Storytelling

The real problem we face is not our inability to communicate effectively. Instead, it is our pursuit of perfection, talking excessively without listening and failing to organize our thoughts. This was discussed in the HBR article, ' How to Shine when You're Put on the Spot', published in September 2023. The following are some of the skills and behaviors that can be summarized:

1. Avoid The Default Response. Experiment with impromptu speaking to connect with your audience and be memorable.

2. Know That Less is More. Keep it simple. As Shakespeare put it, " Brevity is the soul of wit." Start by having a clear communication goal with an understanding of what is already known by the audience - That will help narrow the focus of the message.

3. Dare to be Dull. That means, "Don't let the perfect be the enemy of the good." First, speak like a human; the moderate use of fillers ("um" and "ah") is effective.

4. Focus on Listening. Remember to use "Space, Pace, and Grace." Assume positive intent and demonstrate compassion. Elevate your situational and interpersonal awareness to respond graciously.

5. Organize your Thoughts. Demonstrate connection among specific points, ideas, or examples. It will also sharpen our thinking to stay focused on the essential points only. Then, Consider structuring your pitch or idea like a story, with a beginning, middle, and end that includes the problem, solution, and benefit.

Generative AI and Overcome Bias

The positive outlook for generative AI (GenAI) is to help humanity find new ways to unlock creativity and discover new insights to solve significant challenges. It will be a fantastic journey for all of us!

It has been a year since chatGPT was launched to the public, and its adoption has skyrocketed. There are no signs of slowing down. GenAI is a technology that can create new content such as text, images, audio, and video from a few human (or machine) instructions, also known as prompts. This brings back the idea of users developing their solutions and services instead of depending on a third-party company to build them, as MIT's Eric Von Hippel envisioned in his research on democratizing innovation almost two decades ago.

Seeing the Forest for the Tree

An article by HBR published in June 2023 titled "How Generative AI Can Augment Human Creativity" highlighted that many companies struggle with effectively implementing and promoting innovation to generate compelling solutions and services for their respective industries. One of the main issues is that these organizations only focus on synthesizing customer requirements but fail to involve their employees and customers in the creative process to generate new and innovative ideas or improve the quality of existing ones. This critical link is necessary for the successful democratization of innovation.

Promote Divergent Thinking

GenAI promotes divergent thinking by creating output that combines unrelated concepts and suggests ways to refine and enhance the original ideas. This is accomplished with the help of several tools, including diffusion models, a text-to-image model, and transformer AI architectures (such as chatGPT - a widely recognized large-scale language model developed by OpenAI).

Challenge Expertise Bias and Support Idea Evaluation

New product development (NPD) involves overcoming biases such as design fixation, functional fixedness, and previous experiences that may hinder problem-solving. GenAI tools can assist in the front end of innovation by helping humans evaluate the dimensions of creativity, such as novelty, feasibility, and business potential. In addition to the above, GenAI can be used by teams and individuals, inside or outside organizations, to support idea refinement and collaboration. Humans possess immense creativity, but the challenge lies in simplifying and effectively communicating their ideas in written or visual forms. The future of innovation depends on our ability to nurture and safeguard human creativity.

AR - Reality Interface between Humans and Machines

Augmented reality (AR) enables a new information-delivery paradigm by superimposing digital 3D information into the 3D physical world of the user, which accelerates the learning and understanding of a specific task at hand. AR is powerful because it aims to reduce the cognitive distance (i.e., the gap between the form that information is presented and the context in which it is applied) and minimize cognitive load (i.e., the mental effort required to process a given type of information). Though still in its infancy, AR is poised to enter the mainstream - (HBR, Why Every Organization Needs an Augmented Reality Strategy, November-December 2017).

AR improves how users visualize and access information from smart, connected products (SCPs) spreading within our houses and workplaces - how we receive and follow instructions and guidance from these devices and even interact with and control them. For instance, AR experiences can provide contextual information in real-time, step-by-step visuals by displaying 3D content in the physical world. The chance of executing a task correctly for the first time and with less time sharply increases. At Boeing, AR training had a dramatic positive impact on productivity and quality. For example, trainees completed the work assembly of a complex aircraft wing section in 35% less time than trainees using traditional 2D work instruction, and 90% did it correctly for the first time with little or no experience.

How AR creates Value

AR creates business value in two ways:

1. by becoming part of the product themselves, and

2. by improving performance across the value chain.

The AR product feature plays a growing influence on design interface and ergonomics - how to convey important operational and safety information to the users becomes a key point of differentiation. Wearables such as smart glasses are a breakthrough that enables wide-ranging applications for all sectors. Manufacturers must carefully consider the disruptive impact that this next-gen interface will have on their product offering and competitive positioning. It’s critical to present 3D digital information in an easy-to-absorb way and act on it - simplicity is the challenge. Novel skills are necessary to create and manage the right content. Digital modeling capabilities and knowledge of how to apply them in AR are also essential. The powerful combination of AI 3D object detection/classification with AR technologies will unlock the highest value AR experiences for the users.

Cryptos, NFTs and The Uprising of Blockchain Innovation

In an even more globally connected world, the need for efficient ways to process contracts, transactions and to safely record and protect its integrity are essential to accelerate the future of an extraordinary digital transformation of the global economy - “Blockchain promises to solve this problem,” (HBR, The Truth about Blockchain, January-February 2017).

Think of blockchain as a public ledger that permanently records and verifies all the transactions (from the very first transaction). It’s the technology at the heart of cryptocurrencies, such as Bitcoin, Ethereum, Dogecoin, many other virtual currencies, and smart contracts of unique digital assets, called non-fungible tokens (NFTs). Blockchain generates a digital record and signature of every unique, validated, securely stored, and publicly shared transaction, which means a guarantee of traceable proof of ownership of assets. In this future digital world economy, individuals and organizations across the globe, machines, and algorithms would freely transact and interact significantly faster than nowadays banking and financial brokers. And that is the potential of blockchain, but foundational technologies like blockchain take several years to gain mainstream adoption as “the level of complexities - technological, regulatory and social - will be unprecedented,” cited in the HBR article above.

Patterns of Technology Adoption

Let’s review the adoption process of foundational technologies - TCP/IP, for instance, was introduced in 1972 as the basis for email among scientists on ARPAnet (the percussor of the commercial internet). It established a new paradigm for telecommunication architecture that removed the need for dedicated private lines and massive infrastructure. The initial adoption was slowly within the firm using “private network” then more broadly into the mainstream with the advent of the public web networks in the mid-1990s. Along the way, many new disruptive technologies (software, hardware, and services) were created to support the exponential growth. It took over 30 years for TCP/IP to reshape the economy.

New Architecture

Blockchain, a peer-to-peer network over the internet, was introduced in October 2008 to enable Bitcoin’s (the first cryptocurrency) decentralized transactions. Parallels between blockchain and TCP/IP are clear. A team of volunteers worldwide kept updating the open-source core software, and both unlocked new economic value by reducing costs. In a blockchain system, the public ledger is replicated across many identical databases, each hosted and maintained by interested parties. When change happens in one copy, it gets broadcasted and replicated in all other copies simultaneously. All take just a few seconds! Securely and verifiably.

A Framework for Blockchain Adoption

There are two contextual dimensions used to explain how foundational technologies evolves:

1. Degree of novelty, and

2. Amount of complexity and coordination.

Applications high in novelty and complexity take decades to gain mainstream acceptance but can transform the economy - like self-executing smart contracts. The stage of adoption typically happens in four phases:

1. Simple Use: those have low-novelty and low-coordination applications - better, less costly, and highly focused solutions.

2. Localization: high-novelty and low-coordination - specific, private decentralized apps on blockchain networks.

3. Substitution: low-novelty and high-coordination - Cryptocurrencies that aim to replace entire ways of doing business.

4. Transformation: high-novelty and high coordination - “smart contracts” their adoption will require significant social, legal, and political change.

Guiding Approach to Blockchain Investment

The easiest place to start is single-use applications (i.e., add bitcoin as a payment mechanism) that would reinforce the ecosystem of blockchain capabilities. Another would be using blockchain internally as a database for managing physical and digital assets. Off-the-shelf, cloud-based blockchain services are now available from start-ups and large platforms, making it easier to experiment. Transformative applications are still far away - businesses will need to develop expertise in blockchain programming and rethink their business models. Stand by playing small, developing the know-how to think and play bigger.

Ethereum - The Rise on Smart Contract and NFTs

Ethereum is one of the most popular blockchain networks fueled by ever increased new smart contract projects, such as NFTs marketplaces that allow digital assets to be uniquely owned, traded, and stored for value. It’s private, open, and transparent by default - accessible to everyone with the internet.

The creator’s idea was to allow anyone with internet access to build permanent applications (called decentralized Apps or dApps) that others can interact with but cannot change (e.g., a smart contract). The most popular dApps are NFTs - non-fungible tokens. They caught on among consumers, artists, and investors alike as valuable unique digital assets - i.e., luxury digital art like Kittys, Punks, or Apes, all traded on OpenSea.

Challenges

1. Potential conflicting objectives of regulation, decentralization, and the network’s primary value - its permanent integrity.

2. Other issues are the rising gas fee and slow processing time.

The Endgame

Speculation is high in NFT trading with fewer profitable opportunities - perhaps gains will be realized by the firms and technologies facilitating the trading (e.g., OpenSea, Rairble, SuperRare, and Coinbase) and NFTs interoperability across many different applications.

Innovative Cultures

Innovative cultures generate lots of tension (uncertainty and confusion) that needs to be counterbalanced by not easy-to-like-behavior, as explained in a recent HBR article - The hard truth about innovative cultures, p. 62-67, Jan-Feb (2019).

1. High-Quality Learning

2. Highly Disciplined Experiments

3. Research and Innovation

4. Collaboration

5. Cultural Flatness

High-Quality Learning

"You often don't know what you don't know, and you have to learn as you go." Rapid pivot from unsuccessful outcomes provides new ways of creating novel technologies or business models. For example, create simple prototypes that can validate a proof-of-concept and iterate new prototypes by applying the acquired knowledge and designs.

Highly Disciplined Experiments

One key takeaway is to select concepts that will yield the most learning value at the lowest cost, then establish clear criteria for deciding whether to move forward, modify, or pivot. Be more decisive on pivot early makes it less risky to try new things. It's necessary, though, that initially all ideas are considered, so during the initial exploration process, don't ask: "Is this true?" or "Is there data to support this idea?" but instead inquire: "What if this was true?" or "If only this were true, would it be valuable?" Cycle through more ideas more quickly (less than six months), and that cost less than $1 million. This disciplined process enables teams to laser-focus on the most critical technical uncertainties and to obtain faster feedback (i.e., move quickly in more promising directions). 

Research and Innovation

Encourage criticism of your ideas and proposals - as related in Eisenhower's biography, " ... we are here to get the best possible results." Learning from negative feedback to move forward to the next level. It's safe to speak up with candor: unvarnished honesty is critical to innovation; it fuels discovery and improves outcomes. Be frank and respectful to others. Another way is that leaders to demand criticism of their ideas from their direct reports.

Collaboration

The sense of collective responsibility from people working on collaborative culture is key to fuel innovation within the companies. Accountability drives cooperative behavior. One lesson comes from the Amazon AWS Head, Andy Jassy, when he sought help from internal Amazon technology teams and external partners to map out the requirements, problems, and needs of this new cloud service. - " For Jassy, collaboration was essential to the success of a program for which he was personally accountable."

Cultural Flatness

In a culturally flat company - wide latitude to take action, make decisions, and voice opinions are given to employees regardless of their positions. It promotes a rich and diverse source of ideas from a broader community of contributors. Yet, it requires strong leadership to set clear strategic goals and direction. It reinforces what was said in the above paragraphs about accountability to drive collaborative behavior.

Building a Culture of Originality

"Where everyone thinks in similar ways and sticks to the dominant norms, businesses are doomed to stagnate." Said Adam Grant in the HBR March 2016 - How to Build a Culture of Originality. The key lessons learned are that leaders need to sustain original thinking in their organization by given employees opportunities and rewards for generating ideas; vetting those ideas and selecting the smart ones; and ensuring a balance between cohesion and creative dissent.

Think Like the Enemy - Playing on the offense will force you to think differently and stimulate out-of-the-box idea generation and innovation.

Pursue Smart Ideas - Not every vote is equally valuable. Let fellow innovators be the evaluators of originality. Like in scientific publications, peers' reviews are more meaningful than the majority consensus or researching customer preferences that may be prone to confirmation bias (looking for information that supports one's view and rejecting the rest).

Got Cohesion and Dissent - Cultivate a culture of diversity to balance out strong culture with a steady supply of dissent (or critical) opinions. As in the navy's rapid-innovation cell, the norm is "loyal opposition" - i.e., creating an environment where employees feel safe to share critical opinions openly.

Here are four principles to keep cohesion versus dissent in productive tension:

1. Prioritize organizational values. Give a framework from where to choose between conflicting opinions based on the ranked core values and the company's mission.

2. Solicit problems, not just solutions. Thoroughly understand the problem first before exploring the solution space.

3. Don't appoint devil's advocates. Find them. Groups with diversity in thoughts, opinions, and experiences possess authentic dissenters that promote more - and better - solutions to problems.

4. Model receptivity to critical feedback. Leaders that infuse openness in sharing their weakness and encourage their people to challenge them out in the open are more successful in keeping (and flourishing) a culture of originality.

Power and Influence: What is Water?

An anecdotal picture of two young fishes unaware of their environment ("what is water?") typifies what is not such an uncommon outcome; we usually end up making a costly wrong decision because of an inability to scan the situation we are in and gather more information. 

Power is, in fact, a multidimensional and complex discipline that one might not think of in the beginning. And yes. Power can be exercised in those multi-dimensions using the various influence tactics (pathos, logos, ethos, might, agency, etc.). The organizational processes of the use of influence and power within an organization is usually an overlooked framework model that if explored could facilitate smart-decision making based on organization's business processes. For example, the Allison's models can help us understand the way of exercising influence. One particular theme that inspired me was the importance of trust and relationship, as illustrated in an HBR case. It was illuminating to see that employee selling his idea by framing in a way to get the boss' attention.  

Another classic HBR case talks about how one should be flexible and multifaceted, i.e., what to prioritize first, what will work, and how to reap the investments of relationships. It gives us an example of how important is to be flexible, prioritize the actions needed to get things done and be careful in balancing these activities to gain the others' cooperation.  The main takeaway from the case was the importance of flexibility, intentionality, and relationships. It also demonstrated how an ethical conflict in the decision making was resolved by using the  approach of  "comfortably weighing lesser evils."  The framework that underlies most of the work in power and influence is French and Raven (the bases of social power):

1. Reward power
2. Coercive power
3. Expert power
4. Referent power
5. Legitimate power

Big (Web) Data. How to start?

In today's rapidly changing business environment of high-tech companies, managers can't rely solely on “educated guess” or on analysis of historical data to drive critical business decisions on real-time without risk of misdirecting the company strategy and its opportunities. Yes, data are essential but too many data and complex statistical models that are not suited to C-suite executives had caused an understandably slow pacing in making substantial investments in data analytics. In an HBR article published in October 2012, titled Making advanced analytics work for you, a practical guide on how to start adopting data analytics to drive profitability is presented. Below is a brief summary of the lessons learned:

1. Choose The Right Data. Big data has to do with manage unstructured data coming from many sources, especially from social networks and the web. Leader companies must enable capabilities to mine, curate and do advanced data segmentation that matters to a specific business problem or opportunity. This is a very important first step to avoid a well-known “data-rich-but-insight-poor” syndrome affecting so many enterprises. For instance, perhaps a decade old, traditional statistical methods based on complex probabilistic models and historical data alone did well by helping executives understanding what's going on with their operations and by solving complex business problems in a generally slow-moving industry (e.g., manufacturing). Those same models are prone to fail in today's more demanding and fast-paced environment where high-tech companies compete. In an era of Facebook and Twitter, the company's product insights are on “unstructured data in form of conversation, photos, and video” as quoted in the HBR article cited above. More powerful APIs (Application Programming Interface) is transforming the way engineers and scientists are parsing data from multiple sources to build a real-time web app using modern technologies such as Node.js, Heroku, and Express. These insights are surprisingly relevant and actionable.
2. Building Models that Predict and Optimize
3. It is not about the data but the way you correlate them (e.g., apply advanced segmentation) to reveal useful information about key performance indicators (KPI). A model should always start from a business objective and a set of well-designed metrics that answer this specific business problem. This is also known as hypothesis-driven problem solving that are used by scientists.
4. Organizational Change. Here's a quote from the above HBR article that says: “... managers don't understand or trust big data-based model.” This is a result of a mismatch between company culture and its capabilities to use big data and analytics – the lessons learned here are to develop analytics that is actionable and embedded into a simple user interfaces for front lines and C-suites executives.

The era of data analytics is now. Be nimble and bold as a startup are essential for big companies aiming to leverage the benefits of big data and analytics. Get ready with a myriad of innovative algorithms by using machine learning running on the cloud, and soon they will become a decisive competitive asset.

Building a Learning Organization

Because of the intense competition among companies in the manufacturing sector, six-sigma and lean process were emerging tools applied to guarantee a firm's competitiveness on build quality, with minimum waste and fast products. Japanese had demonstrated superior performance when compared with their U.S. competitors on speed to market, design quality, product-design manufacturability, cost, and productivity. The key to Japanese success was the integration of its many business functions with product design and manufacturing process design. Typically, companies had attacked the problem with cookie-cutter approaches such as new tools for product development process aimed at quality deployment or Taguchi methods. Others more towards an organizational change and its ways of operating, e.g., favoring product-level organizational groups instead of functional-level divisions. The impact was dramatic on improvement on the marketplace but it also resulted in a systematic problem within those companies that have adopted these new solutions. Listed below are some of the common problems:

1. Organizational learning had dropped.    
2. Standardization became difficult across products.        
3. Matrix organization were functional and projects leaders are constantly disputing resources.

The HBR article (Another Look at How Toyota Integrates Product Development - Harvard Business Review @HarvardBiz) explores the strategies to mitigate these problems by taking into account how Toyota had managed its product development process. One lesson learned was that Toyota had maintained its functional organization while executing an impressive degree of integration. The managerial practices are six divided into two groups.

• Social process: mutual adjustment; close supervision; integrative leadership.
• Standardization process: standard skills; standard work processes; and design standards.

Mutual Adjustment. A number one factor for success is face-to-face interactions but many meetings result in a limited value-added work per person. At Toyota, those meetings are only held once major disagreements happened. Toyota enforces short, crisp, written communication among project teams by using standardized forms.\r\n

Mentoring Supervisors. Creates a deep functional expertise in its new hires.  At Toyota, managers are expected to continue honing their technical skills and to be deeply involved with the work of their subordinates.

Integrative Leadership. The goal is to have leaders with “big picture” mind-sets of the firm's mission. Their authority in these matrix organizations comes from their control over a particular project and from extensive technical expertise and prestige. The role of a chief engineer at Toyota is very important because they use its persuasive communication skills to push innovative designs and to create tension for balancing out functional leaders interests. At Toyota, the chief engineer provides the glue that binds the whole process together.

Standard Skills. Companies rely on its skilled workers to perform specialized tasks to bring products to market.  At Toyota, training within the company is a key competency. We have learned from previous readings (The core competence of the corporation) how important is a company to clarify its competencies to the entire organization so that people can support activities that reinforces the firm's competencies. It also creates competitive advantage for the firm in the marketplace that is very hard to copy by the competition. Toyota also had an approach to rotate people only within its core function. This resulted on less time and little coordination among functions because it enforces standard work from each function. The twist is to rotate broadly senior people among functions and encourage them to see the needs of the product as a whole.

Flexible work standards. The real world is messy... and people will resist to intensive planning and inflexibility. Instead, Toyota employed a highly consistent goal-based process with regular milestones (I really like this one!) that is consistent from model-to-model.  At Toyota, “standardized work plans are kept to a minimum”, it generally fits on a single sheet of paper. Toyota's on-the-job training creates a culture of deep understanding and learning across the entire firm. Another twist is the work procedures are owned and maintained by their users and departments, and not by a centralized staff.

Living Design Standards. The use of engineering checklists during design review meetings is a major tool for improving these face-to-face meetings and new products. But again these checklists represent current capabilities owned by the responsible designers, and not one imposed by a central staff. These checklists are living  documents. At Toyota, its rapid product cycles reinforces the frequent use of checklists and it also creates opportunities to learn and develop new skills. Overall, Toyota manages its product development as a tightly integrate system where each part reinforces one another. As seen in the article Competing on resources, Toyota's strategy on product development is to build a learning organization with unique set of resources and capabilities that is hard to be imitated by competitors.

They together reinforce one another and alone would accomplish very little. The managerial practices allow Toyota to achieve cross-functional coordination and build functional expertise. Surprisingly, Toyota bets on limiting cross-functional teams but added a number of twists to ensure flexibility needed in projects and the exchanges of ideas among them thus encouraging learning across the firm.

Timing was Right

Lafley’s strategy for P&G had been to focus on its big brands, including Pampers, Tide, and Crest to drive earnings. He had also focused on acquisitions closer to P&G core capabilities in hair and oral care than previous CEO who targeted diverse business opportunities outside P&G core competencies, including lams pet food, PUR water-filter, and proposals to acquire two large pharmaceutical companies. The SpinBrush product was indeed an unexpected success for P&G that usually charges its products at a premium. But SpinBrush reversed that thinking and helped P&G quick dominance of the (newly created) lower-tier market of electric toothbrushes. One main reason was SpinBrush being aggressively priced at $5 while most of the electric toothbrushes were sold at $50. This gap in the market was noticed by the entrepreneurs (who were external to P&G bias) and had shown that “not all great ideas originate at P&G.” They also knew that the timing was right for sell SpinBrush to P&G. In 1998, P&G had lost its market leadership to Colgate and would be very hungry for a new product to help them regain market leadership. SpinBrush had added $200 million in global sales for P&G and helped Crest return to its position as the No. 1 oral-care brand in the U.S., after two years losing the position to Colgate-Palmolive. Validation of SpinBrush in the marketplace was done diligently by the entrepreneurs. They closed a deal to sell the business to P&G in January 2001, after successfully sold 10 million units, i.e., 3x more than existing U.S. electric toothbrushes. SpinBrush typifies an implementation of discovery-driven planning as discussed in the articles: Innovation Killers, HBR January 2008 and Discovery Driven-Planning, HBR July 1995. They have committed themselves to make the SpinBrush costs $5 if it ended up costing $7.99 they wouldn’t have gone forward. It is also illustrative to think about the Kittyhawk case (HBS 9606088, October 2008) where HP was struggling to find a valid and profitable application for Kittyhawk, their new 1.3-inch hard drive that “leapfrogged ahead one generation beyond the 1.8-inch form factor.” They had traded everything to meet an aggressive schedule to launch Kittyhawk on time (12 months, from start to finish). They ended up with an expensive 1.3-inch driver costing $250 instead of an affordable driver that the market wanted for about $50. They should have used discovery-driven planning to revise their first assumptions and do a course correction on the project schedule and milestones. I believe that Kittyhawk would be better off if the venture had spun off from HP, and had followed similar steps done by SpinBrush’s entrepreneurs, including:

• Validate the marketplace
• Develop an exit strategy (e.g., sell the venture)

The SpinBrush was valuated at $475 million – $165 million (4X its prior sales of $43 million) was paid up-front with an “earn-out” payment in three years based on financial performance. The three also agreed to join P&G during the earn-out period to ensure the business stays entrepreneurial.

Proudly Found Elsewhere

“We were just blown away” ‒ said Darin Yates, a young P&G brand manager, enthusiastically describing, for his surprise, the consumers’ response about Crest SpinBrush at one focus group at Procter & Gamble Co.

The Yates’ statement gives us some insight into the P&G’s old culture (before Lafley era), and why SpinBrush was considered a very BIG surprise. P&G’s model was invent-it-ourselves, i.e., everything were produced and controlled step-by-step inside the company. This approach had strained the company capability to innovate fast-enough to sustain its high growth (from $25 billion to almost $70 billion in 2000). This fact had led P&G to lose more than half its market cap, stocks lid from $118 to $52 a share. A.G. Lafley was appointed CEO in June 2000, and had challenged P&G to reinvent the company’s innovation model and proposed a new concept for Open Innovation – Connect and Develop model (“proudly found elsewhere”). SpinBrush wasn’t invented inside P&G. It was developed by four entrepreneurs in 1998 with the idea of selling to P&G. They invested $1.5 million and sold it to P&G for $475 million. Three of them even became part of P&G payroll to shepherd the product. Their mission was: “… to not allow P&G to screw it up.” The SpinBrush marked a great shift in marketing strategy and product development for P&G. While most of the electric brush in the market were sold at a premium price starting at $50, the SpinBrush price was set at 10x less, costing to the consumers $5, or just $1 more than a high-end manual brush.

But still, other challenges related to P&G’s culture and processes. And the company ability to quickly adapt to this new competitive environment had posed uncertainty about if SpinBrush would or would not reach its potential once fully managed by P&G – “ … not sure you can teach an elephant to dance,” said the leader entrepreneur behind SpinBrush. Lafley’s goal to acquire 50% of P&G innovation from outside of the company represented his vision to balance internal core competencies on marketing and distribution with the velocity needed to gain market share – swiftly and cheaply – in an increasingly competitive, globalized market of consumer goods. Rightly, as a CEO, Lafley drove the culture change inside P&G to a more externally focused innovation model by promoting openness to external ideas, rewards speed of product development, thus favoring open innovation since it can move more quickly from product concept to marketplace.  Examples of Lafley’s laser focus on making P&G externally focused on innovation and encouraging speed to market were an acquisition of a moist toilet paper manufacturer to parry Kimberly-Clark product launch, and negotiations to outsource P&G back-office operation.

The Case of Lean Start-Up

Since the begin,  focus on experimentation and iterative design to make available “minimum viable products” and their use to gather customers’ feedback, and based your decision to “pivots” from analytics.  Learn every day for every interaction with users and adapt to meet what they are saying that matters (not boring stuff apply an innovation accounting). On May 2013, HBR magazine featured a cover article: “Why the lean start-up changes everything” by Steve Blank. The article offers an overview of lean start-up techniques and how they ignite a new entrepreneurial economy. By bashing old thinking that mandates ventures’ founders to have a polished business plan, which was usually written in isolation, and to operate their new venture in a “stealth” mode, i.e., they should only launch a product after years of development, with little if any customer input! Then, they should learn the truth in a hard way – their “customers” don’t want or need most of its product’s features. Unlearn …  to learn again. 

“Everybody has a plan until they got punched in the mouth” – Mike Tyson.

1. Forget about a business plan. Set up a discovery planning.
2. Try to forecast unknowns is a waste-of-time. Go for validated learning.
3. Prefer failing fast and continuing improvement of the initial ideas from revised minimum viable products.
4. Rethink to Win?

A start-up looks for a repeatable and scalable business model, and not for executing a model as a large corporation do.  Accept on day one that you have a set of untested hypnoses – and look for the answer to that single question: How my venture creates value for the customers and for itself? Test, test, and test your hypotheses with real customers, as Steve Blank proposed a “Get out of the building” approach. Then go into the Build-Measure-Learn loops fast and multiple times, and listen to your customers. The discovery is by testing your hypnoses and building a “minimum viable product.” Validate customers’ interest in your solution early on in the process of product innovation. Pivot and revised strategy as required. Create a customer base by raising your marketing and sales investments. Build a sustainable company for executing the model. Build software that matters. It starts with leaving the old thinking about operating in the stealth mode and orchestrated Alfa, Beta tests. Product innovation unleashes openness.  Large companies, including  GE, Intuit, and Qualcomm are already starting to implement the lean start-up processes and tools. The National Science Foundation created a lean start-up curriculum for scientists, called the Innovation Corps. These thriving enterprises have understood that: “Using lean methods across a product portfolio will result in fewer failures than using traditional methods.

A Model for Product Competition

Christensen Clayton's “The Innovator’s Dilemma” author has a theory for product competition. Products may pass through cycles of evolution (birth, growth, maturity, and demise). Although, researchers who support another method of a well-linked product lifecycle with the firm's marketing investment have challenged Clayton's model of product lifecycle of evolution. In this new theory, a product life depends directly on the firm continuous support and investment in that product category. A classical example of counteracting shorter product life cycle is Campbell's condensed soup. This effect was the strategic measure taken by Campbell soup company to sustain its legendary premium brand, Campbell's soup. But Clayton's theory about the regularity in how the basis of competition evolves has given us a deep insight how companies should make their investment dollars in product innovation. He claims that a shifted on the basis of competition is needed when the performance of a product overshoots the market ability to absorb. Those bases are divided into four dimensions: functionality, reliability, convenience, and price.

Its key to a sustained profitability and growth that the firm commits in the search for patterns in the product evolution and aggressively invest into replacing mature product by new ones with improved performance. The Clayton's model for product evolution is based on plotting two trajectories (technology improvement and market needs) over time and studying its intersecting trajectories, where technology improvement overshot particular tiers of market need segments and its ability to absorb any increased performance. Those intersecting points represent a shifting of the basis of competition into the next dimension, i.e., from reliability to price dimensions, which is illustrated in Exhibit 3, p.128 “Patterns in the evolution of product development.” But because of the multi-tiered characteristic of most markets, modeling a market-need trajectory by using simple linear regression is an oversimplification of a very complex, highly dimensional problem. (Actually, I am highly interested in this topic and how machine learning algorithms and analytics could drive more intuitive model for product innovation and development.)

Finding New Markets for Disruptive Innovation

Creativity in innovation plays a vital role in the success of a firm to introduce unique, new products and services into the marketplace. But these activities don’t need to rely always on good luck (although luck is essential). Clayton’s article “finding new markets for new and disruptive technologies” introduces three tools to help structure this creative process:
1. Shifting the basis of competition
2. Discovering what has been discovered
3. Discovery-driven planning

We have discussed before on shifting the basis of competition, let’s focus now on the next two tools. Discovering what has been discovered. The simple lesson here is to stand in a different place, which means step out of your comfort zone and interact with different groups of people, from unrelated fields of knowledge who would force you to think, literally … “outside-the-box.” So you could creatively adapt innovations discovered in a separate domain to be relevant and useful in the firm’s products. Discovery-driven planning is building plans to learn. It is a handy tool when uncertainty about a market condition in the near-future is challenging to assess. It usually happens when companies are innovating in emerging markets and managers can benefit from using discovery-driven planning to validate their assumptions that confirm acceptable ROI for the firm’s investment in their projects. A final note about creativity and business is a growing focus on redefining business model and how to transform ideas into innovation. Five years ago, I received by mail the call for the 2013 C2-MTL Global Conference with the tagline: Creativity is everybody’s business. I agree.

On Shifting the Base of Competition

The WSJ article of 2008 described the challenge faced by manufacturers in “crossing the chasm” of Blu-ray players to the high-volume profitable mainstream market. In 2008, average consumers (i.e., the early majority market) were resistant to switch from DVD to Blu-ray, even knowing about Blu-ray superior image quality. Some of the reasons were related to Blu-ray players’ higher price and the more expensive Blu-ray discs as compared to a regular DVD. Another factor was that most of these customers didn’t have yet an HDTV display required for harnessing Blu-ray players’ full benefits.

The article also discussed the difficulty of introducing disruptive innovation in the marketplace (for instance, Blu-ray technology), which reinforces the theories about “crossing the chasm” from Geoffrey Moore and “the innovator’s dilemma” from Christensen Clayton. Also as discussed in “finding new markets for new and disruptive technologies,” about shifting the basis of competitions, Blu-ray manufactures must employ several tactics to communicate the value proposition of Blu-ray to the mainstream customers through a well-integrated marketing strategy.  They should also orchestrate price cut to a level at which Blu-ray becomes very attractive to this significant market segment. Nowadays high-end Blu-ray models are sold for $100, and the actual price of an entry-level Blu-ray player had dropped from $230 to $50. Today Blu-ray discs are sold in the same price range as DVDs (ranging from $5 for classic titles to $25 on new releases). These developments on pricing were forecast by industry analysts, and it was fascinating to see in this article that in 2008 there were two leading competing technologies for high definition entertainment:

• Blu-ray;   
• HD-DVD.

Blu-ray won because it had a wide variety of Hollywood titles when compared to HD-DVD players. But there are two real threats for the Blu-ray full-adoption by mainstream consumers: the rise of subscription-based on the cloud of high-definition video streaming (e.g., Netflix, Vudu, Hulu, Amazon) and downloadable movies from Apple’s iTunes services and other online providers. Those alternatives represent the next wave of disruptive innovation to the high-definition entertainment industry. How about 3D, 4K, VR applications?