innovation playground Idris Mootee

Innovation Requires New Pattern Of Thinking and Sensemaking. What Are The Key Barriers To These Patterns? How Do We Combine B-School and D-School Thinking?

Some of the most serious challenges we need to deal with in our career or business arise because some fundamental aspect of our world changes. Something shifted while we were busy with other things.  We know that to truly solve these problems will require “letting go” of old ways of seeing, interpreting, and acting that we have come to rely on because they served us so well in the past. Good habits of the past are often the big barriers to new thinking. To break these barriers, you need to leverage the power of both B-School and D-School styles of thinking (new Idea Couture's T-shirt pictured above).

These “habits of mind and heart” are often implicit and unconscious, so we are not even aware of what it is doing until the security and predictability they once provided is threatened. That moment of "oh shit" realizing we could be wrong. When a new and innovative idea is presented, people will bring up dozens of reasons why this won't work. Only after hours of discussions before people realize the truly power of one idea. This is familiar to all of us. People say they want new ideas, but not prepared to get rid of those old habits in order to really see the idea.

In large organizational settings, the more we try to cling to the old patterns, the more likely end up blaming others (especially those in authority, senior executives positions) for the pain. Deep change is possible only if we are able to look at ourselves in the clearest possible mirror and at the same time trying to fully enlarge our awareness of the illusions about our organizations and the world that have brought us to this point of crisis. Only then new patterns of perceiving, relating, connecting, and discovering begin to emerge.If you start seeing these patterns, this is a sign of breaking out of your box.

One thing is certain: the approaches, patterns and quality of our thinking during the crisis will inevitably determine where we'll land when it's over. Are you prepared yourself for that? What are the key barriers to perceiving, relating, connecting and discovering? Here are the top three reasons:

Bounded Rationality. We are all rational beings to different extent and in that we will try to logically understand things and make our own choices. The problem is things are so complex, that we don’t have the capacity to understand everything. We also have a limited time and data to make informed decisions. As a result, our decisions are not fully thought through and we can only be rational within limits such as time and cognitive capability. Herbert Simon points out that most people are only partly rational, and are in fact emotional/irrational in the remaining part of their actions. In another work, he states "boundedly rational agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information" Design Thinking is a good way to get unbounded. We have a great toolkit to help clients to do that.

Representative Heuristics. Human tend to judge the probability of an event by finding a ‘comparable known’ event and assuming that the probabilities will be similar. As a part of creating meaning from what we experience, we need to classify things. If something does not fit exactly into a known category, we will approximate with the nearest class available. It is easy for us to wrongly approximate with a wrong experience and become very bias. In simpler terms, we have buckets of things and if any idea does not belong to any of these buckets we will ignore them. So always keep a spare and unlabeled bucket.

Focusing Effect. When we are make judgments, we tend to weigh attributes and factors unevenly, putting more weight on some aspects and less on others. This is typically due to factors such as stereotyping and schemas that we use that bring certain factors to mind and downplay others. The most common example is we ignore data points that disapprove our theory and over weighting data that supports our theory. A good habit is keep notes of any data that contradicts your thinking separately and find time to look them and trying to understand what it really means or why it could be wrong. But don't ignore them.

Are you aware of these habits that are affecting your judgement on your innovation initiatives The truth is there is really no one best recipe to organize for innovation. Each industry and organization has different objectives and roles for innovation, and different systems and business models in which innovation has to accomplish its role. But doesn't matter which approach you take, you still need to learn to overcome the these barriers.

Viral Video Is A Secret Weapon Many Are Still Learning To Use. It Is Highly Engaging. Advertisers Ask Why Are We Paying For Reach When What All We Want Is Engagement? Think Viral!

When most people think about viral videos, they think of a crazy idea (often funny) that is irrelevant to the brand and put it out there to see what happens. The field has gotten much more crowded in the past 12 months but the behavior of sharing video is more common and bloggers help create more space for that. iPhone is another factor.

How to create and measure a good vital campaign? Here's an example of how to look at it. We;ve built a very sophisticated model and actually adjust and weight each interactions so it can be comparable to 'impressions'.

- 2,000,000+ views on YouTube
- 35,000+ informed on Facebook or Linkedin
- 10,000+ ratings
- 6,000+ favorites
- 4,000+ comments
- 2,500+ mention in community and forums
- 500+ blog post mention
- 250+ blog posts linking back to the videos
- 10+ newspaper/magazine mention

What is the best strategic framework for viral marketing strategy? OK I'll share some of our company best kept secrets here (Pls don't share with our competitors).

Creating the brand connection. This is very important; a concept should not be forced because it fits a brand. Rather, a brand should be fit into a great concept. This is where the art comes in. How do you align the positive attributes of the viral videos to the desirable brand attributes to further strengthen them.

Size does and doesn’t matter. People often think that a viral video needs to be short 15-30 seconds, that’s really not the case. It doesn’t matter, as long as it is not 30 mins. So whether it is 30 seconds or 90 seconds, I don’t think it makes a difference. It is the content.

The shock factor myth. Well sure it attracts attention, but the best viral doesn’t need to resort to using this. Having said that, it is always important that a viral video will allow and attract viewers to investigate further.  Lots of folks think the shock factor is the key viral component, may be for very small teenage segments. Most people don’t care.

Don't create a mini TV commercial. That’s guaranteed to fail and not getting viral. Don’t make an outright ad: if a video feels like an ad, it reduces the likelihood that viewers would share it unless it’s really amazing in production value.

Truly authentic user stories. People are interested in regular people; the cool factor lies in those little things with those everyday folks. Even those they are professionally produced, keep everything as authentic as possible. If you idea involves real life stories, it is even better.

Allow voting. Let the public vote for what they like or whatever makes sense. This will get the bloggers buzzing to their readers.  This is the most powerful participation driver. Everyone loves competition.

Be 'good'. People who believe in a cause tend to be more proactive in spreading the word.  They can be fiercely vocal about what they believe it.  Leverage that behavior and dig deep to find the ‘good’ in your brand.

Encourage ‘remix’. There are lots of creative people out there, and I’m sure many of them would be delighted to add or remix their ideas. Make that easy for them.

Watch this one. It's funny.

So You Think Many Businesses Are Fast Becoming Irrelevant. Well, It Is Also The Same For "Management Thinkers".

I was reading this post from the WSJ Blog titled Management Moonshots (Part 2) written by Gary Hamel. The topic was around what is it about the way large organizations are currently managed, structured, and led that most imperil their ability to thrive in the decades ahead?  OK, fair topic particular at turbulent times like this. The idea was to explore new management principles, processes and practices if we are to build companies that are truly fit for the future? So the build-to-last question.

In May 08, 35 management scholars (top minds in business theory) and practitioners gathered to debate these questions. The goal of the conclave: to develop a portfolio of grand challenges for reinventing the work of management. The broad themes that emerged were captured in the form of 25 “management moonshots.” Here are the top 10, my comments in blue:

1. Ensuring that managerial work serves a higher purpose. Management, both in theory and practice, must orient itself to the achievement of noble, socially significant goals. I think this is a good thought but it is still debatable what level of social responsibility a company should bear and how to manage the conflicts, it is too quick and easy to say business should serve a higher purpose. Purpose is important for any company to succeed.  Our system is currently not designed that way not to say that we should not change. CSR is no question becoming a key movement and will transform organizations of the future.

2. Fully embedding the ideas of community and citizenship in management systems. Management practices must reflect the interdependence of all stakeholder groups and must not give undue weight to the interest of managers themselves. OK This is a no brainer. Although we are experiencing a system failure. Management is always about balancing between different goals and often conflicting.

3. Reconstructing the philosophical foundations of management.
To create truly resilient organizations, machine-age management process must be rebuilt using principles borrowed from fields as diverse as biology, theology, political science and urban design. This is purely academic and theoretical,  it has been more than 15 years since we started exploring complexity theories and other and try to apply them in management. That including myself, I wrote a book on applying complexity theory in management 10 years ago. But we can’t get beyond a metaphor. I remember McKinsey set up a practice in the Atlanta office at 20001 specializing in this, folded in 10 months. It is intellectually interesting, but there's nothing here, let’s move on

4. Eliminating the pathologies of formal hierarchy.
Tomorrow’s management systems must encourage the development of natural hierarchies, where power flows up from the bottom rather than down from the top, and where leaders emerge instead of being appointed. I don't what to say. Off course leaders are emerged before they are appointed. It is not either or.

5. Reducing fear and increasing trust. Mistrust and fear are toxic to innovation and engagement and must be wrung out of management processes.  What are saying here? Sure managers need to do less ‘blamestorming’ and more ‘brainstorming’. This is 101, trust is everything.  Moving up a one point on a ten point scale of 'workplace trust' affects life satisfactory about the same amount as a 40% change in income.

6. Reinventing the means of control. To maximize discipline and adaptability, organizations must develop management systems that foster control from within (based on shared values and norms) and reduce the need for control from without (via rules and sanctions). Haven’t we beaten this one to death already.

7. Redefining the work of leadership. In a complex and dynamic environment, leaders must be more than prescient decision-makers; they must also be entrepreneurs of meaning and architects of collaboration. Leaderships are many things. So here are two. OK. The biggest challenge to leadership is what I called a “pants situation" , meaning one needs to cover his/her backside because of looming trouble and no one wants to take any risks. Leadership is about calculated risk taking.

8. Expanding and harnessing diversity. To succeed in the future, organizations need management systems that value diversity, disagreement, and divergence as highly as conformance, consensus, and cohesion. Anything new here?

9. Reinventing strategy making as an emergent process. In a turbulent world, strategy making can no longer be a top down activity. What is required instead is a strategy process that reflects the biological principles of variety, selection, and retention. We don't need to make this complicated. There are industry that moves so fast that and long range planning is useless, but there are indsutry that required big capital investment cycle and need long range planning. It is that simple. There are different schools When considering the number of movements, schools in the strategy development process. The distinguished: rational planning, planning as a guided learning process, planning on the basis of logical incrementalism and emergent strategy formation.

10. De-structuring and disaggregating the organization. To become more adaptable and innovative, large entities must be disaggregated into smaller, more malleable units. No longer can scale come at the expense of agility. This is the only one that makes sense. Finally. We are talking about structural change in how organizations are structured as well as decision making approach.

At least I managed to find one or two out of the ten that is more relevant managerially.. I definitely feel like I stumbled into a room full of management consultants and armchair management strategists in a karoke contest. I stopped reading management academic journals long time ago because they are so boring and becoming irrelevant. MIT Sloan Journal and LBS Business Strategy Review have actually transformed themselves and are very managerially relevant. Both have nice design.

Back to the ideas of management, the core elements of great management have not changed in a century. It is all about empowerment, engaging employees, being customer-centric, flatten hierarchy, creating/maintaining differentiation, minimizing bureaucracies, and maximize shareholder value creation. It is pretty simple. Didn’t they teach that in B-schools?

Why are we bringing diversity up here? Smart people are smart people regardless of anything, race, gender or sexual orientation. Emphasizing that diversity of ethnicity add about as much to organizational success as hiring for different tattoos or hairstyles is nonsense. Matrix organizations don’t perform better than traditional organizations, especially if you report into incompetent and narrowed minded managers. Smaller business units do not necessarily have less bureaucracies than larger ones. Lots of white boards everywhere doesn’t mean people have creative ideas to share. We don’t need more management buzz, just need higher quality management and better managers.

For those who are interested in revisiting management. Here’s an excerpt from an inteview written by my friend Stephen Bernhut for the Ivey Business Journal, worth another read. Of Charles Handy, Warren Bennis has said that, "If Peter Drucker is responsible for legitimizing the field of management and Tom Peters for popularizing it, then Charles Handy should be known as the person who gave it a philosophical elegance and eloquence that was missing from the field."

Mr. Handy has done that and much more. Since he left his senior management position at Shell in 1965, Charles Handy has been a widely praised lecturer and business consultant and a co-founder and professor at London Business School. He has made his greatest contribution to management thought, arguably, in 15 books.  In all of his books he speaks in a strong and passionate voice, about the nature of work and organizational life, about ethics and values, and about the search for meaning in life and in work. Thoughtful and incisive, he has been ranked as the world's second most influential management guru by FT dynamo.com.  Stephen interviewed Charles Handy in Minneapolis, where he delivered the annual lecture at the University of St. Thomas.

With respect to the elephants, it seems that quite a number of them are being swallowed. In some industries it seems that, at the end of the day, we're going to be left with one bank, one airline and so on. Can that happen and what are the implications?

It seems to me that they'll get bigger and then they will de-conglomerate again. But in the meantime, you're going to end up with 3 or 4 big oil companies and 3 or 4 big airlines, 3 or 4 big pharmaceutical companies, and 3 or 4 big banks, and lots and lots of little ones. And I think it's a bit dangerous, because even though we have all the antitrust regulations and all the rest of it, as Adam Smith said, 'When two or three people get together it is a conspiracy against the public'. And whatever the law may say, the fact is that you don't even need to talk to each other. If you've got three oil companies and one of them drops the price by 5 cents a gallon or liter, then the others will automatically follow suit. They don't have to talk to each other, they just will do it. And if they raise it, the others will probably raise it too, because it's effectively an oligopoly when you get to that large sort of size. So I think it's slightly dangerous. But you can see why they do it. The easiest way to make the shareholders happy is to get bigger, and the easiest way to get bigger is to buy something else; and if you want to reduce competition, buy your competitors.

It's not what my view of what capitalism is all about. Capitalism should be about organic growth, getting bigger by producing more products that more customers want. Buying off your competitors doesn't seem to me to be what it's all about. But you can see why they do it, and it's going to continue to happen.

In the Elephant and the Flea, you note that there are four challenges for organizations. One of them is to meet the conflicting demands of profitability and what you call "social acceptability." Just how does an organization do that?

It's a difficult balancing act. Profitability obviously is an absolute essential. But it is not the main reason for a company's existence, even though it would be nice if it was. But it isn't, because if everybody really acts on that premise, which a lot of American corporations still do, that the main duty of a company is to provide profits to shareholders, they will be despised by society, because it would look like they're just using society to make money from people who haven't got it and don't care a damn on the whole. They just want to get rich. And I think you're seeing some of that in America at the moment, that society actually despises selfish businesses. So the whole point of business is to use profits to make things and provide services that people actually want, of a high quality.

And in the process they've got to behave themselves as decent citizens--they've got to give people fair wages, unlike Wal-Mart, which basically pays people as little as possible. They've got to treat them fairly, reasonable terms as well as money, reasonable terms of employment, and I suspect they ought to give them better holidays than they do in America. I think it's actually ridiculous that you expect people to work that hard for that long. But they've also got to respect the laws of the land and they've also got to respect the unwritten laws of the land. But this is slightly contrary to the most important goal, which is maximizing short-term profits. The way you actually keep the balance is by having people at the top of the corporation who actually believe that that's a good thing to do. There's no law that can keep them like that or honest, and you can put all sorts of codes of ethics there that you like, but in the end if the guys at the top don't feel that, they'll find a way around it. Look at Enron, they had all the codes you could think of and had they acted on it, so it is the responsibility of the leadership.

Now that's management.

Gmail Gets 'Undo'. We Can Use More 'Undo' Functions In Many Of The Problems We Created. It's TIme For Marketers To Learn From Human Factor Specialists.

Most mistakes are caused by human errors, Google user experience team understands this well and last week announced the launching of a Gmail Labs feature called "Undo Send," that lets users abort the sending of any Gmail message--if you use it within 5 seconds. Undo Send lets you snatch an email back before it gets sent out. Not sure it allows user to increase what’s the lag period, I think 2 minutes works for me better.

Other error forgiving features already available include Gmail's capability to watch for words like "attached" in the body of an e-mail and to check you if you’ve actually included the your attachment; and a feature in Google Apps (the corporate version of Gmail) that puts orange borders around the names of e-mail recipients that are not inside your company--to alert you to not send confidential information where you shouldn't. This is definitely useful as we often made mistakes of sending it to the wrong person because of auto-fill address.

I think the next enhancement should be scanning for “words” that show strong negative emotions as we know we often regret what we said when we were angry. So the feature will hold your email for 15 minutes and ask you if you really want to change these words or suggest some alternatives.

I think the notion of  ”undo” is a very interesting one, lawyers understand this notion very well when they write contracts. There are so many decisions in our everyday life that we wish we could ‘undo’.  How often we press the wrong button while we configure a new device and we have to start over again or worst got stuck because there’s no way out. We (humans) are both the strongest and weakest variable in any complex system. The strongest because we are versatile, adaptable, learning beings equipped with the most advanced and fuzzy-logic computer—our brains. The weakest because along with our adaptability is our variability. For the same reasons that even extensive planning, we also err in many situations where we have never erred before. Just look at our current mess in the financial system.

We are often reminder that human errors cannot be avoided. And all too often human error is an explanation, it is never a solution, yet we most often go forward shaking our heads at the sad but inevitable fallibility of people or, better yet, with a deceptively comforting bandage fix and a promise that it will never happen again. Bandage after bandage, eventually they begin to wear out and the vivid lesson grows dim with time, and we set ourselves up for another error. Overtime these errors pile up to point until it becomes system failure.

The whole idea of human factor is to address human weaknesses while facilitating human strengths.  Human factor is not just making better switches and safer devices; it is about compensating for human errors.  And if possible allow us to undo our mistakes. Forgiving user experiences are not easy to come up these days. The world can use more human factor specialists.

Imagine a group of human factor specialist sitting together and rethink the following three things:

Undoing Credit Card Purchases. From how we shop and how we much we decide to pay for each statement period. They could easily come up with dozens of way to “undo” our mistakes. I think many people can use an “undo” function in shopping with a credit card. Lots of untapped innovation opportunities here.

Undoing Voicemail. Can you imagine if we could simply go back and change the voice mail we left before they pick up the message? How often you wished you’d done a better job when you left a message for a future employer, prospect or ex-girlfriends? How come no one thought of that feature?

Undoing Marriage. There must be a better way to “undo” this than divorce. Human Factor folks will find better solutions than the lawyers. The Google idea may be applicable here, how about 60 days lag period that allows either side to opt out?

“Clients Realize That To Succeed At Their Own Projects, They Need To Think Like Consultants” - According To Consultant News. Not Sure It It Is A Good Idea.

“Clients Realize That to Succeed at Their Own Projects, They Need to Think Like Consultants” is the headline of article from the Consultant News published by Kennedy Consulting Research. Clients shouldn't think like consultants, read on to understand why.

Here’s an excerpt from Consultants News:

"The best clients understand this, so many try to absorb as much consulting knowledge as possible during engagements. This enables them to become more innovative and responsive to ever-changing market opportunities and challenges in the future. In fact, client demand for consulting-like knowledge and insight is growing, which prompted Jump Associates – a 50-person product strategy and design firm in San Mateo, Calif. – to launch a new consulting service based on helping organizations to think more like consultants."

What is wrong here?  Here’s an excerpt from a piece by the late Peter Drucker titled “Why management consultants?” that will give you some perspectives.

“But there is a subtler and perhaps even more important reason for the emergence and the importance of the consultant in the practice, the discipline, and the profession of management. “It is a fool who has himself for a client,” says an old legal proverb. And physicians learned long ago not to treat their own families, let alone themselves."

"The professional needs commitment to the client's cause or to the patient's recovery. But he must stay free of involvement. He must not himself be a part of the problem. And the practitioner executive is always a part of the problem, is, indeed, as Chester Barnard first pointed out, always the main problem. The practitioner-executive cannot treat his organization without treating himself. That his own interests are at stake is probably quite irrelevant; the present- day belief that a responsible professional cannot rise above his own self-interest is little but vulgar superstition. But the executive in an organization is also always a member of the organization, shares its traditions, its beliefs, its joys and its sorrows, its greatness and its pettinesses. He is like the physician who treats his own family – he diagnoses with the heart and always takes his own pulse rather than that of the patient."

"And thus, the management consultant brings to the practice of management what being professional requires: detachment. He makes it possible to have a professional diagnostician in management, a professional therapist and a true scholar."

Consultants and clients play a very different role and have very different skills. Consultant’s development goal is to expose himself broadly, analyzing massive qualitative and quantitative data and looking at the business from both industry structure and outside the industry perspectives. An industry executive’s career is to execute and implement in the most effective manner.  It is simply not a good idea now possible for them to put too much focus and energy on different industries.

Often an outside opinion, expressed by a consultant is important to shake things up. The most senior level of strategy consultant can help companies react to competitive threats but remain detached. Companies often made the mistake of Instead of undertaking extensive, sophisticated analyses when faced with a competitive threats, they assess just a few responses, and often choose the most obvious one. Missing out many strategic choices.

Consultant is an ugly word sometimes and we know why. I’ve seen many snake oil salesmen selling best practices with the goal to make every company the same. That’s also called “commodization!” Many are simply lack the depth of experiences, in general many young MBAs who have less than 10 years are basically analysts or specialist consultant,definitely not a strategy consultant.  How can you advise a client on strategic issues when your exposures on many of these big strategic issues are from text book? 

If you have worked with some of the the top tier black belt consultants, you know how much value they can bring and a difference they make to the success of a project. I am not sure about the tier 3 or tier 4 consultants. You might as well just save the money.  The reasons for using tier 1 and 2 professional consultants are:

Talent and brains. They usually hired the best and the brightest and many of these people prefer to jump from solving one problem to the other rather than staying within an industry. They live in airports and hotels. So a different lifestyle.

Stamp of approval. If you want to sell a big project or an M&A to your bosses – having the stamp of approval of a top consulting firm really helps.

Outsider advantage. One of the biggest strengths of consulting firms is that they are external to the organization. You need an outsider to avoid internal politics. The consultants have no self interest because they don't stay on after the project.

Cross industry-knowledge. This is key as the knowledge repository is important and it comes with the package.

Clients don't need to think like consultants. But consultants need to think like client. Consultant's number one skill is "listening". Tom Peters is one of the smartest management consultants and thinkers of the last decades, but you really don't want your people to be like him. He is not an organizational man.  Both consultants and managers have different roles to play, there are things they can learn from each other, no question, but you don't want them to think like each other.

And remember, the most important characteristic that a management consultant brings to the practice of management what being professional requires is detachment, you don't want your managers to start feeling detached, do you?

What's The Value Of Bullshit? What Are The Top Bullshit Professions?

Organizations are losing trust. Some industries do worse that others, but in general, many professionals are close if not already below the minimal threshold of becoming bullshits. It takes a long time to build trust. How do we start trusting people or organizations? We can always watch them how they do their work, interacting with them. And we can check their actions over time. On a day to day level, how many institutions you deal with everyday are the ones you trust? Doctors, lawyers and bankers...who can we trust. Lets try to list the top 10  (not in any particular order):

Advertising Agency Creative Directors: (Interactive CDs, Art Directors not excluded) People building a career by developing their egos over ideas. This title is so out-of-date. The job is being reduced to a hat that people randomly put on.  A big majority of people with this title is no more than a mouth. There were lots of brains in this business in the 70s and 80s. Today I see many young CDs that lack the substance of the older generation. These BS often manifest themselves on TV as we see them. We don't see many Bill Bernback, Leo Burnett or Lee Clow today. 

Film Critics: Ok, no one really cares what they say anyway. The democratizing effect of the internet may have made elitism in writing a thing of the past but it also, by definition, allows any schlub(s) with a connection (and a web cam) to post their opinions. Plenty of supply but less demand. That once high-end criticism is a lost art (or at least one for which there is little demand) every Tom, Dick, and Mary can fill the void.

Investment Managers (including stock brokers but not including financial advisors): Monkeys throwing darts eating bananas. Whether we are talking about hedge fund managers or investment analysts, they offer little or no value or insights and simply sucking blood from your investments like Vampires. The big names are those who lost billions, that how they earn their reputation. You must take the time to learn about your money because no one else cares more about my money than you. It will take a decade for these professionals to regain trusts and re think their value propositions. We need more Warren Buffets. We trained thousands of CFAs and Master of Finance that specialized in investments management, everybody is thinking about quick money. This needs to change. There are so many mini Madoffs everywhere.

Economists (macro): What thy are always wrong? Commerce flourishes by circumstances, precarious, transitory, contingent, almost as the winds and waves that bring it to our shores. Economists were big contributors of ideas to monetize the Earth, perform cost-benefit analysis, and concluded that the planet isn't worth saving.  I remember a saying of economists "always certain, always wrong."  Just hope they can give a little early warning before any recessions.

Organizational Change Consultants:  Too many (good and bad) books written on this subject and some have started to believe the hype... some of the most successful organizations are autocratic (look at Jack Welch and GE) - who is to say that a style is effective or ineffective - sure it needs to be consistent and that people employed 'buyin' or accept the culture. So can you make bottom up change – Yes. Should we make bottom up change - No!

Motivational Gurus: Have you ever watched those infoercial selling the $29.99 audio set? There are two types of motivational speakers. One type you should stay away from like the plague, while the other can contribute to your organization. The first type is the rah-rah, light a fire under 'em kind. With little to say except fancy sound-bytes, and exhortations, the worst of these can talk for an hour and say almost nothing. People who attend these sessions may come away slightly energized, but if you ask them what they learned, they'll look at you blankly, because these sessions don't promote learning, or solving problems. Entertaining, yes. Useful, not sure.

Therapists: The problem with this profession is that there is very little scientific evidence.  Good therapy is, ultimately, about connection and relationship with an intelligent and thoughtful other. Is this individual someone capable of deeply listening and reflecting with you as you share your most secretive thoughts. That could just be one of your friends. You want to feel heard? My advice, save the money and invest in a nice chair and get yourself some fine wine. Or at least a dozen of beer. Is there more benefit than a carefully structured human interactions to deny whatever social effects on the individual. Although this can hardly cause any hard but does it worth the cost?

Beauty Consultants: We know they are in the business of selling hope. Beauty or image consultant, not sure if can really help. You can do only Botox so much.

I can only think of 8 so far. Explaining how bullshits happen... believe it or not, there is an economic theory behind it. The bullshit theory of value (BTV) is a theory from classical economics that understands the value of an exchangeable good or service as equal to the amount of bullshit required to produce it, including the bullshit required to produce the raw materials and machinery used in the process.

Value in the bullshit theory (the idea is also bullshit) of value is different than other uses of the term value, such as moral value, appraised value (potential price), price or usefulness. Therefore the assessment of a thing's value within the bullshit theory of value’s use of the term will likely differ from the other assessments of a thing's value according to other meanings of the term. Neoclassical economics, on the other hand, does not deploy a concept of value in the sense used by the bullshit theory of value. It instead relies on other concepts such as price, utility, preferences, technology and endowments which would be understood within classical political economy as things other than 'value'. To practice bullshit economics, you need to have a BS in BS.

The Massification Of James Bond Inspired Spy Gadgets Culture

As we see everyday electronic gadgets becoming smaller and hackable, GPS and RFID tracking mechanism are embedded in many objects and intelligence is one Google click away, we are seeing a major trend here and will last many more years. Thanks to Q and M, not only Bond had access to a constant supply of gadgets that helped him to get his mission completed and it actually inspired many of today’s latest innovation. Agent 007 is always guaranteed to have the most outrageous and innovative gadgets ever to grace the silver screen. It takes a lot to save the world.

Without them, James would never have gotten close to beating Mr. Goldfinger or Dr. No. Not all his gadget made it as a home run. For every garrote watch, exploding toothpaste, and GPS phone. Other than the exploding toothpaste, all these are becoming real and affordable today. Here are some examples:

Fake Fingerprints  - In what has become known as the "Gummi Bear Attack", Japanese cryptographer Tsutomu Matsumoto demonstrated that your fingerprints could be copied and used to create fake ones pretty easily, as suggested in Diamonds Are Forever. Using gelatine as found in chewy sweets like gummi bears, he showed that a latent print could be lifted from a glass and used to fool 80% of fingerprint scanners tested.

Digital Voice Changer - Bond uses a gadget with a cassette tape inside to change his voice, sounding on the phone to the movie's villain like one of his fellow bad guys. It's a simple trick you can now so with free software. Some allow you to tune it to simulate someone’s voice.

Stylish Amour - A special range of lightweight bullet-proof clothing that can not only protect you from a would-be assassin but also make you look good. It is the creation of Miguel Caballero, a Colombian designer, who first developed his bespoke range of clothing 16 years ago back home. That's probably why the Indian range is marketed under the name, Discreet Inners The Black Collection - leather jackets, slim-line Italian business suits and polo shirts. Although Mr Caballero will not disclose what his body armor is made of, he says they have been tested against a range of ballistic weapons, from revolvers to Uzi submachine guns.

iPhone-controlled Automobile -  In 1997's Tomorrow Never Dies, Bond becomes his own backseat driver, steering his car using a touchpad on a phone showing the view out of the front window on its display. Mobile phones with accelerometers can now be used to control toy cars using free software dubbed ShakerRacer. Military robots controlled using the Nintendo Wii remote were demonstrated by US researchers. They say it makes controlling a robot used to investigate unexploded bombs or mines easier, and plan to use Apple's iPhone to display video from Wii-controlled robots.  Imagine what you can with Android.

James Bond is cool. Like all men, I love his gadgets, cars and his idea of a vacation.  Ideologically speaking, none of us should aspire to the Bond’s ideas. They are sexist, heterosexist, xenophobic, everything that is not politically correct. At least according to Prof James Chapman (Leicester University). No need to take it too seriously, it is not about him; it’s all about the gadgets.

“The U.S. Is A Failure At Innovation” According To Bruce Nussbaum Of B-Week. What Are They Talking About Here?

Bruce Nussbaum’s (B-week) wrote a post with the title “The U.S. Is A Failure At Innovation.” That caught my attention. What was he talking about? Despite what's going on today, I believe US is still the most innovative country in the world and there are plenty of examples and reasons. Whether is design-driven innovation, technology-driven innovation or business model innovation, US is still the leader. Up till last year the US is more than 75% wealthier in terms of real G.D.P. per capita than it was 30 years ago, which is largely attributable to productivity gains driven, in large part, by innovation. The result of industrial innovation.

Bruce was quoting Mike Mandel, the chief economist at Business Week, presented a paper to the Massachusetts Technology Leadership Council on “Innovation and the Financial Crisis.” His conclusions are:

"Looking back, the Internet Decade (1997-2007) was much weaker than we realized; There was a technology shortfall—The Internet alone is not enough.
 Our existing technology and business-know flowed to the developing world. We did not create sufficient new products and services to pay for imports. Dependence on financial innovation instead of real innovation;
Real wage gains were nonexistent (and paltry for college grads);Real stock market gains were nonexistent; Leading tech sectors struggled—
Weak performance of infotech stocks
. Weak performance of pharma stocks
Mediocre performance of biotech stocks. Since 1997, infotech and pharma stocks are flat, after adjusting for inflation;

The result? Financial crisis = Adjusting to a world with slower expected innovation. $4 trillion in excess debt goes bad and needs to be written down. Nationalization of banks, repudiation of debt.
 Collapse of trade bubble.
How long will the crisis last? Without innovation, it’s a slow slog. It takes a long time to dig ourselves out of a $4 trillion hole just through savings. Consumer demand will stay soft for years.
 That’s why economists are increasingly gloomy. Innovation is the wild card. It can surprise on the upside, as well as the downside. New products and services boost both demand and supply. Innovation creates jobs, spurs growth.”

I think it is too simplistic to link stock market cycle or performance to innovation effectiveness of a country. When the market is down, it is not one market but across the world. No countries can avoid the financial markets adjustment, so you’re not able to name another country that performs better than the US. At the end of the day, many of the most successful Internet innovations were started in the US.

Measuring for innovation progress are always tricky, since social practices evolve slowly and surround us continuously, and thus become part of our frame of reference. It is not until we are abruptly forced to put them aside that we become aware of how much they have been shaping our lives.

To determine whether a country is innovative, you need to measure the four legs. The first one is education. That’s the no. 1 factor. Then economic policy (tax incentives) and infrastructure (VC or risk money availability) to support it. The last leg is whether you can provide a lifestyle to attract the creative crowd.

Education is at the heart of human progress. Economic and social prosperity very much depend on the ability of nations to educate their people, engineers, scientists or designers.  An innovative society prepares its people to embrace change and innovation. US ranks high according to the Global Competitiveness Report 2008-2009 conducted by the World Economic Forum.

The development of a global innovation society depends on the mobility and integration in different nations of people, knowledge and technologies. As science, technology, and economic progress become more global, international collaboration is indispensable to generate the talent and knowledge needed to find solutions to many of today’s global challenges.  Education needs to have larger goals than just better school. It needs to take up a knowledge facilitation role between businesses and societies.

Education is to generate new knowledge and nurture innovation to sustain long-term economic growth. This means collaborating on creating research networks among higher education institutions, research centers, business and start-ups, and capitalize on these ideas and knowledge.  Developing a strategy for knowledge-based cluster development and public-private partnerships to facilitate global knowledge dissemination and move technologies quickly from the laboratory to rapid prototyping and to the marketplace.  It is time for higher education institutions to start playing a bigger role.

Does Facial Recognition Technologies Have A Future?

We’ve all seen facial recognition technologies on TV from FBI to CSI in action. We see computer matching faces in real time that image through the database to find a match and identify the person. This technology is not new but has gradually improved from both speed and accuracy over the years.

Accuracy is still a challenge. Boston's Logan Airport also ran two separate tests of facial recognition systems at its security checkpoints using volunteers but the results were disappointing. According to the Electronic Privacy Information Center, the system only had a 61.4 percent accuracy rate, leading airport officials to drop the idea. A few PC companies are now incorporating them as part of laptop security.

We have always had the innate ability to recognize and distinguish between faces usually with expressions. Each human face has approximately 80 nodal points. Some of these measured by the software include 1/ Distance between the eyes 2/Width of the nose 3/Depth of the eye sockets 5/The shape of the cheekbones 6/The length of the jaw line. It is like a 3D landscape map.

When a few laptop manufactures started incorporating facial recognition technologies as security for laptops, many have played with it and quick to discover that it can easily be manipulated. All you need is to hold up a photo in front of the camera. You wonder if they’d thought of that when they designed the software?

Face identification and verification is a a good idea because it non-invasive, broad useful, and user-friendly. The problem is to distinguish persons based on face appearances of different position, size, illumination, pose and age: face detection, feature location, size and grey level of face appearance normalization. Also, feature extraction and classification should be the focuses of face recognition research. Dealing with 3D pose variation and aging is the most difficult problem to tackle. When the technology finally matures, it will be everywhere from ATM to parking lot and vending machine?

Here's a user scenario, in 2012 I walk up to an ATM machine and it recognizes my face, as added security it ask me to make a special facial expression (we all have our own and it is like our signatures), then a voice says "How much?: and I say "Four hundred bucks". In just 5 seconds, money starts coming out. If ever I am in distress, I can pre-registered a facial expression so whenever it sees it, it will contact the police. I'll ask Jeff (photo above, our head of human factor) and see what he thinks of this idea.

A Crop Of New Innovative Reader Technologies Are Lining Up On The Horizon. That Could Include Blackberry And Apple. Blacberry Will Be First.

I am very much a paper person, I like to scribble on books and fold corners of pages. After I finished with it, the book sits in my library. This may change soon after Kindle--the flat panel "purpose-driven reading device" as Amazon puts it.

On a flight from Chicago to NY, I was watching a man (in his early 60s) opening up his James Bond case and took out a wooden box with an iPod inside fitted with wi-fi headphones and extra battery, according to him the wi-fi headphones offer better quality than blue tooth headsets. He was reading from a Sony ebook too, definitely an early adopter. I was impressed.

Not sure if it is a book designed by a gadget designer or a gadget designed by a book lover? It is pretty elegant, with its monochrome simplicity – white surround, grey screen, black text – seems to be saying that it wants to be a book. It reminds me a bit of my first Apple Newton.  The literary experience becomes something like reading a rather long text message, and then another, and another. May be that’s why what my next Blackberry will look like, something between a palm computer and a communications device. The screen is very comfortable for reading as there is no glare.

I don’t know the average of Kindle’s user. I’ve read that a lot of senior folks bought the Kindle--and now the Kindle 2--partially because the digital reader is easier to handle than regular books for arthritis sufferers. It also helps that you can increase the font size, if you have trouble viewing small print in books.  When more textbooks arrive in Kindle format, we should start seeing the age of owners skew younger only if they lower the price for students.  The problem for me is do I need to carry another electronic device? I am already traveling with a MacBook Air, an iPod Touch, a Canon G10,  a Blackberry Pearl, a Prada phone and a portable GPS. Do I want to add an eBook?

Will Apple eventually join the competition between Sony and Amazon by coming up with the iBook? Sony’s is the thinner and more stylish of the pair. You turn pages by pressing small buttons on the right side of the display and have better usability.

The white Kindle is pretty simple to use and you roll and press a rubber wheel to control a cursor bar. You can also select text to bring up definitions. Sony’s device doesn’t have a built-in dictionary which is a shame. Amazon’s Whispernet wireless network lets you fetch content from the Kindle Store in under a minute, including book samples.

The new text-to-speech feature is creating some controversy on the legal front. The latest version of this is the most human yet and voice samples can be found around the internet, the most intriguing of which being 'Tom', the selected voice to read from the Kindle 2, clears his throat and laughs as well as speaking, at least somewhat, like a real human. His voice rises at the end of phrases when asking a question and has such characterization that makes it sound like the most real android speech-to-text reader that we have seen yet surface in the technology world.

Look out for the next generation of Kindle which will be larger in size and equipped with touch functions.  Shoould Blackberry join this game, it will be exciting to see how things play out. Sony, Amazon, Apple and Blackberry…four of the most innovative companies competing in the same space. Blackberry will likley be in partnerhship with a content or distribution partner.  Apple will take longer as they trying to take the time to design it right.

On Customer Empathy: A Tale Of Two Customer Experiences. Apple Versus HP. HP Is The Gold Standard.

Continuing on the subject of empathy, Empathy is key in customer service and it’s not something you can embed in a script or redesign process flow to make it happen.  Especially in call centers, medical services, technical support, hospitality — places where expectations are high and people feel vulnerable … those are the place we need applied empathy to convey to the customer that they understand them and truly care to help resolve their issues. Not reading from a script. 

Almost everyone has the ability to empathize. It’s just easier not to. It’s easier to rely on the script so you don’t have to involve yourself. But until you do just that, the customer perceives your service as inauthentic, unfeeling, uncaring. I suspect over 95% of our daily interactions with customer service people are like that, the other 5% truly sets the gold standard in customer service beyond processes.

Here’s a story in point. I was having a few problems with my Macbook Air for a few months, only recently I had to send it in because the hinge actually broke in additional to audio issues. So my EA brought it after making an appointment, the technician said that the broken hinge was not covered under the warranty and it was damaged due to user’s fault. I asked him to show me any signs of physical damage if it was caused by an external force. He repeated what he said and asked me to call Apple if I wasn’t happy with his conclusion. I asked him to take pictures of it and make sure the person I called understand the case.

A few days later, I called Apple Care and after talking to an AppleCare agent, a product specialist and then transferred to someone in California, she told me could not find any pictures. So she called the store, located the picture and read the notes. The notes said there were many scratches on the cover. I asked them what does scratches have anything to do with the issue. They said nothing. 3 hours into the call, she finally came to a conclusion that the damage was not caused by the user (that''s me) but classified as unexplained accident, whatever it means. She offered to share the replacement cost.  It was not only an uncaring experience, it shows hot broken the system is.  I am paying an extra $250 plus for AppleCare and this is what I am  getting. I wasn't happy because clearly there's a manufacturing problem here.  AppleCare doesn’t really care. That's my experience.

The same week, my son’s HP laptop was more than a year old and last week its logic board blew and translation…you might as well buy a new one than replacing the it. I asked him to call HP anyway. When I came home later that night, he told me the HP service was so helpful and they had agreed to replace it even it is out of warranty. It is a known issue. It was disruptive for my son since he loaded the machine with tons of applications, he still needs to back up all the files but he wasn’t upset because HP promised to fix the problem. The box arrived the next day for him to ship the machine back. He is telling him his next laptop is a HP.

When I went to work the next day, my colleague Nick was telling me how happy he was with HP.  Two weeks ago his HP Pavilion Notebook died...which is not the good part of the story.  Here’s his story. He called their 1-800 # and was talking with a real life person within 20 seconds of calling...a welcome surprise.  As an added bonus he was engaging and helpful. 

They walked him through a couple of steps to see if there was a quick fix, which there wasn't.  They then acknowledged that it was out of warranty and my Pavilion was not part of any recall...but that HP would fix the problem anyway.  They walked him through the whole process, including suggesting to back up the hard drive.

The next day an UPS box arrived for Nick to send back the laptop. He received emails at every stage of the repair and shipment.  Two days after the email telling him it had shipped, he received his laptop back (with the Hard Drive still working)...fixed and as good as new.  Apparently the problem was with the motherboard. For Nick, this experience pretty much guarantees that his next personal computer will be an HP.

Back to my story, I ended up going into a Mac Store and bought a new MacBook Air, Time Machine is great, in 3 hrs I am up and running.  A problem occurred when I try to use my HP printer at home, so I had to call HP. A friendly voice on the other side told me my warranty for the printer has expired, but I might have the date wrong and he could help me to correct it.  He then spent 30mins helping to get it to work. Half an hour later, we still couldn’t figure out why but he tried everything. Strangely I was not upset and in fact I felt sorry that he wasn’t able to help. Next day I went out and buy another HP printer. They deserve my business.

What’s the difference between Apple Care and HP? When handling strong emotion or frustrated customers empathy is key, Apple failed the test. I was a stressed out customers in a desperate situation. Unless one can convey the customer that he/she completely gets what’s going on and feel for them in an authentic way they will never feel satisfied. Even sometimes they may not be in a position to help. To be heard, respected is step one. Nothing else but empathy can immediately deflate an angry customer, and be a release valve in highly charged situations. Empathy is not a “nice-to-have;” it is a must in building strong customer relationship. Many companies don't get it.

An article in the most recent issue of HBR “When Should a Process Be Art, Not Science?” by Joseph M. Hall and M. Eric Johnson highlights many of these challenges.  The idea that some processes should be allowed to vary flies in the face of the century-old movement toward standardization. Process standardization is taught to MBAs, embedded in Six Sigma programs, and practiced by managers and consultants worldwide. Thousands of manufacturing companies have achieved tremendous improvements in quality and efficiency by copying the Toyota Production System, which combines rigorous work standardization with approaches such as just-in-time delivery of components and the use of visual controls to highlight deviations. Process standardization also has permeated nearly every service industry, generating impressive gains.

With success, though, has come overuse. Process standardization has been pushed too far, with little regard for where it does and does not make sense.  According to the authors, scientific process management calls for blindly reducing variability. But sometimes variability cannot be avoided. Take the inconsistencies in the wood used in the soundboards of pianos. In other cases, the costs of decreasing variability outweigh the benefits—for instance, if doctors applied a cookbook approach to treating complex diseases. The traditional scientific approach to such situations is to try to tame the environment by imposing complex rules that spell out what to do in every possible circumstance. Not only does that reduce accountability, but it often causes workers to switch to autopilot instead of trying to understand the specifics of each job.

Of the 9 out of the 10 Apple customer service people I’ve spoken to the last 20 days, only one of them have shown empathy, all the rest were on autopilot mode, shown zero empathy and all were acting like a piece of code. Next time if anyone from Apple try reading a script to me again, I have some nasty things words for them, because I am a very pissed Apple customer.

HP deserves a five stars rating. It is the Ritz-Carlton equivalent for computers and printers. See below the cool Vivienne Tam's design, truly fashion meets technology.  For AppleCare, all you get is free phone support and three years of sub-standard mail-in repair service.

Random Thoughts On Empathy, Intuition And Strategic Vision.

I attended a small gathering this evening at the Rotman DesignWorks with visiting author Dev Patnaik, Founder of Jump Associates, Author of “Wired to Care: How Companies Prosper When They Create Widespread Empathy”. The topic was “How Your Business Can Prosper When You Create Widespread Empathy”. He is an advocate of empathy for business people as it helps them discover unseen opportunities when they develop a personal and empathic connection with the world around them. For individuals, that means developing the ability to walk in other people’s shoes. For companies and other large institutions, that means finding a way to bring the rest of the world inside their walls.  A very simple idea… very difficult to make it happen in the corporate world. Definitely an important personal quality for those who work in marketing, human resources, brand, design and customer service or arguably even in strategy and planning.

Does empathy equal growth? I think that connection is a little too simplistic. There are a million things we intuitively believe are good for business but never easy to draw a direct link. Corporate social responsibility is the best example. The author believed that human beings are intrinsically social animals. Our brains have developed subtle and sophisticated ways to understand what other people are thinking and feeling. Simply put, we’re wired to care. I think that's true.

Intuition is great and be able to have a sense of what’ going on out there is important while many organizations reply too much on analytical data and have lost touch with their customers. Marketing people need that, designers need it, but the question is can it use to transform large organizations? 

Empathy has to be an evolutionary attribute; without it, humanity would not have survived as long. It is not just rational thinking that separates humans from every other animal species on this planet—it’s empathy. It is virtually impossible to think of a world in which rational thinking could be pragmatically implemented for the benefit of human society without empathy being present. This is common sense.

In a piece of writing entitled “Some Thoughts on Empathy,” Columbia University psychiatrist Alberta Szalita stated, “I view empathy as one of the important mechanisms through which we bridge the gap between experience and thought.” 

One obvious setback present in contemporary, postmodern society is the lacking empathy that has manifested itself as objectification (or depersonification). Objectification deliberately gives humans a convenient method of avoiding the discomfort of empathy by helping to avoid feelings of guilt or shame associated with the breaking of self-proclaimed personal and social values. The objectification of others—for any reason—allows an individual to be unkind to others without suffering the repercussions of an empathetic connection.
When people are deemed disadvantaged in comparison to a perceived archetype of normalcy, those lacking empathy can distance themselves, both to protect themselves from empathetic feelings and to avoid the guilt manifested by not helping to end the suffering they perceive.

No questions many of the world’s best innovations come from a deeper level of customer and market understanding. They go beyond what current customers say they know or need. They solve problems that customers either don't realize what the problems were. These innovations create needs and performance gaps only once customers start using them and get turned on to these possibilities. But this is only one baby step. It is not enough.

The customer voice is important, in order for any innovation to be successful, we need to create the balance between the technology voice and the business voice. Business need to know that there is large enough sufficient market and that they have the mechanism to capture value (unless you’re Twitter), the product/technology needs to make sure they the features and performance are properly prioritized. The ability to balance the three voices is the key to successful innovation. This is where B-school meets D-school happen.

Many products today are part of a larger system and it is key to be able to understand how a product fits within the ecosystem. You need to look at the industry dynamics, structure, value chains/networks and capital flow. It is not as simple as “I’ve got an idea!” Particularly in high technology products where shaping user behavior and channel power are often the bigger key to success.

Empathy can only do so much to improve product on a usability level, you need big vision to create industries of tomorrow.  Visionary leaders are the builders of a new dawn, working with imagination, insight, and boldness. They present a challenge that calls forth the best in people and brings them together around a shared sense of purpose. They work with the power of intentionality and alignment with a higher purpose. Their eyes are on the horizon, not just on the near at hand. They are innovators and change agents, seeing the big picture and thinking strategically. In an ideal world, you will have an empathetic visionary!

Just And More As More People Joining The Self-Employed Everyday, Home Office Design Is A Growth Business.

Research is telling us that people who work from home felt they got much more done in their home environment and in fact more longer hours. I guess this depend on individual and what kind of home environment set-up. Most of the time people put the extra effort in because they felt they had to prove they weren't just watching TV.

Today, it is estimated that more than 45% of Americans have a designated room in their home used specifically as an office away from the office, with the economy in its current state, many join the army of self-employed and individual contractors and I think the number of people working from home will double.
The last 5 years we saw trends of big investment in upgrading kitchens, next 3 years we will see people spending their money in their home office, not just the Staples style please, but truly making it comfortable with a personal touch.  Designer home office is the new trend. The home office has become the new staple of the American home.  That’s a growth business.

One advice for those who is new to WFH, you need to establish different activity centers. The efficient office should be zoned into activity areas such as conference desk, this is important as you need to have some level of privacy when you talk to clients on the phone. The second one is the office machine corner, that where you put the all-in-one printers and your office supplies, find a place to hide them if possible. You don’t need to see them to feel like you are in the office.

And the most important part is you must set some very clear home office rules, so your spouse (kids or dogs) know when you should not be interrupted. This is the hardest one.

Service Design Innovation Can Rejuvenate Many Of Today's Mature Retail Businesses.

This is the toughest time for retailing since many decades.  It is also a perfect storm for many retailers from department stores to chain stores to refocus and strengthen their core and rethinking positioning. Many department stores and fashion chains have been operating without a real strategy for a long time, many turned themselves into landlords.

If you take a look back at the history of retailing, starting with the original village green, we added a “main street” which functioned as the main shopping/social area. Department stores ultimately developed, which then moved to the new “malls” starting in the early 60’s. The first shopping malls were traditionally anchored by two or more large tenants,  with in- line space devoted almost exclusively to the sale of clothing. Food courts weren’t even added to that standard format until bigger malls developed. Then shopping “centers” spawned different variations such as mega malls, outlet malls and specialty malls. There are only a handful of formats. Many mall experiences are not exactly great, I think both department stores and malls have lost their luster over the years.

I was first introduced to the concept of “Wheel of Retailing” many years back by Professor Walter Salmon (prof of retailing at Harvard Business School). McNair proposed the Wheel of Retailing theory to explain a retail evolution pattern, which he had observed in Europe and U.S. The Wheel of Retailing theory states that the evolution process consists of three phases: entry phase, trade-up phase, and vulnerable phase.

The theory is pictured as a large wheel with three spokes dividing the wheel into three segments or phases. The first or entry phase of the Wheel of Retailing starts with the opening of innovative retail institutions, which initially offer limited products with low prices and minimum services. Retail institutions at this phase strategically accept low margins due to lack of services and facilities offered and low market penetration, but these low margins can reduce product prices and help retailers to increase penetration of the market. When these retail institutions are successful, other rival retail institutions rapidly copy and adapt those strategies.

At the end of the entry phase, the number of the same type of retail institutions has increased. As time passes, these innovative retail institutions become traditional retail institutions that offer more services and better store experiences at higher prices. These retail institutions are simultaneously increasing their margins and prices and appeal to more middle and upper income consumers rather than bargain hunting and lower income consumers.

As time passes and the wheel turns, retail institution types mature additionally and move into the third and final phase, the vulnerable phase. These firms are mature retail institutions that should have strong or at least stable cash flow. However, as retailers add higher levels of operational practices, costs increase, product prices rise, and margins erode. Some mature retailers abandon high quality and high services in order to reduce operation costs and product prices to survive price competition. These changing operational practices make the third phase retailers vulnerable to easy replacement by other retailers. In this vulnerable phase, retail institutions lose market share and profitability.  Over 705 of today’s large retail institutions are in the vulnerable stage and this downturn accelerate the shake up.

All these conditions allow for the emergence of a new innovative retailer in the next cycle of the “Wheel of Retailing”. The innovative retailer will enter the wheel with low costs, low margins and low price products. A new innovative retailer in the next Wheel of Retailing cycle often initially coexists, with mature retail institutions, which are at the highest popularity position in the previous wheel of retailing cycle.

For mature retail institutions to remain successful, strategic transformation is the key to the future. Retailers need to think of themselves not only as channel but also  as “service innovation hubs”, by acting as intermediaries and co-creators well beyond their core narrow retail propositions. Firms such as Tesco, Carrefour, El Corte Inglés, Nordstrom, Sainsbury’s and Metro are rapidly diversifying through tie-ups with suppliers and partners into financial services, telecoms, utilities, travel, amongst others. Unfortunately many did not execute well and fail to create a meaningful service wrapper around these products. 

Retailers should re-invent the traditional store experience and need to engage all senses with the environment. Radical store experience design and service innovation can rejuvenate these mature retail organizations. This is the time.

Radical Service Innovation Will Transform Best Buy's Geek Squad Into Geek Army Over The Next Five Years.

I was reading outgoing Best Buy’s CEO Brand Anderson’s interview with Fortune magazine, he talked about the secret of his success, transforming Best Buy into a $30+ billion a-year company that accounted for about 17% of the consumer electronics market in the U.S. and Canada. Investors have been well rewarded, throughout the 90’s Best Buy's earnings per share grew faster than Microsoft's, and its shareholder returns outperformed Intel's.  He was leading the company’s effort to focus on customer rather than products, a simple but yet still difficult for many large organizations. He is taking  the company outside of North America with strategic investments/acquisitions in the UK and China as part of a longer term growth strategy. Here are the top 3 secrets of his success he wants to share with other CEOs:

• Create the right jobs for talented employees – it means assigning people a job that fits their talent.
• Motivate your staff – it is a key differentiator and without that capacity, you won’t last.
• Know when its time to leave – know why you’re going and finding the right time for transition and to the right people.

So what’s the future of Best Buy? With a major competitor now gone, it is the last remaining big box electronics retailer, it has many new enemies that are not easy to beat. It takes another radical innovation for Best Buy to reinvent itself once again.

First there are the e-tailers (amazon and many others) that create constant threats, online players have s a significant advantage from a cost structure perspective. Second, Costco and Wallmart will always be playing in this category and may see an opportunity to start a Costco Gadgets, a chain that focus on consumer electronics.  Third is Best Buy itself,this is the biggest one, the business model is reaching its expiry date and has served them well. This is the time for business model transformation. Many product categories are not giving them the margins/volume they needed to support a growth strategy. Blueray DVDs and flat screen TVs cannot power Best Buy forward, the future is not in gadgets, it is in service innovation.

Service innovations is changing from being mainly a company in-house customer service activity to become more of a network process together with different kinds of business partners bundled together by web-services, IP telephony and interfaces. Focus on core competence, outsourcing, service delivery systems and value constellations have changed the conditions for traditional in-house service innovations. We will see more of service innovations emanating between competitors cooperating in the same network.

What's more important is the execution: the alignment of the right idea, the right team, the right development process, the right leadership, the right level of risk management, the right target, the right time to market, and so on. Innovation is not just a matter of "wow" ideas. It is rather a process that requires a disciplined approach to rigorously identify and execute the most promising service ideas that go beyond customer service but opening up new revenue streams. Here is a simple 7 steps framework we use for the development of service innovation:

• Scan for weak signals around consumer electronic space
• Develop new customer insights through ethnographic research
• Develop future scenarios based on a technological scan and customer insights
• Create new customer service value propositions based on those scenarios
• Develop service model prototypes
• Use prototypes to drive business model and economics development
• Get early customer feedback to drive service requirements

Alvin Toffler pointed out in "The Third Wave", the manufacturing economy developed in the 20th century focused on the "product", but the world’s standard has now changed to focusing on the experience of "service" when making a judgment on user satisfaction. The future competitive power of the developed economies will depend on its ability to create service innovation. Along the way new industries will be born.  So Best Buy will go from Geek Squad to Geek Army, every product company should explore service innovation.