Escaping the Internet Commodity Trap

by Rowan Gibson

The Internet is like a black hole that relentlessly sucks in, digitizes and democratizes content of every kind. While that may be generally good news for consumers (hey, look at all the great stuff we can now get for free), it has turned out to be unbelievably bad news for the content providers. Ask anyone in the print media business, or the music business, or the movie business. For at least the last decade, industries that primarily produce content have been struggling hard to find a viable new financial model in a world where internet users (particularly the young generation) don't expect to pay for anything they read, listen to, or watch. As one popular mantra puts it: "Content is no longer king". The fact is, content distribution is now king. Power has shifted to the content aggregators - think Google, YouTube, Digg.com or iTunes - and to new media platforms like Amazon's Kindle reader or the Apple iPad. So how exactly are content providers supposed to make money in an era of rampant digital commoditization? The only option they have left is to innovate like never before; to reinvent their industry business models before they become obsolete.

I remember talking to Kevin Kelly, co-founder of Wired magazine, back in 1995 about the future of the Web. He told me he viewed the Internet as a "planetary-sized copying machine" and added that "trying to stop copying on the Net is impossible." Indeed, within a week of my latest book "Innovation to the Core" being published in Chinese, there were at least two websites in China offering a digital version of the book for illegal download. Consumers clearly win - why buy the physical book when you can get the digital file for free? But in terms of book sales and royalties, the author (i.e. me!) and the publishers lose out entirely.

That's why the book publishing industry is feverishly exploring a variety of new business models. One option is to sell eBooks direct to customers, cutting out middlemen like distributors and retailers, and building a community around the books and authors. Since eBooks have a relatively low price tag, the hope is that consumers will be willing to pay for the genuine article (a la iTunes) rather than download an illegal copy, especially if it comes with social-media-enabled tools that help them discuss and share the book with others. Another option is to make the eBook itself a richer multimedia experience (with audio, video, hyperlinks and so forth) rather than just a text-based medium. Instead of embedding all of these media in a single digital file (which would still be relatively easy to copy and distribute illegally), publishers could give consumers a code when they purchase the book that offers exclusive access to a dynamic, integrated online application environment.

A similar challenge faces today's music business. Over the last decade, music labels, retailers, and the artists themselves have seen their revenues fall off a cliff in an era when teenagers can - and do - get all the music they want for free. Last year, 95% of music downloads were still from illegal file-sharing sites. And although Apple is now the world's biggest music retailer, its iTunes store has never been a massive revenue producer. Instead, it simply serves as a provider of low-cost content for the iPod, helping to drive sales of Apple's premium-priced music player. So far, the latest trend - cloud-based, streaming music sites like Spotify, Rhapsody and Pandora - has not been very helpful to the music industry either. Until now, these sites have employed a free-to-users, ad-supported model which doesn't generate much money for the labels or the artists. As an example, it's estimated that a million plays of Lady Gaga's popular song "Poker Face" on Spotify only earned her a paltry $167.

Frankly, I'm not too worried about the artists because most of them make their money these days on concert revenue and merchandising, not on the sale of recordings. And since people go to live concerts to hear artists performing songs they already know, it's actually in the artists' interests to have their music distributed as widely as possible, even if it's for free, in order to generate a lot of fans. Yet what about the music labels? How can they possibly compete against free downloads? Only by finding innovative new ways to add value. That's what MusicDNA is all about. It's a new digital file format that contains not just music but additional content such as lyrics, images and interesting info like interviews, tour schedules, or updates to the artists' social network pages. Anyone who downloads the file illegally would miss out on all these extras. So MusicDNA offers hope that the industry can open up new revenue streams. It may also point the way forward for Hollywood studios as they look for ways to battle illegal movie downloads.

Another victim of the Internet commodity trap has been the traditional news media industry. According to a new survey by the Pew Internet and American Life Project, more Americans now get their news from the Internet than from newspapers, and three-fourths say they primarily learn of news via updates on social media sites like Twitter. So as readers (closely followed by advertisers) make a mass exodus from print to digital media, 'The Press' as we know it seems to be going the way of the dinosaur. In the face of mounting bankruptcies, mass layoffs and plunging advertising sales, some publishers have already thrown in the towel. As an example, McGraw-Hill recently signaled their despair by selling off BusinessWeek at the bargain basement price of less than $5 million.

So is there any hope for this ailing industry? Some think it might still be possible to go back to the old 'paid content' model. Rupert Murdoch, illustrious media mogul of News Corporation, has been making headlines over the last year with his plans to erect a pay wall around his media. And, if it works, others will almost certainly follow. An analogy could be the advent of cable TV in the 1960s and 1970s. At first, very few believed that anyone would be willing to actually pay for TV shows and movies after spending decades watching them for free. But today the average household in North America pays about $50 a month for Pay-TV, so why shouldn't the same principle work for the Internet? There is also new hope on the horizon in the form of emerging digital media platforms like Kindle and Apple iPad, that promise to bring fresh revenues to the news industry by charging readers to access publications in an exciting new way.

Gordon Crovitz, former publisher of the Wall Street Journal, has co-founded a company called Journalism Online to help newspapers find new payment models. These range from micropayments - where readers pay for individual stories - to "freemium" models like the one used by the Financial Times, where readers can view 10 free pages every 30 days.

One of Rupert Murdoch's properties, The Wall Street Journal already charges readers US$119 a year for an online subscription. The WSJ is also experimenting with a new kind of media mix that takes it beyond the written word. Last September, its Digital Group rolled out News Hub, a twice-daily video news series. In January The Wall Street Journal Network delivered a record 5.5 million streams, with about a million or so views being generated by News Hub. This February the group launched Digits, a video series focused on technology which streams live each weekday, and plans are now in the works for several other original live series.

As whole industries see their traditional business models sucked into the Internet commodity trap, their only hope of escape has become radical innovation. For content providers of every stripe, success and survival in the future will be based on the ability to fundamentally rethink, re-imagine and reinvent themselves by innovating around who they serve, what they provide, how they provide it, how they make money, and how they differentiate from the rest. Stewart Brand's maxim may have famously stated that "information wants to be free", which is at the heart of utopian Internet democracy, but the cold reality is that every business has to make money. That means that whether you produce books, newspapers, magazines, music, movies or TV shows, somebody somewhere has to pay somehow. Figuring out who that could be - and how the financial model would work - is one the greatest business battles of our age.


Related Articles - "Content is No Longer King" - Part 1 - Part 2 - by Stephen Shapiro


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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.

Video Interview - Eric Liu - "Imagination First"

by Braden Kelley

I had the opportunity to interview Eric Liu, author of the new book "Imagination First" at a book event last night. I'd like to share a video interview I did with Eric before the event:



Interview - Eric Liu - Author "Imagination First" from Braden Kelley on Vimeo.


If you prefer YouTube, I've split the interview into Part 1 and Part 2 there.

Eric Liu was interviewed on stage during the event by Warren Etheredge and I'd also like to share some of the key insights from Eric's talk at the event:

• We all have the capacity for imagination, but as we grow up we are disincentivized to share it


• We need to teach kids to have respect for limits and to stretch their imaginations by giving them activities with limits and inviting them to create within those limits


• We need to be careful not to strip out the play from education


• "Play matters" - leaning forward versus leaning back


• We should practice imagination in the same way that we practice music, sports, etc.


• There are two main enemies of imagination


1. Expert Knowledge (we know it already)
   
2. Fear (of succcess, of being exposed, etc.)


• How do we sustain imagination in our little pocket of the organization and then how do we infect others with it?


• Next time something bad happens, try saying out loud "How fascinating!", then allow yourself to detach and observe as you work toward a solution instead of getting stuck in a fear loop.


• We want innovation right now, but you don't get the fruit without first planting the seed


• We need to make education speak to students' and teachers' motivations - More "what if?" and less "what is" - More project-based learning


• Out of all of the practices in the book, the most important one is "Failing Well"


• We must learn to fail better each time
  
• True with entrepreneurs
  
• True with politics


• There is an art to failing


• Failure is the real "f" word in our society

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Fantastically, Brilliantly, Insanely Amazing

by Kevin Roberts

One thing about the January 27th launch of the Apple iPad clashing with President Obama's first State of the Union address was that they both focused on Jobs.

And check out the awesome enthusiasm Steve Jobs and his team have for their new baby in this video!





A lot of hype and hyped-up criticism have accompanied the launch of the iPad. Nothing new there. Apple attracted lots of criticism with the launch of the iPod in 2001 (total sales: 220 million) and the iPhone in 2007 (total sales: 34 million). They centered on a perceived lack of functionality. So it's not surprising to hear gripes that iPad doesn't support HDMI or Flash graphics, or have a built-in camera.

The critics have missed the point. The iPad is not a netbook or scaled-down laptop. In fact, it is only a distant relative to the traditional PC or Mac. Instead, its lineage is the DVD player, the VCR, the television set, the radio, the newspaper, the telephone, the telegraph. It is not a workhorse loaded up with functions and hardware. It is a platform for story-telling, interactive, personal and immediate.

The story of human technology is the relentless advance in the direction of greater utility, connectivity, immediacy, affordability and flexibility. The iPad represents a quantum leap in that direction.

We want to communicate with each other, cheaply and easily. We want information where and when we need it. We want to be entertained and to entertain ourselves. We want to get closer to the people and the things we love. The iPad promises to do that. Technology that fails to serve that purpose is just a gadget, suitable for little more than collecting dust.

There's an interesting blog post in the NY Times predicting that the iPad will become an irresistible toy for children because kids will love the tactile nature of the device (they love to jab at things!), 'painting' software allows for mess-free splatter, it's an ideal distraction for car trips, and the screen offers endless story opportunities. I couldn't agree more, but the author could go even further: They are pretty compelling reasons for adults to get their hands on an iPad, too.

Related Articles:

• Radical Innovation of Meaning


• Apple's Hidden Disruptive Innovation


• Insights to Drive Apple iPad Success


• Will Apple Introduce the Innovation Expected From Google?

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Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Will Apple Introduce the Innovation Expected from Google?

by Braden Kelley

Some great conversations have sprung up around my previous articles on the rumored Apple Tablet (iSlate). In the past I focused on what innovation Apple's potential tablet device might offer and whether or not Apple is likely to make the rumored first year sales projection of 10 million units.

A recent comment from "Marketing Department" brought up the topic of subsidies and whether or not Apple might be on the verge of introducing another business model innovation. So, in this article we'll dig a little deeper into that possibility.

When Apple launched the iPod, they introduced the iTunes business model innovation which turned the music industry on ear, quickly followed by the television and movie industries. Then Apple launched the iPhone and introduced the App Store business model innovation and introduced a new way for people to purchase software that the competition quickly rushed to copy. Now, what could Apple create with a Tablet device?

Well, obviously the App Store and iTunes will be present on this new device, and the iTunes Store will likely be extended to cover books, newspapers, and magazines. An extension of the iTunes Store is more of an incremental innovation. So what disruptive business model innovation could Apple do that would catch the competition off-balance?

Well, in my mind, Apple could very well launch the business model innovation that I expected to come with Google's Nexus One smartphone (but didn't) - shifting the subsidy model.

Currently, when a customer buys the Google Nexus One or the Apple iPhone, the mobile service provider subsidizes the cost of the device by about $325 in exchange for a 2-year contract from the customer. This ties the customer to the carrier for two years (and usually longer). I was expecting the Nexus One launch to include an unlocked phone that Google themselves subsidized in one way or another. One way could have been to pay the customer to use the phone on whatever carrier they wished by depositing money every month in a Google Checkout account based on ad views. This did not happen.

But Apple could take this idea one step further. Not only are they moving into the advertising game with some of their recent acquisitions, but they already have the incredible reach and product offerings provided by the iTunes Store and the App Store. While several people expect any Apple Tablet (iSlate) to have a retail price of $800-$1,000, a mobile carrier subsidy might bring it down into the $500-700 range. Might not Apple then be willing to subsidize it even further based on expected future media and content sales to push the price down into the $300-500 range and make it cost competitive with netbooks and the Amazon Kindle?

After all, Apple makes money (or could make money) in a number of different ways after the device purchase:

1. Applications (Downloads, In-App Advertising, In-App Purchases)
2. Media (Music, Movies, Television)
3. Books and Textbooks
4. Subscriptions (Music Streaming, Movie Downloads, Newspapers, Magazines, TV)
5. Advertising (TBD)
6. MobileMe

You could look at this very much like HP and their ink cartridge business. But how much of a subsidy could Apple offer?

Well, some limited data I found indicates that from this particular data set that the average iTunes transaction is $7 and an average of three transactions per month are made. That would equate to about $21 per month or $250 per year. So, what if you add in games, applications, and other content?

To keep the calculations easy let's say that the $250 becomes $500 when other kinds of content are added in, and using Apple's 30% revenue share, that would give an estimate of $150 per year per user. Yes, I know this is highly simplified, and from a small dataset, but we're just imagining possibilities not doing financial forecasts.

From this point, you could go two ways, look at this as a customer lock-in possibility for Apple and a potential perpetuity, or look at a fixed device life. Again, because this is only illustrative let's simplify and say that over four years Apple might expect (using this data) to earn $600 in revenue per device (excluding advertising revenue) and if Apple decided to dedicate 25% of this revenue to a subsidy, they could allocate $150 to bring down the cost of the device and the rest to go towards costs and profits. Throw in some advertising revenue for good measure, and maybe it makes sense for Apple to subsidize this new device by the $200 that might be necessary to bring the price to customer down into the $300-$500 sweet spot.

But how much of this revenue is incremental revenue? Will the device be an incremental purchase (an additional device people buy), or will it replace a Macbook, iMac, iPhone, or iPod purchase? Would it really make sense to do this?

Hopefully these quick and crude calculations have helped you to see why Apple might consider launching their own subsidy with their rumored tablet device (iSlate, iPad, iCanvas, iTablet, Macbook Slate, etc.) and why they might not. It will be rather interesting to see what they do...


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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

It's Not Rocket Science

by Stephen Shapiro

For those of you who asked, here is the video of my six minute speech at the TEDx NASA conference. Enjoy.

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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.

A Billion Views Cannot Be Wrong

by Kevin Roberts

TV will never die, YouTube will never kill it. YouTube (or its future manifestations) will never die either, TV will never kill it. We're in the world of and/and, where possibilities are not mutually exclusive and creative exposure is based on merit.

A couple of weeks ago, YouTube hit a billion views a day, and the inevitable happened. TV and YouTube are looking at working together. The Daily Telegraph says that the UK's Channel 4 is looking at a deal to sell its own advertising around its own content on YouTube and sharing the revenue with YouTube (read Google). It's like someone moving into your house, renting your living room unsolicited, and giving you a cut of the profits. And I say, good luck to them!!

The power is with the creative champions, and YouTube have proven to be just that. As Steve Jobs said, "creativity is just connecting things." YouTube have connected the techno-geeks, mobile phone users, and home movie recorders together like never before. Their revenue share model has been around for a while, and high volume users are already benefiting from a share of the profits. So why not a TV Channel? It's a Sisomo world, and the game has changed forever. Channel 4 are getting a second bite at their own content, and more importantly, integrating with other platforms online will drive users back to TV, still the focal point of living rooms around the world.

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Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Innovation Perspectives - Engineering versus Intangible Value

This is the first of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'Roadblocks and the Critical Relationship Between Marketing and Engineering in the Cause of Advancing Innovation'. To kick it off, here is my perspective:


by Braden Kelley

Let me start off by recommending that you watch the movie I've embedded, as it does a great job of describing how there is often an engineering solution to a problem and a marketing solution to a problem. This in part explains why there is often a tension between marketing and engineering when it comes to new product development - they see different solutions, assign value differently, and view success in divergent ways. So, please enjoy the video, and my article will continue below it:





So in the future, with the problem at hand, you might want to ask yourself - "Is the problem best solved by changes to the real value, redefining the intrinsic value provided, or a bit of both?"

Of course it is very hard for people to ask these questions honestly as they have a default response, but asking them in a cross-fuctional environment may yield a more holistic and informed response. And after all, many of the barriers that people tend to erect in the achievement of something are often because they didn't feel involved in the decision-making process.

So, what are some of the barriers that people erect in a sometimes tension-filled environment?

1. Isolation - You just avoid communicating with the other side as much as possible


2. Stonewall - You just do what you would do anyways and ignore the input from the other side


3. Passive Aggression - You consciously choose to behave in a way that will cause the effort to fail, so that ideally you get your way instead


4. Build a Fortress - You build complex written rules of engagement for your department saying that it has to be this way because you're too busy and these rules will help you be more organized


5. Omission - You take the inputs but then you don't do anything with them (marketing doesn't promote a feature, or engineering doesn't fully develop it

The biggest danger to the cause of advancing innovation when it comes to the engineering and marketing departments is that the relationship develops into one without constructive conflict and without healthy collaboration. For innovation to be repeatable in an organization these two sides must share openly, have their perspectives valued, and contribute to a conversation. Marketing and engineering hear different aspects of the voice of the customer in their interactions with them, and they approach solutions to problems in different ways.

I would even argue that there is probably no more important set of cross-functional relationships than those between marketing and engineering, and that their health will determine the future success or failure of the organization. The executive team should consciously monitoring the health of these relationships, because when they start pulling in opposite directions, the entire organization could be ripped apart.

What directions are these two organizations pulling in your organization?


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'Roadblocks and the Critical Relationship Between Marketing and Engineering in the Cause of Advancing Innovation' by clicking the link in this sentence.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Video Interview - Saatchi & Saatchi CEO Kevin Roberts

by Braden Kelley

I had the opportunity to interview Kevin Roberts, CEO of Saatchi & Saatchi at the World Business Forum this week at Radio City Music Hall in New York City. You can see the video interview here:





Saatchi & Saatchi is a well-regarded advertising agency and Kevin Roberts has a lot of great insight on the customer. In this short video we chat about the evolving relationship between customers and their mobile devices, the state of integrated campaigns with social media as a component, and about Saatchi & Saatchi's "Do One Thing" (aka DOT) campaign.

For those of you don't know, Kevin Roberts is a contributor here on Blogging Innovation.

What do you think?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

What's Your Blockbuster Strategy?

by Steve McKee

Six months ago the Blockbuster Video store a mile from my house closed. Last week, the store three miles from my house closed. I don't even know where the next closest location is, so I guess my family has rented its last Blockbuster video.

While I was surprised that both locations near me were shut down, I had read that Blockbuster recently announced it would be closing up to 40 percent of its locations in order to shore up operating profit and reallocate its growth capital. Whether or not the move will save the company is an open question, but it does offer a good case study of the never-ending cycle of creative destruction that continues every day in a free economy.

The video rental business has always been a game of distribution. A generation ago Blockbuster put thousands of mom-and-pop video stores out of business by offering better selection, efficiency and convenience. Today, Blockbuster is a victim of those same forces via a host of competitors, from premium cable to pay-per-view to Netflix to Redbox. As technology rapidly evolved, Blockbuster's bricks-and-mortar strategy increasingly looked like an anachronism.

The company is trying to evolve by experimenting with its own mail-order, online, kiosk, and even cellphone download options. But it may be too little too late. The lesson for those of us in other industries isn't if you live by the sword you'll die by the sword--in business, we all live by the sword. The lesson is no matter how big, strong and successful any of our companies may be, there are always competitors out there honing their blades. And their advances may not come from the avenues we expect.

Stay sharp.

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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.

Will the Flip be Flipped by the iPod?

by Braden Kelley

Apple's September 9, 2009 media event came and went with what most might call a whimper. There was no highly anticipated Apple iTablet, and the event served to mostly refresh the iPod line.

Lost in the disappointment over the lack of an Apple tablet computer introduction was a small, but potentially huge change to the iPod Nano.

A lot of other authors have written about how great the Flip video camera is, and how it disrupted the video camera market by introducing a smaller, simpler video camera that was 'good enough' at recording video, but made it much easier to get video onto the PC and onto the Internet. Today at Office Depot I saw an 8gb Flip for $199.

Now, the 8gb iPod Nano is $149.

So the iPod Nano is cheaper and a lot smaller. The iPod Nano also has an FM radio, pedometer, voice memo capability, built in special effects, and this thing called iTunes you might have heard of. Want 16gb of storage instead? A 16gb iPod Nano is only $179 (still less than an 8gb Flip). And if you're a Mac user you've also got iMovie and iDVD to edit and burn the videos when get to the Mac. Oh, and you can post them to facebook and YouTube too.

The video quality of the sample videos look 'good enough' and with its cheaper price, smaller size, and wider solution set, I would expect iPod Nano sales to rise and Flip sales to fall.

Sorry Cisco. It looks like you bought into the cheap, simple video camera space a little too late. But then Cisco wins even if the iPod Nano beats out the Flip because they'll sell more networking gear, so they are happy either way.

What do you think?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Do You Have Innovation Fatigue?

Interview - Jeff Lindsay of "Conquering Innovation Fatigue"

I had the opportunity to interview Jeff Lindsay, one of the co-authors of "Conquering Innovation Fatigue" about the recession, innovation challenges that organizations face, the role of government in innovation, and needs of the innovation workforce.

Looking across the broad range of our conversation, the importance of alignment is probably the thread that ties it all together.

My book review of "Conquering Innovation Fatigue" can be found here.


Here is the text from the interview:

1. What is the biggest challenge that companies face in the Great Recession?

Apart from looming external factors beyond their control, I would say that the biggest challenges that they can control are various combinations of fear and pride. Fear of markets, of change, of the unknown, etc., tends to paralyze at precisely the moment when vigorous action is needed. Pride also hinders needed change. When a company has unhealthy optimism in its business plan, in its intellectual property, in its market position, etc., it is likely to be blind to new opportunities and needed changes in its approach. Rather than blind fear or blinding optimism, improved vision can be achieved with what we call "healthy paranoia" on our blog (InnovationFatigue.com).


2. When it comes to people fatigue, what is the biggest challenge that you see organizations facing?

Withholding of important information is a key problem for organizations that are struggling with innovation fatigue. This can happen for a couple of reasons. When a company is struggling and seems to be in decline, some people find that what is best for their own careers is to lay low and only say what others want to hear. Rocking the boat with alternative approaches, bad news, or warnings is viewed as high risk. If a pet project faces serious challenges due to market risk, technical risks, or legal risks, people may not be motivated to challenge the momentum or raise red flags. Likewise, when a company doesn't properly value its innovation community or has broken bonds of trust and mutual respect, the"will to share" can be broken. Employees then may not only refuse to share their best ideas, but also their best advice, including warnings about technical or IP risks. In this case, some may simply play along and not have the courage to speak out where it is needed, for "the company doesn't want to hear my opinions anyway." For a few, it may be a passive-aggressive response, but for most, it is simply feeling that there is no sense fighting.

When the relationship between the company and its innovation community is healthy, the voice of the innovator is heard and people feel motivated to share and to challenge. Their interests are relatively more aligned with the interests of the corporation and are more likely to speak out and share the information needed for success.

My answer actually focuses more on organizational fatigue, but these personal aspects of organizational fatigue are probably where the bigger challenges are versus the internal rivalries and bad behaviors in the people fatigue sections of the book.


3. Where does the greatest opportunity lie for government to make a positive contribution to reducing innovation fatigue?

There are numerous opportunities here, ranging from taxation policies, government patent systems, regulations, and laws affecting university-industry relationships. But all of these could be addressed by the main recommendation we make to policy makers: "Listen to the voice of the innovator." Laws and policies should be considered in terms of their impact on the innovation community of the nation - not just the CEOs of the largest companies. We encourage government to have commissions or panels representing a wide range of innovators - the lone inventor, R&D managers, university professors, corporate innovators, small business leaders and entrepreneurs, etc., and certainly some CEOs - to gain perspectives on the often unintended anti-innovation consequences that government policies can have. This may be especially important to properly weigh various aspects of proposed patent reform, for example. I think government needs to more actively listen to the voice of innovators and understand the external innovation fatigue factors they face.


4. What stands in the way of many companies being able to deliver new innovations to market?

Poor internal alignment. It's a principle I try to teach in a lighthearted way with my cut-and-restored newspaper magic effect on InnovationFatigue.com, but it's a very serious issue. Alignment means that the behaviors of people throughout the corporation are aligned with the common objective of furthering the good of the corporation. Sometimes the culture of an organization or its performance management system rewards people for behaviors that aren't aligned with the long-term good of the company. Many times poor innovation metrics lead to activities and behaviors that game the metrics without advancing the corporation. Keeping the innovation community and other part of the organization in tune with the needs of the company requires broad communication, strong bonds of trust (the "will to share"), clear strategy, strong innovation systems, healthy metrics, good incentives, and broad cooperation across organizational boundaries. We address some of this in our chapter on the "Horn of Innovation," where we discuss the importance of broad internal feedback loops to keep the innovation community involved, in tune, and following the musical/corporate score.

As I say in my video about alignment and innovation, "If you're not aligned, you're skewed."


5. If you were to change one thing about our educational system to better prepare students to contribute in the innovation workforce of tomorrow, what would it be?

Strengthen reading and writing skills. These are foundational for so much. Without them, it's hard to innovate and hard to influence others for the social adoption aspect of innovation. Improved math and science skills would be a bonus, also.


6. What skills do you believe that managers need to acquire to succeed in an innovation-led organization?

Humility and concern for the people around them. That concern and humility will lead them to listen to the voice of the innovators in their organization and strengthen the will to share and the alignment of innovators with the needs of the corporation. Innovation is all about people. If leaders don't have their trust and respect, if they don't have their ears and their hearts, they won't have their minds.


As a special bonus, here is a video of Jeff Lindsay talking about the importance of alignment and doing a bit of magic:





What do you think?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

What are you doing to innovate for an obese America?

The Wall Street Journal reported this week on the huge price being paid in health-care spending due to America's rapidly expanding waistlines: $147B.

How are we as innovators leading companies to address this head on?

Lecturing, hectoring and "education" aren't changing what's on America's plate, or at least not quickly enough.

I recommend reading Hank Cardello's book "Stuffed: An Insider's Look at Who's Really Making America Fat." As a former exec at Coca-Cola and General Mills, he knows the institutional challenges of bringing Health & Wellness (H&W) innovation to market. He also has smart strategies for overcoming them.

Similarly at our firm, we refuse to give up on major Food & Beverage (F&B) category innovation that improves health.

We're especially excited by five H&W vectors we believe are poised to explode in F&B innovation. We advocate innovating with...

1. The Pleasure Principle - Healthier food that tastes better than not-so-healthy choices


2. Next-Wave Hybrids - Transferring ingredients from one F&B use to another to improve H&W outcomes


3. Ancient Natural Miracles - Going beyond green tea into previously obscure Asian fruits, cocoa and more


4. Process Leaps - Skipping incremental change to create a whole new thing, made a whole new way


5. Right For You = RFY - Appealing to needs for individuality, authenticity and community around food choices

Our 4-minute video "Beyond BFY: The New Spectrum in Heath & Wellness Innovation" outlines these vectors along with current and upcoming examples:





Eager to learn what you're exploring to grow your bottom line whilst shrinking America's bottoms!

---

Joy Bergmann is Communications Director at innovation consultancy Fahrenheit 212 in New York.

Importance of Recognition to Innovation Success

Interview - Adrian Gostick of "The Carrot Principle"

I had the opportunity to interview Adrian Gostick, one of the co-authors of "The Carrot Principle" about the importance of recognition to successful innovation efforts.

Because innovation comes most often from engaged employees, recognition is key to moving employees from marking time to making innovation.

My book review of "The Carrot Principle" can be found here.

Here is the text from the interview:

1. Do you feel that companies should incentivize innovation?

Absolutely. We studied 200,000-people for The Carrot Principle, and a simple truth we found in that data is that people do more of that which is rewarded. If you want great customer service, you find, reward and publicize people who go above and beyond in serving your customers. If you want innovative products, service and solutions, you reward that behavior. It's a no-brainer, but rare is the organization that actually puts this in place in a formal way.


2. How do you recommend that companies think about incentivizing innovation?

Xcel Energy is a great example. This energy company in the West has 10,000 employees. They tried the old suggestion boxes, which got stuffed with gum wrappers and suggestions such as "why don't you pay me more." Instead, they used recognition to drive great ideas. The year we studied the program, they saw 7,500 ideas come into the recognition-based innovation program, and more than two thirds were implemented for a $17 million savings to the organization. They recognized every idea that came in with a very small token. If the idea was accepted, it received a slightly larger recognition award. But if the idea was implemented and saved the company money, the innovation received a third, much more substantial recognition award (from a selection of merchandise awards), that was commensurate with the achievement. So they used recognition three times on great ideas, and the results speak for themselves.


3. What do you recommend that companies keep in mind when recognizing innovation achievements?

Don't make things too complicated. A lot of recognition has to be approved by a committee and takes months. Give idea generators instant thanks. Next, make sure the awards are equal in value to the accomplishment. We've seen organizations where every idea gets a gift certificate to Dairy Queen (seriously). So the guy who comes up with the innovation that makes the company a hundred grand in new revenue gets the same reward as the person who cleaned out the supply cabinet. This happens all the time. Finally, make sure you are publicly recognizing your innovators. Many managers keep recognition in the shadows because they are afraid of jealousies on the team. Nothing could be more dangerous. Employees know who the innovators are on the team, and if you fail to recognize them you fail to show what we consider "excellence" around here. And you will eventually stop getting good ideas from your stars.


4. Anything you would like to say on the topic of recognition and innovation?

Be frequent in your praise as people are developing ideas. Keep letting them know their efforts are appreciated in specific ways. But when they achieve, make sure they get a reward. We praise effort, but we reward results. Get that right, and you'll keep innovating on your team.


As a special bonus, here is a video of Chester Elton (the other co-author) giving the highlights of "The Carrot Principle" (click on the box if you get a black box):





What do you think?


Braden Kelley (@innovate on Twitter)

incentive2innovate Conference Wrapup

I just returned from a great experience at the incentive2innovate conference at the United Nations in New York City. Hosting the conference at the United Nations seemed appropriate given that it was a gathering of people who are trying to change the world. The percentage of people representing non-profits and social capitalist organizations was much higher than I expected, and it made for fascinating discussions. The conference was hosted in a gigantic conference room at the United Nations where UN delegates recently discussed the current economic crisis and debated potential solutions.

The conference was a combination of keynotes, panel discussions, and group breakouts where the groups debated one particular topic and brought their collective reactions back to the bigger group. There was a high level of interaction between participants during the various breaks and meals - with the public, the private, and the charitable all coming together for some interesting conversations and debates.

I had the opportunity to record the following video interviews to share with you:

• Dean Kamen - Founder of DEKA Research and FIRST


• Alpheus Bingham and Dwayne Spradlin - Innocentive Founder and CEO


• Charlie Brown - Executive Director of Ashoka's Changemakers


• Neil Blakesley - VP, Strategy Marketing and Propositions for BT Americas

I have also published a collection of blog articles that highlight the top insights from the various sessions:

• Peter Diamandis and Matt Bross


• Keith Ferrazzi and Don Tapscott


• Tool #1: Open Collaboration


• Tool #2: Incentivized Competition


• Healthcare Industry Applications


• Reid Hoffman of LinkedIn


• Creating an Innovation Culture in Your Company


• Global Development and Partnerships

Here is a video from the Xprize Foundation from the conference to give you a quick inside look into what the conference was like:




I thought that incentive2innovate was a great conference and that the Xprize Foundation organizers put on a fantastic event in a historic location. But, I'm not sure how they can put on another compelling event next year without expanding the focus of the conference. Given the large number of social enterprises, charities, and NGO's at the conference this year, that might be one direction to go - "Innovation for the Greater Good." For people interested in this topic, I encourage you to download and read my white paper "Charitable Innovation - Disrupting for Good."


What do you think?


Braden Kelley (@innovate on Twitter)

Video Interview with Charlie Brown of Ashoka's Changemakers

I had the opportunity to interview Charlie Brown of Ashoka's Changemakers at the incentive2innovate conference this week at the United Nations in New York City. You can see the video interview here:





Ashoka's Changemakers is a community of action where people can collaborate on solutions. The community provides the platform for people to attack projects one idea at a time as they attempt to solve the world's most pressing social problems.

The goal of the community is to create a community of people willing to share solutions that have value as is or that can be built upon to create leverage beyond the benefits created by the original contributor.

Community members talk about issues, share stories, mentor, advise, and encourage each other in group forums. Ashoka's Changemakers also partner with other foundations to offer challenges to the community.

Their mantra is "Everyone is a Changemaker."


What do you think?


Braden Kelley (@innovate on Twitter)

Video Interview with Dean Kamen of DEKA Research

I had the privilege of interviewing Dean Kamen of DEKA Research and FIRST fame at the incentive2innovate conference this week at the United Nations in New York City. You can find the video of our conversation here:





I was pleasantly surprised that Dean Kamen draws the same distinction between invention and innovation that I do. We had a great conversation about the challenges of taking a technological invention and overcoming cultural resistance to achieve a true innovation. Dean Kamen spoke about how really important technology inventions take twenty years or longer to be accepted by society.

We also spoke about the importance of efforts like FIRST and of making math and science fun and mysterious for kids, and about how the pace of technological invention is speeding up but potentially the ability and willingness of people to absorb it is slowing down.


Please check out the video and let me know what you think.


Braden Kelley (@innovate on Twitter)

Video Interview with BT Americas' Neil Blakesley

I had the opportunity to interview Neil Blakesley of BT Americas at the incentive2innovate conference this week at the United Nations in New York City. You can see the video interview here:



Here are the questions I asked him:

1. What do you see as the most exciting innovation in telecommunications to reach businesses in the next 12-18 months?


2. What have been some of the greatest successes that BT has had outside of the UK and how did innovation play a role?


3. What do you feel is unique about BT's approach to collaboration and innovation?


4. Do you feel that incentives have a real impact in stimulating innovation?

The biggest takeaway for me was that even if you design the greatest approach to internal or external open innovation ever seen by mankind, it will still be important to try and keep it fresh for people so that participation can be sustained.


What do you think?


Braden Kelley (@innovate on Twitter)

Video Interview with InnoCentive Founder and CEO

I had the opportunity to interview InnoCentive founder Dr. Alpheus Bingham, PdD and InnoCentive CEO Dwayne Spradlin at the incentive2innovate conference this week at the United Nations in New York City. You can see the video interview here:





Here are the questions I asked them:

1. In your view - What are the greatest strengths of the open innovation movement?


2. Do you feel that open innovation will face its own s-curve of declining interest and decreasing submission quality over time?


3. Where do you think the greatest opportunities lie for open innovation in the future?

Open innovation is a fascinating topic, and it will be interesting to see whether or not companies are able to adapt to expanding innovation beyond their own payroll. Doing so will require companies to master a new competency, and potentially organizations that do not adapt to the new potential of partnering to innovate will be disrupted by new entrants who do.


What do you think?


Braden Kelley (@innovate on Twitter)

Did you miss Dan Ariely at the World Innovation Forum?

If you happened to miss Dan Ariely's talk at the World Innovation Forum (which was quite good), I managed to find two videos from TED that taken together comprise most of the talk he gave.


Video #1 - "Dan Ariely - Are we in control of our own decisions?"




Video #2 - "Dan Ariely - Our buggy moral code"




You can find my Top 10 Insights from Dan Ariely's talk at the World Innovation Forum along with the slides from the presentation.


Braden Kelley (@innovate on Twitter)

Seth Godin on the Tribes We Lead

You may have heard about Seth Godin's concept of tribes. Well, here is a video from the TED conference that lays it all out:



As we move on from the mass marketing epoch of history, we move into an epoch where there will be many tribes, organized around different interests, that will be looking for leaders and ideas that they believe in and actually want to promote.

When you are looking to affect change - Can you find the heretics? - The people who are not "sheepwalkers" (half asleep and following along) that will help to lead a movement


The flow of the tribe methodology boils down to:

1. Telling a story to people who want to hear it
2. Connecting a tribe
3. Leading a movement
4. Making change


Properly pulled together, you will be left with a product or service that has a story to tell. A story that the consumers of that product or service will love to tell for you.

How to Change Everything

When looking to affect change you must ask these three questions:

1. Who are you upsetting?
   (If you're not upsetting anyone, you're not changing the status quo)


2. Who are you connecting?
   (A lot of people are only in it for the connections)


3. Who are you leading?
   (Without a clear focus on this, change won't come)

Tribal leaders CHALLENGE the status quo, they build a CULTURE (defining who's in or out), they have CURIOSITY, they CONNECT people, they have CHARISMA (this comes from being a leader), and they COMMIT to the cause.


So, what do you think?


Braden Kelley (@innovate on Twitter)

Interview and Book Review - Ric Merrifield, Author of "Rethink"

I had the opportunity to interview Ric Merrifield on camera about his new book "Rethink" and here are the questions I asked him:

1. What inspired you to write Rethink?


2. What is the key insight you want to share with this book?


3. What is the most common mistakes people are making in cost cutting mode right now in this recession?


4. What is the most common barrier to innovation that you encounter in your work?


5. In your opinion, what recent innovation (or area of innovation) has the most intriguing potential?

"Rethink" arrived in my mailbox a couple weeks ago and after completing it, overall, I would give it a thumbs up.

For me, the second half of the book was the most interesting part. The case studies were good, and I felt they brought the book's thesis to life. While I found myself thinking about core competencies and value curves when I was reading the book, I could also see how creating 'what' heat maps would integrate quite nicely with other business frameworks like these. They all fit together.

Looking back at my experience of reading the book, my favorite chapter was the 'Key Concepts' chapter. Personally I feel that all too often, the authors of business books spend too much effort expanding a single insight to the requisite thickness, only to omit a proper summary or useful cheat sheet that the reader can go back to for easy reference. The 'Key Concepts' chapter also gives you a glimpse into the level of detail and complexity that these 'what' heat maps actually deliver in practice. I had the opportunity to see one in all of its glory in Ric's office, but there are supposed to be some examples in color at http://www.rethinkbook.com.

So, if your organization is seeking to escape the 'how trap' and refocus its energies on identifying the 'what' changes that will have the greatest impact, I encourage you to check out "Rethink" by Ric Merrifield.

I would be interested to hear what you think of the interview and of the book. Please post a comment with your thoughts.

Braden Kelley (@innovate on Twitter)

Sources of Innovation - Invention versus Discovery

One theory of why there is more innovation in a downturn comes from Professor Dominic Houlder of London Business School. It goes like this:

There are two main sources of innovation - invention and discovery.

Discovery as it relates to innovation is analyzing where customers are being over-served and where they are being under-served. Discovery is teasing out what needs customers have surpressed during the boom times for a myriad of reasons, and identifying ways to better serve customers. The firms that get this right during the downturn are the firms that are likely to emerge strongest out of the downturn.

For more detail check out the video:



So, now that you are less busy filling customer orders. Are you using that time to innovate through discovery or only through invention?

Where will your next innovation come from?

@innovate

Celebrating 20 Years of the Internet

To celebrate the twenty year anniversary of the Internet, here is a video of Tim Berners-Lee talking about the birth of the Internet and where things may go from here.

For his next project, he's building a web for open, linked data that could do for numbers what the Web did for words, pictures, and video - to unlock our data and reframe the way we use it together.

Check it out:



What do you think the future of the web holds?
(please add a comment)

@innovate

Trickle-Up Innovation

Trickle-Up Innovation is a topic you will hear more and more about.

Innovations currently tend to be commercialized in the developed countries and then distributed in the developing world. Trickle-Up Innovation turns that model on its head by commercializing products or services in developing countries and then adapting them for the developed world.



Trickle-Up Innovation does not displace the traditional dissemination patern, but instead provides another option for innovators to consider when looking at commercializing their ideas.

One reason that Trickle-Up Innovation will find increasing adoption is the fact that innovative products and services tend to initially be adopted by those with the greatest pain.

Another reason that companies will expand their innovation strategies to include Trickle-Up Innovation is the fact that often the breakthroughs that drive innovation come from working with extreme users.

Extreme users and those with the greatest need for an innovation are equally likely to be found in the developing world as in the developed world - opening the door for Trickle-Up Innovation.

Where will you find innovation?

@innovate

For more information, see Fast Company's article or BusinessWeek's article on Trickle-Up Innovation.

Sixth Sense

You may have seen a video I posted about a wearable computer designed by some MIT students.

I just came across a TED talk from Pattie Maes that explains the details of the innovation you saw in that video, while also showcasing more of what the technology is capable of and what the device costs to build with off the shelf parts. It's definitely worth a look:



Do you think people will want to wear something like this around?
(post a comment)

@innovate

Charlie Rose Interviews Evan Williams of Twitter

Charlie Rose interviews Evan Williams, CEO of Twitter about the service and its effect on Internet usage, and the future of the company.

The most interesting point he makes is about how strong the developer community is, with at least 2,000 applications and growing, and how they plan to develop the service from a usefulness perspective.



Will Twitter survive as an independent company?

What do you think?

@innovate

Charlie Rose Interviews Reid Hoffman of LinkedIn

Charlie Rose interviews Reid Hoffman, CEO of LinkedIn about the future of technology and social networking, and discusses with him the differences between LinkedIn, Facebook, and MySpace.

The most interesting point he makes is that while tolerance for risk and the ability to manage it are key skills for entrepreneurs, we are all entrepreneurs now. By that he means that each of us is now responsible for managing our careers and keeping an eye towards finding that next job opportunity to further develop our career.



What do you think?

@innovate

Creative Cultures - Making Innovation Work

I found an interesting video of Professor Paddy Miller talking IESE's program Creative Cultures: Making Innovation Work. The video talks about the importance of innovation in our current global economy and the challenges in making innovation permeate the organization.



"Much of the innovation industry talks recycled platitudes: the real secret is that innovation is more about business culture than it is about brainstorming ideas. A culture of innovation is driven by the individual. It's instilled in an organization by small teams working together day to day."

- Paddy Miller, IESE Professor


What do you think?

@innovate

Arthur Benjamin and his Amazing Mathemagic

Here is an interesting video of mathemagician Arthur Benjamin races a team of calculators to figure out 3-digit squares, solves another massive mental equation and guesses a few birthdays. He tries to show you how he does it at the end, but I still can't imagine being capable of replicating the amazing feats he pulls off.

You have to check this out:



What do you think?

@innovate

David Merrill Demonstrates Siftables - The Toy Blocks That Think

Here is an interesting video of MIT grad student David Merrill demonstrating Siftables -- cookie-sized, computerized tiles you can stack and shuffle in your hands. These future-toys can do math, play music, and talk to their friends, too. Does this technology have any promise as an alternative human-computer interface?

Check it out:



What do you think?

@innovate

Interesting Wearable Computer from MIT Students

Here is an interesting video of a wearable computer from MIT students.

Enjoy!



What do you think?

@innovate

Visual Explanation of the Crisis of Credit

Here is a great visual explanation of the crisis of credit from Jonathan Jarvis. Apparently, he created it as part of his thesis work in the Media Design Program at the Art Center College of Design in Pasadena.

Enjoy!


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

What do you think?

@innovate

iPhone Pro in June 2009?

Ok, it was a year ago now that I started making noise about the iPhone Pro that I expected to arrive, based on the underwhelming iPhone 3G launch.

I, of course, thought that the iPhone Pro would make its appearance by Macworld in January (not the iPhone Nano thought other people were suggesting would be introduced), but neither was released as Apple announced that the iPhone was on a June annual release cycle.

Now it's February. The speculation is mounting on what Apple might release in June. Some people are theorizing that Apple will introduce a new $99 iPhone.

I can see a $99 iPhone happening, but I'm not sure I can see Apple investing in building an entirely new design to sell at that pricepoint, given the limitations that the iPhone 3G already has.

Apple will definitely introduce a new iPhone in June, but I still believe it will be a new high-end design, not a new low-end design. If there is a new low-end design it will, in my opinion, only be modestly different than the current iPhone 3G.

Instead, Apple will be looking to reclaim its design leadership with some new capabilities to delight customers, and to provide application developers with some new possibilities. In the past year the Blackberry Storm, the 3-megapixel Sony Xperia X1, the 5-megapixel Nokia N97, and the 8-megapixel Samsung Memoir have all come on the scene to provide attractive alternatives to the iPhone.

I still believe the main new features will be a 5-megapixel swivel video camera (or a front/rear facing camera combo) and a video iChat application for the iPhone Pro.

As a recap, here are the features that I predicted almost two years ago for the third version of the iPhone (noting those achieved), which I now believe will be the iPhone Pro that will launch in the June timeframe:

• 5-megapixel swivel camera (or paired with a 2-megapixel screen-side video-enabled lens)


• Video iChat capability (iChat AV)


• Next generation Bluetooth


• DONE - Bluetooth 2.0 + EDR


• A slightly bigger screen (every millimeter counts) - if the bevel can be reduced


• 16gb or 32gb of flash memory


• Hopefully a faster 3G or WiMax network connection


• DONE with 2nd version


• 802.11n WiFi


• Faster processor with lower power needs


• Improved battery life


• Lower price - $299 or less


• 2nd version hit $199-299 - I now think iPhone Pro will also be priced at $199-299 and the iPhone 3G will drop in price to FREE-$99

So, who thinks I'm right?

Note: These are purely my opinions based on my understanding of technology and of strategy, and are not based on any inside knowledge. For someone else's view on possible specs, see here.

@innovate