Category Archives: Managing innovation

MyTwoCents on MySpace

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So here’s a question: What is MySpace?

Aristotle once said:

The greatest thing by far is to be a master of metaphor; it is the one thing that cannot be learnt from others; and it is also a sign of genius, since a good metaphor implies an intuitive perception of the similarity in the dissimilar. (De Poetica)

Organizations–especially startups–must also master the metaphor.

I’ll be the first to admit that emerging technologies are tethered to the market’s dominant metaphors, which are built from people’s current and past experiences. We make sense of the new only in terms of the old.

But I have also argued the issue is not whether new technologies are interpreted through old frames, but which old frames. This weekend, after reading both a WSJ story on MySpace (MySpace, ByeSpace) and a parent’s experience with facebook.com (Facebook… ), I saw the enormous leverage of a good metaphor in business.

So what is MySpace?

Is it the next media platform–a new company with the reach and influence of an NBC? Does its phenomenal ascendance and enormous population of demographically perfect users mean it is the platform that will usher in a new golden age for marketers. What they last saw in the 1950’s with television and its ability to reach 75% of the viewing audience at a single moment? Is MySpace the next television?

Or it is not the network but rather the hot show–the Mickey Mouse Club or Davy Crockett that sold millions of mouse-eared hats and coon-skin caps. The kids across America who watched these shows were the canaries in the marketing coalmines (pardon my own metaphors), giving advertisers a glimpse into the power of that new medium to create and drive buying behavior from the ground up. Before then, kids were an elusive target and, a few decades later, were so bombarded with advertising that no one message carried as much weight. Is MySpace a glorified, 24/7 Mickey Mouse Club?

What I realized this weekend, reading both the business press and a parent’s account of these social networking sites is that, to me, these social networking sites are exactly that. When I was a junior in high school, after basketball games we would all meet at the nearby McDonalds (Mickey D’s). When I was a senior, we shifted to Burger King (the BK lounge). Why the shift? As Yogi Berra would have explained, “Nobody went to McDonald’s anymore, it was too crowded.” The same flocking behavior accounts, on differing scales, for shifting fortunes of the club scenes in LA and New York.

MySpace is the new BK Lounge. Granted, a national one, but it’s the place kids go to see and be seen.

The discerning teenager–and when it comes to social networking, perhaps nobody is more discerning–now talks candidly about where they choose to spend their online time and why. Kids talk about how MySpace is getting too crowded, too mainstream, and they are looking for somewhere else to hang out. Somewhere with a bit of cachet. And for this reason, the club/lounge seems the closest metaphor for social networking sites.

The problem with this metaphor is that, while it accounts for the phenomenally easy growth of MySpace, it also predicts an equally easy abandonment by its users. Time will tell.

McDonalds with a purpose.

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Govindappa Venkataswamy, an opthalmologist, passed away July 7th. He’s not an American icon, but could (and should) be for his entrepreneurial ways. The WSJ just began a weekly column honoring the passing of prominent business figures, and Dr. V’s passing is an especially nice way to inaugurate the column.

Dr. V Started the Aravind Eye Care System with an 11-bed clinic in 1976, and has since grew it into a five-hospital system. The Aravind system provides affordable surgery for the masses–quite literally–and now impoverished cataract patients can have their eyesight restored for about $40–and if that’s too much, for free. It also proved that there was a way to make money at the bottom of the pyramid; the free are paid out of the profits of paying patients.

What makes the Aravind system interesting to innovation is the origin of its success:

He was inspired, Aravind says, by the assembly-line model of McDonald’s founder Roy Kroc — learned during a visit to Hamburger University in Oak Brook, Ill. … “Can’t we do what McDonald’s and Burger King have done in the United States?”

Sound familiar? In 1910, when Ford’s engineers came back from studying the assembly lines of the Chicago meatpacking plants (first publicized in Upton Sinclair’s 1906 book, The Jungle), one of his chief engineers said “If they can kill pigs that way, we can build cars that way.” From food to cars to food to the operating rooms of Tamil Nadu:

The assembly-line approach is most evident in the operating room, where each surgeon works two tables, one for the patient having surgery, the other for a patient being prepped. In the OR, doctors use state-of-the-art equipment such as operating microscopes that can swivel between tables. Surgeons typically work 12-hour days, and the fastest can perform up to 100 surgeries in a day. The average is 2,000 surgeries annually per surgeon — nearly 10 times the Indian national average. Despite the crowding and speed, complication rates are vanishingly low, the system says.

What if the best ideas of modern economies were, with care, put to better use? As Dr V said, ” Intelligence and capability are not enough. There must be the joy of doing something beautiful.”

A grain of salt for the long tail…

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Guy Kawasaki offers a good counterbalance to the hype surrounding (or soon to surround) Chris Anderson’s new book, The Long Tail. The idea of the Long Tail is that, in a single market, the combined size of many niche products can be as big as from a single (or relatively few) mass-market products. Anderson’s original idea stemmed from comparing the sales of pop hits and artists to niche songs and singers on iTunes and Amazon. Of course, this was also how General Motors ate Henry Ford’s lunch in the 1920s, by introducing multiple makes and models against the mass market-driven Model T.

The threat: Big companies are caught between a rock and a hard place. On the mass market side, Walmart and others are squeezing their margins to nothing. On the other end, smaller companies are increasingly stealing away niche chunks of their more profitable, lower volume products.

The promise: Companies that master the long tail will see their revenues and share grow where those that can’t will watch theirs wither.

The grain of salt: The long tail may hold vast riches in many markets but, as Guy points out, before a company can exploit the long tail, they (and their market) must meet a serious set of requirements…read his post for these.

However, I think there is one area where the Long Tail still may hold promise for big companies: The back catalog. The hundreds, if not thousands, of SKUs that companies have maintained if only to avoid the trouble of formally killing them off. These are the countless products dating back decades which someone, somewhere still needs or wants.

It may be difficult for a company to find, contract for, or develop new products to build themselves a brand-spanking new long tail. But the ideas behind the long tail may still enable companies to find new value in their back catalogs in the same way that eBay has enabled so many of us to find new value in our attics and garages.

The trick will be finding those customers you had neglected before–the mom & pop shops, the weekend users, the 40-year old virgins, who still want whatever you first sold them 20 years ago.

Finally, and unrelated to the rest of the post, Guy utters a classic line:

“Everyone knows that the innovator’s dilemma is to find a tipping point in order to cross the chasm.”

Sums up management thinking in the 1990s.

The ethanol mousetrap (and moonshot)

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As Ethanol, the solution du jour for our energy needs, comes into the spotlight, it reveals itself to be as realistic a near-term solution (and long-term panacea) as its predecessor, hydrogen. Ethanol will not now, nor may it ever, provide the energy independence people seek. As Julia Olmstead writes in Counterpunch:

Improving fuel efficiency in cars by just 1 mile per gallon — a gain possible with proper tire inflation — would cut fuel consumption equal to the total amount of ethanol federally mandated for production in 2012.

Many others have made this same point before. What’s interesting, to this innovation-obsessed blogger, is the underlying impact that the concept of ethanol and other innovations has on the innovation process itself–especially when that process requires public effort and political will. What does the thought of a simple, clean solution just around the corner do to our ability to act with the solutions we hold in our hands (like raising mileage standards by 1 mpg)?

If a bird in hand is worth two in the bush, why is a technological solution in hand worth less than one around the corner? Is it the promise that this next one will take less effort and will to implement than the ones we have available today?

That promise of the better mousetrap that sells itself undermines more than just green technologies. It undermines innovation in organizations big and small. The possibility that tomorrow’s idea will be easier to implement than todays keeps us tolerating the status quo. It’s just like Annie sings: “The sun will come out, tomorrow. You can bet your bottom dollar.” Or was she pushing solar?

7 things every environmental entrepreneur should know

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A lot is happening at the intersection of environmentalism and entrepreneurship these days, and it’s creating a hybrid form: the environmental entrepreneur. Some are coming from the entrepreneurial community. Many more are environmentally driven and, realizing that “commerce is the engine of change,” are starting new ventures. Here’s some quick advice based on having a front row seat at the intersection for the past few years.

  1. Solve the right problem first.
    That problem has to be the customer’s. Your project will, by definition, benefit the environment and coming generations (you’re an environmental entrepreneur, right?). But if it doesn’t also benefit the people who have to pay for it in the first place, it will die. If the first slide in your presentation doesn’t clearly describe a living customer and a real pain they are feeling now (and you could solve), then you’re not ready. Don’t lead with global warming, greenhouse gas emissions, or wetland protection unless you’re talking to the people who feel this pain directly (like foundations and policy makers). Instead, talk about how your solution will help the customer–help grow market share, reduce costs, improve quality, increase margins, reduce weight, grow hair, or get their kids into Princeton. Solving the customer’s problem first focuses you on the here and now, forcing you to be the one person who understands better than even your customers, what they need.

  2. Always solve more than 1 problem.
     Good ideas solve someone’s problem. Great ideas solve more than one problem. Don’t waste your time pushing one-dimensional solutions, the successful ventures, green or otherwise, that you hear about solve multiple problems at once. That means solving the problems of suppliers, distributors, retailers, and regulators, and investors. Powerlight developed a solar panel system that clicks together, has a layer of insulation underneath, doesn’t require penetrating the existing roof, and is durable enough to walk on. This reduces the efficiency of their panels (as they don’t tilt toward the sun) but it makes installation easy, and installers recommend them. Whose cooperation do you need? What do they get out of the deal? Run the numbers. If everyone doesn’t win, go back to the drawing board until you find a solution where everyone does.

  3. Embrace style.
     Somewhere along the way, style became the antithesis of substance. Nearly 100 years of Madison Avenue advertising has made style a cheap substitute for substance (just look at the US auto industry). But you can’t blame them. Consumption is as much about identity as it is about performance. Nike, Coca-Cola, Apple, and Chevy all sell identity as much as the products their names are on. The Prius was helped by images of celebrities filling the gas tank; Willy Nelson’s name scored style points for biodeisel among truckers; even Gore is revamping his style to great effect. Think about your new venture: Style has a substance all its own. What’s yours? What’s your company’s identity and who wants to share it with you?

  4. Don’t make leaps.
    Most environmental entrepreneurs have visions of fixing entire systems–after all, that’s what’s broken–and design solutions that promise wholly new technologies enabling (and requiring) wholly new behaviors. Think hydrogen fuel cell vehicles, which require innovations in fuel cells, fuel, fueling stations, fuel companies, and fuel distributors, to mention just a few. But that’s where most promising ideas fail. Innovations succeed when they offer evolutionary, not revolutionary, changes in behavior. Create a design that provides small steps, easy changes, for your customers. Edison designed his electric light to look and act just like the gas lighting existing customers were used to. Only later did people start using electricity for other uses. Natura non facit saltum: Nature does not make leaps. Neither will customers.

  5. Know when good enough is good enough.
     You will always have two choices: keep working on the product or get it into the hands of customers and see what happens. Hundreds of millions have been poured into perfecting the Hydrogen fuel cell vehicle, all based on what people think the automobile industry will want in 15-20 years. Jadoo Power Systems, on the other hand, found a way to put hydrogen fuel cells into the hands of customers today. How? By taking the technology that exists today and designing products that people need now. Jadoo sells power solutions to video crews, rescue workers, and the military–all of whom will pay right now for something than provides the same power for less weight. And by doing so, they are learning dramatically (doubling performance while halfing costs). Get to the market as soon as you can–there is no substitute for learning what people will pay for, and how they’ll actually use it.

  6. Forget the better mousetrap.
     Emerson had it wrong. Build a better mousetrap and the world will not beat a path to your door. The better mousetrap–or whatever your solution–is the beginning, not the end. Once you have that, you need to market it. You need to get the word out to your customers quickly and effectively by building a website, sending out a press release, writing an editorial (or better yet, an article describing the problem, the market, and the opportunity better than anyone else has yet). Who needs to know about your product? How are they going to hear about it? How can they reach you? The light bulb was 40 years old by the time Edison started marketing his version. The steam engine was over 100 years old before James Watt found the investors, distribution channels, and manufacturing partners to bring it to the mass market. We remember Edison and Watt because they built successful business around existing mousetraps.

  7. Remember, success makes you the new problem.
     Careful what you wish for–you just might get it. Any company that succeeds grows, and any company that grows needs to worry about managing cash-flow, making payroll, paying creditors, and staying around in the long-term. Compromises start to creep in, waste starts to add up, and pretty soon you’re part of the problem. For environmental companies, this is especially challenging. A world filled with electric cars would be a world littered with lead-acid batteries and darkened by coal-burning power plants. Look to companies who, like Patagonia in the last decade or Hewlett-Packard in the 1950s, turned away from growth in order to remain the companies they wanted to be in the first place. Just remember, when you succeed, why you started in the first place.

The return of the Long Tail

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Two very nice posts take up the story of Budweiser’s “Long Tail Libations” (a perfect name, to say the least, for generating buzz these days). Chris Anderson’s post picked up on another post from the Brookstone Beer Bulletin (which in traditional blogosphere fashion is picking up on an earlier Chris Anderson post).

Anheuser-Busch has launched a new wine & spirits subsidiary, aptly naming it “Long Tail Libations” because its charter is to develop and launch many new and relatively unique (read small) brands that would not see the light of day in a company otherwise focused on a handful of national brands.

The cool idea in this string of posts is that the long tail of local beer was there before the mass market began dominating with a brands backed by major advertising. Sound familiar? The major beer brands were born in the 1950s–or reborn from previously local brands–and grew to prominence on the back of newly national advertising, distribution networks, and refrigeration.

In essence, we are now entering the long tail’s second coming. Thanks to even more sophisticated national distribution, we can live in California and drink Boston’s favorite micro-brewed beers. There is a story here that goes beyond the “Long Tail,” and involves how “what the long tail is doing to consumers” is doing to markets and the nature of products and services. That one’s for another post.

In any case, Bud’s problems are the same problems as most major brands–how can you build an organization capable of exploring the long tail, which is either where the next major brands are going to be, where all the sales growth is going to come from, where the earnings growth is going to come from, or all three?

Launching the Energy Efficiency Center

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Yesterday, we launched the first academic Center focused on the commercialization of energy efficient technologies. The Energy Efficiency Center (EEC) was created with a $1M grant from the California Clean Energy Fund (CalCEF) represents a rather unique and interdisciplinary collaboration across the colleges of Engineering and Agriculture and the Graduate School of Management. California’s Governor Arnold Schwarzenegger gave the opening remarks (for related articles, I’ve provided links below).

The Center represents a new direction in the development of energy efficiency and, I hope, other sustainable technologies, as it brings the perspectives and resources of the entrepreneurial community into the conversation–the voices not only of the end-user, but also of investors, suppliers, resellers, and countless others.

As the founding Director of the Center, I gave these brief remarks:

In 1882, Thomas Edison threw the switch at his Pearl Street Station and created an energy revolution. But history can be deceiving. Edison neither invented the light bulb nor perfected its performance. That technology was 40 years old by the time Edison got to it.

Edison’s impact came not from inventing a new technology but, instead, from finding the right business model that would bring this emerging technology into the marketplace–a business model that would be embraced by customers, yes, but also investors, suppliers, regulators, and a host of other eventual stakeholders.

Thanks to the vision and support of the California Clean Energy Fund, the Energy Efficiency Center at UC Davis represents the first effort solely focused on bringing the emerging technologies of energy efficiency into the marketplace.

With the support of CalCEF and in partnerships such as we have now with PG&E, this center will be a catalyst for raising energy efficiency and reducing energy costs in California transportation, building, and agriculture—by bringing rigorous science and practical solutions together with sustainable business models.

Researchers at UC Davis and partner institutions already lead the nation in much of the science and technology of energy efficiency. This work can be seen, for eample, in the Institute for Transportation Studies where innovations are bringing the power of information technology and the internet to problem of traffic congestion and trucking logistics.

Other similar innovations are coming from the California Lighting Technology Center, where they are working in partnership with utilities, manufacturers, and customers to develop new technologies and standards for lighting—some of which can be seen in this building. And from research in Agriculture and Food Processing, where new sensors can improve the efficiency of irrigation pumps and reduce water consumption.

Dan Sperling, in particular, has been a driving force behind the formation of this center and his work has made UC Davis a national and international leader in energy-related research. He will play a key role in this center as its Associate Director.

This center will change the way we study energy efficiency, the way we teach it, and the ways in which we work together with the public and private sector to develop real and lasting innovations in energy. Keep an eye on us.

Here is some of the initial press reporting on the launch:

What a difference a day makes

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Last month I talked about the long, thankless efforts at innovation that predate a technological “revolution” (see earlier Politics of Technology). In the evolution of WiFi technology at the city-scale, we maybe seeing the shift in the adoption curve (from the long nascent tail to an explosive adoption rate). In part II, the incumbents shift from fighting the new technology to embracing (or at least exploring) it.
The WSJ today reports on the recent change of mind by the CableCos and Telcos, from suing municipal wireless efforts to competing with them: WiFi landgrab. This may be because they failed in 13 of 14 efforts to legislate away free municipal wireless last year. Or because it’s become apparent that, while they’re busy lobbying, others like Google, Earthlink, and many local others are out there building networks:

More than 50 municipalities around the country have already built such systems, and a similar number are at some stage in the process, including Philadelphia, Chicago, San Francisco and Houston, according to Esme Vos, founder of the Web site http://www.muniwireless.com, which tracks such projects nationally. By 2010, ABI Research forecasts a $1.2 billion market for the wireless technology used in the city systems.

In 10 or 20 years, this shift and its causes will be lost to some economic arguments about the inevitable forward progress of technological change, but it was critical nonetheless in shaping the paths taken (and not). Will Muni WiFi be the disruptive technology that undermines the grip of Cable and Telcos, or will it simply enhance their position? The answer, it seems, has less to do with the technology than with how (and why) those incumbents chose to react.

A mousetrap in hand versus in the bush?

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What’s the value of a mousetrap (or two) in the bush? Hitting the road to spread his message of energy independence, Bush announced that the US was on the verge of an energy breakthrough (story):

“Our nation is on the threshold of new energy technology that I think will startle the American people,” Bush said. “We’re on the edge of some amazing breakthroughs — breakthroughs all aimed at enhancing our national security and our economic security and the quality of life of the folks who live here in the United States.”

I’ve spoken about the fallacy of better mousetraps before (mousetraps), but to recap–the numbers just don’t pan out. Of the 4400 mousetraps patented in the last 170 years or so, only a few dozen have made any money, and only 2 dominant designs are on the market (the snap trap and sticky trap). The world does not, it turns out, beat a path to anyone’s door for a better mousetrap. Nor will it for a better energy technology: solar, nuclear, hydro, geo, biomass…these were and are all good technologies. But that’s not enough.

Technological revolutions don’t happen overnight. to take hold, they require relatively slow and incremental changes in the behavior of individuals and markets. Edison’s light bulb (arriving as it did 40 years after the first incandencent bulb) still preceded the true age of electricity (in the homes and factories) by another 40 years.

So here’s the dilemma: the more we talk about a great technology just around the corner, the less we take responsibility for the harder work of changing our behaviors to exploit the alternative energy technologies that are out there today. The danger of believing in an energy mousetrap–that a technology will suddenly rescue us from our addiction–is that such a belief only enables our complacency. Don’t worry, be happy, and a solution will be along shortly.

The politics of technology

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Building a better mousetrap seems to have more in common with Britain’s finest hour than with the glamour of innovation. For example, developing the technology to blanket cities with free wi-fi is, to paraphrase Churchill, “…not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Glenn Fleishman, writing in the NYT Advocates of Wi-Fi in Cities Learn Art of Politics, describes the necessary disillusionment of early “free wi-fi” pioneers and their subsequent embrace of politics in order to implement their plans: “All of us were very idealistic, and all quite strongly opinionated,” says one such pioneer.

“The problems that were hard in 2001 were technical ones,” Mr. Spiegel [president of NYCwireless, a volunteer wireless advocacy group in Manhattan] said. “Now, they’re personal and relationship and political ones. The technology, we almost don’t even think about it anymore.”

Sound familiar? Anyone who has tried to push innovation in organizations recognizes that getting the technology right is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. Politics comes next. Perhaps we need a Churchillian theory of innovation?