Won the Tuck Essay Contest

The Tuck school of business recently organized a essay contest. The subject was: "How can strategic innovation be used for solving real world problems like corruption?". I won the first prize- a neat iPod, a signed copy of Prof. Vijay Govindarajan's new book (10 rules for strategic innovators: from ideas to execution), and an admission into Prof. VG's excellent session on Strategic Innovation. Let me thank the Tuck school for creating this opportunity; such systems which facilitate the flow of information and insight in the society play a key role in enhancing the innovation-capability of any region/country.

Quite a few people have asked for the essay- so I am putting the original submission right here, inline:

How can strategic innovation be applied to solve real world problems such as corruption?

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Let us look at Strategic Innovation not as a buzzword heard in corporate alleys, but as a broader means to achieve an all-encompassing end: Change. The need for Change is ubiquitous- from removal of poverty to limiting corruption, from improving performance of athletes to establishing new social institutions. The question is- why are we not already using the principles of Strategic Innovation to solve such real world problems? How can we do this in the future?

The answer lies pithily, again, in one simple word: Context. Strategic Innovation as a discipline has attained a certain maturity in the corporate world, but is in its nascence in other contexts. Applying strategic innovation in these new contexts, therefore, demands a re-look at the core and periphery of strategic innovation: in the frameworks used, in the principles applied and in the analyses adopted.

The late management expert Peter Drucker gave the best analysis of the special considerations for using innovation in public service projects [1]. According to him:

- The key inhibitor for innovation in such areas is effort-orientation.

- The biggest challenge, therefore, in using strategic innovation for such areas is having a focus on results.

Besides Mr. Drucker’s advice on result-orientation, another crucial question to answer is: where do we look for the potential for Innovation? From the strategic innovation perspective, there are two such areas in issues like corruption and poverty [2]:

1. New Solutions to Known problems: In such cases, the innovation would lie in finding new ways of solving problems which have precedents in other contexts. For instance, the known problem of supply chain management is solved innovatively by the Tiffin suppliers in Mumbai, overcoming many of the contextual problems [3].
2. New Solutions to Unknown problems, which are generally not found elsewhere and we don’t have precedents for them. A number of approaches to removing poverty are of this nature. We don’t know what to do in such cases, and so we have little knowledge about how it is to be done. The analysis has to start from a step back, by defining the problem first.

With this in mind, the approach to solving real world problems like corruption is given in Exhibit 2. The key steps in the process are:

1. Understand the context and generate context-specific insights
2. Modify Strategic Innovation frameworks and principles
3. Piloting and feedback, and repeat steps 1 and 2 if necessary
4. Full scale managed execution of Strategic Innovation

[1] Innovation and Entrepreneurship by Peter F. Drucker (pp 179), HarperBusiness, Copyright © 1985 by Peter F. Drucker.

[2] The third possibility, that is a known problem and a known solution which would work in this context, becomes a management issue. For instance, if we know that the police dept. can remove 40% of the corruption simply by making sure its existing processes are managed properly, that does not constitute innovation.

[3] see, for example, http://edition.cnn.com/2004/BUSINESS/08/16/mumbai.dabbawallahs/

Open Innovation by Microsoft

Microsoft recently arranged a design contest for building the next generation PC. See these links:

http://images.businessweek.com/ss/06/01/ms_design/index_01.htm
http://www.startsomethingpc.com/

This is a great example of Open Innovation, wherein a company leverages external knowledge of partners, suppliers, customers, universities and any other community (designers, in this case) for carrying our part of the innovation process.

Design Gets Its Due in World Economic Forum

Businessweek writes about how the world economic forum in Davos, Switzerland, is getting a generous dose of Innovation related topics.

Building a city using Extreme Innovation

This story talks about how a group of citizens from Newark have build a sustainable community development model.

I have been thinking about applying the principles of Extreme Innovation to to build (or re-build) a city, providing basic amenities, public utilities (electricity, water), clean fresh air, green sorroundings, and a productive work environment. The point? To make it a case in point for urban governance.

Why is Extreme Innovation relevant? Building a city inherently looks like a non-competitive effort, in the sense that your gain is no-one else's loss. This is unlike a business scenario, wherein everyone is fighting for the same morsel. Then why do we need to innovate at all?

The need to Innovate comes not from the need for beating your competition, but from the need to solve problems. For instance: how do you provide employment to the poor residents without relying on a welfare scheme? How do you ensure civic sense without excess policing? How do you avoid the problems of corruption and mismanagement in the public utilities?

All these problems involve trade-offs, and solving them would require creative brainstorming, selection of relevant ideas, and effective implementation. In short: Innovation.

If anyone is game for being part of the project, drop me a mail.

Exploration vs. Exploitation- the ship analogy

This CIO article adresses an age-old problem: does an excessive focus on processes have an adverse impact on the innovation ability of a firm?

The article touches upon a 20-year study of the paints and photography industry, where leading firms missed out on disruptive innovations such as digital photography. The conclusion is that this was partly because the firms were so busy exploiting their current capabilities that they did not have the peripheral vision to explore new avenues.

This is always a confounding dilemma for companies. They can not let go of their current processes, and in fact have to get continually better at them. This gives them small sustaining innovations. The cost is that department heads and mid-level managers who hold budgets are wary of sacrificing their short term results for the sake of a risky and uncertain future.

What is the solution? Imagine your company to be a ship. You are racing against a fleet of other competitor ships, and so have to get the most of out of your engine. The engine is your current capability. While you figure out ways to push the limits of your engine harder and harder, you also have to think about new routes- new strategic directions which can put you nautical miles ahead of the competition. These strategic routes are the disruptive innovations. To change direction, sometimes you have to slow down, perhaps even turn the knob off your engine. You can't change direction unless you do that- the ship will overturn.

The job of the senior management is to decide when to turn, in which direction, to what extent, and what is the best possible way to maneuver when the time comes. In corporate-speak, this translates to:

- timing of disruptive change
- nature of disruptive change
- extent of change
- implementating the change effectively

Are you at the helm yet?

How old do you have to be to Innovate?

This page talks about how the average age at which Innovators do most of their productive work has increased over the past century. The same study also suggests that very few innovations are done by people under 27 and over 50.

Is it really so? In the world of Sergey Binn and Larry Page (Google founders), do you really have to be a certain age to be an effective Innovator? There will always be mavericks who will change the world at 25, but remember- Extreme Innovation is about repeatability in results, not only individual genius. So what governs the Innovation effectiveness of the smart but averagely talented Innovator?

There are (at least) 3 things we have to keep in mind while answering this: Domain Knowledge, Personal Maturity and having enough successes or failures behind you to learn the nuances of innovation. Clearly, the total amount of knowledge in various domains has increased substantially in the last few years, so one would expect the average age to increase.

What about the other two factors? The following questions are relevant:

1. Can something be done to train potential innovators in crucial skills early on (not in business schools)? Can we begin to train schoolchildren in relevant skills so they have a better chance of innovating early? This story talks about how school and college education is the key to a innovative workforce for the US, and it applies equally to all nations.
2. Is there a particular way to teach various domains so that children are more likely to innovate in them? For instance, a more practical, reality-based and experiment oriented approach would ensure that children have a more active learning. See this excellent online game, for instance, which teaches schoolchildren entrepreneurship.

Innovation Incubators and radical innovation

In this post I discuss how radical innovation can be brought about by innovation incubators. This is significant because we must increasingly rely on the systematic search for radical innovation, rather than depend only on the individual brilliance of maverick entrepreneurs.

First things first- what is an innovation incubator? This is an example of what we could call an "innovation incubator"- an entity that helps entrepreneurs in successfully launching innovative ventures. Incubators provide varying levels of support, from office space to common resources (printers, network access) to venture capital to financial and managerial guidance...Overall, they specialize in launching new ventures. This is another example of a different kind of incubator- one that has lesser ownership of the ventures it support.

What are radical Innovations? See this page at Rensellaer's website and this. To set the stage, these are the kind of radical innovations I am talking about:

• Steve Jobs in his roles at Apple and Pixar, virtually created two new industries.
• Robert Giuliani- the New York mayor who brought down overall crime by 57%, and reduced murder by 65%. New York City - once infamous around the world for its dangerous streets - has been recognized by the F.B.I. as the safest large city in America for the past five years.
• Finally, Muhammad Yunus- the father of the micro credit revolution in Bangladesh.

In the following discussion, it is also important to keep this equation in mind:

Innovation = domain-specific components + cross-domain components

Obviously, incubators primarily cater to the cross-domain components of innovation, reducing them to standardized and repeatable processes which can be used in a variety of contexts. So you would find the same incubator supporting innovations in a variety of industries- perhaps a couple of software services startups and one wireless venture.

Overwhelmingly, almost all radical innovations seem to arise not from such incubators but from individuals working in companies or entrepreneurial ventures. One fundamental question which comes up is: How can cross-domain Innovation be incubated most effectively? In particular, can incubators lead to radical innovations in the marketplace?

The following are some insights on how Innovation incubators can effectively pursue radical innovation:

1. Invest more time and effort per innovation. Steve Jobs had to struggle for years before his animation company- Pixar- took off. It was an idea not yet ripe, which is often the case with radical innovations. If the incubator focuses on the short term, it is unlikely to reap the exponential benefits of a radical innovation (which takes time to be fully adopted by the market).
2. Ensure domain expertise in the venture: Radical Innovations often require special insights and a deep understanding about the domain. The incubator has to ensure that such knowledge is either available in-house (the incubator itself specializes in certain domains), or available in the entrepreneurial team it is working with. A team consisting purely of generalists is a bad idea, because such a team would lack the depth needed for radical innovation.
3. Have ownership in the ventures: Working without ownership is highly unlikely to lead to radical innovation in your ventures. Don't be an outsider, be an owner!
   
4. Have a balanced portfolio: It is important to have a long term view of certain incubations, and allow the venture to persist if there is little or no initial success. For this, the financial model of the incubator should allow it to balance its own portfolio between short term and long term investments. An excessive focus on short term returns may prevent exponential returns from radical innovations.