Archive for strategy

Dec
27

Connectivity: Key to Successful Innovation

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How to Jump-Start Entrepreneurship” by Philip Delves Broughton is an op-ed piece in the Dec. 26 Wall Street Journal that wisely notes how complex the recipe for entrepreneurial success is. But the real magic sauce, he argues, is connectivity. Start-ups and innovators need to be connected to those who know how to solve the many problems they will face along the way. This connectivity is not easy to promote, but the Start-up America Partnership he discusses is doing exactly that by creating groups of entrepreneurs that can help other entrepreneurs forge the connections they need, such as connecting with D.C. lobbyists to assist with tasks requiring government support.

In my experience, the most successful entrepreneurs work hard to develop and maintain relationships with a wide variety of influencers and examples of success. The broad scope of connectivity may not be reflected by large numbers of connections, but by diverse and high-quality connections. The quality of the connection is crucial. Not just a name card in hand or a Twitter follower, but a person with whom meaningful exchanges have taken place and can take place in the future. These relationships can be acquaintances rather than long friendships, but they have the added quality that comes from time together, from sharing tips and best practices, from repeated encounters, and from periodic “pinging” through phone, email, or personal contact. The two parties see each other as interesting with something to offer to the other, and exchanges are perceived as having potential mutual value. These kind of relationships require deliberate efforts to create and maintain. Diverse, broad, and healthy relationships of this kind can lead to the connectivity that engenders success in entrepreneurial ventures and many other fields.

Categories : start-ups, strategy
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Nov
15

Even Mature, Basic Industries Must Remember This: It’s an iTunes World

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At Tissue World 2012 in Shanghai this week, a conference related to the booming business of producing tissue paper, I had a sobering conversation with a former employee from one of the world’s great equipment companies. I overheard a current employee at this company state that things were slow, in spite of the global surge in tissue production. In fact, if I heard correctly, this leading company “had no orders” for their machines. A disaster. Hundreds of employees may lose their jobs in coming months, as far as I can tell, in spite of this segment of the industry being healthy and active.

The former employee explained the disaster to me. From what I can gather, the problem stems from the decision by management to perfect their processes and standardize their offerings for ultimate efficiency. That sounds like good business, right? It’s what any good MBA would want to do, right? Sure. But what it did was take the focus of the company away from meeting the diverse needs of their customers and instead tried to force customers to conform to the needs and desires of the supplier. Customized orders were given punitive pricing, and pricing of standardized products was made completely inflexible. The company developed highly efficient, nearly perfect systems, and lost their customers. Disaster.  When massive cost reduction becomes massive customer reduction, you’re toast.

We live in an iTunes world. People are increasingly expecting the products they buy to be tailored to their needs. They expect offerings to be flexible, customizable, adapted to their needs. If you can’t build flexibility into your product line and into the service you offer your customers, if you can’t understand and meet their individual needs, your relationship, though decades long, can suddenly evaporate. They can close your web page and in moments find a different vendor that they can work with. You must adapt the way you do business and have ways of customizing what you do and how you do it without adding exorbitant fees.

You may need to rethink your business model to do this. You may need to consider adding some new partners in your supply chain, and perhaps retooling your apps and website to provide a more customized feel for those placing orders or learning about your products. You may need training of your sales staff and marketing teams. But you can’t ignore that we are in an iTunes world with flexible competition everywhere. You must innovate and adapt to better meet the needs of your customers and keep your business, even a very mature business, alive.

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Oct
10

Patents and Strategic Inventing: Nick Nissing’s New Book for Corporate Inventors and Leaders

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The new intellectual property book by Nick Nssing, Patents and Strategic Inventing: The Corporate Inventor’s Guide to Creating Sustainable Competitive Advantage (McGraw-Hill, 2013) is a refreshing guide to help inventors and leaders in corporations. It is a collaborative work with a variety of contributors (myself included) providing a few chapters in addition to the excellent core material from Nick.

Nick has many years of inventing and IP strategy experience at Procter & Gamble and Monsanto, where he is currently the Biotech Strategy Lead. He is also founder of Luminosity LLC, a consulting firm focused on new product development and patent strategy for large corporations. He is also an adjunct professor at Washington University. I’ve known Nick for a number of years and have been impressed with his approach to IP strategy and his business sense when it comes to IP.

This book provides a rich variety of material to help corporate inventors. Too often corporate inventors just sit back and let the attorneys handle everything, but Nick’s book shows that much better results can be achieved when the inventors are educated in patent strategy so that they can invent more strategically and work with the attorneys more effectively.

Part 1 offers a sound introduction to patentability, patent searching, and the role of the corporate inventor, and then explores patents in light of the America Invents Act. Many highly practical nuggets are there such as Chapter 9, “Working with Your Attorney: Nine Steps to a Better Utility Patent,” which offers insights from Byron Olsen, assistant general counsel at Monsanto. This section provides very practical information including a recommendation that inventors work with the attorney to “superinvent,” adding new concepts and uses for the invention to greatly broaden and strengthen the patent.

Part 2 deals with Patent Strategy, followed by Part 3, “Strategic Inventing.” These two sections get into more advanced topics such as building portfolios, analyzing landscapes, life-cycle management of IP, disruptive innovation (that’s my chapter: “Intellectual Property and Disruptive Innovation: Strategies, Tactics, and Lessons from China”), TRIZ, and guidance on implementing patent strategy at the project level. Overall, I find the book to be fresh, original, clearly written, and a good example of how one expert author can add value by collaborating with other contributors.

For more information, see the book’s website, StrategicInventing.com.

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Aug
02

Reduce Your IP Risks

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Innovators need to recognize that there are numerous IP risks that their new products and services may face. Sometimes a little attention to your supply chain, packaging, and business model can greatly reduce those risks. An excellent resource on this topic, from which I have drawn a couple of suggestions, is “IP risk assessments – a pragmatic approach
to avoiding problems” by Richard Baker in Intellectual Asset Management (November/December 2011), pp. 72-77.

One approach involves considering and segregating the risk that various aspects of your products and services expose you to. For example, if you are offering a product that includes wireless functionality, consider providing the wireless aspect as an optional add-on that can be purchased separately. If it’s part of the product, you could be sued for infringement of numerous wireless patents and risk paying a royalty of some percentage on the entire product. By moving the wireless features into a separate add-on, the risk becomes much lower, and if you are found to infringe, you’ll be paying a royalty on the sales of the add-on and probably not the sales of the primary device.

You can also reduce risk by exercising caution in how much you disclose (outside of confidentiality agreements) to the public on the details of your products and manufacturing methods. The less you disclose, the less likely someone with a patent looking to sue will spot you as a candidate.

Baker also advocates careful examination of your supply chain and consideration of the jurisdictions that might be involved if there is a suit. If you are shipping internationally, for example, you might want to avoid assembly and shipping from the US where you could be exposed to US lawsuits. Bakers observes that having operations elsewhere can greatly reduce risks. In England, for example, patent infringement suits are successful only about 6% of the time, and in Italy, IP lawsuits move at “glacial” speed through an inefficient court system that often takes longer than the life of the patent to be decided. The US is a great place to be a patent owner looking to sue an apparent infringer, compared to other nations, so take that into account.

Of course, a good patent clearance assessment and care to avoid infringing other patents should be part of your IP risk reduction strategy in the first place, but there is always uncertainty.

Reducing IP risks can help you have a higher chance of succeeding in the market place and overcoming innovation fatigue.

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“Quorum sensing” refers to the abilities of some organisms, especially bacteria, to sense the presence of others and begin collective action such as forming a biofilm. It’s a critical area of research in immunology. There are also lessons from quorum sensing that need to be applied to business and innovation. Quorum sensing, in a sense, results in “intelligent” collective decisions that are not made by a central brain but through the sharing of signals or other information between individuals, none of whom sees the big picture or understands the meaning of all the available data. The free market’s mechanisms for optimizing supply and demand through the collective information transmitted by price is one analogy in the business world. But let’s look at lessons specifically from the quorum sensing of one ant species that lives its life in a hostile, frequently shifting, rocky environment–sound familiar?–where constant change is required. This comes from Wikipedia’s article on Quorum Sensing:

Colonies of the ant Temnothorax albipennis nest in small crevices between rocks. When the rocks shift and the nest is broken open, these ants must quickly choose a new nest to move into. During the first phase of the decision-making process, a small portion of the workers leave the destroyed nest and search for new crevices. When one of these scout ants finds a potential nest, she assesses the quality of the crevice based on a variety of factors including the size of the interior, the number of openings (based on light level), and the presence or absence of dead ants. The worker then returns to the destroyed nest, where it will wait for a short period before recruiting other workers to follow her to the nest she found using a process called tandem running. The waiting period is inversely related to the quality of the site; for instance, a worker that has found a poor site will wait longer than a worker that encountered a good site. As the new recruits visit the potential nest site and make their own assessment of its quality, the number of ants visiting the crevice increases. During this stage ants may be visiting many different potential nests. However, because of the differences in the waiting period the number of ants in the best nest will tend to increase at the greatest rate. Eventually, the ants in this nest will sense that the rate at which they encounter other ants has exceeded a particular threshold, indicating that the quorum number has been reached. Once the ants sense a quorum, they return to the destroyed nest and begin rapidly carrying the brood, queen, and fellow workers to the new nest. Scouts that are still tandem-running to other potential sites are also recruited to the new nest and the entire colony moves. Thus although no single worker may have visited and compared all of the available options, quorum sensing enables the colony as a whole to quickly make good decisions about where to move.

The standard Corporate model of centralized new product development and decision making has its advantages, but also many limitations. When rapid growth or adaptation is necessary, innovation often works best when many minds can contribute their talents, insights, networks, and scouting activities to the search for fruitful new places to colonize. If decisions are fully centralized, they take forever and many good spots will be ignored. More rapid and efficient pursuit of innovation requires distributed authority and the involvement of many and systems that can tap and respond to the efforts of many without the endless waiting for one all-knowing top dog to sift through the data and make a decision. How flexible is your organization, really? How distributed and dilute is the power to act on innovation opportunities? What systems do you have to tap the knowledge, skills, and networks of all employees?

Horn of Innovation Schematic

Horn of Innovation Schematic

One of the major concepts we discuss in Conquering Innovation Fatigue is the Horn of Innovation, a concept that turns the slow, inefficient innovation funnel around and yields a more efficient innovation system in which innovators, like the quorum sensing ants, are directly involved in all aspects of the innovation process. In our musical analogy, the innovators are able to shape and adapt the innovation in response to the feedback from the market and business leaders for rapid and efficient adaptation, rather than just tossing ideas into the black hole of a funnel and hoping somebody will do something with them occasionally. Innovators need to be included in healthy, robust feedback loops that are closer to the quorum sensing mechanisms than purely centralized, autocratic business systems. I’m willing to bet that it’s time your organization shelves its old, costly systems and implements improved paradigms for innovation. The lives and ants and the physics of horns can both teach us lessons about better ways to run innovation in a business.

The Horn of Innovation vs. the Funnel

The Horn of Innovation vs. the Funnel

Oct
11

Engineers Interested in Innovation, Startups, and IP: Join Us at the 2010 AIChE Annual Meeting

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Chemical engineers interested in innovation and entrepreneurship should consider attending the AIChE 2010 Annual Meeting in Salt Lake City. On Wednesday, Nov. 10, I will chair a session featuring four outstanding speakers on topics that should be of interest to many engineers, including university researchers, corporate researchers, and managers. If you are conducting research that could lead to a new business, if you are involved in leading or managing R&D, if you are part of an effort where intellectual property could make a difference, then you should attend our session, “Intellectual Assets in the Digital Era.” You need to register for this conference through AIChE.

Time: Wednesday, November 10, 2010: 8:30 AM-11:00 AM
Location: Salt Palace Convention Center, Grand Ballroom G, Salt Lake City, UT
Chair: Jeff Lindsay, Director of Solution Development, Innovationedge, Neenah, WI
Co-Chair: Ken Horton, Gore School of Business, Westminster College, Salt Lake City, UT

Schedule of Papers and Abstracts:
8:30 AM, Paper #406A, “Business Development, IP, and Manufacturing Success: Perspectives From Utah’s Manufacturing Extension Partnership” by David Sorensen, Executive Director of Utah’s Manufacturing Extension Program. (See biographical information below.)

Abstract: The Manufacturing Extension Partnership of Utah has assisted many companies in strengthening their strategy for success and continued growth. We will discuss what it takes to advance your business, including lessons relative to leadership, vision, intellectual property, and coping with changing regulations and policies.

9:10 AM, Paper #406b, “The Role of IP in Successful Startups,” Mike Alder, Director of Technology Transfer, Brigham Young University.

Abstract: Many AIChE members will be involved with a startup at some point in their career. While the capabilities of the management team is of utmost importance, in numerous cases, the success of the startup also depends on the quality of its intellectual property. In this era, an IP-savvy team can take several steps to secure competitive advantage and realize greater value from the technology, products, or services the company offers. This presentation will draw upon experience with many startups and startup teams and will provide guidance to researchers, business leaders, and future entrepreneurs on how to better prepare for success.

9:45 AM, Paper #406c, “An Introduction to IP Law: The Underpinnings of Intellectual Assets,” Ken Horton, Kirton & McConkie, Salt Lake City, UT

Abstract: An understanding of the basics of intellectual property law can help chemical engineers in advancing their own research, in evaluating competitive efforts, in building their own business, or in general advancing their career. This presentation will cover some of the key concepts that engineers should know, including the nature of patents, the different kinds of patents (provisional, utility, design), the role of trademarks and copyrights, what it takes to be patentable, and how changes in patent law may affect your career and business.

10:20 AM, Paper #406d, “Cost-Effective Pursuit of IP in a Down Economy,” by Jonathan Lee

Abstract: How does one get the most protection and benefit from intellectual property when the economy is down? How can patents and other forms of intellectual property be obtained in a cost effective manner when budgets are tight? In this presentation, an experienced patent attorney shares insights into cost effective IP with guidance directed to managers, research leaders, inventors, and entrepreneurs.

Biographical information:

David Sorensen
Mr. Sorensen has over 35 years of experience in a wide variety of technical and managerial assignments requiring comprehensive knowledge in several disciplines relating to engineering, manufacturing, information technology and business systems. He has been directly responsible for major contracts with industry and government agencies and has a proven record of technical competence, customer relations, and business planning in rapidly expanding technical companies. Mr. Sorensen has held increasingly responsible positions in product and service organizations. He is innovative, resourceful, and aggressive in accomplishing assigned responsibilities with major strengths in strategic planning, marketing and management. He holds a Bachelor of Engineering Science and a Masters in Manufacturing Engineering Technology from Brigham Young University.

Since 1995 he’s been the Director of the Utah Manufacturing Extension Partnership (MEP-Utah), serving primarily the 6,200 manufacturers in the state of Utah. MEP-Utah was selected to initiate and manage the NIST Information Technology Network for over 60 MEP Centers nationwide. Mr. Sorensen is also a BYU adjunct faculty member and the Associate Dean of Technology, Trades and Industry at Utah Valley State College. With a staff of 18, in one year MEP-Utah helped create or save 2,719 jobs in Utah, increased manufacturing sales by more than $121 million and increased employee payroll by more than $84 million.

He’s been the Chairman & CEO for Echo Solutions, a start-up software products and services company; Executive VP of Eyring Research Institute; General Manager of EG&G Services; Director of Engineering at EG&G Idaho Inc.; Manager of Architect Engineering and Construction at Aerojet Nuclear Company and Manager of Power Generation Equipment at Bunker Ramo. He also has experience with GE’s Nuclear Instrumentation as a Senior Applications Engineer, and in engineering positions at Kennecott Copper, Intermountain Industries, and F.C. Torkelson Engineers.

Michael Alder
Mike is Director of Technology Transfer at Brigham Young University, where his work has been nationally recognized by BusinessWeek and others for their success. Mike is also Chair of the Board for WestCAMP Inc. where he has also chaired the National Centers of Excellence (NCOE), a division of WestCAMP. Mike is formerly the CEO of the Biotechnology Association of Alabama. He was also a Venture Partner with Redmont Venture Partners, Inc. He has been heavily involved in the founding of Tranzyme, Inc.; Vaxin, Inc.; Folia, Inc.; Chlorogen, Inc.; Allvivo, Inc. and Cr3, Inc. All but one of these are biotechnology companies (Folia produces specialty biopolymers).

Mr. Alder has 30 years of experience in leading technology-based startup companies. He was previously CEO of Emerging Technology Partners in Birmingham, Alabama from 1997 to 2003. Prior to coming to Alabama in 1994 he co-founded the Grow Utah Fund that focused on creating technology-based businesses. In 1989 he was asked by the Utah Governor to head the State’s Office of Technology Development, which he did for 5 years as its Executive Director, helping bring Utah’s Centers of Excellence programs to national prominence. In 1973 he founded NPI, a plant biotechnology company in Salt Lake City, Utah and served as President, COO and Vice Chairman of that company for 15 years as it grew to over 700 employees.

Ken Horton
Ken Horton is a member of Kirton & McConkie‘s Intellectual Property Practice Section in Salt Lake City. His practice includes domestic and foreign patent prosecution, patent opinions, intellectual property litigation (including both state and federal court actions), domestic and foreign trademark prosecution, trademark opinions, copyrights, trade secrets, intellectual property evaluations and due diligence, as well as technology and intellectual property agreements. Mr. Horton has extensive experience in both pharmaceutical and semiconductor technologies. He is a frequent speaker on the topic of intellectual property law and strategy, speaking both at the 2007 and 2010 A.I.C.H.E. annual conferences and the 2009 A.C.S. annual conference. Additionally, Mr. Horton is an Associate Professor in these topics in the MBA Technology Management Program at the Gore School of Business of Westminster College.

Jonathan Lee
Jonathan Lee is a registered patent attorney and a member of the Utah State Bar practicing at ALG (AdvantEdge Law Group). His practice focuses on adding real-world value to companies, both large and small, by acquiring, securing, and protecting intellectual property rights.

Mr. Lee has prepared and successfully prosecuted hundreds of patent applications throughout his career, primarily in the electrical, electro-mechanical, and computer engineering fields. He currently helps a number of Fortune 1000 companies manage and develop their domestic and worldwide patent portfolios. He also regularly counsels clients in other aspects of intellectual property law, including litigation, licensing, and opinion work, as well as due diligence examinations, copyrights and trademarks, and patent reexamination proceedings.

Prior to joining ALG, Mr. Lee worked for nationally recognized law firms in Washington, D.C. and Salt Lake City, Utah.

Mr. Lee was recently selected as a Mountain States Rising Star by Super Lawyers, a peer-reviewed publication.

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In late 2009, I was invited to speak at Singapore’s Innovation and Enterprise Week 2009, an event held at Biopolis and sponsored by A*STAR, the world-class research organization of the Singaporean government, in collaboration with Exploit Technologies, the tech transfer arm of A*STAR. While I enjoyed the opportunity to discuss our book, the important thing to me was the opportunity to learn more about that amazing country and their bold approach to promoting innovation and technology. In my presentation for the large crowd at Innovation and Enterprise Week, I discussed the fascinating parallels between the Singapore experiment and the evolving experiment in innovation in my state of Wisconsin, where the Wisconsin Institutes for Discovery represent a brilliant approach to combining the best of public and private innovation.

Below are three video segments from my presentation. A couple of friends in Singapore took the video. There are a few gaps in sound and so forth, but I hope you can understand it. Don’t miss my lame magic trick in segment 3. They seemed to like it–proof again of the great courtesy that one finds in Singapore. In all seriousness, I think there are important lessons about innovation that can be gleaned by inspecting both the Singaporean system and the Wisconsin Institutes for Discovery, which include the Morgridge Institute for private sector research and the public Wisconsin Institute for Discovery. Madison and Singapore are on opposite sides of the world, but on the same side of the innovation spectrum, at the leading edge.

Update: On April 24, I posted a newly recorded and shortened Pixetell presentation covering the basic information I shared in Singapore, without the magic or other excursions.

I am deeply grateful to the many people who kindly shared their time to help me prepare for the presentation, including Sangtae Kim, John Wiley, Charles Hoslett, Carl Gulbrandsen and Janet Kelly from the Wisconsin side (Wisconsin Institutes for Discovery and WARF), plus Boon Swan Foo, Seito Wei Peng, and Sze Tiam Lin at Exploit Technologies in Singapore.

Part 1:

Part 2:

Part 3:

For connecting one human to another, it’s been said that any two people can be connected by acquaintances in six steps, hence the concept of “six degrees of separation.” The term “seven degrees of separation” occurred to me when reading Malcolm Gladwell’s discussion of airliner accidents in his outstanding book, Outliers: The Story of Success. He observes that extensive studies of airliner crashes show that the fatal tragedies often require a combination of seven things going wrong, any one of which might just be an inconvenience or minor problem by itself, but in combination with the others can lead to disaster. When it comes to connecting skilled humans to the very disasters that they have been carefully trained to avoid, there are seven degrees of separation to disaster.

While mechanical defects, fatigue, and bad weather are often involves in the seven degrees of separation, these airliner disasters almost always involve flaws in interpersonal communication. For example, there may be a copilot who is afraid to speak up and challenge the pilot when an obvious mistake is being made, or there is a lack of clarity in communicating a problem to the air traffic controllers. When trouble is brewing, success often requires extensive communication between the flight crew, other crew members, ATC staff, and sometimes others. Plans must be made, checked, implemented, revised, clarified, conveyed, and so forth, at many levels to handle an emergency properly. When crew members keep their mouths shut and don’t share what they know or sense, when courtesy or fear stops urgent information from being shared, or when there are cultural or linguistic barriers to effective communication, multiple mistakes and miscues can accumulate, whittling away at the separation between survival and disaster. It’s that way in the world of innovation as well.

Superior IQ and innovative genius is often far less important than the ability to communicate. Disasters in innovation and new product development are often due not to lack of intelligence among the innovators and corporate leaders, but gaps in communication. Launching a product and safely navigating it through the storms of the market can be much trickier than flying an airplane. The flight of a new product always involves malfunctions and emergencies that require communication skills above all. Information from the market must be effectively shared with the developers. Plans must be shared and communicated with external partners and internal teams. Benefits and features must be effectively communicated to end-users. Expectations must be clearly conveyed to suppliers and service providers. A plethora of data must be handled and shared in ways that inspire, motivate, drive action, and keep all parties aligned.

As in an airplane emergency, “yes men” are not the people you need around to help. You don’t want devil’s advocates either or professional naysayers–you need people willing to share what they know and challenge directions and assumptions that may mislead the project or the company. You need people who can help you confront and conquer the brutal facts of your present reality. (See my previous post on the Stockdale paradox and the danger of optimism.)

More than words alone are involved in the communication relays that are essential for a successful new product flight. Intangibles related to trust, loyalty, and common agendas must be in place. It’s all about relationships, and these take time and effort to build and maintain. Unreliable or misleading communication can break those relationships and jam navigation systems, as can abusing or taking advantage of partners and employees. Bonds of trust and mutual respect inside and outside the corporation are essential to maintaining effective communication and bringing about the alignment and common purpose needed for innovation to succeed.

As Gladwell notes, the seven errors that tend to accumulate in major airline disasters “are rarely problems of knowledge or flying skill. . . . The kinds of errors that cause plane crashes are invariably errors of teamwork and communication.” Ditto for the risky, high-flying adventure of innovation, where crashes are the rule rather than the exception. It’s not that the team wasn’t skilled or clever, but fundamental gaps in teamwork and communication resulted in the product launch smashing at full speed into barriers they failed to notice or attempting landings on runways that weren’t there. These disasters are always going to be far more likely than airplane disasters, but improved communication and teamwork across your innovation ecosystem can do much to bring you safely home.

In Conquering Innovation Fatigue, our chapter on the Horn of Innovation is devoted to illustrating the importance of including the innovation team in feedback loops that bring data from the marketplace to the innovators to allow them to make rapid on-the-fly adjustments for iterative innovation. Cut off that communication, and your innovators are flying blind. Blind innovation is what fills the convention “innovation funnel” with numerous abortive attempts that need to be weeded out. Keeping innovators inside the loop with clear and instant communication gives them a more clear map and helps them work with your team to develop the right flight plan for success.

Innovation success is all about abundant communication and teamwork, not hand-offs that isolate those with the vision from those at the helm. Innovation is disaster prone enough when everything is running well–no need wiping our a half-dozen of your degrees of separation from disaster by your own communication and relationship mistakes from the beginning.

Mar
17

Dark Energy and Dark Matter: What Astrophysics Can Teach Us about Innovation Success

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The Matter-Energy of the Cosmos is Mostly Dark Matter and Dark Energy

The Matter-Energy of the Cosmos is Mostly Dark Matter and Dark Energy

In recent years, scientists have been astounded to discover that the visible universe represents just a tiny fraction of the matter and energy that governs the cosmos. Based on the motion of stars and galaxies, strange “dark matter” must be present, increasing the gravitational tug on celestial bodies more than can be accounted for by visible matter. Further, based on the surprising discovered that the universe is expanding, not contracting under its own gravitational pull as expected, scientists have proposed that a strange, repulsive “dark energy” fills the cosmos countering gravity. The combined effect of these unseen entities, dark energy and dark matter, are so great, that they account for 96% of the matter and energy of the universe. In other words, the visible universe that we used to think is all there is actually is only a tiny fraction of what is there. What we see in the “cosmic org chart” accounts for only 4% of what really influences the cosmos.

It’s that way in the business world. too. Companies can create tidy org charts and draft neat process maps to describe how they work, but the unseen reality outside the visible systems may be what really dominates operations. Increasingly, experts in knowledge management are learning that easily overlooked and often invisible intangibles can dominate corporate value and performance. Numerous intangible transactions may be essential to the success of a company, including casual information sharing between trusted friends, helpful exchanges of tips and best practices between employees or between external partners and internal employees, or loyalty that is gained when people are included in decision making. The invisible linkages and hard-to-observe exchanges in a company’s internal an external ecosystems may be the real engines of value creation, regardless of what is on a process map or workstream. By not understanding the value of such intangibles, corporations can easily break key linkages and crush subtle engines of value creation.

Many companies focus on their “value chains” – a term popularized by Michael Porter in his seminal 1985 work, Competitive Advantage. The value chain describes the linear chain of events as materials and products move from sourcing through manufacturing and out to the market. It is a highly useful paradigm for manufacturing and was highly applicable to much of the economy in the era when Porter was doing his research. But since that time, the explosion of the knowledge economy has changed the way we work and create value. One of my favorite authors, Verna Allee, a revolutionary expert in knowledge management, has detailed the move from the value chain to modern ecosystems and Value Networks in her book, The Future of Knowledge: Increasing Prosperity through Value Networks (Burlington, MA: Elsevier Science, 2003). Verna Allee and Associates have introduced a clever, methodical tool called Value Network Analysis for analyzing and visualizing the transactions of intangibles and tangibles that affect a business.

After my training in Value Network Analysis by Verna and her associate, Oliver Schwabe, an exciting new perspective on business and human behavior opened up. I have been highly impressed with the power of Value Network Analysis and the insights that it can rapidly deliver for a company. The Value Network Analysis work that Innovationedge has done as part of larger projects for some of our clients has been a very exciting part of my work since joining Cheryl Perkins’ exciting company. We value the tool enough that we had Verna Allee speak at the 2008 CoDev conference to introduce other business leaders to the basic concepts behind Value Network Analysis. I’m very pleased to see a community emerging of people using Value Network Analysis and developing exciting tools for it.

Here are some resources that you may find helpful in further exploring this area:

Part of the initial output in Value Network Analysis are maps, called “holomaps,” showing human entities as nodes and transactions of tangible or intangible items between them. There is much that can be learned from such holomaps – a topic for later discussion. For now I’ll show you two sample holomaps I created to illustrate simple ecosystems. One shows several external nodes around a manufacturer and the other shows some structure within part of a corporation. For simplicity, the maps lack all the labels explaining the transactions.

Holomap of an External Ecosystem

Holomap of an External Ecosystem

Holomap of an Internal Ecosystem

Holomap of an Internal Ecosystem

One interesting approach is to use the “holomaps” you get in Value Network Analysis as tools for “what if” scenarios to explore what new partners might do for your business model, or what new business models might do for your ecosystem. Using holomaps to explore innovation ecosystems is a particularly fruitful approach for those doing open innovation and wondering who should be in their external ecosystem.

We have further information on this topic that we’d be happy to share with you. It’s certainly something you should look at to understand how business really works.

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The latest Journal of Product Innovation Management (JPIM), an excellent journal from PDMA for those interested in innovation and new product development, has an article that describes an approach to disruptive innovation that we developed at Kimberly-Clark Corporation when I was there as Corporate Patent Strategist. “Disruptive Innovation and the Need for Disruptive Intellectual Asset Strategy” by Jeff Lindsay and Mike Hopkins (JPIM, Vol. 27, No. 2, March 2010, pp. 283-290), addresses one of the large gaps in the literature around disruptive innovation, namely, what role intellectual assets should play. Search through the popular books and articles by leading authorities in disruptive innovation and you will find scant reference, if any, to intellectual assets, yet they may be key to overcoming the dilemma faced by corporations. A small, aggressive team in a corporation can employ a variety of low-cost intellectual asset (IA) tools to mitigate potential competitive threats from disruptive innovation, while also subtly laying a foundation for future offensive disruptive innovation from the company. By the time the corporation as a whole recognizes the value of an emerging disruptive innovation, it need bot be too late, as is often case, for the initially defensive actions that were taken at an early stage can now provide a serendipitous foundation for taking the offense. It’s not easy, but the odds of success or survival can be significantly increased.

Here is our abstract:

Disruption has become a popular business term, yet it is often used so loosely as to convey almost nothing of substance. Here a largely neglected factor is addressed: the role of intellectual assets in securing opportunities for or averting threats from disruptive innovations. While the literature explains why the decision-making systems in large established companies cause difficulty in responding effectively to disruptive innovation the generation of intellectual assets (e.g., patents, publications, trademarks) typically is not subject to the same cultural and structural barriers. Though it may be difficult to convince a business to invest millions in pursuit of a speculative disruptive innovation, it is much easier for a small team to gain support in pursuing low-cost intellectual assets in the name of mitigating potential threats. A two-pronged approach is proposed that builds on the authors’ experience at Kimberly-Clark Corporation in dealing with disruptive threats and opportunities. The approach calls for generation of intellectual assets, often using small proactive teams, to (1) protect an existing business by reducing competitive risks from disruptive innovation, including the risk of new products with disruptive potential and the risk of associated competitive patents that might limit one’s response; and (2) prepare for future new and disruptive business opportunities that could be protected or strengthened by the intellectual assets generated. Kimberly-Clark’s growing experience with this approach suggests that it may be a valuable component of one’s strategy for innovation and protection of the business.

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