Institute for Innovation & Information Productivity

Virtual Innovation

Dick Reilly writes: "First he locks himself in a room, preferably in a hotel in Puerto Rico, shuts off the phone, pulls down the blinds, has his meals delivered, and does not speak to a soul for a couple of weeks. In this meditative isolation, (he) engages in what he calls 'backtracking . . . I think about everything I done in the past five years, look in each nook and cranny, down to what I put on my toast in the morning.'"[1]

Clay Christensen coined the term, disruptive innovation[2] to refer to a technological innovation, product, or service that eventually overturns the existing dominant status quo in the market. The quote above is from a disruptive innovator whose identity I will reveal later (no skipping!).

In our forthcoming book, “Uniting the Virtual Workforce[3]” Karen Sobel Lojeski and I discuss some of the issues surrounding innovation when people are working in geographically dispersed teams. The overarching question is, Can innovation be as successful when those doing the innovation are not collocated?

The answer depends on how innovation is defined. Our definition is the same as that used by IIIP – “imaginative activity that is fashioned to produce outcomes that are both original and have creative value”. We like this definition because it allows us to consider a very wide range of activities that span everything from the very front end of innovation to the launch of a new service or product.

The front end is where innovation starts.  If you ask people whether it’s best to generate new ideas collaboratively in a group or allow people to work alone and independently, they will invariably choose the group.  But it turns out that the very front end of innovation – generating ideas – is best done individually.  Quite a bit of research has shown that if you want a lot of original, new ideas, it’s better to have individuals work at it alone than in a group.  Two reasons have been cited by researchers for this contra-intuitive finding.  The first is fairly simple. In a group, only one person can speak at a time, so in given amount of time fewer ideas can be expressed.  The second is a bit less obvious and has to do with the apprehension that people might feel about expressing their ideas in a group.  This fear of being criticized dampens the expression of ideas by more timid souls.  But we believe that there is a third reason that has not been studied very much.  It was suggested to me by Jonathan Sharples at the Oxford Institute for the Future of the Mind. He introduced me to the work of John Gruzelier, a neuropsychologist at the University of London.  Gruzelier has been studying the effects of neural feedback designed to put people into a relaxed state characterized by “theta waves” in an EEG.  What he found was a remarkable improvement in creativity for musicians who underwent neural training that allowed them to put themselves into a relaxed state.

Companies, desperate for innovative ideas, spend billions on research on better ways to develop new products, so it’s surprising that nobody has looked at the role of brain activity in innovation (we could not find any published research), and very little research on how working virtually affects innovation. Both of these areas need to be studied, especially when it comes to the fuzzy front-end, the pipeline for innovation. Even better we might study how these two ideas can be combined. Teach people how to put themselves in a relaxed state and allow them to work in a virtual environment that reduces the apprehension of criticism and let the ideas flow. This might help answer the question posed at the beginning. It may be that the virtual workspace is ideal for the front end.

As promised, the quote that I began with is from Frank Lucas, a disruptive innovator portrayed by Denzel Washington in the film American Gangster. Lucas disrupted the market for heroin in the US[1] by completely changing the supply chain. He offered a superior product for a much lower price and was making about a million dollars a day before he was “disrupted” himself. Setting aside the ethical, moral and legal issues Lucas was a true innovator. I did some research on his life after I saw the film and thought that the similarity between his approach to getting ideas and the work of John Gruzelier was striking.

[1] Jacobson, Mark. The return of Superfly. New York Magazine, August 7, 2000.

[2] Christiansen, C.M. The Innovator’s Dilemma. New York: Harper Business Essentials, 2000.

[3] Sobel Lojeski, K., Reilly, R.R. Uniting the Virtual Workforce: Transforming Leadership and Innovation in the Global Enterprise. New York: Wiley, In Press

IIIP's Definition of Innovation

Michael LoBue writes:  Thanks to IIIP's Academic Advisors we have an Instittue working definition of innovation:

"Innovation is imaginative activity fashioned so as to produce outcomes that are both original and of commercial value"

We welcome comments and feedback on this definition.

The Problem with Productivity As Policy

Daniel W. Rasmus writes: I was struck by a recent Caribbean News piece where Caribbean Community (CARICOM) Secretary General Edwin Carrington Tuesday called for a "massive increase in our productivity" to boost the region's competitiveness in the face of the just-concluded Economic Partnership Agreement (EPA) with the European Union (EU) - (read more here).

Why, because a call for productivity in markets that are small and undifferentiated will not result in economic prosperity. When we look at productivity as independent of other measures, it may be a positive metric for improvement, but as the US auto industry has learned,  being efficient at the wrong things is perhaps even worse than being inefficient - more of the wrong cars in the market is a bad thing when you have to take the hit on liquidating those automobiles.

Productivity and innovation need to be tightly linked. What Carrington really needs to focus on in a competitive global economy is creating economic opportunity that takes into account the capabilities of the Caribbean, its uniqueness and how to not only create innovative goods and services, but to think about innovative business models that may make their limited resources more accessible to the world.

When productivity is a policy, and it drives economic growth more than other factors, it can be a problem. The Caribbean, and every other emerging market segment, needs to create policies that encourage innovation because the doing more of the same, especially in comparison to the US and Europe, will not create the kinds of prosperity that governments seek.

Emerging market government have huge influence over commercial development in their regions, more more than the US or the EU exerts on the companies that reside in those regions. Areas like the Caribbean should use policy to effectively drive the innovation dialog, and figure out what differentiated models can bring about new development and growth, even if those models challenge Western views. Innovation isn't limited to goods and services, and can mean new economic models and new governance models as well - and those are all about policies that leave the industrial age anachronism of productivity much lower on the list of things to tackle than looking through a Western industrial policy lens would leave other nations and regions to believe.

Innovation Central Planning - Can this be done?

Michael LoBue writes: David Simoes-Brown reports on Henry Chesbrough's talk on open innovation during his visit to NESTA (National Endowment for Science, Technology and the Arts).  This link also contains NESTA's just released research report entitled "Leading Innovation".  I haven't read the entire report, but the executive summary suggests that they missed one important and necessary element to the innovation equation. That's TOLERANCE!

While Silicon Valley, often refered to as the "gold standard" of innovative regions, is endowed with many important assets that allowed innovation to spring forth, what made (and I hope continues to make) Silicon Valley a well-spring for innovation is its tolerance.

This is not something that is legislated or orchestrated by "regional planning commissions". At least here in the Greater San Francisco Bay Area it's been a part of the area's fabric since the Gold Rush of the mid-19th Century.

Richard Florida of George Mason University in Virginia stumbled onto "tolerance" as a key differentiator in his research on regional urban and economic development. His two books on the "Creative Class" are well worth reading for any serious study of regional and innovation development. What he discovered was that levels of tolerance were highly correlated with a region's economic development and when a region made capital investments in related areas, but the region's tolerance remainded low, those capital investments did not spark economic growth (driven by innovation).

I think there's little doubt that Europe will find its own formula for "innovation success", but if it's going to study existing models, it should understand all the important elements -- including the "secret sauce".  There's only so much central planners can do to impact attitudes, but they need to be sure that their efforts are focused on developing the right conditions for innovation.  Perhaps it's less about "investing in assets for innovation" and more about "removing the barriers to tolerance"?

Efficiency versus Innovation

C. Warren Axelrod writes: There is yet another article on the seeming conflict between innovation and efficiency (or productivity) in the form of an interview of Gary Hamel by Elana Varon of CIO Magazine.  The interview was precipitated by Hamel’s new book The Future of Management, in which he reiterates the mantra that a focus on efficiency leads to conformity, but diversity is the prerequisite for innovation.

This issue was also discussed in Dan Rasmus’s August 24, 2007 blog on this website regarding “Geoffrey Moore: Use Productivity to Drive Innovation.”  Furthermore, there was a feature insert in the June 11, 2007 issue of BusinessWeek with the title “Inside Innovation – In Depth.”  There was a particularly relevant article by Brian Hindo titled "At 3M, A Struggle between Efficiency and Creativity".  The article supports the strong allegation of the detrimental impact of efficiency programs, such as Six Sigma, on the less structured processes of R&D.

However I question the apparent premise that efficiency and innovation cannot co-exist within an organization. I know of specific situations in which Six Sigma has been successfully implemented in order to standardize business, technology and operational activities to make them more efficient and yet, at the same time, they have been able to produce award-winning ideas both in terms of innovative business practices and improved operational processes.

This would suggest that it is possible to be both productive and innovative, and not being so may be due a lack of effective management, rather than due to inherent deficiencies in the underlying processes and environments. Clearly metrics that might be applied to operational processes should not be same as those that measure the “productivity” of creative processes. Neither should the same discipline and goals be applied to both. If a realistic approach is taken, it is surely feasible, as examples have shown, to have efficiency and creativity reside side-by-side and to optimize each. Yes, one can point to situations in which an overzealous management has extinguished the creative spark in their pursuit of efficiency. But it doesn’t have to be that way.

Outsourcers and Innovation

C. Warren Axelrod writes: The lead article in the 15 October 2007 edition of CIO Magazine is “What does it take to get IT outsourcers to innovate?” (see article)  The article addresses the intersection of several critical areas of high value:  outsourcing, innovation and information productivity.

The CIO Magazine article and the online reader feedback on it raise the question as to whether outsourcers can be relied upon to be truly innovative, or even whether it is in outsourcers’ interest to be at the leading edge. Others comment that innovation should be retained within the customer organization as a competitive advantage. Perhaps it is more realistic to expect one’s outsourcers to simply adopt new technologies and methods, rather than come up with their own innovations.  But, if innovation is the application of new solutions (products or services) to meet customer needs, thus creating value, it is perhaps less important that new solutions involve new technologies exclusively; innovation can also result from new uses of existing technologies to address unmet needs.  In this way outsourcers can provide fresh insights that owners of intellectual property may miss.

In my outsourcing book, published in 2004, with the title "Outsourcing Information Security", I disucss outsourcer “expertise” and note that gaining third-party expertise is a major reason to outsource. Often service providers are in a better position to see new technologies and processes than their customers. While this may not represent innovation per se, such injections of new technologies, or knowledge that the outsourcer is able to offer newer products and services, will allow the customer to innovate more effectively, knowing that the service provider has the capability of staying abreast of customer needs and able to support such initiatives.

The other areas are innovation and information productivity. As an Academic Advisor to IIIP, I clearly have involvement here. My particular focus is information or computer effectiveness and productivity, in which areas I wrote two books titled "Computer Effectiveness" and "Computer Productivity" respectively.  While these books were published some 25 or more years ago, many of the concepts are still fresh and relevant today.

The key, from the customer’s perspective, is to ensure that contracts and service level agreements encourage such advances, rather than stymie them. Often, an outsourcer has the incentive to squeeze the last drop of revenue out of older, paid-for technologies rather than engage in costly upgrades. Contracts need to explicitly describe rewards to the outsourcer of implementing more effective and efficient services rather than to discourage them because of potential losses in outsourcer revenue. In the long run, both outsourcer and customer can benefit from an approach that encourages the adoption of new ideas.

Innovation and Corporate Governance — and Sarbanes-Oxley

Michael LoBue writes:A recent paper for Houman B. Shadab should be required reading by anyone interested in the factors influencing innovative behavior in organizations.  True, his paper specifically addresses the impact of Sarbanes-Oxley (SOX) on publicly traded companies, but his framework for innovation and governance go well beyond the US-publicly traded companies and transcend size.

His paper, entitled Innovation and Corporate Governance: The Impact of Sarbanes-Oxley, contains a rich list of citations that beyond the value of his impressive presentation of the material, the citations alone represent an excellent starting point for any student on the subjects he addresses.

Mr. Shadab’s conclusions seem strongly supported by the empirical research he’s reviewed:  “…SOX likely reduces the innovative potential of a significant portion of public companies and thereby imposes a social cost in the form of foregone benefits from innovation.”  One obvious question that comes to mind:  “Isn’t SOX just another condition facing firms that they need to factor into their ‘innovative behavior’ if they are going to survive and thrive in the future?”

Other questions:

• Were there any examples of SOX-compliant firms that successfully balanced the trade-offs between providing sufficient informational asymmetries (to drive innovative behavior) and the reduction of agency costs (to manage managerial opportunism)?  If so, do they demonstrate any general characteristics worthy of further study?
• If the basic challenge presented by SOX requirements is the need for external, or objective oversight, are there non-tradition collaboration models worth exploring to address the problem?  For example, the open source software model (Linux), or the virtually unbounded peer-review model of Wikipedia?
• How much of the challenge of seeking, or investing in, innovation is the mindset that the corporation needs to own the innovation?  The implication in this question is that innovations are different from inventions, or other such corporate assets that can be protected.
• Does the recent trend to appoint chief innovation officers have any impact on the ability of public corporations to address the issues caused by agency costs?  For example, can a CX level position, with sufficient resources, better manage the proximity vs. objectivity oversight balance (see Section II. C. of the paper)?

Thank you Mr. Shadab for a very insightful investigation and excellent write-up of the results.

Stumbling Toward Innovation - Or Diversity?

Michael LoBue, CAE writes: Antoine van Agtmael makes some excellent points in his guest commentary (Newsweek International Edition) entitled Stumbling Toward Innovation.

But, is it enough to think that adversity alone is to account for how some companies are able to grab success from the jaws of flamming failures?  van Agtmael cites Embraer's highly successful turn around as a plane maker, TSMC's success as a logic semiconductor wafer maker - from a start-up (Taiwan) - and Aracruz's success redefining the pulp industry -- and others.  I think diversity has everything to do with it!

Certainly overwhelming failures (and obstacles) may be the catalyst for change, but let's face it, many companies face overwhelming failures and obstacles and don't pull it out.  If turning it around is the result of management being able to see things differently, then why not make this capability systemic in an organization?  Isn't diversity (however you want to define it) the path?

 

Innovation is a Mind-Set not an R&D Line Item

Michael LoBue, CAE writes:   Langdon Morris' blog post How Dell Plans to Beat Apple raises some excellent points about what it takes for Dell to compete with Apple.  But upon some reflection, following a comment posting to his blog post, I'm not sure I would agree as strongly with his contention that Dell needs to increase its internal R&D budget as a way to succeed in their new strategy to "beat Apple".

I'm not aware of any research showing that innovation needs to come from within the company vs. through outsourced strategies to be more valuable.  However, Dell can take one clear lesson from Apple in this department; Apple has been a successful innovator because they have nearly always focused on the user -- well, perhaps apart from some of the silliness during the "Scully years"!  I can recall during the 1980's (pre-Sculley) Apple was the oddity in Silicon Valley because they not only hired "liberal arts majors", they sought them out.  That piece of innovative thinking alone may be the most significant "innovation" behind the Apple success.

Increasing the R&D budget alone, or bringing it in-house, isn't going to help unless Dell's management knows what they're looking for -- to be able to recognize a solution to a real user need vs. a superficial change like a rainbow of color choices.  An innovation should be measured by how well it solves a user's problem, not how intricate the solution (technology) involved.

Making Your Organization More Innovative

Daniel W. Rasmus writes: I just posted an entry on my Future of Information Work blog (Five Acts to Make Your Company More Innovative). The list is not exhaustive, but it is a list I think is useful in helping organizations create the sense of unbalance necessary to stave off the status quo. I would be interested in comments about other "acts" oganizations should commit to that will ensure they create a culture of innovation.