What do I mean by "the art of innovation"? Let's face it, innovation is another word for lucky guess. Sure there is a lot of hard work that can be done to make the guessing more likely to be "lucky" but it is still guessing. First, allow me to share what do I mean for innovation.
Innovation: an innovation is a better solution to a solved problem or a solution to a yet unsolved problem that can be monetized.
At this point I raise two controversial points:
- I compared innovation with lucky guessing
- I stated that innovation is only something that can be monetized.
Let' start with the guessing claim. Why is innovation so difficult? After all if all you are doing is solving a problem, it is just a matter of applying science to the problem. Be that as it may be, the guessing part is not in solving the problem necessarily but in finding the problem in the first place. That is unless your goal is to build a better mouse trap but that case has limited interests IMHO.
From this point on the reader should assume that I am focusing any further postings to the challenge of innovation according to the second half of the definition. A new solution to an unsolved problem. Therefore you have to identify the problem first.
Case and point? Twitter. Twitter has a problem, it cannot (as I write) monetize on its service yet. The problem is well understood but yet unsolved. You can solve it by trying existing solutions (build a better mouse trap) or you come up with a new approach. This is where the lucky guessing comes into play. Say that you have an idea on how to make Twitter profitable. It is innovative in the latter half of the definition therefore you are breaking new ground. How do you evaluate if your solution is going to be innovative? The short answer is that you cannot. The best you can do is remove as much uncertainty as you can, re evaluate and eventually face the dilemma whether you want to spend resources to try it out and get the feedback from your users, buyers and stake holders. That is the only thing that matter.
Sure I am oversimplifying things and sure you can make the claim that I am only thinking web 2.0 models but what product or business today is not tied to it in some way? Think about it. A barber shop can hardly afford not the have an online presence let alone any other type of business. Not to mention online entity such as Yelp that give your business an online persona whether you want it or not.
So Twitter monetization problem shows us that the challenge is that you cannot completely remove uncertainty from your innovative process in the confine of your lab or you would not be innovating in the first place. The answers are indeed out there.
Does this means that Twitter is not innovative? So far, it is not at least according to the definition I proposed above. It has the potential to be but they are not there yet. Why not? Simple, nobody knows what problem they are solving exactly. You do not believe me? Try to explain what Twitter is to someone who has never seen it before. Now try to explain what Facebook or Linkedin is to someone who has never seen it before. See the difference?
Is Facebook innovative? Well Facebook built a better mouse trap. MySpace was the innovative idea and they did have revenues and a well defined business model. As such both MySpace and Facebook are innovative according to the definition herein although as researcher I find it more interesting to study how MySpace came into existence than how did Facebook stole the show. Perhaps more importantly how did we all miss it? The all so famous "why did I not think of it?"
Let's do one more: was YouTube innovative? According to the definition, yes, by all means. They solved a well known problem and they did not just build a better mouse trap, they allowed the cost of sharing copyrighted material to drop to $0. As such they created value for their users and in turn they opened the door to monetization strategies including acquisition, as it were. In other words they broke the rules but gave users what they asked.
The reader should take a moment to ponder that innovation often *is* about breaking rules. We can have a whole other conversation as to which rules breaking behaviour is ethical and socially acceptable and which is not. Case and point the financial "creativity" in the real estate market we experienced in the last several years where banks, broker, realtors *and* buyers broke best practice (and common sense) for quick and easy profit.
This is a good point to address the second controversy, monetization. Sure there are plenty of researchers in the academia that may be displeased with my statement but the fact of the matter is that there is no "pure" research and therefore no "pure" innovation (as in "not tied to monetization") as long as you look closely enough at its dynamics for resource allocation.
All pure research is paid for by someone, a government grant, a private grant, tuition from students, etc. In any of those scenarios someone (or multiple someones) at some point in time sat around a table and decided which proposal to fund based on which one would bring more progress to humanity, whether in the form of knowledge or technology, or perhaps they decided based on some other parameters. My point here is that there was a decision process involved for resource allocation. In a nutshell, as long as you operate under scarcity you will run into money matters. Lets' see how.
Chances are that regardless of the parameters used, the research so funded will add value to the life of human being. How much value depends on the specific case of course but in case you did not noticed, we just proved my point with respect to monetization. How do you measure value objectively? With money, of course. This is the very basic of human social interaction since currency was introduced, whereas we are all decision agents operating under scarcity. We all have to decide what we are willing to give up from our quota of goods (tangible or not) in order to acquire a new something. Example: how much money am I willing to part in order to have the new iPhone 3Gs and what else will I not be able to afford as consequence of depleting my pool of cash. For most of us money is a finite set so every choice we make is driven by which goods do we want to acquire/use/enjoy and which we are willing to part or do without for a sensible amount of time.
My point? Even pure research is subject to the monetization model, whether explicitly or implicitly. So let's just embrace the fact that monetization matters and make it explicit.
Given the above, innovation in the private sector should never be disjoint from monetization. Sounds trivial but you will be amazed of how many companies are ignoring this simple fact. Case and point, Google (sorry guys, I love you but you need to hear this).
Google claims they are user driven when it comes to innovation. Sadly, they are not. What they do is a lot of technological innovation driven by statistical user analysis. That is a whole other story than being driven by users.
They claim they have so much data about what people do that they can ascertain if a new technology or product is worth developing. Yet, more than ten years since they started, Google has tons of products and virtually only one revenue stream. That is, they are still a one trick pony. You take away the search traffic and thus the ad serving business and they are gone. How can that be?!? Google has more PhD than NASA! Well simply put doing innovation based on statistical user behavior is like learning how to drive by looking at parked cars. It has its limitations. Sure you can tell a lot about the habit of drivers but that still does not teach how they do it or, more importantly, why they do it.
In conclusion we have established a constrained definition of innovation and we have shown how it actually encompasses research in both the private and academic settings. Further, we have shown that monetization must be one of the ingredients of innovation or you are very likely to engage yourself in an exercise in futility that can be quite expensive.
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This is a very interesting analysis. Thank you for the distilled definition of innovation. I have some rather undressed thoughts on this - see below (will have to break it in a few parts).
ReplyDeleteI would argue, that there is one important point that gets lost or hidden in your analysis. In a very simple model of innovation, we have two interacting entities: a start-up, and the consumer (i.e. the consumer pool). Your analysis implies that the process of innovation is more-or-less a process of learning, when you find and unsolved problem by studying the consumer pool (users), and innovate by solving the problem.
My point is, that this consumer pool is dynamic, it evolves over time, and it may evolve pretty fast during the process of innovation. Thus, the problem that you identified initially is not exactly the same problem that by the time you are about to deliver the result of innovation. Hence the start-up can easily miss the target, if it is not tracking the target carefully in the process of innovation. Moreover, our consumer evolves in part due to the interaction with the startup. To make observations we have to interact (or to watch someone else to interact) with the consumer, and this interaction leads to changes is not only in the startup entity, but also the consumer pool entity.
(to be continued)
Now, this mutual co-evolution of the innovator and his target customer has some very important consequences, of which I will mention only two aspects.
ReplyDeleteFirst, there is a speed of problem evolution vs. innovation development process. Obviously, any successful innovation has to be fast enough relative to the problem evolution, to be able to deliver a relevant innovation that can be monetized. I suspect, that this relative speed of problem evolution is highly variable from problem to problem, but I can't suggest a good matrix of contributing factors without sliding into tautology.
Second, it is the "strength" of the "innovator -> consumer" interaction, or even more generally, a nature of this interaction which contributes to the speed of interaction. What I mean is illustrated below when I compare Apple vs. Google innovation styles, we'll get there in a moment.
You can imagine an extreme case when the problem evolves way too fast for any reasonable innovator to catch up with it. And I suspect again, that our particular industry, i.e. computer (software + hardware) is in this particular category. Yet I will argue, that this is not an intractable situation.
In case when the "innovator -> consumer" interaction is not a major factor in the consumer evolution, i.e. if there are external factors beyond the startup (oil price, climate change, population density, competitor products, innovation in non-adjacent fields that affect the market), one can embrace the change by unleashing a co-invention, when the consumer is your active co-inventor. This is like perpetual beta of Google products and services.
In the opposite case the "innovator -> consumer" interaction is very strong, to an extend when by learning the consumer ways you are actually shaping up their demands and thus largely shaping up the problem. In this case, you can either try to carefully throttle down or to time the interaction, buying time for your team of innovators to come up with the next solution. IMHO, Apple is a good example of this approach: they keep in secret details about new hardware features in order to minimize customer expectations drift in the time between releases. Or you can again embrace Google's model when you go along with your customers, and let them continuously co-develop the product or service, under your certain guidance (if you already have in mind, where would you like your customer expectations to drift to).
Finally, the strength of this "innovator -> consumer" interaction has certain degree of controllability: in certain cases you can be secretive as Apple to limit this strength; in other cases there may be regulations in place that define the degree of transparency of the innovation process.
To summarize, I think that in many cases startups are to some extent forcing their customers to evolve, thus creating or shaping up the problem they are going to solve in the process of innovation. This may or may not be a deliberate decision. Having a strong influence on the customer base may be a god blessing, or may be just the opposite, depending on how controllable is the customer evolution process, and how observable and quantifiable is this evolution.
I agree with you on the view that things may change from the time you start the process and the time you set a path for growth on a well defined problem. I am not sure how much the process influence the users though. It is indeed possible that during the collaboritve invention process both parties (innovator, start up etc.) and the target users/buyers both learn important facts about the problem they are both focusing on that lead them to change. I would argue though that for the users is more of a process of refinment than change in that they ultimately undestand the problem better than anybody. Our research project did show though that users at time have a limited view of the problems they face often constrained by the existing tools. As soon as you introduce new tools that go beyond the status quo, they usually take off in new direction.
ReplyDeleteConceptually we are in agreement though I am glade that you have different views, that stimulate more thinking.