Tag Archives: economy

The Ways Inflection Points Define Our Future

The Ways Inflection Points Define Our Future

GUEST POST from Greg Satell

Humans tend to think in a linear fashion. If something is growing, we expect it to keep growing. If it is decreasing, we expect it to continue to decrease. We are natural trend watchers and instinctively look for patterns. Yet it is often the discontinuities, rather than the continuities, that have the biggest impact.

The mathematician Benoit Mandelbrot referred to this cycle of continuity punctuated by discontinuity as “Noah effects and Joseph effects.” Joseph effects, as in the biblical story, support long periods of continuity. Noah effects, on the other hand, are like a big storm creating a massive flood of discontinuity, washing away the previous order.

Throughout history, inflection points have defined the future. Business models, built on top of Joseph effects, are disrupted by Noah effects, creating new opportunities for those who are able to identify and adapt. Today, we’re in the midst of a series of inflection points in what was already a time of enormous flux. We can’t predict the future but we can prepare for it.

1920s: A Second Industrial Revolution

By 1920, electricity was already nearly a 40-year old technology. In 1882, just three years after he had almost literally shocked the world with his revolutionary electric light bulb, Thomas Edison opened his Pearl Street Station, the first commercial electrical distribution plant in the United States. By 1884 it was already servicing over 500 homes.

Yet although electricity and electric lighting were already widespread in 1919, they didn’t have a measurable effect on productivity and a paper by the economist Paul David helps explain why. It took time for manufacturers to adapt their factories to electricity and learn to design workflow to leverage the flexibility that the new technology offered. It was the improved workflow, more than the technology itself, that drove productivity forward.

Automobiles saw a similar evolution. It took time for infrastructure, such as roads and gas stations, to be built. Improved logistics reshaped supply chains and factories moved from cities in the north — close to customers — to small towns in the south, where labor and land were cheaper. That improved the economics of manufacturing further.

It was the confluence of electricity and internal combustion, along with the secondary innovations they spawned, that led to mass manufacturing and mass marketing. Enterprises scaled up into huge bureaucracies exemplified by the organization Alfred Sloan built at General Motors. Firms were designed to move large numbers of men and materiel efficiently. Information flowed up, orders went down and your rank determined your responsibility.

1990s – Globalization and Digitization

In November 1989, there were two watershed events that would change the course of world history. The fall of the Berlin Wall would end the Cold War and open up markets across the world. That very same month, Tim Berners-Lee would create the World Wide Web and usher in a new technological era of networked computing.

Much like in the 1920s, these forces had been building for some time. Commercial computers had been around since the 1950s and global trade as a percentage of GDP began to sharply increase in the 1970s. Yet 1989 marked an inflection point and the world would never be the same after that.

The combined forces of globalization and digitization favored the quick and agile over the large and powerful. Rather than spending months or years to develop products, startup firms could rapidly prototype and iterate their way to launching a product in months or weeks. So called “unicorns”, startup companies valued at over a billion dollars, began to emerge and disrupt incumbent industry giants.

Perhaps the biggest shift of the globalized, digital world was from hierarchies to networks. While in the industrial era strategy was focused on linear value chains and the sum of all efficiencies, in the networked world strategy increasingly focused on the sum of all connections. A leader’s role was no longer simply to plan and direct action, but to inspire and empower belief.

Yet much like technologies that came of age in the 1920s, the second and third order effects of globalization and digitization were very different than anyone had predicted. Instead of the triumph of democracy we got a rise in authoritarian populism. Instead of a new era of prosperity, we got stagnant wages, reduced productivity growth and weaker competitive markets.

2020s – A New Era of Innovation

Today, as Moore’s law nears its theoretical limits, the digital revolution is coming to a close and we’re about to embark on a new era of innovation. Much like in the 1920s and the 1990s, the future is likely to surprise us, but the rough outlines of new inflection points are already beginning to take shape.

The first is in energy. The World Economic Forum reports that wind and solar now produce energy cheaper than coal and gas in North America. In fact, in some sunny parts of the world, solar costs less than half as much as coal. Costs for energy storage are still too high, but here too there is significant progress and we’re likely to see a scaled solution within a decade.

Another is the rise of synthetic biology. Driven by new technologies such as CRISPR, we’re beginning to go beyond merely reading genomes and starting to write them. Andrew Hessel, CEO of Humane Genomics, told me that we’re nearing the point that the value of a genome exceeds the cost to produce one. That will unleash a new wave of biologically driven business models. A similar revolution is underway in materials science.

Over the next decade we will also see the emergence of post-digital computing architectures such as quantum and neuromorphic computing, which are potentially thousands, if not millions of times more powerful than today’s technology. Although we don’t expect much of an impact from either of these for at least a decade, they will accelerate advancements in biology, materials and artificial intelligence.

Clearly these new technologies will open up new possibilities, but right now it’s impossible to see beyond first order effects. Nobody looked at a light bulb and saw household appliances empowering women to enter the workplace, or looked at a Model T and saw suburbs and the transformation of retail, or came across an IBM mainframe and said, “Gee, this thing will put journalists out of work one day.”

Preparing For the Future

Six years ago, I wrote how 2020 was shaping up to be a pivotal year. Boy, I had no idea! In addition. In addition to the convergence of longstanding trends in technology, energy and transportation, Covid-19 and the resurgence of the Black Lives Matter movement burst onto the global consciousness.

Two things stick out about these new inflection points. First, they were not only predictable, but were, in fact, predicted by a number of people. Second, both will accelerate already existing trends. Covid-19 has shifted digital transformation and synthetic biology into high gear. Black Lives Matter will likely expedite the shift in political power from Boomers to Millennials.

We can think of various scenarios that can play out. Covid may catalyze nascent trends, such as telemedicine and genomic medicine to greatly improve healthcare in the US. Black Lives Matter may cause a shift in hiring patterns that may help to accelerate productivity. On the other hand, the tensions both inflection points create may exacerbate underlying divisions and make things worse.

Those are just two possible scenarios. There are many more, each of which will create their sets of Noah and Joseph effects and then combine secondary and tertiary changes in ways that are unknowable today. What we can do, however, is explore new possibilities and prepare for them. The most important inflection points are often the ones that we create ourselves through the choices we make. No future is inevitable.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

Whither Innovation in Indiana?

Whither Innovation in Indiana?Now that I’ve got your attention, let’s talk about homosexuality and whether it has any impact on innovation. There probably are two no more polarizing topics in the United States than homosexuality and abortion. But the truth is that if both sides of the political and religious spectrum focused on the golden rule, there would be less corruption, we’d all be a lot happier, probably have more innovation, and our politics would be more productive.

Today we have another great case study for how short people’s attention spans have gotten, how the government can help or hinder innovation, how little investigative journalism still remains in the United States, and how easily people are swayed by a soundbite that runs contrary to (or in support of) their own personal religious or political beliefs.

But this article isn’t going to be some diatribe in support or opposition to Indiana’s Religious Freedom Restoration Act (RFRA) legislation (referred to by the media as an anti-gay law) because I freely admit I don’t fully understand all of the implications of a similar federal law and whether federal protections for gays apply to the state law.

Instead I’d like to focus briefly on what this controversy brings to mind for me in regards to the efforts of hard-working folks attempting to stimulate innovation in Indiana (and elsewhere).

Point #1: People Must Feel Safe to Innovate

If we take Maslow’s Heirarchy of Needs as gospel (okay, maybe that’s dangerous word choice), then safety is one of the most important needs for people, and in order to innovate people must feel safe. True innovation usually requires taking risks and doing things in a new way, and if people feel that trying something new or even just being different has a high price, then people won’t step out of their comfort zone and push the boundaries of conventional wisdom. So if we are truly trying to do everything we can to inspire innovation in our region, shouldn’t we also try to do everything we can to make it feel like a place where it is safe to be different and where that difference is potentially even celebrated?

Point #2: Diversity is Important (to a point)

We all look at the same situation through different eyes and a different history of experiences, values and beliefs. This diversity can help create different idea fragments that can be connected together to create revolutionary new ideas with the potential to become innovations. But at the same time, having some shared experiences helps to make it easier to communicate and to have a higher level of trust (assuming those experiences were good ones). So if we are truly trying to do everything we can to inspire innovation in our region, shouldn’t we also do everything we can to make different groups of people look to our region as a good place to move to so we have a diverse talent pool?

Conclusion: If Culture Trumps Strategy, Environment Trumps Startups

The world is changing. It used to be that companies started and grew in the community where they were founded, hiring increasing numbers of people from the surrounding areas and attracting others from elsewhere. Now, an increasing number of companies (especially digital ones) are moving to more distributed models where they create satellite offices where the talent is rather than trying to attract all of the talent to a single location.

Economically this is meaning that it is becoming less important that the next Facebook starts in your town than it is for the next Facebook to want to have an office in your town. This means that for cities, counties, states and countries, the greater economic impact is likely to be made not from trying to encourage lots of startups, but instead from trying to create an environment that young, talented people choose to live in.

And when you create a place that is attractive for smart, creative people to move to, you know what, you’re likely to end up not just with more growing digital companies seeking a presence, but also a larger number of startups than if you started with the goal of specifically trying to encourage startups.

Does your region focus on creating startups as the primary goal or on making itself an attractive place for a young, diverse and talented population to live?

Does this uproar help Indiana establish its as an attractive place to be, or work against that perception?

I’ll let you decide!

P.S. If you’re curious, here are The Metro Areas With the Largest, and Smallest, Gay Populations (for what it’s worth, Indianapolis isn’t on either list)


Accelerate your change and transformation success

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

The New Reinvigoration of American Manufacturing

The New Reinvigoration of American Manufacturing

As wages and shipping costs rise abroad, unemployment stays high at home, and strategic discontent with offshoring grows, U.S. Manufacturing finds itself facing its best chance at staging a comeback.

American companies are considering a reversal of offshoring and outsourcing to reduce risk, improve agility, shorten product development cycle, and improve their ability to simplify increasingly complex supply chain management.

Missing from this list is innovation, but US companies that commit to engaging American workers in their innovation efforts may also increase their ability to justify manufacturing their products at home.

As wages and shipping costs rise abroad, unemployment stays high at home, and strategic discontent with offshoring grows, U.S. Manufacturing finds itself facing its best chance at staging a comeback.

American companies are considering a reversal of offshoring and outsourcing to reduce risk, improve agility, shorten product development cycle, and improve their ability to simplify increasingly complex supply chain management.

Missing from this list is innovation, but US companies that commit to engaging American workers in their innovation efforts may also increase their ability to justify manufacturing their products at home.

Moreover, Chinese workers are now three-to-five times more expensive than some other Asian workers, leading American firms to reconsider their sites of production.

One such firm is Nike, whose innovative Flyknit technology could allow it to make shoes easily anywhere in the world by having a machine make the most labor-intensive parts of the shoe. To bring production back to the United States allows Nike to react faster to competitors or to increase the speed of scheduled product launches. In the fashion industry, speed is crucial, and onshore production could create a competitive advantage.

Other firms are taking a second look at their reliance on contract manufacturers in China and elsewhere. Companies that once saw contract manufacturing as a strategic or economic necessity are questioning the wisdom of the arrangement as they watch original design manufacturers like HTC move up-market and strengthen their brands to compete with Apple, Motorola and others.

Adding fuel to the fire are rumors of workers at plants like Foxconn smuggling out plans and components to sell to pirates to make a little cash on the side.

But more importantly, an almost religious focus on cost and increased use of standard components across whole industries has made it more difficult for one brand to differentiate their products from another in the industry – increasing price competition and squeezing margins for all.

As a result, companies like Apple are now looking to reverse some elements of their standardization and outsourcing strategy and instead become more vertically integrated. Apple has acquired a chip design firm — and even their own chip fabrication plant (fab) — in its quest to differentiate itself and control some of its basic inputs and it may still acquire another fab to continue this strategic direction. Not to be outdone, Google is acquiring Motorola, and Nokia and Microsoft are working together closer than before.

It is possible for companies to manufacture their products in the United States and make a profit. When you invest in your workers, engage their hearts and minds and involve them in the innovation process, you can not only optimize your manufacturing processes but also uncover new growth opportunities that no contract manufacturer will ever bring to you.

Companies like New Balance, Snapper Mowers, American Apparel, Caterpillar, Syntax-Brillian (Olevia TV’s), Case IH, American Bicycle Group and many others have been working hard to keep making their products in the United States.

Now is the time for the Obama administration and state and local governments to step up their encouragement of US manufacturing. In these difficult economic times, Americans would love nothing more than to stroll down the aisles of their local Walmart, Target, or independent retailer and find more products on the shelves that say Made in the USA.

This article originally appeared on The Atlantic

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

Keep Your Innovation Nerve

Keep Your Innovation NerveIt is much easier to lose your nerve than it is to regain it, so better not to lose it in the first place. I have lost my nerve before and made decisions I regretted for a long time after they were made. Acting out of fear leads to poor decision making and a lack of leverage that, in turn, leads to unfavorable outcomes. That is why you must maintain your nerve and focus on the actions you need to take to create positive change, rather than allowing yourself to be overtaken by fear. Fear is one of those emotions that grows to fill the space.

When this downturn began, I had a client that wanted to extend our contract at half the previous rate in order to cut costs. Without any other projects in hand it would have been very easy to take their offer and hope that something better would come along. It’s much harder to walk away from guaranteed income and focus on winning new clients during the biggest downturn in a generation, but I did. The outcome?

Not losing my nerve, refusing this offer, and fully dedicating myself to revitalizing my business led to:

  1. Signing my first two clients outside the United States
  2. Signing a top literary agent to represent my book project and John Wiley & Sons to publish it (the five-star Stoking Your Innovation Bonfire)
  3. Building upon my book Stoking Your Innovation Bonfire by creating the Nine Innovation Roles Diagnostic Tool to help companies improve their innovation team success
  4. Becoming a popular innovation keynote speaker and thought leader
  5. My personal innovation blog expanding to become the leading innovation blog on the web – Blogging Innovation – with more than 15 contributing authors and upwards of 200,000 monthly page views
  6. Blogging Innovation becoming the foundation for Innovation Excellence, the world’s most popular innovation web site – a Top 1% site that now regularly generates 800,000+ monthly page views (before it was sold in early 2020)
  7. Launching a new business focused on helping b2b companies increase their inbound sales leads and revenue through execution of customer journey research and creation of an effective b2b pull marketing strategy that includes the use of my proprietary single content input, multiple content output methodology

So before you lose your nerve and start asking yourself all those questions about what could go wrong, focus instead on asking yourself about the actions you could take now to make sure that things go right.

Are you going to be nervous in the downturn, or nervy? If you act fearful, your clients will be afraid to do business with you, but if you’re confident that you will do great things, then your clients will want to do great things with you.

Build a Common Language of Innovation

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

External Talent Strategies for a Global Talent Pool

Why Having an External Talent Strategy is Becoming Increasingly Important

External Talent Strategies for a Global Talent PoolThe old way of winning the talent wars was to search for and hire the very best talent and keep them inside your own four walls by offering them competitive compensation, benefits, and perks. Your hope was that your talent is better than your competitors’ talent. But over the last couple of decades, companies have increasingly found that employees who pursue what they do with passion will outperform an employee with a gun to their head every time. Circuit City learned very publicly that people are not commodities and went out of business from treating them as if they were. At the same time, we know that diversity is very important and hard to foster internally. And so it is to get to this diversity of thought in order to accelerate product launch and innovation timelines that companies must open up – it is a global economy with a global talent pool.

The question becomes: what is happening at the micro level with this global talent pool? Well, the world continues to move away from being a place where employees expect to have jobs for life, and fight against any change to this paradigm, to a world where portfolios, personal branding, and project-based work will become more common in an increasing number of industries. The evolving world of work is becoming a world in which individuals will need to be really good at collaborating and playing well with others, while also honing their skills at standing out from the crowd. At the same time, the external perception of your network value will expand from a focus on internal connections to also include the talented minds you might know outside the organization that can be brought in on different projects or challenges.

At the macro level, we are also confronted by an economy right now that is characterized by high unemployment – especially for the young. And for those that have jobs, many are underemployed. Meanwhile, at the other end of the age spectrum, many baby boomers will continue to look to make money and stay involved in the workplace in significant numbers. And for those not retiring who still have jobs, many employees now are doing more work but feeling less engaged. When you combine the macro and micro pictures, you can see that there is an army of talent out there looking to build their resumes or their balance sheets by working on interesting challenges and projects.

As your organization opens up and crafts a formal external talent strategy, there are several ways external talent can help benefit your organization.

Increased Speed:

  • External talent networks can form an expanded rolodex of experts that you can consult with to expand your knowledge on a particular search area or market and give you a running start instead of a standing one.
  • You can use your external talent strategy to find existing solutions from outside your industry. One example of this is a tire company adapting existing technology for cutting cheese to cutting rubber. Another is InnoCentive client OSRI, who used concrete construction principles for the purpose of oil spill cleanup (see sidebar).
  • To accelerate innovation and product development timelines, many companies strategically partner with external talent to advance their projects and help fight through roadblocks or work on other components when the lead team is off the clock. Dissecting work and distributing it to the individuals, groups, or partners that can best complete the work is an essential component of open innovation strategy.

Increased Success:

  • You can form a relationship with a particular expert and work together to solve a problem, to evaluate a range of potential solutions from internal folks, to tap expertise you lack currently in your organization, or to add diversity of thought.
  • You can use your external talent strategy to engage a large number of potential solvers on a tough problem. Through open innovation and crowdsourcing, Roche found a solution to a problem it had been struggling with for fifteen years by engaging the InnoCentive global solver community. At the same time, the company validated that the approaches it had already tried were the logical and correct ones.
  • When you engage external talent, you can collect lots of little ideas from outside, and connect them internally, uncovering some really big ideas that properly applied and executed can lead to some great new breakthrough innovations.

Increased Learning:

  • An under-appreciated and under-utilized benefit of working with external talent is to use it to learn new problem solving techniques by analyzing how the external talent solved the problem, to learn new technical skills not held internally by having external talent train internal talent, and by encouraging information sharing from the outside-in from external talent working in different disciplines.

Teamwork and Collaboration:

  • An increasing number of problem solvers are working together to solve challenges posed by organizations and this collaboration and teamwork is yielding higher quality solutions. Research by EMC into their own internal innovation challenges has shown that teams were more likely to successfully create winning challenge entries. InnoCentive, for instance, has responded to this behavior by creating more collaborative features for its global solver community to use in responding to challenges.

Consider scale for a moment. A person delivering a ton of value does not need a ton of headcount anymore if they are employing an effective external talent strategy. In an era where organizations are focused on increasing productivity and output without changing the number of headcount (focusing on revenue or profit-per-head), smart employees and business units will increasingly focus on being a force multiplier – getting more work done with the same number or even less headcount.

Two of the most important job skills in this new world of work will be the ability of the individual and the organization to deconstruct the work into portable units that can be executed by a mix of internal and external talent, and construct a project plan for distributing, aggregating, integrating, and executing the component parts to achieve the overall project goal.

But to maximize the efficiency and effectiveness of your work with outsiders – as well the output – you need to be strategic in your approach because the speed of adaptation (your ability to adapt and integrate work from outside into the inside) will become more important. And the flexibility you show as an organization and the ability of your employees to execute under immense market and customer pressures will become increasingly important as well. You must be strategic because ultimately you want to design scalable external talent strategies, policies, and processes.

— Download the rest of this FREE white paper to continue reading —

Build a Common Language of Innovation

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

Innovating Through Downturns

Innovating Through DownturnsWhile most individuals and organizations natural reaction to an economic downturn is fear and retrenchment, they also present a time of great opportunity.

Where would Microsoft be if they hadn’t continued investing through the downturn of the early 90’s?

  • Microsoft may never have finished the hugely successful Windows 95.

Where would Apple be if they hadn’t continued investing through the technology crash of 2001-2003?

  • Apple may never have fully realized the promise of the iPod and subsequent iPhone.

  • The unemployment rate increases (more available workers)
  • Interest rates drop (lower cost of capital)
  • People become fearful of losing their jobs making it easier to recruit from companies reducing or eliminating their innovation investments (increased labor mobility)
  • People are more open to moving if a spouse’s job is eliminated or at risk (increased labor mobility)
  • When a recession arrives, it is easier to acquire tax breaks or other incentives for expansion, new sites, etc. (lower investment costs)

So, if companies have positive cash flows or significant amounts of cash on their balance sheet, or promising ideas to invest in, then there is no better time to invest. Companies with the courage and financial capability to invest in innovation through a downturn, absolutely should.

In addition to all of the other benefits, there is no better opportunity to achieve competitive separation through continued investment in innovation.

It does, however, take a strong CEO and steady board to have the courage and conviction to make such an investment. Innovation is not a perfect science and requires a tolerance for failure and a long-term commitment.

In today’s short-term Wall Street quarterly profit-driven corporate reality, investors’ short-term outlook may be the biggest impediment of all. But, smart organizations will find strategic solutions to overcome this impediment.

Organizations should take the following strategic actions to maintain or expand their innovation initiatives, despite the current global economic downturn:

  1. Secure the leadership flexibility capable of continuing to invest in innovation despite financial pressures
  2. Identify resources that you would like to have had access to during good times, that you might now have access to such as:
    • Labor in scarce specialties
    • Affordable capital
    • Scarce real estate

  3. Increase competitive monitoring to identify opportunities that may be created in areas where the competition reduces previous innovation investment
  4. Increase customer research to identify opportunities to refine your ability to deliver products and services that deliver increased customer value, ideally at lower cost
  5. Improve your innovation processes to improve your ability to innovate more quickly and effectively than your competition
  6. Improve your organizational agility to increase its flexibility to adapt to changes in market conditions caused by the downturn and to shift resources efficiently and with increased speed

Organizations that take these necessary strategic actions, will come out the other side stronger than the competition, stronger than ever before, and create opportunities to preserve or attain market leadership.

Happy innovating!

Build a Common Language of Innovation

Subscribe to Human-Centered Change & Innovation WeeklySign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.