Do you organize your business for Innovation?

13/05/2012 Leave a comment

There is a popular saying attributed to Greek author and philosopher Plato (427 BC – 347 BC, The Republic) that says  “Necessity is the mother of all inventions”.  This has proven true for all the history of mankind from 500,000 BC, when fire was discovered by Homo Erectus (early humans) until the most modern times when human race is able to invent sophisticated and complex models for social and economic order.

While this is true that the inventions has played a big role in the advancement of human societies, it is also a fact that the benefits of these inventions has only been realised when someone (individual or people) is able to understand the use of this invention and employ this for public or private gains.

For example, fire was first tamed by early humans around 500,000 BC but it was primarily used as a defence against harsh weather out of necessity. It’s use to cook food was not discovered until much later when the humans developed their sense of taste.

Take another example of “printing press” which was first invented by German Johannes Gutenberg around 1440 in Roman Empire. As the technology developed the book printing and book making started but it was not until 1605 when the first newspaper  Relation aller Fürnemmen und gedenckwürdigen Historien was published in Strasbourg by Johann Carolus. It was Johann who discovered  there was a need or desire among people to know about the events happening in the the society and he tried to satisfy this need using an existing technology i.e. printing press.

An invention can be defined as a discovery or an idea about something. An invention does not automatically lead to widespread use.

Innovation is the process of linking an invention to satisfy a specific need in a business or social context. The people who work on finding ways to do this are called as innovators. The people who take the existing technologies and package them together and commercialise it as an offering and build organisational structures to support this, are called entrepreneurs.

As I explained in my other blog “Why companies need innovation? A market competition perspective”, innovation is not a choice today for any company rather it is a must for sustainable growth in today’s marketplace.

So if we agree that innovation is key, then what is the ideal recipe for an organization to promote innovation in its ranks. Does it mean that you need to create a creative culture or need to hire people who can think outside the box? Or does it mean that tech companies can follow the Google model where all software engineers get time to work on their own projects? Or the solution is in organizing an innovation or hack day?

In my opinion, all of these are just steps in an organizations journey to become more innovative and relevant to the market. They create a momentum for the people to start thinking and come up with ideas (some good and some not so good).

Before this happens however, there are two very important steps which are often ignored or are not executed properly.

First, understand you competitive environment and recognize your strengths and weaknesses in a systematic way. This realization along with the knowledge of market opportunities will provide you many choices to how to differentiate your business against your competitors. This will inform you who is your competitor and who is your friend. This is the basis of defining a business strategy. A clear and well articulated business strategy is very important for every organisation which is embarking on an innovation journey as it acts as a guiding force for all innovation activities the organisation takes.

Second, create a governance model or idea selection process which can take all new ideas from all parts of business and evaluate them for the value they will create for the organisation for the business strategy. I will go into the detail of this later but this is an important building block of the innovation process and the absence of this will be like holding sand (ideas) in one’s hand. It is also important to make everyone aware of this process so that people understand how this works and how their ideas are evaluated.

Now obviously you need to hire good people who are passionate about their jobs and want to solve new problems and you can use some of the following techniques to generate new ideas and promote creativity:

  • Create a stimulating environment by allowing people to work in smaller teams in casual settings ideally with cross functional teams
  • Remove barriers between engineers and their customers
  • Promote cross functional collaboration
  • Give people or cross functional groups some problems and allow them to come up with solutions. Give them some time and resources to do that. As I wrote earlier, some people choose to follow Google model or Facebook model. Some companies also use ideation, brain storming and other techniques to get ideas.
  • Invest in technologies or processes which allows teams to test their ideas with the end users quickly and effectively.

Overall all of these building blocks are important for any business to have an organisation wide innovation process. There are many advantages of this innovation model:

  • It ensures that organisational resources are spent on the initiatives that support business strategy.
  • Articulating a clear business strategy guides all team members to understand what is the purpose and goals of innovation.
  • Using an innovation governance process allows the management to filter and select the best ideas which delivers strategic value to the business.
  • People will be happy to know the organisation really values their ideas and has a process to evaluate and implement (transparency is key).

By following these steps organisations can come up with a comprehensive innovation system.

I have provided my thoughts at a high level and organisations will have to adapt this at the business unit and corporate level as per their business structure and needs.

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Why Companies need Innovation? Market Competition Perspective

15/04/2012 1 Comment

This blog is part of a series of blogs, which I am planning to write on the topic of innovation. In this first blog, I look at the factors that force companies to innovate and why innovation is so important today.

 

How Market Competition is shaping business landscape?

During the last two decades the political, economic and technological developments have changed the world like never before in human history. Starting with the collapse of USSR and the end of bi-polar world political order, the world politics started converging. This gave momentum to coordinated global economic efforts and the formation of World Trade Organization. The liberalization of economies and reduction in trade barriers, coincided with the emergence and embracing of Internet globally, and helped shape the world that we are in today.

 The globalization of markets, rapid removal of trade barriers helped many large markets to open up for new competition. Many of the markets which had not faced competition due to government controls saw their market shares erode due to new entrants and in many cases large established businesses struggled against new competition. Many large companies when faced with competition at home markets opted to expand in overseas markets where they did not have local market knowledge and often found it harder to compete.

The advances in the Internet and related communication technologies helped the economic integration as well as made the scale of market competition global. No longer businesses could take their geographical location as a strategic advantage because of emergence of online businesses.

As the creation of knowledge and access to it became more accessible the information that was exclusive to incumbents became available to all. This has put pressure on companies to have clear strategies. Because unless companies have a clear vision about how they are going to be distinctly different and unique from their competitors in offering something different to their customers, they are going to get eaten by the competition.

 According to Michael Porter there are three principles of competitive strategy:

1-    Its not just a matter of being better at what you do; it’s a matter of being different at what you do. If everybody is competing on the same set of variables, then the standard gets higher but no company gets ahead. The basis of the competitive strategy is to get ahead of others. The companies that will be true market leaders will be those that don’t just optimize within an industry, but that actually reshape and redefine their industry. The important aspect is to try to shape the nature of competition and compete on your own rules.

2-    The second principle is that good strategy makes the company different and gives it a unique position. Unique position can be achieved through the delivery of a particular mix of value to some customer groups, which are a subset of a market. The fundamental principle here is that you can’t be above average if you want to please the entire market. A company can’t be every thing to all people and do a very good job of it. Strategy is about picking some options from the available choices. Companies need to decide what particular kind of value they want to deliver to which customers.

3-    Potter’s third principle is that it’s just not good enough to be different. You have got to be different in ways that involve trade-offs with other ways of being different. If a company wants to serve a particular target customer group with a particular definition of value, this must be inconsistent with delivering other types of value to other customers. Otherwise it will be easy for competitors to replicate or imitate the value, which you offer. If there are no trade-offs between what your competitors do and what your company does then everyone is competing for the same customers using the same value proposition and it is called a loser’s game.

 In general companies do not like to make choices, which limits their product range, and narrow the range of value they can deliver to their customers. And this unwillingness to make choices is one of the big obstacles to creating a focused winning strategy.

 

Innovate to achieve Business Goals

The key to any innovative company is to have a good strategic vision, which gives it a distinctive position. Innovation means offering things in different ways, creating new combinations of value offered, to further reinforce the strategic intent of the organization. Innovation doesn’t mean small, incremental improvements (these are just part of being a dynamic organization). Innovation is about finding new ways of combining things generally. The essential core of strategy is cross-functional or cross-activity integration that enhances organizational capacity to link and integrate activities across the whole value chain and to achieve complementarities across many activities.

So if a software engineering team can simplify the release process and has the capability to release to specific customers then product development and marketing teams can plan better go to market activities with more focus on customers. The gradual release of software to customers can reduce the pressure from customer call centers and allow the limited company resources to be better utilized. These cross-functional capabilities when deployed to serve target customers create source of competitive advantage internal to the company. It is difficult for the competitors to imitate this from the outside.

Take the example of Amazon.com EC2 cloud services. Due to its enormous scale and requirements for online data and storage needs, Amazon had to invest heavily in building gigantic network and data farms. With the rise of cloud computing Amazon saw an opportunity to monetize its IT investments and made its vast data infrastructure opened to everyone. They definitely did not see this as counter to its competitive position as other organizations were building this huge infrastructure too. However by offering and bundling these services in a new way, not only Amazon was able to generate new source of revenue, it was also able to create efficiencies of scale and shared its IT costs with many more businesses.

In my opinion innovation that does not align with company strategy and does not provide it a distinctive position in the market has little value from a strategic perspective. This may take company in a new direction and might distract the senior management from focusing on core business.

In my next blog I will discuss what can be done to make companies more effective in innovating new products and services that makes their organization more relevant in the marketplace.

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Essay – Fiscal Policy Responses to the Global Financial Crisis (Case of Australia and China)

14/03/2012 Leave a comment

I have posted this essay for the benefits of everyone. Please properly cite this as a reference if you use any of this in your work.

This essay considers the fiscal policy responses of Australian and Chinese governments to the Global Financial Crisis (GFC) and evaluates the effectiveness of their short and long term implications on the economy of these two countries. It considers causes and characteristics of the crisis, which are a significant determinant of the chosen policy responses and discusses future issues regarding policy decisions. 

This essay is available in my profile section.

 

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Customer Orientation and Software Development

13/03/2012 Leave a comment

Software developers are very passionate people and always try to write code which is better in quality, performance, structure and on any measurable metrics. All the software engineering literature is full of aspects and scenarios to help make write software with is better to use, better to maintain and meets customer requirements.

But still many organisations still struggle with the economics of software development. It is still expensive to develop and maintain software over its life cycle. Many of the companies have found outsourcing a way to reduce the cost of software development by outsourcing different stages of software lifecycle, sometimes outsourcing to third parties and sometimes offshore outsourcing.

But still businesses still complain about IT as not understanding the business and delivering value by partnering with business on delivering on ROI. One of the main reason in my opinion is the focus of key requirements professional on taking the requirements and converting into software specifications. In my opinion they should also take into account the life cycle aspect of the software beyond development and into maintenance and consider the more applicable usages of the system. To give an example consider Toyota and Honda. Both companies are leaders in auto industry. Honda has the best engines in their cars but still Toyota besides having good reliable engines also has the lowest maintenance costs. Toyota engineers over the years has focused not only on the end customers but also on the mechanics (as their customer) and have tried to develop engines which are easier and quick to service and maintain thus saving a lot of time for mechanics. This saving of time translates in more productivity and therefore less expenses for the end user.

Taking the same approach if the software professional can focus on the end users and try to understand the outcomes or usage in the long term, they will find uses beyond the normal understanding of customer use. One example is the usage of software by the production support engineers. In case of an issue if the front line support engineer is able to quickly diagnose (readable logs) and fix the issues (easy to read and documented configurable software) then the more productive he will be and more economical the product will be.

Generally there are many other users for a software application other than intended paying customers. A good product development team will identify and understand these users and will try to address their usage scenarios too.

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Converging Social Networks

13/03/2012 Leave a comment

If you have been using Internet for some time it is likely that you would have used some kind of social networking website or application such as Facebook, Windows Live (formerly msn spaces), Yahoo 360, eCademy, Linkedin, twitter, Yammer, etc. If not from this list then may be in old days you would have used multiple chat clients such as yahoo, msn, skype, IRC, GTalk etc.

I admit that my introduction to Internet was not that exciting and started only by searching for some documents for University assignments or projects in 1997. The most popular site at that time which I remember was Yahoo.com and all of my searches went through that search engine. As time passed I learned about chat clients through friends as everyone was on yahoo or msn or AOL or IRC. So I made accounts of all of these and added my friends to my lists. However it quickly bacame clear to me that it was not feasible to keep myself online on all of those. The usage of those clients varied as I tended to use the one which most of my friends used. Realising this the companies behind these services started providing capability or APIs which allowed developers to write their own clients and connect to the servers. Therefore we saw the emergence of multi-clients such as pidgeon, meebo etc.

The social networking sites are now going through the same phase in their product life cycle. People have memberships of many social networking sites due to various reasons such as regional sites, interests, demographics, nationalities, ethnicities etc. We are also seeing continuous integration by the popular social platform developers e.g. Facebook, linkedin etc. Facebook is allowing other applications to connect to its platform while the same is happening with other platforms too.

Idea is simple, these platforms operate like a society. The more diverse and culturally rich your audience/users are the more likely you will attract more users. Facebook understands that and so does many other platform developers. By usage, Facebook with more than 600 million users is the largest society in the world. It knows that people do move around and potentially take many of their friends and families with them. I liken this with the real world migrations which people make between countries. The way many of the Western countries have developed and have become more multi-cultural is a phenomenon that will be repeated here on the social platforms.

Social platforms which will allow open integration and innovation and will change themselves with the society will stay relevant to their users.

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Agile Release Planning (Part 1)

28/08/2011 Leave a comment

Release planning process in an agile team is to facilitate a dialogue between the team and the stakeholders and to answer the question of which functionality the project is likely to deliver by when. A release plan is not a once off document which is created at the start of the project. Rather release planning takes place throughout the project as the project team listens and responds to user feedback. In an agile team the release planning is a more collaborative effort and keeps the process more transparent.

During the release planning process team discusses about which of the three project lever i.e. time, cost or functionality can not be compromised to launch the product successfully. Is the a set window of opportunity for the product in market which makes the launch date mandatory? Or is it the budget which is fixed? Or there is a minimal set of functionality which has to be delivered? From experience on many agile projects it has been learnt that fixing all of these levers is not possible. At least one of these levers has to be flexible. On most of the market focused projects the objective is to make use of a particular market opportunity and often the customer requirements are uncertain. Therefore in these cases projects respond well when time is fixed but functionality is flexible. There are also certain advantages of releasing the product early. It gives an opportunity to product teams to test the product in the market and learn from feedback. The feedback can be used to improve the product during the later phases.

However in certain projects where the functionality is determined (e.g. legacy systems) and has to be fixed the other two levers must be flexible. It is not possible to fix the budget with these type of projects when functionality is fixed because the complexity of the system re-implementation may be unknown. Similarly by fixing the time while the functionality is fixed but complexity is unknown will also be counter-intuitive.

A product’s vision determines the window of opportunity  for the product to achieve the desired benefits and therefore should be used to determine the product launch time. By setting the launch date the time is considered as a scarce resource and other variables are adapted to this. However the teams should keep an eye on the product quality as a launch date is not an excuse to compromise on the quality of the product.

In my experience choosing a launch date based on the work in the product backlog is difficult. It forces the team to freeze the requirements and often results in a poor estimate. In fact an estimated launch date based on requirements may be off by as much as 60 – 160% (Cohn 2005). Identifying a launch date and focusing everyone on the window of opportunity will avoid these issues.

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Learnings out of Entrepreneurship course

18/04/2011 Leave a comment

Today I finished a course on Entrepreneurship and Venture Creation at MBS. Over the last 12 weeks there were a lot of opportunities to learn. I worked in a syndicate with very energetic and passionate members and there were quite a few lessons which I learned about this process.

Team Building: This is a very important part of any startup. You need to have a committed and passionate team but at the same time think about experience. All other things equal I will choose team members who have relevant industry and technology experience. It does make a hell lot of difference. No doubt you have to be a good team members but experience is the element which will determine the success of your team. So my first lesson is to identify the right people for your team.

Disagreements: This is part of dealing with any situation where there is no right or wrong answer. Every team member will have his or her own opinion. Key is to realise that disagreements provide an opportunity to think differently. It is also important for team members to express disagreements openly. It is possible that the dissenting team member has a unique observation which others don’t have.

Dealing with Ambiguity: Entrepreneurship is journey fraught with uncertainties and ambiguities. Often you find yourself with situations where there is no right or wrong answer but at the same time you have to make a decision to move forward.

Opportunity Focus: This start with understanding the pain of your customers, talking to them and understanding how to lessen this pain. If you find a solution which can address a pain of a sizeable market then you have got an opportunity in hand.

Ethnographic Research: We used this research technique a lot by talking to our target market and understanding what they wanted. Based upon these discussions we refined our ideas several times.

Overall this course and the way it was structured provided a strong practical learning environment.

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2011 – Tablet competition heating up for second position?

16/01/2011 1 Comment

Recently quite a few tablets are announced at CES 2011 and most of the predictions are that we will see these tablets in consumer’s hands this year. This reminds me the CES 2011 when everyone was expecting a tablet from Apple and a number of companies announced their own plans for tablets in 2010. Nothing materialised really in 2010 but 2011 is poised to be a different year because of advances of technology and also a viable market for tablets which is currently dominated by Apple. With a keen interest in tablets I want to know how the market will shape up when all these tablets are launched.

I wrote a few months back that why iPad will be a winner regardless of the emerging competition. That prediction was based upon Apple’s first mover advantage, product development theory and brand recognition. Lets see whether Apple can whether this new competition?

More exciting challengers to iPad are Motorola Xoom, Blackberry Playbook and Toshiba Tablet. There are also some more tablets from Samsung, Asus, MSI etc which will be running Windows 7 as well as a HP tablet which will be running on WebOS. Out of these Motorola, Toshiba and Blackberry’s offerings have gathered a lot of positive press. Blackberry has a considerable market in smart phones and with the launch of its app store last year, it has offered its customers a good channel to purchase applications. Motorola and Toshiba will be relying on the strengths of Android and its app store. Google which develops Android is poised to launch version 3.0 (honeycomb) of Android in the first quarter of this year and is also rapidly increasing the capabilities of its app store.

All of these companies has taken a note of Apple’s success in developing an ecosystem of its products and various channels such as app store which has become a key winning factor. This is why Google, Blackberry, Nokia and Microsoft has launched their own app stores for smart phones and are now extending those to tablets.

iPad is at the crucial stage of its life cycle and I believe as the market is ready to be exploded in this segment, iPad has all the chance to move from early adaptors to the mainstream users with the launch of its iPad 2 later this year. I believe iPad will still dominate the market because its designers and developers has the most experience in the market and they will be able to offer the most polished experience to users. No doubt the companies such as Blackberry, Motorola, Toshiba, Microsoft all will be offering very powerful tablets, but the hardware specifications will not be the only factor in success. In order to reach to the mass market beyond techies they need to offer a simple and intuitive experience and that is where I think Apple will dominate.

I think the competition will be fierce in tablet market but that competition will be for the second position and iPad will keep its domination by just adding enough muscles to it iPad and offering more features.

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Some thoughts about making innovation work in your organization

26/09/2010 1 Comment

Last week there was an IT innovation day at my workplace where final 4 of the many innovative ideas were displayed by their respective developers. All of these ideas or innovations were technical and capability enhancing in nature. One of the idea was about improving the operational efficiency of the search technology by using a different search indexing tool. The other three ideas were related to introducing new ideas which could provide improved features for consumers and customers of my company’s products.

At the end the first idea was awarded as the best idea by most votes although two of the other ideas came very close. In my opinion the reason the first idea won the innovation challenge was because of its immediate impact on increasing the operational efficiency by reducing the time required to update the databases and by reducing the complexity of the process which resulted in major cost savings of time and resources. While the other three ideas were also very good but the reality was that IT alone could not make them a reality. However it does demonstrate the technical capabilities of the organization.

After this event I was talking to my colleague Steve Halloway who suggested that to make this innovation process really tick, marketing will have to be involved with the technical teams (cross functional teams) so that business can sponsor the good ideas and take them to market.  I think Steve is right in his thinking and in order to make innovation work there has to be focused cross functional teams with the right balance of skills to be able to market a new idea. New product development is not an easy job however as research shows that still about more than 70% of new products fail in the market. Therefore these cross functional teams need the right balance of skills in technical knowledge, process,  and market knowledge (which includes delivery channels, consumer and customer knowledge, competition etc) and this is not an easy task.

This is why still many departments focus on innovation in their own respective domains which results in operational efficiency which ultimately improves the EBIT or profit margins of the organization but does not really enable the company to increase the pie of the economic benefits (or in simple words diversify and increase the revenue).

I think when companies focus on implementing an innovation culture, they need to articulate clearly their objectives from the innovation process. It should be clear that their innovation process is targeting at increasing the operational efficiency or new product development or both. In my opinion you need different thinking and processes for these two types of innovations.

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Why iPad is a winner and why eeePad and windPad are going to lose?

03/06/2010 Leave a comment

Asus and MSI has yesterday announced their foray into the emerging tablet market by announcing two tablets each called eeePad and windPad respectively. Each will have one tablet for each Android and Windows 7 where Android based tablet will be 20% cheaper than the Windows 7 based tablet. According to the product manager of MSI, they are convinced that consumers want a product in a sub $500 segment with more computing options.

This announcement from Asus and MSI gives me an impression that they are trying to take advantage of the hype created by iPad. They are trying to extend their EeePc and Wind brands into tablets and hoping to benefit from the initial success of iPad and the potential market which iPad has created for tablets. But their focus on below $500 and choice of features sounds a bad decicion to me.
In this blog I will explain further why so.
By offering a tablet each with Android and Windows 7 both of these companies are indicating that they are not sure which OS is the best choice or they have not done their market research properly. By claiming that consumers want the features of a PC in a tablet shell, and pitching their products against iPad, they are clearly unaware of the positioing of iPad. iPad has never claimed to offer the features of a PC. Neither it has the features of a phone. The choice of two operating systems will increase the cost of after sale service and support for Asus and MSI. This will have a direct impact on the bottom line which will already be thin due to higher production costs during the introduct phase of product life cycle (also remember that these tablets will have more features compared to iPad).
By moving first into this tablet market (so far more than 2 million iPads have been sold) Apple will be able to grab a bigger market share of this market. They have a very strong brand and are associated with innovations. They have offered a core iPad product which they can easily augment with some more features such as camera or usb port if there is serious competition. The price of iPad is higher which will give healthy margins to Apple. As the scale of production will grow the fixed costs will become a lower fraction of the costs of iPad and Apple will be able to drop the price and further boost the production. Any competitor such as Asus or MSI who enters at this stage into this market will face annihilation. Apple will have the choice of reducing the price of current iPad and offer a new augmented version of iPad at a higher price point.
Given that both Asus and MSI are targeting the sub $500 segment with more features means that their profit margins will be lower and ultimately they will be commoditizing their products themselves. Because they will not have the economies of scale due to late entry, they will face the dilemma of high production cost and lower prices and will be unable to compete against Apple. Their only bet will be against other non-Apple customers to get some market share. But none of these players will have any competitive advantage.
This is classic case of first mover advantage which Apple has got and now the competitors will play the game Apple wants them to play.

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