Tuesday, February 28, 2012

Case Study - Kodak Bankruptcy Illustrates Why Status Quo is the Enemy of Innovation

January 19, 2012 was a sad day in the story of photography indeed for it was on that day that Kodak, a company founded by George Eastman back in 1888, filed for bankruptcy. It was on that day that the company that almost completely defined and created a new market of amateur photography shut down its doors. Never again will a birth, a graduation, a wedding, or a vacation be captured as a "Kodak Moment."

Kodak was born in 1888 with the introduction of the Kodak #1 camera. Invented and marketed by George Eastman (1854–1932), a former bank clerk from Rochester, New York. The Kodak #1 was a simple box camera that came loaded with a 100-exposure roll of film. When the roll was finished, the entire machine was sent back to the factory in Rochester, where it was reloaded and returned to the customer while the first roll was being processed. Eastman's real genius, however, was not in the creation of the box but in his marketing strategy. By simplifying the apparatus and even processing the film for the consumer, he made photography accessible to millions of casual amateurs with no particular professional training, technical expertise, or aesthetic credentials. To underscore the ease of the Kodak system, Eastman launched an advertising campaign featuring women and children operating the camera, and coined the memorable slogan: "You press the button, we do the rest."

George Eastman's Kodak #1 Camera in 1888
Kodak continued its leadership of the photography industry for over a century. In 1975, Kodak unveiled the first digital camera to the world. Weighing in at around eight pounds and about the size of a toaster, the hefty device was the brainchild of Kodak engineer Steve Sasson and his team from the Kodak Apparatus Division Research Laboratory. Over the years, since 1975,  Kodak amassed more than 1,000 digital-imaging patents upon which almost all modern digital cameras rely.

Kodak introduces the world's first digital camera in 1975 
So, if Kodak pioneered the market for amateur photography and invented the first digital camera, why then is it the company that ultimately filed for bankruptcy while companies such as Canon, Nikon, Pentax, Sony, and many others are thriving in this very lucrative digital amateur photography market?

While Kodak's demise is a complex tale consisting of many contributing factors, the root cause can be traced to a strong reluctance to alter the status quo. From the very beginning,  bewildered Kodak executives could not (or did not want to) understand why anyone would ever want to look at images on a TV screen. Considering that Eastman's Kodak #1 camera turned photography into a hobby for the masses way back in the 1890s, it is sad that although Kodak actually invented the "next big thing", it did not market it "seriously" enough, letting Japanese rivals dictate, drive, and ultimately own the lucrative digital-camera market. Rather than embracing the future, Kodak executives wasted their precious time and energy in trying to preserve their profitable business model of cheap cameras and expensive film. By the time they realized their mistake, it was just too late.

Interestingly enough, another iconic company that played a similar role in bringing personal computing to the masses is also going through a similar market situation. Microsoft has been a dominant player in the personal computer operating system market ever since co-founder Bill Gates won the contract to build the first operating system for IBM Corp.'s personal computer in the early 1980s. As I write this blog, Microsoft is putting the finishing touches on Windows 8 - perhaps the most important piece of software that it has written since that historic moment in the 1980s. Microsoft designed Windows 8 to help it perform a difficult balancing act. Just as Kodak tried to with its expensive camera films, Microsoft hopes to keep milking revenue from a PC market that appears to be past its prime, while trying to gain a stronger foothold in the more fertile field of mobile devices. It's a booming market that, so far, has been defined and dominated by Apple Inc.'s trend-setting iPhone and iPad, and Google Inc.'s ubiquitous Android software. Will Microsoft be able to do what Kodak wasn't by having its cake and eating it too?

The bottom line - Status Quo is the Enemy of Innovation. Kodak's demise was a direct result of its lack of willingness to "go where no man had gone before."* It was a company that got too wrapped up in "preserving its present" (revenues/profits from its sales of expensive film) rather than "creating and accepting a future" in which there would be no film. Kodak tried to survive by ignoring and stalling the future. Paradoxically, the future came anyway and just ignored Kodak!

* Principle #3 in my book "Living in the Innovation Age." I discuss many similar examples throughout the book about companies who faltered by not challenging the status quo and conversely companies that have continued their leadership by challenging existing constraints or imposing new constraints that spur innovation.  

Monday, February 27, 2012

The Insidious Dark Side of Cyber "Human" Attacks

As an avid reader of Bloomberg Businessweek, I look forward to their "Innovator" section every week.  Businessweek does a pretty good job identifying innovators who are working hard towards new and novel approaches to make our lives better. So as always, I was expecting to read a positive, upbeat write up in my February 27 - March 4, 2012 issue of  Businessweek.

Well, it turns out that this week I was in for a disturbing shock!

This week's innovator spotlight was on Jay Radcliffe. Last year, the 34-year-old computer network security expert discovered that a best-selling insulin pump used by fellow diabetics was (and still is) vulnerable to hacking. Tinkering with his own pump, Radcliffe noticed that its wireless connection opened a security hole that would allow an attacker to manipulate the amount of insulin pumped, potentially inducing a fatal reaction.

As I mentioned above, I was shocked. It was like I was reading a sci-fi novel in which an attacker with a powerful antenna a mile away from his victim launches a wireless attack that gives him remote control over his victim's insulin pump and kills the victim. In all honesty, I always knew in the back of my mind that this sort of thing might be possible. After all, isn't all science fiction just reality before it's time? But I did not expect to read about this so soon.

After reading the Businessweek article, I spent some time doing more research. It turns out that there is a real threat emerging as more and more life preserving, implantable electronic devices become a part of our daily lives. Consider, for example, the pacemaker, which uses electric pulses to regulate a person's heartbeat. Newer generations of pacemakers also have wireless connections enabling them to transmit information for doctors to analyze. And they can receive signals in turn, enabling doctors to non-invasively alter a treatment regimen. While this sounds great, it has created a vulnerability, which in theory could allow a malicious agent to remotely hack a pacemaker and cause it to deliver a lethal shock. The same goes for other classes of implantable medical devices, from defibrillators to brain stimulators to drug pumps such as the insulin pump discussed earlier above. The alarming fact is that deranged implant hackers could exploit security holes in those, too, causing injury or death.

If you still don't believe that this is much more than just "geek theory" then consider this - The U.S. House Energy and Commerce Committee has also taken an interest in protecting wireless enabled medical devices. In fact, the committee sent a letter to the Government Accountability Office (GAO) asking it to "conduct a review of the Federal Communications Commission's actions in regard to wireless medical devices."

So here's the bottom line - The good news is that to date there have been no publicly known murders by hacking insulin pumps or pacemakers. But is it only a matter of time before we read about the first cyber homicide or assassination? I sincerely hope and pray that we never see this insidious dark side of cyber in action.

Tuesday, February 21, 2012

The 2011 Top 50 Business Thinkers...

Do you have a favorite management guru? Someone that guides and shapes your thinking in an area such as leadership, business or corporate strategy, or my favorite - innovation. Interestingly, when CEOs like Jeff Bezos name their favorite books, they'll often cite authors like Jim Collins, who wrote the business school classic, Good To Great, Malcolm Gladwell, and Michael Porter, known as the father of modern corporate strategy. If, like me, you have ever wondered who the most influential and respected business thinkers are then your wait is over...

I just came across a definitive global ranking of management thinkers that is published every two years based on voting at the Thinkers50 website and input from a team of advisers led by Stuart Crainer and Des Dearlove. The Thinkers50 has ten established criteria by which thinkers are evaluated: originality of ideas; practicality of ideas; presentation style; written communication; loyalty of followers; business sense; international outlook; rigor of research; impact of ideas and the elusive guru factor. Not surprisingly, 2011's winner is Clayton Christensen of "disruptive innovation" fame. The 2009 winner was the late C. K. Prahalad, who co-authored a favorite book of mine "The New Age of Innovation" with M. S. Krishnan.  

Here's the link to the website:

I have reproduced the listing* below with yellow highlights on the business thinkers that I actively follow.

Ranking        Name (Previous Yr. Ranking)
1                     Clayton Christensen (28)
2                     W. Chan Kim & Renée Mauborgne (5)
3                     Vijay Govindarajan (24)
4                     Jim Collins (17)
5                     Michael Porter (11)
6                     Roger Martin (32)
7                     Marshall Goldsmith (14)
8                     Marcus Buckingham (25)
9                     Don Tapscott (39)
10                   Malcolm Gladwell (2)
11                   Sylvia Ann Hewlett (-)
12                   Lynda Gratton (18)
13                   Nitin Nohria (-)
14                   Robert Kaplan & David Norton (37)
15                   Gary Hamel (10)
16                   Linda Hill (-)
17                   Seth Godin (-)
18                   Teresa Amabile (-)
19                   Rita McGrath (-)
20                   Richard Rumelt (-)
21                   Richard D'Aveni (26)
22                   Jeffrey Pfeffer (-)
23                   David Ulrich (31)
24                   Tom Peters (19)
25                   Rosabeth Moss Kanter (27)
26                   Nirmalya Kumar (-)
27                   Pankaj Ghemawat (-)
28                   Herminia Ibarra (-)
29                   Daniel Pink (-)
30                   Henry Mintzberg (33)
31                   Costas Markides (47)
32                   Thomas Friedman (30)
33                   Tammy Erickson (46)
34                   John Kotter (41)
35                   Amy Edmondson (-)
36                   Kjell Nordström & Jonas Ridderstråle (23)
37                   Howard Gardner (16)
38                   Henry Chesbrough (-)
39                   Daniel Goleman (34)
40                   Vineet Nayar (-)
41                   Rakesh Khurana (44)
42                   Fons Trompenaars (-)
43                   Ken Robinson (-)
44                   Andrew Kakabadse (-)
45                   Stewart Friedman (-)
46                   Adrian Slywotzky (-)
47                   Stephen Covey (29)
48                   Sheena Iyengar (-)
49                   Umair Haque (-)
50                   Subir Chowdhury (-)

*Source: The Thinkers50

Thursday, February 16, 2012

The "Innovative" Company - Is it just a figment of one's imagination?

Fast Company just released their list of 2012's 50 most innovative companies. One company that immediately jumped out for me was Netflix - not because it is on the list but rather because it is NOT on the list! Netflix was #12 on the top 50 most innovative companies in 2010. It then advanced to #8 in 2011 for streaming itself into a $9 billion powerhouse and crushing Blockbuster along the way. Now, it's completely out of the top 50! Those of you who have read my recently published book, Living in the Innovation Age, might not be surprised by this as this is exactly the discussion that Chapter 1 begins with - just as Netflix displaced Blockbuster by changing the rules of the "movie rental" game so too is it being displaced by others who are now changing the rules on Netflix!

Anyway, that is not the point of this blog. :)

The reason that I brought up Fast Company's list of the top 50 most innovative companies is that most of us would love to see our company mentioned among this esteemed group. After all, who doesn't want to be part of leading an "innovative" company?

But is there such a thing as an "innovative" company? Or is it just a figment of our imagination much like how a damsel in distress might dream about her "knight in shining armor?"

One of the principles of innovation I discuss in my book is that "Innovation is a Journey Not a Destination." As I explain the principle, I refer to the "impedance mismatch" between what typically sustains organizations (whose natural tendency is to seek efficiencies) and what it must do to innovate (promote an environment that is tolerant of mistakes and potential inefficiencies in the short term). Given the natural "efficiency-oriented" mindset of organizations, "innovativeness" is an unnatural state of existence. As we all know from our study of science, all elements in nature strive to exist in their steady state, which for organizations is the state of minimal errors and risk. 

A recent blog in HBR from Scott Anthony, author of the "The Little Black Book of Innovation", summarizes three theories from innovation thought leaders that support my hypothesis above:
  1. Clayton Christensen asserts that a single organization can't house two competing systems; companies seeking to drive disruptive growth therefore need to create spin-off organizations.
  2. Michael Tushman and Charles O'Reilly suggest that ambidextrous companies need to create "distinct but linked" organization, governed by a "rare but essential" executive who can simultaneously use competing frames
  3. Vijay Govindarajan and Chris Trimble suggest that companies can consciously manage the balance between the "performance engine" (that minimizes mistakes) and the "discovery team" (that encourages experiments) by being clear about what core capabilities should be forgotten and borrowed.
Each of the above theories highlights the importance of not allowing the efficiency-oriented culture of an organization to smother to death the innovative tendencies of the fledgling few. 

The bottom line - Innovative companies can exist in nature but only in tightly controlled and managed environments that allow an open sharing of ideas, collaborative learning, and a culture where taking risks and making mistakes is not only tolerated but encouraged. With out these precursors, innovative companies can only exist in one's imagination.

Tuesday, February 14, 2012

The Legal Side of Innovation Strikes Again...

I just read an interesting, shocking, disappointing, disheartening, and a lot of "ing" provoking article on Yahoo News today. Titled "Apple may face iPad export ban in China trademark dispute," the article speaks directly to a topic a discussed in my book "Living in the Innovation Age." The topic is highlighted as a side box and is appropriately titled "The Legal Side of Innovation" since it discusses the how intellectual property (IP) law serves as a double-edged sword that on the one hand protects an innovator's hard work and yet on the other hand creates impediments in the road to innovation.

That's exactly what is happening in the Yahoo News article that I mentioned above. A Chinese technology firm, Proview, claims that it owns the iPad trademark and is seeking a ban on exports of Apple Inc's computer tablets in from China. It goes without saying that Apple is not too happy since this could strike a major blow to iPad sales worldwide. Not only is China a huge consumer market but it is a major production base for Apple's iPad, iPhone and iPod. Chinese local media have reported that Proview is taking legal action, seeking up to 10 billion yuan ($1.6 billion) in compensation from Apple for trademark infringement. That, however, could be the least of Apple's problems. So what went wrong? Was Apple lax in its due diligence, or did Apple just choose to "ignore" this issue thinking they would cross that bridge when they came to it, or is Proview misrepresenting the facts?

As a spectator, I look forward to seeing how this case unravels...

Wednesday, February 8, 2012

Want to Innovate? Think "Different"

I came across an interesting blog today on HBR titled “Wanted: Idea Fusers” by Bronwyn Fryer. The blog starts off quite simply with a well known and proven concept that "great innovation springs from the ability to pull two unlike things together to create a beautiful third.” Of course, her premise is supported by how Steve Jobs famously shifted a paradigm by “fusing” calligraphy with technology to create the Mac's legendary graphical user interface.

Frankly, I couldn’t agree more.

In fact, that is exactly what Chapter 8 of my book, Living in the Innovation Age, is all about. Titled “Leveraging the Medici Effect”, the chapter talks about the importance of leveraging the ideas, background, and experiences of a diverse group of people (employees, customers, and partners). The Medici effect refers to the popular theory that the Renaissance Age began in Florence, Tuscany in the 14th century primarily because of Florence's affluent Medici family. Historians who back this theory contend that the Medici family acted as the catalyst for innovation during the Renaissance by bringing together people from vastly different professions and cultural backgrounds. This enabled a unique exchange and confluence of ideas that had never been possible before. California’s Silicon Valley, a hub for entrepreneurship and innovation, is often considered a modern example of the Medici effect because many credit its success to the cultural diversity in a small concentrated area. The fact is that organizations, too, can leverage the Medici effect by providing a safe and unencumbered environment that encourages the free exchange of ideas and promotes collaboration between people with different skills, competencies, and backgrounds. In my book, I discuss four specific techniques that can help organizations leverage the Medici effect to spur innovation in their environment.

  1. Rethinking Workspace Design
  2. Harnessing the Community
  3. Collecting Ideas from Everyone and Everywhere
  4. Making Innovation a Team Sport

One point that Bronwyn makes in her blog a bit more clearly than I did in my chapter is the importance of truly practicing "hiring diversity." She provides examples of companies such as IDEO and Jump Associates that get paid big money for their ability to spur innovation through associative thinking. Both IDEO and Jump practice "hiring diversity" in which they hire people who are a "mile wide and inch deep." In other words, they prefer generalists over specialists. Bronwyn concludes her blog by challenging us to take a good look at the people we typically hire. Does our "diversity policy" only apply to people of different genders and races? To innovate, we need more diversity than that - we need intellectual diversity that can help us combine unlike ideas together in new ways much like what happened back in the Renaissance Age, the Silicon Valley, and Steve Jobs' MAC's graphical user interface.

The bottom line - Innovation Thrives on Diversity and Generalization not Homogeneity and Specialization.

Monday, February 6, 2012

Social Media - A life saving innovation that's more than just a toy!

In my recent book, Living in the Innovation Age, I discussed how Social Media tools such as Twitter and Facebook have been used with great success in the non profit sector to save countless lives in the face of natural disasters such as earthquakes.

For example, last year when Japan was hit by massive earthquakes, both Twitter and Google’s online Person Finder tool gave aid organizations a method to gather information about the disaster and correct any misinformation on the Web.

Another example that I discussed in my book is Ushahidi, which has helped save many lives in
disaster struck areas such as Haiti and Chile. The origins of Ushahidi can be traced back to 2008, while Kenyan blogger Ory Okolloh was covering the post-election violence in Kenya and she blogged, "Any techies out there willing to do a mash up of where the violence and destruction is occurring using Google Maps?" Within days, two such techies wrote software code for an open-source, Web-based platform that would come to be known as Ushahidi, which means “testimony” in Swahili. Ushahidi provides volunteers information collected from a variety of sources that include text messages, blog posts, videos, phone calls, and pictures, all mapped in near real time. Over 10,000 Haitian-American volunteers across the United States translated every text message from Creole to English within 10 minutes. The result of this innovation has been nothing short of spectacular with countless precious lives saved.

Now, it seems that we have yet another convert.

The Federal Emergency Management Agency (FEMA) is also using information gathered from social media monitoring to help improve its effectiveness in responding to natural disasters. On February 3, 2012 at an event hosted by the State Department called Tech@State, FEMA Administrator Craig Fugate conceded that "While official assessments are more thorough, speed is more important than precision." He likened disasters to horseshoes, hand grenades and thermo nuclear devices in which you just have to be close. In his words "You won't get that time back...speed in response is the most perishable commodity in a disaster."

Over the past few years FEMA has been heavily citicized especially following its sluggish response following Hurricane Katrina. Many have claimed that FEMA failed miserably because it spent the precious first 12 to 24 hours after the disaster getting teams into the area to make an assessment and send information back to headquarters rather than taking the desperately needed life-saving action.

Compare and constrast that to how FEMA responded when tornadoes ripped through Joplin, Missouri in May 2011 in which FEMA correctly realized that it had enough information, even if it was imperfect, from Twitter and Facebook to suggest that the situation was dire and immediately start taking remediating action.

The bottom line is that social media is becoming an increasingly important way for aid organizations to quickly assess, mobilize appropriate resources, and rapidly respond to disasters helping them save countless lives.

Now that's way cool! :)

Thursday, February 2, 2012

Crowdsourcing - A Future Beyond Innovation

Innovation Seeks to be Free, so states Principle #4 in my recently published book, Living in the Innovation Age.

And as I further elaborate in my book, “crowdsourcing,” is an example of one such innovation trend that exhibits the three requisite characteristics of being free – Openness, Participatory, and Collaborative. Crowdsourcing refers to the outsourcing of tasks that are typical performed inside an organization by employees or contractors to an unspecified, large group i.e. the crowd. I cite several examples of successful crowdsourcing projects in my book including former Federal CIO Vivek Kundra’s “Apps for Democracy” and DARPA’s next-generation combat support vehicle (XC2V) prototype contests.

Now it appears that the concept of crowdsourcing is really catching on beyond what one normally might consider the realm of innovation. Just yesterday Rita McGrath blogged on HBR about how employers are using the concept of crowdsourcing to acquire skills to get even traditional jobs done. As an example, she cites an article in the Wall Street Journal that described how AOL has been doing just that. Although this appears strikingly similar to traditional outsourcing, it’s actually not since the employer doesn't need to make any commitments at all – not even to a temporary project team, much less to permanent employees.

So, why the sudden interest in crowdsourcing? The bottom line is that in today’s roller coaster economy access to assets trumps ownership of assets. As it turns out, crowdsourcing makes gaining cost competitive and flexible  access to critical assets easier than ever before.