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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

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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.

2008
Rank

2007
Rank

Company Name

Overall
Grade

Profitability
%

Profitability
Grade

Sales
Growth
Rate %

Sales
Growth
Grade

Market Value*
($bil)

12-mo.
Sales
($bil)

12-mo.
Net Income
($bil)

One-yr.
Total Return

Three-yr.
Total Return

Sector

 

COACH 

A   

60.5 

A   

24.1 

A   

10.0 

2.9 

0.7 

-41.8 

-4.0 

Consumer Discretionary

GILEAD SCIENCES 

A   

45.0 

A   

47.5 

A   

45.2 

4.2 

1.6 

40.9 

180.5 

Health Care

26 

ALLEGHENY TECHNOLOGIES 

A   

43.2 

A   

27.2 

A   

7.5 

5.5 

0.7 

-25.7 

224.3 

Materials

VERIZON COMMUNICATIONS 

A   

13.8 

A   

11.1 

A- 

99.7 

93.5 

5.5 

-0.1 

14.2 

Telecommunication Services

QUESTAR 

A   

24.3 

A   

11.9 

A- 

9.9 

2.7 

0.5 

37.8 

95.4 

Utilities

34 

APPLE 

A   

31.6 

A   

38.3 

A   

112.4 

26.5 

4.1 

44.7 

217.7 

Information Technology

COLGATE-PALMOLIVE 

A   

58.0 

A   

9.0 

B- 

39.3 

13.8 

1.7 

19.5 

56.9 

Consumer Staples

BJ SERVICES 

A   

37.3 

A   

22.5 

C   

7.4 

4.9 

0.7 

-6.2 

4.7 

Energy

ABERCROMBIE & FITCH 

A   

56.4 

A   

22.5 

A   

6.5 

3.7 

0.5 

2.5 

34.5 

Consumer Discretionary

10 

MEMC ELECTRONIC MATERIALS 

A   

46.3 

A   

24.7 

B+ 

19.1 

1.9 

0.8 

50.8 

485.8 

Information Technology

Market Value*
($bil)

12-mo.
Sales
($bil)

12-mo.
Net Income
($bil)

One-yr.
Total Return

Three-yr.
Total Return

Sector

 

10.0 

2.9 

0.7 

-41.8 

-4.0 

Consumer Discretionary

45.2 

4.2 

1.6 

40.9 

180.5 

Health Care

7.5 

5.5 

0.7 

-25.7 

224.3 

Materials

99.7 

93.5 

5.5 

-0.1 

14.2 

Telecommunication Services

9.9 

2.7 

0.5 

37.8 

95.4 

Utilities

112.4 

26.5 

4.1 

44.7 

217.7 

Information Technology

39.3 

13.8 

1.7 

19.5 

56.9 

Consumer Staples

7.4 

4.9 

0.7 

-6.2 

4.7 

Energy

6.5 

3.7 

0.5 

2.5 

34.5 

Consumer Discretionary

19.1 

1.9 

0.8 

50.8 

485.8 

Information Technology

Does life imitate art? 

Remember the awful film starring Arnold Schwarzenegger, in which the muscular Arnold got pregnant and bore a child? (“Junior”, 1994).

Well, guess what. A former Hollywood beauty queen named Tracy underwent a sex-change operation, became a man, and then married Nancy, divorcee with two children from her previous marriage. The couple wanted to have a child of their own, but Nancy had problems getting pregnant.

Now, in the sex-change operation, “Tracy” had chosen to retaine his/her uterus and reproductive organs. So he became the one to bear their child. The birth will occur in a few months. His pregnancy has of course attracted world-wide attention, on BBC and with the couple appearing, inevitably, on the Oprah Winfrey Show.

“Tracy” says that child-bearing is not a male or female thing, but simply a human desire – to bring life into the world.

My question is: will baby Nova call Mom/Dad, Mom? or Dad? Will he or she call Mom, Mom? How about Mom one and Mom two? No, too long. 

Innovation is not without its problems. 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
April 2008
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