[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.