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Many years ago, Harvard Business School Professor Clayton Christensen developed the notion of disruptive technology: Technology that unobserved threatens the fundamental dominant technology in an industry, and quickly makes it obsolete. Now he and colleagues have applied this notion to education. In America, they note, faced with overwhelming constraints, schools are (under the radar, often unnoticed) innovating new models of schooling.
The same, I believe, is happening in Israel. The vaunted “Ofek Hadash” (New Horizon) strategic innovation in Israel’s educational system was developed top-down, led by a consulting company, with little participation by teachers in the field. I spoke to some of those teachers. They showed glaring obvious flaws in Ofek Hadash, that could easily have been fixed had they participated in the formulation process. Despite this, innovative experimentation is going on in many schools. Problem is: There is a lack of a benchmarking process, in which great ideas spread rapidly from best-practice schools to mediocre ones.
Here is how Christensen (interviewed in Harvard Business School Working Knowledge) describes the process in America, whose schools are no less troubled than those in Israel:
…. on average, schools have done a better job adjusting to disruptions imposed upon them than have companies in the private sector. Our research shows that the classic signs of disruption are now occurring in the world of education, in the same ways they occur in the other contexts we have studied.
Computer-based or online learning is beginning to fill the void and plant itself and make inroads in the education system in classic disruptive fashion. Online learning has increased from 45,000 enrollments in 2000 to roughly 1 million in 2007, and shows signs of continuing to grow at an even more rapid pace.
Computer-based learning is an exciting disruption because it allows anyone to access a consistent quality learning experience; it is convenient since someone can take it virtually anywhere at any time; it allows a student to move through the material at any pace; it can customize for a student’s preferred learning style; and it is more affordable than the current school system.
In education, the tools of the software platform will make it so simple to develop online learning products that students will be able to build products that help them teach other students. Parents will be able to assemble tools to tutor their children. And teachers will be able to create tools to help the different types of learners in their classrooms. These instructional tools will look more like tutorial products than courseware initially. And rather than being “pushed” into classrooms through a centralized selection process, they will be pulled into use through self-diagnosis—by teachers, parents, and students who don’t have access to another tutoring option.
Can Israeli schools take up Christensen’s challenge and disrupt the misguided establishment’s “strategy”?
Here is a true mystery for our readers:
• Ford has spent the last thirty years moving all its factories out of the US, claiming they can’t make money paying American wages.
• TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter’s results: TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses. Ford folks are still scratching their heads, and collecting bonuses. GM is essentially bankrupt.
Chrysler is dead in the water.
Why?
Simplify, Einstein counseled.
What is the simplest of all explanations – which, according to the scientist’s principle known as Occam’s Razor (eliminate everything but the bare essentials from a theory), is generally the most powerful and accurate?
Success in making and selling cars rests mainly on making beautiful, appealing, sexy, lovely, and hard-to-resist cars. This is done by managers who love CARS, and the car business, not accountants who love bottom lines. The true bottom line is: Do you truly love cars? Do you have a passion for them? And do you know how to find people who share your passion and know how to design incredibly beautiful ones?
Remember Chrysler? When bankruptcy loomed, along came Lee Iacocca, a true car man, who loved beautiful cars (he led development of the Ford Mustang, one of history’s most beautiful cars), and revived Chrysler, not with outsourcing and bean-counting but with design.
Toyota makes beautiful innovative cars that work, tailored to the needs and dreams and wishes of those who buy them. Low end, medium end, high end. Lexus trumps Mercedes. Corolla trumps Focus.
Ford makes ugly cars tailored to the needs and dreams (as its managers perceive) of bottom-line quarterly-statement-focused shareholders.
Which company would you bet on, in the long run?
And why does Ford simply not get it?
In 1990 the legendary rock band Deep Purple, a huge innovator, visited Israel during the first intifada. Soon they will return. Their leader, interviewed on Kol Israel, explains their vision.
Deep Purple was first formed 40 years ago, in 1968, in Hertfordshire, England. They have sold 100 million albums worldwide, and were once called “the world’s loudest band”. They refuse to label themselves as ‘heavy metal’ or any such tag. “We are musicians, not performers,” their leader says. “We play music on the stage, not put on a show”. This in part explains the huge and faithful following Deep Purple enjoys, decades after it was launched. They are real, they are authentic.
In this, a key principle of innovation is revealed: Authenticity. Make sure your product is what it says it is, what it claims to be, and does what it claims to do. Today, there is so much fakery – the dubbing of the little Chinese girl’s voice at the Olympics opening ceremony is a tiny example, as is the revealing storm of protest that ensued – that people increasingly crave what is real.
In their new book, Authenticity: What Consumers Really Want (HBS Press, 2008), B. Joseph Pine and James Gilmour state the key principles of authenticity.
* The craving for authenticity is “getting more intense in an increasingly artificial world”.
* To be perceived as “fully authentic”, your company must “be true to itself and what it says it is to others”.
* Effective marketing today involves “placemaking experiences” which enable companies to be who they say they are.
* Authentic offerings should be rendered as: natural, original, exceptional, referential (referring to other authentic offerings) or influential.
Even totally fake offerings, like Disneyland or Vegas, “can be perceived as authentic”, note the authors, if they are “honest about their fakery”.
So, innovators: Ask yourself – is your innovative product or service offering real, true, honest, or is their any element of dishonesty, hype, excessive claims, spin or deception involved? Is your marketing deceiving or honest? In the Age of Authenticity, you just cannot fool any of the people any of the time, despite what Abe Lincoln said. This is part of the explanation for Deep Purple’s abiding long-term success.
We all have read about Coopetition: how to collaborate with competitors.
Now we are beginning to learn about the opposite: How to compete with collaborators. Shall we call it: Collabetition?
What happens when your strategy leads your organization to pursue what strategy expert Koby Huberman calls “more to same” – selling higher-value higher-margin products to your existing customers? What if that strategy brings you head-to-head with those with whom you collaborated, crucial strategic partners, because you are now supplying products that your partners once provided?
This now seems the case with Google. Google is launching Knol, a user-written ‘wikipedia’, in which users write content. Google’s business model has until now been that of a ‘conduit’ – a search engine, the leading one, that brings users to content generated by others. When Google begins to generate ‘content’ by itself, it becomes a competitor to some of its key collaborators, to whose sites Google’s search engine brings millions of eyeballs.
Google insists this is not the case, that it remains a ‘conduit’. But the launch of Knol, and what I believe will be Knol’s rapid growth in usage, belies this. It was probably inevitable that Google, in its search for growth, would have to move beyond the search business and into content creation. How it manages this ‘invasion’ will be crucial for Google’s future.
This has happened before. Years ago, there was tension within the “Wintel” community – the collaboration between Windows (Microsoft) and Intel (microprocessors), as Intel put more and more software onto its chips, threatening to move up the value chain and appropriate some of Microsoft’s revenues. A competitive war was averted, partly because Intel has now moved to seek value elsewhere, for instance in mobility, mobile devices and wireless. Collabetition has also pre-empted key strategic moves – Dell’s direct-sale model has not been embraced or copied widely in the PC business, partly because for HP or IBM to engage in direct sale would place them directly in competition with their collaborators, value-added resellers.
Strategically, moving up the value chain is crucial for growth and profit. Often, doing so leads to collabetition - head-to-head competition with those in the value chain with whom you closely collaborate. How to manage this key transition takes wisdom and planning. A good example of a company that managed it successfully is Infosys… see the fine case study by D.V.R. Seshadri on how they did it*.
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*See D.V.R. Seshadri and James Narus, “Value Chain Migration at Infosys” (A), Int. Journal of Technology and Innovation Management Education, vol. 1, issue 1, 2006 (available on request from smaital@mit.edu)
Increasingly, in the media business, innovation is about a race in which the winner takes all. Movie studios seek blockbuster hits, and run business models similar to VC’s - 9 losing movies are paid for by one ‘winner’ that strikes gold.
Benny Meyer, chairman of the film studio Warner Brothers, has proved it. Warner Bros’ innovative Batman film The Dark Knight [See July 26 blog, “The Dark Knight”] just broke box office records for opening day, grossing $66 m. in receipts. The film may come close to Titanic for overall lifetime revenues. As Warner’s parent company Time-Warner downsizes, Warner Bros. films make big bucks for its struggling ‘mothership’. When new movies launch, there is ‘buzz’ – word of mouth quickly decides which picture is worth seeing, and then everyone has to see it, so they can talk about with their friends who have also seen it. Great movies that come second fare badly; it is winner take all.
Not long ago, DVD sales were a key part of movie business models, often grossing more money than box office receipts. DVD sales often rescued movies that did badly at the box office. Now DVD sales have slowed to a crawl. The same thing has happened to movies as happened to music – pirated downloads. Moreover, this was predictable! But movie studios missed it, just as music companies missed it.
Time-Warner CEO Jeffrey Bewkes notes (in an International Herald Tribune article), “Around the world the consumption of entertainment products is growing rapidly. The question is, how do you offer it? And how do you get paid for it?”
This, of course, is the eternal key innovation question. How do you create value? And how do you capture it in revenue and profit?
A key principle of benchmarking is, you learn more outside your industry than within it. Music is a separate industry from film, but closely related – both generate ‘content’. Had movie studios tracked the music business, as Meyer clearly did, they may have better grasped the sweeping changes occurring in the industry, and may have adapted to the ‘winner take all’ blockbuster model, in which again, box office receipts drive profits, rather than DVD sales.
Time Warner now appears to be asking the right questions, and coming up with at least some of the right answers, led by its movie productions.
Innovation is about breaking the rules. Or, as Oracle founder Larry Ellison said in a recent talk in Israel, “innovation is finding the flaw in the conventional wisdom”. [He clearly found it – the proof is Oracle, #462 in the Fortune 500, whose $18 b. revenues in 2007 were up 25 % over 2006. The bottom line wasn’t that bad either: $4.24 b., in net income, up 26% from 2006.]
The question is: Which rule should you break? Answer: The one that seems most inviolable, most sacred.
Take, for instance, the holy of holies: Raising money. After all, the rules about money are set by those who write the checks. Want a check? Follow their rules and procedures religiously.
Recently, Eli Reifman, entrepreneur and kabbalist, founder of Emblaze, spoke to TIM’s MPEC participants. His topic: How he raised over $2 b. by breaking some of the rules while adhering to others. If results are the best proof-of-concept, Reifman has results. Emblaze Group had revenues of $387 m. in 2007, but has lost money for the past three years, partly because of interest payments that probably accrued through financing acquisitions. Yet Emblaze survives and grows, partly because of Reifman’s skill in raising money.
Rules not to break: The key rule never to violate, when you seek money, is this: Never fail to understand fully, and appeal to, the underlying motive of the investor.
• For venture capitalists, it is ‘exit’ and little else. When seeking VC funds, be sure to present a forceful and realistic model for a 10x (ten-times) exit, one that brings the VC investor 10 times his or her investment.
• For an investment fund manager, the motivation is the bonus. Bonuses are based on investments outperforming the industry – not the market. If your Earnings Per Share falls by half, but that of the industry falls by two-thirds, you have outperformed. The investment manager’s bonus is secure. So, in speaking to them – show how and why you will outperform the industry.
Which money-raising rule can and must you break, according to Reifman?
• Do It Yourself… break the rule that says, you need experts (i.e. investment bank clerks) to do everything for you, including writing the prospectus.
A prospectus is just a business plan, Reifman explains. It is written in sometimes obscure language. When floating Emblaze on the London AIM market, Reifman did the IPO paperwork in record time. He and his colleagues read the British securities law, word for word. They acquired the appropriate template, filled in the blanks, and reduced the accepted time for writing a prospectus from three months to three weeks. Keep in mind, he says, that the junior employees of investment banks who do the ‘grunt work’ often, perhaps usually, know far less than you do.
Reifman says raising money is a key skill. Like any skill, it can be learned. Problem is, there are no courses. MBA programs teach the economics of finance, the theory, not the minutiae of practical IPO’s. You have to learn this skill by learning-by-doing, Reifman says. Conquer your fear, tackle it – and you will have a skill that can give you and your company enduring competitive advantage.
Reifman used an effective analogy to drive his point home. Want to learn parenting? He asks. He and his wife did. Before their first child was born, they called a well-known parenting institute. We want to learn how to be good parents, they said. How old is your child? They were asked. Not yet born, they said. Come back in a few years, when you have a child, they were told. Reifman now speaks widely on parenting, based on experience and common sense, partly to those who do not yet have children.
Want to learn how to raise money? There may be no choice but to overcome your fears and tackle it yourself. Learn by doing.
Reifman arrived for his talk on a motorcycle. He is known in his industry as a maverick, and among other things speaks to 3,000 people every week on kabbalah. He says that the set-in-stone maxim – businesses must maximize profit – is false. Not so, he says. And indeed, Emblaze is not profitable. But who cares? It has money to spare, while other startups with brilliant technologies die, because their oxygen supply – money – runs out.
There is one last rule Reifman urges us to break, a small one. Avoid Powerpoint, he advises. In his ‘road show’ presentations, he did not use slides. Maybe your audience will say, what a jerk, he came unprepared. So what… they will remember you. By not using 285 slides, you have already differentiated yourself. And, you have forced yourself to prepare, to put the knowledge into your own head instead of onto the slides.
When it comes to innovation, alas, Sony just does not get it. And this, despite its brilliant CEO Sir Howard Stringer, a UK citizen knighted by the Queen*.
Many years ago, Sony and JVC (Japanese Victor Corp.) raced head-to-head to develop a home video recorder. Sony should have won hands-down. And in fact, technologically, they did. They developed Beta-Max technology which gave a superior crisp picture. But business-wise, Sony lost. JVC’s VHC technology was designed-for-manufacture, and as JVC raced down the learning curve, costs fell, and with them, the prices of its VHS recorders. JVC triumphed. Sony’s superior technology lost to a far better business design. And Sony ultimately was humiliated, having to lease JVC’s VHS technology. When master recordings of videos were made, they used Betamax technology; but our home machines were VHS.
Today, Sony is locked in a similar duel, this time over e-book’s, with Amazon. Sony’s entry in the race is the Reader, a neat portable device for reading electronic devices, launched by Sony two years ago. It has a great screen, and is restful and easier to read than a compute screen.
Against it, Amazon has launched Kindle. Kindle, with inferior technology, will win – in fact, it already has.
Why?
A superior innovation model. Kindle follows Jeff Bezos (Amazon founder and CEO) and his philosophy of avoiding “cognitive overload”, meaning “help people avoid thinking too hard when they buy something.” Amazon pioneered ‘one click’ shopping. Now, with Kindle, you can easily link to Amazon’s on-line store and download 145,000 titles. Moreover, Kindle connects to a 3G mobile network, so you can download books and newspapers within a minute. Sony’s Reader does not have this feature.
And Sir Howard? After being trounced by Steve Jobs’ iPod, he has now ordered that 90 per cent of Sony’s devices should be networked, connected wirelessly, within two years.
Two years? Amazon already did it. Too late, Sir Howard.
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*Based in part on: John Gapper, Why Sony Lost the e-book battle, Financial Times, Thursday August 7, 2008, page 7.
An enormous amount of innovative energy is now pouring into energy – alternative ‘green’ energy sources, wind, solar, etc.
Here are 10 things energy innovators need to know about oil, still the world’s major source of energy.
1. American oil production peaked at 11,297,000 bbls/day in 1970, and has gone downhill since. In 2007 America produced only about half that, or 6,879,000 bbls/day.
2. Saudi Arabia is still the world’s largest oil producer, producing 10,413,000 bbls/day in 2007, down from 11,114,000 bbls/day in 2005.
3. Russia ranks #3 in oil production, behind Saudi Arabia, and America, with nearly 10,000 bbls/day in 2007, very close to Saudi Arabia.
4. Iran ranks fourth in oil production, with 4,493,000 bbls/day in 2007.
5. Iraq (in which America placed great hopes for higher oil production) produced just under 2,000,000 bbls/day in 2007, far below its production peak of 2,800,000 bbls/day in 1989, before the First Gulf War.
6. Canada and Mexico produce, together, nearly as much oil as America, and supply most of it to their huge neighbor.
7. America consumes 20,600,000 bbls/day (2007), leaving it with a shortfall between production and consumption of more than 14,000,000 bbls/day.
8. America’s oil imports have grown from a small 2,500,000 bbls/day in 1965 to a massive 13,800,000 bbls/day today (2007). This increase was completely predictable, given forecasts of oil field discoveries, development and production history. So, America has had 43 years to prepare an energy policy to reduce or even prevent U.S. energy dependence on nations (like Iran) that are hostile to it.
9. Failure to build such a policy, and failure to invest sufficiently in innovation for alternative energy sources, must rank as one of history’s great innovation failures, and policy failures, of all time. Democrats and Republicans share the failure alike.
10. Total world production of oil in 1965 was 31,800,000 bbls/day; in 2007, it was about 81,533,000 bbls/day. So oil production has risen by 156%. So has oil consumption. The result can be seen daily – just look at your outdoor thermometer.
In May-July 2007, the Asian Wall Street Journal surveyed some 2,477 executives and professionals, to find China’s most admired firms, and asked respondents to rate Chinese companies on five attributes:
* responding to customer needs
* corporate reputation
* management’s long-run vision
* quality of products and services
* financial reputation of firms.
Among the winners: Qingdao Haier, an appliance maker now campaigning to make Haier into a powerful global brand, as Sony did in the 1970s; and Lenovo Group, the company that bought IBM’s PC division, moved its headquarters to New York, left Stephen Ward as its CEO, and is now rapidly becoming a powerful global player.
According to the Wall Street Journal, “Chinese business leaders approach innovation differently than in the West: by aiming to boost revenue, not costs, and by making incremental rather than fundamental improvements.” Chinese innovators often seek ways to adapt global products to local market needs, in ways that foreign firms cannot. For instance, the head of Qingdao Haier ordered that his firm’s washers be capable of cleaning vegetables – a common practice in China, not so common abroad.
Take, for instance, Baidu.com. This is a search engine. In China, 60% of Internet searches use Baidu, rather than Google. Defeating Google is no easy task. Baidu does it, in part, by using a different corporate structure. According to the WSJ, some 60% of Baidu’s employees are in sales and marketing (the comparable figure for Google is about 40%). And Baidu employees’ average age? Believe it or not: 26. Many of their innovators are high school students, whizzes at computers, who are too young to formally hire.
China Merchants Bank found ways to tap into the growing middle class. Focus Media Holding Ltd. slashed through media clutter by simply placing ads in elevators (nowhere to run in an elevator)….
Here is the list of China’s most-admired firms, by category:
Overall: 1. Qingdao Haier, 2. China Merchants Bank, 3. Lenovo Group
Innovation: 1. Baidu.com 2. China Merchants Bank 3. Focus Media Holding
Long-term Vision: 1. Lenovo Group 2. Qingdao Haier 3. China Merchants Bank
Quality: 1. Qingdao Haier 2. China Merchnats Bank 3. Wuliangye Yibin
Corporate Reputation: 1. Qingdao Haier 2. Lenovo 3. Baoshan Iron and Steel
Financial Reputation: 1. PetroChina 2. China Mobile 3. China Merchants Bank
It is well known that open free-market capitalism is a powerful engine for creating wealth. Much of that wealth is generated through innovation. So innovation itself is an engine for capitalism’s wealth engine.
But capitalism, too, is a focus of innovation, not just the products and services that free-market capitalism generates.
What will be the form of capitalism that wins the evolutionary battle for survival?
In the ‘boxing ring’, we have American capitalism, a rather brutal form of capitalism, which has almost no safety net, leaves one American in six without health insurance, and which has offshored its production without offering production workers viable alternatives except minimum-wage Wal-Mart jobs. Taxes are so low, governments lack the funds even to maintain infrastructure.
Facing it we have French, German, Danish, Norwegian and Finnish capitalism, with high taxes and high safety nets. Inefficient? Wasteful? Sluggish? Perhaps – but humane. Victims are not blamed.
And of course we have Asian capitalism – the Chinese variety, for instance, which features significant economic freedom but very little political freedom.
We have seen rapid convergence in social and economic systems. When the Berlin Wall fell on Nov. 9, 1989, nearly all countries in the world rushed to embrace some form of free-market capitalism.
However, enormous differences among the various types of capitalism remain.
There is a highly competitive world market in ideas, not just in goods, services, capital, technology and skills. Just as companies scour the world for best practices, so do people and political leaders. We do not yet know what best-practice free-market capitalism is.
Which form of capitalism will ultimately triumph? The battle seems to be between efficiency – the American form is highly efficient, though brutal – and equality – the French and Scandinavian models are perhaps less efficient, in France’s case much less efficient, but are very humane.
My personal hope is that fairness and humanity will win – and quickly.
Google has just announced that it will begin offering a new service: A kind of Google wiki, in which search users write material and upload it, to become part of the Google information base. This is long-awaited, because it extends Google’s powerful vision:
Make all the written information available, all the time, anywhere, to anyone.
Now Google wants to add to “written”, the adjective “unwritten” or “tacit” as well – knowledge in people’s heads, but not written down. By asking people to write down this information, Google is extending its vision.
The founders of Wikipedia say they do not feel threatened, because the Google wiki will be more like a blog than a Wikipedia. Time will tell.
But a key message for innovators from Google’s planned wiki is this:
Most of the time, great innovative organizations do not know what they know. Because their creative people are so busy creating, they never take time to document what they are doing and how they are doing it. Much of this valuable information is later lost, when the innovators leave or retire.
Does your organization have a wiki? Can you set up one? Can you persuade your developers to document what they do while they are doing it? Don’t wait for Google’s wiki. Build one of your own. You will find it is a powerful tool for building the new generation of innovators.
The latest Batman sequel, The Dark Knight, has opened and is breaking box office records, with over $200 m. in revenue grossed so far. It is the largest gross for a movie opening in history.
What can innovators learn from Batman and its director Chris Nolan?
* Break the rules. Batman is a ‘comic book’ movie. Movies in this genre have a formula. They have villains, but the villains are not that villainous, because viewers want to be amused and entertained, not frightened. Nolan broke the rules. His comic-book movie raises real issues of ethics (can you break the law in order to enforce it?). His villain, The Joker, played by the late Heath Ledger, is truly unredeemably evil. Comic-book movies usually do not win Oscars. The Dark Knight may just break this tradition. Nolan was unafraid to make a serious movie out of a genre that previously has not been at all serious.
* Be like Bizet, not like Henry Ford. Bizet wrote the opera Carmen. Carmen was a rule-breaker, a game changer. Before Carmen, there was Comic Opera, and there was Grand Opera. Bizet combined them. Audiences were puzzled and booed. But in the end, they got the idea. Carmen became one of the world’s best-loved operas – though Bizet did live long enough to see this happen. The Dark Knight may also have become a game-changer, and we may see more comic-book movies that treat serious issues and that make people think.
The Ford Motor Co. is celebrating the 100th birthday of the Model T, first developed by Henry Ford in 1908. The Model T was a smashing business innovation, of a kind that made competitors irrelevant, in Gary Hamel’s phrase. After Henry Ford invented the assembly line, no other business model for car production could compete with it. Ford changed the rules of the game, not only for cars but for all manufactured products. Ford’s business innovation made Ford the dominant car-maker for 20 years, until 1928. In that year, a business genius named Alfred Sloan introduced another game-changing innovation: Cars with different colors, styles, engines, and with closed bodies (the Model T was open). Henry Ford missed the boat. He failed to change his business model in time to meet competitive threats. Ford went downhill until 1965. And today, the company he founded is losing massive amounts of money and its existence is threatened, as is General Motors – the company Sloan founded. Both Ford and GM have lost the innovative talents of their founders. They have forgotten their core values. They have forgotten their history. They no longer make beautiful cars. They are no longer run by executives who live, eat, sleep and dream cars. And they certainly do not seek game-changing innovations, as Batman’s Chris Nolan does. Instead they pursue cost-cutting strategies, and those never ever sustain marketplace success by themselves.
And the rest, as they say, is history.
“That just ain’t cricket!” This is a common English expression for anything that is not precisely according to rules. It comes from the fact that the game of cricket is played by gentlemen according to written and unwritten rules, without deviation.
Cricket is one of the world’s oldest organized sports, with history going back to the 16th C., and with international cricket played since 1844. One would expect, therefore, NOT to find innovation anywhere near the cricket ground.
Not true. Cricket test matches are normally long, sleepy events played by two teams of 11 players that can last up to five days. Years ago, someone invented one-day cricket – a match limited to, say, 50 ‘overs’ (an ‘over’ is a series of six bowled balls). It was a successful innovation. And now the British have invented Twenty20 cricket. According to Wikipedia:
Twenty20 is a form of cricket, originally introduced in United Kingdom for professional inter-county competition by the England and Wales Cricket Board (ECB), in 2003. Both teams have a single innings and bat for a maximum of 20 overs.
A Twenty20 game is completed in about two and half hours, with each innings lasting around 75 minutes, thus bringing the game closer to the timespan of other popular team sports such as football. It was introduced to create a lively form of the game which would be attractive to spectators at the ground and viewers on television and as such it has been very successful. The ECB did not intend that Twenty20 would replace other forms of cricket and these have continued alongside it.
The game has spread around the cricket world. On most international tours there is a Twenty20 match and most Test-playing nations have a domestic cup competition. The inaugural ICC World Twenty20 was played in South Africa in 2007 with India defeating Pakistan in the final.
But – guess what. The nimble Indians (India, as a nation, is utterly insane about cricket -–life stops there when an important international match is being played) grabbed the idea and created a hugely successful Twenty20 professional league. Now Britain is about to do the same, creating a televised British league.
Conclusions? Even in the most conservative hidebound product can be innovated. To do so successfully, think ‘in the box’. The ‘box’, in this case, is television. You cannot really televise a five-day match! But you can televise a Twenty20 two-hour match. And without television revenue, you do not have a real product. Once you assume that the rules of cricket must conform to the constraints of TV – Twenty20 follows instantly. Interestingly, the British invented Twenty20, but the Indians were first to make big bucks from it. How many times have we seen that happen, decades ago, with American inventions and Japanese commercialization!
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p.s. My friend Richard Milecki, Kibbutz Tuval (in the Galilee) wrote to reveal the true origin of one-day cricket:
Hi Shlomo!
One Day Cricket was initiated by Kerry Packer - the Australian Media Mogul. As you suggested, he did it to make more money out of television advertising. The Brits of course could never have taken such a step. It created a huge up roar at the time as did night cricket. He even had the gall to dress the players in coloured uniforms! In retrospect the move ensured the ongoing survival of the game.
One correction: As a child I remember sweating it out in front of the box for 5 days watching Test matches against England - it can be done!
Breakthroughs often occur, both in research and product innovation, when innovative pioneers succeed in combining two disciplines, or technologies, not previously integrated. For example: The Japanese engineer who combined digital photography with cell phones. Or, in the early 1970s, when Israeli scholars Amos Tversky (z’l) and Daniel Kahneman brought models and methods of psychology to economics.
A new breakthrough is occurring, as neuroscience (which uses the imaging of brain activity to infer details about how the brain works) combines with economics and decision science, to create “neuro-economics*.”
Innovators can learn much from neuroeconomics. Here is one small example.
Neuroscientists have found that there is a specialized area in the brain (possibly, in the prefrontal area known as Brodman 10) where ‘theory of mind’ (i.e. knowing how another person thinks, and how another person thinks about you) is processed. Neuroscientists believe that some people have this ability innately, genetically. Their Brodman 10 brain centers become very active (as shown by the color red on function MRI images) when, for instance, some subjects play strategic games, requiring them to assess other players’ moves. For other people, the same brain center remains cold, color blue.
Successful innovation management requires innovators to predict how competitors will react when our innovation is introduced to the marketplace, and to prepare strategic responses. What are our competitors likely to do? they ask. This is the business context of ‘theory of mind’ and Brodman 10.
Innovators should ask themselves:
• Am I good at accurately anticipating the responses of other people? Or am I very poor at this? If poor, can I strengthen this skill through practice?
• If I am poor at it – How will I find others, and make them part of my team, who are good at it?
You can successfully complete 9 of the 10 innovation stages, but fail at the 10th (market launch), if you lack “theory of mind”. Analyze yourself – and prepare in advance.
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*Colin Camerer, George Loewenstein & Drazen Prelec, “Neuroeconomics: How neuroscience can inform economics”, in: S. Maital, ed., Recent Advances in Behavioral Economics (Edward Elgar: Cheltenham, UK, 2007).
**Special thanks to Ben Gilad, author of the forthcoming book Business War Games, for providing the insight described in this blog.
University of Chicago economist Gary Becker won the Nobel Prize for economics in 1992, in part for his remarkable insights into the economics of the family. Becker showed how families are small production units in which family members engage in trading services, for mutual gain*.
But if families are production units, they can also be innovative units.
In your family, at the dinner table, raise these questions:
• What changes could we make, in the way our family organizes its life, that would make things better for everyone?
• What is the one thing that most bothers each family member, about how the family is organized and operated?
• What are the core competencies of each family member, and how can these be better utilized for the benefit and gain of all?
• What new things can be done, as a family, that will enrich our lives?
• How can our family share its many blessings, with other people, in ways that enrich the family’s life as well as the lives of others?
A family, someone once said, is the ‘we’ of me. If there is creativity in ‘me’, why not spread it to ‘we’? And indeed, is Tolstoy right, that ‘happy families are all alike’**? Or are happy families all different, because they find unique innovative ways to enrich their lives and broaden their horizons?
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*Gary Becker. The Economic Approach to Human Behavior. Paperback: 320 pages. University Of Chicago Press (September 15, 1978.
**Anna Karenina.
What the New York Times called “one of the greatest tennis matches ever played” between Rafael Nadal and Roger Federer ended last night, with Nadal winning a five-hour match (in near darkness) 6-4, 6-4, 6-7 (5), 6-7 (8), 9-7. It was the longest singles final in Wimbledon history, and without doubt the best. Nadal took the first two sets. Federer fought back doggedly to win the next two, in tie-breakers. The fifth and deciding set was tied 6-6. Normally there would be another tie-breaker. But not at Wimbledon, where strict rules prevail (players without exception must wear all-white clothing, for instance). There, the final set is played out, even in doubles, until one of the players leads by two sets – even if it means playing to 17-15.
Picture: Rafael Nadal
What can innovators learn from this amazing final – apart from courage, stamina, persistence, will to win, character and fierce determination, shown by both players?
On Israel’s Channel 55, the commentary (in Hebrew) was awful. Both commentators kept saying, “lo ye-amen” (unbelievable) or simply Wow! But one commentator did note a key fact.
“Nadal’s advantage was not only his physical athletic ability,” he said. “He has mental strength. He does not think about the past. He does not think about the future. He is totally focused in the point he is playing NOW. This is a huge advantage.”
For instance, the umpire chastised Nadal for taking too long with his service. This might have rattled many players. But Nadal remained totally focused. He had a game strategy, he stuck to it, and did not change it even when he lost two sets. He was completely immersed in the present.
In his best-selling book The Power of Now (Thomson Press, Delhi, India, 2001), Eckhart Tolle notes, “most people are always trying to escape from the present moment and are seeing some kind of salvation in the future.”
This is true of innovators. They are fueled by dreams of some outstandingly successful future. This of course is important; an energizing vision is crucial. But it is far more important, after the vision is established, to shelve it and focus intensely on the present – on what is required at the present moment in order to implement the future vision. Forget past failures. Forget future dreams. Focus on the practical things you need to do today, now, to succeed.
That is what Nadal did. And because he did it so well, it helped him fulfill his childhood dream – playing at Wimbledon, and ultimately, winning at Wimbledon.
Can innovators help get the stalled Mideast peace negotiations back on track?
For certain!
There are two types of innovation: radical ‘blue oceans’, that create breakthrough innovations, and incremental ‘red oceans’, that create significant incremental improvements to existing products.
At present, Israeli and Palestinian teams are negotiating a ‘blue oceans’ radical final settlement agreement. There is little hope it will be achieved, despite visits by U.S. Secretary of State Condoleeza Rice and even President Bush himself. The gap between the two sides is too large, and the degree of trust between the two is very low. Moreover, leaders of both sides, Ehud Olmert and Mahmoud Abbas, appear to have little support from their own people.
Is there another way?
In our forthcoming book*, my friend and co-author Gen. (ret.) Robert Dilworth and I propose what we call IRDI’s (‘immediately reciprocal diplomatic initiatives’). These are small incremental measures, in which one side ‘trades’ a trust-building initiative (e.g. removing a checkpoint barrier) in return for a quid pro quo (e.g. removal of a hateful message from a Grade One textbook). Over time, a series of these IRDI’s can build trust and build peacemaking momentum.
I believe this approach to peacemaking is analogous to Nokia’s Finnish R&D strategy. Nokia invests substantial sums to develop incremental improvements to its existing products, eschewing, in general, blue ocean breakthroughs. As a result Nokia often misses technological ‘leaps’ – but quickly regains market leadership by its skill in focused incremental innovation. We see this happening now as Nokia takes on Apple’s iPod. Finland as a whole follows the Nokia strategy in its national R&D policy.
Final settlement? We tried that at Madrid, Oslo and Geneva. Incremental steps toward a settlement? Isn’t it worth a try? We have little to lose.
*Robert L. Dilworth and Shlomo Maital. Fogs of War and Peace: A Midstream Analysis of World War III. Praeger Security (with A-USA Books), forthcoming: Washington, DC. October 2008.
Picture: Luis Aragones,
manager of Spain’s European champion football team
Last Sunday Spain’s talented speedy football team won the European championship, with a 1-0 victory over Germany.
What can innovators learn from Spain’s victory, its first European championship in 44 years?
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In entrepreneurship, as in football, the winning formula is: Chose talented motivated ‘players’, give them a strong vision, align them all with the vision – and then turn them loose to give full expression to their creativity. Aragones, Spain’s 70-year-old manager (the oldest manager in history to win the European championship), calls himself ‘manager’ not coach – for a reason. His style is to pick great players, tell them what he wants – and then let them play with full creativity and freedom. This does not mean that Aragones is passive – he ran up and down the touch line for the entire game, exhorting his players. But – he does not over-manage, as do many football managers. As Jim Collins says: Get the right people on the bus. Tell the driver where to go. And then – let them roll… Aragones wanted fast, attacking possession football, picked the players who could implement it – and let them fulfill their creativity.
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Aragones instilled in his players the unshakeable belief that they could indeed win the championship. Even when Germany opened the championship final strongly, and Spain looked bad, this rock-solid belief never wavered. Eventually, Spain’s foot-to-foot passing tired Germany – and Spain triumphed. Winning entrepreneurs, too, never cease believing that they will ultimately triumph, through hardship and defeat.
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In entrepreneurship, as in football, speed (not defense) wins. Football fans for years have suffered from boring dull teams from Italy, and Germany as well, who build their victories on solid defensive walls and mediocre attack. Italy, especially (the national team, as well as Inter, and AC Milan) has chosen this route. Along comes Euro 2008, bringing a speed-of-light Russian team with players able to run for 120 minutes (90 minutes plus a 30-minute overtime), who sprint as fast at the 120th minute as they do in the first minute, and suddenly attacking football and speed are back. Russian surprisingly made it to the semi-final round, losing to Spain.
Aragone chose speedy players, taught them ‘possession football’ (precision passing) – and turned them loose. In entrepreneurship, too, speed is crucial. Do you have a great idea? I will bet any sum that someone in the world has had the same idea and is working on it, too. Who will win? Usually, though not always, the fastest – the first to market and to patent.
Spain’s talented speedy young striker Fernando Torres raced German defender Phillip Lahm (his names means “lame” in German, but he is far from that) to the ball, started a yard behind him, managed to overtake him, and flipped the ball over the desperate keeper to score Spain’s only goal. Entrepreneurs, too, score ‘wins’ in this way. By instilling urgency in their team, they get to market fast, ahead of their slower competitors.
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As I am about to turn 66, I deeply relate to the grey-haired Aragones’ victory. I felt it was me the players were tossing into the air, not just Aragones. Aragones’ players say they related to their manager as to a father. How many players love their managers, as a father? Virtually none – because the manager himself is a media star, often, and competes with his players for attention and fame. (Ever heard of Juan Maurinho?) Entrepreneurs, like Aragones, who lead with strength, but above all with humility, will create the motivation needed for continued success. Share the credit fairly with your ‘players’ – and watch them win championships.
Know the old saying, nature abhors a vacuum?
Well, when it comes to creativity and ideas, it is not true. Nature truly loves a vacuum. Innovators create lots of them. Here is what I mean.
This morning, on my way to the bus stop, I noticed that my bus was already at the stop. As an addicted jogger, I chose to sprint to catch the bus. I ran about 30 yards and made it in time. But the driver refused to open the door and pulled out into traffic. Of course I was angry. In my mind, I began writing letters to the bus company, to the Ministry of Transportation and to the whole world.
And then, in a calmer moment, I had an insight. Wait one second, Maital. You are now on your way to jog along the beach. This is a time when ideas flood into your head. When you jog, there is a lovely vacuum of peace and serenity in your mind. When that vacuum is created, all kinds of great ideas flood into your head. Most people have experienced this – in hikes, and in the shower in the morning.
But when the vacuum is destroyed by negative thoughts – how to get even with the bus company – the creativity is ruined. I could easily have allowed this to happen this morning during my run. But at the bus stop, I made an instant decision simply to forget it – and to let the idea vacuum happen.
It worked. The Evidence? This blog.
My advice is to treat the space in your mind – what psychologists call cognitive resources – as your scarcest most valuable resource, even more than your financial resources. Treasure it, protect it, and above all, never never waste it. Simply, cancel all thinking that will not lead to positive results.
This takes practice. You need to work at managing your schedule, to create opportunities for creativity vacuums to happen. And you need to practice focusing thoughts on constructive positive areas rather than negative ones. It is not easy.
But once you master this, the results will surprise you. Try it!
David Wendorsky works for 3M in its labs. He also goes out to universities to speak to students about innovation.
On one of his visits, he noticed that students were reading books and making passages with highlight pens. He also noticed that some of them were flagging pages with Post-It notes.
Wendorsky put 2 and 2 together – and came up with 3M’s latest hit, a highlight pen that has little Post-It flag notes attached to it. By combining the highlight pen with the Post-It sticky notes, it is far easier both to highlight and to flag.
This is an example of an innovation ‘formula’ known as X+Y. Take two existing products. Combine them, in a manner that creates new value.
In my book Innovation Management, I describe the X+Y innovation of Lucky Goldstar (the early incarnation of today’s Korean giant LG). A brilliant engineer thought of combining a TV with a VCR, in the same box, using a single tuner, and called in a Viewmax. It was a hit. Stores bought it for counter-top displays. Students bought it for dorm rooms.
Another example is the cell phone with digital camera built in.
If you can add, you can innovate. Try this exercise: write a list of products you use daily, on the left hand side of the page. Now write the same list on the left hand side. Randomly, join products. See if you come up with something that makes sense and creates value.
Susan and Donald Sutherland, who lived in Tempe Arizona with their five daughters, thought they might like to start an ice cream business. They talked to a friend, bought some equipment – and 20 years later, Cold Stone Creamery is a $ 500 m. empire with 1,400 franchised stores across the United States.
What is their secret?
They asked, as Harvard Business School professor Ted Levitt counseled, what business are we in? Ice cream? No. Fun. Entertainment. Cold Stone personnel let customers design their own ice cream, choosing the ‘base’ ice cream flavor (French vanilla, pumpkin) and combining it with a huge variety of things like raspberries, M&M’s, Oreo cookies, etc. The ice cream is mixed with the flavorings on a cold granite slab. No two servings are the same.
When a customer gives a small tip to the Cold Stone personnel, they get a mini-performance: A spirited song and dance by the ice cream servers. According to Wikipedia: “In the spirit of joviality, and to encourage customers to give tips, Cold Stone instructs employees to sing a Cold Stone song, usually to the tune of recognizable melodies such as “Take Me Out to the Ball Game” or “Bingo,” when a customer places money in the tip jar. Lyrics include short, catchy phrases, such as, “This is our Cold Stone song, it isn’t very long.””
Like other franchises, Cold Stone strives to provide similar service at every store by supplying instructional material and training videos to franchise owners. The founders have intuitively applied the principles outlined by B. Joseph Pine in his book The Experience Economy. Cold Stone customers get, with their ice cream, a memorable experience. Chances are, they come back for more.
The Sutherland’s five daughters all grew up in the business. When the Sutherlands began to franchise it, they were opposed – they liked the “Mom and Pop” business they grew up in. But recently on the Oprah Show, they seemed to be enjoying the success and attention the booming franchise generates.
Cold Stone Creamery is now the sixth-best-selling brand of ice cream in the U.S. and now operates stores in Japan, Taiwan, South Korea, Puerto Rico, Indonesia, Guam, China, and Mexico. The company was also named the 11th fastest-growing franchise by Entrepreneur Magazine in January 2006.
Not everything is rosy. Richard Gibson recently wrote an article about Cold Stone in The Wall Street Journal, about how not to run a growing franchise.
It is a sad fact: Many startups and established companies run into trouble, when their innovative development projects go awry, exceed their budgets, miss their time targets and fail to achieve their goals.
Why? Most project managers are well-trained, experienced, diligent and hard-working. What goes wrong?
Former TIM Board Member Prof. Alex Laufer, past Dean of Technion’s Civil Engineering Faculty, has a theory. The classical discipline of Project Management assumes a world of certainty and provides finely-detailed planning tools, like Gant charts, that specify every detail. Most project managers use those tools in one form or another.
But the real world is chaotic, uncertain and stochastic in nature. Planning tools tend to be static, while projects they plan are highly dynamic. The conventional wisdom is misleading and even harmful. A dynamic project requires a dynamic approach to planning. Successful project managers are flexible, adaptive and quick to improvise solutions to unexpected problems that arise.
This brings to mind the early days of rockets and guided missiles. A branch of mathematics known as optimal control was used, to plot the optimal trajectory. But it was quickly discovered that rockets and missiles are constantly buffeted by unexpected forces – winds, humidity, temperature. You cannot plan the rocket’s trajectory just once and expect it to reach its planned destination. You have to recalculate the trajectory every millisecond. This is known as adaptive control.
In project management, a set-in-concrete project plan is often built. But almost invariably it quickly becomes irrelevant. You need an adaptive dynamic approach in order for your project ‘rocket’ to hit its target.
I recently had the privilege of evaluating a Ph.D. dissertation written by Laufer’s student, Zvi Zilick. Zilick has some grey hair and has long experience in managing projects. His thesis was unusual – it comprised 10 detailed case studies of successful dynamic project management, including a highly unusual story of an emergency heart operation to repair damaged heart valves. I wish every project manager could read these fine case studies. They combine both Zvi’s experience and the insightful experience of those whose stories he recounts.
In two books (and a new forthcoming one) Laufer explains his own principles of dynamic project management that contradict the current conventional wisdom. I recommend that every innovator read his 2000 book, co-authored by E. Hoffman, Project Management Success Stories (Wiley, NY). You learn more from successes than failures, Laufer notes, because there are millions of wrong ways to run projects (and fail), but only a few successful right ways.
How can you improve your own project management? First, read case-studies of successful project management. Second, drop your set-in-stone project models. Third, build in to your project plans buffers and ‘shock absorbers’ that permit flexibility. Fourth, remember that managing projects is not about steel girders or transistors, but rather it is about people. Laufer finds that ‘soft’ behavioral variables like interpersonal trust are far more important than ‘hard’ engineering variables. For example, do team members tell the truth? If they are slipping in their timetable, will they tell the project leader in time?
Projects are dynamic. Managing them, therefore, must also be dynamic. Why has it taken the discipline of project management so long to realize this?
Remember the hype about the New Economy? Companies with no revenue at all, without a real business model and without any grounding in reality launched Initial Public Offerings and raised millions, from 1995-2000 - solely because they had three letters, .com, after their name. After the crash, the words “New Economy” crashed even deeper than the NASDAQ.
Guess what? The new economy is real, powerful and is changing our lives. What the new economy really is, is the Digital Economy – converting knowledge, information, services and products into bytes, to sell, transform, transmit and store. The dot.com crash was just a minor and temporary setback, as almost always happens during enormous life-changing revolutions.
What is the key to business success in the New Economy?
Let me try to simplify it, in about 112 words.
Economists tell us there are two kinds of costs: VARIABLE (directly related to costs of production, such as raw materials, components, labor), and FIXED (not related to production, such as management, marketing, rent).
In the Old Economy, VARIABLE costs were dominant – the cost of making products.
In the New Economy, FIXED costs are dominant, because once you build the mobile network, or website, the marginal ‘production’ costs of adding another subscriber or customer are zero. In fact, they are negative! The digital economy has zero or negative marginal costs. Because for a network, the more people there are, the more valuable it is and the more people want to join it.
What does this mean? Take, for instance, Sprint, who spent $1 b. to build America’s first fiberoptic network. Once that network was in place, the name of the game was innovation – how to innovate new services, based on the network, that people would want and would pay money for? And innovation, not only in services, but in pricing. Pricing innovation is crucial.
Why?
Because economists teach that to maximize profit, companies need to equate price with marginal cost. This works in the Old Economy. But in the New? When marginal costs are negative? Negative prices? Pay customers for using our service???
Pricing policy is the most underutilized area for innovation. The New Economy requires innovative pricing for success – zero prices with subscription fees, zero prices with service contracts, zero prices just to gain eyeballs for advertising – all are pricing formulas that have created billion-dollar businesses, including Google.
If you want to launch a New Economy business in the new Digital Economy, don’t think pricing is Old Hat. Find ways to make money with clever pricing systems. Find ways to build demand and utilization for platforms that have nearly infinite capacity.
The New Economy is actually pretty old. We have always had platform businesses based on utilizing expensive platforms (copper-wire phone systems, for instance). The difference is, today, far more new service innovations are digital in nature. The digital revolution is spreading to huge industries, such as music and publishing, which for the most part simply do not see the revolution coming and have been trampled by it.
So, innovators: If your innovation is digital in nature: How does your innovative business model answer this question – how can I build a clever pricing model, when the cost of an additional customer is zero or negative? How will I find customers, sell to them, and retain their business, to boost utilization of my expensive platform?
Yves Saint Laurent, one of the world’s greatest fashion designers, died in Paris. He was 71. Here is what the New York Times wrote about him:
During a career that ran from 1957 to 2002 he was largely responsible for changing the way modern women dress, putting them into pants both day and night, into peacoats and safari jackets, into “le smoking” (as the French call a man’s tuxedo jacket), and into leopard prints, trench coats and, for a time in the 1970s, peasant-inspired clothing in rich fabrics.
Mr. Saint Laurent often sought inspiration on the streets, bringing the Parisian beatnik style to couture runways and adapting the sailors’ peacoats he found in Army-Navy stores in New York into jackets that found their way into fashionable women’s wardrobes around the world. His glamorous evening clothes were often adorned with appliqués and beadwork inspired by artists like Picasso, Miró and Matisse. Above all, he was a master colorist, able to mix green, blue, rose and yellow in one outfit to achieve an effect that was artistic and never garish.
What can innovators learn from Saint Laurent?
There are three simple lessons. First, he found inspiration, not inside his studio, but “on the streets.” Second, he was fearless, able and willing to break the rules of an industry that has very rigid rules. Third, he built his innovative designs on life style.
I heard a fashion expert explain Saint Laurent’s success brilliantly. “His success was due to the baby boomers”, explained Gil Michaely, Israeli Paris-based journalist. “He designed clothes for baby-boomer mothers who wanted to look like their daughters. He designed clothes, as well, for the daughters, who wanted to look like their mothers. And, he designed clothes for the mothers, who wanted to look like their [wealthy, successful] husbands.” Saint Laurent invented the pants suit, which now has become a high fashion item women wear not only to work but also to parties and evening social events.
“My small job as a couturier,” the New York Times quotes him as saying, “is to make clothes that reflect our times. I’m convinced women want to wear pants.”
“The clothes incorporated all my dreams,” he said after a show, “all my heroines in the novels, the operas, the paintings. It was my heart — everything I love that I gave to this collection.”
Live your dream, we tell innovators. Yves Saint Laurent not only lived his – he let other people wear them. In doing so, he made them beautiful.
NASA’s Phoenix explorer spacecraft, about to begin digging into the surface of Mars, has a major lesson for innovators. Sometimes you find the best ideas in the junk pile of discarded failed ones. Here is how the New York Times describes the process that led to the Phoenix’s rise, literally, from the junkpile ashes:
In NASA’s “faster, better, cheaper” era, two landers of almost the same design were built: Mars Polar Lander and Mars Surveyor 2001. The Mars Polar Lander disappeared as it tried to land on the planet in December 1999, NASA’s second Mars failure that year. After an investigation showed shortcomings in the spacecraft design, the Mars Surveyor 2001 mission was canceled, and the spacecraft was put in storage.
In 2002, Peter H. Smith of the University of Arizona proposed taking the mostly built Mars Surveyor 2001 spacecraft, which was to have landed near the equator, and using it to land in the northern arctic plains of Mars. NASA gave the mission, named Phoenix Mars, a green light in 2003.
Let us salute the innovative Peter H. Smith. We all recycle plastic bottles and newspapers. Why not recycle old ideas – especially those that have already been built and paid for? There must be a great many of them just lying around, waiting for the right “Peter H. Smith” to come along and discover them.
The remarkable story of Arnie Goldman, who had a fantastic idea, implemented it, ran out of money a few months before the legislation to validate it passed California’s legislature… and is trying again. This time, the story will have a happy end.
Arnold Goldman – or Arnie, as everyone calls him – is an extraordinary Jewish visionary, entrepreneur, electrical engineer, and author, in that order. Entrepreneurs can learn much from him. His earlier failure was colossal. Today, he is 63 years old, and has embarked on a new entrepreneurial venture. This time, he may succeed big-time. His latest book is Moving Jewish Thought to the Center of Modern Science. And, he believes he is the only person in the world who is convinced that 1+1 does not equal 2.
In California, where he was born and raised, Arnie was co-founder of Lexitron, the first company to sell word processing software, sold to Raytheon in 1977. He then came to Israel with his wife and three children to build a solar energy firm. In the early ‘80s, he founded Luz International, a pioneering solar-energy company based in Israel. The name Luz came from the Biblical city where Jacob dreamed of a ladder rising to heaven. Jacob renamed the city Beit El (House of G-d).
Arnie dreamed of building a new ladder to celestial energy. Between 1984 and 1990 Luz built nine SEGS (Solar Energy Generating Systems) in southern California, generating 2% of the area’s energy needs and aspiring to produce up to 10%. The solar energy fields built then used solar reflectors that covered 2 million square meters. Arnie used talented Israeli engineers for Luz’s R&D, done in Jerusalem.
At one point Luz produced 90% of all the solar-generated electricity in the world! But it ran into a snag. To compete with conventional energy suppliers, in the era of cheap oil, Luz needed its vast solar-mirror-covered fields to be exempt from property tax. Such exemptions had been legislated in California, but the legislation expired in 1990. Luz assumed the renewal and extension would pass easily. And it did, with over 90% of California’s legislature voting “aye.” Luz went ahead with construction of its 10th solar plant. At one point Luz had $300 m. in annual revenues.
But in 1991, the Republican Governor of California, Pete Wilson, vetoed the bill, under pressure from powerful electricity companies. Later in 1991, the U.S. Congress passed national legislation exempting solar fields from property tax – but it was too late. Luz had burned $20 m. a month to keep the construction going, and had run out of money. It was broke. Business Week says Luz went bust because rival natural gas systems were superior. But I think the reason was the delayed tax exemption.
Goldman says “the failure was shattering – financially and personally,” according to the Jerusalem Post. It took him 15 years to recover.
But Arnie is back – big time!
He has founded Luz II, wholly owned by BrightSource Energy, which he founded and chairs, a U.S. company that designs and builds large solar electricity plants. Investors in BrightSource include Google.org, the ‘social responsibility’ arm of Google, which together with other investors has put $115 m. into Luz II. According to Business Week (May 14), BrightSource signed a huge deal with utility giant PG&E (Pacific Gas and Electricity) to supply PG&E with up to 900 megawatts of solar electricity.
Luz II’s technology is unique. Unlike photovoltaic cells, Luz II’s thermal system uses concentrated heat from the sun to drive turbines, which in turn generate electricity. This technology is based on the system developed by the original Luz, in the 1980’s.
According to Business Week, “Israel is quickly becoming a hotbed of alternative energy research and startups.” Among them: Solel Systems, Zenith Solar, and the Trans-Mediterranean Renewable Energy Cooperation project, sponsoring Desertec, a scheme to install thousands of parabolic trough collectors in North Africa and the Middle East, to generate electricity for the often-cloudy Northern and Western Europe.
And Arnie? Well, about that 1+1… combine two hydrogen molecules with one oxygen molecule, 2+1, and you get not 3 but one water molecule. Combine one amoeba with another, and you get not 2 but millions.
He believes he can quickly build Luz II’s revenues to $3 b., 10 times those of the original Luz. “We can produce energy less expensively and more cleanly than anyone else in the world,” he told Jerusalem Post columnist David Horovitz in 2006.
“The Luz Brothers are back,” Arnie says. With oil at $130/bbl., we should all rejoice.
Presentation Slides
Results-driven innovation is thinking INSIDE the box. SLIDE #2. The “box” is the set of challenges, issues, problems industry faces. These challenges are communicated to universities. Universities then apply creative thinking and cutting-edge science to meeting the challenges, working hand in hand with industry. The trick, of course, is to know which boxes are essential and which can be discarded. Innovation without any boxes is of no value to anyone.
This, I believe, captures the essence of successful results-driven university-industry cooperation. We have heard many case studies showing how this is done here in India.
I have come 4,000 miles from India to deliver a very short message. Israel and India are strawberries and cream. Together our two countries can do great things. But how?
Here is my message.
Israel has a problem. As a nation we are a powerful innovation machine. But we sell our brains too early and too cheaply. We have 3,000-4,000 startups, in a country of only 7 million. But our great entrepreneurs and innovators ‘exit’ prematurely, selling their startups mainly to U.S. companies who leave a huge check with one or two entrepreneurs, but the people of Israel do not benefit, because a potentially great global firm, another Nokia or Infosys, has been stillborn. (SLIDE #3)
The solution is: (SLIDE #4) BUILD AN INDIAN INDIGENOUS INNOVATION MACHINE. Israel can help. We will gladly share the so-called secrets of our innovation machine. They are not really secrets. And it is not rocket science. India is already highly innovative –(SLIDE #5) I know this, because I work with Indian companies and have taught many brilliant and creative Indian engineers over the years, in America and in Europe. However (SLIDE #6) some of this creativity is deeply buried. Yesterday Vinay Deshpande noted that Indian students want to work for a ‘brand name’ company, even though 80 % of innovation comes from SME’s. My question is: How do you get Indian mothers to tell their sons and daughters to start risky businesses, rather than seek safe paychecks? The mothers of India hold the key. In Singapore Lee Kwan Yew told the mothers of Singapore, in 1965, to tell their kids to study math. A generation later, Singapore had many first-rate engineers.
NEXT: TAKE THE FRUITS OF ISRAELI AND INDIAN INNOVATIVE IDEAS, MANY EMERGING FROM UNIVERSITIES.
SCALE THEM INTO GLOBAL BUSINESSES RAPIDLY.
SHARE THE FRUITS OF SUCCESS BETWEEN OUR TWO COUNTRIES.
This is a session on case studies. So far, we have mainly heard about success stories. But we learn most from failures. One of the secrets of the Israeli innovation machine is that it is OK to fail. You get another chance. And another. Here is a story of a brilliant innovator, who bridged university and industry, made a huge fortune – and said he had failed. And indeed, he did fail. Here is the story.
SLIDE #7
CASE STUDY: Moshe Yanai, The Case of the Reluctant Multi-Millionaire
Moshe Yanai is a living legend in Israel, with a Midas touch in data storage technology.
He himself, however, appears rather disappointed with the outcomes.
Why?
Yanai graduated from Technion-Israel Institute of Technology in 1975, with a B.Sc. degree in electrical engineering. He went to work for Elbit (see above), where he helped design and build data storage equipment for mainframe computers. In 1984, after eight years at Elbit, he was sent to the United States to support a project sold by Elbit to the German computer company Nixdorf. He worked at Nixdorf for three years, until he met EMC2 co-founder Dick Egan. [Contrary to what people believe, EMC did not get its name from Einstein’s equation, but from the names of its co-founders Egan and Roger Marino.]
Yanai joined Boston-based EMC in 1987, when EMC employed some 1,000 people. He led development of what became the flagship division of EMC, Symmetrix, ultimately becoming its VP. Little EMC took on the giant IBM – and with its innovations, led by Yanai, defeated it utterly. Yanai’s team included many Israeli engineers Yanai ‘imported’ to EMC’s Hopkinton, MA. Headquarters. When Yanai left EMC, 14 years later, in 2001, it had a market value of some $200 b., and employed 25,000. During the decade of the 1990’s, EMC’s share price rose by more than any other listed company – some 85,000%!
After leaving EMC, Yanai returned home to Israel, reportedly a multi-millionaire from his EMC options and salary. He helped found EMC’s startup in Israel, known as Diligent. He also invested some of his personal wealth in another startup, XIV, and became its chairman. Both Diligent and XIV innovated data storage technologies.
Yanai found innovation skills among creative young people drawn from graduates of an Israel Defense Forces program known as Talpiot.
Talpiot’s participants are chosen from a pool of highly-motivated youth who specialize in hard sciences such as physics and mathematics. The soldiers, who all become officers, undergo more than three years of training - during which time they receive a degree in both physics and mathematics - and then join the Defense Ministry’s Research and Development Directorate or highly-classified units in the air force. Following the training, Talpiot participants are obligated to sign on for an additional six years of military service, for five of which they earn high salaries. (Jerusalem Post, August 6, 2007).
On Jan. 2, 2008, IBM announced it was acquiring Yanai’s XIV for a reported $250 m. “We are pleased to become a significant part of the IBM family,” Yanai said, probably smiling at the irony that after defeating IBM while at EMC, he had helped create technology at XIV that would now allow IBM to return in style to the storage business, to compete with EMC.
On April 18, IBM announced it was acquiring Diligent for $165 m. Diligent pioneered ‘de-dup’ technology, which, in case of two duplicate files, allows backup only of the difference between the two, thus saving storage space.
Israel’s daily business newspaper The Marker said that Yanai will pocket about $200 m. of the $415 m. IBM paid for Diligent and XIV.
It is hard to imagine feeling the emotion of ‘disappointment’ at such an outcome. Yet according to The Marker, Yanai was deeply disappointed. His dream was to build the next Israeli Nokia. As The Marker noted:
“Yanai had not intended to make such quick exits. His original plan was much more Zionistic. He wanted to build the two firms into a global company based in Israel. But in both cases, his partners insisted on selling when faced with such a good opportunity – and profit – and Yanai had little choice but to go along.” *
“My model is Nokia,” Yanai had told The Marker just two weeks earlier, on April 1. Instead, he had to settle for a different model: King Midas, of golden-touch fame. Will IBM build a new Nokia in Israel with Diligent and XIV? It is improbable.
AND IN CONCLUSION: SLIDE #8
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*The Marker, Friday April 18, 2008, p. A12. “IBM purchasing storage startup Diligent for $165 m”.
One of my heroes is Leonardo da Vinci, without doubt history’s most creative individual. But alas, out of honesty, I am forced to say in my talks about him that most of his great inventions – helicopters, submarines, parachutes – were never implemented, even in prototypes.
Well, an intrepid Swiss man (Swiss??? Intrepid??) named Olivier Vietta-Teppa built a version of da Vinci’s parachute (see the original sketch below), leaped out of a helicopter with it and… landed safely. This was after a Brit tried the same thing, in 2000, but had to use his reserve parachute (OK, I admit it – Olivier had one too… but he did not use it).
I doubt there are many examples of innovations that wait for 523 years before being implemented. Now – what about da Vinci’s helicopter? Submarine? Aircraft?
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Parachute that Da Vinci drew is made to work… after 523 years
By Ian Sparks- 28th April 2008, Daily Mail
Parachutes have come a long way in the last few decades. They’re easier to steer and a great deal less likely to go wrong. So it takes a certain amount of nerve to plunge 2,000ft relying on a “chute designed more than 500 years ago. However a Swiss daredevil has done just that, trusting to the genius of Leonardo da Vinci. Olivier Vietti-Teppa, 36, jumped at the weekend using a parachute based on sketches made by the Italian Renaissance artist in 1485. He said after the jump in Payerne, near Geneva: “It worked perfectly. I was unable to steer it, but I just glided gracefully to the ground.
Used da Vinci’s parachute: Olivier Vietta-Teppa
“I came down smack in the middle of the tarmac at Payerne military airport. A perfect jump.” He admitted he had been wearing a modern reserve parachute in case da Vinci’s design - made out of four triangles of fabric and with a pointed top - had failed to open. Mr. Vietti-Teppa is the first person to have made it safely to the ground with the da Vinci model. In 2000, Briton Adrian Nicholas tried it but had to use a back-up parachute to complete his descent. Mr Vietti-Teppa’s parachute was made using modern fabric along lines imagined by da Vinci. The specifications were found in a manuscript dating from 1485.
The parachute consists of four equilateral triangles of fabric, seven yards on each side. The base of the pyramid is a square of mosquito net, which enables the parachute to open. A wooden frame originally conceived by da Vinci was not used. It has one drawback - it is impossible to manoeuvre. ”You come down at the whim of the wind,” said Mr Vietti-Teppa.
The electronics product of the year is without doubt the FLIP Video camcorder, made by an unknown startup company called Pure Digital Technologies based in San Francisco. This innovation illustrates what Amnon Levav at SIT Systematic Inventive Thinking, in Tel Aviv, calls “subtraction” – innovating by removing features rather than adding them. It is a powerful way to systematically develop innovations, because most innovators are stuck in the rut of ‘addition’ – adding features, creating needless cost, complication and complexity.
Pure Digital began in 2001 as a maker of throwaway digital cameras. Buyers offered feedback, as they always do. Founder Jonathan Kaplan listened carefully. He produced, as the customers requested, a permanent shoot-and-share video camera that was fun, easy to use and above all, really cheap. It appeared just in time to tap into the craze for homegrown videos posted on blogs and YouTube, and when existing camcorder markers were busy adding unnecessary bells and whistles to their expensive products.
FLIP is the size of a bar of soap. It has no slot for memory cards. Instead it has a flip-out USB key (no cables!) [press a button and it pops out!] and internal storage of from 30 to 60 minutes.
Its built-in software loads instantly when you plug it in to your computer.
Price? $150 for the 30-minute version, $180 for the 60-minute one. Over a million have been sold this year, out of a total market of 6 million units.
Pure Digital has, in the words of the ‘blue oceans’ school, changed the rules of the camcorder game. It has proved that in winning innovations, often, less is more.
FLIP: Orange version, with pop-out USB
Steve Jobs offers contradictory advice.
“Do not listen to your customers,” he says. “They do not know what they want.”
Yet in the same interview, in Business Week, he says, “Always listen to your customers.”
Which view is right?
Both.
In the words of the Quaker prayer, modified for innovators:
• Give us the courage to not listen to our customers and provide them with innovations that fail market tests and that people say they do not want and do not need. E.g. the Walkman.
• Give us the serenity to to listen to our customers, when they tell us what they want and need and when we believe they are telling the truth. E.g., the FLIP camcorder (see next Blog).
• And – give us the wisdom to know the difference.
A BBC World Service documentary, The Convict Streak, about Australian convicts and their attempts at escape, includes a wonderful segment about Bernie Mathews, an intractable prisoner sentenced to solitary confinement for two years.
Mathews says his cell is pitch black, with no light at all. Once a day he was given a jug of water, a jug of milk and a loaf of bread. Once every four days he was allowed out to exercise for half an hour or an hour. He lived this way for two years.
How does one keep from going insane, in the total black darkness of a cell, with nothing at all to do?
Innovation.
“I found a plastic button in my cell,” Mathews relates. “I invented a game. I flicked the button, then crawled along the floor to find it. Then, after I found it, I flicked it again. I played this game for hours and hours and hours. That is how I survived solitary confinement.”
Management educators motivate companies to innovate, in order to survive. I wonder if they realize how, for some individuals, this is literally true.
I am an incurable and persistent listener to the BBC’s World Service on radio (AM, 1323), even though the BBC is consistently anti-Israel in its reporting – doubtless, because of its millions of listeners in the Arab world.
The programs I find most relevant and helpful in tracking global innovation are Global Business, with Peter Day, and Culture Shock. Day travels the world and interviews innovators (recently, for instance, he visited Philips’ R&D sites in Enthoven and elsewhere). But my favorite is Culture Shock. This program tracks trends in global culture.
For instance, a recent program segment titled “For Better or Worse” interviewed Prof. Clay Shirky from New York University, who related how mobile phones and the internet are fundamentally changing the way people organize themselves in single-interest groups - and why this might be bad. In the segment “Preserved in Rice”, Richard Kimber described a trend from Japan where new technology and traditional gift-giving culture have produced unique mementoes for parents and grandparents: customized bags of rice each of which is exactly the same weight as the new born was on his or her Day 1.
If you believe, as I do, that innovation is NOT about technology, but rather about lifestyle, in turn deeply embedded in culture – then listening to Culture Shock is a must. It opens a window on cultural trends that we might miss otherwise.
The table below shows Business Week’s latest top 50 corporate performers for 2007. The rankings are based on profitability, sales growth, and market value.
What we learn from it is this: Every one of the top 10 performers has found a way to innovate, especially in its business model and business design.
Here is what Business Week said about Coach, the #1, performer:
The handbag maker moved quickly when it understood that its aspirational customers might suddenly hesitate at spending $900 for one of its Legacy handbags. Coach quickly rolled out more affordable lines of bags for as little as $160.
And about #2, Gilead Sciences:
The Northern California biotech firm sensed an opportunity for any company that could develop drugs that were simpler and cheaper than standard HIV treatments, which required patients to take dozens of different pills throughout the day. Gilead’s researchers simplify those cumbersome treatments by combining myriad compounds into a single pill, Atripla, that costs just $1,300 a month and is taken at bedtime.
Going on down the list, we learn what strategy guru Gary Hamel has been saying for years: Truly powerful innovation changes the rules of the game in an industry, by redefining the way companies do business. When they succeed, profitability and sales growth soar.