Category: International

One useful way of analyzing the concept and processes of innovation is to make a distinction between Revolutionary and Evolutionary Innovation.  Both are valid and both produce excellent results.  But each is better suited to a different environment and, unfortunately, it’s not clear which produces better results.

Revolutionary Innovation

Revolutionary Innovation seeks to adapt the world to new ideas.

Revolutionary innovation is the type we see and hear about most in United Statese.  On the one hand, it can quickly make available wondrous new products and services.  On the other, it is disruptive and expensive, and it produces unpredictable outcomes.  Revolutionary Innovation requires large pools of highly risk-tolerant investors who are prepared to make large capital investments to try something completely new, and those investors require, in turn, very large returns for the few major successes that they come across.

Diversity and high levels of education are essential ingredients of revolutionary innovation.  Entrepreneurs and investors are much more likely to develop wholly new approaches to business and technology if their day-to-day experiences include exposure to and stimulation by a host of differences in thinking and working, and if they have both the training and the intellectual capacity to act on new ideas.

Unsurprisingly, heroic role-models and celebration of the individual are conducive to revolutionary innovation.  A social system that admires game-changers like Bill Gates, Steve Jobs, and Jeff Bezos is likely to produce a large number of aspirants trying to achieve the same glory.

Digital photography is an excellent example of revolutionary innovation.  It changed the way people take, share, and use pictures, destroying an entire ecosystem of companies from local camera stores to giant manufacturing companies like Kodak.  It also made possible whole new business models: Facebook would not exist on the scale it does today without digital photography.

Evolutionary Innovation

Evolutionary Innovation seeks to adapt new ideas to the existing world.

Evolutionary innovation dominates in countries like Japan, but it is also broadly followed in most very large corporations, regardless of their national heritage.  Evolutionary innovation tends to be incremental in nature and less expensive to develop than revolutionary innovation.  Evolutionary innovation focuses on preserving or gradually changing existing fundamentals, including people, product, and business relationships.  Because the changes tend to be smaller, investment in evolutionary innovation tends to be smaller, and because the destruction wrought by evolutionary innovation tends to be less dramatic and spread over a longer time frame, the costs, both in terms of dollars and in terms social and business disruption, tend to be smaller as well.

In part because the consequences of failure are smaller, evolutionary innovation also dispenses with risk takers and the need for big rewards, diversity in thinking and practice, and lionized role models.

The automobile companies of Japan, especially Toyota, exemplify evolutionary innovation.  Through a steady stream of small changes in manufacturing, design, distribution, support, and integrated technologies, Japanese auto makers quietly achieved the goal that all Silicon Valley and Silicon Alley entrepreneurs say they aspire to but rarely reach: World Domination.

Revolutionary vs Evolutionary: Which is Better?

There’s no easy answer to which is better, revolutionary innovation or evolutionary innovation.  Evolutionary innovation is clearly more boring, but it’s also more secure because it’s more predictable and manageable.

Companies and economies that rely on evolutionary innovation need to keep that innovation coming at a rapid rate or they will get left behind by someone else’s innovations.  Similarly, no matter how quickly they may innovate in many small ways, evolutionary innovators are subject to game changers from the revolutionary innovators.  As mentioned earlier, evolution is less expensive, both on the development side and on the consequences side, but entrenched interests, which tend to emerge when evolutionary innovation dominates, can stifle changes and improvements that are desired by and in the best interest of the majority in favor of smaller or entirely different changes and improvements that are in their own best interests.

In the long run, businesses and economies probably benefit from having a combination of both forms of innovation, which means having the social and economic infrastructure to support both.

 

Virtual Reality designers have their heads in the clouds.  That’s fine for designers of MMOG (massively multiplayer online games), but what about those who are designing “practical” virtual worlds, virtual worlds intended to meet business or professional needs?  Caught up in the coolness of doing new things with technology, virtual reality developers haven’t yet stopped to think about when and how virtual reality can actually be useful.

All too often, virtual worlds generally available today are used to present information and to do things that could be done more easily and more cheaply in other ways.

Features like avatars that fly are fun, but essentially meaningless.  In fact, when it comes to non-entertainment uses of virtual worlds, almost everything built to accommodate or enhance avatars, from lecture halls and amphitheaters to lifelike animation of human movement and fancy clothes, is a waste of coding time, processing power, and bandwidth.

Displaying two dimensional, billboard-style displays of text or graphics (including videos) inside a virtual world is like putting twistable knobs on a smartphone to control volume and brightness.  If little knobs are ok, why use a smartphone, and if you’ve got a smartphone, why use little knobs?

When determining when and how to use a virtual world in a professional environment, ask a few simple questions:

1. Is doing something in virtual reality a substantively better experience than simply doing it “in your head” or by some other less flashy means?  Do you learn more?  Do you work faster?  Can you communicate better?  If so, why and how?

2. Does the improved experience provided by virtual reality justify the cost of creating a virtual world and operating in it?  (Note that sometimes, virtual worlds are cheaper than working in the real world, especially if participants are widely dispersed geographically, but they need to come together to work on something.)

3. Does virtual reality make possible something that was not previously possible?

4. What is lost by working in a virtual world rather than an off-the-shelf computer application or even a pencil and paper?  (This is sometimes a much harder question to answer than it seems, at least until after the virtual world has been implemented.)

If you don’t have clearly affirmative answers to the above questions, the odds are very good that the virtual reality effort will be an interesting but ultimately unproductive effort with low or negative return on investment.  Proponents of virtual worlds need to keep in mind that businesses ultimately make cost-benefit based decisions, so as cool as virtual worlds may be, if you can’t produce convincing, positive answers to the questions above, you’re not going to get a serious hearing from business people.

Here are some guidelines showing who in the real world (other than gamers) is likely to benefit from virtual reality:

1. Teams that are geographically dispersed in the real world that need to examine a 3D object in real time together.  (eg: An architect, a contractor, and a group of business executives discussing the layout of a new factory or office building.)

2. Teams or individuals that need to study possible changes to the real world. (eg: A consumer wanting to try on new clothes or a different hair style.)

3. Individuals or teams that need a safe space to experiment with an object that is dangerous or inaccessible in the real world.  (eg: Engineers trying to understand how to deal with a damaged nuclear power reactor or oil rig.)

4. Individuals or teams who need a safe space to practice dealing with a scenario that is dangerous in the real world.  (eg: Soldiers practicing cultural interaction with local non-combatants in occupied territory.)

5. Individuals or teams who need to examine an object that has not yet been created.  (eg: Engineers testing parts for a new jet engine.)

6. Individuals or teams who need to examine an object that is too small or too large to be directly studied in its natural state.  (eg: Pharmaceutical researchers or students examining a molecular reaction or astrophysicists analyzing models for galaxies or galaxy clusters.)

7. Individuals or teams who need to examine a 3D process that has a real-world time scale that is too long or too short to be adequately studied in its natural state.  (eg: Astrophysicists studying the creation of planetary systems or particle physicists studying the decay of one particle into another.)

Notice that few of the examples above require an avatar or a complete recreation of reality.  Those features would be nice-to-have, but they are not necessary to a productive, cost-effective use of virtual reality.

Questions are fundamental to innovation; the two are inseparable.  Right now, out there somewhere, someone is asking questions about how to do what you do better, faster, cheaper.

Whether you work on an assembly line, in a rock-and-roll band, or in a library, changes are being planned that will affect what you do, and the people making those plans are doing something very simple: They are asking questions.  You need to ask questions, too.

The first and most important questions to get right are:

• “Who is the customer?” and
• “What matters to the customer?”

Sometimes the customer is hard to identify.  Take clothing for toddlers, for example.  Toddlers don’t buy the clothes they wear, and they rarely influence the decision making process by expressing a particular preference before the purchase is made.  Therefore, the purchase decision for toddler clothing is usually made by a parent, a relative of the parents, or a friend of the parents.

In the case of toddler clothes, the user is not the customer, and the user has no influence whatsoever over the purchase decision.  (The toddler may express a distaste for a clothing item, but it comes after the purchase so it may affect future purchases but not the initial purchase).  Take it from me, the most important feature of toddler clothing purchases is durability, especially durability in repeat washing – something about which no toddler would ever be concerned.

What about a company that makes siding for houses?  A siding company may seek to improve competitive advantage by, for example, innovating in product durability or ease of installation.  The former is important to homeowners and the latter is important to contractors and builders of large developments.  Therefore, which innovations a siding manufacturer chooses to pursue depends on who they decide are their customers.

Another key question: “Why innovate?”

Sometimes the objective is pure avariciousness: more profit.  Of course, profit is always present in the decision making process, but most likely there are additional objectives as well.  The siding manufacturers mentioned above are trying to avoid price competition by differentiating themselves from each other.

A soft drink company that substitutes less expensive corn syrup for sugar in a soda is simply trying to lower costs so it can increase profit margins, but if the company changes the size of the soda can when introducing that same soda into the Japanese market, the change has more to do with meeting the needs of local channel partners and distribution practices.

Now ask, “What is our purpose?”  And think about that question in the context of how you will make yourself different.

Since Steve Jobs returned to Apple in the 1990’s, a major consideration in Apple’s new products, universally admired as innovative, has been style.  Apple requires its product teams to subordinate technical creativity to usability and aesthetics. The major technical innovations are only important to the extent that they serve the design objectives, especially functionality and sexiness.

Compare Apple’s Newton with its iPhone successor.  Take a look at the pictures of the two devices with the hands normalized to (roughly) the same size.  Consider the dimensions of the two instruments.  Now look at the screen layout.  Look at the styling of the cases.  Think about the way users are expected to interface with the devices (stylus vs fingers). Consider the range of uses (apps) available for each and the ease with which users can add or remove functionality (and the ways that Apple makes money from the apps).

Yes.  Of course, the technologies that make the iPhone what it is today simply were not available 15 years ago when the Newton was first introduced.  But don’t think for a moment that many consumers notice or care about the iPhone’s technology.  Consumers are not interested in the geeky side of GPS services, super hardened glass, accelerometers, programming languages, or gesture interfaces; they care about maps that tell them where they are and how to get where they want to go, products that fit into their pockets, and getting to the information and services they need with as little time and effort as possible.  They don’t care about 3G vs 4G LTE vs 4G; they care about how long it takes for maps or Facebook or photos to download and update.

What they care about is the look, the feel, the comfort, and the functionality of the device in their hand.

Steve Jobs and his product team played a simple thought game and asked what it was that consumers wanted from a smartphone.  They decided that “cool” for the consumer is not the same as “cool” for an engineer.  Consumers want ease of use, functionality, and sexiness.

The Newton came up short on all criteria.  So Jobs killed it.

Since Apple introduced the iPad, Amazon, Barnes & Noble, Samsung, and Google have introduced products intended to compete with it.  But are any of those products substantively different from the iPad?  They may be simpler and cheaper, but they copy the fundamental features and functionality, in one way or another, of the iPad.

The iPad’s competitors do not rethink the questions “Who is the customer and what does he want?” the way the designers of the iPhone did.  They see their purpose as making devices similar to the iPad.  Therefore, they are not likely to change the tablet market the way the iPhone changed the cell phone market.  But out there somewhere, someone – perhaps someone at Apple – is asking the questions.  And eventually, change will come.

American mobile service providers are doing their customers a disservice.  In the end, it is the mobile service providers who will suffer.

A couple of weeks ago, a friend from Japan visited the US for the first time.  This is a friend who speaks little English and has spent a lifetime working for the Japanese government focused on domestic issues.  After he had spent a week traveling from Boston to New York City and Washington, DC, he spent a weekend at our house in New Jersey.  I felt compelled to ask him, “What do you notice that’s different here in the US?”  It was an open ended question.  He could have commented on anything, but he replied, “Mobile internet access is really slow.”

At the time, I laughed.  His comment was totally unexpected.

His observation, however, fits anecdotally into a pattern set by hard data: The internet infrastructure in Japan (and many other parts of the world) far surpasses America’s.  Looking specifically at mobile access to web pages, Google found that the average web page downloads in 4 seconds in Japan but takes more than twice as long, 9.2 seconds, in the US.  Nine seconds is an eternity when accessing data.

Part of the difference is the deployment of 4G and LTE data networks versus 3G networks.  Theoretically, 4G networks can handle 100Mbit/s throughput for devices on trains or in cars and 1Gbit/s throughput for devices held by pedestrians.  3G, on the other hand, maxes out at 56Mbit/s.  Then there are the latency issues….

Another part of the difference is the willingness of the providers to make maximum use of the available technologies.  In other words, they’re holding out on their customers.  When was the last time you had 56Mbit/s through put on your 3G phone?  Or even your 4G phone?

Earlier this month, Japanese mobile services provider Softbank Mobile announced plans to take a 70% stake in Sprint/Nextel.  Eight billion dollars of Softbank’s planned $21B acquisition will be used to improve Sprint’s infrastructure, shoring up the weaknesses in its 4G network.

How much pressure that will put on AT&T and Verizon, the American mobile heavyweights who are also rolling out 4G networks, depends in part on how aggressively Sprint pursues customer acquisition.  Masayoshi Son, Softbank’s founder and Chairman/CEO, has a reputation for taking big risks and competing aggressively, so aggressive competition is a foregone conclusion.

A Japanese national of Korean ancestry who was educated at UC Berkeley, Son is accustomed to being an outsider and has frequently taken contrarian positions, placing big financial bets and coming off the winner through shrewd and determined business strategies.  At various times in his career Son has unabashedly annoyed Japanese business leaders and government officials by making business decisions that did not conform to the established order.

Each time he has survived and on most occasions he has come out ahead; starting from very humble beginnings Son is now the second wealthiest man in Japan.

In 2006, Son directed Softbank to acquire Vodaphone’s failing Japanese mobile subsidiary, which was losing tens of thousands of subscribers per month to the two top mobile providers, NTT DoCoMo and KDDi.  After rebranding, investing in infrastructure, and acquiring exclusive rights to the iPhone in Japan, Son’s newly named Softbank Mobile, quickly attracted subscribers and took a solid third place in the mobile market on the strength of its data services for smartphones.

Not only did Softbank leverage high speed data services to attract the bulk of the new customers coming into the mobile market, it stole customers from DoCoMo and KDDi.  Surprised and feeling the pressure from this upstart, the market leaders have been forced to improve their service offerings as well.  4G and LTE are now ubiquitous in Japan and the vast majority of Japanese customers use them to access maps, graphics, and other throughput intensive applications.

Instead of whinging about how customers are using their smartphones for data intensive applications the way America’s mobile operators have, DoCoMo, KDDi, and Softbank have moved to provide their customers with what they want, for lower rates than Americans pay.

Sound familiar?

In the 1970’s, America’s auto companies were put on the defensive by better quality, less expensive Japanese auto manufacturers, who were simply doing what they should do, compete on quality and value.  Is it possible Masayoshi Son is poised to repeat the trick on US mobile service providers? Furthermore, will American mobile providers prove agile enough to respond to a competitor who plays by different rules.  Masayoshi Son may not be a “typical” Japanese, but like other Japanese business people he believes in competing by providing the best possible services to his customers at a reasonable price and making himself and his colleagues and investors wealthy in the process.

Last June, KPMG released a survey asking two things about the next four years of tech innovation: Where will it come from and which technologies will see the biggest disruptive influences?  The survey asked questions of 668 entrepreneurial CEOs, angel and venture investors, and large company M&A and strategy executives in the US, China, Europe, Asia, the Middle East, and Africa.

The predictions are somewhat, forgive me, predictable:

• China and the US will share top spots in producing major consumer and business technology breakthroughs.
• India is expected to be a major player, too, but not as much as China and the US.
• Mobile and cloud computing will be the big innovation playgrounds in both consumer and business technologies.

No one has a crystal ball, but these predictions may well prove right.  The timeline is relatively short, after all, so the hot topic of today could well be the hot topic in two years, which is all it would take to become the big influence on a four year time span.

The easiest prediction to take seriously is the one about China stepping to the forefront of disruptive technology breakthroughs.  Shear size makes this possible, but China also has education levels, ambition, cash, infrastructure, and an entrepreneurial culture.  Israel, another contender, has all these elements except size.

China’s real advantage, however, comes from its customer base: Chinese consumers and businesses are early adopters.  They don’t have significant legacy product investments, and both individuals and CEOs find it sexy to be more modern than their neighbors.

But there are good reasons to expect surprises.  Although KPMG generally speaking picked the right people to survey, since they are in the thick of the disruptive technology stew, they also come heavily biased.  A big chunk of the respondents who picked China to lead in tech innovation over the next four years were, not surprisingly, Chinese.  More than 70% of the Chinese surveyed picked China to pass the US as the world’s chief innovator.

Europe is generally regarded as a “has been” in disruptive technologies and Latin America isn’t even mentioned (perhaps because no Latin Americans were interviewed?).  Among other issues, these two continents lack that broad “early adopter” market that new companies with new technologies require to get started and grow.

However, the key element of interest in KPMG’s survey results is completely missed in the conclusions and observations: diversity.  The simple fact that disruptive innovation is taking place in completely different social, economic, and cultural contexts means that there will be more of it and it will appear at a faster pace.  Precisely because China is a new source for innovation in contemporary technologies and business practices, innovation will be even less predictable and more dramatic than in the past.

Ironically, the recent innovations in communications are contributing to the emergence of new innovators.  The disruptive technologies that have emerged over the last two decades from a relatively small group of countries are making it possible for smart, capable innovators around the world to stimulate and compete with each other.

But don’t expect the “old world” to be left behind.  The emergence of creative, productive forces in China, India, Israel, and other hot spots will stimulate, not smother, creative, productive forces in the traditional leaders of innovation.

The United States, far from fading, will continue to be a major force in disruptive technologies.  It has capital, infrastructure, receptive markets, and buckets of both new and seasoned entrepreneurs.  Japan continues to hold back huge potential, if it could only turn that potential loose.  Korea will surprise us all.  And almost certainly there will be other surprises from companies in countries underrated in KPMG’s survey results.  The global diffusion of capital, higher education levels, shorter communication distances, and more efficient access to global markets for products and services virtually guarantees surprises.