Think about it, as spoiled as we are with great brands such as Trader Joes, NetFlicks, and Apple—when it comes to customer service we’ve unfortunately become accustomed to layers of poorly designed pre-recorded menus and canned responses that don’t actually help us. Companies have streamlined operations to the point where we assume it will take forever to speak to a live person who can actually help us.  Or if we get a live person, we’re disappointed.  Then all of a sudden a few companies start helping people via a network such as Twitter and we’re are all over it, happy to spread the news that someone is out there listening.  To me the insight is this:

We’ve become so starved for authentic live human contact that when it’s offered up to us we are all to happy to rejoice and tell the world.

As with many professions, digital has made certain things more accessible to people with potential.  Some of the most forward thinking companies like IDEO have invested in hiring anthropologists,  people who combine an intuitive curiosity with a learned skill for observation and pattern detection.  These anthropologists come from all backgrounds, and the really good ones have developed methods and toolboxes for capturing behaviors in the hopes of uncovering the insights they are looking for.

Today, a big part of that toolbox has become the Web, which lowers the bar for curious people who can detect patterns but perhaps haven’t earned their formal degrees in the social sciences or have the experience of recording hours of behavior via A/V equipment.  But there is a catch.  You have to be willing to investigate, spend time in the virtual communities—you have to participate to some extent and you have to develop your own system for capturing data whether it be tagging via delicious, favoriting links or archiving media.

The big shift is that the new kind of “digital ethnography” I’m describing is there for those willing to do what it takes to uncover those insights.  No special degree or professional recording equipment required.  I’m fairly certain some company out there is going to tap into this idea of “direct engagement”—live interactions with real breathing people enabled by digital technology.  Could be video, text, audio or a combination of all three.  But I’m fairly certain that the small percentage of people who are experiencing it through networks such as Twitter are acting as collective canaries in coalmines signaling a desire for more live human connectivity vs. artificial intelligence.  If you can relate to some of the things I've said here, then you just might be a digital anthropologist. At least, that’s my gut feeling.

It is a provocative question. After all, markets often punish companies that diversify into non-related industries, because individual investors can get the benefits of diversification by investing in different industries themselves. Are companies similarly wasting their time — and their investors’ money — when they try to invest in innovation?

Maybe established corporations should solely focus on exploiting what already exists, leaving the creation of what doesn’t to start-ups. Of course, not investing in innovation ultimately will consign a company to failure, but hey, that’s what creative destruction is all about.

There is no doubt that the innovation struggles of incumbents lead to significant waste. Companies spend billions of dollars developing fatally flawed products and services. They give advertising agencies billions more to convince people to want things that they really don’t.

An inefficient incumbent innovation market has spurred the ascendancy of the venture capital industry. Venture capitalists earn substantial fees attempting to fix this market inefficiency by providing capital to startups. Similarly, growth-seeking incumbents pay investment bankers handsome fees to advise them on acquisitions to plug the growth holes created by their innovation struggles.

However, we strongly reject the view that incumbents should eject from the innovation game. Incumbents have tremendous assets at their disposal. They have whip-smart developers with ample resources to invent cool, new things. They have economies of scale that can help them operate efficiently. They have partnerships that can help accelerate the development and deployment of new growth initiatives.

Read the rest on Scott's Harvard Business blog, Innovation Insights.

Advertising is a case in point.  Seismic shifts are shaking up the world of advertising big time. But which shift is most relevant?  And what are the implications for executives?

Understanding the shifts

In the advertising world, multiple shifts are piling on top of each other and it is often hard to keep track of them, much less understand their implications. Let’s look at just some that are re-shaping the advertising world:

• Shifts from advertising placed in digital content to ads placed in social networks and applications
• Shifts from digital advertisements delivered through conventional PC’s to a growing array of mobile devices, with an increasing ability to target messages based on the physical location of the person
• Shifts in the behavior of digital users in their responsiveness to advertisements online
• Shifts in the way that companies connect with and build relationships with stakeholders (e.g., blurring boundaries between customers, partners and suppliers)
• Shifts in the revenue models for businesses, as online businesses in particular become more and more dependent on advertising as a key revenue source (e.g., is there any Web 2.0 start-up that doesn’t blithely answer “advertising” when asked about their revenue model?).
• If that isn’t complicated enough, we also have broader macro-economic shifts like potential near-term recessionary pressures

Whew! No wonder it’s easy to get confused, especially since one set of changes can offset or even reverse the impact of another set of shifts.  So, how do we make sense of all this?

In essence, three fundamental shifts are piling on top of each other.

• Advertising is migrating to digital media because it is far more effective in targeting and reaching relevant audiences than most traditional media.
• Aggregate advertising spend in the US is likely to experience a cyclical downturn as the economy softens
• People are confronting a proliferation of sources competing for their attention and becoming less receptive to advertising messages, even when they are very well targeted

Here’s the danger: we may become so focused on the recent growth in online advertising that we dismiss any short-term slowdown in spending growth as a purely cyclical phenomenon. In the process, we may miss the longer-term, and ultimately far more profound, impact of the diminishing returns that online advertising is already beginning to experience.

This is particularly relevant in the Internet space. Virtually everyone seems to be zeroing in on advertising as the basic revenue model. Titanic battles among Internet gorillas, including mega-acquisitions, are at least in part motivated by a desire to occupy choke-points in the advertising value chain. 

The likely evolution of Internet advertising

The basic paradox of the Internet can be framed very simply:  The very platform that makes advertising both more relevant and more measurable is the same platform that longer-term will challenge and ultimately undermine the basic role of advertising in communicating with customers. 

Why will the Internet ultimately undermine advertising?  A number of factors come into play:

• The Internet proliferates resources, all competing for the attention of people.  Even the most targeted and relevant ads over time will have a harder and harder time rising above the noise.
• The Internet creates powerful options for people in terms of how they become aware of new products and services and how they obtain information about the products and services that are relevant to them.
• The Internet offers increasingly powerful tools to filter and block advertisements (and, yes, product placements will be an interesting alternative for a while, until even that space becomes so cluttered that people will mentally filter out the products)

On the second point, social network sites provide increasingly robust platforms for us to learn about what our friends are interested in and purchasing (although in many cases still trying to figure out the appropriate balance between privacy and attention). In this context, Esther Dyson wrote a great op ed piece in the Wall Street Journal on February 11 on “The Coming Ad Revolution” (a longer version is available at her blog here) highlighting the “walled gardens” that users themselves are cultivating to connect with each other and with favored vendors.

Amazon continues to represent a leading edge example of how a trusted third party intermediary can help filter and present information about the interests and purchase patterns of others in ways that are very helpful in discovering new products. We are still a long way from the infomediaries that I wrote about almost ten years ago in Net Worth. However, the proposition of a trusted advisor who can help us sort through the growing array of resources and discover those that are truly relevant and valuable becomes ever more compelling.

As we find richer and more diverse ways to connect with friends and trusted advisors who can help us discover what we need, conventional advertising – even with all of the best behavioral targeting algorithms - will become viewed at best as marginal value and at worst as an increasing nuisance. People want to connect with vendors, especially vendors that can address unmet needs, but they will increasingly want to do it on their terms.

Advertisers are wrestling with this shift in user preferences.  Recent declines in online click-through rates and the especially dismal click-through rates experienced on social network sites like Facebook should be an early red flag regarding the challenges ahead.

Implications for advertisers

For advertisers, the key message should be to build the skills required to genuinely engage people around their products and services in such a compelling way that people seek them out – and keep coming back because they have received so much value. The old game of paying for placement of messages, no matter how targeted, will yield diminishing returns. The long trajectory that will shape the advertising business is the move from random interception to targeting intention to seeking attention and ultimately to attracting attention. 

The end game is collaboration marketing where advertising, meaning paid placements of messages, becomes more and more marginal. The focus shifts to becoming more helpful by creating rich, serendipitous environments that people will actively seek out (there’s a lot more to be said on this front, but this is a blog after all, so the details will be left to the imagination of the reader).

I want to be clear: while I am skeptical about the long-term future of advertising as paid placements of messages, marketing becomes more and more important in an era of abundance.  Companies of all kinds will wrestle with growing challenges in terms of connecting, and building deep relationships, with key stakeholders.  I also understand that advertising does far more than convey information; it also excites and engages people in imagining how their lives could be improved with the vendor’s products.  Marketing will still need to address this emotional and psychological mission – my only point is that advertising in online environments will be increasingly marginalized as the vehicle for accomplishing this mission. Will advertising go away?  Hardly, but it will move from the core of marketing to the edge, challenged by diminishing returns and more robust options for engaging people.

Implications for revenue models of businesses

If advertising is likely not to be a sustainable revenue source, it means that online businesses must find other sources of revenue to support their businesses long-term.  What might be some of those revenue sources? Well, one option is to get customers to pay. In this regard, Kevin Kelly has an interesting post on “Better Than Free”.  Observing that the Internet is a vast copy machine that makes copies of everything super-abundant and free, he concludes that “when copies are free, you need to sell things which can not be copied.” Kevin highlights eight uncopiable values that can in one form or another be sold – immediacy, personalization, interpretation, authenticity (meaning here certification of authenticity), accessibility, embodiment, patronage and findability. It is a thought provoking piece and, for my money, it begins to shine the light on the key question: what will people continue to pay for in this digital networked world?

Kevin’s perspectives are largely framed in the context of digital goods and services that are the core of the Internet today.  More broadly, until fab labs become consumer items, physical goods that cannot be reduced to digital code will still command a price, although we need to be ever watchful about the extent to which these goods will be transformed into services (look at what’s happening to computers as they get sucked into the cloud). 

And, if Chris Anderson is to be believed in the preview to his forthcoming book, more and more things will be free in the economics of abundance. But even Chris ultimately circles around to finding money.  As he observes, “to follow the money, you have to shift from a basic view of a market as a matching of two parties — buyers and sellers — to a broader sense of an ecosystem with many parties, only some of which exchange cash.” While he acknowledges advertising as one source of cash, Chris offers a much more nuanced view, tapping into a number of other cash reservoirs.

So, where’s the money?  Here’s my answer: to find the money, seek out scarcity.  Abundance in some areas inevitably creates scarcity in others. Attention, reputation and talent become relatively scarce in economies of abundance.  Businesses will be well positioned to charge for their services if they can deliver one or more of the following values:

• help amplify attention through more effective advice/recommendations
• foster and protect reputation
• help amplify talent development through rich learning environments

The real winners will realize that amplifying return on attention, building reputation and developing talent are deeply and intricately related – the most valuable platforms will address these needs in powerful new ways.

Bottom line

Bottom line, if entrepreneurs want to build hot properties that can be flipped quickly, relying on advertising as the primary revenue source in the near-term may be OK – it will position you for a robust exit as long as investors stay focused exclusively on the first shift (I can hear a lot of my entrepreneurial colleagues breathing a deep sigh of relief at this point). 

On the other hand, if entrepreneurs want to build enduring businesses that will change the world, resist the temptation to become too dependent on advertising. It’s OK to offer many products and services for free (in fact, that will be essential for success) but just be sure you understand your role in a broader ecosystem where someone (even if it is not directly you) is making a ton of money with platforms and services that people will pay for. In particular, look for ecosystems with platforms and services that generate increasing value as the number of participants expands.

(PS – I appropriated the title of my posting from a great YouTube video of the same name – the video, created by Charles Frisch, looks at globalization and information trends and is well worth viewing. I believe it was Jean-Louis Gassee, a Silicon Valley entrepreneur, who first used the term.)

Addendum: Here's another great YouTube video that captures the dilemma of many advertisers (hat-tip to Max Bleyleben).

• Global Economic Trends: An Interview with Jim Carroll
• "Where's the growth: Global innovation strategies for the long term"

One thoughtful colleague responded:

This is because (sadly) formal schooling is concerned primarily with the mere transmission of mediated data.  Given the usual instructional materials and methods, about the only thought process that students CAN USE is memory.  Your hockey question is atypical.  Go through the final exams of most institutions from about grade 4 up thru 16, and you'll find that at least 80% of the questions simply ask, "How much can you remember?"  It's a rare one that requires students to categorize, infer, hypothesize, generalize, synthesize, etc." see full post

Business schools such as the Rotman School at the University of Toronto should be applauded since they are now at least starting to focus on the need for and lack of "high quality thinking" in business. In my opinion though, this is only a "half way" measure and does not go far enough. Just as Total Quality Management (TQM) had it limits, so will the notion of "high quality thinking. In a fast paced, ever-changing business world, high quality thinking is unfortunately not good enough.

CEO's and entrepreneurs should be striving to be outstanding "unique or distinctive" thinkers and not just "high quality" thinkers or copycat thinkers --benchmarking what the competition did 5 years ago, so that maybe in 2-3 years we can catch up to where they were 8 years ago. It's like admitting: "I only want to be as good a thinker as my other CEO or entrepreneur peers and slightly better then  most "mediocre" thinkers. Why not just teach cognitive skills in an MBA program? No one does that !

As I said in 1995:

"There seems to be an over emphasis on problem-solving, correcting faults, gaps or mistakes as part of the traditional appraoches to TQM / CI.  IMHO, not nearly enough energy and time in LO is focused on being constructive.  Opportunities result from looking forward and generating new concepts.  The focus of most TQM / CI models is on the present or the past.  Ie.  How do I optimize my corporate intrinsic or operating assets.  Some CEOs are now beginning to realize that maximizing Quality has its limits.  You can only get ahead of the competition if your rival is less competent at quality then you are.  Relying on someone elses incompetence doesn't seen to be a strong "pro-active strategic position" ---Walter Derzko Circa 1995

N.B. The next Master class on the Idea Lab and the Opportunity clinic will be May 30th in Toronto. see here

One of the key cognitive skills  is the ability to step into your opponents shoes and articulate their "point of view" on the situation. But is there experimental data to show that this tactic is better?

According to the May 1st Economist magazine:

[...]....a team of researchers have come up with some intriguing answers in a series of experiments just published in the May issue Psychological Science.

Adam Galinsky of Kellogg School of Management at Northwestern University, Illinois, and his colleagues looked at two related approaches often used to understand the opponent in negotiations: perspective-taking and empathy. Although the terms are often used interchangeably, they are different. Perspective-taking is the cognitive power to consider the world from someone else's viewpoint, whereas empathy is the power to connect with them emotionally. 

They conducted a series of experiments using more than 150 MBA students who had just enrolled on a ten-week course on negotiations—so they were novices. The students were divided into pairs. One played the part of the seller of a petrol station and the other the buyer. They were told to strike a deal, but this could not be done on price alone, because the maximum the buyer was allowed to pay was lower than the seller's reserve price. So only a creative deal would work (made possible because the seller needed to finance a sailing trip but would later want a job, and the buyer needed to hire managers to run the petrol station). Just over two-thirds of the pairs managed to reach a deal. Analysis showed that when the buyer in particular had a perspective-taking ability it could predict a successful outcome.

The experiment was then re-run, with the pairs split into three groups. In the perspective-taking group the buyers were told to try to understand what the petrol-station owner was thinking and what his interest and purpose was in selling. The empathy group was told to understand what the seller was feeling and what emotions he might be experiencing. The third group was a control; the buyers were told simply to concentrate on their own role. Again, it was the pair with a perspective-taking buyer who were more likely to strike a deal (76%) than the empathisers (54%), followed by the control group (39%).

In a third and different experiment, lots of issues had to be negotiated and trade-offs made, with one student playing the role of a job candidate and the other a recruiter (with the recruiters randomly assigned as perspective-takers, empathisers or a control). In terms of a joint gain, 40% of the pairs with a perspective-taking recruiter scored maximum points; 22% of the empathisers did and 12% of the control group. However, in terms of an individual gain, the perspective-taking recruiters did far better—pushing the empathetic recruiters into last place.

What this shows is that even with one negotiator having perspective-taking abilities it can produce a better overall outcome for both sides. “You want to understand what the other side's interests are, but you do not want to sacrifice your own interests,” says Dr Galinksy. “A large amount of empathy can actually impair the ability of people to reach a creative deal.”

ABSTRACT The current research explored whether two related yet distinct social competencies -perspective taking (the cognitive capacity to consider the world from another individual"s viewpoint) and empathy (the ability to connect emotionally with another individual) --have differential effects in negotiations. Across three studies, using both individual difference measures and experimental manipulations, we found that perspective taking increased individuals' ability to discover hidden agreements and to both create and claim resources at the bargaining table. However, empathy did not prove nearly as advantageous and at times was detrimental to discovering a possible deal and achieving individual profit. These results held regardless of whether the interaction was a negotiation in which a prima facie solution was not possible or a multipleissue negotiation that required discovering mutually beneficial trade-offs. Although empathy is an essential tool in many aspects of social life, perspective taking appears to be a particularly critical ability in negotiations.

N. B. The next Master class on the Idea Lab and the Opportunity Clinic will be on May 30th in Toronto.  Details to follow shortly

If you think hard about the logical conclusion of a complete focus on continuous improvement, you'll end up with the fact that every firm in an industry is racing to eliminate waste and cost from products and processes.  However, only one firm is going to be the excellence leader, and everyone else is playing catch up at best, and is falling farther and farther behind at worst.  Need an example?  Think about the real "low cost" big box stores.  Wal-Mart has destroyed most of its competition by a single minded focus on lowest cost.  Kmart and others are completely irrelevant as competitors.  Only the Dollar Store chains, which serve a specific niche, remain as competitors in that space.  However, Wal-Mart has jettisoned everything else. Remember how they used to talk about all of their products that were Made in America?  Gone.  All other strategies have fallen by the wayside to the god of low cost in this case.

Well, if continuous improvement is a good thing but not likely to be differentiable, where should you focus your creative energy?  I think firms should have a team that's responsible for continuous reinvention.  Rather than asking "what can we do better" we need a team asking "what should we be doing?"  Given how quickly tastes change and technology changes, we ought to be constantly re-evaluating our business and strategy.  Yet too frequently we lock into one long term strategy as if the world and our competitors and clients won't ever change.  Rather than have change forced upon you when you least expect it, why not constantly ask the question - what should we be doing differently?

Christensen spends the first half of the lecture reviewing the basic concepts of his first book: the process of disruptive innovation.

Here’s a tip for those who don’t want to watch the video or read his books: if you find yourself in a business that is happily conceding low-margin commodity business to small start-ups and happily retreating to the more lucrative high-margin business, be careful or you may end up as one of Christensen’s case-studies on extinction by disruptive innovation (you will never forget this lesson if you watch Christensen’s video).

I love the way that Christensen phrases his preventive medicine for avoiding extinction by disruptive innovation: create a division that is given an unfettered charter to kill the parent—imagine that mission statement on a conference room wall!

Christensen’s prediction for the future of health care (which begins around the 38–minute mark of the video) is that it will experience disruption due to three emerging technologies:

• molecular diagnostics,
• imaging technology,
• high-bandwidth telecommunication.

Part of his message is something that I heard biotech guru Steve Burrill talk about a couple of years ago when predicting future trends in biotech: that better diagnostics will allow health care professionals to treat causes rather than symptoms. I’ve talked about how my field of hearing impairment will go through a similar transition, with better diagnostics allowing us to identify the physiology behind different hearing loss etiologies and provide individualized treatments. This falls under the general theme of individualization in health care, a future trend not only in my field by in health care in general.

For the rest of Christensen’s thinking on innovation opportunities in health care, check out the video—it’s worth the time.

Create The Future is a design competition presented by Nasa Tech Briefs and SolidWorks. The competition opened on Monday July 7th and entries can be submitted until Oct. 17. Previous winners are pretty heavy on the tech side, like the "3D Ultrasonic Neuronavigation System for Real-Time Image-Guided Brain Surgery" which won the Medical category last year. Grand prize of US$20K!

1. Should the innovation team focus on developing ideas to better position the existing products for new customers?
2. Should the innovation team focus on incremental but new ideas for the business to create?
3. Should the innovation team seek methods or process improvements to dramatically cut costs (thus increasing profits)?
4. Should the innovation team consider reworking the business model of the organization (using Dell as an example and changing the predominant industry paradigm)?
5. Should the innovation team consider radical or disruptive product innovation?

What is the business impact of strong brands?  Why are strong brands so important?

•    Brands deliver the following key benefits to organizations:
-    Increased revenues and market share
-    Decreased price sensitivity (or the ability to charge price premiums to consumers and the trade)
-    Increased customer loyalty
-    For manufacturers, additional leverage over retailers
-    Increased profitability
-    Increased stock price and shareholder value
-    Increased clarity of vision
-    Increased ability to mobilize an organization’s people and focus its activities
-    Ability to attract and retain high quality employees
-    A strong, well-positioned brand extends the life of your organization indefinitely by providing independence from a particular product category, increasing flexibility for future growth (through extension), and therefore, increasing the ability to expand into new product and service categories and alter the product and service mix to keep up with marketplace demands.  Without a strong brand, your organization’s life span will be tied to the life span of the products it manufactures or the services it provides. 

A number of studies have shown that the percentage of a company’s value that is unaccounted for by tangible assets has increased significantly.  From 50% to 90% of a company’s total value is now attributable to factors other than tangible assets.  In a 1996 study, the Cap Gemini Ernst & Young Center for Business Innovation (CGI) discovered that non-financial assets account for 35% of institutional investor’s valuation of a company.  In its 2000 “Measuring the Future: The Value Creation Index” report, CGI reported that, after rigorous research, they discovered that 50% of a traditional company’s value and 90% of an e-commerce company’s value result from nine factors.  The following value drivers seem to be common across most industries (Source: “Measuring the Future: The Value Creation Index.” Cap Gemini Ernst & Young Center for Business Innovation, 2000.):

•    Innovation/R&D
•    Quality of Management
•    Employee Quality/Satisfaction
•    Alliances
•    Brand Investment
•    Product/Service Quality

“Neal Foster, a board member at the Financial Accounting Standards Board [said], ‘As we move into more of an information age and service-based economy, the importance of soft assets is becoming more relevant to valuing some companies than brick and mortar.  A lot of companies don’t even have brick and mortar.’”   An increasing number of methods have emerged to measure non-financial business drivers, from Economic Value Added and the Balanced Scorecard to Value-Based Management and the more recent Value Creation Index (from CGI). Wharton accounting professors recently conducted a study across 317 companies and discovered that 36% of the companies sampled used non-financial measures to determine executive incentive compensation.

Sources:  Baltes, Michael, “Measuring   Source Non-Financial Assets.” Wharton Alumni Magazine Schultz, Don E. and Anders Gronstedt, “Making Marcom an Investment: Market-driven accounting system splits spending into business-building and brand-building activities.” Marketing Management.  Fall 1997, p. 45.

Sponsored By: Brand Aid

An article in the New York Times a couple weeks ago gave a surprising example of successful institutional antibody avoidance. Disney and Pixar: The Power of the Prenup outlined the various ways those two wildly divergent companies have worked to maintain the spirit of Pixar since their 2006 merger.

“When Disney bought its rival, Pixar, in 2006 for $7.4 billion, many people assumed the deal would play out like most big media takeovers: abysmally,” wrote Brooks Barnes in the June 1 article. “The worries were twofold: that either Disney would trample Pixar’s esprit de corps (turning Mr. Lasseter into a drone, chanting “Hi Ho” en route to Mickey’s animation mines) or that Pixar animators would act like spoiled brats and rebuke their new owner.”

In fact, so far the companies seem to be getting on well, and Disney’s stock has made welcome gains in recent months. Some of the successful tactics Barnes described include drafting an explicit statement of what would not change at Pixar, including the retention of superior benefits packages, no contracts and no move from Emeryville to Burbank. Meanwhile, the company has conceded to Disney’s push for sequels to popular movies like Cars, ramping up its production schedule and outsourcing some animation.

It should give others who are facing the institutional antibodies challenge hope: If Disney and Pixar — who spent years before the merger embroiled in personality clashes and combat over partnership deals — can make it work, anyone can.

The study involved close to 500 companies that have appeared on the Fortune 100 or international equivalents over the past 50 years. Close to 90 percent of those companies experienced a stall, or “secular reversals in company growth fortunes.” Only 50 percent of companies that stalled were able to grow even moderately over the next decade.

There are many reasons why growth becomes increasingly difficult as a company grows. One challenge is that the hurdle for new initiatives becomes so high that many potential game-changing initiatives never see the light of day.

A few weeks ago I was with a group of senior executives at a Fortune 100 company. We were talking about the strategic objectives of that company’s innovation efforts. One executive said that $1 billion felt like a reasonable target for a generic new growth initiative. Another said, “A billion is nice, but at our size we really need to set the target at $10 billion.”

Mathematically, of course, the executive is right. It got me thinking, though. Only 261 public U.S. companies had $10 billion in revenues last year. How many of the high-flying start-up companies over the last decade reached $10 billion in revenue in 10 years? Well, Google hit $10 billion in its eighth year (2006) and … I think that’s it. …

Read the rest at Scott's Harvard Management blog, Innovation Insights

Modular design is being introduced to a range of new product categories, helping businesses cash in on a number of larger trends. These include lifestyles that are more flexible and unpredictable, creating demand for products that can meet a range of needs over time. As this extends the lifespan of the product, the increasing desire for greener products is met. Modular design is also a way of satisfying the growing demand for affordable yet bespoke products.

Cases

Bug

Bug’s modular cellphone enables users to choose exactly which components to include, preventing them from spending excessively or overcomplicating their lives with unnecessary features.

A La Carte

A La Carte is an attractive, flexible kitchen system from that can be easily assembled and dismantled without tools. It’s ideal for those who move from place to place more often, perhaps due to renting accommodation, or running a ‘pop-up’ restaurant.

Radiator by Anna Gotha

Part art piece, part functional heating device, this modular radiator is ideal for any home that’s tight on space. It can be installed in any configuration to suit any room layout or aesthetic taste, and saves valuable floor space with its wall mountable design.

Trend Impact

This trend may affect even more product categories, such as fashion, domestic appliances and architecture. Business models could change as revenue streams shift from one-off sales to smaller, more regular sales of updates and add-ons.

Specialist manufacturing expertise could thrive once more – with modular design, it may be enough to produce fantastic camera lenses that plug into other companies’ devices rather than developing an entire device from scratch.

Links
Bug
A La Carte
Anna Gotha

I have been on the leading edge, sometimes bleeding edge, of technology for most of my career. I have been fortunate to be part of start-up teams that have created "first-of-its-kind" innovations at companies like Forte Software, AltaVista, Napster, Bowstreet, and Groove Networks. All of these companies were first in their field, yet few of them realized the financial rewards one would expect. Is it all timing and luck? I don't think so.

Before exploring the reasons for success or failure lets review a list of innovation leaders and fast followers.

• AltaVista -> Google
• Napster -> iTunes
• VisiCalc -> Lotus 123 -> Excel
• Word Perfect -> Word
• Netscape -> Internet Explorer
• Apple Newton -> Palm Pilot -> Blackberry
• IBM PC -> Compaq -> Dell
• Double Click -> Google Ad Sense
• Ofoto -> Flickr
• Compuserve -> AOL -> @Home -> Comcast & Verizon

All of these companies were innovation leaders and market leaders. Yet, they were eclipsed by fast followers, in some cases multiple times, who imitated their innovation. My belief is that the technology was outstanding...the management was not.

Clayton Christensen wrote The Innovators Dilemma which I reviewed in an earlier post. The basic premise of the book is that management optimizes around protecting their existing business and fails to recognize and react to disruptive threats. However, the examples in Christensen's book play out over 10 or 20 years. The above examples played out in 5 or less years. Are the same factors at work here? Lets take a look.

AltaVista was the first search engine and the clear technology leader. The management at DEC didn't understand what they had and didn't invest the necessary resources to make it a business success. Later Compaq and CMGI squandered the search opportunity and tried to imitate Yahoo, Excite, Lycos, and AOL in the consumer portal game. Big mistake. Fault management.

Napster was the first P2P file sharing application to bring together search, FTP, and Instant Messaging. Brilliant technical synergy. There are lots of reasons for failure here, mostly management decisions and unfortunate timing.

VisiCalc was the first spreadsheet, invented by Dan Bricklin and Bob Frankston. I know Dan fairly well but have never asked him why he thinks VisiCalc fell behind and Excel moved ahead. This topic deserves its own post. My memory is that VisiCalc was slow to adopt the DOS platform. Lotus 123 moved ahead on DOS and achieved market leadership, but failed to jump onto the Windows platform fast enough. Excel did make the move and the rest is history.

IBM created the PC revolution and was the early leader. Compaq was a fast follower focusing on "transportable" PCs and won huge market share. Dell came in later and trounced them all with a better business model.

Compuserve was the first dial-up service provider. Together with Prodigy they dominated the market. Later AOL entered the game with superior marketing and original content. AOL absolutely dominated in the 80's and early 90's. Then @Home created the cable Internet market and took the early lead. It wasn't long before Verizon, Comcast, and other cable providers owned the broadband market. AOL never really made the transition from dial-up to broadband.

In nearly every case the early innovators were eclipsed by fast followers. Why did the fast followers take over market share leadership?

• Better business model (Google, Ad Sense, Dell)
• Better market position (Word, Excel, Comcast, Verizon)
• Better timing (iTunes, Flickr)
• Better platform choices (Blackberry, Word, Excel)
• Better management (all the fast followers)

It is overly simplistic to pin the success or failure of these innovators on one factor. There were a combination of factors at work. But in most cases the problem was not inferior technology, it was inferior management decisions.

So, were these early innovators led by technical visionaries who were not good managers? Will the imitators  and "fast followers" suffer the same fate and be overtaken by new fast followers?

The list of "fast followers" above are more than just imitators. They have continued to innovate far beyond the original idea or feature set and have maintained market leadership. If you look closely at these companies they have a  mix of technical visionaries and business management leaders. I discussed this with Robert Scoble who pointed out that it takes a different set of skills to start a company than it does to sustain a company. This balance of skills, I think, is the key to sustained market leadership.

Cisco is an example of an early innovator that kept their market leadership position over time. Their technical founders brought in professional managers to take them to the next level.

There is a rare breed of technical visionaries who are also great business leaders. Bill Gates, Gordon Moore, Larry Ellison, and Scott McNealy are examples. They are truly extraordinary and rare. However, I suspect that each of them has a strong business management team behind them. Bill Gates has Steve Ballmer. Larry Ellison had Ray Lane. The early innovators who failed did not have the business leadership necessary to sustain them.

Lessons for entrepreneurs;

• Never stop innovating
• Build a well rounded management team early
• Value sales and marketing talent as much as technical talent
• React quickly to disruptive technologies or business models
• Don't be too proud to imitate when it makes sense

NOTE: This is a reprint of a story I wrote three years ago. I was speaking at a conference today and several people asked me about this story. I thought I would reprint it for the benefit of my new readers.

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When it comes to bringing cool stuff in to the world, I'm a big fan of Honda.  If you've been around metacool for any period of time, then you know that I admire Honda a great deal.  I've written about Honda's ability to innovate on a routine basis, about the fact that it is led by someone who really -- really! -- knows the business, about its ability to advertise truth rather than myth, about the pickup they make which I dearly want and am only waiting for the diesel model to arrive to purchase, and about kick-ass minivan race cars made by Honda's own employees on their own time because, well, kick-ass minivans are a kick in the ass if you're a racer.  Just about everyone at Honda, it would seem, is a racer, as explained in this great article in Fortune:

Unlike Toyota (TM), which is stodgy and bureaucratic, Honda's culture is more entrepreneurial, even quirky. Employees are paid less than at the competition, and advancement is limited, given Honda's flat organization. Their satisfaction and fierce loyalty to the company come from being around people like themselves - tinkerers who are obsessed with making things work.

At the risk of making a broad generalization, I would say that innovative startups and more mature organizations capable of innovating on a routine basis (like Honda) share two key elements in common:  first, a remarkable lack of status differences among employees, and second, a low-friction environment when it comes to the meritocracy of ideas.  I actually believe the latter is a function of the former.  Why? 

We all have 24 hours a day to live our lives.  We have finite time and energy at our disposal.  If we all start with the same account balance, some of us choose to spend it worrying about what our boss's boss thinks about us, or on over-preparing for that internal review meeting, or on wondering what our growth path is.  Others say "this is this" and get on with being generative, pushing ideas as far as they can go, and helping others see what works by gathering real evidence from the world and letting opinions fall by the wayside.  Status differences are energy sinks.  Do you want to spend your life worrying or producing?  Dramatic status differences lead to dramatic wastes of energy. 

Show me a group of people who worry less about where others think they stand, and more about how things are really going and how they might do things better and cooler, and mark my word, that's the group of innovators.

SXSW Interactive 2008 Sketchnotes

Welcome BoingBoing readers! Be sure to check out my follow-up post called Lessons Learned from my SXSW Sketchnotes too!

SXSW Interactive 2008 Sketchnotes are up!
I've just completed scanning, tuning and uploading 34 pages of sketchnotes I captured in my pocket Moleskine sketchbook at SXSW Interactive earlier this week.

I think the sketchnotes turned out well, and it was no problem for me to continuously create them for nearly every session I attended. I certainly went through ink in my G2 mini pens — I'm glad I brought several along.

With the SEED Conference sketchnotes being pretty popular, I'm curious to see how these SXSW sketchnotes are received. While sketchnotes capture concentrated concepts for each session well, I think they're even better at awakening ideas stored in the minds of session attendees.

Speakers Featured
Here are the speakers featured in the SXSW Interactive Sketchnotes: Naz Hamid, Veronica Belmont, Casey McKinnon, Ryan King, Glenda Bautista, Ariel Waldman, John Gruber, Michael Lopp, Jim Coudal, Dan Rubin, Didier Hilhorst, Eris Stassi, Lea Alcantara (sorry for the Leah misspell in the notes!), Ben Brown and Frank Warren.

Rohdesign | Mike Rohde - Designer | SXSW Interactive 2008 Sketchnotes

It would be great if every idea was pitched like the next Silicon Valley savior and venture capitalists where lining up at the door to shower you with you millions. However, for most entrepreneurs it takes dedication and creative ideas just to scrape up the funds to begin.

In every city there are success stories of entrepreneurs who have persevered even when funding was a challenge. For example, in my community one of the fastest growing restaurants was started by two brothers who took a loan on their house and within two years have already opened a successful second location. The bottom line is if you have drive you’ll find money.

While many of these options involve great risk, for the entrepreneur risk and passion is usually the driving force. Here are a few options you may consider.

Funding Options:

1. Borrow against your home
2. Borrow from friends and family
3. Borrow from your retirement fund
4. Cash out your savings
5. Get a line of credit
6. Lower your expenses
7. Use your credit cards
8. Work a side job to raise funds

If you’ve started your own business, what ways have you used to fund your business?

image by: Dawn M. Armfield 

Ira Glass, host of This American Life, may be the golden child of radio, but his musings on the creative process apply to all disciplines. Always an inspiration, his thoughts on creative drive, the power of failing and the need for tenacity make any struggling creative feel right at home. Greatest sound bite?

"Keep working...You will be fierce. You will be a warrior."

Sigh. Now back to those renderings.
Catch more of the interview on kentj1 You Tube channel.