I was talking with entrepreneurial brothers Paul and Ian Everest last week about how Unit, the company they started together 10 years ago, uses social media.  Ian said: “We hate Twitter… but we get a lot of love on Instagram.”

They thought that the amount of love on Instagram was a bit weird, because while they have more than 250,000 likes on their Facebook page, they only have 16,000 people following their Instagram account.  On twitter they have 5000 followers.

The paradox is this – when they post on Instragram, they are averaging around 700 likes per post – which is equal to about 5% of the people following them.  On Facebook, they’re getting around 300 likes per post – about 0.1% of the people they’re connected with.

What makes they difference?

Here’s a photo of theirs that has nearly 1200 likes on Instagram, and it tells a big part of the story:

They get a lot of love on Instragram because they are a highly visual brand.  Their slogan is “The Art of Progress” – while they are making clothes for FMX and BMX riders and fans, they primarily view themselves as a creative and artistic brand.

That’s why Instagram loves them.

Choose Outposts That Fit Your Strengths

Ralph-Christian Ohr and I are just putting the finishing touches on a book chapter that we are writing together on how to use social media to support innovation.  One of our key messages in it is that you need to match the social tools that you use to your skills and objectives.  There is no one-size-fits-all solution to social.

It’s not the case that everyone needs to be on Twitter, or on Facebook, or blogging, or anywhere else.  What you choose depends on what you do.

The Unit guys illustrate this perfectly.  Of course they hate Twitter – they’re not a verbal brand.  They make art.  So Instagram is the way to go.

Valeria Maltoni does a great job of laying out a sensible social media strategy – check out her description of how she participates in social networks.  She has her home base – her website.  She also uses Google+ to reflect on and discuss important stories in her area, and Twitter to share resources.

This base + outposts has also been discussed by Chris Brogan -  who says:

Thinking of your primary online presence as your home base (and it doesn’thave to be a blog, but Twitter isn’t necessarily the right medium, I don’t think), and then thinking of the places where you make social connections as your outposts (realized I forgot LinkedIn, but I’m there too, obviously), then you see how you might prioritize your time and/or how you might try keeping the value chain alive.

You pick your outposts based on your strengths.  One of Valeria’s strengths is conversation (her site is called Conversation Agent after all!), so it makes a lot of sense to use Google+ as the main outpost.  In the same way, Unit’s strength is in the visuals – so Instagram makes sense as the primary outpost.

Three Steps for Social Media Success

There are three steps for social success:

1. Do awesome work.  There’s no point in doing any social media if you’re not doing awesome work in the first place.  You have to have solid content and ideas to share.  Put your energy here first, then figure out the best way to share it.  Valeria and Unit both do awesome work – and that is the foundation for their success with social media.
2. Connect with people. Here’s how Hugh MacLeod puts it:
   

   …all the internet is, as Doc Searls said, is a bunch of protocols that “allow us to get along.” Protocols allow us to talk to each other. The stuff in the middle, the stuff that separates us, the stuff that directly makes use of these protocols – hosting companies, web sites, blogging platforms, microblogging platforms, etc. – matter far less.

   You’re on one end of the wire. Just think about who’s on the other end of the wire, and what you can do for them. Worry less about the wire. Worry less about the shiny objects in the middle.

   Just worry about MAKING your own stuff, and the rest of the internet will look after itself.

3. Choose outposts that fit your strengths.  Valeria and Unit make great stuff in very different ways.  So they need different outposts.  If you try to use every social media tool available, you’ll spread yourself so thinly that you won’t be able to use any of them well.  Pick the best ones for you – and focus on them.

There are many different ways to use social media.  It’s also important to remember that social media is only one small part of the social era, which, as Nilofer Merchant says is about how:

Connected individuals can now do what once only large centralized organizations could do, which changes organizational  structures and individual power.

So doing the social era right is another topic entirely.  But start with social media, the path is: do awesome work, connect with people, and choose outposts that fit your strengths.

The post Three Steps for Social Media Success appeared first on Innovation for Growth.

        

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One of the big privileges in my job is that I get to travel a fair bit. As part of this, I’ve been coming to Palo Alto about once a year for the past five years.  This is interesting because that is infrequent enough that the changes that look gradual to those that live here look like jumps to me when I’m here so irregularly.

The big jump I’ve noticed on this current trip is that electric cars are finally taking off.

On previous trips, I saw lots of Tesla cars – all in showrooms.  This trip, they’re on the road:

And it’s not just Teslas.  The place I usually stay has had reserved parking spaces for electric cars since 2009.  Previously, I haven’t seen any cars in them.  On this trip, they’re taken, and they’re using the charging stations:

Observing the Lead Users

Jean-Louis Gassée wrote a really interesting post on Tesla this week.  In it, he talks about how Palo Alto has always been a leading indicator of where green vehicles are heading:

Walking Palo Alto’s leafy streets in the early 2000?s, I witnessed the rise of the Prius. Rather than grafting “green” organs onto a Camry or a disinterred Tercel, Toyota’s engineers had designed a hybrid from the tires up…and they gave the car a distinctive, sui generis look. It was a stroke of genius, and it tickled us green. What better way to flaunt our concern for the environment while showing off our discerning tech taste than to be spotted behind the wheel of a Prius? (I write “us” without irony: I owned a Gen I and a Gen II Prius, and drive a Prius V in France.) Palo Alto was Prius City years before the rest of the world caught on. (Prius is now the third best-selling car worldwide; more than a million were sold in 2012.)

The Prius case is interesting, because when they first came out, the response was very similar to what we’re hearing about Tesla now.  The car was too expensive, it was elitist, it would only sell to radical greenies, and so on.  And now it’s the third best-selling car in the world. 

I don’t know if Tesla will ever get to that point, but it is definitely moving electric cars along the innovation diffusion curve.

Innovation Diffusion Lessons from Tesla

This diagram shows how innovation diffusion usually works.  New ideas spread along an S-Curve – the solid line in the diagram – or if they fail they follow the curve marked B.  But when there’s a lot of hype around an idea, we expect it to follow the curve marked A.  Incumbents that think they have a lot of time to respond expect the new idea to follow the curve marked C.

But new ideas that succeed don’t follow any of these curves – the follow the S Curve.

We can see why by looking at Tesla and the other electric cars that are just starting to take off.  Here are some of the lessons:

• New ideas spread much more slowly than we expect.  The first electric car was made back in the 19th century, before there was a dominant design for cars.  GM introduced the EV1 in 1996 – seventeen years ago.  That made everyone expect electric vehicles to take off – it’s where the hype really started.  But new ideas spread slowly – the time value for X is always longer than we expect it to be.
• Disruptions start in niches.  When the Prius came out, it was relatively expensive.  Gassée’s recounting is pretty accurate – it first took hold with people that were willing to pay a bit more to show off their greenness.  But it eventually spread from that niche.  He thinks that Tesla will do the same:
  

  The numbers point to a future where Tesla can leave its niche and become a leading manufacturer in a too-often stodgy automotive industry. And, of course, we Silicon Valley geeks take great pleasure in a car that updates it software over the air, like a smartphone; that has a 17? touchscreen; and that’s designed and built right here (the Tesla factory is across the Bay in the NUMMI plant that was previously occupied by Toyota and GM).

• It takes time to work out the business model.  One of the reasons that the value for X is longer than we expect is that it takes time to learn how to make the new idea work.  A big part of this is building a good business model around it.  Farhad Manjoo compares Tesla to Apple, and he explains how their business model is evolving:
  

  But even though its prices were competitive, Apple was able to keep its profits high, thanks to amazing manufacturing efficiencies.

  Now Tesla seems to be following the same path. At $70,000 the Model S, its family sedan, is still a very expensive car, but it’s far cheaper than the $109,000 Roadster that Tesla launched in 2009. This week, the company announced that in the first quarter of 2013, it earned its first-ever corporate profit. It sold 5,000 cars in Q1, and its list of orders is growing by 20,000 per year. Part of the reason Tesla has turned profitable, Musk explained in a shareholder letter, is by making its production processes more efficient. Among other things, the company reduced the amount of time it takes to build a car by 40 percent. Over the long run, Musk aims to keep lowering the price of its cars—he’s hoping to release a $30,000 car in the next three or four years—while keeping the company’s gross profit margin at 25 percent, which is very high for the car industry.

• Slow diffusion makes it easy to mock new ideas. All of this comes together to show how it is pretty easy to mock a new idea – the first stage of responding to a disruptive innovation, followed by aggression, bargaining and getting smashed like a but.

Steven Johnson made the Apple-Tesla comparison first, and this quote from him pulls all of these issues together:

The question is whether Tesla is the Apple of 1985 or the Apple of 2005.

Tesla critics tend to see it as the former: a luxury car maker for people who have the spare change to experiment with ultimately impractical electric cars. The Roadster and the Model S, in this scenario, are the automotive equivalent of the original Macintosh: an expensive experiment that will never capture a mass audience. The believers see Tesla as closer to Apple right before the launch of the iPhone: a company about to help propel (and profit from) a massive sea change in consumer behavior.

In large part, those two alternatives ultimately come down to a single, crucial question: how close are we to the obsolescence point for combustion engines? Most scenarios assume that we are not very near indeed. Warren Buffett apparently thinks all cars on the road will be electric by 2030, but most analysts assume it will take us that long just to get to 50% EV penetration. But what if Buffet is correct, and the EV tipping point is right in front of us? What if Buffet is underestimating the rate of change?

I think Buffett is right.  It looks to me like we’re starting to hit the tipping point.  The analysts are assuming that electric vehicles are going to follow curve C.  But students of innovation know that they will follow the S-Curve.

Time to get ready for your electric car.  And I guess we can start planning for flying cars next - maybe that’s how I’ll do my traveling in the future!

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Valeria Maltoni

I’ve admired Valeria’s work on her blog Conversation Agent for a number of years now. Today, I was fortunate enough to meet her in person.  Our discussion was wide-ranging, and we touched on a number of interesting ideas.

Valeria one of the best thinkers around on the topic of how firms actually work.  She is starting to place more focus on the importance of executing ideas, which is an area that is often an innovation problem.

As you would expect from the name Conversation Agent, she thinks a lot about how discussion drives business, and idea that I also looked at in  talk is the technology of leadership.  In doing this, she is putting an increasing focus on listening to form genuine connections with people.  In a post on the importance of making real-life connections, she says:

Do you have enough diversity and autonomy in your life? How well do you listen to others? Are you open to multiple cultures outside your own?

All good reasons to stop seeking (fake) links, and start making connections.

Valeria is a strategist, and an outstanding one at that.  If you’re not familiar with her work, you should check it out. Here is one of her short talks:

Terri Griffith

In one of my exec ed courses earlier this year, one idea really seemed to stick with the people in the class.  It came from Terri Griffith and her excellent book The Plugged-In Manager.  In the class we were discussing how to make their firm more innovative.  They asked what tools they should be using.  In response, I outlined Terri’s argument that it is insufficient to think only about tools – you must instead consider technology, people and proceses, and how these three systems interact.

This is how she describes the objectives of the book:

Too often discussions of management practice focus exclusively on managing people and organizational issues. Rarely, however, do they incorporate a discussion about technology or address all three dimensions in a balanced way. When they do, the result is game changing. In our hypercompetitive environment, those managers who are outstanding at being plugged into their people, technology, and organizational processes simultaneously excel at coming up with effective business solutions.

The Plugged-In Manager makes the case that being plugged-in—the ability to see choices across each of an organization’s dimensions of people, technology, and organizational processes and then to mix them together into new and powerful organizational strategies, structures, and practices—may be the most important capability a manager can develop to succeed in the 21st century.

I think that this is absolutely correct – and my class did too.  This framework showed up in a couple of their final reports.

Terri is at the leading edge of management thinking and research, and I love her work.

Henry Mintzberg

Another person at this leading edge is Henry Mintzberg.  I’ve been reading a lot of his work recently.  He is one of the leading proponents of the idea that the most important form of strategy for organisations is emergent strategy – the routines and approaches that occur as we respond to our changing environments.

Mintzberg’s description of management is the one that really rings true with my experience as both a manager and one who studies them.  This is from his book Managing:

Most of the work that can be programmed in an organization need not concern its managers directly; specialists can do it. That leaves the managers with much of the messy stuff—the intractable problems, the complicated connections. This is what makes the practice of managing so fundamentally “soft,” and why labels such as experience, intuition, judgment, and wisdom are so commonly needed to describe it. Put together a good deal of craft with the right touch of art alongside some use of science, and you end up with a job that is above all a practice. There is no “one best way” to manage; it depends on the situation.

…

I don’t want you to leave this book knowing. I want you to leave it, as I do, imagining, reflecting, questioning. Managers are only as good as their ability to work things out thoughtfully in their own way. To repeat, this is a job of paradoxes, dilemmas, and mysteries that cannot be resolved. The only guaranteed result of any formula for managing is failure (including, of course, this one).

When you think of managing in this way, the Valeria’s point about the importance of conversation becomes more critical.  So does Terri’s discussion of the interactions between technologies, people and processes.

Mintzberg’s work is well worth checking out.

Rosalind Franklin

This is the scan that led researchers to the discovery of the structure of DNA:

Since everyone knows that Watson and Crick discovered DNA, then this scan must be theirs, right?  Wrong.

This scan was done by Rosalind Franklin.  I was reminded of her story while reading Nonsense on Stilts by Massimo Pigliucci, where he credits the discovery of DNA’s structure to “Watson, Crick and Franklin.”  This attribution is rarely made, but it’s actually correct.

Franklin was a brilliant scientist (see this biography for more information) until her career was cut unnaturally short by cancer.  Her DNA research was creative, while her approach to science was determined.  We could use more like her.

Rita Gunther McGrath

The lifespan of the average competitive advantage continues to shrink.  This means that traditional approaches to strategy are becoming decreasingly useful.  This is an issue where Rita McGrath is doing important work.

She has already demonstrated the importance of making staged investments in innovation, rather than big bets.  Here is how she frames it:

 In highly uncertain environments, it’s nearly impossible to predict with any accuracy which innovations are likely to succeed and which are not. It makes sense, therefore, to test out a number of different approaches on a small scale, proceeding forward only when you’ve validated enough assumptions to move ahead with confidence. The logic of real options supports this approach: essentially encouraging companies to take out a couple of different projects aimed at a promising market or technology, without huge risks. “Big bet” ventures in our experience seldom work out.

As Paul Hobcraft pointed out to me recently, she is expanding on this issue in her forthcoming book The End of Competitive Advantage.  Here is how she introduces the key ideas in the book:

Strategy is stuck.  If you dropped into a boardroom discussion or an executive team meeting, chances are you’d hear a lot of strategic thinking based on ideas and frameworks designed in, and for, a different era.  the biggies – such as Michael Porter’s five forces analysis, BCG’s growth-share matrix for analyzing corporate portfolios, and Hamel and Prahalad’s core competence of the firm – are all tremendously important ideas.  Many strategies today are still informed by them.  But virtually all strategy frameworks and tools in use today are based on a single dominant idea: that the purpose of strategy is to achieve a sustainable competitive advantage.  This idea is strategy’s most fundamental concept.  It’s every company’s holy grail.  And it’s no longer relevant for more and more companies.

In this book, I take on the idea of sustainable competitive advantage and argue that executives need to stop basing their strategies on it.  In its place, I offer a perspective on strategy that is based on the idea of transient competitive advantage: that to win in volatile and uncertain environments, executives need to learn how to exploit short-lived opportunities with speed and decisiveness.  I argue that the deeply ingrained structures and systems that executives rely on to extract maximum value from a competitive advantage are liabilities – outdated and even dangerous – in a fastmoving competitive environment.

This is important work.  I’m looking forward to the book.

These are five thinkers that have influenced me recently.  Who is influencing you?

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Drake Baer wrote a terrific profile of a startup called Thumbtack discussing how their decision to hire a full-time chef has transformed their business.  Cofounder Sander Daniels lists the reasons they made this decision:

• Meals build community: Everyone on the team eats together every day
• Meals build networks: On Wednesdays they have an open dinner where recruits can hang with the company
• The team is more productive: People aren’t leaving the office to wait in lines or scrounging around for food
• Everyone is eating awesome food, so everyone is healthy

And they say this in their Food Rules for Startups manifesto:

Often startups try to attract talented teammates by offering benefits like ping-pong tables, video games, or gym memberships. While those things are valuable, a culture of good food is an order of magnitude more important. Sharing meals around quality food builds an environment that encourages collaboration and celebrates excellence. The team is excited to come to work because they value and respect the full work environment. We believe every company can benefit from a food-centric culture.

Baer outlines why this is a broadly good idea, but I want to talk about why this is a great innovation idea.

If you do something like this, you are actually changing your business model.   I’ll use the Business Model Canvas version of the business model to illustrate the discussion:

When you start cooking people lunch (and changing all the other food-related processes in your workplace) you are changing a key activity.  The first consequence that a lot of people will think of is that you are adding cost.  This is true, you are a cost.  But if your people are healthier, you are also reducing the costs that accrue from poor health.  And your productivity goes up, etc.

More importantly, this will attract a different, probably better, pool of people that want to work for you.  So your key resources change.

Idea generation will improve as people problem-solve together at meals – so another key activity changes.  Your key partnerships will change as more people learn about and interact through the company at the open dinners.  This may in fact lead to new channels to customers.

As all of these back-end activities change, you will be coming up with great new ideas that can lead to new value propositions, different customers, and so on.  One change to one activity has a domino effect throughout your entire business model.  After that happens, you are running a firm that is substantially different from all the other ones in your market.

Here are some of the important lessons in this:

• You can innovate anything.  Not everyone can afford to invest millions in R&D.  Not everyone can start entirely new product categories from nothing.  But everyone can think about their business model and find ways to change it.  Find the things that everyone else takes for granted – like “we get our own lunch” – and change it.  It can transform the way you do business.
• Face to face is still critically important.  Here is what Valeria Maltoni says:
  

  Emails, phone calls, or in person meetings are the best conversion tools for individual connections. In a post that has helped me research the question of influence more thoughtfully over the years, Stephen Downes said that rather than being a question of linkage, influence originates from [diversity, autonomy, openness and connectivity.]

• Yes this probably will work for you. When I talk to people about ideas like this, they will often say something like “That’s fine for a startup, but that would never work here in the real world.”  Why not?  If you’re running a big company, isn’t it important to have healthy and productive people?  Every single CEO that has ever said “our people are our most important asset” should be doing something like this.  If they’re not, then maybe it’s their real estate that is their most important asset, or their fleet of vehicles, or….. something. But if your firm is built on people, you need to take care of people.

The idea that changing one activity can change your entire business model is powerful.  It takes time to reorganize the other components of the business model to adjust to this, and that can be hard.  But it can also be an important source of competitive advantage, because innovative business models are harder to copy than innovative products.

Give it some thought – what are the activities that everyone in your firm or industry take for granted?  If you can innovate lunch, you can innovate anything.

[Photo of Thumbtack chef Thea Baumann by Anastasia Tumanova]

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I can’t prove this yet, but the more I study the innovation process, the more convinced I am that this is true.  If you have an innovative new idea (and this can be a product, a service or a new way of doing things), if you are going to replace something directly, you need to perform at least 10X better than the incumbent.  That’s not impossible, but that’s a pretty big jump.

It’s much better to come up with something interesting, and then innovate the business model.

I was talking about this yesterday with my colleague Jeffrey Babin.  He agreed with me, and he pointed me to one of the IBM CEO Reports that addresses this issue.  There are two key pieces of data in it.  The first shows how firms distribute their innovation efforts:

It shows that while most organisations put some effort into innovating across the board, business model innovation gets the least attention.  But look at the impact of the three different types of innovation on the bottom line:

This shows the effect that innovating has on profits compared to firms in the same industry that don’t innovate.  As Jeffrey said, product and service innovation is baseline stuff – you have to do it to stay in the game.  The firms that primarily tried process innovation were actually worse off!  And those that undertook business model innovation had a 5% higher compound annual growth rate over five years.

5% higher compound annual growth – the argument should be settled right there – you should probably stop reading right now and immediately start innovating your business model if you aren’t already.

In case you’re still reading, here are a few more thoughts.

If you’re in a startup, innovating the business model is a bit easier than if you’re in a large firm.  The whole lean startup approach is basically built on the idea that the main objective of a startup is to build a scalable business modle.  This is a big part of the reason that lean startups turn into innovative firms.

Building business model innovation capabilities is a bit more challenging if you are a larger firm.  Paul Hobcraft recently discussed some of the issues here.  The problem is that you will be competing against startups that are innovating your industry’s business model – if not right now, then in the future.  So you need to have this skill.  And also, it leads to 5% higher CAGR!

Managing multiple business models within one firm is challenging.  However, you can see the payoff.  And some very large firms have done this very successfully.  I’ve spoken before about how Dow Corning did this with Xiameter, and how Hindustan Unilever did this with their Shakti initiative.

So it’s not impossible, it’s just hard.  And that’s exactly why it pays off – there’s no reward for solving easy problems.

I was talking late last year with the Chief Operating Officer from a company I’ve worked with for a while.  They are just now starting to benefit from a business model innovation effort that they started nearly three years ago.  They are a market-leading firm, but they have been facing increased competition recently as others have entered the market.

First, I asked him how long it took his competitors to copy a new product or service.  He said that it used to take 18 months, but now the time was down to 6 months.  Next, I asked him what he thought the outcome of their business model innovation would be.  He said “Well, it will take our competitors a year or two just to figure out what we’ve done and how we’ve done it.”  I pointed out that even then, they’ll have to go through a 2-3 year transition just like he did if they want to copy the business model.

Think about that for a second – product innovation gives them a 6 month competitive advantage, but the advantage from business model innovation is a few years.

Rita Gunther McGrath argues convincingly that competitive advantages have increasingly limited lifespans.  I agree with her.  Business model innovation is one of the best ways to respond to this.  It leads to higher growth, bigger profits, and higher chances of sticking around for a while.

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“It’s raining at night, and a car coming the other way has their brights on – they’re blinding you.  What do you do?”

I had already passed my practical driving test after we moved to New Zealand, and now I just had to answer this question, and I’d have my new Driver’s License.

“Slow down until it’s safe.”

“Ok, but what actions would you take?”

Now I had to think about it – what would I do step-by-step?  I didn’t know!  Now what?

I took a deep breath, then closed my eyes and visualised the situation.  I put left foot on an imaginary clutch, my right on the imaginary gas, and grabbed the imaginary steering wheel.  Then I talked through each action.

“Well, I’d let my foot off the gas to start slowing down, then I’d look down to the left to find either the white line or the edge of the road.  If was safe, I’d pull over, otherwise I would navigate by the line until the car was past.”

That satisfied him.  Now I had my new license.

The Things We Don’t Know We Know

When we drive, there are hundreds of things that we do every minute that we don’t consciously think about.  Over time, we get so good at making these constant adjustments to speed and direction, gas and brakes, that we forget just how hard it is to actually drive a car.  If we’re not careful, our concentration will slip and that can lead to trouble.

The things that we don’t know we know are like that – they allow us to do incredibly complex tasks without thinking about them, but the unconscious nature of the action can also get us in trouble.

Managing is a lot like driving.  When you’ve done it long enough, parts of it become automatic.  I don’t get to manage much in my current position, so when I get a chance to exercise my management muscles and I can see all these actions coming back, I’m much more aware of them than I was when I was a full-time manager.

Management is all about influencing from a distance.  The whole job is nudges and levers, questions and suggestions.  Little adjustments to keep on course, or speed up, or slow down.  That’s the art of managing.

The academic term for the things we “know” but can’t articulate is tacit knowledge.  It includes mostly things that we learn from doing.  Think about riding a bicycle – can you explain step-by-step how to balance while you’re moving forward?  It’s actually pretty close to impossible – that’s why we need training wheels.

We actually need training wheels as managers too.  Here is how Henry Mintzberg puts it in his superb book Managing:

Little of management practice has been reliably codified, let alone certified as to its effectiveness. That is why Hill found that people “had to act as managers before they understood what the role was”

It should be emphasized that, unlike other workers, the manager does not leave the telephone, the meeting, or the e-mail to get back to work. These contacts are the work. The ordinary work of the unit or organization—producing a product, selling it, even conducting a study or writing a report—is not usually undertaken by its manager. The manager’s productive output has to be gauged largely in terms of the information he or she transmits orally or by e-mail. As Jeanne Liedtka of the Darden School has put it (in a talk I attended): “Talk is the technology of leadership.”

Talk is the Technology of Leadership

I love that quote from Jeanne Liedtka – talk is the technology of leadership.  When was the last time you thought about how you use words?  That’s something we learned to do ages ago.  So long ago that we don’t even know what we know about speaking, or listening.

And yet, these are the core technologies of leading.  Speaking, and listening.

If you’re leading, or managing, it pays to think about these technologies a little more deeply.

Tom Peters addresses listening in a great document that he posted over the weekend called Presentation Excellence (link to .pdf).  The main document is about presentation skills, and it’s useful.  For me though, the goldmine is the appendix on listening.

He starts this by saying “Interviewing/asking questions is a critical—and under-studied and under-practiced—skill. Few have treated it as a skill to be mastered akin to learning to play the piano.”  He then goes on to give 59 thoughts on becoming a better listener.  This is an invaluable resource – check it out.

In terms of speaking, I’ve also run across an excellent resource recently.  It’s a book called The Power of Framing: Creating the Language of Leadership by Gail Fairhurst.  Like the piece by Peters, this book contains a wealth of practical examples and tips for using language more effectively.

It’s time for us to consciously think about the things we do automatically.  If talk is the technology of leadership, than it makes sense to build our skills in this area.  As we do this, we should pay attention to one last quote from Mintzberg’s book:

“It’s not [the manager’s] job to supervise or to motivate, but to liberate and enable” (Max DePree of Herman Miller, 1990).

(photo from flickr/fragglerawker_03 under a Creative Commons License)

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One of the responses to that post said “Have never believed failing is good [see item 18]. Try telling that to the families of trainee pilots!!”

I get this a lot, and it is extremely dangerous thinking.  Some people just seem to shut down as soon as they see the word “fail” – the critical parts of this idea are the last two – fail small, and learn.

Here is how Hugh MacLeod put it in his daily newsletter:

Nassim Nicholas Taleb addresses the fail small idea in his latest book Antifragile.  He says antifragile systems gain from things that people try to avoid:

What is that something? Simply, membership in the extended disorder family. The Extended Disorder Family (or Cluster): (i) uncertainty, (ii) variability, (iii) imperfect, incomplete knowledge, (iv) chance, (v) chaos, (vi) volatility, (vii) disorder, (viii) entropy, (ix) time, (x) the unknown, (xi) randomness, (xii) turmoil, (xiii) stressor, (xiv) error, (xv) dispersion of outcomes, (xvi) unknowledge. It happens that uncertainty, disorder, and the unknown are completely equivalent in their effect: antifragile systems benefit (to some degree) from, and the fragile is penalized by, almost all of them—even

…

Or look at errors. On the left, in the fragile category, the mistakes are rare and large when they occur, hence irreversible; to the right the mistakes are small and benign, even reversible and quickly overcome. They are also rich in information. So a certain system of tinkering and trial and error would have the attributes of antifragility. If you want to become antifragile, put yourself in the situation “loves mistakes”—to the right of “hates mistakes”—by making these numerous and small in harm. We will call this process and approach the “barbell” strategy

The implication of the second quote is that in fragile systems, when we try to suppress failure (“we can always celebrate success!”), we actually increase the chances of a big catastrophic failure down the road.  Antifragile systems avoid catastrophic failures because they have a series of small mistakes that lead to learning.

Learning is the second issue.  The latest issue of Smith Journal has a great interview with Zach Klein, who has been involved with founding Vimeo, College Humor, Boxee and the Founder Collective venture capital fund.

There are a lot of investors who invest solely in the entrepreneur, because that relationship is really important,” he explains.  ”They want to be supportive of their bad ideas so that when they do have a good idea, they have  front row seat to participate in the investment.  I don’t perform any science to evaluate what our success of failure ratio should be.  You need to invest in enough companies to be resistant to failure so that if one company fails, your entire portfolio isn’t spoiled.”

Failure, he says, is just fuel….

“Entrepreneurs and ideas are constantly mutating,” he says.  There’s never been a moment when someone just failed and that’s the end of it.  Usually what happens is that someone has a theory about how something should work or should be built, and they pitch that logic to me, and I trust them.  I invest money and I hope that they will faithfully execute on their plan.  When it doesn’t work, it’s just as much my failure as it is theirs, and we take that experience and we hopefully convert it into another opportunity; What do we know now?  What do we know better? I’ve never really dwelled on failure because it’s a critical component of succeeding  You have to experiment.  You have to take a risk.”

This is what Stefan Lindegaard calls SmartFailing.  He’s trying to address the same issue:

A few years ago, I argued that we needed to become better at learning through failure, but that the word failure itself is so negatively loaded. How could we create a new concept and vocabulary on the intersection of failure and learning?

I agree with Stefan, we need to reframe failure.  There are a few ways we can do this:

• Dont’ Fail Fast, Learn Fast: that’s what Braden Kelley says.  And he is right.  We need to test ideas as early as possible, and we need to set the test up as an experiment so that we are sure that we learn.  When Hindustan Unilever launched their Shakti program, they started with a very small experiment.    They were trying to set up a rural sales force of entrepreneurial women so that they could reach the 40% of people in India that lived in villages too small to have a store.  They didn’t roll out the new program across the whole country.  First, they trained 17 women and tried to answer two questions: could these women run their own business, and was there demand for HUL products in these villages?  If the answer to both questions was yes, then they would expand the program.  If the answer to either was no, then they learned something and could adjust their plans accordingly.  That’s how to set up an experiment.
• Ask “Is the knowledge that we’ll gain worth having?”  If you set up an experiment so that you learn something no matter how it turns out, then you are investing in knowledge, not failing.  There’s no point in experimenting if you don’t learn.  If you don’t learn, then that really is a failure, and we do need to avoid that.  If you learn, then you are building an antifragile organisation.
• Scale up your investment over time.  If the first Shakti experiment had yielded negative results, the cost was low.  As they continued with further experiments in years 2-5, the cost gradually increased.  First they expanded the geographic ranges and went up to trialling the program with 60 women.  Then they tested the supply chain, and finally they tested potential profitability.  This minimizes the cost of failure.

Rita Gunther McGrath has done great research on how to make this work.  In an article in Harvard Business Review, she says that you can do this by:

1. Define what success and failure look like before you start.
2. Experiment to turn assumptions into knowledge.
3. Iterate through this process quickly.
4. Do it cheaply – ask how much you can afford to lose to gain the knowledge.
5. Contain uncertainty by testing one thing at a time.
6. Build a culture that celebrates experiments that lead to learning.
7. Make explicit what you learn, and share it.

The fact of the matter is that trainee pilots fail all of the time.  They do it in simulators, and in trial runs on the ground.  The repeated small failures make it much less likely that they will fail once they’re actually up in the air.

We should follow the same principles in our innovation work.

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I ended up reflecting on some other excellent books that I’ve read recently, and I thought I’d share some thoughts on five thinkers that I admire.

Sheryl Sandberg

Since Lean In triggered this line of thought, I’ll start with Sheryl Sandberg.  The book is terrific.  It’s not a comfortable read, because it confronts the fact that we still face serious gender issues in both our work and personal lives.  While there are important institutional factors that contribute to this, Sandberg focuses on steps that we can take as individuals to address these issues.

Her TED talk summarises some of the key points from the book:

Here is what I really like about Sandberg’s approach here: she has an almost perfect mix of stories and data.  The book is highly data-driven, which is something that I always look for (and too often fail to find).  But for every statistic, Sandberg has a story that illustrates.  It’s a killer combination.

Yes, there are arguable points in the book, but it raises enormously important issues, which we need to be talking about. From an innovation standpoint, I think we’ll all be better off if we’re getting great ideas executed by everyone, regardless of gender, race, or country of origin.

Nilofer Merchant

Second on my list is Nilofer Merchant.  Yes, I’m biased, but I think she’s doing consistently excellent work.  I had a session on innovation with nine small-business CEO’s on Friday.  When I asked them what problems they faced, several of them had issues with embedding a culture of innovation throughout their firm.  They were describing an air sandwich.

That’s an idea from Nilofer’s first book The New How – that strategy fails because there is a gap between top-level managers, who have the vision of where they want to go, and the front-line people who understand where the real problems and opportunities lie.  The New How talks about how to bridge that gap so that there is a shared purpose within firms.  It’s a really important issue, and an under-rated book.

Nilofer is doing excellent work, with important applications.

Brene Brown

Nilofer tipped me onto the work of thinker number three – Brene Brown.  Her book Daring Greatly is one of my recent favourites.  One of the quotes in Sandberg’s book is “what would you do if you weren’t afraid?”  Brown’s research addresses precisely this point – that when we’re afraid, we prevent ourselves from accomplishing what we’re capable of.

Her solution is that we need to be vulnerable to reach our goals.  I believe that we do need to be vulnerable to innovate.

While I enjoy Brown’s work, and it resonates with me, I admire the work because it is based on some of the most careful research that I’ve run across.  It’s case-based, and the number of people that she interviewed is staggering – many quantitative studies have far fewer data points than her work does.  That in itself is great, but the other reason that I admire Brown’s work is that she changed her mind.

That’s what great scientists do when they run across data that doesn’t fit with their original hypotheses – they change their mind.  Sadly, this doesn’t always happen.  Brown is a great scientist.

Edith Penrose

I was talking about Edith Penrose with a couple of colleagues recently, and discovered that all of us regularly re-read her classic book The Theory of the Growth of the Firm.  Penrose has been one of my intellectual heroes from the early days of my research career.

Here is what I said about her for the first Ada Lovelace Day:

Here is what she set out to do in the book:

So far as I know, no economist has as yet attempted a general theory of the growth of firms. This seems to me so very strange that I am sure anyone attempting it should indeed watch his (or her) step, for naturally there is always a good reason for what economists do or do not do. Perhaps such a theory is impossible to construct, unnecessary, trivial, or outside the ale of economics proper. I do not know, but I offer this study in the hope that all four possibilities will be rejected.

Penrose succeeds admirably in rejecting those four possibilities. It is a beautifully constructed study, and a wonderful book to read. It’s been cited over 10,000 times, although her ideas are often mangled so sometimes I wonder how many times it’s actually been read. In any case, her key thoughts have formed an important part of the development of evolutionary economic thought. She builds on many of Schumpeter’s ideas, and in turn, her ideas contributed to great subsequent work like A Behavioral Theory of the Firm by Cyert and March and An Evolutionary Theory of Economic Change by Nelson and Winter.

Here is a brief statement that encapsulates the key points in her approach:

One of the primary assumptions of the theory of the growth of firms is that ‘history matters’; growth is essentially an evolutionary process and based on the cumulative growth of collective knowledge, in the context of a purposive firm.

Those are some of the key ideas that have driven evolutionary economics ever since. Edith Penrose conducted beautiful research. She developed important ideas based on deep observation and understanding of firms. Even though she’s been widely cited, I still think she’s a bit under-appreciated. If you have any interest in how firms grow, you owe it to yourself to read her book. The idea that firms grow through the growth of knowledge is a strong argument for experimenting, data gathering and innovation as key functions within organisations.

Rebecca Stott

The fifth thinker that has posed interesting questions for me is Rebecca Stott.  She writes both non-fiction and fiction, all with a strong focus on science.  I recently finished her novel Ghostwalk.

The book is a gripping mystery set in Cambridge, and bouncing back and forth between the present and the time when Isaac Newton was there.  Here is a quote that sums up the main issue that Stott is tackling:

Look. You forget. As a neuroscientist I’m up against the edge of what’s known all the time. Every new thing we map or understand brings a whole new set of unknowns with it. Science is really unsettling. Take quantum mechanics. The theory was so weird that Schrödinger, one of the founders, famously said, “I don’t like it and I’m sorry I had anything to do with it.” In the quantum world particles can be in two places at once, they disappear for no reason, and even act differently depending on whether we’re watching them or not.’

Yep, it’s a novel exploring quantum entanglement.  That might not do much for you, but I absolutely loved it!  It’s one of the most thought-provoking novels that I’ve read recently, and another in the recent string of great books.

One of the key drivers of innovation is connecting ideas in novel ways.  To get really good ideas it’s useful to explore widely.  Encountering great thinkers is one great way to spur this process.

I think you should check out these five, and if you have thinkers that you admire, please let me know – I’m always looking for more!

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Check this out:

The picture is from here, and it raises several important innovation points:

1. Your market is never stable.  Did phone makers think they were in the camera business in 1993?  What about camera makers?  We’ve seen an incredible collapse in categories as many different industries become increasingly IT-based.  When something like this is happening, you need to be thinking about your business model.  As your market changes, it opens up new opportunities for collaboration and value creation, as well as new threats. There is a pretty good chance that your business model will need to change as the boundaries of your market shift.
2. We’re all in the knowledge business now.  The control room for a mine looks identical to the control room for a space shuttle launch.  Construction companies now are more concerned with getting the right data to the right people at the right time than they are with traditional logistics.  Again, this means that you need to be thinking about your business model.  It’s getting increasingly difficult to build a competitive advantage based on keeping your customers ignorant (think of the way cars were sold pre-2000 or so).  Even if you’re making stuff, knowledge flows are really important.
3. It’s pretty cool!  I don’t know about you, but I think it’s pretty cool to have all that capability packed into one device.  Yes, it has downsides.  It’s dumb to be checking email right when you wake up like I nearly always do.  But that’s also part of figuring out the best way to use new tools – do dumb stuff until you find the best applications.  Even though some say that we’ve run out of big ideas, I think that we live in pretty amazing times.

The transition from brick-sized handsets to palm-sized supercomputers would have been unimaginable for most of us in 1993.  On the other hand, as William Gibson said, the future is already here, it’s just not evenly distributed.

So what ideas that will be transformational by 2033 are here already? What impact will these ideas have on the business that you’re in right now?

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The first chart shows the the market share of various systems, and you can see the rise and then slip of Microsoft here:

You can see how Texas Instruments dominated things around 1977, only to be replaced by first Atari, then Commodore, before it disappeared entirely.  Atari and Commodore held on until the early 90s, then they disappeared as well.

The tipping point from the Apple OS to Windows happened early too, followed by a long period of domination for Microsoft right up until about 2007.  Currently Android + iOS have about 55% of the personal computing OS market, and Windows has about 45%.

However, if you look at the data another way, looking at the total number of OS sales, you can see a slightly different story.  Here’s  Dediu’s original chart:

This chart shows a slightly different story.  The market share for Windows isn’t falling because its sales are dropping – it is falling because with the advent of smartphones and tablets, the overall size of the personal computing market has doubled.

There are several important innovation lessons here:

• When a market is forming, the race is for the best business model.  If you look at the market shares around 1982, Atari, Commodore, Apple and Microsoft all had significant market shares.  Microsoft won because it developed a robust business model the fastest.  As Greg Satell points out, they won because they developed modular architecture first.  Furthermore, while their code wasn’t open, their API was – and openness is a big innovation advantage as well.
• In a mature market, the threats come from outside.  Microsoft still dominates the desktop.  The problem right now is that the desktop is being rapidly overtaken by more portable computers.  Even as Apple revived a bit on the desktop with the introduction of the iMacs in the early 2000s, their market share in this market still didn’t go up that much.  It only took off with the iPhone and then the iPad.  The threats to Microsoft’s position came from segments outside of their core market.  They knew this was coming for a while, but it wasn’t until the introduction of Windows 8 that they really attacked this issue head-on.
• Your market is never stable.  One dangerous assumption that organisations make is that they know what market they are in, and that this will remain stable.  Information technology is wreaking havoc on traditional industry boundaries.  John and I visited a research lab for an engineering company last week, and it was very clear from the projects that they are working on that the firms that will win in this traditionally very conservative industry will be the first ones to become fully knowledge-based.  As projects get more complex and more expensive, managing the flow of data becomes increasingly important.
• Nothing ever stays the same.  The Justice Department didn’t need to break up Microsoft.  The evolution of the market has taken care of their dominant position.  It’s always tempting to think that today’s winners will also be front-runners tomorrow.  This is very rarely true.  That’s why we have to innovate.

Richard N. Foster has looked at this problem in a couple of outstanding books.  He outlines the key issue in this interview:

Let me tell you how I got to the term “creative destruction.” In the 80’s, I was in a search for “the excellent company” – the all-seeing, all-knowing, all-wise company that made all the right moves in advance, and that made more money for its shareholders than any of its competitors. This was the permanent outperformer stock – the really good deal. I looked at 4,000 companies over 40 years, and what I found stunned me. There was no such company, and there never had been such a company!

I thought something had to be wrong. Was I looking at the problem in the right way? No company had been able to outperform the market for any substantial length of time. (GE came as close as any, but didn’t do any better than the overall index). Somehow the market – managed by nobody – was performing better than all the brains on the planet. But why? Then I realized that the reason markets outperform companies was closely tied to what Joseph Schumpeter called “creative destruction.” This was actually a phrase that came from the Hindu religion, dealing with the transformation of an individual throughout their life, from creation, onto death, and ultimately rebirth.

My friend Geoff sent me this quote from Joseph Campbell last week:

The interior of man has been essentially the same for 40,000 years, since the first emergence of Homo Sapiens Sapiens. Myth has to do with the spiritual potentialities of this constant, this human being. But the images of myth must be derived from the environment of today and in this place. There is therefore a constant transformation of the image, but not of the reference.

This is probably true – it explains why so many of the stories that we respond to as humans have such similar structures, and similar points.

But another constant is that in business, things change.  If you’re running a business, that’s a very good argument for innovating.  As innovators, our job is to invent the future.

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