Wild Duck with a Gun

Great CEOs cherish their wild ducks, the employees that see the world differently and challenge the status quo. But fostering them in a corporate environment is as tricky as… well, as tricky as keeping a flock of wild ducks in your house. It’s a matter of balance, especially when it comes to power and influence.

Wild ducks are often best when they have no institutional power.  They don’t need it.  They can get things done by sheer force of will. Provide too much protection and you can turn a wild duck into a boring domesticated duck in no time.

But if you provide no protection, something much worse can happen. When some wild ducks get fired upon too often, when they are hunted for sport inside a culture that seems designed to eliminate the species, they can go rogue. Rather than use their creative energy to outmaneuver the slow-witted duck hunters, these wild ducks become aggressive — they shoot back.

It’s cathartic to see the wild duck with a gun, taking down the corporate drone who is standing in the way of a new idea just to get home early. The powerless fighting back; who doesn’t love that story!

But sometimes, usually long after he has run out of creative energy and is left only with a pervasive sense of aggression, the rogue wild duck acquires institutional power. Hurray! you say. Now he’ll really be able to stand up for innovation and send the drones running for the exits.

But that’s not what happens. Instead, the fearful, angry old duck becomes a menace to his own species. He sees new ideas as a threat to his own. He drowns out other voices, appropriates others’ ideas without giving credit, and ironically creates a culture more hostile to fresh innovators than a field full of corporate duck-hunting drones ever could.

The rogue duck becomes the perfect hunter of wild ducks. It’s a kind of corporate Darth Vader story, a cautionary tale for those who have spent years taking fire for new ideas and are now beginning to acquire a little bit of influence. It’s easy to let it go to your head, and then it’s a short step to the wild duck dark side.

So CEOs, cherish your wild ducks. Protect them — a little. And when one stops being creative and turns aggressive against other innovators, open a window and let him fly away.

In fact, just keep all the windows open and make it easy for wild ducks to come, go, and come back again. That is, in fact, the best, most sustainable ecosystem for innovation you could possibly create.

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API Management – It’s about finding your true business

If you are a company with valuable, unique online capabilities that you are not exposing to other companies as REST JSON APIs, then stop reading and go read any of 1,000 articles about why you are probably making a huge mistake. When you are ready to join us in the 21st Century, read on. 2013 is being called the year of the API…figure it out.

If you do offer APIs but aren’t using API Management, wow…that’s a lot of work. Probably you’re working too hard and making the business decision around exposing APIs too slowly to be nimble in the API Economy…and nimbleness is what the API Economy is all about.

Let me tell you my story: As the CEO of a company in ground transit, my team had developed a series of really amazing services on a very difficult, esoteric platform that very few developers knew. We were using these services internally to enable our ground transit application. One day, it occurred to me that we should offer these services to other companies needing to do similar things. The problem was that doing so at that point, with no easy way to expose, manage and promote the services, was going to be a Board-level decision…about three months of effort, not to mention the siphoning of executive focus (namely mine) from our core business. So we decided to wait and continue using the technology internally.

If we had started from the very beginning with API Management, we would have been able to make our services open to the developer community with just days of effort and minimal executive time…enough to quickly offer services and see which ones were compelling enough for developers to use and pay for…a key to the notion of validated learning that any good Lean Startup today understands.

To this day, I wonder what opportunities we left behind there at that moment of non-decision, opportunities that might have far surpassed our business in ground transit? What if we had released our APIs and companies all over the world started using our services to enable entirely different business models? Then I could have gone back to my Board with real data on how our services were being used and what people were paying for…and data-driven meetings are the best ones.

Today, I work with many companies who have public APIs and manage them through IBM and others’ API Management offerings. But too often, I learn that the data coming from the API Management dashboard never makes it to the CEO and other decision-makers, or those reports aren’t presented and perceived as strategic intelligence that can help executives see where to move the company.

HP famously has a saying: “If we only knew what we know.” If you have API Management working in your company, you have the data to make better, faster, more confident decisions…if business decision-makers know what you know.

API Management data is pure gold. Don’t waste it.

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Is Uber the Napster of Transportation?

If you’ve been following the “Taxi App Wars” in the media, you’ll have heard of companies like Uber, Sidecar and Lyft.  A lot of hoopla has been made about this fracas, from people who want to see these new services shut down to those who want to see them dismantle the current system of taxis and limos in most cities.  Both sides make a lot of arguments against the other, and most of these are red herrings.  For example, it is not about monopolies and taxi lobbyists on one hand, and it isn’t about the so-called safety of drivers that don’t have taxi licenses on the other.

The real issue comes down to why the taxi/limo/livery system started and persists through 120 years of history, through multiple phases of deregulation followed rapidly by re-regulation in many cities. Check 1979-1983 Seattle for one example.

Bottom line is this: Grandma needs a ride home from the supermarket on a random-access basis (not just the bus) for a price she can afford.

This one goal of keeping random access ground transit affordable – that cities all over the world come to again and again through history – perturbs the entire “free market” structure that so many pundits around this story suggest: just let supply and prices float and everything will be fine. Not so. Been done. Doesn’t work. Many reasons. Becomes a mess fast.

Regulating prices is not a great way to do things, but in most cities, the number of wealthy people that can bid up the price of a ride exceeds supply, even when supply is liberal. Grandma gets left at the curb. This leads organically to the introduction of price-regulated meters. Once you have meters, you have people tampering with meters. And that leads to the department of weights and measures having to spot-check and certify meters…same as they do the scale at the meat department at the grocery store.

(By the way, who thinks metering rides with iPhones is a good idea? Terrible. Who but a 1-percenter is comfortable hopping in a car, not knowing what the ride will cost, and then relying on a driver’s iPhone to tell him accurately where you are and how much to charge? How long would it take some of our hacker friends to game that? And I don’t know about you, but my iPhone puts me in the middle of the Pacific frequently when I’m standing in San Francisco’s financial district’s tall buildings…do we really want to trust a smartphone GPS with the distance measure used to calculate the cost of the ride?)

Right now we have an unsustainable situation: a group of drivers who are obliged to charge what the meter in their car says, and now a group of drivers who can charge whatever they like (or rather, whatever these services choose to charge without regard to city fare regulations). This cannot stand. Two obvious paths to balancing this equation: 1) eliminate the meter in the taxis and let them charge whatever they want; 2) put validated city meters into Uber/Sidecar/Lyft/etc. Presumably nobody wants to see 2, and with 1, we are back to grandma getting left at the curb. (We’ve done this test…drivers who can get floating bids on a smartphone quickly wait for the higher bids and leave the meter-price rides to someone else…which means nobody. )

Flywheel (full disclosure…I’m a founder and investor) took a long look at this and found a better solution. Because Flywheel provides a cloud-based dispatch system as well as providing a unit in the car and an app for the passenger, it can tell when drivers are turning down “shorts”…what I’m calling the “grandma fare” here. We found a way to essentially turn the practice of picking up grandma reliably and consistently into “table-stakes” for high-bid dynamic priced fares. If a driver wants that airport ride, or the bid-up offer from a high-roller out at club in the Mission on a Friday night in the rain, he better be responding to all his dispatch fares, and not ditching people on the way to pick them up.

I believe this approach, invented by Flywheel at great cost and by listening intently to passengers, drivers, dispatchers, fleet owners, regulators and others since 2008 when the company began as a student innovation project, is the long-run solution to the deep issues that cause so much historic dissatisfaction in city ground transit. It took us three years of really understanding the nuances of city ground transit to figure this out. And once implemented, I believe it will mean more money for drivers, and a reliable ride for everyone from the busy lawyer to grandma.

The CEO of Uber likes to say that he “breaks things to fix them.” Break it to fix it has been tried with taxis a dozen times since the early 1900′s. I’m an innovator and have broken many things to fix them over 25 years in business. But the biggest thing I learned while breaking things is that it is usually a good idea to understand what you are trying to change before you either cause a mess or simply repeat history.

Are the Ubers of the world innovating? Maybe.

But maybe they’re simply destined to be the Napster of transit: the companies we thank for shaking things up, and which are then shaken out.

Take a look at Flywheel. In the long run, I think it is the better approach. I’m biased, of course.

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Invention Intention

From the halls of government to the smallest startup, if you are engaged in a conversation about “innovation,” ask yourself if you are instead really talking about R&D, about invention.

Innovation is like a sentence. Inventions are the nouns. Intentions are the verbs.

Take the humble pencil. It’s an invention. Stick of wood, some graphite, and a little piece of rubber on the end. There it lies. Inert. It is an invention without an intention. Adding some intent, I could use it to write you a nice note, or I could write a manifesto for change. Or I could  start poking people in the eye with it. Now it’s a disruptive innovation!

I’m helping co-found a company that is chock-full of invention. The team is top of its field and has made amazing scientific breakthroughs over a decade of hard work. This stuff is seriously going to change how everyone experiences the world…if we match the right intentions to our inventions. Pencil => Eyeball.

A classic mistake for startups fortunate enough to have strong intellectual property is getting too excited about the inventions. They often think less rigorously about what they will do with them and for whom they will do it. The story of their business is told only with nouns. Countless startups turn exciting technology into boring, verb-less stories.

So here we stand with our startup, about to mix some disruptive intentions with our awesome inventions. Hold onto your eyeballs!

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The End of Apple Innovation

There is a classic argument that Apple’s game was never really innovation, but that would be wrong. Strictly speaking, Apple has shifted paradigms several times, and most times during Steve Jobs’ second tenure, the shift was a hit. If you start as a desktop hardware manufacturer and become a media & consumer products company with a heavy dose of retail shop management…I’ll call that innovation.

I’ll even call iPod to iPhone an innovation…it changed how we organize ourselves and live our lives. Inventions can spur real innovation, after all…if you have a visionary maniac with complete control of the team and the Board running things.

But today, with the launch of the iPad Mini, Apple’s CEO and even Jony Ive had the brass to call 2012 a very innovative year for Apple. Respectfully, no. This is a classic case of abusing the word innovation purely for marketing purposes, and in a year where presidential candidates routinely and crassly trample on the meaning of words to score emotion points with soft-brained voters, I’m tired tired tired of it.

Apple did some amazing inventing this year. Lots of it on the inside engineering of their devices. They did some incredible improving to their existing products, though I’m not sure I really needed an even-lighter, even-thinner iPhone. (Notably, I haven’t bought one, and it’s a first for me to not buy a new Apple product on day one.)

What Apple didn’t do is redefine how we perceive what we could do with their products. I’m giving points to Samsung for that. The Galaxy Note II is a strong attempt to squash the concept of a tablet and a phone into the same device. One device to rule them all. Might not sell as many as the iPhone or S III, but it would have been innovative. If the iPad Mini had come out with the ability to make phone calls, I’d have given props for that. But no…it’s just a regular iPad that was left too long in the dryer.

And yes…I’ll probably end up buying one anyway. Apple might not be innovative anymore, but who said you couldn’t make money by just selling really nice, if conventional, products?

What does Apple need to do to get its true innovation mojo back? Think different not just about the fine engineering, but also about how you will cause people to change how they experience the world through it. That was the magic of Steve. He liked using technology to bend peoples’ reality.

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Innovation Wars Part 5: Focused Fire

One of the advantages of being a large, multi-division company like IBM or Johnson & Johnson is that keeping your innovation capability in fighting form without distracting the company from the current winning business model becomes a matter of portfolio management.

With a company that defines itself by a single line of products or services, paradigm shift inevitably disrupts the current business. And because paradigm shift is how we distinguish innovation from improvement, a single-threaded company that is enjoying strong growth playing by the rules of its current business model is right to err against changing those rules in the near term.

That means the answer innovators in such companies often receive even for very good ideas is, “Let’s wait and see.” Not fun for innovators who, no matter how good the current business is, want to try something different.

But in a highly diverse business like IBM – what I would call a strategically aligned conglomerate – there is always some part of the overall business that is facing a clear and present threat. The core competency of such companies is not on one specific business or business model but rather on managing a portfolio of options. So for lucky innovators in strategically aligned conglomerates, there is always something to do, some business that needs to be reinvented.

A strategic conglomerate can focus innovators where real innovation is needed without throwing the whole company into a spin. Managers in parts of the business that don’t need to be transformed at the moment can nominate those employees who are happiest “changing the rules” for innovation projects in other parts of the business that do need transformation.

Anyone in the company can get onto these focused, innovation “seal teams,” but not everyone in the company needs to – or even wants to – be actively involved in paradigm shift all the time.  This “focused fire” strategy keeps innovators in the company, honing their skills as game-changers, while leaving improvers to further improve how the company plays the games it is currently winning.

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Innovation Wars Part 4: Shock and Awe

Shock and Awe (technically known as rapid dominance) is a military doctrine based on the use of overwhelming power, dominant battlefield awareness, dominant maneuvers, and spectacular displays of force.”

In this fourth segment of Innovation Wars, the notion of Shock and Awe seems apt, following the comparison of Google and Amazon and how they handle innovation during different phases of the business cycle.

Most established companies don’t get a chance to engage in Shock and Awe innovation. They defensively react – slowly, usually too slowly – to outside disruptions.  Few companies engage in proactive “wars of aggression,” where they shift focus to a new business model before being forced to by the actions of others. The shining example of this aggressive approach is Amazon.

If you look at the moves Amazon has made over the past two decades, they follow a pattern: A big change in customer segment but a small change in core capabilities. It’s almost dance-like: 1) Target a market segment; 2) Build new competencies to improve operations; 3) Pivot onto one of these competencies to target a new market segment…repeat. 1-2-3, 1-2-3, 1-2-3…it’s a waltz.

This short, rhythmic, functional pivoting is the key to rapid aggressive innovation.  Using incremental improvements made for the current business as the foundation for the shift into a new business model reduces uncertainty. It prevents overreaching and allows the firm to focus fire as soon as it decides which target to shoot at. This is superior to blindly developing green-field capabilities right in the middle of a period of disruptive change, which is typical in defensive innovation.

Amazon’s approach, using improvement to launch innovation, is a real advantage in following the most important rules in both war and business transformation:

  1. Know as much as you can about what you are getting into;
  2. Commit fully to a specific objective;
  3. Win as fast as you can.

The alternatives to this approach, and there are many, often suffer from uncertainty and mistakes, and that means delays. Executing a paradigm shift too slowly is like fighting a protracted war. You tend to get bogged down. Best to remember the military adage: If you are going to go to war, make it a short one.

This is the fourth in a series that stars here.

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Big “Buts” Better in Brainstorming

Nothing prompts the instinctive eye-roll response from employees shanghai’d into a brainstorming session like a corporate Richard Simmons impersonator saying:

“Now I don’t want to hear any killer phrases!”

That line may not kill phrases, but it sure-as-shootin’ is going to kill off any creative thought in the room, especially among those who, under the right conditions, really do have well-developed creative thoughts.

I work with a lot of scientists and engineers. And they live on killer phrases. It is fundamental. It is, in fact, a critical part of the scientific process. You tear things down until they can’t be torn down any more. And then you might have something.

In a past life, I used to direct theater, and I sure wish that the critics in the audience would take the “no killer phrases” class before writing their reviews. Professional artists know that they have to be good enough to turn those critics into fans, or at least to be strong enough to keep going in the face of withering criticism.

So when it comes to companies, here’s my point of view:

We don’t need nicer naysayers.
We need intrepid innovators.

At IBM, we figured out a way to make this work. We called it “But the But.” In a brainstorm, anyone is allowed to say, “But that won’t work…” about any idea, but it must be followed with, “BUT it might work if…”

The rule allowed for the second “but” to be totally made-up. Often even the made-up ones, like, “But it would work if we could stop time” led the team to a better, more practical approach to the original idea.

Beyond “But the But” is the corollary rule, “We like big Buts!” Not very PC, I know (does anyone say “PC” anymore?), but vital in a brainstorm. If you are going to say, “But that won’t work…” try to make sure that your objection is really interesting, a BIG but, something that will lead to more ideas than the one you are about to shoot down.

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Does Improvement Lead to Innovation?

A perfectly natural comment appeared on innovationexcellence recently. Here’s the quote:

“Incremental innovation leads to an innovative culture.”

But the longer I thought about it, the more uneasy I became. Then I substituted the word improvement for the phrase “incremental innovation” and the word transformation for innovation. Suddenly, I saw what was bugging me, and I was left with this question:

Is a company that is very good at improving its current business likely to be good at transforming itself into another kind of business when the time comes?

Is the “lets do things better” guy (the improver) likely to jump on the “lets do something different” (innovation) bandwagon? Or put another way: Is the person who just spent years polishing the current business model to a brilliant shine likely to love the person who tries to throw that model into the trash bin of history? Seriously, I’m asking.

On the other hand, improvement and innovation are subsets of the general class: Change. So if a company is good at changes that lead to improvement, perhaps it is also more limber when it has to engage in paradigm-shifting innovation.

Well I’ll admit, I’m scratching my head.  But at least now I’m clear about the question.

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Innovation Wars Part 3: A Tale of Two…Companies

This is the followup to yesterday’s feature, War and Peace.

Google:  There is hardly a business writer who hasn’t praised Google’s various innovation-friendly policies, notably the 20% time rule. Everyone loves this story, and rightly so. What innovator wouldn’t want to live in Google-land? Twenty percent of your time devoted to doing something different - innovator crack!

No doubt, Google has learned the lessons of the past decade:  1) Big things can come from tiny beginnings;  2) You can’t tell what the right bets are in advance. Let 1,000 flowers bloom.

Heaven forbid I should quibble with that strategy in general, but was it exactly right for what Ben Horowitz calls peacetime? Steve Jobs famously told Larry Page to “figure out what Google wants to be when it grows up…It’s now all over the map” (Isaacson, 2011). Now they are focusing. That’s good, perhaps, but remember yesterday’s war and peace lesson:

Focus and build an overwhelming advantage in peacetime and then paradigm shift in wartime.

If Horowitz is right and Google is now entering a war zone, then they have this lesson reversed. Sure, they did alright in peacetime. Nobody can scoff at Google’s success. But they ran their innovation engine incredibly hard – indulging everything from self-driving cars to  dodgeball. And what are they doing now? They are going into an era of disruption, where they really need to find and execute new opportunities, with the peacetime strategy of heavy pruning and focusing.

That said, a recent Forbes article suggests Google may be demonstrating one of the key symptoms of a peacetime innovation engine run amok: innovation addiction. They say they want to focus (whether that is the right wartime innovation strategy or not), but then they explode their active portfolio again like a struggling dieter wolfs down entrees at a buffet.

Contrast this with Amazon.

Jeff Bezos and team are possibly the very best business model innovators in the world today. Amazon has followed the “war and peace” strategy perfectly for nearly two decades. The formula:

  1. Establish a repeatable, scalable business model in an attractive market.
  2. Employ the peacetime strategy of focusing on radical improvement.
  3. Reinvest heavily in the core and achieve total market domination.
  4. Then go to war by pivoting hard, paradigm-shifting into an adjacent space by focusing on competencies that had merely supported the previous peacetime operation (e.g., world-class logistics, manufacturing, IT infrastructure).
  5. Rinse and repeat.

Over and over, when Amazon found a repeatable, scalable business, it doubled-down, pouring in resources and boldly sacrificing short term profits to go all in.  Focus, focus, focus – a classic peacetime strategy.  First, the online bookstore, then supply chain for anything from A-to-Z, then eBooks, crowd-sourced services, and cloud computing.  These are really different businesses, but you can see how the company used the lessons of one to attack the next.

And they are doing it again. Just yesterday – thank you, gods of blogging, for your excellent timing – Forbes reported that Amazon is signaling revenue growth but net loss as it aggressively pushes the Kindle Fire, a bold move into tablet computers leveraging lessons from making eBook readers.

That’s the cool thing about paradigm-shifting innovation: you can make small moves that are huge.

How Amazon maintains a team of active paradigm-shifters during peacetime periods of focus is less obvious from the outside than it is for Google, but they are doing something right. You don’t roll this many “hard-sixes” in a row without knowing how to manage your innovators in both peacetime and at war.

So both Google and Amazon are inventive, vibrant, very cool companies. Both have strong innovators that they have to manage, and both are balancing ever-more diversified business portfolios.

But where Amazon really has the “war and peace” formula nailed, Google appears to be stumbling into it.

Fortunately for Google, they do a lot of things right, and one of them is the subject of a future post: how to keep a standing army of innovators fit and ready even when you aren’t going to throw your weight behind their ideas any time soon.

Tune in for the next installment of Innovation Wars: Shock and Awe.

Caveat: This post is more of a journey than a destination. Using the “war and peace” lens to look at how companies handle innovators and innovation portfolios is not well established, and for me it raises many questions. If there were ever a post of mine that called out for comment, this would be it.

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