[Book review] 'Purple Cow' & 'Free prize inside'

The two books 'Purple Cow' and 'Free prize inside' by Seth Godin deals about marketing. The underlying presumption of both books is that the traditional way of marketing was based on the old TV-industrial complex. New products and services were created for the masses and then marketed on TV to the masses in order to increase sales and profits. In modern days, consumers stopped listening. Of course this is also because of the increase in number of channels on TV and other media (internet) people spent time on, but it is also a new consumer who actually decides on whether he wants or does not want to listen. The second presumption is that most of people's needs are satisfied, so products and services have to cater to what people want, not what they need. Other people might call this to create a market need/demand.

To overcome this problem, there is only one solution according to Seth Godin: be remarkable. It takes new and innovative products and services to be noticed by people. To be noticed means being worth talking about, which leads to more sales. But the only way this happens if the product/service is remarkable. And what is remarkable today, might be common and boring tomorrow, so to continue having remarkable products and services means to innovate.

Seth Godin suggests marketing companies to stop making remarkable advertisements, but ask their clients if they can be involved in the very design of their products and services, just like the type of companies I talked about in my previous blog post.

When talking about innovation, Seth Godin notes that although most people think about advancement in science and technology, this strategy is risky and expensive. What is cheap (free prize) in contrast is the design of 'soft innovation'. The strategy is to make your product/service remarkable not through new technology but 'to go to the edge'. Do something else than others do and make it remarkable: be cheaper, or more exclusive, or put extra packaging, or remove all packaging, be open 24/7 or be open only on Tuesdays afternoon, etc.

Furthermore he notes (like others have noted) that the only thing that all innovators have in common is that they have nothing in common. They are unique in their sector and doing something remarkable that no one has done before. And to follow them means to be a follower: not innovative and not remarkable. So his message is: be remarkable.

During the Ford industrial complex, blue collar workers were expected to do as they where told. White collar workers nowadays have on the other hand to come up with new ideas and do things different, since they have to work with their minds and cannot be instructed what to do. Therefore it is your job to be remarkable. 'Free prize inside' discusses different strategies and methods for how to be remarkable.

New services arise

Over the last decade, I have seen the birth and growth of a completely new industry sector that hardly existed before. A new service firm that takes (partly) over the responsibility from their client for the organisation of their eco-system and their innovation process. Traditionally there are consultants who will tell you what you should do, what choices to make and how to adapt your strategy. Sometimes this was followed by an interim-manager who would execute this new strategy, mostly in times of crises. The new type of service firm not only suggests new strategies, it also partners in the implementation of the new strategy by taking over share and part in the design and execution of the innovation strategy. Sometimes this include conducting applied research together, developing prototypes and doing the market-introduction together. In other cases it is limited to the finding, selecting and linking to new global partners to include in the new innovation eco-system. This last service is not the generic match-making services as run by many private and public bodies but includes a very specific in-depth knowledge of a typical sector/technology to be able to find and link to partners that can offer true value added.

Both of these services existed only very limited before and probably only available and affordable for large firms. Nowadays with new innovative methods for sharing costs and profits these new services are available for all companies. It will be interesting to see where this development will go in the future...

The rise of the NGO

In the book Microtrends by Mark Penn, one of the identified micro trends is that more and more people in the USA are employed in in the non-profit sector. Although the average salary in the non-profit sector still lags behind both government and profit sector, the share of population that is employed by these NGOs is growing every years. First of all, this is because of a growing number and amount of donations. But another argument is that both government and profit sector have a low credibility and are therefore less and less able to attract new (talented) people.
Together with this new development is the growing role for non-profit organisations to contribute to solve societal problems, which before was considered to be the domain of the government using innovation and dedication that before belonged to the private sector. Furthermore, the trend (also recognised in the book) is that all three sectors government, private and non-private increasingly collaborate together and therefore contribute to the breaking down of the strong barriers that defined and separated the three sectors. Non-profit organisation also deal with business plans, innovations and advanced monitoring and evaluative tools. New venture philanthropy has emerged and as non-profit organisations grow they have to focus more and more on traditional business topics as human resource, organisation structure, management etc. This means for innovation that the traditional focus on business or on 'tripple helix' has to be rethought and has to include non-profit organisations as well. In the far future the whole distinction between profit and non-profit might as well disappear, with successful leaders and organisation being able to address societal issues in ways that also generate profit.

Crowd sourcing for NGOs

One of my main messages about innovation is that it is not only for companies. NGO's have done many innovative things lately. From showing the real size of the BP oil spill in comparison to your own region, to KIVA that created a direct market for micro-loans between loaners and lenders.

Furthermore NGOs have started to specialise. They focus more and more on finding local partners in developing countries and have their own specialiaation in fundraising and communicating with the donors. They find new ways of fundraising (using SMS) and new ways in communicating with the general public (using social media)

The next talk introduces the idea of crowd sourcing for NGOs:

It's people, you stupid!

What is the most crucial factor that determines whether a potential innovation will make it or not? Many policy makers think they know, and they try to support their favourite factor, being it focussing on high-technologies, spend more money on research, support for intellectual property rights, better access to finance, more entrepreneurship or better cooperation between science and industry.

When you ask a successful entrepreneur who has started and grown many innovative businesses during their working life time what for them was the most crucial factor in making innovation happen, you always get the same answer: innovation starts and ends with people. You need a group of talented and skilled people who can make it happen. These people, according to the successful entrepreneur are the most important assets of the firm. Companies that don’t innovate often claim that lack of finance is their main reason for not innovating, while companies that are successful innovators claim it is due to their skilled and competent employees. According to these successful and innovative firms, money will always be attracted by good ideas. It is the good ideas themselves and knowing how to execute them which determines if innovation will become a success or not.
For any process of innovation, you need talented people. First of all you need people with different skills and competences, in order to reach all the different topics that relate to innovation: technology, marketing, design, fashion, culture, business, finance, law etc. For this you need people with good education, with experience in their job and they need to be free to give their input in the process. Besides the need for skilled people, any innovation process starts with the collaboration between a group of people, individuals. A CEO might decide that innovation is important for the strategy of the firm, it’s the employees that have to make this a reality. And with more international trade, globalization, open innovation and further increase in the complexity of products and services, the people that make innovation happen are not exclusively working in the same firm, but create collaboration between different firms and organisations, both public and private.

To innovate is therefore also to create a network of people that collaborate and exchange knowledge and experience based on trust, creating consensus, be open to good ideas and suggestions for everybody. What is even more important work teams working on innovation, is that the activity goes beyond the normal business activities and tries to establish something new what has never been tried before by the same firm or firms. More creativity and more problem solving, trial & error and anticipating and responding to unexpected events are essential in the process of innovation. This required the full commitment of the group engaged in the innovation activity and is not a standard process that can be managed from high in the hierarchy in the firm.
In a more globalised world, innovation not only takes place between different organisations locally, the collaboration often takes place at a global level. Different inputs into the innovation process, like knowledge, design, technology, marketing could be provided from anywhere in the world by any partner. The open collaboration between individual that takes place is more and more a cross-firm and cross-cultural event. Management literature of innovation and policy makers dealing with innovation often neglect this individual perspective. More attention should be paid to the role of people in the innovation process, the importance of trust building, and how to transform our companies into flatter, adaptable and learning organisations in which employees get more responsibilities and the to be more self-managing, how to deal with the need for less barriers between organisations and between countries that now hinder collaboration and open innovation. These barriers include cultural, psychological and social barriers, inherited by a historic culture and need to be dealt with.

For any country, this means that to foster innovation in the country, first more attention should be paid to establish real high quality education. When people receive good education, they have the knowledge to come up with new innovative ideas. In order for them to try out these ideas and translate them into projects, it is important that there is an environment (in the country and in the company) in which people feel free to suggest new ideas, feel responsible for the wellbeing of the company and are not afraid that they will be criticized and worked against, because the idea seems to strange, unrealistic and nothing that has ever been done inside the company. Foreign investor and national policy makers should start paying attention to the role of individual people in business and innovation and create and maintain an environment in which trust can be build, people have the means as well as the responsibility to share, collaborate and engage in innovative activities. To create such an environment means more attention to social, cultural conditions and a shift in focus towards individual people. The new Finnish strategy for innovation includes a shift from investing in companies towards investing in people. Also innovative global competitive companies such as Google focus on a creating a working atmosphere in which employees feel valued and responsible to participate. Such examples deserve to be followed by others.

[An adapted version of this article has been submitted to the magazine 'Invest in Lithuania']

See also this video Where Richard Floriday speaks about economic development, I just found several days after I wrote this article.

Francis Bacon (1561-1626) 'Of Innovation'

AS THE births of living creatures, at first are illshapen, so are all innovations, which are the births of time. Yet notwithstanding, as those that first bring honor into their family, are commonly more worthy than most that succeed, so the first precedent (if it be good) is seldom attained by imitation. For ill, to man’s nature, as it stands perverted, hath a natural motion, strongest in continuance; but good, as a forced motion, strongest at first. Surely every medicine is an innovation; and he that will not apply new remedies, must expect new evils; for time is the greatest innovator; and if time of course alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end? It is true, that what is settled by custom, though it be not good, yet at least it is fit; and those things which have long gone together, are, as it were, confederate within themselves; whereas new things piece not so well; but though they help by their utility, yet they trouble by their inconformity. Besides, they are like strangers; more admired, and less favored. All this is true, if time stood still; which contrariwise moveth so round, that a froward retention of custom, is as turbulent a thing as an innovation; and they that reverence too much old times, are but a scorn to the new. It were good, therefore, that men in their innovations would follow the example of time itself; which indeed innovateth greatly, but quietly, by degrees scarce to be perceived. For otherwise, whatsoever is new is unlooked for; and ever it mends some, and pairs others; and he that is holpen, takes it for a fortune, and thanks the time; and he that is hurt, for a wrong, and imputeth it to the author. It is good also, not to try experiments in states, except the necessity be urgent, or the utility evident; and well to beware, that it be the reformation, that draweth on the change, and not the desire of change, that pretendeth the reformation. And lastly, that the novelty, though it be not rejected, yet be held for a suspect; and, as the Scripture saith, that we make a stand upon the ancient way, and then look about us, and discover what is the straight and right way, and so to walk in it.

Tom Peters: Innovation is Actually Easy

This speech holds for anybody who wants to be (market) leaders. In truth, many companies stay alive by following. The question here is innovation means new. New for who? New for the world, your sector, your country or only new for your company?

[Book review] Innovation and collaboration for a harmonious world

The book "Innovation and collaboration for a harmonious world" is written by the Dr. Johan Wallin (Finland) and Professor Jun Su (China) and discusses different themes around innovation policy, competitiveness, clusters and global trends and challenges. Besides the potential for collaboration between the two countries and many different examples of clusters and business development within each country, several statements about innovation policy and cluster development I considered worth quoting or summarising:

...in the knowledge society, competitive advantage of individual products or services is not sustainable for very long periods of time. Individual offerings provide superior profitability just for a certain period, after which competition will catch up, and no advantage ca be sustained. Because of this, the only way to be economically successful is by having the capacity to constant innovate." (p 19)

About innovation

Three different types of innovation activities are distinguished:

1) Cost innovation; cost-effective, standardized operations, improving supply-chain operations.

2) Offering innovation; capacity building and collaboration with customers and partners for developing new offerings by integrating the contributions of partners, so that individual companies cannot match on their own

3) eco-system innovation; considering partner portfolio and forming the social architecture for long term collaboration and innovation

Eco-innovation, the book claims, is today the most essential factor the drives growth.

Eco-innovation can be pursued through two different options: Strategic Niche Management (bottom-up evolutionary approach) and Orchestra manager (top-down approach). The first approach is based on the socio-technological system approach developed in the Netherlands and which views:

...the whole complex of scientific knowledge, engineering practices, production process technologies, product characteristics, skills and procedures, established user need, regulatory requirements, institutions and infrastructures.

The different types of innovation also required different types (levels) of collaboration

About Collaboration

The book also discusses different stages in the development of collaboration, described in the light of the earlier mentioned different types of innovation. Since eco-system innovation demands a different level of collaboration, the different levels of collaboration are introduced:

1) Mapping the context (a new worldview)

2) Engaging customers (new segmentation

3) Offering repositioning (reconfigured resources)

4) Institutionalising collaboration (cemented partnerships)

5) Ecosystem orchestration (co-specialised capabilities)

The book further notices the important role of clusters in innovation policy.

About Clusters

A Cluster develops according to Wallin and Su in the following four steps:

1) Chance: The accidental event that initiates a change. This could be a single vision of an influential person

2) Strong individual: a small number of strong and influential individuals are attracted to the region, or start working on a long term cluster idea, and are able to attract more talented people.

3) Obtain concrete results: the small group of talented people have to reach concrete results that will attract not only other people but also business

4) Institutionalisation: Reach critical mass in which the cluster is not dependent on several individuals but is institutionalised and has enough critical mass to further attract people and business and continue to grow and develop.

Unfortunately, only one example of a cluster is described, on which bases these four stages of development seemed to be based. The book also notes that no cluster in Finland has been developed on initiative of the national authorities.

Country Development

The authors further distinguish different levels of development at country level, from the perspective of innovation.

1) Resource oriented country: Mainly development countries. Depending on their natural resources, few means to develop an eco-system, but could benefit most from 'grand challenges' innovations

2) Investment oriented country: Country is investing in equipment, technology, develop new technology, focus on IPR. Country promotes direct investments as a means to increase competitiveness. Country can be included in eco-system due to possession of some key technologies

3) Innovation oriented country: Service economy, knowledge intensive and focus on new knowledge and innovation. They might be natural orchestrators of eco-systems because of capabilities to design, and develop multi-cultural networks

4) Sustainability oriented country: Social and Environmental policies are integrated into innovation policy for the wellbeing of people and nature. Focus on employment, education, health, housing, eldery care, medicine as well as a focus on long term issues regarding wellbeing and environment. These countries see opportunities in the grand societal challenges to develop new innovative solutions and bring these forward on the global agenda.

The authors note that China is somewhere between a resource and investment oriented country, aiming to become an innovation oriented country, while Finland is at the moment an innovation oriented country and and aims to become a sustainability oriented country.

Another noticeable issue raised by the authors is that national innovation policy that supports global, innovative and competitive sectors/clusters/firms should take into account that global champions operate at global level (see eco-system). Much of the support for these global champions (either direct, or through sector/cluster support) might therefore create overspill effects to the global level and not necessary create more jobs in the country. This raises issues about the justification of national innovation policy. The role the authors see for national (and regional) authorities is the guidance in the forming of networks at global level that will benefit the national champion(s).

Business Prototyping

When talking about start-up firms, a lot of attention is paid to the technical specifications of the future product that has to be introduced to the market. The new entrepreneur test, changes and adapt the prototype and will conduct different tests and will show or maybe even sell to a customer to see how the product can be improved and how it is liked by the customer. This process takes some time and ends not when the entrepreneur has found the 'perfect' product, but when the entrepreneur is confident in the product and is convinced that it will satisfy the needs of future customer who he/she expects to like and buy the product.

More attention in literature and in innovation support services is paid to the need of having a business strategy and model for a start-up company. Although this need is clear, less attention is paid to the process in which a start-up can think, try out and play with different options before being staisfied with a certain strategy and starting to implement this. Similar to technological prototyping, this takes time, energy, and trying out (safe-fail method). Although I have not invented the term, I very much like the idea and concept of 'business prototyping'. This refers to a period of time in which an entrepreneur is reflecting and/or trying out and fine-tuning his business model. And similar to a defect or non-functioning prototype will not bring the company anywhere, a not working business model will never bring the company any growth or future.

So in conclusion, I would like to say once more: "Business Prototyping": the time period in which an entrepreneur is testing and trying out and tweaking different business models.

See also this link

James Andrew (Boston Consulting Group) on: "A New World Order in Innovation"

Rinnooy Kan about innovation

The president of the Dutch Social-Economic Council, Rinnnooy Kan, made on Dutch television a strong case for more investments into knowledge & innovation (12 billion Euro per year, half private and half public). To see the original TV-show, click the link.

It sounds like an often used policy measure: when there is a (perceived) problem in a public sector, the solution often contains the increase of public spending on that domain. When there are problems in the health care system, or the education system regarding the quality a lot of pressure is put on politicians to increase the budget. Why an increase in budget will solve the (perceived) problem remains unclear. Also in the case of innovation: the case is often made that to remain innovative and competitive in the knowledge society, we need to increase our investments in innovation and knowledge. The 'Lisbon strategy' and also the new 'Innovation Union' both aim at an EU average investments of 3 % of GDP in R&D. Why in general a target is set for investments and not for results is unclear to me, and furthermore why there is such a strong perceived correlation between R&D and innovation performance is also unclear to me. In stead of analysing what are the problems in the National Innovation System and trying to solve these problems, the problem is tackled by throwing more money into the system. When taking into account that innovation often thrives in an environment of scarcity, the increase of public spending might even have an contrary effect. One danger could be that we copy the Swedish example in being a leader in investments in R&D, without this resulting in growth in number of jobs (link, pdf; link2, pdf) or increase of GDP (link, pdf).

EU - The Innovation Union

As posted earlier, the European Commission has announced the Europe 2020 Flagship Initiative Innovation Union.

In the introduction it announces that this document will focus on a broad based definition of innovation (not limited to R&D-driven innovation) and will be an inclusive of all actors (public bodies, civil society and not only limited to high-tech companies). A very good intention.

Unfortunately, more than half of the remaining document focus on issues of R&D-driven high tech companies, like:

+ Creation of a European patent
+ Establishment of a European Research Area
+ Better collaboration between science & industry
+ More investments in R&D
+ European Institute of Innovation and Technology that focuses on Knowledge Intensive Clusters (KIC)
+ Better and more effective collaborative research and knowledge transfer
+ Attract world class researchers
+ Create Knowledge Alliances between education and business

Only a small number of initiatives go beyond this narrow focus:

+ Access to finance for SMEs, including more Venture Capital
+ Innovative public procurement
+ Innovation Partnerships that focus on societal challenges
+ European Social Innovation Pilot (focus on societal innovation initiatives)

These last two initiatives seem the only through new ideas presented in the document and both have the ambition to look beyond the traditional view on innovation as R&D driven and focused on competitiveness only. I support these new ideas, but at the same time have to say that new initiatives without the discontinuation of old initiatives create an overload of public initiatives that lack effectiveness and focus. Therefore I would suggest that any new public initiative can only be launched when at the same time the discontinuation of an old initiative is announced in order to create the 'creative destruction' that is necessary to make space for new initiatives.

Also the section focusing on creativity, design and creative industries (without making a distinction between these concepts) contains more than half its length on IPR-issues, apparently lacking the understanding of what is non-technological innovation.

The whole service sector (70% of European economy) is only mentioned as containing only a small section of knowledge intensive companies. The role of service innovation is overlooked in the whole document.

Also the role of non high-tech (often traditional) manufacturing is not mentioned. Their needs to face challenges of competitiveness, environmental and social standards are completely overlooked.

In summary, it seems that the document does not fulfill its promises of going beyond the traditional understanding of innovation as measured in R&D efforts and growth of high-tech industry, but some small baby steps into new directions are made.

The Rise of China

A doom scenario for all innovation policy makers in Europe and USA is the rise of China (and India, and other emerging countries) as a leader in innovation. In all benchmarking studies (see previous post) the performance of countries or Europe as a whole is measured against each other and we tell each other that we have to intensify our efforts in innovation in order not to loose the competition against China and India. But why again are we afraid? What is the danger in several billion of people escaping poverty and getting good education, access to innovation tools like computers, internet, phones. I would like to see that as a gigantic pool of potential clients, collaborators and great ingenious variety of ideas and enough smart people to execute these ideas. Exactly what we need when we face the 'grand societal challenges'

I therefore love the following quote from Ezra Klein in the Washington Post made today (link to article):

"People often worry about what will happen if China becomes as innovative and technologically capable as we are. I think it makes a lot more sense to worry about what happens if they don't."

OECD - Measuring innovation: a new perspective

The OECD perspective on the role of government on innovation has shift according to the above video from spending on R&D to stimulating R&D through both direct and indirect (tax-breaks) measures. The link between R&D and innovation is apparently still evident. Furthermore, the final sentence: "...but what is clear is that governments have a powerful role to play in helping business unleash their innovation potential in todays knowledge economy" is not explained. Why is the presumption that governments have to help business unleash their innovation potential and why should that be done through direct on indirect support for R&D? it still puzzles me. The OECD report can be found here

Socialist Party - opinion about innovation

Ronald van Raak, member of the Socialist Party in the Netherlands has published two articles about innovation policy in Dutch (two very similar articles):

Het Innovatieplatform was een politieke mode (2007)
Geen innovatie zonder motivatie (2005)

Not necessarily my opinion, but at least well written coherent opinion based on solid arguments.

John Cleese - Creativity

Short summary:
1) Creativity works for a large part in the sub-conscious brain, for example when sleeping.
2) Creativity is hindered or stopped when disturbed by an outside event.
3) To foster creativity create boundaries of space & time to work undisturbed and initiate the creativity.
4) To know how good you are at something requires the same skills as it does to be good at that thing. Which means that if you are absolutely hopeless at something, you lack exactly the skills that you need to know that you are absolutely hopeless at it. A teacher who lacks creativity often undervalues the creative work of a student, a manager is likely to take credit for the creative input of an employee.

3th Generation Knowledge Management

Sorry, this post is in Dutch. A post done in the Linkedin group CoT (Community of Talents) by Albert Cath:

"De opkomst van kennismanagement kan geplaatst worden in de jaren negentig van de vorige eeuw. Er worden hierbij drie fasen onderscheiden, ook wel generaties genoemd. In de eerste fase is het uitgangspunt dat kennis vooral de organisatie dient en is daarmee iets dat je kunt managen, net zoals je alle andere processen kunt managen. Het kan dan opgevat worden als een economische waarde, als een logistiek probleem (kenniscreatie, productie, distributie en toepassing) en als een strategische kwestie, waarbij termen als kerncompetenties en concurrentie op de voorgrond treden. In deze opvatting is dus sprake van een dominante instrumentele benadering, waarbij kennis vooral een managementinstrument is.
Daarna en daarnaast is een tweede generatie van kennismanagement opgekomen. In deze zogeheten consensuele benadering erkent men dat er kennismanagement dient te berusten op wilsovereenstemming (consensus) tussen de manager en de kenniswerker. Hierbij wordt dus het idee dat expliciete kennis valt te scheiden van de impliciete, ervaringsgebaseerde, dimensie van kennis verlaten. Kennis is dan vooral ingebed in de waarden en cultuur van de organisatie. Je kunt het dus niet managen als een basisproduct. De ingezette instrumenten zijn vooral gericht op facilitatie van kennis. In de aandacht staan dan: het verhogen van kennisuitwisseling, het verhogen van de kans op interactie en vooral het creëren van zoekmachines door middel van informatietechnologie zodat individuele expertise vindbaar is in de organisatie.
De kritiek die geleverd wordt op deze twee generaties van kennismanagement is dat organisatie vooraf gaat aan kennis en dus louter de organisatie dient en niet het individu. Ze richten zich op de vraag: “hoe organiseren we kennis?’ Organisatie wordt voor kennen geplaatst, wat mogelijk is als het aantal onzekerheden beperkt is. Bij ongestructureerde vraagstukken is organisatie en organiseren eerder afhankelijk van kennis dan omgekeerd. Beter gesteld: organisatie, management en kennis zijn in toenemende mate onderling afhankelijk. De vraagstelling van de instrumentele en consensuele benadering dient dan omgedraaid moeten worden in: “hoe en wanneer en op welke wijze beïnvloedt kennis de organisatie?”
In de derde generatie kennismanagement wordt ingespeeld op deze kritiek en gewezen op het begrip participatie in relatie tot complexiteit. Immers kennismanagement veronderstelt dat het management de kennis zelf volledig kan overzien, zo ook de verwachte behoefte aan kennis en dus in staat is kennis toe te wijzen. Dit kon wellicht in het verleden, binnen kleine organisaties en beheersgebieden en redelijk overzichtelijke kennis. Echter onder complexe condities, waarbij organiseren rijke feedbackloops vereist, ligt hiërarchisch kennismanagement overhoop met de complexe actuele situatie."

The story of stuff

The Story of Stuff from Long Island Pulse on Vimeo.

[Book review] The long tail

The Long Tail, written by Chris Anderson, is a book about the shift from hits to niches. According to the book this trend is fueled by three forces:

1. Democratize tools of production (e.g. PC)

2. Democratize the tools of distribution (e.g. Internet)

3. Connect supply and demand (Google, blogs, recommendations)

This shift can be seen the best online through online sites as Amazon, eBay, Netflix, iTunes etc, where an almost unlimited amount of products/services is offered within a product category. Where a typical Wallmart has one small stand with classical music, focusing only on the most known 'hits', on iTunes you would be surprised if you could not find the music you are looking for. iTunes and other online retailers are able to offer such a huge variety of product, because in contrast to Wallmart, it has limited to no costs of shell space. Also many of the physical products on sale at Amazon are actually located in the shops, on which behalf Amazon sells the stuff, therefore Amazon does not bare the costs of storage. Although on the internet the effect of the Long Tail is the easiest to spot, the trend is also visible in the offline world. Mail-order companies with almost endless catalogues offer far more than a regular shop and larger cities have more specialised shops (soap shops). In supermarkets the number of different kinds of flour you can buy nowadays indicates that people want to choose.

Link with innovation.

The Long Tail has already lead to many different kinds of innovation. It reorganizes the value chain creating new partnerships like the one mentioned between Amazon that sells online on behalf of other shops. It democratizes the tools of production and enables many users to create their own products (music, video's, news and also physical products)m which leads to prosumers: consumers creating their own content and offering these to others, leading to more choice for other users and a new competition between professional content and user generated content that compete side by side. Furthermore, the long tail creates more niche opportunities for companies to create new value for users through more choice: The endless choice of different kinds of coffee at Starbucks has been replicated in other industries like jam, chocolate, etc. Hits will continue to exist, but more choice will attract people to your shop or website.

Dark side of innovation

"Everybody supports innovation, as long as it does not mean change". This is a quote I once heard and pretty much describes the phenomenon. Everybody loves the concept of innovation, nobody can be against it. That is why it is so popular among policy makers: strive for something everybody wants. But innovation always also means change. And not always people like change. See the topic of resistance that is discussed widely in innovation management: how do you fight of cope with the initial resistance against a new idea or innovation within a company. From the perspective of innovation management literature, people who initially fight change in a organisation do this out of fear, defending the status-quo and an attempt to keep their privileges and their current level of control. One part of people fighting against change and technological progress within organisations are described as Luddites . The challenges of managers and policy makers is often formulated as overcoming this resistance for the public wellbeing.

But let us look a bit deeper into that fear of change. What if technological progress or the new innovation does mean loss of jobs or loosing power? The introduction of the car factory producing T-fords meant more employment against a higher salary for many people, but it also meant the introduction of Taylorism: a very dull repetitive and relatively low responsible work. The concept of organisational innovation that includes outsourcing leads to the closing of many factories in US and Europe. The innovation of direct online booking of flights, cars and hotels has lead to the decay of the travel agencies. How to explain to a now unemployed person that innovation is a good thing for all? Part of the savings a car manufacturer can make by closing a factory in Europe and opening a new one in China will go to the people who close the deal and make it happen. But how to explain to the unemployed workers that some people get big bonuses for getting you laid off?

Do I still have to explain financial innovations to show the possible negative impact that innovation can create? What about computer viruses, online crime and identity theft, more powerful weapons and the possibilities of bio-terror?

The truth is that innovation always means change. And when change happens some people win and some loose. It does not have to be a zero-sum game, but there are almost always people who will loose. Accept & acknowledge that and try to see if that is a reason not to innovate or not

The future of books

The Future of the Book. from IDEO on Vimeo.

Small is the new big is the new small

Last week I was attending a seminar in which Getjar CEO and founder Ilja Laurs gave a presentation.

During his presentation, he compared the typical start-up company in Silicon Valley with the more traditional established business like Microsoft and nowadays also Google. According to Ilja Laurs, the start-up companies are winning the competition for talented people to the big firms, because they can offer higher salaries and better perspectives. The reason that small start-up firms can offer higher salaries is because of their prospect of fast increasing firm value which can be capitalised and partly spent on salaries. Big firms in general make small profits and don't increase their company value and cannot offer the same high salary. The future prospect of creating new 'world changing' technology, products or services is also more appealing than the prospect of making more of the same in the large firms. Small is the new big...

From a talk with some people in the former Innovation Platform in the Netherlands, I know that the people working their consider the "Big seven" companies in the Netherlands employ almost all talented scientific people in the Netherlands, which hurts the development of new technological based start-up companies, since they are unable to attract and attain talent. These large companies are able to attract talented people because of the high salaries, the variety of career opportunities within these firms and the prospect of working and collaborating on new advanced technological challenges and bringing new technological products to the world.

France is renowned for life-long employment for state-worker with good salary and working conditions. It is therefore not a surprise that many talented people choose a career in a state institutions after finishing one of the prestigious 'grandes écoles'. In Lithuania on the contrary, an average talented person would choose a career in business, and preferably start his or her own company.

In conclusion, it can be said that different circumstances in different countries and probably also different sectors determine the conditions for organisations to compete for talented people. The prospect any organisation can offer to people in terms of current and future salary are just as important as the values, working conditions and the image of the organisation and the sector it operates in. And finally, talent attracts more talent.

"Cargo Cult" innovation

Some time ago I participated in a strategic meeting about converging technologies in Lithuania. One of the speakers was prof. Rimas Vaisnys from Yale University. He explained the phenomenon of "Cargo Cult":

"Cargo cult activity in the Pacific region increased significantly during and immediately after World War II, when the residents of these regions observed the Japanese and American combatants bringing in large amounts of material. When the war ended, the military bases closed and the flow of goods and materials ceased. In an attempt to attract further deliveries of goods, followers of the cults engaged in ritualistic practices such as building crude imitation landing strips, aircraft and radio equipment, and mimicking the behaviour that they had observed of the military personnel operating them." (source: wikipedia)

He further concluded that this same ritual can be identified for policy makers in developing and transition countries when developing innovation policy. The policy makers are imitating the efforts of other countries, copying foreign policy documents without a true understanding of the topic itself.

I think that this practice is not limited to developing countries, but is wide spread among many developed countries. I have heard a Dutch minister of Education and Science justifying a multi-billion public investment in nano-technologies by claiming that: 'other countries also do that'.

Furthermore I suspect that the same "Cargo Cult" might be wide spread among companies trying to imitate, mimic or copy the success of innovative competitors. Put an i in front of your products name and hope you will become as successful as Apple...

[Edit 15 April 2011: More people have recognised that governmental policies for the support of innovation can be classified as cargo cult, see link]

EU: Innovation Union

The EU announces the Innovation Union, their strategy for innovation until 2020.



Press release here

UPDATE: Document is released here

My ideas?
The linear model of innovation is dead. Long live the linear model.
1. The EU focuses mainly on R&D and hopes that innovation will follow.
2. The EU believes that economic growth will lead to more jobs. Apparently they never talked to an economist and have not followed the news about jobless growth in the USA.

Where Good Ideas Come From

Who innovates?

Who innovates? Traditional answer: companies. All traditional literature and policies regarding innovation take this as a starting point. In most countries the Ministry of Economic Affairs is in the lead in creating innovation policy. Academic literature regards innovation as an economic phenomenon (following Schumpeter, Porter, etc), including the "market failure" paradigm. Popular literature as The Economist and Business Week spend much attention on the topic. Strange... Innovation is a multi and inter-disciplinary topic that touches disciplines as culture, social behavior, technology, marketing, governance, legal frameworks, etc. etc. Here some non traditional examples of innovaters

1 Governments innovate
Really? Yes. Governments are trying to be more transparenr, engage and inform citizens, increase efficiency, decrease bureacracy, improve their services and use the knowledge of the crowd for policy making.  Some examples: Voting by Iphone; using open source software in government and government crowd sourcing.

2 Individuals innovate
Ever heard of DIY? I am not talking about home improvement, I talk about advanced science and creating new businesses. With internet as a tool, can you see the difference between a multinational and a self-employed person? Open source (software) is a group of individual innovating together.

3 Dont forget NGO's
Many NGO's are rethinking their strategies. How to link, engage, activate and inform donors. How to decrease overhead costs. How to increase, measure and publish the impact? How to focus on core competences and link and outsource to other organisations?
Examples: Writing letters for Amnesty International is now sms or e-mail; webcam of oil-spill or using social media to create protest movements. Select in which firm you want to invest to using micro-credits. And what about Wikileaks?

Chris Anderson: How web video powers global innovation

Aho Report (2006) Creating an Innovative Europe

Charles Leadbeater on innovation (Old, 2005!)

Nothing new, an old talk with well known ideas. Still good not to forget.