Innovation threat, innovation fatigue

from: Alain de Botton, Status Anxiety, 2004

"Employees must in addition worry about the consequences of the pressure put on companies to introduce new and better products into the market place. For long stretches of history, the life cycles of goods and services were longer than those of the human beings who produced and consumed them. In Japan, the kimono and jinbaori went unchanged for 400 years. In China, people were wearing in the eighteenth century exactly what their ancestors had worn in the sixteenth. Between 1300 and 1600, the design of ploughs did not alter across northern Europe - a stability that must have given artisans and workers a reassuring sense that their businesses would outlive them. But product life cycles have sharply accelerated since the middle of the nineteenth century - destroying workers' confidence in the long-term integrity of their careers.

"Rapid defeats at the hands of new products and services are to be found in almost every area of the economy: canals after the invention of the railway, passenger liners after the introduction of the jet engine, horses after the development of the car, typewriters after the birth of the personal computer.

"The market's passion for change has a propensity to involve companies in product development costs so high that their very survival can depend on the successful launch of a single item. Companies can resemble palpitating gamblers who, instead of being allowed to retreat cautiously after a good run, are continually forced at gunpoint to risk their assets and the livelihoods of their employees on the outcome of a few wagers or even a single bet, as a result either amasssing vast but precarious riches or self-destructing."

Review: Reinventing Banking by Johan Kestens

• "We have learned that risk awareness should be as much a part of a banker's DNA as commercial astuteness."
  

There's no shortage of 20-20 hindsight masquerading as confident prediction now that business is getting used to the turmoil of the markets. But this paper from AT Kearney's Johan Kesten is that rare commodity: a clear and well-argued agenda for getting banking back on track, complete with convincing examples and actionable advice.

Kestens summarises the origins of the current financial crisis, focusing on the drying up of public debt in the late 90s, the systemic errors made in the risk ratings of new types of credit derivatives, and the breakdown of mark-to-market valuation models. He also pinpoints issues of governance, organisational culture and regulatory failure. Acknowledging that customers' appetite for innovative investment products is unsurprisingly low in the light of evaporating confidence, Kestens suggests that memories are short: "Will greed surface again over the next three years?"

Kestens marshals seven ideas that banks can use to rebuild their capabilities and reputations. His first area is risk management, where he calls for proper appreciation of risk management throughout the management ranks, more equitable compensation schemes, alternative risk assessment models, scenario planning and simulation ("war games"), new reinsurance strategies and improved risk reporting.

His second area is the redefinition of business scope, starting with an improved understanding of the organisation's actual versus stated scope. He advocates concentrating on core competencies, citing winners who've stuck to the knitting and losers who've diversified away from what they know best. He advocates shielding lines of business from capital markets by making greater use of internal financing - implying that institutions have been lazy in their use of their own resources. Kestens remarks that organisational excellence, including reporting, is a competitive advantage. He recommends focused acquisitions and disposals, and greater use of outsourcing.

The third area of attention is product reinvention. Here Kesten advises banks to counter the natural commoditisation of banking products through the use of affinity, emotion and loyalty - offering real ideas for repositioning product lines. He also discusses product and feature bundling, and customer life stage modelling.

The fourth area for concern is the rebuilding of brand and trust. Consistency, emotional connection, and full and transparent communication are the keynotes here. This section segues neatly into "Do real marketing", an appeal for banks to get better at event-based marketing, and to work harder to understand online behaviours - especially the wealth of intelligence being generated in social networks.

Kestens' last two areas for attention concern distribution and IT. On the distribution side, he urges better mastery of online channels and greater recognition of contemporary customers' savvy, while advocating better management of the purpose, design and location of physical branches. In the IT arena, Kestens makes good arguments for service oriented architecture (SOA) and, perhaps surprisingly, careful systems design - the days when it was okay to assume that computing power is free and limitless have gone. He also makes sound points on the need for careful sequencing of change in IT; programme management is a notorious tanktrap for IT transformation.

The full text of the paper - which includes a valuable appendix on the future of investment banking - is available here.

On Provocation Selling

Here's an idea: tell your customers what they should be worrying about. That's the proposal made by by Philip Lay, Todd Hewlin, and Geoffrey Moore in a recent issue of the Harvard Business Review (In a downturn, provoke your customers). Instead of trying to sell people the products you've made, or listening to their needs and matching them to the goods and/or services you supply, you take them a big, juicy issue and show them why they should be really, really concerned about it. Instead of asking them what keeps them awake at night, bring them something that will destroy any sweet dreams they're still capable of harbouring.

Lay, Hewlin and Moore advocate that you identify a critical issue, develop a provocative proposition based on that issue, and then secure a meeting. At the meeting, you lodge the provocation - and see what comes back at you. If the reaction isn't positive, you "retreat with dignity". If the reaction is good, you can move on to discussing war stories, and then offer to conduct a short, diagnostic study. 

I don't know that this approach is unique to the downturn, because I've seen it used effectively in boomtimes too. If it's done with too little preparation, the perps get known as scare consultants: they turn up every few months with a new strain of business-birdbrain-birdflu that's going to wipe everyone out unless the correct vaccines are ordered immediately. Most targets pass on these scare tactics, waiting to see if anyone else buys the line.

But if you have a good working relationship with your customers, then they won't see this approach as scare tactics. They'll accept that you're bringing the issue forward - together with a means of tackling the issue - because you care about the relationship and its continuance. 

This ought to be common sense; but I've noticed that some service suppliers have incorrectly internalised the principle of offering "no surprises" and now interpret it as meaning "no bad news". It's worth remembering that if there's something in the environment that's going to bite and maybe swallow your customer, that's a kind of surprise they don't want. As a trusted partner, it's part of your duty to zap these incoming asteroids before they hit the surface.

A further warning: don't feel you need to manufacture an issue in order to justify a provocation. Do some real research. Ask your people what the issues are in your domain, and you'll quickly discover the topics that your best folks feel aren't getting the airtime they desperately need. With so many of the old certainties stuck in intensive care, now is a good time to reflect critically on where your customers are heading - and how you can help them avoid the obstacles lurking over the horizon.

MoSoNe: Mobile Social Networks: 2 - Mind versus Theory

Which term to use: “mobile social networks”, or “mobile social media”? I used to think that the two phrases meant the same thing. But I've changed my mind. (I'm allowed to change my mind: it proves I've still got one to change.)

When I think of “networking”, I think of goal-oriented behaviour carried out by people who have a theory of the social space they are investigating. The theory in play may be complex, and it may be dynamic, but it is still a constricting force. Networking doesn't have to be aggressive, but it is always instrumental. When people network, they are looking to match other individuals against predefined criteria. Wherever you have matching, you have narrowing. That's why old-fashioned checkbox-based online dating, and to some extent newer-fashioned speed dating, are so good at helping people repeat their previous relationship errors.

But when I think of “media”, I think of bits of dialogue, of jokes, strokes, pix and li(n)ks. I hear conversation. And conversation is fluid. Even where conversation begins with an agenda in mind, it often strays into unplanned areas. Media enables and encourages undirected exploration, and co-discovery by members of a community. Those members don't define themselves by attributes; they reveal (and conceal) their interests through their engagements with others, and via the materials and observations they choose to share. The activity in the “social media” space is surprising and creative. When commercial interests infiltrate these spaces and try clumsily to assert their own agendas, they are quickly ostracised. Social media, then, is self-cleansing.

So, “mobile social networking” is for people with a theory, and “mobile social media” is for people who want to participate in an emergent, collaborative space. Mobile social media is, I believe, a new state of mind: a truly shared experience that its participants are generating and evolving moment by moment, message by message.

Cig Int: the new smoking gun

I happened to walk past a building where I used to work recently, and stopped to see who is now using it. It's what you might call an iconic building, but on a homely scale. That's because it's a converted Victorian church. The old name is writ large in the brickwork, but to read the nameplate on the door you've got to get up close. That's how I met the guy on the cigarette break.

He asked me if I needed any help, which is a reasonable query to throw at some nutter who's squinting at your nameplate, and getting all dewy-eyed. And he told me what the company he works for does, and I thanked him, and I went on my way – knowing much more about... Okay, I won't say.

I mentioned this micro-event on Twitter, and my Twitterfriend @reyes responded, wondering if “you could do a London tour of technology just by being at the right cigarette break at the right time?” He went on to say that you could probably blag yourself a free seminar series.

And that's a pretty good idea. The spooks have “sig int” - signals intelligence. We could have “cig int”.

I'll stress that the guy outside the church didn't tell me anything confidential, or express any opinions about anything – he simply told me what I could have found out from the company's website. But it's possible that if you were less scrupulous than me (or do I mean smarter?), and you were targeting someone less alert and less honourable, you might be able to find out something interesting about the operations, prospects or mood of your target organisation. I know that if I were a recruitment consultant, and that if anyone was recruiting anyone for anything, I'd be learning to smoke (I'm sure there are courses) and getting myself out there.

I also think that marketers could probably learn plenty by sidling up to smokers on their breaks. I mean, you know where they work – more or less, because they may have been told to stand a little way off from the office. Now you can subtly also ask them where they do their grocery shopping, or who they would vote for tomorrow, or whether their boss is looking stressed.

Legend has it that long, long, ago, when smoking was compulsory, agents of the tobacco companies used to steal butts from the ashtrays in selected bars so that they could see what brands were being smoked in which types of establishment. They ran a sideline in reporting on the most popular shades of lipstick, as revealed by the butts, to the cosmetics companies.

Now that only the most committed people continue to smoke, and they're forced to indulge their habit in the street, they represent potential points of intelligence vulnerability for the organisations that employ them. It's no longer what they leave behind that's of interest: it's the fact that they exist at all, and might be up for a chat.

Small World: How do we know the people we know?

My good friend and lightning co-farmer Brendan Dunphy was one of the select group of people who bullied me to look at Twitter way back, when I was convinced it wasn't for me. Of course, Brendan was right – as he is about everything, darn him. Twitter's perfect for me, because I can't shut up. And because I'm nosy. And because I like bumping into new people.

I've met a bunch of new people through Twitter. Not by trying to describe myself, or by looking for points that I have in common with other people – but by starting conversations, and joining in conversations.

How do I know the people I know outside of Twitter? Through shared experience. I went to school with them, I worked with them, I danced with them in a cage in a sleazy warehouse joint in Budapest – the usual sort of thing. We found ourselves occupying the same patch of earth at the same time, and we got talking.

But the data stream generated by Twitter hints at tantalising new possibilities for making connections. A couple of weeks ago, I hooked up with Brendan for a coffee. He was going on to an event run by NESTA, the UK's leading light in innovation. That evening, as I thumbed through my Twitter feed, I noticed that another guy I follow was tweeting from the very same event.

Not surprising? I mean, if I'm into researching and writing about innovation, surely people I know are going to cluster at the same waterholes? But the thing is, the person tweeting from the NESTA event wasn't part of my “innovation” cloud. He's in my follow list because I found him, at random, on the public timeline, where Twitter presents a real-time sample of current tweets. And I was interested in him because he was tweeting about a train service I use. When I looked through his past tweets, I got the impression that he and I were, so to speak, fellow travellers. I wanted to follow his train comments – because I've often thought I'd like to see inside the heads of other commuters. (They don't say what they're really thinking when they use their mobile phones. They say: “I'm on the train”, and “Mummy really wants you to have your bath, darling”.)

My dilemma is: do I introduce these two people to each other? Fans of networking say I should – that I must. My more rational self points out that this pair could have met each other IRL at the waterhole – they don't need me to matchmake.

I haven't connected Brendan with my train-travelling friend, and for a very good reason. I don't know what they would talk about. I need more than a coincidence of place to create a genuine connection between two other people. I learned this last summer when I introduced the only two people I'd ever met who'd been to Antarctica – and they had nothing to say to each other. (“Cold, innit?”)

Do the Hoxton: innovation by critique

Sinclair Beecham, co-founder of Pret a Manger and originator of the Hoxton hotel, talks about his approach to creating innovative businesses in today's Times.

He hates the "breakfast buffet" that other hotels do - that spread of pre-cooked bacon and eggs, sweating under lights - so he banned it from the Hoxton. In fact, he designed the experience of his hotel by refusing to do all the things he doesn't like as a hotel guest. So, out go the ruinous phone charges, and the WiFi fees.

But as well as taking the nasty stuff out, he's injected virtuous practices from other leisure outlets. Chief among these is a yield-managed approach to room prices. Prices rise the later you book - just like at EasyJet. "At least five rooms a night go for £1", acording to the Times.

Pret reinvented the sandwich by returning to what real customers wanted. It's one of the few companies that has the moral right to that overused word "passion". In Beecham's case, it seems passion is a key not just to customer insight, but to empathy. He's building his hotel business by critiquing the practices he sees around him, and gearing his actions to his own judgements. His clarity puts him in a distinctive line of entrepreneurs who don't just think about their businesses, but who feel them too.