innovation playground Idris Mootee

10 Big Reasons Why Most Innovative Products / Services Fail? How Many Of Them Are Avoidable?

Why innovative new products fail? Because marketers believe they know the industry, the product market and the customer and their needs.  And after going through cycles of input gathering and any orginal innovative ideas were ultimately turned into something that a lot like their existing products with minor improvisation. Sounds familiar?

Too many firms “innovate” with very few real insight about the market, their customers, or customers’ aspirations, needs or wants. Rather than go out and understand what customers need and expect, they rely on anecdotal evidence and market research, or simply perform some "ethngographic" study performed by traditional marekting research companies. "ethnographic" field work performed withour an anthropologist is like goging to bungee jump without an instructor.  This is a ley failure point of the first order, like jogging on the rooftop blindly down a path that ends off the building.

What leads some innovative products and servies to succeed and others to fail? The answer to this question encompasses a number of different factors. In some cases, the product cannot deliver the promised performance, capability or attract sufficient interest.

Even if potential can be demonstrated early on, it may take a substantial amount of time to reach the projected adoption figures. Or the product’s innovative feature is being replicated by an existing product as an added function and there is no need for a stand alone new product. Or the economics of the new product is not attractive enough and cannot hit a critical mass. Insight into the minds of the early adopters can greatly reduce the risks of failure, which is generally due to one or more of the following reasons:

1. The innovative new products are not shown in the right user context thus creating a misunderstanding of the applications
2. The new technologies behind the innovative product are not linked to an exciting and worthwhile market opportunity or are too niche
3. The innovative new products are not positioned within any product category and also fail to open up a completely new category
4. There is insufficient knowledge and resources for marketers to drive consumer adoption
5. The core functions of the innovative new products cannot support themselves as stand alone products and only work as features.
6. The promised performance of the innovative new product does not materialize and does not provide enough customer value
7. The innovative new products were distributed through the wrong channel and compromise the value propositions
8. The innovative new products perform only a small function and can be included by others in other products as an additional feature thus diminishing the demand
9. The expectation of consumers adopting the new products is over estimated
10. Products are pushed to a skeptical customer group and fail to neutralize the perceived risks associated with the new product.

The innovative new products require an ecosystem of support which did not exist or were not built fast enough. Determining the suitability of market research for innovative new products or services is a challenge. Insights are not only needed in the early phase of ideas gathering, it is equally critical at the pilot stage. Many traditional market research methods are inherently more tactically focused (orientation on the customers of today) and lead to the development of small improvements in existing products and the big ideas eventually diluted. Read more of this in the next big INSIGHT issue of M/I/S/C available in bookstores in 28 countries.

Why Traditional Apporach To Business Transformation Don't Work Anymore?

Over 60% of companies out there are operating on a dated buisness model and 20% operating with a mental model that had expired for more than 5 years. There are little reasons for those 20% of companies to survie another 5 years or even 3 and for the other 60% they have a short window of opportunity to design and orchestrate their transformation.

Rapid changes in external environment, consumer behavior, global economics and disruptive technologies are throwing off the most rigor business strategies and the best trained managers. Although everyone expect to see big changes ahead but people reacts differently to change.

Many people become accustomed to the status quo and don't want to alter the way things are being done -- regardless of the potential benefits or the disruptive threats from emerging competition. For many, fear of the unknowns and the concerned about the ramifications on their careers are barriers to acknowlege the need for change. People don't like change. And winning belongs to those who thrive with change.

Success for operating in a neck-breaking speed and unknown environment often comes from the ability to drive the proper (or mulitple) transformation at different critical points -- for industry breakpoints. “Business as usual” simply means "end of a business or an industry." Being able to reimainge and reinvent offerings and models are critical to addressing economic volatility and staying on top of the market.

Business transformation traditionally takes the form of unfreezing to refreezing and briding the gaps in capabilities, mindset and performance. And these changes which can take the form of business strategy, management style, culture, organization design and business processes.  One most popular model is the classic model proposed by Lewin which argues that the process of change involves three stages 1/ unfreezing, 2/ change and 3/ refreezing. This model was valuable in recognizing the importance of not only new learning, but also “unlearning” old attitudes, habits and behavior patterns. Today many question the practicality of this model suggesting that a “refreeze” implies a resistance to future change and partucular the future is uncertain.

The Idea Couture Brand-Driven Transformation Model has a strong future oritentation and focused on bringing strategic foresights and organization insights to reimage futures. It uses a lot of Design Thinking principles and makes the process very tangible and collaborative. It is a process of organzation co-creation which people put their stake on what shared destinies they wanted to particiapte in creating and thus releasing energy in the process. It will take 80 Power Point slides to illustrate the process, a high-level view of this model is captured by the following formula: Successful Brand-Driven Business Transformation = P+N+C+M+I+F

• P = Develop a perspective of the future(s) informed by strategic foresights (both customer and technology contexts) and deep organizational insights;
• N = Develop a co-created brand narrative that inspired people of possibilities and put purpsoe at the core of the story;
• C = Develop a compelling case for the need for change developed and shared by all executives, investors, employees and B2B business partners;
• M = Develop a practical means to tie innovation (roadmap) and projects to the desired future(s);
• I = Design an incentive systems that are aligned to identify and encourage appropriate behaviors compatible with the desired future;
• F = Develop feedback mechanism for each stage of the process to monitor progress and provide input for continuous improvement.

Any Business Transformation process is painful. The way many organisations manage change or transformation using existing model is facing the challenge of speed. They are too slow and by the time they refreeze, the market has shifted and they need another transformation. The other important issue is key decisions are made in isolation and the change piece comes later which I argue often is too late. The future of Business Transformation is a co-created one.

On Building The Creative Culture And Learning How To "Forget" Creatively.

We had our Idea Couture Christmas staff part last week. Looking back there were a lot being accomplished and a lot more to do. What started as a little experiment bringing multi-disciplinary design thinkers together and now becoming a key driving force and intellectual engine advancing the practice of design thinking in innovation and business applications. Idea Couture is where multidisciplinary thinkers come together with shared purpose and where creativity flourishes. I am looking forward to have our London and Mexico City offices running in 3-6 months. I feel I have the right people in place and that's a great start.

At Idea Couture, creativity means more than just novelty ideas. It means new ways to frame problem, using new lenses and developing new perspectives. I am so happy when I see happy people in the company doing great things. I am happy to see people growing and that's gives me tremendous satisfaction.

At the end of the day, we're in the business of producing the non-conforming super smart and creative thinkers and doers. I am pushing the envelope everyday and so far no one is complaining. Heartiest thanks to my management team who did a great job of putting togther the first Idea Couture Award.  You guys rock!

On the road this week and spending time with people hearing them talk about their innovation challenges and how they apply design thinking. Lots of great meetings. We're aware of the big changes coming ahead. Every business, government and instirutions will be impacted. Change does not creep up on us every 10 or 20 years, it is an ever-present business and organization phenomenon that is disrupting industries and causing firms and industries to disappear. Although the degree and velocity of change is unprecedented.

Everyday we’re dealing with more and more unknown and unknowable, but decisions still need to be made. Many of the challenges today are unique and have few or no precedents, so textbook solutions (and no guru don’t waste time buying whatever best sellers) or trying to find aHarvard Business School case study. Past solutions do not necessarily apply today. The external environment is constantly absorbing shocks from technological advancement, cultural change and systems failure.

Creativity is needed everywhere to rethink and reimagine products, experiences, companies, processes and even industries. Top executives are looking everywhere for new thinking and solutions that are outside the routine of orthodox strategies and old paradigms. So where can you look for new ideas? And how can you design an environment in which creative people can survive, thrive and flourish? We can begin by asking, how can you make people creatively forget what they know in order to reinvent the future? This is where sensemaking comes into play.

A big part of sensemaking is creative “forgetting” and it is first thing you must do. We all create our own environments and then constrained by them. Being able to aware and realize the impact of our own behavior in creating the environment in which we’re in is a very important first step. Forget who we are is something worth practicing. There may not be any scientific evidence to suggest that those who know what to forget can think more creatively about the future, but in the formulation of business strategy, creativity can be seriously constrained if it is burdened by the past. The problem lies in the notion of “core competencies,” which suggest that companies should stick to what they know best. If that’s the case, then why many of those once great companies should still be around.

What Every Innovation Manager Needs To Know About Value Creation? Let's Start With Something Simple.

What is value creation? Something commonly used in strategic discussions but not well understood among managers as well as business or design school students. If a company needs to reinvent itself, they need put value creation first. If a disrupter wants to attack an industry leader, it needs to put value creation first. If your company want to grow your way to greatness, put value creation first. If your company wants to stay relevant, put value creation first.

There are many practical issues that affect value: from the nature of owners and investors to the shifting perception and behavior of the financial market, smart and foolish ways to invest, divest, reorganize and acquire etc. At the very core, it is about how companies create value by investing capital to generate future cash flows at higher rates of return than their cost of capital. And how different ownership structures and organization designs could affect value. Here I am talking about one level below.

For business managers, technologists and design professionals this means creating value with everyday decision. Value is the source of competitive differentiation. Here are a few ideas for you to think about:

• Every innovation manager needs to know or consider constantly how each new ideas will benefit consumers and in what way whether helping them to perform, produce, organize certain things or feel certain way. Value can be both tangible and intangible. Customer value needs to be created first before you can think about capturing them. Value creationn before value capture.

• Every innovation manager must understand and better than their competitors at understanding where, how and why value is created and destroyed within your industry and your company. Not only by business unit, by product, by customer, by channel, by market, by technology, or whatever that best reveal your formula that drives value creation.

• Every innovation manager needs to know how their decisions will enable the organization to create, deliver and capture new value from change and foresight. By bringing new perspectives, they can help executives to make better future-informed decisions that create value.
• Every innovation managers need to stay focused on the objective of creating value through purposeful innovation. Don’t be distracted by other management measurements and indicators that don’t build organizations (they are for managing organizations, not building them) and avoid the trap of spend time managing the lagging indicator rather than creating real value for the future.
• Every innovation manager needs to remember that creating value is also about managing expectations. They need to accept that even great ideas will fall flat and some mediocre ideas will be successful and timing can be a key factor. Avoid "short-termism" and confusing product extension is innovation. The best way we can build successful innovation that delivers growth is by putting value creation first.

A misunderstanding of “value” is causing many companies to be “recklessly cautious” or "creatively overwhelm" and forgetting that they are competing for tomorrow’s market and cash flow – not yesterdays. And by their “short-termism” they are passing up terrific opportunities to create long-term value. “Short-termism” is not good for innovation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Strategic Innovation And The Quest For Breakthrough Ideas

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

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

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

The most common mistakes fell within the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Design Thinking Can Help Organizations Making The Quantum Leap In Strategic Innovation.

Lately I have been meeting with dozens of potential candidates who are seriously interested and passionate about design thinking and understand the role it plays in transforming organizations, design thinking can help companies to make the next quantum jump in organization, human and social evolution? It is a new managerial logic as well as competitive logic and in then years every business school will have this in their core curriculum. The problem is there are far more people interested in it and not many understand the ‘what’ and ‘how’. I am getting an average of 10 resumes a week and most people think design thinking is super cool.

The relationship between design thinking, system thinking and strategic innovation are pretty muddy and many conversersation and writing are mostly around the simple notions of observational research, prototyping and design. We’ve beaten that one to death long time ago and many of these conversations are missing the point.

I don’t think design thinking has come to a point when it is over hyped nor it has come to a point where people truly understand what it means and how to apply it. There is a design perspective, an engineer perspective and a business perspective to it. The challenge for many is the ‘how’, Idea Couture is the only company that has taken this to a practical level for business applications, and beyond telling people you need to be creative. Here is good piece on design thinking from Will Novosedlik's blog.

So far there are no empirical studies that look at a directed implementation of design thinking in business with the aim of improving strategic competitiveness, innovation capability and business performance. We don’t usually ask for a business case of HR, legal, compliances, risk management or strategy department, why are we asking for design thinking investment business case? Another reason for lack of concrete evidence is that is it is hard (and wrong) to compartmentalize design thinking into the format of a method, process or tool. Rather the approach should resemble an emergent learning journey where rapid experimentation, broadening of new perspectives and challenging of dogmas needs to be at the fore.

Design thinking is an emerging discipline and our work to date is a work-in-progress. It is not about getting brilliant ideas from the minds of geniuses or creative superstars. We don’t want creative superstars; we want people who understand cross-disciplinary and interdisciplinary collaboration and the importance of rigor, play, balance and discipline to create elegant objects, solutions and systems.

I have a great respect for Tim Brown who introduced the word design thinking although we have a very different definition and approach to it. He is a designer at heart and I am a strategist. Our jobs are similar which is to help identify patterns where others see complexity and confusion; we synthesize ideas from seemingly disparate fragments; and uncover solutions new opportunities. Design thinking is a method in which genius is not needed, just ordinary people with a lot of commonsense and empathy.

It has been a very productive week in Vienna talking to many interesting people including the organizer of Vienna Design Week and I am thinking about dong a special feature for our next issue. Vienna is an interesting city where it has a history of music and engineering, the two very different or similar domains depend how you look at it.

In addition to music, Austria has made a name for itself with the electronic engineering of customized electronics like microprocessors and integrated circuits for airbags, ABS braking systems and components for airplanes and high-speed trains etc.

I was staying at the top floor of Das Triest, loving it. The hotel is in the fourth district, which is set back about ten minutes straight walk from the city centre. An old hotel that was transformed into a luxurious, warm and unique contemporary design hotel by Sir Terence Conran, it was the first design hotel in Austria. The building was originally used as a stable for horses pulling stagecoaches between Vienna and Trieste - hence its name, "City of Trieste." The hotel design provides a sharp contrast to the city 19th-century Art Nouveau architecture. It has a lovely courtyard garden, which reflects Sir Terence Conran design philosophy and give a sense of Viennese flair with a little English touch. Perfect for Viennese summer party.

I literally had most of my meetings in the courtyard. It is very popular event venue for the entertainment business. I am thinking of hosting our next client's event there. Client innovation workshops with sacher tort for coffee time to be followed by a Mozart concert. I think that’s a really good idea.

Design Thinking Has Inspired Multi-disciplinary, Interdisciplinary and Trans-disciplinary Approaches To Problem Solving. This Is Just The Beginning Of A New Discipline.

Prague is mystical with a mix of medieval, Renaissance, and Art Nouveau architecture and the design scene is slowly taking shape. You still see traces of history of what communism had done to the city even after these buildings are completely restored. It is where Renaissance meets neo-Gothic and the baroque structures from the 18th centuries.

You can see shadow of cubist touches, which thrived in Bohemia more so in the neighborhood near Vysehrad Park. The public housing or “rabbit huts” as they called it, cheap but highly functional (the Walmart of architecture), provides a stark contrast to the Bohemia style. It is the featureless nature but with modern plumbing and heating were once considered the politically correct way to live. Or at that time, politically sustainable living as I would have called it.

I stayed at the Hotel Josef, a nine-year-old modern boutique hotel that was one of the first in Prague and still the most popular one. It is centrally located in the old Jewish quarter and right next to the Parizka Street. I don’t like the word boutique hotel, as it doesn’t mean much other than small and not part of a big chain. I rather use the word design hotel.

I was really impressed with the design and how it holds up over the years – now that’s design at its finest. There was not a thing to make you feel that it is getting out of fashion, in fact, the hotel design concept is to provide guests with a break from the fascinating baroque architectural surrounding the hotel and give them space to step back and relax in a soothing, and luminous environment. I enjoyed the hours and hours I spent sitting in the lobby lounge doing work with my Macbook while occasionally looking out the windows.

When you’re in Prague, you can’t avoid talking architecture. I’m not trained as an architect but always fascinated about the design process as well as the visual artifacts architect employs. Architects are considered designers and probably fair to say that they required the most rigor training both in art and art history compare to other design discipline such as graphic, fashion or industrial. They probably attracted a very different type of design mind than those of other design disciplines. I wonder what would happen if first year MBA students were required to spend 3 to 6 months studying the history of architecture and design, at the same time learning some basic drawing skills. I think that would drastically widen their perspectives as well as picking up some drawing skills that they can use for life.

Today, most MBAs can’t even draw simple diagrams. The pre-MBA studies are mainly statistics and accounting. There is plenty of time for accounting later in the program. The abilities to communicate using simple diagrams are extremely useful for business problem solving, strategic communications and visual sensemaking (strategic modeling and business model design). Architects use diagrams to explain their visions, elements and relationships between them. Business people can use abstract visuals to show business model options, new value chain design or customer interactions. Once business persons/design thinkers are supplied with visuals to making connections, they can see the relationships between different components better and in return easier to see something otherwise too complicated to express.

Visual sensemaking is quietly changing decision theory, it is also influencing design thinking and theories of design-oriented problem solving as a manifestation of pattern recognition. It is hard to say whether sensemaking is influencing design thinking or system thinking is influencing design thinking and in turn influencing sensemaking. It is a fact that design thinking has inspired multidisciplinary, interdisciplinary and trans-disciplinary approaches to problem solving. I will explore the application of this in my coming Design Thinking for Creativity and Business Innovation seminar organized by the Harvard Graduate School of Design in NYC this month. 25% discount for early registrations and affiliates of a list of design and business schools. Now hoping on a train to Wien.