“…the only band literally directed by an ass.”
Each August, Elvis Presley fans mark the anniversary of his passing. Presley’s fusion of country with rhythm and blues was a musical innovation of historic proportions; however, my first Innovation Award goes — not to Presley — but to his first drummer, D. J. Fontana. In a radio interview I caught this month, Fontana explained that Presley’s original band was just a guitarist and bassist — drums were looked upon suspiciously by country audiences. When he first met Presley, Fontana was the house drummer for The Louisiana Hayride radio program and a journeyman who had played many genres and venues including burlesque shows where strippers were known to want drummers to mark every bump, grind, twist, and turn. Not wanting to overshadow Presley’s voice or stage presence, Fontana initially took a “less is more” approach until one day he began marking Presley’s moves with the drum accents he’d learned in burlesque. Cross-pollinating is the backstory to countless innovations. Fontana’s helped create a legend!

“…just a good time overall.” [The Farm Bar & Grill, Essex, MA]
Can you imagine a worst month to open a new restaurant than April 2009? Yet The Farm has been busy until after midnight every night since. What’s more: over the past 20 years five previous restaurants have failed in the same location! The Farm is a feel-good story about three first-time entrepreneurs asking two simple questions and getting the answers stunningly right! “What can I do really well?” asked chef/entrepreneur Ryan. Ribs and pulled pork are his forte and became the foundation of the menu and concept. “What kind of place would we go to?” asked the trio. A friendly, fun place with great comfort food, they decided… but really fresh ingredients… and affordable. The trio’s innovation is an informal gathering place where friends (and young families) can meet, mingle, and unwind. The large backyard — ignored by the earlier restaurants — is now alive with barbeque, Red Sox games, picnic tables, volleyball, horseshoes, and children having fun with their parents and each other. The whole thing feels like a beach party! Now, with the instincts of natural entrepreneurs, the trio is “plussing” their product with the help of a large white board of new ideas and an adherence to a brand standard they call “Farm quality.”

“Solar power meets consumer power.” [One Block Off the Grid]
One Block Off the Grid (1BOG is its nickname and url) is one of those business models that is so simple yet savvy that it could be widely replicated. Group purchasing power and an array of old-world and new-world organizing methods are combined to recruit groups of homeowners and partner with them to install over 13,000 solar panel systems in just a few years. 1BOG researches the best products and firms in the solar panel industry, negotiates a volume discount with a preferred installer in cities across the country, then guides engineering, purchasing, and installing for each homeowner. The installer pays a referral fee to 1BOG while the service is free for homeowners who would otherwise face a steep learning curve and higher prices. 1BOG is an innovation of market creation: on the supply side, they research and make sense of all the technical, financial, legal, and industry factors implicit in a complex, rapidly changing technology like photovoltaics. At the same time, they create market demand by organizing consumers, simplifying the buying decision, reducing risk, and lowering the cost to homeowners.

Congratulations to these first Innovation Award winners!

First, I’d just like to applaud the Knowledge Alliance, Stupski Foundation, and West Wind Education Policy for convening and delivering an incredible summit. Attendance was by invitation and there was a rich mix of private, social, and government sector representatives, many involved in innovative initiatives. Together, they spent three days exploring ways to combine and focus their efforts. [KnowledgeGarage repository]

Doblin’s Larry Keeley offered the keynote on Innovating by Design. Here are the three big ideas he discussed:

1. “Innovation is a set of skills, an everyday thing and not an event or a turn in the road.” Of course, I won’t be doing Strategy | Innovation | Facilitation if I didn’t believe that! Yet how many organizations have any consistent structure or systems for innovating?

2. Larry presented Doblin’s Ten Types of Innovation model. It’s a model I’ve used in my consulting for years because it dramatically broadens thinking beyond new and better products and services. This graphic comes from an online article by Larry summarizing the model.

3. His presentation concluded with a set of tips for fostering innovation (copied here from the session notes):

• Think big and stand in the future…Focusing too tightly on the status quo will force failures
• Prototype a compelling model solution…Not because you will get it right, but instead because it is a shared idea
• Co-construct, co-construct, co-construct…All of us are smarter than any of us; don’t be exclusionary
• Avoid central control…It doesn’t work, it is woefully out of date, modern systems don’t need it
• Start with what you have now…You will not ever have perfect conditions, so be adaptive and modular
• Foster integrated platforms, not products…not just what we do, but how we do it, so that many independent participants can participate in the solution

Here are a few of my own observations about innovation in K-12 education, most of which are easily extrapolated to other arenas:

1. Standing in the future dramatically clarifies strategic thinking. Someone once said if you’re having trouble solving a problem, make it bigger. While the present (actually the near-future) often seems muddy and contradictory, many things about the more distant future have a high degree of confidence: for example, minority students will comprise a majority of our school-age population within two decades; mobile computing will be more powerful and accessible, and the 5% per year increase in per capita cost of education is unsustainable. Accordingly, I submit it’s easier to envision the shape of U.S. education twenty years from now than it is five years from now.

2. I loved Larry’s admonition to look for a “profound case of stupidity” at the core of any system. In education, it’s our age-graded assembly line system operating in the face of growing dissimilarity in student needs. We need to study/innovate other systems for personalizing learning that produce better results at sustainable cost levels.

3. I wrote in my notes, “Find and study the fastest moving organisms.” There are teachers and principals who are innovating new models and having success. There’s lots of research on their successes (see our Turnaround Challenge and Karin Chenoweth’s research for starters), but what’s missing is a systematic effort to identity, adapt, and adopt. In my view, these pioneers (or “lead users”) are the key to education innovation. Eric von Hippel, Director of the MIT Innovation Lab, has spent much of his career researching the vital role of lead users as the fundamental driver of innovation. He has a series of short video tutorials about lead user innovation. This bottom-up lead user innovation model needs to be married to Doblin’s top-down model if innovation in education is to have success.

4. In education, innovation is inhibited by dominant design forces that perpetuate our existing K-12 model in the same way they do the QWERTY keyboard, Microsoft Windows, the internal combustion engine, and other industry standards. James Utterback studied these forces in Mastering the Dynamics of Innovation:

User acceptance of the dominant design of the original innovation created certain boundaries within which subsequent waves of innovation wisely developed….For example, we will see in the next chapter how the displacement of gas lighting by incandescent lighting was advanced by Edison’s running wires through the very same pipes that once brought illuminating gas into consumers’ homes. […]

The lesson for technology managers and business strategists is straightforward: understand the constraints of systems, user learning, habits, and collateral assets already imposed by the existing dominant design. [p51]

I love that image of Edison running wires through repurposed gas pipes! It’s quite an analogy for K-12 education innovation, given that the current dominant design is reinforced by so many levels of standardized systems and regulations, stakeholder expectations and habits, physical infrastructure, and teacher capability! Can we be smart enough to design effective innovation from within?

5. “Careful there!” Evolutionary biologist Stephen Jay Gould might have said. Dominant design principles exist in the natural world as well and beneficial mutations are often eradicated by genetic dilution despite their benefit to the mutated organism. Gould noted that many, many evolutionary adaptations spread and gain superiority in small, fringe populations before migrating into larger populations. To apply this principle to education, Gould might point out that within traditional schools innovative methods developed by cutting edge teachers rarely propagate far from their source. Meanwhile, charter schools are small, fringe worlds where innovation is more common, yet there is no effective migration path back into the larger dominant design schools.

6. Thus, we are confronting what we might call the Gravitational Paradox of Education Innovation. If we attempt to foster innovation, as Utterback suggests, in full recognition of the boundaries of the dominant design, we run the risk that the gravitation forces of the existing model will crush progress. On the other hand, if we foster innovation in places sufficiently protected from those forces, we run the risk they will burn up trying to re-enter the dominant design atmosphere. Where then to position our innovation camp?

7. I digress here to comment: on the core task of educating high-poverty students for productive lives, we have a ton of knowledge about how to do so if we were starting with a clean slate! It’s not an easy thing, for sure, but it’s the lesser innovation challenge compared to the institutional complexity of changing the K-12 industry itself. (Similarly, we know the DVORAK keyboard is 16 times easier to use than the QWERTY, but the unsolved innovation challenge is how to migrate from one model to the other.)

8. So how do we tackle the Gravitational Paradox? Where do we position our innovation camp? I’ve thought a lot about this since the summit and I wonder if the Linux/Open Source model might not offer promise. In 1984, Richard Stallman’s Free Software Foundation launched the GNU project to create a free version of the Unix operating system as an alternative to the dominant, proprietary systems of the time. In the early 90s, Finnish grad student Linus Torvalds extended this work, proving to be adept at enrolling different organizations and programmers, coordinating self-interested development projects, promulgating standards, and slowly nurturing an entire Linux industry around a collaborative, global, largely volunteer effort.

9. Urban education, in my view, needs the same three things that made Linux work:

• A clear mission and mandate to develop an alternative to the dominant design.
• A means of enrolling and coordinating local innovators (typically lead users) to build that alternative.
• The ability to perfect and protect a rigorous, yet customizable, system with reliable, replicable performance and supported by a sustainable, professional industry.

Despite the many differences between software and education, Linux successfully solved the paradox faced by education innovators. Committing to an “Open/Urban” model could pull lead user innovators into a national coalition, focus R & D, accelerate dissemination of successful innovations, and stimulate the formation of supporting institutions and professionals.

I look forward to comments!

Cisco, which had revenues of $36 billion in its latest financial year and employs more than 66,000 people, has been making headlines again for different reasons as well. “Cisco plans big push into server market,” read one in January. Another, in March, declared: “Cisco pushes further into consumer territory.” More recently a third said: “Cisco: smart grid will eclipse the size of internet.”

In other words, the plumber is branching out….[T]he company is tackling more than 30 “market adjacencies”, as new areas of growth are called in the corporate argot.

Cisco is moving everywhere it thinks networking will change how we live and how we work and that makes this article a fascinating lens into the future. I found the section on video particularly compelling:

Cisco believes [video] will in the long run account for a lot of communication among both businesses and individuals….To get an even bigger slice of the video pie, Cisco developed TelePresence, the first unit of which was sold in December 2006. It combines big, high-definition screens, spatially sensitive microphones, custom video-processing technology and networking equipment. What is more, setting up a TelePresence meeting is as easy as making a telephone call. Facilitators are no longer needed.

Cisco intends to push TelePresence into the home. This is the main reason why it bought Scientific Atlanta, a maker of set-top boxes, for $6.9 billion and, more recently, spent $590m on Pure Digital Technologies, maker of Flip, a range of hand-held camcorders. TelePresence at home will soon be combined with another project: sports and entertainment. The firm intends to turn stadiums into multimedia temples—and eventually to pump the match-day experience into living-rooms. Mr Chambers [Cisco CEO] hopes one day to watch North Carolina against Duke, archrivals in American college basketball, with his sister while they are linked by TelePresence.

Sports and entertainment might be the drivers, but one can envision this technology being transformational in virtual health care and education, or almost any consultative or knowledge-based transaction. UnitedHealth Group, Marriot, and Starwood Hotels are three companies making major investments in TelePresence centers.

In fact, Cisco is convinced that the network is enabling and defining a new organizational model based on “co-ordinate and cultivate” rather than “command and control.” A significant portion of the article describes Cisco’s restructuring initiative: to centralize and streamline functions like engineering, manufacturing, and marketing while replacing business units with “an elaborate system of committees made up of managers from different functions.” What comes to my skeptical mind is the old “when everyone’s responsible, no one’s responsible.” However, Cisco is hell-bent on overcoming the traditional shortcomings of cross-functional structures through a combination of collaborative technologies and organizational development strategies. It’s a fascinating read. I confess to a degree of skepticism, but John Chambers is highly regarded and if they make their structure work, it may soon be coming to an organization near you!

There’s a nice backstory to Galileo’s telescope that’s as applicable today as it was 400 years ago! Let’s start with the basic history, compliments of Radio Free Europe:

Despite the summer heat, the Senate of Venice assembled on this day in 1609 to view a remarkable scientific instrument. It was built by the well-known astronomer and philosopher from Pisa, Galileo Galilei, and could make distant objects appear closer when viewed through one end of its long pipe. It was a telescope.

Not that Galileo had invented the instrument. Credit for that is generally given to a Dutch stargazer who is almost forgotten today, Hans Lipperhay, who unveiled his basic telescope only the previous year, in 1608.

But Galileo, ever the practical perfectionist, had already improved upon the basic essentials and produced a variable-focus instrument that increased the size of the observed object by eight times.

Why he presented it first of all to the assembled Venetian senators is not clear. But perhaps the Venetians, who had business and commerce in their marrow, saw this instrument as a way to boost their glass lens industry. After all, Venice along with Florence, was the leading center for high-quality ground glass for spectacle lenses and magnifying glasses.

Certainly Galileo made money building and selling his telescope to eager customers, until his designs were overtaken in a relatively short time by more sophisticated types.

The outline of the innovation backstory doesn’t need much interpreting:

1. The telescope made Galileo a more productive astronomer. In economic terms, innovation is not “newness” but “new productivity.”

2. Galileo didn’t invent the telescope; he optimized it to his work. Invention must be adopted and used to constitute innovation. Invention, Professor Kathleen Eisenhardt explains, “…is the starting line of the race, not the finish.”

3. Galileo, and the original inventor Lipperhay, were both “lead users” – the folks striving to solve real world problems that MIT innovation scholar Eric von Hippel identifies as perhaps our most productive source of innovation.

4. Classic Schumpeterian economics are at work here: Lipperhay invents the telescope, Galileo quickly “improved upon the basic essentials,” and “more sophisticated types” were soon brought to market (by manufacturers rather than lead users, I would speculate). In this brief span of time, we can see the “creative destruction” triggered by new productivity and the “temporary monopoly” held fleetingly by each round of telescope maker.

5. Galileo’s rapid improvement of Lipperhay’s design was probably greatly facilitated by his proximity to the high level of glass-making in Venice, particularly the grinding and polishing of lenses. Innovation springs from local superiorities.

6. Finally, although absent from the above summary, there is rapid and wide diffusion of Galileo’s tool through many continents and occupations. Often, the best business opportunities require — not the scientific genius of a Galileo — but the ability to identify and harness emerging innovations that will have a similar rapid and wide diffusion. As economist William Baumol notes, “invention is not a prerequisite to being an innovation contributor.” The Internet is an obvious contemporary example.

For a more complete history of innovations in optics and telescopes, see The Galileo Project.

In a business where tradition can squelch creative ways of doing things, it is often difficult to introduce fresh ideas, but the economy is encouraging experimentation.

Here are some of the themes I noted:

• Taking smaller and off-beat projects
• Offering streamlined online services
• Empowering client-led design efforts
• Creating new events and venues to get exposure
• Creating an online exchange for eclectic furnishings

Regarding consumer spending, Baseline Scenario critiques a post in the LA Times discussing a new Bank of America Merrill Lynch report “The Myth of the Overlevered Consumer.” The Times writes:

The consumer debt problem in the economy really is a debt problem for the middle class. The need to work off a chunk of that debt will sap middle-class families’ spending power for perhaps years to come.

By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

Using 2007 data from the Federal Reserve, BofA Merrill defines the middle class as people in the 40%-to-90% income percentiles. It defines lower-income folks as those in the zero to 40% income percentiles, and the wealthy as those in the top 10%.

Baseline Scenario:

There are a lot of moving parts going on with the interaction between the top percents and the middle class, inequality and collapse, but it isn’t hard to see a story where the stock market picks up, housing is in decline for a decade, and we have a jobless recovery. [bold by me]

Baseline Scenario goes on to quote A Detailed Look At The Stratified U.S. Consumer from Zero Hedge:

…while average house prices are still dropping countrywide, with some regions like the northeast, and the NY metro area in particular, still looking at roughly 40% in home net worth losses, 90% of the population will be feeling the impact of an economy still gripped in a recession for a long time due to the bulk of its assets deflating. The other observation is that only 10% of the population has truly benefited from the 50% market rise from the market’s lows: those better known as the Upper class.

Meanwhile, use of the term “jobless recovery” continues to grow. Earlier this year, I published this graph showing slowing post-recession job growth rates over the last half century. For example, from the end of the 2001 recession, it took 30 additional months before we stopped losing jobs. Hopefully, the economy is hitting bottom; however, it is going to be many years before we get folks back to work again. Adjust business strategies accordingly!

First, the ability to adapt and the ability to react are not the same.
We react to a contract being cancelled; we adapt to changing market conditions. Reacting is a response to an event; adapting is a form of evolution. Organizations, like species in the natural world, adapt to improve their fitness to succeed in their environment. (According to Scientific American, the extinction of Neanderthals may well have been caused by their inability to adapt quickly enough to rapid climate swings and not by competition or inter-breeding with modern humans. See terrific 6-minute video.)

Second, the ability to adapt has three parts:

• Finding opportunities to add value within an enterprise’s doable sphere
• Enrolling the necessary resources (employees, partners, capital, technologies)
• Executing well

The ability to continually find and deliver new value to customers trumps all other business competencies. Organizations that do it well see themselves as “can-do” market leaders; others label it “change” and wring their hands.

Third, each act of adaptation is a strategic initiative: an assignment of resources to a potential opportunity. The great entrepreneurs — like Carnegie, Disney, Walton, and Gates — forged their success not from a grand vision or technological genius, but from a cascade of adaptations aimed at creating new value. These strategic initiatives are eventually aggregated and relabeled, erroneously, by history as a Grand Strategy. The truth is far more instructive!

Fourth, creating new value faster is a competitive advantage. In 1997, I first read Wheelwright and Clark’s book Revolutionizing Product Development and have been referring to it as a book of strategy ever since. In this simple but powerful diagram, they capture a truth about business in a rapidly-changing environment: if you are a fast-cycle enterprise that can adapt (create new value) quickly, you can overcome slower competitors despite their lead and improve your fitness despite turbulence.

The bad news in the BLS report for July is on page 2:

The number of long-term unemployed (those jobless for 27 weeks or more) rose by 584,000 over the month to 5.0 million. In July, 1 in 3 unemployed persons were jobless for 27 weeks or more.

According to NPR, long-term unemployment is higher than at any time since 1948 when the data began being collected. Long-term unemployment –- the stuff of foreclosures and household devastation — is now increasing much faster than short-term unemployment:

The problem of long-term unemployment is a main reason I predict we will see many years of “green shoots” before we have any significant economic growth. For those interested in the topic, there is an outstanding and still relevant 2005 briefing paper from the Economic Policy Institute entitled The Rising Stakes of Job Loss: Stubborn Long-Term Joblessness Amid Falling Unemployment Rates:

A different pattern emerged after the 2001 recession. With far fewer job gains in the most recent recovery, long-termers found their pathway out of unemployment blocked. The fact that job losses declined meant that the overall jobs picture started improving, but this did little to help those who had already lost their jobs during the heart of the slump. It was these workers who became and remained long-term unemployed as job creation languished many months into the recovery.

The decline in job growth stemmed from many factors: employer reluctance to hire because of continued instability fostered by weak demand, escalating fixed costs of hiring (especially health care costs), and the escalated use of just-in-time employment practices.

Several options enable employers to avoid hiring the more traditional full-time permanent worker and instead resort to just-in-time hiring, which is likened to inventory-adjustment practices used by firms to respond to demand. To meet cycling demand, “just-in-time” hiring practices include more traditional options, such as the use of overtime, but it also includes newer practices such as the use of contingent workers, temporary workers hired (and fired) through temp agencies, and contract workers (many of whom were once employees of the firms they contract for). While such strategies may raise profits, they prolong the lack of job creation, and as such likely help explain the unusually weak job creation in this recovery.

Serial entrepreneur and professor John Greathouse probes the origins of Fosbury’s innovation:

[Fosbury] began experimenting with alternative, unconventional methods of high jumping as a high school sophomore. Rejecting the straddling approach, which had been the standard for the prior forty years, Dick tweaked the old-fashioned scissor kick, eventually morphing it into a new and unique approach, which was eventually dubbed the “Fosbury Flop.”

The track and field community initially scorned Fosbury’s approach, labeling it “unsafe” and “too unorthodox” for the average jumper to master. However, nothing sells an innovative idea like winning. After Fosbury set an Olympic record at the 1968 Mexico City games, jumping 7 feet 4.25 inches, track coaches all over the world took notice.

The adoption of the Fosbury Flop was rapid. The last high jumper to set a world record using the straddling approach was Vladimir Yashchenko in 1977. As shown in the chart below The Fosbury Flop had become the international standard by the 1980 Olympics.

The Fosbury Flop helps illustrate an essential principle of innovation:  ”…Whereas it may be appealing to focus on the future, breakthrough innovation depends on exploiting the past.” (Kathleen Eisenhardt, from the foreward of How Breakthroughs Happen by Andrew Hargadon) It is in the combining and synthesizing of long-established or emerging elements, often from disparate fields, that new solutions spring. If we reverse-engineer the Fosbury Flop, we can tease apart the details of training, equipment, and technique assembled and refined by Fosbury. For example, he abandoned the mainstream straddle technique and began experimenting with the older scissor kick. There was also a game changer that is too frequently left out of the picture (literally and figuratively): “Given that landing surfaces had previously been sandpits or low piles of matting, high jumpers of earlier years had to land on their feet or at least land carefully to prevent injury. With the advent of deep foam matting high jumpers were able to be more adventurous in their landing styles and hence experiment with styles of jumping.”

This same recombinant pattern is evident in the birth of mass production at Ford Motor Company, as chronicled by Andrew Hardagon in his book How Breakthroughs Happen. Interchangeable parts and tools were essential but had been part of industrial production for nearly a century. Continuous flow production was already widely in use by H.J. Heinz, Campbell Soup, and other food canners and processors. The final major innovation in the Ford system was bringing the work to the worker rather than the worker to the work — and Henry Ford credited Chicago meatpackers for that insight.

Aubrey Kauffman of Fasken Martineau Dumoulin in Toronto observes that “the key departure from previous downturns is that potential purchasers don’t have access to financing to buy businesses in distress — even if these businesses are fundamentally sound.” [...]

“Other downturns have been more focused,” Mr. Kauffman says. “We’ve had the likes of real estate busts and the dot.com bubble burst, but nothing like this — where the pain is so pervasive and we’ve gone from a position of unlimited liquidity to no liquidity in 10 months.” Restructuring lawyers say they are shifting their efforts. “We’re looking a lot less at identifying an exit strategy and more at shifting everyone to surviving this terrible situation, preserving the business, and hopefully keeping the existing stakeholders in place long enough to find a better solution,” Mr. McElcheran adds.