plants, cutting down of manpower, cancellation of investment plans or a change in their direction. These actions can only help them temporary. These are no changes in the present cognitive frame of the organization and these efforts may only enhance the sliding of the organization toward its doom.

The new world of reinvented strategic management requires applied design thinking across all management functional disciplines. The very core of many management theories are being questioned and “management” is close to a point of failure. Leaders are looking to find something new to grasp onto in order to make sense of what’s going on and how to organize for a future of unprecedented uncertainties. Companies that fail to make the transition and missing industry breakpoints will be forced to play catch-up or risk being irrelevant or extinction.

Successful Business Transformation Requires A New Logic To Handle Ambiguity And Change.

The future is scary and there are reasons for it. I have been giving a lot of keynotes lately to different professional organizations and senior executive roundtables and my keynote topic of strategic innovation and design thinking went beyond innovating to find growth and adapting to new economic, market, political and social order. I shared ideas on the future of economic development, the come-back of manufacturing, developing glocal innovation networks and creative or self-destruction of old establishments and the renewal and transformation of the modern enterprise.

There were never ending questions from the audiences on these topics. I can write a book on them, I guess I won’t have time. I hardly have time to get enough sleep. Everyone is looking for a theory to anchor. The future has never been so uncertain and almost any economic theories invented decades ago has become another working white paper again. The very old ideas of management and strategy taught in b-schools are so dated and when I look at the 800+ management books I have on my bookshelf, I am guessing 80% of them are completely irrelevant (50% were irrelevant when they were first written).

Some turn to other knowledge disciplines to look for sources of inspirations. The field of business strategy borrowed heavily from industrial economics and the filed of management sciences borrowed heavily on organizational psychology. What about "Strategic Foresights?” Where can we look for anchors and new inspirations? How about mathematics?

Fuzzy logic is the branch of mathematics that says that science isn't about absolute truth; it's just a heap of guesses at a reality that's much more complicated than that. The term “Fuzzy Logic” emerged in the development of the theory of fuzzy sets by Lotfi Zadeh (1965). A fuzzy subset A of a (crisp) set X is characterized by assigning to each element x of X the degree of membership of x in A (e.g., X is a group of people, A the fuzzy set of old people in X). Now if X is a set of propositions then its elements may be assigned their degree of truth, which may be “absolutely true,” “absolutely false” or some intermediate truth degree: a proposition may be more true than another proposition.

Professor Bart Kosko (Professor of Electrical Engineering in the University of Southern California's Viterbi School of Engineering and a Professor of Engineering and Law in USC's Gould School of Law) draws out some pretty interesting applications of that theory. He lost his faith and rediscovers it in science. The fuzzy future is part bog-standard libertarianism (with a side of Reaganomics), part extropian hooting-and-hollering, part small boy reveling in the Tolstoy and Clancy school of military exchange, and part Rube Goldberg engineering of unlikely theory, all bound up in hundred of pages of inscrutable equations in the footnotes.

My teaching on 'Design Thinking" goes beyond many simple (and shallow) creative tools. Forget those three wheels of design, technology or whatever. Those are complete BS. "Design thinking" is comfortable with change, it is disruptive and provocative by nature, and promotes new ways of looking at problems, often through new lenses. The strategic framing of complex and ambiguous issues requires thinking approaches that are free from organizational dogmas, codified limitations and old assumptions.

A large part of the design thinking process is to step out of roles conventions and free oneself from these dogmas and explore new frames of thought and approaches to problem solving. I am using "Design Thinking" to push us to rethink everything from scratch, including the tools of logic itself. Most people believe creativity means there is no logic. But what is creativity anyway? Or what is design? We need to look at the world or our business or social challenges with a fuzzy prism. It is like watching 3D movies without the 3D glasses. You can never make sense of the present and the future by using conventional lenses and logic.

In a world of full of chaos, unpredictability and fuzziness we need to look at the world through a fuzzy prism. Here is what Dr. Bart Kosco has to say, "How do you upload yourself onto a chip?" The fuzziest fact of all. The problem with current schemes in theory is a binary shock, when all of a sudden you die in meat, and wake up in chip. So how do you do it consciously? We could cut out that little chunk of your brain and replace it with an equally functioning chip, maybe a more powerful chip. We could keep doing it, while you're wide-awake. So in the end, you've completely transferred to a network of chips, and your brain is a bunch of sodium chunks in a jar of formaldehyde.

For the modern enterprise to evolve, survive and even prosper in the future, any change and transformation effort cannot just be putting on bandages. There is no one single future state to map against current state. There could be a range of different strategic futures and companies need to be ready for all of those. It takes a very different kind of transformation process when the future state is unknown.

Apple's Biggest Challenge Is What To Do With $100 Billion. Just Write A Check And Buy Sony Before They Further Destroy More Value.

Apple's current biggest problem is not the next iPhone. It is the 100 billion dollar problem. Microsoft had been criticized for years for having too much cash and not putting them to use. They eventually started paying dividend starting 2003. It is not easy to deploy them in a way that creates the expecatation of return Apple's investors are expecting. I think they will eventually start paying dividend.

With Apple's war chest hitting $100 billion soon (currently around $98 billion but was originally estimated to be $60 billion) investors are asking the same question: What are you doing with the money or return it to shareholders? Putting that kind of money to work is not easy. It is over $100 in cash per share. $100 billion is roughly the same as California's 2012-2013 state budget and can literally buy a few countries or pay for a year of student loan for every college student in America.

Apple's core business is like printing money. Apple recorded a $16 billion increase in cash sequentially and there is no sign of slowing down with 66% rise in revenue with 36% rising expenses. That makes Apple the most valuable company at $300+ billion, which is close to the sum of the market cap of three computer giants: Microsoft ($200.2 billion), HP ($72.5 billion) and Dell ($29.2 billion).

Unfortunate big acquisitions don’t always work because of many reasons. And there is no magic formula for successful strategic transformation post acquisitions and most companies ended up underperforming post acquisitions. The problem is the inability to articulate the strategic logic of an acquisition and developing an organization and cultural integration plan.

At Idea Couture, we help acquirers in visualizing the future state and show how the pieces fit together in a very tangible (and credible) way. The future strategy is manifested in a well-articulated way showing its value creation potential. It is done through applied design thinking. Power Point cannot do the job. We bring the future state to the present to excite shareholders, employees and customers.

Apple’s history of acquisition has always been late stage start-ups that bring unique capabilities or technologies rather than revenue. With $100 billion you can literally buy up every early-stage start-up you want. Google has $44.5 billion for comparison.

Apple can use the money to purchase all patents over the years developed by Kodak, Research In Motion, Xerox Parc and Erickson and that can only account to a maximum 15-20% of the cash that they hold, but that patent portfolio allow them to sue anyone competing in their space in the next ten years.

Or Apple can use the money to buy up HP and Research In Motion and swiftly end Windows dominance in the enterprise market? Or buy Amazon and Netflix to reinvent and dominate content distribution.

Or Apple can just buy Sony? Funny Sony was looking at buying Apple when the company was at its worse shape in 1995. I still have a strategy deck I produced in 1996 about how Sony can leverage pieces of Apple and how the deal can create value for Sony. Now Apple could easily afford to buy Sony with its market value around $18 billion. If I am Apple’s CEO, that’s what I’ll do. Sony has been poorly managed from a corporate strategy level but does have great technologies, products, brand and talents. I would sell the studio business and concentrate on entertainment appliances. This deal can immediate further increase Apple's enterprise value. The integration part would be a nightmare.

Or just make it easy, Apple can acquire with cash HTC, Sony Ericksson, Samsung, Nokia, RIM, LG, Motorola, Nintendo which together has a combined value of roughly $93 billion. That's a lot of fun to figure out what you can do with these companies. And you still have $7 billion left to play with. Perhaps acquire New Balance for $400mm, Jobs probably would like that idea if he is still around. We miss him.

You Think Innovation Is Hard. Business Transformation Is A Hundred Times More Difficult. And In Fact It Is The Number One Barrier For Strategic Innovation.

People think innovation is almost just about new ideas. Funny how many think Blue Ocean Strategy is a big wake-up call when all it does is communicating the very the basic and simple idea of strategic innovation – how not to compete with your competitors in the same game and instead create a new game.

A strategist has the choice between getting back into the fight with existing competitors or creating a new space when there is no competition AND no proven customer demand. This is the hardest part - "no proven customer demand" and let's see what the board has to say when you tell them that your strategy cannot be validated quantitatively. New game strategy is extremely difficult to make happen for a number of reasons:

• It is hard to convince the board to bet on a market that has yet to exist
• Successful founders CEOs are stuck seeing things with an old mental and underestimaing the threats
• It is hard to change the minds of people who wanted (and have vested interest in) the old business to work and not willing to give up
• It is hard to make the switch as it requires new mindset, capabilities and organization design
• It is hard to be credible using the the current brand entering or creating the new market space
• There is the question of how sustainable the new value logic from a customer and market perspective

Looking back at the history of industrial revolution or our information or technology revolution, red oceans vs. blue oceans or a better way to describe it is “today cash flow" vs. "future cash flow" or "defender vs. "attacker" etc. Avoiding competitions in the red oceans give rise to innovation opportunities that create new market space and could triggers a new round of industrial transformation. The author did not address the dynamics of the industry transformation.

Straegy is never that simple as red and blue oceans, organizations are increasingly inter-connected as they leverage brand, patent, talent, technology, knowledge, channels, products and services from each other often located in disparate parts of the world. These complicated inter-connections often prevent companies to reinvent themselves even the opportunity is obvious.

There are many hurdles and barriers for transformation including cognitive, resource, capabilities, motivation and political ones that prevent making a new game strategy implementable. Idea Couture Brand-driven Strategic Transformation goes beyond creating, communicating and maintaining a sense of identity and belonging for the employees, we bring foresights into the process and connect the align the brand with the business strategy and the strategic futures.

The brand is used like a savings account for emotional equity while we develop an engaging and energizing feeling of commitment to the organization by creating and co-creating a shared destiny; this is where it creates the highest impact. Conventional visioning and mission writing exercises often fall short to drive transformation. The idea is to get executives and senior managers in front line employees to move beyond empty, slogan-driven communications, which are more likely to lead to detached cynicism than to engagement, and to help them develop a clear personal commitment to an organizational purpose that will reflect in all aspect of managerial actions.

Business transformation is the execution of an integrated, corporate-wide program aimed at aligning the present and future as well as the organization, strategy and brand, it ensures alignment and internal consistency by reshaping the leadership, strategy, finances, organization and operations of businesses as a whole. It is not a Power Point, it is the energy flow of an oranization.

There Is An Inherent Conflict Between Logic, Emotion And Creativity. So How Should We Deal With It?

When peope ask the quesion "Do you know the correct answer?" I don't like that question at all. It is not a smart question as a start. The biggest problem with our formal education systems is our over-emphasis on finding the correct answer to a particular problem. While the quest for correct answers helps us to function at work, it also impedes us when it comes to making the bigger, more important decisions, largely because many bigger, real-life business issues are ambiguous, complex and dynamic. If you have been around for over 50 years and have travelled to more than 20 countries and speak a few languages and have a few degrees under your belt, you probably know there is no right answer, may be a lot of wrong answers.

Creativity is not a license to be wrong (you have been reading too much Fast Company), strategy is not a license to be boring or lack of imagination (Reading too much HBR). A PhD degree is not a license to overintellectualize and being irrelevant to the real world and use words that you need to explain what you mean. And an MBA is not an automatic license to make key business decision, you need to earn it.

However an MBA does teach you a few important concepts if only if you understand how to apply them. You should know how to re-org your in-laws into a 'team-based family.' You learn to refer having babies as pilot market testing. You should understand the cost structure and sytem implications of starting a family. You know the cost of capital when your spouse decided to purchase a Hermes Birkin. And most of all, you know how to talk about your past relationships as ‘sunk costs.’

I definitely school needs to teach more creativity. Not the crazy useless exercises but applied creativity and design thinking in everyday life from science to economics. Today (and I should say it has always been) creative thinking is critical to business strategy and innovation; however, If you look at the top 20 MBA programs around the world, you will be challenged to find any courses, core or elective, which teach, train or even inspire students to be truly creative. Instead, most MBA programs and courses focus on numbers, analysis and the logic of deductive reasoning.

There is an inherent conflict between this kind of logic and creativity, and in most business settings, logic is usually quick to get in the way of creativity. Creative ideas can run into the walls of business logic because 1/ it does not quickly, clearly or at all connect to 2/ business strategists often operate within the boundaries of defined roles, and decisions are made based on those boundaries – they draw on what they know and what they have learned including formulaic behaviors, processes and the “best practices” that have evolved through mass consensus – to shape how they think and act.

That explains how many MBA students had Adam Smith on their reading list. The 18th Century idea that people – given their limited time, information, resources and budgets – act purposefully to maximize their own satisfaction is epistemologically central to business thinking. In Smith’s view, all human behavior is rationally self-interested and we are innately selfish. Thanks to this model convinces many how “easy” it is to predict individual or organizational behavior. It is not quite that simple.

When it comes to human behavior, this is where many economic principles, particularly Smith’s, break down. I am not rational (ask those people who work wiht me) and many of us are not. The economist's notion that people act rationally only implies that they try to act in ways that are consistent with their own personal objectives, even if those objectives seem absurd to outsiders. That's the beauty of being human. Read more about creativity in this coming issue of M/I/S/C - The Creativity Issue.

Interactions Design Will Enable New Social And Cultural Behavior. How Do You Research These Emerging Behavior And Their Implications?

Back from London and a very productive week. Many are still sadden by the loss of Steve Jobs. I quote Ginsberg: "I saw the best minds of my generation... angelheaded hipster raging or the ancient heavenly connection, in the machinery of night...". The world misses Steve Jobs.

Apple said he had been "the source of countless innovations that enrich and improve all of our lives" and had made the world "immeasurably better".VC and ex-Apple executive Jean Louis Gassee - who Jobs recruited to Apple - said that Jobs should have 'seven statues' built for him - 'One for the Apple II, one for the Mac, one for Pixar, one for coming back and reviving Apple and the Mac, one for the iPod and iTunes, one for the Apple Stores and one for the iPhone. This picture of Steve was taken in an emotional moment knowing this was his last keynote.

Everyone is obsessed with Apple and how to disrupt the master disrupter, but what everyone is doing is either copying each other or try to make small changes to Apple’s designs without the power of the Apple brand/user experience and the powerful Apple ecosystems behind them. Let’s say if your army has the same uniform, equipment and the same Hummers as the US military doesn’t mean you can compete with the powerful military intelligence system linking everything. Apple is a system with central command and control with highly sophisticated logistics system and deep R&D budgets. It is truly a textbook example of sustainable competitive advantage.

Most companies got it wrong when they believe 1/They think Apple is only about clean design and nice features 2/They think what they do is easily replicable 3/They think people are willing to save some money buying a non-Apple substitutes. Look around how many MP3S out there and how cheap they are, anyone buying them? The same can be said about tablets.

We’ve spent a lot of time on researching the future of ‘devices’ or ‘personal technology’. It will be the single largest growth opportunity for the coming 10-15 years and will eventually be bigger than the PC business. It is the next game. I am not talking about mobile phones, smart phones or tablets. I am talking about a convergence of these portable devices that utilizing haptics, gestures, facial, biophysical, voice, movement or any combinations that could create novel ways of interacting with a devices or entertainment appliances.

There is simply no way to predict what would become the dominant interactions paradigm of the future and which one will prevail and which one is transitional. Is multi-touch transitional or something will come and leapfrog this intereaction paradigm?

Apple is milking everything ‘multitouchables.’ One of the latest idea is the Apple's Magic Mouse may include multitouch display. Earlier this year Apple filed a patent application on a multi-touch mouse that can display information and allow users to input directly from the mouse such a number keypad. The screen would then change to a different functionality for each application when they're switched between active and non-active and depending on whether you’re play games or chatting with friends. I think the next one would be a multi-touch Macbook cover that let you do things without opening the laptop. That would be a nice crossover to bring some tablet functions to a laptop. If I want to play music with my Macbook I may not need to open it.

And Apple is getting close to offering cloud-based movie streaming,working with Hollywood studios to get movies streaming through iTunes. LA Times this week said that Apple was hoping to get that service off the ground by the end of this year, or early next year. Apple now streams TV shows and movie to devices like the Apple TV, but Apple TV has small penetration. This would add that feature to purchased content, and widen the range of devices that could stream and most importantly iPads.

Functionality available through the input device is something worth exploring. When we do research work on how devices (or tools) from both an anthropological and design perspectives evolve and how they shape our everyday interactions, we see emerging complex cultural artifacts that connect different kinds of social and cultural practices.

The increasing emerging interactions and sociability makes the behavior hard to research using conventional research approach. The three main central affordances of the personal technologies for social actions are 1/the very personal nature of these devices (at least more so in the west) and getting more personal with increasing access to critical information and 2/ the idea of anytime anywhere always on, everyone and always connected 3/ the sensing and reacting capability of future devices. Like many I carry my Blackberries around in the office, at home and everywhere I go. Many of us are tied to our iPhone/iPad/Android phones/Blackberries and must carry a functioning smart phone at all times. For our research, we focus on how multitouch can interact with geospatial information and on how other modalities can be combined to enrich the interaction with spatial differences. We have a lot of very interesting findings. I may share some here next week.

Thank You Steve! Let's Type This On Our Touchscreens "We Will Miss You Steve Jobs."

It is a very very day with the news that Steve Jobs, who has died aged 56 following a long battle with pancreatic cancer. The world has lost a visionary, not only he made an unprecedented impact not only on the world of computing and consumer electronics with insanely great products that inspired a generation of people to dream big and be different, he has also reinvented management by building and rebuilding one of the greatest companies on earth. His creative and innovative spirit and remarkable accomplishments will forever be remembered by all of us.

Steve was the most creative person on earth in business I’ve known of. His creative spirit will inspire many for decades to come. You wonder what’s makes Steve so creative? And what is creativity anway? How creativity happens? How do we prepare ourselves for creativity? Do you have to be a whole-brain thinker? Or you only need to be a rightbrainer? Are there many more young Steve Jobs out there?

Creative individuals have a few distinctive features that distinguish them from their peers: They have a rich body of domain-relevant knowledge and well-developed skills, also they find their work intrinsically motivating (Simonton 2000; Amabile 1988). They tend to be independent, unconventional, and more risk-taking, and to have wide interests and a greater openness to new experiences (Simonton 2000). Steve met all those criteria and was a perfect archetype of a super creative person.

Creative individuals also tend to have a strong “discovery” orientation, which leads them to look at situations from different perspectives at the same time, to frame problems differently, and to ask novel questions. Some academics and creative managers like to describe creativity as a process, I belong to the school of Vinacke that believes creative thinking in the arts does not follow a model or any models. Ask any top creative talent, see if they follow a process. I never like the idea to reduce creativity to a five staged process. It is simply not creative to do so.

The best creativity comes from managed chaos and applied fuzzy logic. It is never about careful calculations and you simply cannot engineer lucky accidents. It is also about committment to make change, it is a powerful motivator for creative people. Design Thinking helps organization to improve its creative and imagination capability, but it is not a creative process. Creativity has no process. Don’t waste your money on any books. Just read Steve Jobs’ story.

Steven Paul Jobs, management guru, creative visionary, businessman, born 24 February 1955; died 5 October 2011.

Does Management Needs Creativity? Is It A Gift Of God Or Product Of Preparation, Practice And Training?

This has been a very crazy week between meetings, conference calls with London, Mexico City, Shanghai, Seoul and Paris, magazine deadline and cover shoot, staff party, a number of other social events, and London Business School's worldwide alumni celebration took place last Thur in over 80 cities, and it was great to catch up with many familiar faces.

The next issue of M/I/S/C is the big "Creativity" issue - the magazine is doing so well and it is putting some pressure to keep up the quality. I started them magazine in a few weeks and operate it on a "zero planning" basis - meaning I do not have an editorial calendar, or editorial meetings and everything is sponstaneous. Scary thought for some. I was wondering what should I do about the cover last Monday. Decided to use a dancer instead of a model for the cover on Tuesday. Picked up the phone and called a dance school the same day and talked to Karen Duplise of Ryerson Theatre School (Performance Dance Degree Program) and went in for a quick casting the next day. Studio booked and shooting session scheduled on Thurs. Friday was for picture selection. I am pretty happy with it. You have to wait 10 weeks to see the next cover. Here's a peek.

Dance is like design, the question is always about how much art (the craft) and how much creativity. Celebrity choreographer Twyla Tharp choreographed Push Comes To Shove (1976) which featured Mikhail Baryshnikov and is now thought to be the best example of the crossover ballet. The crossover was a perfect example of creativity in a highly disciplined art. 

Tharp has written a book about creativity - The Creative Habit: Learn It and Use It for Life.  In the book she shared what she has learned about creativity and how those lessons apply to anyone with creative impulses. She believes that creativity is not a gift from the gods, but rather the product of preparation and effort. Some truth here but not sure I torally agreed with that.

 

Like to share a reprint of my interview with London Business School Alum News on new thinking that is crucial to innovation, first apprared in LBS Alumni News and then LBS IMPACT.

What do you see as your impact on the world? My LBS degree was my second graduate business degree. I was able to have the luxury to put more focus on the quality of the learning in one specific subject area rather than multiple foundation components. I was excited about learning from inspiring teachers such as Sumantra Ghoshal, Tom Stopford, Jules Goddard and many others. They inspired me to think about deep management and leadership and helped me to realise the difference between good managerial practices influenced by bad management theories and good management theories applied through bad managerial practices.

Business and government leaders are experiencing a profound crisis of trust and even legitimacy and that has triggered a loss of confidence in traditional ways of ‘managing’. The very core of many management theories is being questioned and ‘management’ is close to, if not passed, the point of failure. My mission is to help Fortune 500 companies make sense of what’s going on and to rethink, re-imagine and reorganise for a future of unprecedented uncertainties and opportunities through applied design thinking. I operate at the intersection of design thinking, competitive strategy and organisational change.

What indelible mark do you want to leave on the world? As a side project, I publish a design thinking and innovation magazine called M/I/S/C/ (Movement/Intuition/Structure/Complexity), the idea came to me when I was in Milan trying to decide what magazine I wanted to read on the plane. I really wanted one about innovation and change but the ones on the shelf were not hitting the mark. So I decided to start one. It is doing amazingly well selling in over 22 countries. Now we’re doing a Spanish edition as well as an iPad edition. I hope it can take on a life of its own and leave a mark by inspiring future managers and business thinkers.

What is the greatest lesson you’ve learnt? I learnt that it is very important to embrace failure. I should have failed more and more often when I was younger. But unfortunately people did not encourage ‘embracing Failure’. I didn’t take many risks and I played it very safe with every project I started. I did everything I could to make it work because failure was seen something that holds you back. I know now that you learn more when you fail often. Trying to avoid failure only prevents growth but once you alleviate that fear many more opportunities present themselves to you. Slowly, ‘failure’ is starting to gain acceptance and it will make future professionals much stronger and wiser.

What was your biggest mistake? Not listening to my intuition. It’s difficult to trust yourself when everyone and everything around you is telling you something different. Trusting your gut is one of the most important things you can learn. Also, not leveraging the opportunities that come with any crisis. Every situation presents obstacles but also opportunities – you just have to look for them.

What is the next step for you? I’m very excited about helping companies power into the future through design thinking. It is the reason I go to work (or the airport) every morning. Our company started as an experiment and is now fast becoming the most talked about innovation firm. The next step is to secure a global presence and build the next generation of leaders that will propel our growth. The future is exciting.

Innovation Is A Discipline Like Marketing And Finance. It Needs To Be Designed, Managed And Optimized.

I am writing about a few articles on creativity for the next issue of M/I/S/C The Creativity Issue. The editorial deadline is this week so I am now selecting the pieces that goes into this issue and art directing the design. I am still not sure what to do with the cover yet, I have a few days to think about it. May be 2 or 3. Busy week with cocktail paties and b-school alum events. Here are pictures of IC end of summer party, but arn't we just a week away from end of fall?

Creativity is an easy subject to write about but also a difficult one. Creativity is too heavily linked to novelty rather than purposeful creativity that powers up innovation and create positive and sometimes disruptive change. I am looking forward to finish writing this and move on to my day job – which is helping clients with design thinking tools, frameworks, processes and organizational design to make innovation a discipline.

The key difference between creativity and innovation is that while any idea can be an expression of creativity, it must create both customer value and economic value, and preferably social value, for it to be considered innovation. Innovation is a discipline. It is not a group of people pumping out ideas (which is the easy part); innovation is essentially the application of high creativity, applied across different disciplines from product design to marketing and channel strategy.

How can innovation be turned into a discipline? It is the discipline of getting deep customer insight;the discipline of sense making from different data sources; the discipline of managing ideas along the innovation life cycle; the discipline of capturing the imagination of customers and employees; and the discipline of managing internal resistance and stakeholder expectations.

The discipline needs to crossover with strategy, marketing, insight and product development in order to create breakthrough ideas, to fuel growth, to completely transform the ways that companies are managing themselves on the front end and the back end of their processes.

There is an interesting event Optimizing Innovation 2011 (3rd Annual Cross-Industry Event) to be held in New York City, Oct 19th and 20th. A very interesting speaker list includes Fabienne Jacquet (Director, External Innovation Global Technology at Colgate Palmolive), Pascal Mignolet (International Marketing/Intelligence Director Coffee & Tea at Sara Lee),Jorge Carbo (Senior Innovation/Project Director at Nike), Dondeena Bradley (VP, Global Design & Development at Pepsico) and Hannes Erler (VP Innovation at Swarovksi). It is a great opportunity to get to learn the secrets of success from the most experienced innovators so to put these ideas into practices. See you there.

Apple: A Rare Case Of Successfully Building A Truly Sustainable Compeitive Advantage. It Is Definitely Worth The Current Valuation Premium.

Here's the cover model for the coming issue of my M/I/S/C magazine. We shot the cover in London and here is a picture of her taking a picture of me. The concept seems surrealistic. The next M/I/S/C Design Thinking and Customer Experience Issue will be in book stores Sept in the US and a bit later in Europe and Asia/Australia. Now I am working on the Dec issue which is Design Thinking and Creativity. I am thinking of who to invite to write for this issue. BTW this is a picture below of Idea Couture's latest window display. I am liking it.

If you've just upgraded your iPhone you will not be happy if Apple is bringing out a new one in a few short months. In addition to launching both iPhone 5 and iOS 5, there will be the new iTunes 11 bought to you from the Cloud.

Expect a very clean design and iCloud will be closely integrated with iTunes. iTunes Store is actually turning into a browser (funny without we seeing it that way) and it will actually be integrated into the entire app. Your music will be backed up by the Cloud and everything will be fully synced.

It is harder and harder to beat Apple with its deep integration between apps, OS and devices. It is reported that iCloud will be offered for free initially, and at some point users will be charged $25 annually for subscription of the service. That’s another way to get another recurring revenue stream just like MobileMe service.

Apple has finally locked-in deals with big record labels Warner, EMI, Sony, and Universal. With 30% of revenue from iCloud’s music offering with the major lablels, 12% with those holding the songwriting rights, and the remaining 58% for Apple to keep. That’s a good profit margin. Not only it is helping with the bottom line, it is further stenghtening the Apple fortress with all these integration.

Apple is building a fortress around its suite of product/services/experiences and it is almost impossible to break that. It is not only around music and devices. They have just filed a patent application that an iProjector that I believe is in the making. It makes perfect sense, a minisize slim projector that sells for $600 to $1,000 and most of them have problems with setting up. And you thought it should be easy. I will not think for a second of getting one if it is fully integrated with my MacBook or iPhone or iPad. With interactive presentations and sharable contents between devices.... and not to mention a really good looking Apple design.

The patent application "Projected display shared workspaces" was filed in February 2010 and it is basically a system for taking what's on screen and projecting it onto a nearby surface such as a wall etc. The true innovation is that about the system proposed in this filing is that it can combine projections from multiple devices into one screen, in what's dubbed the "shared workspace." So you can simultaneously show power point from your computer, a video from your iPhone and notes from your iPad. No switching between apps anymore. Called it a “presentation canvas”?

Apple’s horizontal integration strategy across devices and channels and vertical integration strategy from chip design to software and retail is creating a truly sustainable competitive advantage that is hard to replicate. For that reason alone, its valuation skyrocketed. This is a brilliant example of classic business strategy theory at work.

Every single Apple products complement (compete) and complete each other. Get an iPod, and you can download content via iTunes and access them trhough iCloud and use that to move content to iPad or other devices. The sort of control over the entire user experience or process, from hardware to software, strengthens customer loyalty and provide lock-in. You cannot leave Apple once you’re in. It is becoming the consumer equivalent of IBM for business.

'Purpose' Can Consciously And Authentically Infuse Workplace With Positive Emotive Energy Beyond Money Can Buy. There Is No Strategy Wihout 'Purpose'.

Teaching and practicing strategy is what I love. Strategy or strategic innovation is like a chess game except the chessboard keeps morphing into different shapes and there are always players entering and leaving the game. My experience is that it is subject that is undertaught in business schools and least understood in the business world. It seems like my students at CEDIM Master of Innovation Program are all having a good time. And I got a bottle of Tequila from Carolos and Michael. You need that to teach innovation I supposed.

First you cannot separate strategy from strategic innovation, competitive strategy can sustain you but cannot leapfrog others. Second strategy has a soft side, such as the putting ‘Purpose’ into the strategy equation. You cannot differentiate around something that you don’t have a heart for it.

Finding differentiation is hard enough, making sure it is relevant and sustainable is even more difficult. Putting ‘Purpose’ into it is the most difficult, you simply can’t fake it. When it comes to strategy implementation, purpose is even more important. Often you will have to make very difficult economic trade offs, without that, you will simply make those decisions based on short term economic benefits.

If Zappos did that, they would not have offered one year return policy or have their call center in India instead of Las Vegas. These all add up to the happiness indexes of Zappos which is the core of its strategy. Strategy implementation is also iterative, a process inducing various forms of individual and organizational learning, because both external threats and strategic responses are shaping these decisions on an everyday basis.

What every organization needs to achieve enduring success and power up true differentiation is ‘Purpose’. It is critical and can break the most robust strategy if there is a lack of one. It is not a mission statement or something that hangs on the wall. It is core reason for people to come to work and to mobilize all managers and employees to act consistently, responsibly and decisively. It triggers innovative thinking and trustful working relationships.

‘Purpose’ can consciously and authentically infuse workplace with positive emotive energy can impact every aspect of performance. It is the heart and soul of strategy.

Strategic Innovation And The Quest For Breakthrough Ideas

Innovation is now a very hot topic at the C-Suites. I have speaking a lot on the subect the last 5 years. The funny part is I am talking about Strategic Innovation and many still talk about Technology Innovation as if it was the sole source of innovation. People are very interested in my interpretation of Build-to-Last and the idea of Build-to-Fail-Fast. (Photos by Anddres Ahues)

Every large companies is thinking about it and most have little idea how to integrate that with the organization’s strategic intent; how to make it work within certain organizational structure; how to decide which project to fund; how to create a balance between reenergizing the core and attaching white space; what types of people to staff the innovation function; or simply what capabilities gap are needed to fill.

We just finished a comprehensive study of 42 top companies across 5 industries to understand what challenges and barriers that exist as well as little success stories. Generally speaking there are less success stories as we dig deeper but it is fine since they are at the early stage of the learning curve. We codified the knowledge in lessons learned as well design and implementation options as well as capabilities gap and how to fill them. It is not a 50,000 ft view but a very pragmatic understand of the situations and every company can learn from it.

The most common mistakes fell within the following:

• Focus too much on break-though ideas or staying too close to the core
• Not focus enough on creating break-through ideas and results in only incremental ideas
• Using existing (advertising and market research) vendors and infrastructures as well as toolkits that are not designed for innovation but apply them anyway and not getting the results desired.
• Fail to articulate the core purpose of innovation and how it is driven by the strategic intent and value creation
• Totally don’t understand the concept of ‘whitespace mapping’ let along the sense-making process behind it, and just called it ‘brainstorming’
• Fail to create a space that allow people to play and experiment and fail safely. A physical space that people with shared interest to play with ideas.

The idea of an innovation space is a good one. Even Microsoft has a space called Garage, a place opened last week that gives their staff access to tools such as a soldering bench, a laser cutter and a 3D printer to make prototypes and connect people with shared interest.

The Garage is in one of the oldest Microsoft buildings in campus but lots of windows. They filled the building with new "pods," basically temporary work spaces where teams of 2-6 employees can set up shop to collaborate on projects for a couple of weeks.

It is an attempt to create a safe place to fail. Fail as much as you like that and you wont get demerit points. Like all large companies, any good idea can get lost quickly because the initial market size is too small or it is threat to the core. Every company should explore having a space like this. Or they can house them in one of our offices that are even better.

The New Game Of Strategy: Applied Design Thinking In Business Innovation And Transformation

Just when I thought I can have 2 days in an office then I realized I have to be In NYC tomorrow for a few days. I am writing this post on a flight after missing my connection in Houston, and just finished teaching a three days Strategy graduate course with a focus on strategic innovation and design thinking. What I did was bringing the Harvard Business School case study method of teaching and apply it to design thinking and innovation, it is really interesting and probably an innovation itself because innovation means going against the conventional analytical thinking.

The shift from teaching competitive strategy to strategic innovation changes how the case studies were originally written for. I am using the same teaching material but instead applying atotally different pedagogical focus – which is how to avoid the very obvious and how to develop and apply ‘New Game’ in strategy making. It was intense for the students but they were liking it. I theorize, practice and teach these concepts and so for me, it is not academic, it is real.

Strategy is never that simple as picking the right competitive positioning, segments or competing on different dimensions. It is often complicated because it involves changing of mindset and mental models – mindsets that inspire individuals and teams to think imaginatively, to take risks, to seek out, and to expand the boundaries of a business or redefining customer value. It is hard.

Then there are structural, systems and processes for sharing of ideas, sense-making of data and working together. This includes developing new perspectives and collaborate on ‘white space mapping’ which was never taught at business schools. The very nature of competitive advantaged has changed and I challenged anyone who tell me if they really have a real and relevant competitive advantage that they thought they have.

The information revolution continues and is enabling companies to easily (and sometimes cheaply) match current competitive differentiators and rapidly create new ones. The result is that competitive advantage is evolving from simply focusing on differentiation, low cost or focus. The idea is to do all, the stuck in the middle can be a desirable position if you understand the underlying economic forces. Most business school students and even professors hardly understand how to apply the Five-Forces properly and let alone adapting it to a very different business environment where speed, empathy and community become key strategic elements in addition to bargaining powers and competitive dynamics. We need a new framework that takes into consideration the use of community in business strategy development. I’ve used cases including Method, Microsoft X-Box, Loco Motor and a few others to illustrate the concepts.

I think I should start developing teaching notes based on the original case study but with a different teaching emphasis. Classic views on strategy include Joseph Schumpeter focuses attention on innovation and entrepreneurialism. He suggested that bigger the company the more resources and diversification one can bring to R&D and as a result get better return on innovation. Michael Porter, following Alfred Chandler, focuses attention on business organization and competitive strategy and introduces the concept of cluster to explain competitiveness.

Today’s the nature of strategy and competitive advantage is drastically shaped by strategic innovation -- powered by customer co-creation; desire of consumer to change the status quo and powerful social innovation networks; integrates customer deep into business organization; demand chain into supply chain and contrasts inter-firm relations in terms of market, and closed or semi-closed and open-networks.

The attempt to develop competitive advantage is only the first step. It is sustaining the advantage that is far more challenging. How often companies invested millions and millions of dollars to create barriers for entry only to find out they lasted only for a short a few months. Waking up one morning seeing that your industry value chain was being reconfigured and the expiry date of your business model was last week is not exactly a fun thing. If you find that every six months you have to innovate on something the market will embrace is too exhausting, it is time to embrace design thinking.

The Economics of Co-Creation. Can What Happened To Microbrewery Happens To The Auto Industry?

A lot of talk and interest around the concept of co-creation. It is no question that this is going to have asting implications of how products and experiences are designed, developed and marketed. In 3-5 years, customer co-creation will be the part the norm of everyday business. Much like early days of ecommerce when people struggled with the legal, technical, operational issues. Slowly these issues will work their way out and we would look back and say “that’s simple…. makes perfect sese.”

What’s a great example of co-creation? Let’s first try to define it here as sometimes people refers it to anything from idea crowd-sourcing to technical expert groups to simple product/service/marketing customization. One good example of real co-creation is a company called Loco Motor.

I met Jay Rogers (founder and CEO) at the PDMA Co-creation Conference when I was moderating a panel. He was hosting the event and I was extremely impressed with what he is trying to do and has achieved to date. It is the first co-creative automobile design and purchase experience in the world. Just as the auto industry is dying for new ideas and change and Detroit needs a new strategy and it is more than making a better car. There are many structural issues to deal with and it is complicated. Jay is attempting to disrupt the auto industry by using co-creation as the strategic core.

The people in the car industry that have tried to innovate in the last 100 years and mostly fail, what makes him think he has a chance? Perhaps Detroit should concentrate on redesigning the business model and the whole experience before redesigning cars.

The first product Rally Fighter sells for just under $60,000. It’s an incredible car that looks like a life size HotWheel and gives me fond memory of my childhood. Remember the Hot Wheels yellow track?

The Rally Fighter is designed by the online community and ismanufacture at the microfactory in Phoenix, Arizona with a sustainable and highly efficient process. Jay wanted to build cars all his life, after raising $10 million seed capital, he launched the company with a simple idea that is extremely difficult to pull off. Loco Motors hosts a passionate online group of car-lovers or fanatics who compete to design vehicles for some regional communities in contests that run about once a month. The winning designs is then produced and sold to the communities.

There is more than to the flexible and customizable micro-factory, the concept here is when you give people tools, a strong community network with shared passion, some inspiration, small incentive you are in game. In fact, he is reinventing the customer co-creation experience for automotive. There are more than needs to be done in order to reinvent the economics of the industry. I think every business should look at Loco Motots and see what is relevant for their industries.

Will Loco Motors remains to be a niche business or eventually springing into a platform that supports a auto-cottage industries I don’t know. But we also need to think how we reduce traffic including rethinking local supplies network for certain products and cutting down unnecessary traffic.

An example is to look at how we replace pizza or UPS delivery with perhaps flying delivery drones – pizza right through to your windows. I am not sure if someone has thought about flying delivery drones man by 14 year old part-time students that doesn’t even have a driving license. The military drones can be converted to do the job. It is more realistic than flying personal transport, because in the event of an accident the worst is you don’t get your pizza. May be this is another idea of Jay, his Marine Corps background can be very useful. A central drone delivery operations theater that supports the nation’s takeout industry.

The Past You Can't See, The Future Is For You To Imagine and Shape. Welcome To The New 'Future' Issue of M/I/S/C Magazine.

Here’s the Jun issue of M/I/S/C which will be coming out in newsstand in a week. This will now be available in 22 countries outside of US, Canada and UK. We’re so happy with this issue and I always thinks the ‘Future’ idea is always an exciting one. As Terri Guillemets puts it “The past can't see you, but the future is listening.” I always find it fascinating when I see a magazine cover featuring something about the future – technology, economics, design or anything.

I have been speaking with many senior executives recently on future and strategic foresights. They were so excited when I showed them how we bring strategic foresights into their planning process and how we can show tangible futures.

Our strategic foresights approach is both rigor and unique and very tangible. It is the opposite of some dream up scenarios and random visions by armchair self-claimed futurist. Let me remember the future is not an end state. Tomorrow will someday be today, which will fade into yesterday. As our world moves through this unyielding passage of time, how people act in our world will determine just which of many possible futures we end up with and how our imaginations, actions and open-mindedness can shape a very different and more positive future. Given how little we know about it today.

What do we know about the future and what’s considered useful information to help us understand the future? The “easy” and only certain answer is simply that the future will be both dramatically different and yet pretty similar. Not only we don’t know about the future, we know how little we know about the human mind and human behavior. As the proverb says: “Every 100 years, all new people.” Now every 20 years I suppose.

This new issues you will no longer find me writing every single piece of the content, I have invited numerous contributors that enriched the content but without losing a voice. This issue we are also featuring a number of Royal College of Art / Imperial College graduate students and their work-in-progress as well as a number of future oriented innovative ideas from the MIT Global Challenge all are working towards solving some of the world’s most wicked problems. For the special feature, I will let you find out yourself, it is a piece that I collaborated with Mat Lincez and Ricky Thomas which I hope you will like.

I am in London the next two weeks and will be working on a client’s site but thinking about the next issue - the “Customer Experience” issue. I have no ideas what I want to do exactly on this one. I think I will figure out in the course of the next few days or hours. And for the cover, will be casting for a cover girl and shoot the next cover in London next week.