innovation playground Idris Mootee

Is Best Buy Ready To ReInvent Big Box Retailing? Or Are They Too Busy Thinking About Competing With Wal-Mart And Amazon?

There is a Business Week article about how Best Buy is now flexing its market power to help manufacturers and brand owners to develop more marketable products. As the last standing consumer electronic retailers, now they don’t have much direct competition, but instead will be competing with two of the most hyper-efficient retail systems on earth – Walmart and Amazon. 

Best Buy’s CEO Dunn has a vision and ambitious plans to play this game. The big box retailer business model needs reinvention and there is not enough value from selling LCD TVs and PCs. Best Buy needs to be the gatekeeper or tastemaker of consumer electronics. They need to turn their retail stores into giant consumer labs. That way they can shape, influence and even participate in development of new product and service platforms. It makes sense that the big consumer electronics companies won’t like the idea. They want to see the retailers to be reduced to just a distribution channel with little market power. That is not going to happen. 

Best Buy will continue experimenting new ways to engage and enlighten consumers and grow its influences along the way. The big box retailer has optimized their format over the years by using clustering instead of standardized format. It has revamped hundred of stores, introducing "customer-centric" formats to appeal to local shoppers. Can Best Buy reinvent retail economics just as Apple did? Apple retail miracles have proved to be exportable. They broke every rule of retail economics.

Apple's Regent Street store (London) has become a tourist attraction in its own right. Most important it takes £2,000 per square foot. Compare to high-end department store such as Harrods or Harvey Nicols which is making about £700-£750 per square foot, while Topshop in Oxford Circus takes about £1,000 per square foot. Other high traffic electrical retailers average about £700 per square foot. 

The most interesting thing about Best Buy’s strategy is the digital service platform; this one is not as easy. Blockbuster has gone down that path quite unsuccessfully. Best Buy bought online music service Napster a year ago and then took a stake in CinemaNow, Sonic Solution's movie-streaming service. I think they need a lot of more thinking to play in this complex landscape with Apple and Sony seeing this as their core. Thais is what Kai Patel, Best Buy EVP for emerging business is thinking all the time. Wal-Mart and Amazon has a slight cost advantage over Best Buy. Adding Costco and many other online retailers. Best Buy can never compete purely on cost. Best Buy has no choice but to rethink what unique differentiated customer experience can help transform Best Buy with its 1,000 plus stores. 

What innovative new services that can create high margin revenue stream? What digital platforms they can effective build and effectively compete? What are the top three strategic partners (you've to pick your friends)? What is Best Buy new role in supporting product development? If Best Buy is a consumer electronics middle ware, what would they do? Can Best Buy effectively serve the unmet needs of small/medium businesses? What's Best Buy strategy for connective health care? What are the strategic options for redesigning and reinvention of current format? And does Best Buy needs a cool brand like Apple that separates the store from the products? It is probably easier to design a cooler brand than making Best Buy cool.I can go on and on. In the age of rampant consumerism – desire-driven market – Best Buy has a lot of rethinking to do.

The Banking Industry Is At Its Industry Breakpoint. Industry Transformation Is Now In The Making.

We are finally reaching the end of the financial turmoil; it was bad but not as bad as anything close to the great depression. China is a key factor although many are skeptical. The dilemma facing Beijing will be to balance the use of its huge foreign reserves to boost its own slowing domestic economy against continuing buying U.S. Treasury bills. As the second-largest holder of U.S. Treasury bills, China will inevitably end up financing the $700 billion bailout plan ultimately went to the banks and auto industries.

If China chooses to stop buying U.S. securities, or even to sell off its holdings, the effects could be devastating; there are no reasons why they won’t continue to finance their biggest customer. It is like walking into a dealership buying a car and they won’t lend you the money to make a sale. For now, Beijing seems willing to help maintain U.S. financial stability and continue to purchase government-backed treasury bills. It also announced a $586 billion national infrastructure program, the largest stimulus effort ever undertaken by the Chinese government to lift its economy.

For the banks and other financial services, it is time to start thinking forward, time to deal with new realities. Suddenly an industry that was traditionally recognized, as stable now needs to rethink their business architecture. What lessons they can learn from others that can help bankers to reframe, rethink and reinvent the future.

With times of change, bank executives and corporate strategist need to think, work and execute beyond the the normal - to drive the banking industry into uncharted paths and directions and be better equipped as change agents. There are a lot of complex problems to solve, trust to rebuild and new meanings to drive and support organizational change. No longer is yesterday’s “normal” the standard or all your benchmarking is a throwaway. Imagining and leading in the future requires a deeper involvement to tackle the daily issues and the big picture issues.

How banking and the personal financial services might respond post turmoil? Understanding this shift requires banks to likewise shift, to reinvent themselves by rethinking architecture, products, customer experiences and relationships. Here are some possible approaches: Bankers should redesign their product development approach and process so they can be more agile and responsive to rapidly changing market needs.

• Bankers should replace their mass-market thinking and start thinking individual segments. It is time to write off some of those millions of (sunk) investments of useless CRM systems.They need to out serious effort in creating differentiated products and services. They need to figure out how to attach meanings and emotions to financial products.
• Bankers should sort help to rethink product platforms completely differently than before, re- emphasizing capital preservation over aggressive cross-selling of investment products. Banking must relentlessly eliminate complexity in all products and services. What’s simplicity means for personal financial services is a good starting point. Making sure relevancy, value and convenience are the core of the value equation.

• Bankers should revisit the fundamental design of internal processes. From product development to product and service integration, there are plenty of broken links. Bankers must re-design risk management at a model level, not just relying on models with a normal distribution curve of risk, they need to reassess risk algorithms to deal with abnormal market periods.
• Bankers need to accept and prepare for more government involvement. Example is Credit Card issuers need to revamp internal systems and overhaul how they communicate with customers and it will spread to other financial service products. The new rules limit fees, restrict changes to interest rates etc.
• And for Swiss bankers, this is the end of Swiss banking as we know it. No bank will be shielded by the banking secrecy anymore with the diplomatic showdown between the US and Switzerland. Swiss banks will race to rethink their value propositions and market positioning.

The list is non-exhaustive and I can write another 10 pages. But need to get back to my day job and have some rest, my jet lag from the Asian trip is killing me.

People Talk About Strategy And Business Model, Often forget About Thinking Industry Architecture

I was speaking in a panel at the Ivey Venture Forum this week with more than 150 guests, great event with 10 companies entering the final and presenting their ideas from recycling technologies to therapeutic technologies. Thanks to Jeff Szeto for inviting me. I was asked by Ron Close, the moderator (Residence Entrepreneur of MaRS and Ivey School of Business) the question of does strategy means for start-up. Ron was asking some very good questions. What does strategy means for new venture start-up? I gave a long answer.

But the short one is they need to see beyond the product and see how their products will evolve and fit in with a specific industry architecture, whether it is an evolution of the existing one of the transformation of the current. Understanding industry architecture can impact how you develop your product roadmap and even points of exit. That way you will be better position to align yourself with the other key players to capture value from your innovation. Perhaps unsurprisingly, people see their own idea as the center of the universe and everything revolves around it. Industry architecture is not yet a common business term, it is the foundation to deciding on your business model.

Industry architecture can be shaped by technological changes, strategic intent and competitive dynamics. How many of the first generation PC design/manufacturers are still around today? What about the HDDVD? Xerox and Apple invented the graphical user interface, but Microsoft Windows dominates the PC market with a follow-on graphical user interface. Apple did invented the PDA category (remember the Newton?) but Palm became leader, Apple stikes back 10 years later with the iPhone. The first portable music player was produced by another manufacture and now iPod dominated the market. It was released in 1998; the Eiger Labs MPMan was the world's first MP3 player, boasting 32MB of internal memory -- expandable to 64MB.  And Google was not the first browser. Many innovations simply did not create value for the innovators. In fact most do not.

New venture is a team sport or a music band. What would Beatles be without John or Paul or George or Ringo?  Most innovations yield don’t value on a stand-alone basis. They need to find a place in a new eco-system or industry architecture. Every one under the same architecture requires complementary hardware, software, services, channel and customer access. The delivery of product/process innovation often requires the employment not just of complements, but also of many inputs/components up and down the vertical chain of production and sometimes consumption (even customers or advanced users).

The power of the innovator of new technology is often compromised by whatever economic might is possessed by owners of required inputs/ components. Apple is an exception as they influence (dictate is a better word) many of the platforms they designed. It is a great position to be in but not many are lucky to be in that position. Industry architectures characterize the nature and degree of specialization of industry players (or "organizational boundaries" or role in the value chain) and the structure of the relationships between those players.

A simple example here, the Segway is a great invention and innovation. It solves a personal  transportation problem but in the process creates many new problems. They include questions such as when Segways are being used on sidewalks, would they be subject to the rules of the road that apply to pedestrians under the Highway Traffic Act? If the Segway is being used on roadways or highway shoulders, the traffic laws that apply to bicycles and cyclists would apply to the Segway operator? Will they get a speeding ticket? Do they need to yield to pedestrians and bicycles, if there is not enough space to safely pass? Are you allowed to talk on your cell phone when riding a Segway? These are just a few examples. If they had worked with urban planners and city governments early on, they would have enjoyed a real success.

Without any understand of industry architecture, there is no strategy. Industry structure determines how an industry architecture looks like. Industry architectures sometimes change without us knowing it, sometimes they evolve slowly and sometimes as a sudden shift caused by disruptive changes such as technology or regulations. An economist’s view of that is to look at the nature and intensities of competition and pricing dynamics, while a marketer’s view is more on the managerial aspects such as market definition, customer definition and channel choices. There are some overlap on the two but both are important analysis to understand the emerging architecture of an industry and finding a unique role to play there. As the architecture changes, profits migrate and value creation formula changes at the same time. Consider the increasingly untenable position of large media company telecommunications operators, automobile and financial services.

The Evolution Of The ATMs. 30 Years Later Still Struggling To Make Them Scam Proof. It Is All About The Human Factors.

I find that people are over-concerned with online security every time there is a piece of news about identity theft on TV. It is really not that bad and we need to accept the fact that it will not go away. Whatever security mechanism being put can fix one hole but usually create another hole. Let me take the example of the ATM, it is a very mature technology (probably about 30 years). Not many people know the first mechanical cash dispenser was developed and built by Luther George Simjian and installed in 1939 in New York City by the City Bank of New York, but removed after 6 months due to the lack of customer acceptance. No customer wanted to get money from a machine. It was a failed innovation.

I remember the one ATM card (Standard Chartered Bank) I used, every time I used it the machine will eat the card and mail it back to me. Not sure what security reason caused the design. So I can only used it once until they send it back in 2 days. It is designed to prevent fraud.

30 years later, there are still many ATM scams. Japan is still trying to figure out a way to stamp out ATM frauds. Chiba Bank has installed phone signal jammers at four unnamed ATMs at bank branches in the Tokyo region, I am not sure what exactly the criminals were able to convince people to do via mobile. I think there is too many cases criminals instruct victims to withdraw cash from the ATM through the cell phone. The often target the elderly, often telephoned by perpetrators claiming to be relatives and in need of some emergency funds. A new innovation is Aichi Bank is now ATMs will now no longer allow consumers to complete the transaction until they hang up. So you cannot be talking to your friends while getting your money.

How it works? A metallic film around the ATM will block access if it detects mobile phone waves. Essentially ATMs will become out of range for mobiles. Not only might this prevent the criminals from relating their information, it also helps to provide a break for the consumer to think carefully about the transaction.

While others are jamming cell phones, BT Broadband is converting 2,500 ATM machines to serve as free Wi-Fi hotspots. And for some places like Tibet, people are blessed (literally) with money with their ATM withdrawals. A relatively new addition to Lhasa's old city urban infrastructure an ATM machine - including the red pasted duilian - effectively blessing every transaction that passes through this machine. It is a way to making money clean (legally). Here's another real customer unmet need. (Photo courtesy of Chip Chase)

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

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

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

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

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

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

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

Random Thoughts On Industrial Design, Busness Model Design And Design For Change

I was chatting with some members of our design research team just yesterday next to the cooler the other day, we were talking about how iPhone is such a bad phone and a great media player, and the Backberry is such a great email gadget but terrible browser. The conclusion was phones were not designed to handle the “social” functions and they are just add-ons. What does a true “social” gadget looks like? I will ask our design team to come up with some crazy ideas and sure clients love to see them

As more and more people use Twiiter or Facebook as their core communications. What are the best gadgets designed for that? The gadget lets them tweet, reply, retweet, send direct messages, and connect with followers. Here comes the TwitterPeek which sells for $99 or $199 (with plan) which included a service plan. It can only support one account at a time. Users can also view TwitPics by clicking the "view content" option from the TwitterPeek menu. If users choose to pay $99 at the time of purchase, they will get the TwitterPeek device and six months of Peek service. After that, they need to pay $7.95 per month for network access. If customers plunk down $199, they'll get the device and service for the life of the product. In either case, TwitterPeek allows for unlimited tweeting.

It is always an important industrial design discipline that they teach in school, do we design something for a singular or more important function or something that does everything. The preference is design something with a purpose in mind. Is the TwitterPeek really necessary in the marketplace. Or we need a Facebook Device? The deep satisfaction of design is when you find an elegant solution to a problem that has, until now, had a hindering effect on our p quality of life or experience or the environment. And the function should be super obvious - developing a straightforward solution to a meaningful problem. But it is not that simple. Industrial design is understood as a part of engineering design, or as running parallel to engineering design and increasingly interface design.

However, when industrial design activity is engaged in the more aesthetic or style concerns of a product it can be understood as running parallel with marketing and brand activity. And when industrial design is engage running parallel with business strategy activity, that becomes a very different game. There is not a right or wrong or simple answer here, there is a lot of room for ambiguity and misunderstanding and many designers are confused about design themselves.

Many designers love to talk Business Model design, not sure how many are qualify to discuss this subject. My experience is even among the MBAs that I hired, anyone with less than 10 years of solid experience don’t understand the real implications of these Business Models discussion. My response to them is "How exactly do you change a business model without understanding the industrial and distribution economics plus the individual players' competitive dynamics. There are always game theory in play in these moves.

One interesting thought is traditional industrial designers came into being as mass production raised output and wanted to match those to market demand, this is still true but not entirely the case. If industrial design comes within a marketing function and marketers buy the creative services of industrial design consultant on an occasional basis for a special project, this quite is different if industrial design is a part of the manufacturing function. And if industrial design comes within a strategy firm and executives buy the innovative services of a firm that has strategy + design capabilities (like Idea Couture), then it is part of corporate strategy undertaking. That’s design thinking in action, not design talking. Am I confusing you?

When Wal-Mart Enters The Funeral Industry, The Business Is About To Change. Will Amazon.com Follow? What's The Latest Innovation In The Funeral Busines?

Some survey stated that the average person's greatest fear is having to give a speech in public. That’s not for me but I am sure for many. I remember one guy told he when he was put on stage in front of 800 people, the dead silence was like death. Giving a speech in public ranked even higher than death which was third on the list. So, you're telling me that at a funeral, most people would rather be the guy in the coffin than have to stand up and give a eulogy.

The first baby boomers are entering their mid-60s, and the death rate in the U.S. is expected to rise from 8.1 people per thousand in 2006 to 9.3 in 2020 (according to the National Center for Health Statistics). Yet the traditional funeral industry is hardly healthy: The Federated Funeral Directors of America, an accounting firm for independently owned funeral homes, found that in the past 20 years, its clients' profit margins have been cut nearly in half. Some 44% of funeral home directors, up from 28% in 2006, blame the increasing popularity of cremations and alternative burials for sinking profits. Some funeral homes have responded by more innovation such as themed funerals, from backyard barbecues to mini concerts.

The 11 billion industry is forced to innovate when Wal-mart enters the business. Wal-mart has started selling coffins online at prices that undercut many funeral homes. People can choose from 14 different ones, from the $895 "Dad Remembered" steel model, to the exclusive "Sienna Bronze" one for $2,899. Why did Wal-mart decide to enter the coffin market? Well, in fact this is a response to Costco’s move to sell coffin online (not in bulk thank God) with delivery within 24 hours. I guess people don’t want to wait for this category. I think it is a good idea. Funeral homes industry is overcharging and often people don’t know what these things should cost. With Wal-mart you need only to pay $1,000 versus 3 or 4 times more through a funeral home.

The funeral homes industry has reason to be concerned. I am sure their argument is these funeral homes can provide full service (like gas station) and ability to provide comfort and empathy, but it comes at a price. If it works for Wal-mart, the next one to join would be Target. They would invite Stella McCartney or Phillipe Starke to design caskets that costs just a little more, but with a lot more style. Amazon.com will follow with online customization that you can pick your favorite patterns or engraved your family crest on it. And for those creative types who are big thing art lovers, forget the traditional wooden box, you want something very special. A company called Crazy Coffins can pretty much order any design you want. There isn't a lot they can’t make. The bespoke coffins are made by two carpenters and costs between $3,00 to $10,000 (£2,000 and £6,000).

And when you decide to spend more on a coffin, may be you should consider an upgrade to Louis Vuitton or Karl Lagerfeld. And for those die hard rock fans , they used to sell a KISS goodbye with the "Kiss Kasket". It is decorated with the logo and pictures of the band members; plus: it is waterproof. The Kiss Kasket went on sale in 2001 until 2006 and now it's no longer available from Kiss' website. I’d like to see a Beatles one.

Random Thoughts: From Aviva Community Fund To Positive Social Change To Women Empowerment.

I was so excited that our Aviva Community Program is getting such good response even before the official launch. It is a very important project for both our client and IC because it is something we truly believe in. It is about 1/ Empowering change in our communities while building brand 2/ Prove that social media is not a hype and if you use it right it is the most powerful communication medium 3/ Authenticity is the key ingredient of marketing, this program is about action and not just words. Check out the program here It is truly where "Marketing Innovation" meets "Social Innovation".

The idea is Aviva Canada will be introducing a nation-wide pilot positive social change competition supported by see a large-scale $500,000 donation put towards the fulfillment of positive community changes in neighborhoods across Canada. So far our metrics are indicating that this will be a super hit for an insurance company successfully social media to drive awareness and action for positive social change and brand awareness. Quick stats to date (before official launch): Ideas created: 800+ (see map below), Registered Users: 60,000+ Site Votes: 160,000+ Comments: 6,400+ Not to mention the crazy Facebook links.  Kudos to the client and the IC team John, Paul, Caroline, Jeff, Jackie, Claire, Cheesan, Andrew, Patrick, Ryan (did I miss anyone?). Lot of hard work, big thinking and flawless execution. Thank you team!

I received some interesting positive feedbacks and discussion on an earlier post this week titled “A Simple Life Or Green Living Are Not The Solutions. They Distract Us From The Real Number One Problem”. I’ve received a dozen of emails and some great comments /discussions from the linkedin group "Design For Social Change" which I'd like to share here:

Manuel Toscano, Design Principal, Zago NY

“There are many problems and many systems that can benefit from more design thinking, more involvement and support from the design community, but I wound't argue that it should start from one place, or in one way. I say this even while agreeing with you that empowering women (everywhere) is proven to be the social investment that brings the most significant returns.”

Jeremy Faludi. Green Design Strategist, SF

"I agree that nowhere near enough attention is given to this issue. The key is that it's not just a social issue--it's an environmental issue. Empowering women in developing countries is the only effective (and the only humane and responsible) way to stop the population bomb. Easing population pressure helps solve all the other environmental problems we have (all forms of resource depletion, and all forms of pollution). The fact that it's also pivotal in fixing a lot of social and economic problems is icing on the cake. I agree, it should be a very high priority. (Note, though: why is it all three of us who've talked about this so far are men?)”

Kara Pecknold, Design Researcher at Emily Carr Institute, Van

“I'll jump in as one female voice in this discussion. I'm sure there are others who could add additional ideas. I concur, we're past "green living. After working with a group of women in Rwanda, I would suggest that empowerment is definitely needed. Actually finding out what these women regard as empowerment is something else altogether. The "developing world" is a broad title and each country faces its own political, social and cultural realities that can affect this empowering. But talking to the people we perceive as needing it might be a step in the right direction. They likely have some good ideas to contribute to this conversation. “

Maz Kessler, Creative Director, NY

“Hi all - such a huge area for discussion, but extremely glad to see it surfaced here. there's definitely momentum building around an increasing awareness (at last!) of the benefits of investing in women globally, and what this brings to communities, regions and nations. This rapidly emerging awareness (hesitate to call it a movement yet...) has recently been given mainstream visibility in high-income countries through e.g. Nick Kristof and Sheryl Wudunn's book 'half the sky'... through the 'girl effect', through the NGO Women to Women, and eve ensler's work in DRC etc……as designers we can bring our creativity to communications and advocacy in high-income countries, as well as into advocacy and design projects in low-income countries (anyway, immense and great topic and yes I'm also female)”.

Growing up in big cities and having lived and worked in Boston, London, Toronto, LA, HK, Milan, the women empowerment thing was never under my radar screen. I worked with some of the smartest and well educated women and it never came to my mind this is such a big issue in the developing worlds. I always thought we were making good progress. While a lot of progress has been made in the last 20 years improving women's health and education, women in the developing world are still at the periphery of the economy, marginalized in segregated low-paying jobs, or practically barred from education and work opportunities. The situations are different country to country but the problem is still very serious as a whole.

I am very interested in what innovation is needed to make the change. Social innovation that links to empowering women is what I am talking about. An example, in 1999, 35 women on the isolated island of Char Montaz in Bangladesh discovered they could make a huge difference in their community by going into business (none of them have MBAs no surprise). Taking a lot of criticism since they were breaking society's rules by working outside the home and that’s a big deal there. They later got funding from the World Bank and the UN Development Program, and assistance from a local non-governmental organization Prokaushali Sangsad Ltd.

They started to build battery-powered direct current lamps to replace kerosene lanterns widely used in local homes—a known source of indoor air pollution. And as they mastered lamp construction, they also learned about quality control, business development and marketing. Soon, their critics were their customers. Within two years, they were bringing low-cost light and clean power to over 1,200 households, shops, and boats, and 300 businesses. Shops stayed open longer, children spent more time on school work at home, and incomes increased by 30 percent. My point is, this is not just a moral or a human rights or a political issue, it's deep down also an economic issue as well as global climate change issue.

Hope everyone have a very scary weekend.

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

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

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

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

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

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

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

Does Intergrative Creavity Exist Today? Where Do They Exist? D-Schools Or B-Schools? And Is There A Place For A-School In Our Future?

Someone asked me who’s the design head in our company? I am not sure. My answer would be everyone. Everyone is a strategist and everyone is a designer (or design thinker) in our company. We long understood strategy doesn’t necessarily come from strategist, and design idea doesn’t necessarily come from designer. Design wants to change the world and often over thinking and under-doing. Strategy wants to change the world but stuck in an old paradigm of management. Strategy, management and design are not what it used to be.

“Strategy” is distancing itself from “Competition” and “Innovation” is distancing itself from “Invention”. Strategy now needs design and design needs strategy in order to have impact. Met John Maeda today and his idea of the difference between art and design is design should is being ”relevant” and art should is being “free” and design is “producable” and art is “imaginable”. Those are good observations.

Let’s come back to business strategy for a moment, if “strategy’ is “predictable” then innovation is “unknown”. Business schools are not very good in teaching people seeing, imagining, conceptualizing, and visualizing the future. Design schools are very good in training people to imagining and asking questions, but terrible in understand from a system view how the world works.

Strategy’s ultimate goal is to create power and exercise them to your benefit. Design’s ultimate goal is to come up with solutions to a predefined problem. Art’s goal is to ask questions and reflect on some of our paradoxes and express deeper concepts that sometimes words fail to do the job. If strategy is ultimately about effectively exercising power, the answers to these questions may convey a good deal about how we think strategically. There is ample ground to conclude that our ability simply to cope with—much less shape—a future of pronounced complexity, uncertainty, and turbulence will depend in large measure on the prevalence of strategic thinkers in our midst. Ideas and the ability to generate them seem increasingly likely, in fact, to be more important than capital and weapons.

The question is what type of thinkers do we need  that has the intellect to dissect the status quo, grasp the big picture, discern important relationships among events, understand causation and events, generate imaginative possibilities to inspire, and operate easily in the conceptual realm as well as understand execution and change. Integrative creativity simply does not exist today.

As Maeda puts it, "Right now, our nation sees left-brain thinking, focused on logic and reasoning, as critical to future economic development. You can see it in the emphasis on the STEM (Science, Technology, Engineering, Math) subjects. What's missing from STEM is right brain thinking -- embodied by what I call the key "IDEA" (Intuition, Design, Emotion, Art). We need both both halves of the brain to work together and channel that brilliance through our hands and propagate ideas throughout our world." That's what we meant by the power of D-schools + b-schools.

Your Next Electric BMW May Not Come With Any Sound. Need To Pay For Separately Dowloadable "Autotone".

Many years ago people did not realize the power of the ringtone. Not only they can make money selling them but it is a powerful political tool. I think the Philippines was the first country in the world to use text messaging to topple a former president, they may soon be the first country to overturn a government with a ringtone. Imagine the power of the voice on poll tape and ringtone. What about the Obama ringtone?

The BBC World Service Trust understands the power of the ringtone to achieve development goals. When they were tasked with the tough task to make condoms more acceptable, and free from negative judgment, they came up with a wacky idea to get people talking about condoms -- a condom-themed ringtone. World Service Trust Condom Ringtone was the solution. They hope that this will stimulate conversation, which is desirable as - according to research - those who talk about sex and condoms are more likely to have safer behaviors

Or do you know about the mosquito ringtone for teenager that allows teenagers to receive text messages and phone calls in class without the teachers hearing them. In case you didn’t know, it’s a tone outside the audible range of hearing for most people over the age of 30. You probably don’t know this, the history of the mosquito ring tone dates back to 2005 when a British inventor by the name of Howard Stapleton came up with an ingenious idea to drive away teens through ultra high frequency sounds much like how a dog whistle would affect dogs. It was an idea to make the storefront very uncomfortable for the loitering teens while leaving the money spending adult customers unaffected.

So what’s next for ringtone? Here another innovation for the auto makers to make money. How about “autotones” for your car? If you live in New York City or Toronto you will often encounter bike messengers speeding pass you just a few inches away. The problem is you don’t know they are coming because there aren’t making any sound. When electric cars eventually get popular, the same problem will arise. Because they are so quiet, it can be dangerous if you are crossing the street and couldn’t hear them. Those hyrids need to figure out how to make the cars nosier.

Many have started working with sound engineers to design sound effects to simulate engine noises. The Fisker Karma, an $87,900 plug-in hybrid expected to be in the market soon, will emit a sound -- pumped out of power sub-woofers in the bumpers -- that the company founder, Henrik Fisker, describes as "a cross between a starship and a Formula One car. I believe at one point they will get creative and designing unique noises to differentiate their brands. There will be Mercedes, Porsche and BMW noises.

Buying an electric car in 2012 you will need to pick from the price list what “Vroomtone” or “autotone” package that you may want to include (for a price). Or you can buy a subscription package that you can have unlimited download of all “autotone” for your car for a year. Pick something for the locking of the cars, or another for engine noises or when the charge is ready etc. May be the automakers end up making more money from these “autotone” that the car itself.

Have a great weekend and off to Boston.

Creative Capitalism + Social Innovation = New Social Enterprises That Make Money And Change The World.

We need more (and more innovative) social enterprises and I really want to see a top tier MBA programs with specialization in Social Enterprises. Call it B-school needs S-school. There are so many problems out there and sometimes we feel we are almost giving up. Our capitalist system is not adjusting well to these shocks. It is almost pointless for these endless debates on how things got to this point and who is to blame. The point remains: We've got to change it—and change it fast – and change it for the better.

The last thing we want to replace these problems with a set of newer problems, I’ve seen in many case when smart people think they have a solution, but they are simply migrating the problems. There is hope. The good surprise is that business—the same institutions that bear a fair amount of the responsibility for the current situation—is also the most potent force for bringing change. No government alone can make that happen. Businesses are powerful, if we can align the forces. There are hundreds of social enterprises are doing exactly that.

Who invented the social enterprise? Or the better idea is how do we reinvent social enterprises so they can be good business and good citizens. Not good business and bad citizens or bad business good citizens. Peter Drucker argued that in this post-capitalist society (not sure I agree with that tern), managers must learn to negotiate a new environment with a different set of work rules and career expectations. Businesses exist to serve social purposes, they have to function in ways that make sense to the society in which they are situated – and in the case of multinational corporations, they often have to function in ways that make sense across more than one society, at a deep level.

Social enterprises can change the world for the much, much better. If social entrepreneurs can navigate around the challenges and become some of the most popular brands of the world. For now, they need to improve the odds and make sure that they can proof that it works. I am very convinced that the concept works, it is just exceptional challenges that needed to be overcome. Some realities. I don’t know the success rate of social enterprises. I don’t think it is higher or lower than the average business. Like any business, social enterprises fail—because businesses fail. But how come social enterprise didn’t scale—like many other businesses with successful business models?

The way I see it, it is not uncommon that traditional social enterprises did not attract the best and the brightest entrepreneurs, many are into the mission and not interested in the business. The other reason is there is a lack of appetite or aspiration for them to take it global or to a larger scale. And then there is the question of capital availability and time frame to achieve scale. Too many are forced to think survival, rather than innovation and growth. There needs to be series ambitions to make sure the social enterprises is leverage its mission and commitment to changing the world and transform our future. That’s a big mission. And it is not mutually exclusive to pursue the mission and not ignoring the competitive dynamics of the industry that you operate in. What’s the best example? Here is one.

Rubicon Programs is a $16mm social enterprise n SF focusing on helping with employment. It started initially as a drop-in center in Richmond, California, for very low-income people with severe disabilities. Their first social enterprises were very small programs that were seen more providing with some training than anything else. Today Rubicon has evolved into an organization that today serves low-income, homeless and mentally disabled people in the businesses, housing and services it provides. About one-third of the people currently served have a mental health disability, so its original focus is still a part, but not the largest part, of what Rubicon does. It is a one-stop shop for those trying to escape poverty. It not only helps clients find homes and jobs but also offers career, mental heath, and family counseling, as well as technological training and money-management programs.

Take Rubicom Bakery as an example, they produce a range of delicious cakes and tarts. The high-quality and handcrafted products are baked from "scratch" recipes and use only the best of ingredients including fresh-grated carrots, Maine blueberries, real butter and Dutch chocolate. We use absolutely no preservatives and our products include no transfats. The bakery also serves as a unique training center, preparing people for employment with Rubicon or other employers. Job training, counseling, and peer support provided in a dedicated baking workshop, classroom with audio-visual capacities, and a job search center with computer terminals help participants develop their work and life skills. Everything integrated, almost like the Cornell School of Hotel Management. There is even an online store too.

Social Enterprises Will Become The Next Big Global Brands. But Not All Socal Enterprises Are The Same.

Let me make a prediction, 10 of the top 100 most popular brands in 5 years time will be Social Enterprise Brands. What are they? They are a new form of organizations. We see more and more development of a mixed economy of companies coming together to further progress on social, economic & environmental well being. Expect to plenty of innovation where Social Technologies meet Social Enterprises.

What exactly is a social enterprise? A social enterprise is a BUSINESS with primarily social objectives whose profits are reinvested for that purpose in the business or the community, rather than being driven by the need to maximize profit for shareholders. But it doesn’t mean that they are not maximizing their effort to create competitive advantages to create economical value in additional to social value. There are many ways to do this but they should not just means non-profits business:

1. Create economic value in the form of profits and use 100% of that to benefit larger purposes. Often include community-based services such as community banking etc.
2. Create economic value by emphasizing double or triple bottom line and use that as a core element of the business model such as value based goods/services esp. fair trade etc. A business that, beyond the profit motive, has a social mission built into their business model or strategy.
3. Create economic value in the form transforming current business model to include social components in a meaningful way.
4. Create value in terms of jobs and some revenue to sustain operations by specifically targeting groups with challenges and to provide training and job opportunities (this employment model is closer to non-profit).

I don’t think Social Enterprises should compete based on lower cost (salaries or subsidized rent etc.). They cannot just rely on a lower cost structure and compete with for-profit businesses with a lower quality product/services, but instead they need to focus on creating innovative business model that allows them to compete just as any regular businesses.

They should not just exist to provide jobs, that’s a pure non-profit’s role, they should be creating value by developing human capital and skilled labor just as regular businesses. The model of many employment-based social enterprise is not 100% Social Enterprises. They provide employment opportunities and job training to its target populations or "clients," that are people with high barriers to employment such as disabled, homeless, at-risk youth, and ex-offenders.

Generally this model is predicated on the appropriateness of jobs it creates for its clients, regarding skills development, and consistency with clients' capabilities and limitations, as well as its commercial viability. This model is usually embedded: the social program is the business, its mission centers on creating employment opportunities for clients. I hope to see the more innovative Social Enterprises that can take this further by innovating more and be able to produce a decent return on capital deployed. It needs to move away from a traditional non-profit model to becoming a doubled-bottom line Social Ventures.

There should be a commitment to both investors and the capacity of individuals and communities to help themselves. Social Enterprises should empower communities and build social capital; you CANNOT take financial capital out of the equation. Not sure if you think this makes any sense to you.

Scott Griffith (CEO, Zipcar) was asked the question by Qn (A Yale School of Management publication) on as the CEO of a social enterprise, how does he make the call when his social goals and profit motive conflict? This is his response:

“Just by the nature of our business model, the social benefits are accruing as we grow. Most of our members don't own cars. As a result of that, every car we put on, we know through surveys, takes about 20 personal cars away, because people choose not to buy a car or they sell a car. “

“That 20-for-1 ratio also benefits household discretionary income. Through surveys we know that between $6,000 and $7,000 a year of transportation spending comes back into the household after they've spent on Zipcar. A clear social and economic benefit to the community that accrues as that happens. “

“As a lot of the economists will tell you, any time you start to pay for something per unit as opposed to a fixed cost, you get much smarter about how you spend your money. So as you transition car transportation from a fixed cost, being car ownership, to a variable or a unit cost, like Zipcar, people get a lot smarter about grouping their trips. And they just make the trade-off: Should I walk? Should I take public transit? Should I use the Zipcar? Their vehicle miles traveled get cut in half. The big purchasing driver, in our case, is economics. That's the steak, and the sizzle is the social good that comes with it, and the sense that they're doing something good for the environment and for the community as a result of their behavior shift toward Zipcar.”

All Nippon Latest Innovation - Pre-Boarding Toilet Monitors

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

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

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

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

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

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

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

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

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

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

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

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

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

Elegant doesn’t have to simple.