The emerging knowledge economy will reconfigure the role of discovery in innovation in some surprising ways. First, a couple corollaries:
For most of the history of mankind, information has been scarce, and an important way that people innovated was through discovery. In agrarian and industrial economies, it was extremely important to discover new ways to transform raw materials in order to create new products. Since people lived in relative isolation compared to today, there was significant duplication of discovery efforts in pockets around the world. The pervasive TCP/IP network (i.e. Internet), combined with accelerating adoption of modern architectural approaches (i.e. service-oriented architecture) and messaging (Web services and XML) is unlocking the world’s data/information as a dizzying pace. It’s a cliché that we have too much information, and this trend shows no sign of abating. Moreover, software tools for automating the management of information are improving all the time. Of course, this development gives people an unprecedented ability to collaborate—on everything.
In the knowledge economy, discovery gets leveraged, pervasively and instantaneously. Discovery will remain extremely important to creating value, but I’m going to argue that it will play a cameo role in the hyper-innovation knowledge economy: crucial but supporting.
Anyone attending […]
Adam Hartung of Spark Partners led a compelling and thought-provoking discussion at this month’s MITEF meeting on 14 March in Chicago. Adam is a veteran of a bevy of management consultancies and large corporations who has spent the last four years researching a hypothesis about innovation, writing a book (The Phoenix Principle) and consulting. His observations are straightforward, profound and potentially healing for industrial economy companies.
Summary of the Meeting and Discussion “Lock-in” is a corporate phenomenon that is fatal for organizations because it prevents new thinking. New thinking is increasingly important because the market is more volatile than ever. Lock-in happens in a cycle: in its formative stage, the corporation experiences success, and success “hardens” into a success formula; it leaves an imprint on executives, workers and customers, who all identify with the success. Of course, the problem arises when the market moves and nullifies some key assumptions that are embedded in the success formula. There are three types of lock-in:
Behavioral lock-in: group-think, not invented here; slow decision making; rigid ideas about customers and products; sacred cows. Profits from financial manipulation. Structural lock-in: many, but one stood out–“biased toward easily quantified, traditional actions and against more speculative […]
The American Marketing Association Chicago Chapter held its Power Lunch round tables, 23 February 2006 in Chicago. I hosted Technology and Strategy tables, where marketing leaders from Fortune 1000 companies, startups and service providers exchanged impressions about emerging marketing trends and techniques. Here are my notes from the discussion.
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In the post-Internet-boom period, it’s easy to forget about some old friends, so here I thought I’d drop in and revisit e-commerce…
 The old joke about commitment being like a ham and eggs breakfast certainly applies to producers (of goods) and consumers in the industrial economy. The punch line is that the chicken (consumer) is involved, but the pig (producer) is committed.
A large part of producers’ inflexibility today is due to the fact that they are committed to bits (as opposed to bytes) at all stages of production and distribution: inputs, inventory, safety stocks, unsold goods, returns “… the whole catastrophe,” as Zorba says. These commitments are, in many cases, more important to producers than putting the customer first, and they represent a critical barrier to industrial economy companies’ intimacy with consumers because companies must sacrifice customer needs to maintain their operating realities. (For more on this, see Transformation: from Self-contained Company to Networked Global Organization.)
E-Commerce is steadily liberating producers from this dilemma in many categories. Let’s take a banal example. Probably most readers have shopped at “Earth’s Biggest Bookstore.” For many people, it defined the e-commerce experience. […]
A blog is not like a plant of the desert variety; it needs watering more often, so here’s an excerpt from my imminent Market Advisory on the marketing tectonic shift:
The Mirror: Customer Experience and Intimacy
We will see more changes in marketing practices from 2006-2015 than in the rest of the profession’s history because marketing will be the vanguard for the shift from an industrial economy to a knowledge economy, which will demand competence in all encompassing customer experience in order to achieve differentiation. Similarly, the globalization of markets is accelerating: emerging markets will represent extraordinary potential, but addressing them will demand unprecedented innovation. In a bright spot, ongoing CRM and BI initiatives, combined with continuing standardization of architecture (SOA) and messaging (Web services, XML), will begin to deliver the proverbial 360° view of the customer.
The Customer Experience Imperative
The customer experience will be mandated from producer and consumer quarters. Consumers have product fatigue. In many categories, there are too many choices with little differentiation save price. Producers will have unprecedented information, which they will explicitly use to create experiences. In fact, no consumer wants a product or service anyway; rather, consumers buy products and services in order […]
Sidebar: Industrial Economy DNA
Chicago, in being one of the foremost industrial regions, has industrial economy DNA. This DNA isn’t well suited to the first phase of the knowledge economy, which turns many industrial economy assumptions on their heads. For example, even more remarkable than tech companies’ ability to create wealth quickly is their lack of constraints from raw material inputs: these companies can be located anywhere, irrespective of natural resources. Their main physical requirements are power and fiber, which can be built or brought almost anywhere. In contrast, putting together an industrial enterprise involves accommodating materials with physical constraints at every turn: the sources of raw material inputs are often limited and scarce. Moving the material or parts from one area of the enterprise to another often requires special machines and specialized equipment. Dangerous chemicals are often involved in transforming raw materials. Disposing of waste is not trivial. Often, machinery to transform the raw materials must be custom built, and the machinery imposes its own constraints. Consequently, Chicagoans are accustomed to changes being incremental; we are accustomed to things taking time. This economy is bits, not bytes.
Chicago is renowned as a distribution hub, which began with its proximity […]
The End of Corporate Imperialism, by C.K. Prahalad and Kenneth Lieberthal, encapsulates the obvious elegantly and factually, and its thesis is far more true today than in 1998, when it was written: “Too often, companies try to impose Western models of commerce on developing countries. They’d do better—and learn more—if they tailored their operations to the unique conditions of emerging markets.” Western MNCs (multinational corporations) perceive the primitive state of consumption in emerging markets, and they too often develop a strategy in which they: 1) focus on the extreme minority of wealthy consumers and/or 2) address the order of magnitude larger middle tier of the market by offering their past-mature products with minor cosmetic changes.
This is another symptom of MNCs’ being stuck between industrial and knowledge economies. As I stated in my Transourcing Point of View, “Enterprises are ambivalent about innovation and product creation because they represent an inherent conflict: the drive to amortize past investments (including process-oriented constraints of marketing, distribution, service, etc.) conflicts with companies’ need to satisfy customers’ wishes for novelty. In practice, this too often leads to vapid product extensions.” The industrial-era enterprise derived its competitiveness largely through production and distribution efficiency, and it marketed […]
In the entry on innovation, I mentioned that an excessive focus on the numbers produced irrational behavior, and I found a perfect example of it this morning. Coca-Cola spends millions of dollars on developing new flavors of Coke, most of which have proven to be well publicized, expensive flops, at least compared to projected goals. According to The Wall Street Journal (“U.S. Thirst for Mexican Cola Poses Sticky Problem for Coke“), the growing Hispanic community in the U.S., a large portion of which is from Mexico, thirsts for its home-grown version of Coke, which Coca-Cola refuses to import due to its agreements with U.S. bottlers. Some enterprising distributors manage to quasi-circumvent the system to import just under $120 million of soda into the U.S. each year. Coke threatens retailers and distributors with legal niceties when bottlers cry foul but otherwise looks the other way.
Let me get this right. Coke spends millions on developing product extensions that flop, yet it has a $120 million nascent market for a product that already exists, which it is resisting.. all because of its relationship with its distribution channel. This is a perfect example of industrial economy thinking: restrict and control while putting customers […]
Innovation
I had the privilege of hearing Larry Keeley, Co-founder of Doblin, the innovation strategy firm, at the GCB Innovation Round Table last night. He painted a vivid picture of the white water global economy in which we find ourselves as a context for his talk on innovation. In brief, the degree of uncertainty and change has created a “nervous time” for corporate executives. The pace of change is probably unprecedented in the experience of the human race (my take on this below). He implied that the anxiety around terrorism is amplifying this underlying general nervousness:
We face a high degree of ambiguity on political, economic and societal levels. People hate ambiguity. Complexity has two meanings: things are difficult to understand and we cannot know the outcome of our actions (because there are too many inter-related concepts, dependencies and data for us to comprehend). People find this overwhelming. Volatility of markets; Wall Street (fill in the blank for other markets) punishes executives for vagaries in the numbers, which has led to a legendary “make the numbers at any cost” attitude. People find this mystifying and unsettling because it constantly produces nonsensical behavior.
If we define innovation as measured risk-taking and […]
The current revolution in enterprise software is only a preview of a much larger, more pervasive shift that will transform the global economy within the next decade. Service-oriented architecture and Web services are two of the more well-known elements of the maturation of distributed computing, which is changing the rules of the vaunted software development life cycle.
In short, we are on the way to becoming a real-time market for global human capital whose ascendancy will increase with the growth of the knowledge economy and global standards for work processes. If we classify economic value according to knowledge/information, manufacturing and agricultural products and services, the knowledge portion has been steadily increasing its share of the value chain, and this trend is accelerating. Of course, information technology facilitates the creation, distribution and sharing of knowledge.
What does this mean for outsourcing and offshoring? By understanding how standards-based technologies have combined to transform enterprise software, we can learn how the coming standardization of work processes will drive explosive demand for an always-on market for knowledge workers and real-time value chains.
Read a longer version of the article published in the Technology Executives Club Journal. Forthcoming next month, my point of view […]
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