Innovation Perspectives - Desperate for Innovation

This is the fifth of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'What product or sector is in desperate need of innovation?'. Here is the next perspective in the series:

by Paul Hobcraft

When you look at the question posed it is clear to me the key word here is 'desperate'. What or whom is desperate for innovation? After such a seismic shift that has taken place in the recent period causing the global recession there is a really good case for many products, sectors or industries as all in need of fresh innovation but are they desperate? Most of us would immediately think of the automotive industry, the insurance sector, the banking and the home ownership sectors as 'primed' for desperate measures or more radical innovation thinking but after all the considerable bail-outs by public finance this seems not to have happened? So are they 'desperate' or just apathetic to making the changes felt necessary for returning to sustaining futures? Clearly time will tell on how the final consumer judges the 'revised' offerings from these sectors, in new products or services. Also time will tell if we see emerging different models to challenge existing players. It is then they become desperate because they don't seem to feel they are in that situation today, although many, including me, might disagree.

As Clayton Christensen outlines in his book "The Innovator's Dilemma", Harvard Business School Press, it is failure of companies to confront certain types of market and technological change, even what we thought were well run companies that surprise us when they do fail. When do they begin to fail, I think it is when they are not applicable to the future? Are we ready to ditch these sectors or the products, many bailed out, as we know them today? I'm not sure we are...yet.

We have lived through some exciting times for growth in the "Noughties", the first ten years of this century, and as we enter the "Teenies" we do not seem to be that well equipped as we would have liked to be, to tackle the wholesale changes society is expecting. Our past models are not sustaining us to take us forward. We have made this 'rod for our own backs' by producing thousands of competent managers, risk-adverse not risk-taking, with our business leaders continually look over their shoulders or in the rear view mirror who have become short term in most of their actions. Governments still take 'adversarial' positions. The end result of much of the activities of the past decade have led us to building a failure framework, one more sustaining old models and not ones that shift us truly up a gear or two into a new age of prosperity.

So I would argue we are in a desperate situation, but on a broader front than products and sectors alone. What I believe that need tackling through innovation is at a higher level, at the society level and this is where there is a truly 'desperate' need for fresh innovative thinking to sow the seeds of real, lasting change? Products and sector change comes as a result of this shift of focus to the higher level as it forms the 'call to action' framework.

I believe it is through social innovation we see the greatest desperation for change. We are faced with enormous challenges like aging populations, climate change, migration, social divides, chronic diseases, growing behavioral problems, diversity challenges in cities and countries, transitions into adulthood, addition, crime and punishment, learning disabilities, education inequality, conflicts and mutual resentment, rising long-term health related conditions, the effects of affluence and a greater search for happiness and community belonging. These are the truly 'desperate' areas of innovation need that should hold our attention.

It is in these fields that many of our existing models simply do not work well enough. We try to apply business models whereas we need to become more flexible, more imaginative and we need to think more deeply upon the factors that would allow innovation to be successful here.

These challenges have very different patterns of innovation; they are likely to have different motives, different mixes of commitment (voluntary, political and philanthropic) that call for even more complex relationships, different patterns of growth, often more resilient. Judging success will not be based on market share or scale but on a more contained need to overcome with imaginative solutions. We need to plan out different National Social Innovation solutions to tackle these immensely complex problems that only get worse without us turning our creative, innovative thinking upon. These are our pressing, more desperate, frontiers to tackle.

This social innovation space is the new frontier between civil society, government and business to find ways to solve common problems that require real innovation solutions. The positive news is that we are learning fast about the power of networks, different communication mediums and different processes to see some emerging solutions that must now shift from personal experimentation to community engagement ones . It is the power of combining the different players around these social issues and to find a new set of tools, new skills and new kinds of organizations that will occupy us in the years ahead.

Innovation is no more the 'nice to have' experiment it needs deeper understanding, a forward thinking for concept forming and then working them back to the issues on hand and applying novel solutions in many cases. By exploring the power of new combinations, using technology and having better social market understanding will give us a greater appreciation of the different aspects of innovation and how they can contribute so each player understands and does play their part, so we can begin to address these more pressing social innovation challenges that are certainly 'desperate' to resolve in the years ahead.

Perhaps as we enter the "Teenies" it is the right time; the time we start to grow up and understand what innovation can provide to us all so as to tackle those pressing social ills that need new thought and solutions.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'What product or sector is in desperate need of innovation?' by clicking the link in this sentence.

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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.

Detroit's Decline and Fall

by Rowan Gibson

In March 2008, British Airways discontinued its decades-old daily service between London Heathrow and Detroit. Not exactly world-shattering news, you might think. But BA's decision was quite significant. They made it because passenger numbers had dwindled so pathetically low that the flights were no longer profitable. It's just one of a whole kaleidoscope of symptoms that signaled the Motor City's dismal decline. Then, Detroit's "Big Three" automakers were forced to beg for billions in bailout money to stave off bankruptcy (although Ford opted out). Yet, as far as I can see, not one of them seems to have a credible plan for long-term viability. All of which begs the burning question: How could such powerful car giants ever get in this sorry state?

Over twenty years ago, auto-industry analyst Maryann Keller wrote a book called "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors". It recounts hair-raising stories of GM's arrogant excesses. One story involved a sales VP attending a regional sales meeting who insisted that his hotel room have a refrigerator filled with soft drinks. Since the hotel couldn't get the fridge up the stairs, GM's local people persuaded the hotel to take out the room's window and part of the wall, then use a crane to insert the fridge through the hole! Another story involved a junior GM staffer who was assigned to stand for ages outside a hotel in a snowstorm, just so he could be there to open the door for an assistant general sales manager who was flying in from Central Office. GM even bought one of the hotel elevators and blocked it off so that this manager would have his own private elevator to use. And, as if that wasn't enough, the kitchen staff was instructed to test his glass of morning orange juice with a thermometer because Mr. Important wanted it served at a particular temperature!

This was the kind of insane stuff that continued to go on while the Japanese were stealing percentage point after percentage point of GM's U.S. market share. Fast forward to today, and we found that the five best-selling automobiles in North America in 2008 were (in this order): the Toyota Camry, the Honda Accord, the Toyota Corolla, the Honda Civic, and the Nissan Altima. And, bailout or no bailout, the prognosis for Detroit was not looking good.

It seems the Big Three have taken an excessive, heavy-handed approach to almost everything they have touched over the last few decades. Including innovation. While Toyota, for example, took a careful, staged approach to building alternative powertrains (and scored big with its hybrid technology), GM famously blew billions of dollars on its massive but so far failed forays into electric and hydrogen-powered vehicles. In the late 1980s, Ford's top brass tried to push the company's engineers to be more innovative by setting up a high level "Committee for Creativity". Yet rather than making the cultural environment more conducive to innovation, this initiative actually had the reverse effect. When engineers were brought in to report to the committee, they found that they were being judged, criticized, and ordered to work on their boss's pet projects. It became just another example of the massive hand of authority imposing itself and intimidating people. Instead of fostering or facilitating creativity, the committee was trying to command and control it. No wonder the structure was eventually scrapped.

In 1994, I had a conversation with strategy guru Gary Hamel about the state of innovation in Motor City. His gripe was that 'there has not been one fundamental strategic innovation in the automobile industry in the last 40 to 50 years that has come out of Detroit'. A couple of years later, I related this to a former top manager at one of the Big Three. At first, his response seemed to contradict Hamel's view. He said, 'Rowan, some of the most important and innovative ideas in the auto industry came out of Detroit'. But then, with a look of deep frustration and despair, he added, 'Very few of them were implemented'. The reason? People couldn't get the resources, the investment and the support they needed to make their ideas happen. As The New York Times put it last year, 'GM's biggest failing, reflected in a clear pattern over recent decades, has been its inability to strike a balance between those inside the company who pushed for innovation ahead of the curve, and the finance executives who worried more about returns on investment.'

Of course, uncontrollable external events in the U.S. economy have rapidly worsened Detroit's woes over the past couple of years. But, let's be honest, the Big Three have been hemorrhaging billions of dollars for years. In 2006 and 2007 alone, Chrysler lost over $3 billion, Ford lost over $15 billion, and GM lost over $40 billion! Nobody can blame those numbers on the U.S. economy, because it was growing briskly for six straight years from 2001 through 2007, as were the sales figures of Detroit's Japanese and German competitors. Instead, the accusing finger is increasingly being pointed at the failure - particularly of GM - to successfully innovate; to continually come up with and commercialize new ideas (and new vehicles) that create meaningful value for customers.

GM candidly admitted this for the first time in a one-page advertisement that ran a year ago in Automotive News. In this open letter, entitled "GM's Commitment to the American People", the company frankly acknowledged that it had "disappointed" and sometimes even "betrayed" U.S. consumers with its lackluster products. Instead of innovating in response to shifts in the marketplace (come on, guys, the writing has been on the wall since the 1973 oil crisis, for crying out loud!), GM has been impossibly slow at adapting its cars to changing customer needs.

If, then, it's essentially an ineptitude at innovation that has driven Detroit's once-great industry leaders down the toilet, I would argue that companies of all shapes and sizes should sit up, take note and, more importantly, take action to make innovation happen inside their own organizations.

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Rowan Gibson is widely recognized as one of the world's leading experts on enterprise innovation. He is co-author of the bestseller "Innovation to the Core" and a much in-demand public speaker around the globe. On Twitter he is @RowanGibson.

Detroit, D.C.

by Steve McKee

Not a day goes by without more news about Detroit's beleaguered automakers. While each new development is notable in and of itself, I find it more telling to take a few steps back and look at the big picture.

Below are a few clips from selected Wall Street Journal articles I've run across over just the last few days. Take a minute and scroll through them. They tell a fascinating tale.

First, GM continues its inability to focus, revealing a growing lack of consensus between management and the board:

"In a dramatic change of course, General Motors Co. backed out of a deal to sell the company's European operations to car-parts supplier Magna International Inc., and now plans to spend billions to restructure the money-losing business itself."

"The decision...was made at a board meeting Tuesday in which the company's directors strayed from the plan of Chief Executive Frederick "Fritz" Henderson, who had spent months negotiating the Magna agreement."

"The Opel deal is the second major transaction to fall apart for Mr. Henderson in little over a month."

"Whereas Mr. Henderson's predecessor, Rick Wagoner, had often won in the boardroom by relying on the support of long-serving directors, Mr. Henderson appears to be tiptoeing through land mines of strong opinions by adjusting his game plan."

"Carl-Peter Forster, who worked for GM for more than nine years, is quitting as chief executive of GM Europe. The decision follows a vote by the company's board of directors on Tuesday to scrap a plan to sell control of the German Opel unit..."

"Despite his dissent of late, Mr. Forster was long viewed as a strong asset on GM's executive roster and his departure serves another blow to Mr. Henderson, who has seen his management bench shorten since the company's exit from bankruptcy."

Across town, Chrysler is making fairy-tale sales and market share predictions to try to convince investors (that means you, taxpayer) that it will repay the $9 billion it owes us by 2014:

"The company said it is counting on a slew of new models to spark a surge in sales over the next five years and drive its revival."

"Chrysler - which has seen its sales plunge by half in the last few years - predicted revenue will rise about 20% a year, from $42.5 billion in 2010 to $67.5 billion in 2014, and said it would break even in 2011."

"To hit its financial targets, Chrysler expects to double its world-wide sales, from 1.3 million cars and trucks in 2009 to 2.8 million in 2014, and predicted its U.S. market share will rise from about 6% in 2009 to 11% in 2014."

Meanwhile, Detroit's only private automotive company, Ford, has gone about regaining its focus, finding its nerve and sticking to its game plan.

"Last week Consumer Reports gave the company quality ratings comparable to those of Honda and Toyota."

"On Monday, Ford reported its second consecutive quarterly profit - and more impressively, a swing from a $7.7 billion cash burn a year earlier to positive cash flow of $1.3 billion in the just-ended third quarter..."

"The company gained a percentage of market share in the first 10 months of this year, no easy feat in an ultra-competitive market."

"The company's turnaround actually began three years ago with decisions that amounted to zagging every time that General Motors zigged, which was remarkable for a company whose strategy for decades was to follow GM."

"While GM kept its unwieldy assortment of eight brands, Ford sold Jaguar and Land Rover, cutting its brand lineup down to a manageable size."

"What's more, shedding brands and shunning the mortgage business has helped Ford focus on quality, where it had slipped badly early in this decade."

"Consumer Reports said last week that 90% of Fords, Mercurys and Lincolns rate average or better in quality, right up there with Honda and Toyota."

"When the economy recovers and car sales increase, Ford could be in great shape."

The automotive business is complex, but it doesn't have to be that hard. Focus, nerve, consistency, consensus - no matter the industry, all tend to diminish when growth stalls. And all are essential to getting it back.

At the moment, Ford is the only one of the Big 3 to be paying attention.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

A Fascinating Model for the Auto Industry

by Vyoma Kapur

When you hear the word 'crowdsourcing', what comes to mind? Most people list ideas, tee-shirts, logos and advertisements. If you are familiar with InnoCentive, the world's largest open innovation platform, you would know product development, design projects and campaigns can be crowdsourced too.

It was at the Business Innovation Factory conference earlier this week I first heard of a 'crowdsourced' car. Jay Rogers, the founder of Local Motors, amazed the audience with his story of launching a unique automotive business that taps into a community to design and develop cars through regular competitions.

Running Colspark LLC, a company that crowdsources for ideas and solutions, I certainly found this concept bizarre. A few questions sprung up. What is the community made of? How are the winners selected and rewarded? In what way are Local Motors cars different from regular cars?

Rogers explained that the Local Motors community consists of over 3,000 designers, engineers and car enthusiasts. Local Motors organizes monthly competitions focusing on making car designs 'local'. These competitions can focus on either the exterior or the interior of a vehicle. Community members pick up competition briefs along with engineering guidelines to create their designs. Submitted designs are critiqued and selected by the community, which keeps in mind which designs will fit best in which region.

Once a design gains enough popularity, Local Motors, after determining that it is 'manufacturable' and takes them to the next phase of development. The community is kept involved in every step of the developmental process.

Local Motors is, hence, dedicated to COOL - Community, Open, Ownership and Local. Its cars are built in regional micro-factories which are also picked by the community. Once design and engineering has been completed, members of the community are able to go to a micro-factory of their choice to build their own vehicle. With the possibility of such customization, Local Motors customers are able to develop cars with higher horsepower, greater fuel efficiency and have other advantages over regular cars.

The open innovation model has numerous benefits for companies that adopt it. The most apparent one is the output it helps create, in terms of both quality and quantity. In just a few years, Local Motors has built a repository of thousands of original car designs.

Another less apparent benefit pertains to marketing. By leveraging car enthusiasts, Local Motors effectively addresses the disconnectedness there tends to be between the automotive manufacturing industry and their consumers. In this day and age of consumer sovereignty, it is important to involve consumers in decisions that have a direct impact on them. The power of a community lies in its dedication to a brand, a concept or a company. Local Motors has benefited vastly from the word-of-mouth awareness generated by its community.

Being a huge believer and practitioner of crowdsourcing, I definitely see Local Motors going far. It has revolutionized the age-old car manufacturing process and sets an example of others in the industry.

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A marketing professional turned entrepreneur, Vyoma avidly supports and practices open innovation. Earlier this year, she founded Colspark LLC (www.colspark.com), a crowdsourcing platform to help companies tap into student talent for ideas and solutions.

Which is Heavier? - Car or Soft Drink Shipments?

by Stephen Shapiro

Last week I had a fantastic meeting with the CEO of a mid-sized energy company. We had a number of fascinating conversations ranging from Personality Poker, Open Innovation, and alternative energy.

In the meeting, I was drinking my "caffeine in a can" - a diet cola.

The CEO pointed at my soft drink and said that it was one of the worst energy hogs.

He pointed out that years ago, Coke was sold as syrup (in fact, it was originally sold for medicinal purposes). The carbonated water was added at the point of sale (e.g., the pharmacy or soda shop). Less energy was expended in the packaging process. Less material was used for the packaging itself. But more importantly, less energy was used in shipping.

After doing some digging, I found that, according to one website, 500ml of syrup makes the equivalent of 12 liters. That means that a can of cola contains <5% syrup and over 95% carbonated water. According to one study, nearly 300 billion liters of soft drinks are sold a year. Hoovers research shows that only 35% of that is from fountain sales.

Ok, so let's do some math.

A liter of soft drink weights approximately 1 kilogram. This means that a liter is over 2.1 pounds of water, and .1 pounds of syrup. At 65% bottle/cans (excluding the 35% fountain sales), this is over 400 billion pounds of carbonated water needlessly shipped with the syrup. Let's not forget the weight of the cans/bottles. To put this in context, this is the weight of 100 million cars. In 2007, 16 million cars, SUVs and trucks were sold in the US. Every car sold in the United States over the past 6 years weighs less than the weight of the excess water shipped EVERY year with bottled soft drinks.

Enough of the math. I could attempt to calculate the average distance the bottles travel and the amount of fuel required for transportation, but I just don't have the time. And I suspect you get the idea.

What do you do about it?

• Of course advocates are trying to reduce the amount of soft drinks we consume. But so far nothing points to that being a successful strategy.


• Encourage people to buy and use soda machines. There are several companies that provide this type of product. You buy the machine, the syrup and the gas cartridges.


• Another option might be to find a solution similar to Crystal Light "On-the Go." The challenge is adding carbonation to a powder. While eating Pop Rocks Candy the other day, I realized that there must be a way of addressing this.

Of course there are many more possible solutions. But the solution is not the point of this article.

Innovation is about asking better question. It is about surfacing the hidden assumptions. When looking at issues (environmental, business, or personal), sometimes you need to question everything...even the can of soda in your hand.

P.S. Soft drinks account for the largest percentage of the "liquid refreshment beverage" market. This article did not even include the oft-maligned bottled water industry, which is smaller in size. Do you want to know how far your bottled water traveled to go to you? Check out this article.

P.P.S. I am not suggesting we eliminate soft drinks. My consumption of diet cola - especially first thing in the morning - is one of my guilty pleasures!

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Stephen Shapiro is the author of three books, a popular innovation speaker, and is the Chief Innovation Evangelist for Innocentive, the leader in Open Innovation.