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.

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.

Creativity And Innovation In Small And Medium Size Firms

I am in Egypt this week and trying to finish three big Power Point decks, writing 6 documents and finished reading 63 documents with a slow Internet connection. And trying to finalize the editorial content for March 2012 issue of my magazine. It is not easy.

The December issue of M/I/S/C/ is the big "Creativity" issue. It will be out in 25 countries in the second or third week of Dec. This is thickest issue so far  and will also available on iPad. I like the idea of "Creativity" as a magazine theme but also wanted to make sure they are relevant to business and not just pure creativity.

People often ask what is creativity? How does it happen? How do we prepare ourselves for it? Or can you be prepared for it? Do you have to be a whole-brain thinker, or do you only need the right side of your brain? Does it require for other profession that are usually not associated with creativity too? There is no simple answer.

Creative individuals have a few features that distinguish them from their peers. First, they possess both a rich body of domain-relevant knowledge and with well-developed skills to express them through different medium. And second, they find their work intrinsically motivating and enjoy the creative process not only interested in the outcome.

Creative people also tend to have a “discovery” orientation, which leads them to view situations from different perspectives, to find problems, and to ask novel questions and to avoid group-think. Almost every entrepreneur/start-up person is a creative person at heart, because it requires a lot of creativity to start and manage a new business (with the exception of franchise business). It is harder to find creativity in large firms not because there are not enough creative people, but the organization design and business processes make it almost impossible to be creative. And for them, creativity means finding ways to work around the system but not creating new ways to meet customer needs.

For that reason, many believe that small firms are more creative and innovative than larger firms. Not only they are more creative, they are more agile and nimble. But what about mid-size firm? There are companies that are too small to be big and too big to be small?

Medium size companies tend to lack resources and expertise whereas larger firms tend to have more resources and knowledge (including hiring consultants) but more vulnerable to external shock and any radical change. People think the sheer availability of resources means larger firms should be able to innovate along product, channel, process, and paradigm more effectively. That's not true at all. Any large established businesses carry their own old mental models and operational legacies make them hard to adjust to any changes - in particularly new ideas that cannibalize their core businesses.


I am not saying it is easier for small firms to innovate, it is not for the lack of creativity. Small medium companies tend to suffer a lack of knowledge cross-pollination and carry a higher degrees of path dependency. There are basically three strategies for innovation for small and medium size firms:

1. Advancing creativity and technological competitiveness based on new processes to deliver better products
2. Advancing technological and design creativity to design innovative new products
3. Advancing creativity and design thinking to turn products into experiences

Generally these three distinct models identify three trajectories for innovation that are largely separate from one another, although some complementarities exists. Medium size firms often suffer due to a lack of strategy or expertise to develop a robust strategy.  Their innovation in processes are often the results of the need to search for greater flexibility and minimize resource requirement. The high performance small and medium enterprises are usually the results of access to strategic advice combined their speed and agility in execution.

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.

Idea Couture's Planned IPO Is Now Official.

Newswire - Idea Couture's planned $150 million initial public offering is being greeted favorably on Wall Street and could help buoy the stocks of other innovation consulting and services firms, according to industry watchers.

"Stock prices in this sector were up fairly dramatically today, and I think it's primarily related to the news of the Idea Couture filing," says an analyst with S.S.D.D., an investment advisory firm in San Francisco.

“As Idea Couture goes public, it will remind investors that this is still an early stage in the development of this type of firms within the consulting service industry and the firm has created a lot of value over the last four years,” he adds. "What this has done is reinvigorate interest in the sector."

The announcement had been widely anticipated, and there were rumours that Idea Couture will merge with Fahrenheit 212 before filing an IPO. Both firms were considered top players in the space and together becomes the market leader. An attempt to contact the CEO of Fahrenheit 212 but they did not return calls.

Insiders says the IPO will give Idea Couture stock currency with which to do deals and build up its innovation organization design business, making the innovation consulting firm more of a competitor to more traditional consulting firms such as Monitor or IBM (NYSE:IBM) Global Services.

The timing of Idea Couture's offering remains uncertain. The innovation firm could wait later in the year in hopes of riding an upturn in the market. The market is anticipating a successful offering that pave the way for further acquisition as the company continues its international expansion.

Happy April 1st. Now let’s get back to work. Stop dreaming.

Powerful And Affordable Real Time Data Mining, Visualization And Interactions Are Powering Up A New Culture Act - And Enabling "Infovation".

Just landed in Rhode Island and spendin the next 2 days in Providence, long working sessions ahead, expect to some productive knowledge exchange. The topic will be around where arts meets science, design meets technology.

We talk about how information changes our life and how it affect the way we make decisions both as individual and as a team or society, I think we are still unaware of the true power of change information visualization can have and the impact when applied in an interactive and social mobile settings.

Imagine a scenario everytime a politician suggests an idea and you can see realtime information in simple graphics visual data to confirm his/her coment or when a company makes a statment you can see how other respond with an instant trust index? That's a very likely future, an idea which I am working on. Can't say more.

And I don’t mean just data visualization such as bar chart and 3D chart etc, primarily it is the study and application of the visual representation of quantitative data, meaning "information which has been abstracted in some schematic form, including attributes or variables for the units of information."

Infodesign of infographics is actually different (it is like when I was trying to explain the differencne between customer experience and user experience/usabiity 10 years ago) from data visulaization. Information graphics (or so called infographics) instead of visualizing data, it is the strategic use of data by incorporating interactions, icons, charts, diagrams, graphs, tables and maps to present information that could bring new knowledge and sense making. Not only it helps to explain oterhwise difficult to understand data, but also illuminate and explain system complexities or system relationships in an easy to digest manner.

This is not new, in our human history our ancestors created cave murals and giant paintings to show us what was happening including what their understand of the the world, an event or even the universe. The power of infodesign lies in its effectiveness in simplifying complex data into understandable visual representations that can be universally interpreted.

The power of real time interactions with live data brings the potential to a whole new level. The human minds are real time computing machines that works to constantly changing and creating value and meaning of objects; the interactions between human brain and semiotics is conducted every time we see a visual representation of a scenario and makes possible of expanding our human cognition to absorb large amounts of data at just one single glance or click.

Here comes the most interesting part, infodesign is powering up an “infoculture” where massive real-time socailly digitally distributed (useful and useless) information is enabling a new form of cultural act. It is where science meets arts, and will continue to power up new possibilities as we learn how to use them. I will be the first one here to call it “Infovation.” Remember you hear it here first. Will write more about it next few days.

One more thing, how many schools out there actually teaches information design? Not many. We are still training people yesterday's skills for yesterday's job. No wonder it is hard for designers to find work. I think design schools should be paying for the continuous education of their graduates, becasue they never trained them enough or properly in the first place.

In 2012, Facebook Will Give New Meanings To 'Social Services' And Will Pass Yahoo In Revenue And A Key Player In Mobile Space.

A week away from Christmas and we're not slowing down yet. Still plenty of things going on and I plan to spend the next 5 days in the office (a first in a year). This is the time I usually make predictions and I am working on a long one to share with our clients. Give you some ideas of what I am looking at:

At the end of 2012, there is the mass push to the clouds and consolidation will happen and India will probably own 25% of the world’s market. Not finished with my spreadsheet models, 25% is close.

At the end of 2012, the idea pf 'customer engagement' will finally emerge as a disciline that sits on top of all CRM, direct marketing, brand activiation or social media marketing activities. Big agencies continue to struggle as they are far behind the curve.

At the end of 2012, social innocation will hit a new high as corporations come to realization that CSR needs to be more than just corporate public relations. It is about issues management, stakeholders dialogue and social empowerment through emerging technologies and interactions design. True experts will emerge to help corporations to navigate this landscape.

At the end of 2012, Yahoo will not exist as a public company and will reach the end of a slow death; its valuation would dropped drastically and ultimately get acquired. The shareholder value destroyed over the next 18 months will be significant and they wish they’d sold it earlier.

By the end of 2012, smart phones/pads will significantly take away from PCs as the most common Web access device globally both from consumer device sales and usage.

By the end of 2012, someone will figurte out how to use iPad as a platform for education. It is a school for everyone and everywhere. Earn your credits or even degree with just your iPad. And free iTunes music for high score students?

By the end of 2012, Facebook will be a key player in the mobile space. What’s the big idea? They will have a platform that includes hundreds of standalone cross-platform applications for iPhone, Android and Blackberries. They would provide mobile developers with tools and support to create and push new 'social' apps.

Today Facebook generates only a little less than $3 per user per year in revenues while Google generates about $25 per user per year (more than $25 billion in revenue from about 1 billion users). Facebook has plenty of rooms to rethink and create new “media” space to capture some of that money. Facebook targeting potential is more attractive and it is an always on for many user (including me) already, it is far better than TVs.

But the bigger disruption is outside the 'media' space; it is payment and shopping – FB social shopping and payment mechanism. Imagine if they plug in product targeting (with what they know about you) and allow users (to be categorized as searchers/opinion shapers/advocates) to use some form of Facebook money to pay for it. Do the math here: FB Shopping + FB Mobile + FB Money.

Facebook will give new meanings to 'social services' and create new shareholder value. Facebook’s value (currently privately held valued between $35-$50 billion) would surely surpass Yahoo’s (publicly held current valued at $21 billion with operating margin at 12%) revenue by end of 2012 and Facebook can get a margin of 37%, multiply that by a moderate 14X P/E and you get a sense of what’s Facebook worth.

If you're interested in trends and forecast, here's a company TrendHunter that produced a good general trend reports and used by many firms. Will provide a review of some of the themes in the next two weeks.

What Designers And Design Thinkers Can Learn From Complex Adaptive Systems?

Early 1995, I was obsessed with the new science of complexity and have spent a lot of time on cellula automata and was looking for new clues to illuminate strategy making when emerging technologies were causing uncertainties in the world of business. I questioned the relevance as well as applicability of many social science theories and economic theories in understanding the nature of change bought by complex systems.

Complexity science seems to shed some lights on the behaviors of network effects of people/computers, immune systems and termite colonies. I was intrigued by what I was seeing and ended up writing a book on its complexity theories and business strategy. It helps to explain the role of network influences and behavior, connections and interactions. Fascinating to the business applications of concepts of emerging orders, self-organizing, nonlinearit, I realize the value of pattern recognition, difference between the whole and the mere sum of the parts, the value of outliers and diversity, and the way some very small inputs can lead to big changes.

15 years later, now when I revisit the ideas, these concepts seem to make more sense as we see with what’s doing on around us. It is important to understand that this science is not a single theory or a theory of everything. It is a lose combination of different ideas, theories and concepts from a variety of disciplines--biology, anthropology, economy, sociology, management that together helps explain complex adaptive system.

What does it mean for designers and design thinkers? The new science (or art) helps us to understand how complex adaptive systems work the patterns of relationships within them, how they are sustained, how they self-organize and how outcomes emerge. It is highly relevant when we are dealing with introducing a highly innovative products/technologies to the market where different elements interact to create a new behavior. Until they use the products, it is hard to see how it will be actually used rather than what was envisioned. It invites us to examine the unpredictable, disorderly and unstable aspects of organizations and human behavior.

Think social media and think sustainability. Think how activities at a local level can shape individual change and activate organizational capacities of communities and ultimate affect structural change. If Blockbuster understands these ideas, they might have a good chance of not letting Netflex eats their lunch. If GM understands these ideas, the might have come up with a new business model. If Visa understands these ideas, their market cap could be doubled from the current market valuation. If LG understands this, they can create the next tablet that beats iPad.

Corporations Should Create A New Role: 'Chief Social Engineer' Accountable For The Company Second Or Third Bottom Line.

Very crazy weeks with 8 key projects in critical phases and we're excited on every one of them. MIT Global Challenge is one of my favourite since day one as it is a great idea to bring the brighest minds of MIT alumnis to solve the world's wicked problems. There are no shortage of wicked problems, while we try to solve one, new ones are being created. And I think B-schools need to follow what MIT is doing. I think the true impact is how the MIT Global Challenge will inspire young students and aware of what challenges we are dealing with and true power of communities and purposes. B-schools need to start breeding a different generation of humanitic capitalists and not the old school i-bankers, we don't need more.

Another exciting one is Aviva Change Fund. The last one was a runaway success and this year we expect the same. Great client of ours that truly understand the how the world has changed and it takes real action to build an authentic brand. Building great brands and creating positive change is not mutually exclusive. And there is Recyclebank which we have a dedicated team working day and night for some really exciting change. And there is the Adopt a School project which has jsut come to an end with some fantastic results. 26,960 books raised for children in high-need elementary schools, far exceeding our client Indigo's initial goal. Everyone at IC are so excited about these projects. More to come next month.

Over the years I’ve seen many large multinationals developed a cowboy mentality, where greed, ego and arrogrant aggressiveness took over and they were living on capitalism horsebacks, especially during a long interrupted post war boom. US-dominated international financial order has experienced a series of crises as its flaws manifested and we see one after another-big industries failing. In fact, the current world financial crisis has once again exposed the flaws of the US version of extreme capitalism (I am also a capitalist make no mistake) and it went to the extreme.

Management theories were mostly invented during those period based on assumptions that now seems outdated and some of them were flawed in the first place. Instead of thinking about how we can create more sustainable and humanistic societies, we pushed the other buttons to drive things to the extreme and the world is widely polarized.

Innovation did not happen in areas of how to make business models sustainable and how to develop human capital and social equality as a differentiating competitive advantage, instead money and creativity were spent on how to expand new profits by using "financial technology innovations" to develop financial derivatives and establish a man(not many women)-made "virtual financial world". That world is virtual but the damage is not.

Take the subprime mortgage credits as a perfect example. They were integrated, split and repackaged into a series of securities-like commodities, which were then sold throughout the world as new virtual financial products after being split and repackaged again and again by downstream retailers. These money machines did not add value to societies. They simply push risks to the mass, which have no idea of what’s going on. The focus on short-term profit over long-term client shareholder and social/environmental value and the lack of consideration for the global impact of their decisions is causing us the pain for a long time.

Large multinationals often profess to have a higher moral vision (at least according to the annual reports) and to be pursuing a world with laudable goals of sustainable economies and environment. On the other hand, it is convenient to ignore the socially destructive behavior of those economies that rely heavily on governmental regulations and state-operated monopolistic enterprises. These economies have incurred extreme rates of poverty, repressed human rights, and excessive or even unreversible environmental damage. I want to see large multinational corporations starting or incubating social enterprises just as they incubate technology start-ups through their venture funds.

They need to play in this sandbox to prepare for a sea change and apply their scale and structural advantage to see what a social enterprise can do. I don’t know when we can see a first multi-national social enterprise with certain scale and scope. May be a first publicly traded social enterprise. That will be next birthday wish. Or my next or last career move?

I suggest every large organization should create a role for a Chief Social Engineer similar to the role of a CMO or CFO, his or her job is to identify systemic problems within the social systems and structures and responsibility for the second bottom line or call it the third if you wish. Just as a CFO is responsible for the financial bottom line, the CSE will be responsible for measuring the positive social impact bottom line. And I am not talking about the fuzzy CSR thing; I am talking about hard-core metrics that show social economic impact. And that should be part of the market valuation.

The Chief Social Engineer’s job (not a PR role for sure) is to create innovative path- breaking new ways to address social problems that are aligned with the corporation business strategy. I will consider taking that that job if GE hires me as the CSE. Or they can outsource that role to our Idea Couture, that's even better.

Developing Communities Of Purposes Will Soon Become The Strategic Mission Of CEOs' Offices.

I was invited to speak to a group of busness incubators from all across US and Canada. My goal was to cut to the point to show them what is needed to qualify as a viable strategy for any start-up 1/ it must not be subject to the same economics as the dominant players, otherwise there is no reason the world needs another start-up. 2. it must answer to very specific customer unmet needs 3/ it must have a purpsoe. A strategy without a purpsoe is like a computer without an OS. I shared my 70 slides power point with them. Unfortunately not much time for interations as I needed to be back in the office.

Before you talk about game-chaning strategies, think what you propose to do would impact your busines model or the industry architecture? How you turn the strategic assets of big competitors into strategic liabilites and how to leverage your strategic agility so their scale advantage is disminishing. Large multinationals not only have challenges with their legacies, they also have a motivation and mobilization challenge. The cubicles and business processes are designed to reduce individual’s imagination to ‘zero’ and these incentives (bonus etc.) are hardly as powerful as other intrinsic motivation. Companies need a purpose or people won’t feel intrinsically motivated on the works that they perform beyond getting a pay check.

Communities of purpose are the business backbone of the 21st Century and this does not end with companies’ employees or suppliers, it also extends to customers. It has profound and far-reaching implications for how companies should be organized to benefit from how value is created and distributed. It makes many management theory looks outdated (and many are very outdated). Any start-up or large enterprise that can consistency maintain a community of purpose would unlock there the true potential of an organization. I think many social enterprises will have an advantage both in attracting talents and customers, and eventually capital markets.

And to clarify, when I say social enterprise I don’t mean just co-ops, or quasi non-profits, I mean privately owned companies with policies on corporate social responsibility as part of their business strategy. It is a particular type of business or value creating activity that sometimes gives rise to distinct organisation forms reflecting a commitment to a social cause working with stakeholders. It’s business objectives is still to mazimizse profits well still aligned with core values. Whereas conventional businesses distribute their profit among shareholders, in social enterprises the surplus (or a meaningful part of it) tends to go towards one or more social aims which the business has - for example education for the third world,women empwerment, environmental issues or for animal rights.

The question of what percentages of profits can be retained for future use? Or for redistrubution to shareholders?  Should they enjoy some kind of tax incentives? Can they be public? Can they acquire non-profit and turn them into for profit?  And do we need tp adapt a broader definition which is independent of any legal model. This latitudinarian definition could include not only companies limited by guarantee, and industrial and provident societies but also companies limited by shares, unincorporated associations, partnerships and sole traders. It is complicated.

What Blockbuster Should Be Watching Now? "Repo Man"? “Die Hard 4" ? May Be Just “A Series of Unfortunate Events”?

It is nice and sunny in SF. have 18 people to interview and 2 other business meetings. So Blockbuster is finally I have been expecting this for 6-7 years and it finally happened - Blockbuster filed for chapter 11. No surprise for many and it doesn’t take a business strategist to tell you no one is driving to a store and rent a DVD. It will cost about 20 shares of Blockbuster to rent one DVD if you do have the share certificates. If you return late you have to provide another 5 shares. May be you will never have any opportunity to return it at all, because the stores closed.

At least they tried to accelerate the death process. How?  An obsolete business model renting DVDs orchestrated an unsolicited $1 billion bid for then a near dealth computer and electronics retail chain. Blockbuster went after Richmond, Va.-based Circuit City in December 2007. There is no benefit of two dying together, other than savings on funeral cost.

How about movie downloading? Yes, they wee talking about a special movie download kiosk that can be placed in stores. But why do you have to go to a store to download? Something is very wrong here. These Blockbuster executives were not sleeping on the wheels, it was not the case that they didn’t see the threats or not acting at all, so what went wrong?

Their business model was under attack by technology innovation as well as low cost competition. $1 a DVD at Redbox or download it somewhere. Yes you can download popcorn, but you can stock a big box at home from Costco. Blockbuster did match its competitors and launched mail-order, Internet, kiosk, and cable distribution, that was a smart move but only when you have their overheads. Your competition did not have the legacies of carrying those hefty retail and operating expenses. Strategic assets suddenly became strategic liability. Cost wise, Blockbuster paid out on average 35-40%of its revenue to Hollywood and Netflix paid under 25% of revenue and Redbox paid even less 20%. How do you compete with them? That’s typical the challenge with established players.

Blockbuster acquired movie download service Movielink a while back, I am guessing it costs them south of 30 mil. Not bad since more than $100 mil was sunk into the company from some big studios building the company, so it was a bargain. Well, depends how you look at it. Movielink has a very broad library of movies, but heavily DRM’ed and the prices were not competitive.

Not only Blockbuster is underthreat, even cable and broadband companies that offer movies are not better. Consumers are all thinking and talking about cutting-the-cord with Netflix, Hulu, and Apple TV are pushing forward closer.

And for many young people, their laptop is their set up box. And the iPads of the world? That $65 to $100 monthly cable bill is looking less and less attractive to many, when Netflix mails discs and streams movies all for $9 a month. Cord-cutting is real and will accelerate particular for the 20-30 year old segments.

What’s the next episode for Blockbuster? The company hopes it can re-emerge a more streamlined entity capable of competing in a digital world. I don’t think they can just copy Netflix, they have to play a “new game” and do what Netflex did to them. Amazon, Google, Apple and some start-ups are all going to offer IP TV and not questions it's going to become ubiquitous. There will be plenty of shareholder value being created and destroyed. Ready for more innovation?

It Is Time That Google Needs A Reset. Now Facebook Places. Next Facebook Faces. Then Facebook Realtime Mobile Directory?

Here's Simon and Ashley as part of a team working on a social strategy for a very cool company. Part of the mission is to look at their competition and coopetition. In the world of business strategy and competition, friends can become enemies overnight. Google is definitely not happy with the idea that Facebook is sitting with 500 million users with 50% very active. What can they do?

Back in 2002, Google was competing with Overture and other search engine for shares. Overture was the search leader and was mining 3.2 billion pages, roughly 70 mm more pages than Google. Shortly Google climbed to 3.3 billion pages and continued to extend the gap. Soon after Overture bought the Web search assets of AltaVista and Fast Search and Transfer (including AlltheWeb), to compete with Google head on.. and the battle began...

Google won AOL business away from Overture; and Overture won Freeserve away from Google. We will be seeing the same battle all over again when this time Facebook is the rivalry? Google is the place to find anything and that is extending to places with Google Map and Street Views. “Local” is still hole in the Google world. Facebook Places is an innovation to fill that hole with a social-media twist. Facebook users can now "check in" to an existing list of nearby locations from their mobile phones or add new listings themselves, sharing that activity with their friends.

Facebook will potential become a platform for local business search listings, the same strategy that Google, Yelp, Foursquare, Gowalla, and a few others that are fighting to get local advertising dollars. Facebook Places is the latest example of how information access is empowering new behavior.

We don’t know if these behavior will become mainstream. It is not difficult to imagine that I will be able to use my Facebook app on my mobile device to find local business. I won’t have to open my laptop and Google a restaurant if I can just use my mobile device, with added comments and suggestions from my social networks. Facebook's decision to add location data to its product instanly creates a Google-scale competitor overnight. With so many businesses already have Facebook pages, it is easy to pay and extend that into Facebook local search. So pages + places = Yellow Pages + instance update on products + prices right in your pocket.

Today, 100 million people a month are using Google's Maps for Mobile product but it doesn’t mean much in terms of barriers for entry, at least not for Facebook. Google knows very little about me other than what I search but Facebook knows my friends, communities and what I am passionate about. Google needs a reset. Buy FB stock if it goes IPO.

What Game Theory Can Teach You About Online Dating? There Are Plenty Of Room For Innovation And Money To Be Made.

A few days on the beach is too much for me.  But perfect place to write my blog posts. Watching these love birds on the beach, I started to think about game theory and love. What advice an economist can provide for online dating service by applying game theories?

Finding a spouse is a game, a serious and sometimes high risks (high reward I hope) game. We are looking at different types of network behavior (the high demand princess, the career type, the girl next door and the appearance-over-substance-and-insecure type etc. We all kind of know how the game works, and some people are better at it.

A quick primer on game theory: Game theory is a branch of applied mathematics that is used in the social sciences, most notably in economics, as well as in evolutionary biology, engineering and military strategy. It attempts to mathematically capture behavior in strategic situations, or games, in which an individual's success in making choices depends on the choices of others, pretty much like chess game.

While initially developed to analyze competitions in which one individual does better at others expense (zero sum games), it has been expanded to treat a wide class of interactions. Imagine, an online dating service that only the super attractive can join? Or the super successful? Or dating only for virgins? Or lawyers dating lawyers? How niche we want to get? Using these examples, anyone looking for an opposite (or same sex) can exit once they find the right person.

Imagine a dating site for the super gorgeous and handsome. Every member’s preferences is based on looks, and therefore their payoffs are equal to how good looking their partners are. Although good looking is subjective, it is also quite objective compare to other factors. There are easy ways to use a software algorithm to identify what features are considered good looking plus information on weight and height.

In this game, everyone is looking for the best looking person and share the edge with the ideal partner who can maximize the rewards from such a relationship. Since everyone is attempting to maximize their rewards.

It would start with the most attractive woman or man finding the second most attractive partner and exiting the community with maximized rewards from both parties’ ends. Then the third most attractive person, seeing that the prospects of at picking the most attractive person or the second most attractive person, will settle with the fourth most attractive person in order to maximize rewards, and the thing continues on and on.

When people exit the system, the next most attractive pair will become the optimal choices in the community for each other. This model does present many problems, if you are not among the best looking; you simply have to wait for your turn. Other factor includes timing, if an attractive person enters the community at a particular time, it will change the order. You may be pushed back to the wait list. I will need a few hours to build a spreadsheet modeling out the different outcomes. I also need to add the factor of “desperateness” too. What if we are not talking about just appearances?

Let’s introduce another element- virginity. OK this real, a husband and wife team decided to create an online dating site only for virgins, called YouAndMeArePure.com, It primarily caters for virgins to meet other virgins (not sure what's the average age of their members). Imagine everyone there is a virgin, and then I wonder how age plays a key factor.

Unlike other dating site, you can always go back to the game if the matching doesn’t work out. In this case, you only have one chance. Because if you lose your virginity, you can no longer join this dating site. So technically, there is only one chance for both parties. This changes the game dynamics totally.

If we apply game theory to this business, the first and most attractive virgin will be gone quickly, but age may play a key role here. I am not sure a 45-year-old virgin, no matter how attractive, will get to the top of the list. So how does that change the game dynamics? This complicates the business rules. I need to spend the next few days on the beach to crack this one.

I don’t know exactly how the rules work since I am not a member. You obviously have to be a virgin to join, or you’ll have your membership evoked once you’ve lost your virginity. Not sure how they validates that. Yes you can buy gift certificates and V-Cards that ID your V-ness (or degree of V-ness) on the site. I am not sure if you regain your virginity through surgery counts (if you’re female). Or they are forgiving to those who lost their virginity by all kinds of accidents.

I am already spending too much time here; I should be applying my game theories to something more useful. Such as when Blackberry enters the table market how Apple should response. Enough talking about virgins.

What Is A Social Enterprise? There Is Still A Lot Of Debate?

Social enterprise is a hot idea. Being asocial entrepreneurship these days is way cooler than being a iBanker. I think we are only seeing the beginning of a long term trend, people realize it takes a new kind of enterprise to solve the world’s problem. And NGOs are not the solutions. Getting donations and acting as administrators are not adding enough value. They need to start thinking how to create value – here comes social enterprises.

We don't have a good definition of what is considered a social enterprise. Are they in the business of making money or a new kind of “non-profit?” Or “not-just-for-profit" company with a double or triple bottom-line? What’s the percentage of profit that they should retain in order to claim or to qualify as a social enterprise?

More questions: Who should be funding them and what is an acceptable rate of return? What kind of retained profit should they keep? Should they use the money to grow the business or given them out for social good (at the expense of the future growth of the enterprise)? What kind of social value must the enterprise create to be considered “social”? Is green considered “social”? Is healthcare in developed countries “social”?

Creating a start-up is hard enough? Creating a start-up with a social mission is harder? Creating a start-up that is profitable is not easy? And worrying about generating too much profit is an additional challenge. So what is the priority of a social enterprise? Should social enterprises be pushing for more efficiencies and economies of scale the same way as corporations do today? In that case, at what point it is at the expense of social good? All these questions warrant a lot of debates, no easy answers.

Social enterprises require creativity, passion, commitment and the right combination of investments and talents. I've seen a few interesting ideas from students' competition and here is one that I like.

MaloTraders: Founded by Temple University student Mohamed Ali Niang, MaloTraders' is in the business of  processing, storing, and marketing of rice for small-scale farmers in Mali. By making local production more competitive on the international market, MaloTrade is working to alleviate poverty. Malo Traders’ social mission is to alleviate poverty, combat food insecurity, and eradicate malnutrition in Mali.

They aim to accomplish their social mission by minimizing post-harvest losses of small-scale farmers utilizing modern technology, increasing profits of harvests by creating an efficient rice value chain, and fortifying rice with micronutrients such as vitamin A, iron, zinc, and folic acid. The plan is to create the first brand of Malian rice and adhere to international export quality standards. A social brand for rice, that’s a good idea.

What Do You Know About Business Model Innovation? People Are Confused About The Difference Between Business Model, Strategy And Innovation.

Most people think they know what a business model is. But when you ask them about the "strategy' then they wondered what they're talking about. Most of the time they mean business strategy (what a company does and how to make money) and use the words interchangeably. That’s fine. Then some people even get more confused when they apply that in innovation context. They mean changing or rethinking the business itself, including its core, boundaries, activities and capabilities. That’s strategic innovation. Business model innovation could be part of the outcome. But let’s face it, how many companies out there need to (and can afford to) rethink their business models?

A company can innovate strategically but with no need to change its business models. After all, there are only less than 10 business models out there, it is not like you can do unlimited creative explorations. At its simplest, a business model simply about exploring various ways to develop, improve or optimize your revenue stream(s) and matching them to your customer value propositions. Here are some examples of how people missed the term: 

Google is probably perceived as one of the most innovative companies today. They are essential exploiting technology innovation and you can say they have created an innovative culture. But there is nothing innovative about their business model design. Selling ads and sponsored links, not different from other media in that case, but there are so many people saying Google has an innovative business model.

And think about Amazon.com, it is an online retailer started with books and now expanding into new categories and even products. OK, it is a pretty innovative company but there is nothing innovative about their business model. They are an online direct merchant even though they open up their channel for others to sell their products and take a cut, that doesn’t qualify as business model innovation. That’s retailing except there is no physical store, just technology infrastructures.

What is Facebook’s business model? Not sure there is one, but so far it is advertising. And what options are available to them, not many. You don't need a strategist to perform a business model design innovation exercise, I can tell you in 5 minutes. I’ve read so much garbage about people running seminars on business model innovation, these are feel business yoga classes for those who knows nothing about real business strategy or Jnana yoga.

I’ve just finished writing 90% of our Innovation and Strategy Training package material, lots of good stuff and we will be using them to help our clients to truly innovate from organizing to planning and activation. These materials can turn anyone with a few years of good general business experience into an innovation strategist in a few days, and smarter than those who write books and articles on business model innovation who are as confused as the people who they talk to.

To strategically innovate or complete redesign of a company business model, first there must be a need, or strategic intent. Driven by a business strategy that forces the rethinking of the business models. Not the cart before the horse. Also one must understand what options exist and the migration paths. Strategic innovation can sometimes include business model redesign in combination with product, service, social, technology and experience innovation.

Not every company need to make radical changes in its core business itself, and in some instances the case for change becomes desperately obvious – as it is in the case of Blockbuster, Kodak, Palm or GM. Business model redesign is driven by of strategic innovation (a strategy to play a new game). This means complete transformation—of the organization, its core offerings, structure, systems, culture and capabilities—to create value in a new way. This include a business strategic decisions to move up-market or down-market or shift from products to services or solutions when the pace of commoditization continues to accelerate or the industry boundaries is opening up for new entrants. Not every company needs it. But every company needs to innovate around their products/service/experience/delivery/technology in order to remain competitive, all without rethinking their business models. My strategy and innovation material includes methods and tools that are rigor and effective, sometimes reading these junks can actually confused me.