Outside the Industry

Often you'll hear Eric von Hippel discuss how certain breakthrough (radical) innovations come from industries that are closely related to, but outside, the industry in which they are ultimately used.

Von Hippel gives the example of anti-skid breaks on cars: this came from the technology used to stop aircraft wheels from locking up.

Another one he gives is a membrane barrier used to stop infections during surgery: this one came from vets, who are often forced to operate in extremely dirty conditions.

These examples are useful. Sometimes we need to stop asking people "in the industry" and ask people outside the industry how they solve a particular problem.

If your car is rusty and you're looking for a way to stop it getting worse, are you going to ask the guy at the garage or a guy that protects oil rigs in the North Sea of Scotland?

Joseph Schumpeter

It's difficult to discuss innovation without mentioning Joseph Schumpeter, evolutionary economist. Schumpeter concluded that capitalism would ultimately fail and be replaced by some form of economic socialism -- despite capitalism's huge successes. Schumpeter's conclusion that capitalism would fail was the same as Marx's; however, Schumpeter's arguement differed.

In Capitalism, Socialism and Democracy, published in 1942, Schumpeter goes into great detail as to why capitalism would ultimately fail. There is no doubt about it, some of the "observable tendencies" mentioned by Schumpeter are very apparent today. For example, when people don't have children, they are less inclined to build a "transgenerational dynasty," which was, according to Schumpeter, one of the key motivations for entrepreneurs to do what they do.

So, no kids; no need to worry about their financial future; and, therefore, a reduced desire to innovate. Seems reasonable.

Fragmenting Markets

The following is a quote taken from an excellent interview with one of the co-founder's of Excite, a search engine.

"The 20th Century mass production world was about dozens of markets of millions of people. The 21st Century is all about millions of markets of dozens of people," observes Mr Kraus.

The full piece is here:

Lessons From Silicon Valley

This piece is relevant to bloggers who write about obscure subjects in which people -- in the immediate locale -- have no interest. Turns out that there is an audience out there, and this audience can add up to thousands! (or dozens at least!)

Eric von Hippel's New Book

Eric von Hippel has a new book out entitled Democratizing Innovation. It is available as a free .pdf download from Eric von Hippel's Web site. Essential if you are interested in innovation.

The Six Million Dollar Man

Remember that show with Lee Majors as Steve Austin?

"We have the technology . . . "

But what, exactly, is technology? Here's a definition for consideration from Dosi (1984):

" . . . a set of pieces of knowledge both directly ‘practical’ (relating to concrete problems and devices) and ‘theoretical’ (but practically applicable though not necessarily already applied), know-how, methods, procedures, experience of success and failures and also, of physical devices and equipment" (p. 151).

Dosi’s definition of technology is comprehensive and emphasizes the use of knowledge to solve real, current problems in addition to its ability to solve problems that are not already evident -- future problems. Dosi’s definition of technology is fascinating because it explicitly includes experience (both successful and unsuccessful) as a key component of technology.

Though it is a great definition, it is nevertheless a bit long winded. Here's another, more useful one:

Technology is: "the practical application of scientific or technical knowledge" (Ketteringham and White, 1984). I like this one!

The Great Asian Century

How many times do you hear this?

There's a lot of talk these days about job losses in Europe and the United States. I have this theory (well, and idea) as to why talking about job losses alone from these continents to Asia is missing the point. What about the job increases in other sectors? Here goes: My theory is that as long as the Chinese aspire to displaying their rising socio-economic status relative to their peers, there will be increasing jobs in Europe and the United States in certain industries.

People often like to show off their wealth in different ways. Trips to Vienna (travel industry); "study" in America or elsewhere (education industry); a nice bottle of Cognac (entertainment industry); a BMW or Mercedez (car industry); a nice handbag (fashion industry) etc. etc. Often, it is European countries that produce these products.

The next time somebody harps on about job losses in manufacturing from the West; ask them to tell you a little about the new jobs that are being created in some of the industries mentioned above.

BCG Report

It's always good to read current research on innovation and its management. Here's some from the Boston Consulting Group.

Respondents were asked which companies they viewed as the most innovative. Unsurprisingly, the usual suspects were mentioned, Apple, Dell etc. etc. I would probably imagine, though, that there are many, low-profile companies in the business-to-business world that are far more innovative than these high-profile companies.

It always amazes me how in popular business books the authors can't seem to see beyond Starbucks, South West Airlines, Dell, and Amazon. The authors must be aiming for the mass market with these books!

Convergence

How many times have you heard company spokesmen rattle on about "convergence," and how we are all going to be using devices with numerous, and increasing functions?

Cameras with phones. (No thanks, camera phones take poor pictures and my battery doesn't last long at the best of times!)

Tablet PCs. (No thanks, I prefer paper.) I saw an ad here by Tatung, a Taiwanese manufacturer of electrical appliances, for their "new" tablet PC that pictured a guy happily looking at a bar chart while he was swinging in a hammock on some tropical isle. I don't know about you, but any time I have been lucky enough to be on a tropical beach in a hammock the last thing I'd be doing is working. And what about the sand getting everywhere?

Not only is Tatung's idea bad. They should have learned from Acer's failed attempt at flogging tablet PCs to a very resistant market (that's us, by the way). Acer only sold 5 percent of what they had planned to sell. It has cost the company dearly.

TVs with video unit combined. (Manufacturers have been there, done that. Huge flop.)

Washing machines and dryer combined. (Didn't work either.)

I am in total agreement with Al Ries's position that for the most part convergence is out and divergence is in.

Products that combine previously separate components always end up compromising their performance in order to squeeze them into this one unit. Not only that, all these "extra" functions do is make battery life shorter.

Why Bother?

That innovation is important is pretty much a given in 2005 for firms, regions, and nations. But why should we innovate? This is often a question that, on the surface, seems easy to answer, but if you actually nail somebody down and ask them to list the reasons, proves to be quite tricky.

Here are some reasons from the United Kingdom's Department of Trade and Industry:

Why innovate?

1. Innovation reduces waste and environmental damage.

2. Innovation creates growth, increases productivity, and economic wealth (avoids stagnation)

3. Innovation provides better goods and services at a cheaper price – higher standard of living.

4. More interesting work for employees.

7. Old strategies get replicated and, consequently, margins get squeezed.

8. Survival.

The above list is not exhaustive, but it certainly gives some concrete reasons why we need to innovate, either proactively of reactively.

The Perils of Thinking You're Smarter

"What do the Japanese know about making cars?"

This quote, which came from somebody at General Motors years ago, was mentioned in one of my previous posts on how disruptions are often ignored by incumbents, for very rational reasons.

I just came across this article on the BBC Web site. It discusses how some of the Japanese manufacturers are thinking about raising -- yes, raising -- their prices as a goodwill gesture to the American car companies.

Proctor & Gamble Finds Non Consumption

Not only does P&G look for and find non consumption, it exploits it to make a dollar. This is innovation in its purest form. Real innovation.

The Crest Tooth Whitening Strips were not introduced to compete with expensive cosmetic dentists, but non consumers. Non consumers being the people who would never have bothered to go to one of these dentists in the first place. Not because they don't care about their teeth, but because cosmetic dentists are expensive and a hassle to get to. (You've got to pay the dentist fees AND suffer the cost of taking time off from work.)

Sure the strips are not as good a the dentist's whitening lasers (and P&G are well aware of this), but they are much better than what these non consumers were using before, which was nothing.

Clayton Christensen claims that there is non consumption everywhere. You just need a process to find it and exploit it. This process starts with scanning, the first stage in any innovation process.