BankerVision

"How Hits Work": Talk Next Thursday in London

Next Thursday evening in Central London, with some colleagues past and present, I'm going to be presenting some of my work that's going into a book I'm calling "How Hits Work". The event is being run by Spigit, the enterprise innovation platform company. I've been invovled with Spigit for a few years now, and they're the platform that power both Innovation Market at Lloyds and IdeaStreet at the Department.

The basic premise I'm exploring in my presentation is hits - those massive, immediate product successes that just take off - almost never happen because of radical innovation. That's counter-intuituve I know, but the mechanics of hits aren't easily explained by traditional innovation theories.

Traditional theory around the way new ideas spread suggest that mass media messages - like advertising - effectively target those individuals with a particular affinity for trying new things, who then communicate their successes or failures to other, like minded people. After a while of this happening, there is enough communication going on that expansion of the idea becomes self sustaining. That's the critical mass point that people always talk about, and it takes time to get there, because it takes time for people to communicate their experiences with each other.

But hits don't seem to work quite that way. They get to their critical mass point very quickly, much more quickly than this traditional approach would seem to allow. How is it possible, for example, that a revolutionary movie can become a hit in a single weekend? Why was the iPad an overnight success?

In every single case I can find, hits are the result of taking a well understood process, technology or service from some other, adjacent market and repurposing it in a new application. There is nothing innovative about the product or service or technology: the innovation is all in the way its applied.

On the other hand, truely groundbreaking, amazing innovations without precedent are rarely hits. That's why Microsoft, with the highest R&D spend in the industry and more truely innovative things in their labs than practically everyone else, is trailing Apple. Apple  know how to take commodity, tried stuff and apply it in new ways.

There's more to it, of course. In pratcially every case of a hit, there's been something else also present, a twist which reinforces the unique application. There are only a few possible variations on the twist, actually, 5 that i've identifed thus far.

I'll also be presenting some interesting cases: Microsoft versus Apple, of course, but also the the TV series Glee, the rise of Steam and its defeat by Diesel, and thje story of the man that invented the diode that made wireless possible -and never made a penny.

Anyway, that's the topic of my talk on Thursday evening. Also on stage will be David Cotterill from the Department, whose going to speak about his innovation team and motivating innovation behaviour, and Steve Wakefield, who used to run Innovation Market at Lloyds.

I have 5 spaces, so ping me if you want a spot at [email protected].

Update: My seats are gone, but I am sure Spigit will be give me some spaces if I beg. Let me know if you missed out and I'll ask: [email protected]

Never waste a crisis

I'm in Malaysia presently speaking at a banking conference (civil service watchers - I've taken annual leave to do so).

A question I've just gotten is "what is necessary to make a bank go after radical innovation"? My answer was "you need to be staring death in the face".

This is true for most organizations, I think. Truly business radical, game changing innovations that affect core business almost never comes from large organisations who can sit happy on their current operations.

"But", I hear you ask, "what about Apple? What about Google. What about.. what about..?".

Notice that I said game-changing innovation that affect core business. Apple, with iPhone went after a new segment. Google, with Docs and so forth, are going after a new segment. They're not doing anything that disrupts where they got their money previously.

Banks, and to a lesser degree, the public sector are different. Bankers don't have any new segments they can go after. They go after incremental innovations that let them do more of the same, certainly, but you either are a banking customer or you're not. And for public sector, you are a customer, whether you want to be or not.

In both cases, there is no reason to change anything unless you're facing a crisis of titanic proportions and your back is against the wall. You have to innovate because there are no other options available. If you fail to pull something out of the bag, its game-over.

Banking had it's crisis, but conveniently got a bit of a boost from the public sector. This meant it dodged the "do or die" transformation it might otherwise have been faced with. Whether that was the right thing or not, I won't comment on. But let's face facts. There will likely be no radical transformation of the banking service offer, because profits are returning and "going back to basics" is a perfectly reasonable strategy in this scenario.

The same cannot be said of the public sector though, which has its back to the wall substantially. We will not be able to do the things we've done in the past the way we've done them, because the money to do so doesn't exist. Ergo, we are forced into new ways of doing things, whether the entrenched hierarchy likes it or not.

Here is the conclusion I draw from all this. If you want to be an innovator, and you want to make a real difference, you can only go to organizations in crisis. They are the ones that are forced into changes rather than choosing to adopt changes. No-one chooses to change without a good reason.

Little Innovation Book Finished

Over the Easter break, I finished uploading the whole of Little Innovation Book to the web. The whole is about 100 pages printed, so its an easy read that can be done in a day or so. I've also completed preparing the ePub version, which is available for download now if you have an ebook reader (like a Kindle or an iPad, or appropriate software), and there'll be properly published versions available from the site and Amazon within the week.

To those of you who who tipped, or bought individual chapters, or helped otherwise, your free downloads have already been sent to you. I'll continue to post updates here on the progress of the book from time to time.

Boring innovation

Robert Brook (hat-tip to PubStrat) suggests that:

Innovation has become boring in a bad way. Innovation could be boring in a good way.

The premise, Robert suggests, is that management thinking has made innovation a business process that stifles creative thinking. Best not to apply any business processes, like Project Management or budgeting. He goes on to suggest that what's really needed is:

... a two pronged approach. Introduce, recognise and support innovative thinking within existing processes - and, separately, set up a sandboxed arms-length entity to take on the risk.

It seems to me what Robert is suggesting is that good innovation is all about celebrating ideas and then setting up lots of little projects to take them on and deliver stuff.

Would anyone really expect that to happen without some "management" around all those little projects?

Now, I have to admit to some prejudice here, having written two books on the subject of innovation in large organisations. My research on the subject - and my own experience - suggests that waiting for "innovative thinking" to generate anything meaningful is usually a waste of time.

Everyone thinks innovatively all the time, whether they know it or not. But when it comes down to the press of doing the day job, versus changing it to accommodate innovation, most people will just do what they have always done.

Nothing wrong with that. Not everyone can be a change agent.

The fact that not everyone can be a change agent is the reason you need boring innovation. How else do you take the ideas which remain latent in organisations and turn them into something real? Working on everyone else's ideas all day is, by definition, an entirely operational and boring process. The fun only comes when you get to work on your own stuff.

What happens when you don't have a boring, operational process you can use to start up lots of little projects in the way that Robert describes?

You are forced to rely on individual heroics. Individual heroics are all very well, but there are only very few people in organisations who are capable of them. Getting a new project started without support is very, very hard.

That's why you need an innovation unit, whether you bought it or grew it yourself. The name of the game is about starting lots of little, new projects. Without waiting for that random blue-bird superstar performer who can do it without any help at all.

So let us have more boring innovation. Boring innovation, at least, works. Presently, we're getting a 4% success rate on our idea flow at the Department. That doesn't sound like much, except our innovation unit has access to the ideas of thousands of people. Yes, maybe it is boring, and maybe the ideas themselves are boring.

But surely, getting 4% of the ideas done is better than doing none at all. Which is only slightly worse, in my view, than waiting for random chance to blow a few wins through the door.

This, lets face it, is what people who propose that "innovative thinking", or (even worse in my view) "innovation culture" are relying on.

Monetising an Online Book Part 1

The www.LittleInnovationBook.com is an online book I’m proving free of charge for people thinking about starting an innovation effort.

Well, actually, its not quite free. There are ads and some other things there as well. The other thing are the most interesting.

Because I own the whole rights to the work, not my traditionalist publisher who has to do things in a certain way in order to fit in with the traditional publishing model, I have the liberty to use the book as a live innovation experiment.

I promised readers a while back that I’d update on how my experiments are going from time to time.

Firstly, let me tell you about the traffic build. The site got spidered pretty much immediately by all the search engines, because of the links here and the fact that the announcement I made on Twitter got retweeted extensively. Retweets are excellent predictors of Google’s pace at recognising content, I’ve found. The book was immediately number 7 for the keywords “innovation book” and for a range of other innovation words as well it was in the first page of results.

Traffic has been building steadily, and the book is presently getting about a hundred uniques a day after two months. During the build I ran two StumbleUpon campaigns just to see. You can buy relatively targeted traffic for $0.05USD a visitor, which quite cheap considering they are real visitors, not just bots. However, I did find the bounce rate on that traffic to be very high. In other words, visitors would stop at the landing page, and just move on without going deeper into the content. I’ve abandoned StumbleUpon for now.

FaceBook traffic and Google CPC traffic are better, but very expensive. It doesn’t look as though you can buy traffic for an online book and return a profit, as far as I can see.

So much for mechanisms where you pay for visitors. I’ve given up on them now and switched to Article Marketing. For those of you unfamiliar with it, what you do is write short, pithy article with lots of Google-friendly keywords. Then you submit them to various article directories, complete with a resource box containing URLS that link back to your site. The pundits all say you have to have published some hundreds of them before you notice a real difference, but that you get exponential traffic that lasts a long time once you do. I’ve been doing two a day since the start of March. I’ll come back to you on how successful that’s been in a month or so, but it looks promising for now.

But I know most of you will be interested in the “Pay what its worth” model I was trialling. Since then, I’ve also tried “Tip the Author a fixed amount” and as of this morning, I’m doing “Micropayments for Ad-Free content”. Let me run these three for a few weeks and I’ll come back to you with specific results.

Here’s the top line, though: “Pay What its Worth” works less well than the Tip scheme, and I think its because people don’t like having to make a decision on value AND tell me what they think it is. When I told them what the fixed amount was, they were far easier with it.

Anyway, as I said, let me come back to you with more specifics on that later in the next instalment. I’ll also be talking about the performance of AdSense, especially as I’ve now doubled the ad density in the book. My apologies to those of you who find them too annoying to continue.

PS: For those of you who have tipped, or paid otherwise, you’ll be getting book content in either ePub or PDF as soon as it is ready. And thank you for your support, and for continuing to read.

Banking innovation’s death predicted early

Chris Skinner, much respected banking commentator and author suggests that banks have dropped the word “innovation” from their mantra. He says the focus on being innovative in banks was “a focal point during the 2000 and now its all over”.

Supporting this point, he says that the number of times banks use the word in their annual reports has dropped and that all the Heads of Innovation jobs in banks have gone.

I have to beg to differ, because as one of those “gone” Heads of Innovation, I find myself talking more than ever to big innovation programmes in banks. Last time I looked, all the big innovation programmes at the top banks around the place were still very much going on strong.

Perhaps Chris isn’t talking to the right people. I’ve never seen so much interest in the work I’m doing (even though I’m now in the public sector) from banks, and the book I wrote on banking innovation seems to be doing quite a brisk trade.

The point of the argument that Chris makes, really, is he thinks that big high profile innovation teams are fading away, to be replaced with some kind of “innovation culture”, which works away behind the scenes to create outcomes which are invisible in overall tapestry of what banks are doing. He goes on to say that:

“the lesson learnt for most banks is that innovation is not a function or a label, but a culture so it is gratifying to see innovation has been remove from the mantra of the banks”

Personally, I think he’s missed the point. All the examples he quotes of an innovation culture working in banks are actually examples of innovative new things that have been adopted as part of business-as-usual in the past. That’s not a sign of an innovative culture, rather it shows that in the past these banks have created some new way of doing business which is now part of ongoing operations.

The question I would be asking is this: how did those successes get generated, and how did they get so well adopted that they are now part of business as usual? If the answer is the individual heroics of a few key people, then what you have is random innovation, not an innovation culture.

You see, innovation cultures don’t work unless you put the systems in place to support them. Everyone talks about companies which are supposed to be inherently innovative and fails to recognise that what makes them so is not the goodwill of their employees who engage in individual heroics. They are all companies which have systems, structures and active goals that support an innovation agenda. They are organisations that have decided that innovation itself is a business process.

Naturally, there is usually some kind of team that is responsible for running that business process.

I don’t disagree for a moment that the high profile, bet-the-bank innovation team has gone underground to a degree. That doesn’t mean these teams aren’t around any more and innovation magically happens by itself, regardless of any cultural imperative set by leadership.

I’d say, though, it is a sign that innovation teams are getting recognised as part of a business as usual process, so are naturally getting less visible as they become less different.

Unconference Crowd Sourced Strategy Pt. 2

CIO Magazine were interested enough in the discussion about our approach to using unconference and crowd sourcing methods to do IT strategy, that they asked us for a write up for their magazine. Its published here, for any of you who are interested in a few more details about what we did.

When failure is not an option

Over on The Little Innovation Book, Malcolm Lowe asks the question:

What are your thoughts on organisations were failure maybe is not an option. For example nuclear physics, NASA or a government organisation that pays benefits. In these situations failure could be disastrous. What strategy would you recommend in these types of organisations?

This is such an interesting question, that I thought it worth a whole post all on its own.

The point I was making in that chapter of the book was that 80% – on average – of new things innovator try will fail.

When you start new things, there are all these processes you have to go through before anything happens. You have to write business cases, win money, and eventually, deliver stuff.

Failure that occurs at any point before delivery starts is “good failure”, and in fact, is something that innovators should develop competencies in if they want to stay in business. The fact is, before delivery starts, you probably haven’t spent much money on whatever-it-is, so the downside of stopping isn’t that great.

On the other hand, the further you get into delivery, the more money you’ve spent. If you have to stop then, its very bad indeed. As innovators, you don’t want that situation occurring if you can help it. It leads to what academics call “innovation trauma” – the scenario where everyone is so burned by a failed innovation that no-one will ever sign up for anything new again.

For a great case study of innovation trauma, do a Google search on “SunRay”, the Sun Microsystems thin client which wrecked the careers of a number of smart people, and made the company’s salespeople unwilling to take any risks on innovative new products for years.

The point is, failure which is “good failure'” should be most of that 80% that I refer to in the book. It doesn’t damage anyone, and probably offers instructive lessons to the innovation team

Even one bad failure, though, can close down an innovation programme. And clearly, in the cases that Malcolm mentions, that kind of failure has very dire consequences indeed.

One last point on this: “failure is not an option” is a mentality that leads to – you guessed it – failure. Trying new things is a process that requires lots of stops and starts. There will, inevitably, be more stops than starts, actually.  In an organisation that doesn’t celebrate good failure, what you get is a scenario where nothing new starts at all.

That, clearly, is a very bad situation to be in, and is one of the main reasons people complain they “don't have enough innovation”

The innovation economy

You should read this article that argues another phase change is occurring: from a knowledge economy to an Innovation economy. It’s suggesting that even when you have great structural capital (factories, assets, and all that stuff), great financial capital (money!) and great intellectual capital (knowledge and know-how) you will still not be a successful organisation.

Nothing really happens unless you also have innovation capital,  which are the assets you build up that let you do value creation.

Now, of course, since the discipline of corporate innovation is still so young, we’re as far away from a decent system of valuation of Innovation Capital as we are from manned starhips that cross the void. At least with intellectual captial you can compare the difference between the book value of all the assets on the balance sheet and the market valuation of a firm and say “yep, that’s how much our know-how is worth!”.

This is a concept that resonates strongly with me. I’ve worked in banks and technology companies – both Lloyds and Microsoft for example – where all of the traditional assets were available in spades. How come, then, neither of these companies has truly produced anything that was game changingly value creating in the last decade?

Organic growth is not the same thing, even though its highly desirable, obviously.

I’m of the view that both lack Innovation Capital, and furthermore, that almost all organisations do. Lloyds has spent the last couple of years building its Innovation Capital up, and it may be we’ll start seeing some interesting new stuff eventually.

I’ve been away from Microsoft too long to have any insight about its capabilities in this area, but no-one is stupid there, so I’d not be surprised to discover they get this also.

Anyway, the point of al this, if its true, is that the role of innovation groups suddenly fits neatly into the value hierarchy of an organisation in the same way that accountants and marketers do.

But I’m also thinking that without a reasonable system for the valuation of Innovation capital, we’re going to be nowhere for a while yet.

Academics and other big-brained people… do you care to take on the challenge?

Terrible Innovator No: 6 – The Cowboy

The following is the last excerpt from Innovation and the Future Proof Bank in my series on terrible innovation employees I identify six archetypal innovation employees you should watch out for, and the last is “The Cowboy”.  From Chapter 9:

The final kind of innovator to watch out for is the Cowboy.  Such individuals are very, very committed to their innovations, so much so that no blockage can stand in their way. They go after what is needed to make the new thing happen, and they do so with gusto.

Unfortunately, they also do it without much thought as to what will happen after they’ve rammed the innovation down everyone’s throats.

If Cowboys are lucky, they’ll at least get their current innovation out the door and into the hands of customers. But in doing so they will have locked themselves out of being able to do the next round of innovation.  Cowboys are aware that they are burning influence to make things happen, but their focus is so much on the now that they don’t permit themselves to consider how they will deliver the next innovation, or the one after that.

I’ve met innovators in this category, in fact, who feel that if they can just get this innovation out the door, all sins will be forgiven, no matter how heinous. That, of course, is never true, because for every innovation there are both winners and losers. The losers will never be happy that the innovation makes it out the door at all, but the winners will also likely have a bad taste in their mouths: they might have a successful innovation on their hands, but to get it they were forced to do something they didn’t want.  There is very little upside here.

Another failing of the Cowboy is that they will almost never drown the puppy. They get so invested in one particular innovation (which they have burned a huge amount of influence to promote) that failure is not an option.  Even if the Key Questions turn out to be less than positive they won’t let things go. And they can’t: their personal success is tied into achieve this one, great thing. They have no choice but to continue, since if they fail, they are left with nothing.

That, of course, just highlights to everyone that their performance is sorely lacking.

I hope you’ve enjoyed the Terrible Innovators. I’ll be returning to normal posting from now on.

Previous terrible innovators:

• The Gadgeteer
• The Talker
• The Consultant
• The Lone Ranger
• The Defeatist

Reprinted from Innovation and the Future Proof Bank, published by John Wiley & Sons. Copyright 2009.