Not Invented Here

A nation’s economy is not just about GDP and jobs. It’s also about what sectors of the economy are growing or shrinking and what jobs are being created or lost. And it’s about investments in intangibles such as education, innovation, learning and R&D, i.e. a nation's investments to grow the knowledge component of its economy.
Recent numbers about global R&D investments show a trend. While R&D growth has slowed considerably in the US since 2006, the EU has seen a more steady situation. Last year - even with a slight decline from 2007 - the region outperformed both the US and Japan with a 8% growth in R&D investments.
Tracking R&D can be a bit difficult given that not all innovation or R&D is labeled as such, particularly in service sectors. Networked R&D, outsourcing and offshoring further complicate the picture. But the numbers are telling. With China reporting a 40% growth in R&D last year and India 27%, one must conclude that something is happening here.
Bruce Nussbaum writes a few words of warning:
America is Losing Its Innovation Edge

Some recent stats from the EU illustrate the issue:
2009 EU industrial innovation scoreboard

“Not invented here” may turn out to be a bigger issue than we thought. At least for Uncle Sam.

The CI professional's dilemma

Like innovators, competitive intelligence professionals have a dilemma. In an interview earlier this year, Nokia’s Peter Richardson expressed his view on what makes CI professionals effective.
“I would say the three most important skills are the ability to:
1. Develop a robust thesis on how a particular issue is likely to develop
2. Effectively communicate intelligence findings to clients
3. Maintain a strong network both within and outside the company
Let me expand on those a bit. I can find many people who are quite good at analysis, but they’re often very uncomfortable with sticking their necks out and making a call on how an issue is likely to play out and then to defend their conclusions in front of decision-makers. In my view, this ability is essential to being a successful CI person.”

Mr. Richardson makes a good point. CI professionals should try to draw a conclusion from the analysis. This is what decision makers need. The problem with intelligence of course is that there can be both source errors and incorrect conclusions. And there can certainly be an unwillingness by decision makers to accept uncomfortable facts or unconventional views. Nevertheless, operating without CI wouldn’t make the situation better.
Just like innovation, CI can fail. In innovation it’s generally accepted that failures are part of the game. Perhaps CI too should be allowed some room for mistake. Both deal with complexity, uncertainty and risk. And in both cases, abandoning the practice because it sometimes fails would be a very risky strategy.

If you want to read the full interview with Mr. Richardson, you can do so here:
A Discussion with Peter Richardson of Nokia

More funky business

The big question since this summer has been “are we out of it yet?”. I don’t know, but I occasionally check in with what Swedish business guru Dr. Jonas Ridderstråle is up to. He is well known for his flamboyancy and provocative ideas expressed in books like funky business and karaoke capitalism.
The good dr. of course has a prescription for the current challenging times. He seems to have mellowed a bit, but here he is in a jyskebank interview back in June:

From classroom to workplace

Communities of Practice burst on the management scene over 10 years ago just in time to save knowledge management from becoming information technology. Very timely considering what happened to IT early this decade.
Since then, not only has IT returned (with a vengeance), the community concept has also evolved. Nothing wrong with learning and knowledge sharing, but focusing community building solely on those benefits leaves out an important aspect - community accomplishment.

The original definition of communities of practice by Wenger and Lave still lingers. However, in addition to deepening their own knowledge in professional disciplines through networking and learning, many members of communities also want to see that the community itself has a clear impact on current and future business. In that sense, the community value proposition expands from learning to also accomplishing.
I suspect managers welcome the new communities: less classroom and more workplace.

R&D Management

The current issue of the Brainovation newsletter features the first in a series of interviews with technology management executives. Both a rewarding and challenging task, R&D management has gone through some turbulent times:
http://www.interknowledgetech.com/brainovation.html

Making the case for mindful practice

We are well into the knowledge economy, but despite the increased general awareness of emerging business practices such as ideation, learning, collaboration and social networking, many companies still don’t seem to quite get it. Some managers may well believe in the intrinsic value of these knowledge practices, but somehow think that they happen naturally in the organization to the extent they need to happen and can’t really be managed in a way that makes any sense.
In other words, it’s the outcome and benefit of a deliberate effort to introduce or improve knowledge practice that they can’t see clearly enough.

There can be two ways to address the issue. Either traditional, but credible, business cases are worked out so that managers can justify the time and money that need to be spent, or a system is created whereby knowledge practice becomes part of regular work, i.e. becomes non-optional and therefore doesn’t need a business case.
Identifying the additional value of deliberate effort, a clear articulation of business benefits, a sound value creation logic and using a language the organization can understand will support either way.

A practice in which learning is work and thinking is doing, I call a mindful practice. The Strategic Management Society calls it thoughtful, or reflective, practice.
Next year, I plan to join.

Entrepreneurial innovation

In addition to the high profile innovation we have come to expect in areas such as consumer electronics, ICT and life sciences, there is also a great deal of good old entrepreneurial innovation still around.
Here are a few examples I have come across from industries that we don’t normally think of as highly innovative - tilt rotators, automatic saw chain sharpeners and oil-free compressors:
http://www.engcon.se/nobleart/en/index.html
http://www.markusson.se/grindomatic-eng.html
http://www.turbocor.com

What these innovations pretty much have in common is a clear and concrete problem to solve followed by a strong entrepreneurial effort resulting in a growing business.
I suspect these entrepreneurs never read Christensen or Chesbrough. They didn’t think about dominant designs, open innovation or crowdsourcing. They saw a problem and they worked hard to solve it. Then they worked even harder to sell the solution. That’s entrepreneurial innovation.

Accounting for the value of knowledge

Knowledge may be as necessary to business practice as iron is to steel, but that doesn’t change the fact that managing knowledge remains a challenge to many organizations.
A long time ago Plato asked the surprisingly modern question “what is the value of knowledge?” Today the relevance of the question is still recognized not only by epistemologists and knowledge economists, but by managers, experts and knowledge workers in general as well.

Justified true belief may serve as an epistemic definition of knowledge, but that doesn’t help us much in business. Still, and without defining knowledge or estimating knowledge value, organizations continuously engage in acts of knowledge, i.e. the acquisition, creation, transfer and sharing of knowledge. The simple reason of course is that their business processes require that they do so. In addition, and over time, organizations not only gain knowledge but also lose and leak knowledge.

While it’s easy to account for e.g. cash flows, it’s considerably more difficult to account for knowledge flows. In the case of R&D it’s all about the future. However, most companies still account for R&D as cost today even though they may have estimated the future revenues of all their R&D projects. This also means that equal investments in higher and lower value opportunities are accounted for equally. And yes, future and uncertain benefits cannot easily be claimed as assets and don’t have an obvious place in accounting. So while it seems that knowledge has undisputable value and in fact is quite real, the concept of an intangible asset remains somewhat of an accounting oxymoron.
Nevertheless, driven by globalization, deregulation and innovation the importance of competitive capacities such as e.g. intellectual capital has certainly increased. This interview with Baruch Lev dates back to 2001, but touches on some of the fundamental issues involved and is still an enjoyable read:
Measuring The Value of Intellectual Property

Innovation & Entrepreneurship: a global challenge

It's a common view that developed nations have an advantage over low cost developing nations in terms of innovation. This sounds a bit like wishful thinking and seems to be more about not being able to compete on a cost basis, than about inherently being more innovative. While not having a monopoly on being innovative or entrepreneurial, developed nations certainly have well established economic, political, industrial and knowledge infrastructures that are generally helpful to both new business ventures and the exploitation of new technologies.
Still, as all entrepreneurial innovators know, the odds are stacked against those who try something new and the greatest of ideas that doesn’t attract funding will always have a hard time making it to market. And even if it does, incumbents will resist it and the market may reject it.
Yet, innovative and entrepreneurial forces are very strong. It’s almost like the way a former US president once put it “we want to do it not because it’s easy, but because it’s hard”. Perseverance and hard work may not be crucial to the success of individual corporate workers, but for the entrepreneur it may make or break the business. They need all the support they can get. And knowledge & skills. Here is an interesting report from The World Economic Forum:
Educating the Next Wave of Entrepreneurs

Innovation is a global phenomenon occurring on an increasingly level playing field. Overall, the anticipated – and necessary – shift towards a greener, resource efficient and more socially responsible world will present significant challenges and opportunities for innovation in many areas. China is already a manufacturing powerhouse and India is currently making a significant shift from a low cost value proposition towards one that is talent and innovation based. Germany has emerged as a world leader in alternative energy technologies. Clearly, wherever they are based, firms pursuing growth strategies must learn to manage innovation, and manage it well. In the words of UK based firm innovaro: “innovation is now a core issue for any growth-focused business and, as such, keeping abreast of the latest approaches, understanding what makes them work and seeing how to adapt them will be a necessity for all ”.

The Creative Company

It’s been argued that if a company wants to be more creative, the best thing it can do is to hire some creative people. It could also be the worst thing to do, if the organizational environment is not really conducive to creative contributions. The new creative hires will soon find out, switch their minds off or head for the exit. There are, however, things companies can do to stimulate creativity and increase their return on creative effort. But as most of us already know, creativity is more than bean bags and brainstorming. Let’s take a closer look at the creative company.

A logical (yes, left brain) analysis would go something like this. The more creative people an organization has and the more creative and motivated these people are, the more creative the company. Creativity would thus be viewed as an individual capacity that can more or less be added up as “creativity headcount”. From another perspective, one could argue that social networks, knowledge and idea exchanges and overall communication and collaboration could stimulate and strengthen creative contributions. Therefore organization, culture and work practices – although not in themselves creative – help define creative capacity. We have plenty of dots (i.e. creative people) and we connect them. Engaged and motivated creative minds wired together forms a creative company.

Maybe not so fast. Shouldn’t there be some output or outcome as well? Yes, and then a creative company is simply a company that demonstrates its creativity by consistently doing creative things. But what makes a thing creative? Like beauty, it could be in the eye of the beholder. It could also be something that actually is the result of a deliberate creative effort.

So where am I going with this? Here of course: The Creative Company

Apple Pie

Everybody is waiting for the tablet. If it comes it will no doubt be a sleek design. But will it sell? As always, time (and the market) will tell.
Apple are known for being innovative. Steve Jobs has remarked that innovation is not just about connecting the dots, but also about having a lot of dots to connect. Apple claim they don’t do it by traditional market research, but by immersing themselves in user issues, wants and needs and ideas to the extent that they can say “if we like it, others will too”. It sounds like a rich and wonderfully chaotic ideation process, but in fact it appears that Apple are not just obsessed with innovation, but are quite deliberate in the way they go about being innovative.
Using a staged 10-3-1 idea conversion process is perhaps not unique. But starting again and again with 10 well developed good ideas knowing that only one will make it through requires a strong dedication to innovation, a fair amount of discipline and a quest for perfection. I’m an engineer so I call it productive innovation engineering. Steve Jobs has pointed to it with another remark “to turn really interesting ideas and fledgling technologies into a company that can continue to innovate for years, it requires a lot of disciplines”. Besides, the 9 ideas that didn't make it may have represented valuable learning experiences and certainly helped qualify the winner.

While innovation a la Apple obviously works well for them, the Apple way may not be for everyone. But it does emphasize that innovation is - and must be - serious business.

The Overflowing Brain

Last week I finished reading Torkel Klingberg’s “den översvämmade hjärnan” (the overflowing brain). Klingberg, a cognitive neuroscientist, writes about the cognitive challenges of modern life, new techniques for mapping brain activity and the constraints of working memory.
It is believed our brains are pretty much identical to those of Cromagnon man 40,000 years ago. The question Klingberg tries to answer is how a brain structure that evolved a long time ago copes with the distractions and multitasking of modern life, particularly in view of the (limited) capacity of working memory. This is an interesting enough perspective to justify picking up a copy of the book. It's an easy and delightful read.
I was also looking for perspectives on creativity, expertise and decision making, but didn’t really find that much. Is there e.g. a difference in the number of neurons, synaptic connections, metabolic rate or something else between the brains of individuals showing high cognitive performance and the rest of us? There doesn’t seem to be a conclusive answer, but neuroscientists at least know that the brain shows plasticity, i.e. it has the ability to structurally respond to performance challenges. Perhaps a neurological confirmation of the familiar claim that “practice makes perfect”.
You can follow Klingberg’s research at the Stockholm Brain Institute.

Cromagnon lived alongside Neanderthal, but might have had superior cognitive capacity. They even created art. In fact, from an artistic point of view I prefer the cave paintings of Lascaux over the art of e.g. Jackson Pollock.
For those interested in specific brains, I suggest you start with Einstein's: http://health.howstuffworks.com/einsteins-brain.htm

Emotional Infrastructure

Infrastructure used to refer to physical structures. Organizational thinkers have started to use the term emotional infrastructure. A good example is Vijay Govindarajan in a co-authored article on The Emotionally Bonded Organization.

Govindarajan and Bagchi make a difference between the intellectual and emotional infrastructures of an organization. And they make some good points. Personally, I think more in terms of tacit infrastructure, i.e. knowledge, expertise, ideas, social networks and relationships. Perhaps history, rituals and taboos (aka culture). Maybe Intellectual Capital. It may all be semantics, but words carry meaning and create associations in the mind. Tacit infrastructure can be damaged and may need repair, e.g. after a major reorganization or a round of layoffs. We don’t usually think of culture that way. And it's obvious what Intellectual Capital makes us think about.

Overall, I think we need to tread rather carefully when exploring and putting labels on the “softer” characteristics and behaviours of organizations. And use “hard” metaphors with caution. In that sense, and in the context of emotion, I actually don’t like the word infrastructure that much. Perhaps we can find a better word?

Risky Business

All businesses face uncertainty and risk. For obvious reasons most businesses are risk averse and better able to deal with challenges and situations where outcomes can be predicted with reasonable certainty. There are ways, however, in which businesses can better equip themselves to deal with uncertainty.

A recent Knowledge@Wharton article features an excerpt from “Unlocking Opportunities for Growth: How to Profit from Uncertainty While Limiting Your Risk” by Alexander B. van Putten and Ian C. McMillan.
Drawing on real options, the authors promote the concept of Opportunity Engineering, which they claim will enable businesses to pursue an opportunity while minimizing the potential loss and skewing the outcome towards the upside. Sounds good of course. I haven’t read the book, but the concept appears to have some merit and may be worth considering. After all, what else can businesses do other than pursue or abandon an opportunity?You can read the excerpt at the K@W website:
How 'Go/No Go' Thinking Can Stop Innovation Dead in its Tracks

Along similar lines, and in the context of technology innovation, the Monitor group offers the following reflection:
Managing Technology-Driven Innovation Risk: How to Turn Uncertainty into Advantage

While there are some powerful techniques, and the inevitable s/w tools, available to managers and decision makers, a lot is still about plain old mindset. Uncertainty is all too often interpreted as risk rather than opportunity. Shifting that mindset is a big step forward.

The science of ideas

Whether planning a research project or evolving an idea during the early stage of innovation, applying a well thought out methodology can result in significant benefits.
While attending the ispim conference last month, I came across Idea Puzzle® - a solution for "scientification" of ideas. It's quite unique and I like it.

Dramatist Eugène Ionesco once wrote "it's not the answer that enlightens, but the question". This can probably be said about Idea Puzzle® as well. It's using 21 questions to guide the process of planning and thinking through a research idea. It's also free and I think it's well worth trying:
http://www.ideapuzzle.com/index.php?id=168

ispim afterthoughts

Last week I attended the 20th annual ispim conference in Vienna. I spoke about Guided Ideation on a track about Creativity & Idea Generation moderated by Ron Dvir.
This was my second ispim event and, based on the sessions I attended, my impression was again quite positive. ispim events are well organized and include academic, government and industry perspectives on innovation and innovation management. A few learning impressions from the conference are included in the June issue of the Brainovation newsletter. If you're not already subscribing, contact me for a copy or sign up to receive your monthly issue.

While on vacation, and for a suitable post conference subject, I’m currently reading Torkel Klingberg’s “The Overflowing Brain”. Excellent little book for the amateur cognitive neuroscientist and a useful input to a new seminar I’m planning for later this year: Deep Smarts, Creativity & Cognitive Constraints – The Psychology of Innovation.
I’ll post a review of Prof. Klingberg's book sometime in July.

Creativity Based Performance

Next week I will be speaking at the ispim conference in Vienna on how to guide and nurture the creative process in organizations during the early stage of innovation. Here are some views on the topic:

Intrinsic motivation, continuity and positive feelings are known to stimulate creativity. However, idea management has traditionally been approached mainly through process and technology, where a fair amount of knowledge and experience has been gained. The people side of the ideation performance equation has not developed to the same level of understanding and managers are generally not very well equipped to address human and organizational issues in the “front end of the front end” of innovation.

Ideation performance is determined by a number of intrinsic and contextual factors. Even if less inclusive, a more targeted and focused approach may yield a better result in organizations where ideation relies on voluntary contributions. From a management perspective there are some easy measures and some more difficult ones. Unfortunately some of the more difficult ones are crucial and unless addressed, the easier measures may not yield the benefits expected. It is possible to raise the level of creativity and increase the return on innovative effort in organizations, provided that three important factors are addressed: driving the effort, creating engagement and making time. Concerning the latter, management need a way to approach the issue of organizational slack.

Even though creativity can be stimulated, it has some limitations. Technology and product areas to some extent determine the creative potential (i.e. it’s not just about the people) and creative ideas to a large extent originate from what individuals are actually working on, i.e. what they naturally think about. Intrinsic motivations may differ between individuals, but organizations tend to also develop a shared set of attitudes and behaviours relating to ideation.

If you are attending the conference, don't hesitate to look me up. Maybe we can share some ideas about creativity based performance.

Cognitive Quirks

I just finished reading New York Times bestseller SWAY by Ori and Rom Brafman. With plenty of real examples, the most shocking the 1977 Tenerife airport disaster, the Brafman brothers offer insight into why we sometimes abandon logic and behave irrationally. Diagnosis bias, commitment and value attribution are examples of psychological phenomena that may cause cognitive errors. We have probably personally experienced most of these and possibly a few more. Not always with catastrophic consequences, but often serious enough when it happens in business, politics or in our personal lives.
Even though the characteristics of the human mind seem to include cognitive quirks, being aware of these at least gives us a chance to think twice before we make important decisions or take action. As the Brafmans put it: “wherever we looked – across different sectors, countries and cultures – we saw different people being swayed in very similar ways; we’re all susceptible to the sway of irrational behaviors; but by better understanding the seductive pull of these forces, we’ll be less likely to fall victim to them in the future.”

An introduction to the book can be found at http://www.swaybook.com/
You can also view Ori Brafman on YouTube:
http://www.youtube.com/watch?v=jLAX0XwHAVM

Both Brain Business

The June print issue of the Harvard Business Review features an article by Darrell Rigby, Kara Gruver and James Allen titled “innovation in turbulent times”. Pointing to HP, Chanel and Pixar as examples, the authors argue that “when resources are constrained, the key to growth is pairing an analytic left-brain thinker with an imaginative right-brained partner”. This recipe is obviously not limited to turbulent times, but could be useful also in leading entrepreneurial ventures or whenever a business would benefit from a well balanced combination of analytics and creativity in its leadership. As one might expect though, the concept comes with a few issues. Quoting the article again, “uncreative people have an annoying tendency to kill good ideas, encourage bad ones, and demand multiple rounds of improvements”. A hard statement, but such behaviour would certainly be a challenge to a right-brained partner.

The appointment of Co-CEOs have been tried a number of times, but not necessarily using left and right brain criteria. Some executive partnerships seem to have worked well, like e.g. the one at BlackBerry maker RIM. Others have not been as successful and the Co-CEO concept has attracted some debate over the years.
Here’s a view from Ann All at IT Business Edge:
Co-CEOs Not Common, but Leadership Model Works for Some

Business Smarts: Intelligence & Expertise

The current issue of the Brainovation newsletter is now online. It features a reflection on intelligence and expertise and inculdes a link to the Gartner Group's magic quadrant report on BI platforms.
You will also find links to interviews with industry gurus and a sign-up to receive your monthly copy.