innovation playground Idris Mootee

'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.

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.

Design Thinking And Growth: What’s The Connection? Why Do We Need Growth?

The Harvard Design Thinking Semina was a great one. High quality particiapants and great turn out with beatiful New York City spring weather. Lunch on the rooftop is way better than a banquet room or a faculty's dining hall. No place on earth can beat the view of New York City. So much energy and creativity. Many participants came all the way from China, Argentina, Mexico and Korea. Thinking of the nex one outisde US, perhaps somewhere Europe and Asia?

Growth is a funny word and often misunderstood just like other words such as strategy or innovation. I have heard from people from 25 year old young smart people to 45 year old seasoned executives and often they struggle with the idea of growth. Why we need to relentlessly achieve growth and what growth means?

Growth is often perceived as a proactive (not defensive) strategy, as the Red Queen says in Lewis Carroll’s Through the Looking Glass, “Here it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” We're at a point that you can't run faster anymore and is close to the physical limit of how fast we can run. Both organizations and even economies. We ned to develop out talent pool to match the economy of the future and harness the full capabilities of the our human capital and technological progress and to reverse the damage we've done to the environment. Now it's time to reinvent the wheels.

Growth is perhaps the most important word on CEOs’ minds, small companies or large enterprises. Small firms want to get big and big firms want to get bigger.  Scale brings resources, market power, improving employees’ standard of living and it gives you currency to acquire.  Today, quality growth is hard to come by, and responsible growth is more difficult. Every company needs a grow strategy or you are waiting to die to be acquired or planning to exit. It is like swimming up stream a river, there is nothing call stay put. Either you swim to go upstream or washed down the river.

Philip Crosby, author of  The Eternally Successful Organization says that growth is unavoidable, "if for no other reason than to accommodate the increased expenses that develop over the years. Inflation also raises the cost of everything, and retaliatory price increases are not always possible. Salaries rise as employees gain seniority. The costs of benefits rises because of their very structure, and it is difficult to take any back. Therefore cost eliminations and profit improvement must be conducted on a continuing basis, and the revenues of the organization must continue to increase in order to broaden the base."  When a person ask you why do we need to grow? Ask him or her whether he or she is preparing not to have any promotion, personal development and increase in income and responsibility for the next 10 years.   If a company stop growing, there won’t be opportunities for everyone. Period.

The challenges are 1/ How to grow responsibility? 2/ How to grow purposefully? 3/ How to ensure your growth is sustainable? That’s where design thinking comes into play.  Design thinking can help create a compelling story of the future, anchored on the needs of customers (and societies) and bring a future orientation on strategy development and an empathetic manner to how company think about its customers. Through storytelling, we can unveil the aspirations and natural inclinations of an organization and we can get a sense of what feels right. The story of a company is what can truly determine its value, and the right story will always be more substantial than the right strategy. This is primarily because strategies are susceptible to the ingenuity of competitors, disruptive industry shifts and bad luck, while stories are impervious.  

Spreadsheets and power points don’t tell story. The Design Thinking approach believes that stories are fantastically useful in their ability to bring people onto the same page (unify attention), organize information and present it in an efficient and easy to access manner. Stories help organizational stakeholders access and understand the logic, reasons, motives and intent that surround a potential vision or context for growth. Stories can help reveal the choices presented to an organization, its possible behaviors, courses of action and their potential outcomes. Perhaps most importantly though, stories significantly improve cognition and comprehension. A well-crafted story or narrative can help make contexts and strategies for growth more accessible so they can be questioned, debated, shared and recounted.  

So what’s your growth story? Not only your company needs one. Amercia needs one. And every country needs one too. Design Thinking can help goverments and cities to rethink growth and development which mostly comes from productivity growth, which reflects multiple factors — but the biggest factor is technology.Yes tehcnology is the key driver of grwoth.

Indeed, the dominant role of technological development in economic growth has been well-documented ever since Nobel Laureate Robert Solow published his seminal paper in 1956, “The Economic Record,” which demonstrated that technological progress drove at least 80% of economic growth in the United States between 1909 to 1949. That's why I have faith in the US economy because the US is still the most technologically advanced country in the world. At least for now.

Innovating Within Or Outside the Core? Let's Start With What Is The Core?

One interesting dilemma about strategy and innovation is how far we move away from our core and more importantly how do you define the core? What are the core competencies of Gap? Netflix? LVMH? BMW? Hermes? Canon? Nike? Marc Jacob? Blackberry? Samsung? HP? Target? Starbucks? Do they even have anything in common?

Do you see core capabilities as distinct capabilities or deeply embedded values? Or special access to buyers or assets? There are hard core competencies and soft core competencies and people need to understand the difference and that they are not mutual exclusive. Core competencies are double-edged sword. How do you define ‘core competence?’ It is currently seen as a unique capability/know-how that provides some type of competitive advantage for an organization and it is not easy for other to replicate. It is not one thing; it corresponds to organization design, and involves underlying skills, systems, technologies and knowledge in specific industries or markets.

A simple test to see if something is a core competence, ask yourself, "Does this 'thing' give the company a unique advantage over its competitors and create value through a differentiated offer or extreme cost advantage or both?"

When my staff comes to me for career advice, I always ask them about their core. Who are you and what are you really good at? I advise them to find out what they like to do and what they’re good at, and if you combine skill, passion and strength, you are going to excel. You need to understand and align all those three. Likewise, companies gravitate towards their core competencies, capability and values.

Successful organizations adopt a rigorous approach to identifying and defining their core competencies and then single-mindedly pursue them. When market shifts and suddenly their core competencies and strategic assets all become strategic liabilities. It happens fast these days. The most important thing is to put innovation at the core and use design thinking to drive continuous renewal and reinvention. There is only one game – new game.

Auto makers have for years restricting themselves to a few tasks they do best -- designing and assembling automobiles -- offloading all other value chain activities to others. A web of suppliers produces the components that go into the car and a web of dealers sell, deliver and service the cars bought by consumers. By limiting their focus, auto makers are able to perform the tasks they undertake extremely efficient using Six Sigma. Apple is doing just the opposite.

Luxury goods companies for years restricting themselves to a few tasks they do best – designing collections, fashion shows production and retail management – offloading other value chain activities to others. The question is what seems to be a very creative (won’t use the word innovative) industries are mostly very old fashion companies that have done very little to transform the category, the industry and the economics. There are a very few notable exceptions. The reality is innovation and design thinking rarely happens in the fashion and luxury goods world. They need to break out of their current creative mode and start innovating. The new affluent luxury goods consumers are less interested in traditional status symbols and more interested in ‘content-rich socially-validated self-identity creation experiences.’” It is more than the logo, price and exclusivity. Many will wake up to this shift and realize this is not the customers they used to know for many years.

Today, organizations must confront the dilemmas of how to manage their core competencies and capabilities. These are systems, assets and skills that need to be continuously monitor, evaluate and ensuring they are up-to-date aligning to the company’s innovation agenda. This has been becoming increasing complex especially with so many uncertainties. When you start thinking about putting ‘design thinking’ as your core competencies, suddenly the idea of core competencies give new meanings.

We are going beyond the narrow definition of core competencies and you can think of ‘design thinking’ as your cultural capital: an organizational wide appreciation and practice of design thinking skills that can be leverage across solving channel problems; produce development, marketing and operation challenges. It is time to rethink the core definition of ‘core competencies.’

The Next Time You Pick Up The Phone To Call A Customer Service Agent You Might End Up Talking To An Inmate In Tijar, India.

Global customer servicing outsourcing is touching us everyday and sometimes you don’t know who you’re talking to on the phone or online when you call your service provider. I have had good experiences as well bad ones and the business case for companies are obvious and the continuous drive for lower costs are pushing companies to be creative and look for emerging destinations beyond the popular candidates such as India and Philiphines despite their relative advantage in English proficiency.

India is trying to move up the food chain and trying to provide higher value outsourcing jobs while in the Philippines, but moreover in Malaysia, Thailand and increasingly Vietnam and Indonesia, all want a piece of the still gorwing pie. We are seeing some anti-outsourcing sentiment due to the high unemployment rate at home recede to historical norms. The cost saving justification needs to be significant these days but it is not easy as the standard of living in India and Vietnam are quickly rising. That’s when you need to be creative.

Now they are doing a pilot program in India recruiting inmates with some good IT skills to try them doing basic data entry, customer service and support. They need to start with changing the policy of allowing Internet access in prisons. Those who participate will get paid more than what they could earn doing other jobs in the prisons. This is still at pilot stage and I wonder how they will select the people to participate beyond their skills, will they have to say something like “Sir, before we continue on, I’d like you to know that I am special customer service agent and a convict and previously robbed and bank and shot the manager. I need to confirm that you would like to continue on to allow me to help you with your banking transaction here?”

According to Gopinath Reddy, director general of prisons in the Indian state of Andhra Pradesh, he told the Guardian in the UK that inmates' knowledge should be used for the benefit of "the nation." The pressure to lower cost and perceptions of lowering capital investment make outsourcing an almost irresistible impulse for service businesses and manufacturers. Global access to vendors, falling interaction costs, and improved information technologies and communications links are giving companies unprecedented choice in designing their operations. Theses strategies are too easy for many taking an extra few cents out but it is time to rethink outsourcing. We need the jobs back and let’s talk smartsourcing. The next outsourcing RFPs will go to top prisons in the US, India and Philipphines to competete against each other perhaps. That's innovation.

The iPhone Is A "Creative Destruction". So Is An iPad. So What Do We Mean By "Creative Destruction"?

Earlier this month Michael Tompert, a San Francisco digital imaging artist, violently destroyed some brand-new Apple products for the sake of art and the results are a collection high resolution prints with a statement "our relationship with fetish, fashion, freedom, and bondage.

The collection of giant prints including one called "Targeting" that shows a 3G iPhone that's been shot with a Heckler & Koch handgun. I guess we can call it “creative destruction.” What’s “creative destruction?” It is of communist origin --a term originally derived from Marxist economic theory which refers to the linked processes of the accumulation and annihilation of wealth under capitalism. These processes were first described in The Communist Manifesto and were expanded in Marx's Grundrisse "Volume IV" (1863) of Das Kapital.

It is about economic innovation, the way in how capitalist economic development arises out of the destruction of some prior economic order. Only since the 50s the "creative destruction" has become more readily identified with economist Joseph Schumpeter who popularized it as a theory of economic innovation and progress. The idea is company needs radical innovation (radical new proposition and business design) and even the most exceptional, enduring corporations cannot continue to beat the capital markets indefinitely – there is no built-to-last. In order to continue to maintain excellence and remain competitive, they must adopt the dynamic strategies of discontinuity and creative destruction. In a simple word-innovation.

Foster and Kaplan (McKinsey) in the late 80s examined more than 1,000 companies in 15 industries and discovered that even the best-run and most widely admired companies are unable to sustain market-beating levels of performance for more than 10 to 15 years. This was in the 80s’, with today’s technological progress, we are talking about 5-8 years.

Their research suggested that: "Corporations are built on the assumption of continuity; their focus is on operations. Capital markets are built on the assumption of discontinuity; their focus is on creation and destruction. The data present a clear warning: Unless companies open up their decision-making processes, relax conventional notions of control, and change at the pace and scale of the market, their performances will be drawn into an entropic slide to mediocrity."

Every company should engineer its own “creative destruction” while they have the resource based to do so and have the luxury to examine and explore new organization design and new mental models. At Idea Couture we use strategic foresights and scenario development to show clients the future of "creative destructions" that could happen to their industries. They are so real and executives can actually feel the future. May be an idea is to take a framed copy of their vision and mission statement, shot it with a Heckler & Koch handgun and hang a giant high resolution print in the board room to remind them. More business for Michael Tompert and his digital print shop.

Apple Should Forget The Movie Studios. Go After The Banks Instead. I Want My iMoney.

This sign is up for our San Francisco office. The archtiects and the girls are working day and night to get this right and a lot of furniture are still in the Atlantic Ocean. Shipping furniture from Europe to US is always slow. Hey we need to get the righ stuff we need to wait.

Congrats to Nick Hughes (managing director of Signal Point Partners and LBS alum) for picking up the Social and Economic award at the Economist Innovation Awards a few weeks ago held at the Science Museum in London. Nick was recognized for his part in creating the M-Pesa venture in Kenya, a mobile money-transfer initiative – something that is long overdue in the world of banking unmet needs.

M-Pesa was first launched in 2005, allow people to transfer money, pay bills and save using a mobile phone, without NO bank account. Handset to handset money transfer, you would wonder why we don’t have it here. Now it is widely adoption in different parts of Africa with over 12 million users in Kenya alone. I see this is more than a technology innovation; it is a social innovation to facilitate economic development in the developing world.

Today, it still takes weeks to clear a check, transferring money is still a pain and fees are hefty. It is time for disruptive change. PayPay was great; never really get beyond the web. It should have been Twitter Wallet or Facebook Money that we are using now. Twitpay is one of those; the service has only 15,000 users to date. They are not the only one trying to attack the payment ecosystem, seeking out ways small and large to tear down the fortress the banks and credit card companies have built to defend their businesses.

PayPal is trying to harness the creative powers of the open Innovation to rethink payments. ClickandBuy's Facebook application allows Facebook users will be able to easily execute money transfers among each other and purchase Facebook apps quickly and conveniently. Another one called Square, a new company founded by Twitter cocreator Jack Dorsey, lets anyone accept physical credit card payments through a smartphone or computer by plugging in a free sugar-cube-sized device — no expensive card reader required. I don’t know why Google is not attacking this seriously, big markets and big money. I guess that’s the problem with bottom-up innovation and efforts are not aligned with opportunities.

And I'd rather using Apple i-Money and use i-Tunes to manage my banking. Steve, forget the movie studios..go for the banks!!!! I am looking forward to getting rid of my wallet…so I have more rooms for gadgets.

Off to San Francisco for IC Innovation Masterclass and BTW our street sign is up. Competitors alerted and we are in game. Magazine gone to the printer. New staff starting this week. Partnerships discussions with a few firms. Busy week and now looking forward to catch up with my couple of dozens of frineds in the Bay area.

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.

Sustainability: What's Is The Right Thing To Do? Transformable Space Or Minimalist Living? Is It About Consuming Less?

I am at a stage when I really have too much stuff. My house is full of furniture from Philippe Starck’s Costes chairs to Le Corbusier lounge chairs to Barcelona day bed and Eileen Grey stuff….  and then there are a collection of French country and New England styles Ralph Lauren furniture in the basement. These are stuff I accumulated from my days in LA, HK, Boston, London and Milan.  Now I don’t know what to do with them. My basement is filled with things from art pieces to cameras; high tech gadgets to old French magazines date back to 1980s. I seriously think I need less, but I am getting more everyday. I carry an iTouch, iPad and iMac to work, plus my Leica, solar charger, Blackberries and portable GPS and all chargers and cables. My life is dependent on all those things.

When Graham Hill (founder of Treehugger) tells everyone that less is more, he has a good reason. He is now inviting people to submit design ideas to Life Edited, a design competition for a 420 square feet apartment that embodies this philosophy and demonstrates how we can "radically reduce our urban footprint, while living better and saving money."  I am sure people who live in Tokyo have plenty of proven ideas for this. You don’t need to have a competition, just fly to Tokyo and check out those tiny apartments. I am heading to Tokyo in two weeks.

Life Editor’s idea is to get people to think about transformable space furnished only with the essentials and digitized media. The idea is to own less. Now we have plenty to learn from Buddhism philosophy. The Heart Sutra espouses the doctrine of “emptiness.” One of its famous lines teaches  “Form is emptiness, emptiness is form.” Design schools should design a new elective called 'Buddhism and Design.' I like that idea. I will teach that.

Don’t misunderstand that emptiness here in a nihilistic, nothing-exists sense. Rather, it means that nothing is absolute—everything is relative and impermanent, and everythng in a constant state of change. Therefore, there is no point in becoming irrationally attached to things. Don’t get upset if you can’t get your hands on the latest Louis Vuitton limited edition bag. I feel that embracing “emptiness,” rather than clinging to the material aspects of existence, opens us to a more direct, genuine, and fulfilling experience of life.

Graham is using his own 420 sf apartment as a reference for what the space ought to include living space, a home office, a work area with a rolling tool chest, and a retractable kitchen.

Is it less? In a paper recently published in the prestigious Journal of Economic Perspectives, Paul Ehrlich joined a group of nearly a dozen of the world’s most ambitious ecologists and economists to try to put some hard numbers behind sustainability. They boldly entitled the paper “Are We Consuming Too Much?” I suggest you get a copy of that.

The authors suggested the problem is not consuming too much. It’s that they’re consuming far too little. Think Africa. Consumption is obviously inadequate when people are dying of malnutrition. But insufficient investment also means that the next generation of Africans will have less than this generation, and the generation after that still less. This is a death spiral of declining consumption and investment, two keys to well being and sustainability.

But what about us? The answer Ehrlich and his colleagues came up is a surprise to many.  It turns out that even we with our Priuses and SUVs and venti lattés might not be consuming too much, as long as we are investing enough in the future to ensure that generations to come enjoy standards of living at least as high as ours. And that suggests that we might be worrying way too much about how much we consume and far too little about how to invest in the poorest regions of the world, many of which are home to some of the earth’s greatest biodiversity as well as its most desperate people. I definitely buy the idea, investing in biodiversity is the most important step to secure our future.

Apple Is Considering Splitting Up The Company. Including Selling Of Its Computer Division.

Apple is considering splitting into three companies and selling of its computer division. Yes I make that up. But it was equally crazy If I was telling you in 1995 IBM would get out of the computer and laptop business. The Thinkpad was doing so well and they were good machines. Unthinkable? Well they did.

This is not happening anytime soon, at least when Steve Jobs still the CEO. Like many other Apple fans, I don't think it is a good idea. But what do I know. One day, consultants and i-bankers will be pitching to the board and shareholders that splitting up the company can increase total enterprise value and getting out of the hardware business are a good idea for Apple.

Manufacturing will be outsourced to factories in China (which is already the case) and the will license the MacBook name to multiple manufacturers. That way Apple can focus on competing on high value opportunities such as mobile, software, content and even advertising.

When Steve Jobs spoke about Google’s acquisition of AdMob last year. “Google came in and snatched them from us. We bought a much smaller, but good company Quattro,” he said. Now with iAd, Apple directly targets Google. Jobs thinks user behavior is different on the phone vs. the PC because the 200,000 plus apps currently available on the iPhone “get you into every corner of the internet. I think he is right. The PC paradigm is outdated.

Apple business strategy will evolve and eventually some of their strategic assets will slowly become strategic liabilities. Apple’s war chest will get bigger and bigger (it is already big with almost $40 billion in cash I the bank). A significant accounting change now allows Apple to book revenue sales of iPhones immediately instead of over two years sales as before. This moves revenue to nearly $15.7 billion and per-share profits to $3.67. Think about this: Apple reported more revenue in the first quarter of 2010 than it did for the entire fiscal year in 2005. We can see this trend continuing, just looking around you and see people with all walks of life taking an iPad wherever they go. It is a mass product in day one. Probably the first Apple product that needs zero time for diffusion.

In addition of coming up with the next killer iSomething, now Apple also needs to figure a way to use its cash to provide a decent return. What can you buy for $40 billion?

So how do we divide up Apple? Let’s start with iPod/iTunes, it is a media business. It should focus on content distribution and the business model is a great one. With next generations of Apple TV, this is a great media play. Mobile is a high growth business and will be for 10 more years at least. The Apple iPhone and iPad platform have given them a distinct competitive advantage. Apple’s advertising business? It is unclear their strategic intent to play in the mobile ad space. Apple computers keep the software and license other to produce them.

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?

"Corporate Repsonsibility Is An Illusion?" According To Prof Karnani. What Is He Thinking?

This is an argument that will not go away anytime soon. I have had heated debate in our b-school days way back.The question goes back to the core of the modern corporation. What role does business plays in creating value in societies? Or the question should be more about the ‘how’? Among B-schools there are many different point of views on what is a modern corporation.

CSR is becoming a buzzword much as social media. There are many real experts and many wannabes. Why the rush now? Well, the answer is simple, with all those money thrown into advertising whether targeted at institutional or retail investors in WSJ or general public adverting on cable TV, they are almost a total waste of money. Net net, people don’t trust large corporations. Period. This is not even a question of brand value or equity, it is simply difficult for companies to communicate anything—without the trust. Not to mention asking for a price premium.

So how have some companies joined the socially responsible bandwagon? We first launched the Aviva Change Fund 2 years ago with stellar success, followed by Pepsi launching of its Refresh Project. There are many campaigns out there these days and now everyone wants to be like Petagonia. Marriot utilized giving a washer basket from World of Good – a social enterprise helping overseas artisans create more sustainable lives. Liberty Mutual’s campaign with the theme/slogan 'Responsibility'. You have probably seen some of the television spots depicting everyday Americans confronted with a decision to do the “right” thing or “look the other way.” (For full disclosure, Pepsi, Liberty and Aviva are all current clients of Idea Couture).

CMOs are very enthusiastic and are convinced CSR is the answer to customer engagement. The role of CSR in marketing and branding is undeniable and its importance will grow for sure. But what about CSR in business strategy?

I remember in my business school days I had long debates about the role of business in societies. 35 years ago, Milton Friedman wrote a famous article for The NY Times Magazine with title aptly summed up its main point: “The Social Responsibility of Business Is to Increase Its Profits.” The future Nobel laureate in economics had no patience for capitalists who claimed that “business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.”

I seemed to share the same point of view then but since then my views have changed. I am not a socialist by any definition at all, but I think what is missing is the humanitarian dimension of capitalism. I am not fully convinced that a corporation role of adding value to societies is not just maximizing profits and then perform philanthropies. The order should not be that way; it is not about making tons of money at the expense of the planet and then figure out how to put money in fixing it. This is not how it should work. They need to put people and planet not ahead of profits, but aligned with profits. I believe that the enlightened corporation and CEOS should try to create value for all of its constituencies including investors but not excluding everything else.

I admire companies that make good profits, usually those are the results of continuous innovation, operational efficiencies, strong leadership and great brands and I am not hostile to profits and shareholders. In fact, I believe in relentless pursuit of profits. But I believe good CSR is good for profits.

A recent WSJ report suggested otherwise. Aneel Karnani, a prof at the University of Michigan's Stephen M Ross School of Business, believed the idea that companies have a responsibility to act in the public interest and will profit from doing so is fundamentally flawed.

He argued that CSR is an illusion, and a potentially dangerous one. Very simply, in cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant: Companies that simply do everything they can to boost profits will end up increasing social welfare. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.

I think his views are very narrow and dated. The answer lies in what kind of executives we are breeding today for tomorrow. It is all about maintaining that balance. CSR is an unstoppable movement against the public outcry over corporate malfeasance (you don’t need to agree with me). CSR means building sustainable economic development, sustainable societies and sustainable consumer lifestyles, the collective mission is to rethink and rebuild an economic system that is in balance with the natural world. You can’t have two worlds. Business and the rest.There is only one world.

If "Design Thinking" Can Power Up Companies, How About "Art"? "Art" Should Not Be Reduced To Something Just For Display. "Art" Is The Soul Of Design.

This is the view from my temporary office. I have received a lot of great feedback from my last post and I guess it is a popular subject. And there are many different point-of-views out there. I want to continue on the subject and this was written on my 18 hour transpacific flight while eating a stack of home made French toast because I can’t stand airline food.

Executives are increasingly convinced that businesses are not merely offering functional devices or products to help customers to get their jobs done, but also visual imagery, customer experiences, user identity and social connectiveness. This new design consciousness is a result of many factors including the commodization of quality manufacturing, proliferation of channels, oversaturation of brands and products and rapidly changing customer expectations. Plus a heightened demand for better aesthetic experience and usability given the increasingly complex interfaces for technology products. Design has (and should) become a critical element within the strategic tool kit for new product development. But it can be useful as part of the business strategy tool kit to create growth.

A question arises here, can art also become a strategic toolkit? “Artistic Thinking” in additional to. “Design Thinking”? How is art different from design? Design is often confused with art; some designs will eventually become art. And some art becomes design. Art is an important force shaping design and design is now becoming an important force shaping business strategy. Is there a connection between art and business? Hey, welcome to the world where everything is complicated.

Is art a state of mind or is design also a state of mind? Art, design and business strategy are about the articulation of an idea and each has different and increasing overlapping tools to help expresses itself and for manifestation. Let’s not talk about the downstream activities of business strategy, design or art. Each one of these has its craft side and toolkit.

People are saying design is important for business today, not many people are saying art is equally important. I think art is equally important for both design and business. Wonder how many of you would agree with me? Part of the reason design is moving upstream is because it is becoming predominant among companies and particularly marketers where the aesthetic/sensorial aspects have become key drivers in differentiation. But the meaning of design should not be reduced to a mere question of just look and appearance. Instead, design needs to be understood as something that powers the entire company. It is viewed more as an attitude that something that is linked producing new ideas from a core set of design-centered beliefs.

Can the same be said about art? Art should not be reduced to be something purely decorative or expressive with no connection (never mind influence) to business strategy. Can art be viewed as something that inspire new perspectives, new experimentation and inspirations for organizations beyond products. Is that a stretch? I am not sure.

Case in point: The Italian company Alessi is a prime example of an “artistic acting” company. Alberto Alessi, head of the company, thinks of Alessi as an applied arts research laboratory. At Alessi, design is viewed as an artistic and poetic discipline, while manufacturing conceives it as a tool for product development and marketing. The process of selecting projects to be prototyped rests with Alberto Alessi. Choices are based largely on his intuitive knowledge of what will appeal to the people. He describes his role as someone who mediates between the most interesting expressions of creativity of our times and the dreams of the consumer.

Apple can probably be classified as the same type of company where intuition is central to the company’s basic innovative processes. If you think about how Apple comes up with new products, it is definitely not a “design thinking” type of company, it is an “artistic thinking” company that relies on intuition and a heavy emphasize on personal expressions.

Someone once points out the paradox on art (the same is said about pornography, no illustrations here sorry) is that art is difficult to explain but easy to recognize. You know it only when you see it. Design is something we can see and touch, art is difficult to be identified. Over 50% of art I’ve seen I would not considered them as art, but other can have exactly the opposite point of view. That is the single biggest distinction between art and design.

And for strategy, 50% of the time you can describe a company’s business strategy by looking at what they do and what they produce or sell, the other 50% of the time you don’t know exactly where a company is going. When a great company (and its brand) touches our deep emotional state, it is only when businesses are to be viewed the same way as a painting or sculpture. They have to be looked upon as an expression of something that the artist experiences and not merely as a functional representation of a real-world product or commercial entity. If you look at companies such as Virgin, Alessi and Apple, these companies are works of art themselves.

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.