"The New Age of Innovation"

The New Age of Innovation: driving co-created value through global networks, by CK Prahalad and MS Krishnan.

One of BusinessWeek's top innovation books of 2008, The Age of Innovation may have a hard time being accepted in the new economic climate. There's an assumption about abundance of both capital and connectivity which I think leaders are less certain of today. Yes, globalisation hasn't gone away, but we're seeing more barriers to creating flexible global supply chains. And the primacy of personalised customer experiences is looking a little less vital in a climate where customers are choosing to experience less, and are heading for mass-market, commoditised options when they are buying. But historical context is a cruel thing, and no one can be criticised for writing sincerely with the best information available to them. Prahalad and Krishnan have written a book which offers much food for thought for business leaders.

I'm particularly impressed that they put their weight behind business processes as a key differentiator in organisations' performance and ability to innovate. Their coverage of business processes includes a number of sound case studies and also incorporates an overview of the many definitions that have been proposed for the concept. The authors have a gift for expressing their leading insights with clarity and memorability; for example, that strategists exploit analytics to “amplify weak signals” or that firms have a “dominant logic” that can constrain their thinking. The authors' treatment of what they call “social architecture” is very useful and acts as a counterbalance to their material on IT, as well as being a more practical approach to organisational culture change than is found in many such works.

I think, however, that the authors miss a trick in relegating standards – particularly data and process standards – to a subordinate role. They emphasise that organisations need IT capabilities fashioned to their own unique opportunities while taking advantage of efficient, componentised technologies. They are also clear on the critical need for business process governance, with leadership and visibility at the very top of the organisation. The missing part for me is enterprise architecture, and – where available – industry architecture (such as the ACORD standards in the insurance industry).

The core principle of the book is that offers co-created with customers can and must be supplied by entities that are willing and able to see themselves as virtual organisations, marshalling resources as and when required to meet individual customer needs. The authors acknowledge that the drives towards customer-created offers and virtualised delivery have typically arisen from different sources. So, for example, much of virtualised delivery is a result of the desire to drive down operating costs by outsourcing and offshoring. Prahalad and Krishnan note that while Indian suppliers know they must move beyond the cost arbitration model, few are doing enough to evolve their business models beyond this initial logic.

But... curse these current times! It's hard to read of Indian IT service businesses today without thinking of Satyam. I also note The Economist's recent piece (12 February 2009) about the ownership structure of large Indian companies, and how family ownership practices may add risk to them. The New Age of Innovation is good on the need for transparency, efficiency and control, but its view on “social architecture” seems to live a little too much in the ideal conditions of the laboratory. Organisations exist within complex cultural conditions, few of which I believe we understand to any great depth, but all of which may impact our ability to direct the business with confidence.

And, as I read, I couldn't help thinking of the apex of the co-created product, sourced by a virtualised, globalised market: the self-certified home loan. “Innovation” is a dirty word in some circles, because it's been so often preceded by the word “financial”. Can there be a more frightening example of a product or service designed as a personalised customer experience and delivered by a fluid, ad hoc chain of suppliers? The immediate future for innovation may well lie in strategies for limiting personalisation and guaranteeing supply chains.

Compliance Meets Complacency

"I thought it was a little bit strange for somebody in that position, to be on the board advising them about risk who has no knowledge at all about risk and regulation [...] We were constantly being pushed back and constantly being told that things had to be put in a way that wasn't going to upset the business - basically that wasn't going to stand in the way of the sales culture at the time." 

- Anthony Smith, former manager of regulatory developments and group policy at HBOS, BBC News, 17 Feb 2009

Think Before You Send

It's easy enough to send a vanilla tweet when you mean to send a direct message, as most forgiving people will admit. As in many of the controversies that attend any news event generated by the BBC, the fact that an appointment was mistakenly communicated to the world via Twitter before an official announcement was made highlights normal human fallibility rather than gross incompetence, or technological ignorance.

What interests me is the fact that anyone within an organisation would choose Twitter - in either public or private mode - for internal communications. On the one hand, it's good to see social media (presumably) being used to improve the way staff collaborate. On the other hand, you'd want to hope that organisations already had effective systems in place for doing just that. I can't help wondering why a manager would choose to discuss a staff appointment via Twitter direct messaging rather than email, IM or good old phone.

Perhaps new forms of communication, with their informal styles, attract traffic precisely because there are fewer cultural constraints around them. While every corporate email comes trailing a lawyer-approved disclaimer and a plea to save the forests, Twitter is awash with effing and blinding. I doubt that anyone in a line management post in an organisation with established HR processes would write an email containing a casual value judgement about a member of staff; Twitter's 140-character, real-time style seems to encourage that most dangerous of qualities - honesty.

Evoi: Social media for financial markets

I came across Evoi in the unnecessarily good London free newspaper City A.M. Jessica Mead wrote a piece about it in the edition of 22 January 2009, interviewing director Martin Hollands. The article explains that Evoi lets financial market traders see other traders' positions and publish their own if they want.

This is interesting because it's bringing a sense of the old open outcry market back to financial trading. Hollands says: “You are getting a real feel for real trades”.

And Mead says: “Algorithms might be the name of the game in the big investment banks, but for the smaller players, getting an idea of what traders are actually doing, rather than what they say they are doing, is immensely helpful and arguably levels the playing field a little.”

Doctrine tells us that markets are, in themselves, information systems. The price of a stock or a commodity supposedly encapsulates all that is known about its standing and performance characteristics. Therefore traders should be able to take decisions simply by responding to price movements. And algorithms – computer models and programmed trades – can do that for them.

Evoi call the information in its community “flow”. Users can watch what other traders do, and follow their lead if they want to. They can benchmark themselves, and improve their consistency. They can also shield themselves from the misinformation that's layered into financial markets even though, officially, it isn't.

This is the first example I've seen of social media adapted for the financial domain. But if social media belongs in any commercial context, it belongs here. Reclaiming the trading activity for traders has got to be a good thing: I'd trust the herd instincts of frontline traders over backroom analysts any day. I can imagine that becoming a leader in the Evoi world is a position of some status, too – not one that could be earned easily, or held on to without sustained performance. And that means, ultimately, the trust of the community.

Waterhole Studies: Finding the prize herds on Twitter

The architect Christopher Alexander, who gave birth to the design patterns movement through his writings about buildings and neighbourhoods, made an interesting observation about cows. While transport experts and city planners liked to say that communications needed rational design, and that you couldn't just “pave over the cow paths”, Alexander said that laying roads where the cows led was exactly the right thing to do. Cattle, you see, know where they're going. They're heading for water. And they're taking the most efficient route to their goal across the terrain. In a country like the UK, most of our land routes probably trace back to the purposeful travels of animals looking for water. The humans followed the beasts – and built Croydon.

I remembered this when searching for a name for a new field of social media studies that popped into my head recently. I was going to call it “Self-Selected Star Diaspora Studies”. But I can't see that doing very well on the international conference circuit, can you? So I'm going for “Waterhole Studies.” And I'm certain that it's soon going to be a topic aired at virtual (and real) watercoolers.

How did I stumble upon this soon-to-be crucial area of frenzied activity? In the best tradition of the lone, lunatic inventor, I was looking for something else. I was, in fact, trying to see if I could find people on Twitter who worked for Google, so I could sneak up on them. Being a somewhat literal person (when I'm not being tangential and tendentious), I plugged the string “at google” into search.twitter.com.

As luck would have it, while I was doing this, the good citizens of the US (and many other countries) were celebrating the inauguration of Barack Obama. Because, out there in the real world beyond my office, it was Inauguration Day. So what did I find? I found a bunch of people tweeting that they were at Google's inauguration party. I found a waterhole.

I guess that if you're a dab hand at programming you could knock up a utility to tag the people you find tweeting at a waterhole, and create a follow-group. As it is, I added the (doubtless bewildered) Google/Obama folks to my follow list, where they are now undifferentiated. I enjoy my Twitter feed based on the content, after all, not on a person's affiliation or his/her past party invites. But there are definite possibilities here, aren't there? People are essentially volunteering to tell the world at large when they're at particular events – events which may have implications for their social, professional or economic standing. And that information is potentially very valuable.

For example, when there's an important sporting occasion in progress, wouldn't it be interesting to know who's enjoying hospitality in the corporate boxes? If you want to know who's got tickets for an exclusive preview, now's your chance to grab a sample. And if you want to track customer loyalty across coffee shop chains, I'd say your chances of gathering meaningful data are looking up.

Zhiing-ifying London

I like the look of zhiing, a mobile location service emanating from California. The key things it's got going for it is that it's platform-neutral, service provider-neutral, free and straightforward.

But it's based on the idea that you drive, or that you're being driven around. That makes sense in the US, but it's a little limited here in Europe, where the directions you need might involve public transportation too - and even, whisper it now, walking.

Transport for London's brilliant Journey Planner gives travel options for trains, tubes, buses, trams and river buses. Look carefully at the advanced options and you can also grab a tailored cycling route. This would be immensely difficult to do well on current mobile platforms if the full graphic content were to be carried. But translated into the equivalent of turn-by-turn instructions, it could be zhiing-ified. And that would be great!

Lessons in Scaling Up

Esther Addley wrote a wonderful piece in the Guardian about Josh Silver's project "to offer glasses to a billion of the world's poorest people by 2020", distributing "100 million pairs annually" within a few years, with each pair costing only a dollar - and no profits being taken.

Professor Silver is clearly an inspired and inspirational figure, as well as being immensely practical. His project and his approach to it illustrate some key recurring themes of innovation.

Silver's story falls into three distinct phases. There's the sudden burst of insight, or the dawning of the idea: what if someone could adjust the power of their own spectacles, so that they didn't need an optometrist? The second phase is invention – in Silver's case, a period lasting longer than two decades, during which he and his team have developed an ingenious mechanism involving liquid lenses. The third phase, which Silver has now embarked on, is the diffusion phase, where the invention leaves the laboratory, enters production – and goes out to change the world.

The compelling core of Silver's idea echoes a number of breakthroughs in consumer goods and services. His self-tuning glasses remove the professional constraint on growth imposed by the need for a skilled middleman, just as Eastman's photography system turned us all into everyday photographers. Early automobile manufacturers doubted that cars could become mass market products because there wouldn't be enough people available to train as chauffeurs. In more recent times, skilled programmer availability was seen as a limiting factor on the growth of computers. The productivity advances we have experienced in white-collar settings also largely flow from technologies that cut out intermediaries, whether it's dedicated typing pools, counter clerks or, in these days of business process outsourcing, entire back office teams.

But I think the more impressive lessons that innovators can take from Silver's project are to be found not in the breakthrough characteristics of his idea and invention, but in his methods of diffusion. Firstly, Silver has declared very solid goals. Aiming to distribute 100 million products at a dollar each every year is an unambiguous goal that can be shared, broken down into component plans, and interpreted flexibly across different territories. The irresistible phrase "2020 vision" also helps the project's messaging.

Secondly, Silver is growing the project by networking. He is making use of organisations and connections that already exist in the places where he wants to make an impact. He is using networks to spread knowledge of the project and its benefits, to stimulate demand, and to recruit partners.