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By Rabbi Yochanan
By Prof. Shlomo Maital

Rabbi Yochanan asks, in the Talmud, “what is the right path for a person to follow? Who walks in this path?”

His terse answer, rather surprising:

(in Hebrew) “ha-roeh et hanolad”.  

Translation: He who sees the future.

“Hanolad” means, literally, “what will transpire”.

But it can also mean, “what is happening – now”. Because if the learned Rabbi Yochanan meant “what will happen in the future”, he would have said, “ha-roeh et mah she’yivaled” (what will transpire in the future),  future tense. 

One interpretation of Rabbi Yochanan’s terse, puzzling statement is this:

To live well, to do right, and of course, to innovate, what is needed is to really see what is happening now,  right at this moment, under our noses.  

Most of use look at things but we do not really see them. We hear people talk, but we do not really listen.    What we need is truly sharp vision, sight that becomes insight. I believe this is what the Rabbi meant. And to achieve such sight, to see what transpires now, at this moment, requires us to:

a) care about other people around us, b) be empathetic toward them, and c) really see them as they are and understand their needs, so that we can meet them, as innovators and simply as good people who want to improve the world.

Innovators begin with deep insight into what people need, what their wants and needs are, and then produce goods and services that meet those needs. Above all, they have very sharp vision. They see what is transpiring. They have insight, while others simply look.

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A new business known as Jet Republic just announced a $1.5 b. order for new aircraft, on Sept. 23.

Run that by me again? An airline is buying $1.5 b. in planes, when all the other airlines are cutting back and cancelling flights and grounding planes? (Even Ryanair just announced it would ground more planes than planned during the winter off-season). 

Well, it is not exactly an airline. Jet Republic bought 110 LearJets. These are small private planes that carry about 7 people. Businesses who don’t want to buy their own plane, perhaps because this is seen as a luxury expense, can buy as little as 1/16 of a LearJet, or book 25 hours of flight time a month. The LearJets of Jet Republic fly point to point, mainly in Europe, wherever the client wishes to go, without queues or changing planes at hubs. A flight hour costs about $7,000. But for each of seven people that works out to about $1,000. Not far from business class fares. But the service is far far better. 

We teach that global managers see opportunity where others see crisis. Jet Republic (based in Portugal) CEO Jonathan Breeze, a former Royal Air Force pilot, says that the “crisis in financial markets even strengthens the proposition”.   

We also teach that innovation often lies in the business model, not in the technology. Jet Republic has built a new business model. It looks very powerful indeed, because it meets a real need. Senior executives work 80 hours a week, and every hour is precious. Save them an hour, you save them much money and more important, you give them time with their family. “Time with family” is a key feature that Jet Republic offers, rather than “time in the queue and at the hub waiting for the next plane”. 

There are nay-sayers. Analyst Chris Tarry says that “at a time when corporate are cutting back their travel policies and the European economy is weakening, it is hard to see why they are doing this now.” Well, Chris,  as TIM Chair Lester Thurow wrote, in his recent book title: Fortune Favors the Bold. We wish Jonathan and Jet Republic success.    

* source: Times Online, Sept. 23, 2008.

A question to our blog readers:

When you begin to transform your organization or your team, or yourself and your own life:

What is the very first step toward transformation through innovation?

In other words: What must you do first, to implement innovative change?

I get a lot of answers to this question. But the best answer comes from the ‘horse’s mouth’ itself, the global guru of change management, Harvard Business School Business Professor John Kotter, author of The Heart of Change (HBS 2002).

The very first step in transformation is: URGENCY! Develop a sense of urgency – within yourself, within your team, within your organization. Without that, you will lack the necessary energy and speed to move forward and pull people with you.

Unless you yourself believe that you MUST, NOW, TODAY, THIS MINUTE, change your life and transform what you are doing… it just may not happen or may drag on and you will lose enthusiasm. If your organization believes all is well, the important transformations will be shoved to the back burner by the daily press of operations. 

How do you create this urgency? Within yourself – by simply believing it. Within your team – by persuading other team members, perhaps by the scenario method: Painting possible scenarios that could happen, that would endanger the team. (“What could happen that might hurt us and our company?” Foreign exchange traders ask this question every hour, in examining their positions). For the organization: Persuade senior people that a crisis may loom. Some companies like Intel actually create such mini-crises, and of course Intel’s “only the paranoid survive” is well known.

Just for interest the other 7 steps of Kotter’s method are: Build the guiding team; Get the vision right; Communicate for buy-in; Empower action; Create short-term wins; Don’t let up; and Make change stick.

Is innovation related to the current Wall St. crisis, likened by many to 1929?

It is indeed. It is an example of creative destruction, but not in the sense Schumpeter meant.     

From Wikipedia: “The economist Joseph Schumpeter popularized and used the term to describe the process of transformation that accompanies radical innovation. In Schumpeter’s vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power.”

Financial geniuses created complex new financial instruments with acronyms for names (MBS, CDS, meaning ‘mortgage backed securities’ and ‘credit default swaps’). These instruments were so complex few understood them.

Former Clinton Labor Secretary Robert Reich, an Obama advisor, relates once asking a hedge fund manager to describe the assets in his fund. He laughed, Reich relates, and said he had no idea. That means he had no idea what the risk was. And it turned out to be huge. That manager, if paid like the others, made 19,000 times more, on average, than the average American worker.

This type of financial-engineering innovation results in ‘creative destruction’ – it was creative, but the creativity went toward concealing the risk from other sophisticated players. The Wall St. bonus system meant, as the former vice chair of UBS noted, that the greatest fear was to underperform others (and miss the bonus), hence everything in the innovation system pointed toward taking and creating ever-greater risks.  And it was destructive, because ultimately the system had to collapse. 

No, all those fancy acronyms created a fog of complexity behind which lurked unsustainable and unacceptable risks. It was destructive innovation.

A major lesson: What you do not fully understand, do not invest in.

The greatest living practitioner is Warren Buffett. Ask him. His Berkshire Hathaway has $43 b. in cash. He just bought a major energy company for a song, $4 b., half of what it cost last week, simply because investors are utterly panicking. He buys companies he can understand.

Creative financial destruction was built on complexity. The lesson we learn is to avoid it by demanding simplicity. If we all do,  we will lift the curtain concealing risk and see it clearly enough to avoid it or manage it.

Prepared for The Marker Innovation Conference
Avenue, Ben Gurion Airport, Sept. 21/2008

How many of you in the audience are industrial designers?

I argue today that all of us are designers. And we are all, every one of us, working on the same project.

We are all designing our lives. Even the failure to design our life, because we fail to think about it, is itself a design, though always a poor one.

What is the single most powerful principle for design innovation, for optimally and innovatively designing our lives, our organizations, and our products and services?

It is, I would argue: Simplicity! Simplicity is simply wonderful. This is not just my view. It is the view of a brilliant MIT Media Lab computer engineer and video artist named John Maeda, who has now become the President of RISD – Rhode Island School of Design. His book is called The Laws of Simplicity* and it is only 100 pages long.

To follow the Simplicity Principle, I have shortened by talk from 30 to 20 minutes and eliminated many slides. 
  
In my short talk I aspire not only to interest you, the audience, but at least for some, to change your lives.  This is hutzpah but I will try anyway.

Systematic Inventive Thinking (SIT) uses five innovation ‘templates’. The first template they list is called “subtraction”**. Remove things. This is counterintuitive. Innovators usually assume that you innovate by adding features on to existing products and services. But the most powerful innovations are those using subtraction. Subtraction is a way to increase simplicity – and simplicity is an increasingly scarce value, in today’s complex world. Today one of the scarcest resources is “cognitive capacity” – space in our brain. If you can save yourself and the world brain energy by simplifying, you can achieve greatness.    
          
Author John Maeda suggests the following: Let every software company reduce the number of features in its software every year by 10 per cent, and charge 10 per cent more. Would this work? Would you pay more for less? Is this not a stupid idea? Have any of you tried Office 2007 – a ten-ton burden piled onto the back of a struggling donkey? Most of those ten tons of features are not useful or used. 

Think about your organizational chart. Can you eliminate one or more layers? If we have learned anything about innovativeness, it is that layers of hierarchy are its enemy. Flatten your organization. Simplify. Subtract layers. And you will quickly see not only savings but results.    

John Maeda offers 10 Laws of Simplicity***. I will describe only the first three of his Ten Commandments and the last one. They are: Reduce; Organize; Save Time; and Unify. 

Law #1. REDUCE. “The simplest way to achieve simplicity is through thoughtful reduction”. Ask yourself, about your lives, about your products, and about your organizations:

How simple can I make it?  

How complex does it HAVE to be?

Consider the iPod. It evolved from a wheel with four buttons, to a wheel with four discrete buttons, and finally, using Subtraction, into a single button or wheel. 

The First Law of Simplicity can change your life.      

I would like to ask each person in the audience to reflect on the following power question:

What single thing can you eliminate from your life, that would raise its quality?

Can you take away something, inessential, time-wasting, energy-wasting, and improve your life? Can you do it right now? If not, why not?

In innovating your products, how can you practice Subtraction? 

There are three ways. 

First, Shrink. Maeda says, “the smaller the object, the more forgiving we are when it misbehaves.” For instance, our children. 

Second, Hide. Hide the complexity. Maeda cites the Swiss Army knife. Blades not in use are hidden.  

Third, embody. Embed quality in the product so that it is perceived. Bang and Olufsen’s remote is thin and small, but is made heavy intentionally to convey quality.

Law #2. ORGANIZE. “Organization makes a system of many appear fewer.” Simplify complexity by organizing it. You do this by sorting, by grouping and by combining. When you do, you will naturally eliminate many things that are redundant. Disorganized complexity is chaos. Organized complexity, when done well, becomes simplicity. 

Law #3. TIME. “Savings in time feel like simplicity”. By shortening my talk by 10 minutes, I believe I make it simpler to understand. By shortening my sentences, I save you the reader time. By shortening the words, I save you time and effort. After writing this talk, I went over it and replaced long words with short ones.    

IBM’s Global Services division accounts for over half IBM’s global revenue. A decade or so, it did not exist. It is a good example of the simplicity laws. IBM has a customer-facing representative  diagnose the client’s needs, then build a virtual organization using a matrix system to tailor precisely the required services. The process is complex, but it is complex in order to deliver simplicity to the client, and to save the client’s time. We can only justify a complex organization if it makes our customers’ lives simpler.

Law #10. THE ONE. “Simplicity is about subtracting the obvious and adding the meaningful”. 

Consider Einstein. His equation E = mc2 was initially quite complicated. One by one, Einstein eliminated every variable that was not essential. The result linked energy and matter in the simplest, clearest and most powerful way possible****.   

Einstein himself warned us about simplicity.

Simplify as much as possible, he said – but not more so. 

If you subtract essential things from your lives, your organizations, your products, you oversimplify and create destruction. Think about this graph: 
       

I strongly believe that in at least 90 per cent of all cases, in our lives, our organizations, our products, we are in the “too complex” area rather than in the “too simple” area. And if we err, better to err toward simplicity than complexity. The cost of error is far less.

In your lives, and in your products, you should allow “addition” – the usual procedure for innovation, adding features – if and only if it creates true value, and adds meaning for yourself and for your clients. Addition should be subject to very stringent hurdles. Every addition creates added complexity – for yourself, for your organization, and above all for your clients. Make certain that in your cost-benefit calculation, you consider  the hidden cost of added complexity, vs. the value it creates

The value and beauty of simplicity are old and eternal truths.  

– St. Thomas Aquinas said, “If a thing can be done adequately by means of one, it is superfluous to do it by means of several; nature does not employ two instruments where one suffices”.

– Scientists have long used the principle of Occam’s Razor: “All other things being equal, the simplest theory is the most likely to be true”.

– Da Vinci said: “Simplicity is the ultimate sophistication.” 

– The novelist Antoine de Saint-Exupery said: “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” 

Subtract, my friends. Simplify. 

What can you take away?  

And what will you take away from our conversation?

_______________________
* The Laws of Simplicity (Simplicity: Design, Technology, Business, Life) (Hardcover) by John Maeda, MIT Press: 100 pages, 2006
** Jacob Goldenberg, Roni Horowitz, Amnon Levav, David Mazursky, “Finding Your Innovation Sweet Spot”, Harvard Business Review, March 2003
*** See his website:  www.lawsofsimplicity.com
**** See David Bodanis.  E=mc2: A biography of the world’s most famous equation.  Walker & Co.: New York, NY, 2000

We are currently in Switzerland, with a group of some 32 TIM managers, coaches and staff, conducting our 29th international best-practices benchmarking visit to leading Swiss companies and political figures. In our visit, we have met with the President of Switzerland, Pascal Couchepin, his Economics Minister Jean-Daniel Gerber, and with the Chair and CEO of Nestle, and the head of R&D of Novartis. We again learned: There is no substitute for learning ‘through the soles of your feet’ and through your own eyeballs. We saw global leaders first hand, saw great global companies, and the impact is hard to overstate or even describe.

At Novartis, Romeo Paioni, who heads R&D for this global pharma giant, explained the remarkable system he has built. He himself has been personally involved in developing many of Novartis’ blockbuster drugs, including Glivek, the drug that cures a virulent form of leukemia caused by a gene defect. He spoke about Novartis’ “open innovation” system. Procter and Gamble recently pioneered a different form of open innovation, based on replacing “not invented here” with “proudly found elsewhere.” At Novartis, a hybrid has been created. Some 70% of R&D is done internally, at Novartis’ R&D centers sited around the world – wherever the science is strongest.  

(Recently senior biomedical R&D staff at Novartis voted to move their operation from Switzerland, to Cambridge, MA, where Nestle bought the old NECCO candy wafer building and has placed a huge R&D center there, right next to the MIT campus, where biomedical and biotechnology research is at the leading edge in the world; and a second site was place at 250 Massachusetts Ave., housing hundreds of scientists). 

But another 30% of R&D investment is done through external sources – university laboratories and researchers, and independent researchers. Paioni weaves together a powerful innovation system, based on this internal/external system.

Big Pharma worldwide faces a major crisis. Wall Street financial analysts are discounting Pharma’s future growth, noting that the pipeline of new drugs is nearly empty, old drugs are coming off patent and are being shifted to generics,  and the number of new drugs is declining. Pharma companies are seeking a new innovation model, abandoning the old trial-and-error model, where some 10,000 to 100,000 compounds might be examined to find one winning molecule, to the new genetic engineering approach, where a target molecule is identified, causing illness, then ‘shut down’ by a ‘cure’ molecule. The old method was based on very small molecules; the new one, on sometimes huge molecules. This requires many new competencies in synthesis and discovery. Novartis, led by Paioni, is adapting and innovating its innovation process to meet the challenge.

Our participant, Yair Shamir, Chair of Israel Aerospace Industries, asked: Innovation is chaotic. Yet it requires discipline in Pharma, to bring drugs through clinical trials and to market. How does Novartis preserve the chaos and strengthen the discipline?

Paioni liked the question, approved the notion that innovation was ‘chaos’, and explained the transition from chaos to discipline. Later, at lunch, I asked Paioni about his own discoveries. One of them was remarkable. A long chain molecule was used, he said, to ‘capture’ target molecules, because at many places on the chain the capture could happen. Scientists all felt this was the best way. But Paioni thought ‘out of the box’. No, he said. This is wasteful. I am going to take this very long chain, which uses a lot of energy, and connect the ends, to make a single ring, and that ring will be much more efficient in capturing the target molecule. He was told he was utterly wrong… but he persevered, created the ring – and based on it, developed a powerful new drug. Chaos – in thinking otherwise. Discipline – in persisting in creating the ring, despite huge difficulties. 

One of our participants asked a senior Novartis manager, Michael Nohaile (who heads Corporate Strategy): What do you want your new employees to think and feel, when they first join your company?

One, he said: This is a powerful wealthy company, highly successful.

Two: This is a company that helps people a great deal.

Both of these elements are built on Novartis’ success at constant innovation, and lately, on its ‘open innovation’ system.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
September 2008
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