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Need More Innova-ting, Less Innova-tions

by Paula Thornton

July 14, 2009 at 1:46 pm · Filed under Economics, Enterprise 2.0

**“No word in the current business arena is more used with incorrect applicability than the word ‘innovation’.” — Richard Saul Wurman**

Before all the cards and letters pour in, I’m taking semantic liberty with the title to make a point — one that is enforced by Scott Berkun in his 2007 book, The Myths of Innovation:

“Any seemingly grand idea can be divided into an infinite series of smaller, previously know ideas…in the work of innovation itself, for most, there is no singular magic moment; instead, there are many smaller insights accumulated over time. The Internet required nearly 40 years of innovations in electronics, networking, and packet-switching software before it even approximated the system Tim Berners-Lee use to create the World Wide Web. The refrigerator, the laser, and the dishwasher were disasters as products for decades before enough of the barriers — cultural and technological — were eliminated, each through insights of various kinds, to make them into true business innovations.”

The basis of my point: there’s a lot of innova-ting that is required to get to successful innova-tions. Focusing on the latter isn’t what gets you there.

There are some who suggest that the real issues of innovation today are in the lack of execution and funding of good ideas. Berkun’s evidence might suggest this not to be the case. Are execution and funding an issue unique to innovation or a fundamental attribute of the business model and its operations?

Organizations operate today leveraging techniques and methods that were optimal for manufacturing — in the early 1900’s. One hundred years later, they (and the highly-protective behaviors that go with them) are ill-suited for survival in today’s economy.

Companies, for the most part, are “enterprises” by legal definition only. To emphasize this point on occasion, I interject the phrase, “There is no Enterprise” — to suggest we’re relying on or blaming something that doesn’t really exist.

From The Matrix:

“Do not try and bend the spoon, that’s impossible.
Instead only try and realize the truth….There is no spoon.”

In reality, for the average worker, the only thing about an enterprise that is real to them is their workspace that sits before them. Decade after decade, survey after survey, the number one complaint from employees: lack of communication. And yet, all the monies and efforts to change that have been for naught. Employees still feel ‘isolated’ in their efforts. Imagine, the millions of people who go to work each day to do their work in isolation from each other — isolation that actually costs a lot of money to provide.

Any real interactions between people on a day-to-day basis are likely engaged via 3 primary business channels: meetings, phone, email. Such interactions are typically focused on: status, issues, actions.

Anything inherently flawed with this scenario thus far? It depends. The evolution of these interactions were shaped by necessity and available technologies. Even the hierarchical nature of organizations was originally the ‘ideal’ for the effective distribution of information. Clay Shirky notes in Here Comes Everybody:

“The value of such hierarchies is obvious — it vastly simplifies communication among the employees. New employees need only one connection, to their boss, to get started. That’s much simpler than trying to have everyone talk to everyone.”

While this might have been true at one time, for the past 1.5 decades the managers I’ve had either don’t have the information I typically needed, don’t have the time to get it (as soon as I need it to do my job), or sadly, tell me the wrong information (the latter has been increasingly the case).

Clay goes on to point out:

“Running an organization is difficult in and of itself, no matter what its goals. Every transaction it undertakes — every contract, every agreement, every meeting — requires it to expend some limited resource: time, attention, or money. Because of these transaction costs, some sources of value are too costly to take advantage of. As a result, no institution can put all its energies into pursuing its mission; it must expend considerable effort on maintaining discipline and structure, simply to keep itself viable…the problems inherent in managing these transaction costs are one of the basic constraints shaping institutions of all kinds.” [emphasis added]

Who’s responsible for managing these transaction costs and optimizing them? Who’s watching them and measuring them and making sure that they’re in line with ’standard deviations’? The Chief Operating Officer? The Chief Financial Officer? Even if they accepted responsibility for these things, how could they manage them when the effort to create needed metrics would cost more than any potential gains?

The Internet changed everything. It allows for the cost of transactions (i.e. one form of an interaction) to approach zero. And yet, wherein are we capitalizing on this same economic opportunity for all of the critical business interactions (ala. transaction costs) internal to an organization?

Businesses who capitalized on Web 1.0 and successfully transact with consumers online achieved success the same way industrial designers optimize manufacturing floors: by design. But have we simply traded one manufacturing paradigm for another? Online transactions are still fundamentally linear. Business is not linear. We artificially force it into being so, that we might make it repeatable (via algorithm) and lock out the variability for ‘quality’ (via binary code). In doing so we lock ourselves into specific scenarios. The minute ANY of the conditions by which the process was optimally designed change, the process is sub-optimal and must be changed. The reality is, conditions ALWAYS change. That means ALL process-driven systems are sub-optimized to reality (unless you’re making widgets).

By focusing on innovation as the output of a business’s mission, businesses fail to do what Clay Shirky noted was important for viability of the business itself: manage the transactions costs of doing business. This is, by my definition, where innovating is differentiated from innovation.

Enerprise 2.0 — and the related premises fundamental to its purpose — is the means to provide the infrastructure to facilitate lower transaction costs and support continuous innovation: innovating.

Looking for ROI to justify E2.0 technology investments is the wrong approach. The technology will get you nothing of value (well, unless you’re using Clayton Christensen’s definition of technology “the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value” — but nobody does).

The real value of E2.0 is unmeasurable by projection (estimates). The real value has to be ‘attained’ by optimizing the factors of the context — the reality of the moment. Many ROI-approved initiatives never ‘attain’ their true value — they don’t need to, they passed the ROI test — a truly regressive form of measurement.

The true potential for optimizing E2.0 investments is to focus on lowering transaction costs, with technology, by design (the proportion of people-focused design investment — including changes to facilitate adaptation and continuity — to hard technology investment should be at least a 9 to 1 ratio).

The Internet lowered transaction costs to the point that many enterprises lose the primary economic advantages that originally made them viable: concentration of capital resources for output. Barriers to entry were lowered for competition, not just in the market but in operations as well. For knowledge workers in particular, most individuals have the necessary resources they need (or can access them) from home — concentrating capital in a central building has lost its former economic advantage, for many business models. Yet we continue to do it, because it’s what we’re familiar with — it’s comfortable…all the way to the collapse of the business under the weight of its own transaction costs.

While there is real threat of traditional businesses being undone by new forms of business models, at the very least traditional businesses need to do everything they can to minimize transaction costs and facilitate continuous innovation to have some hope of survival, to have time to reinvent their methods of doing business.

There are a variety of transaction costs and many ways to minimize them. An immature E2.0 implementation might attempt to facilitate sharing more effectively via blogs or wikis. Does this minimize transaction costs or simply add more transactions? Clay Shirky very brilliantly points out that the true potential is in moving “from Sharing to Cooperation to Collective Action”.

Trying to figure out what all of that means ahead of time to create an ‘optimal solution’ is meaningless. Like knowledge, it defines itself and its relevance within the business context, guided by a design strategy. This is the primary reason that the ‘internet as platform’ is so relevant. This is the same reason that any E2.0 solution should not be an ‘application’, but a flexible platform to accommodate a variety of structures that can be tailored to ‘fit’ situations as conditions change. It means that we need to move from an application-focused paradigm to an architecture-focused one, where we leverage ‘bits’ of structure that are ‘applied’ for a given set of circumstances in the form of: templates, filters and functions.

The rest comes from the most valuable resources business have — the most underutilized resources to date: human wetware. Unleashing the potential of the human mind within a working environment where they can connect with one another — innovating through sharing, cooperation and collective action — is not an option. It is now the ‘cost of entry’ for business survival.

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Andrew S. TownleyJuly 15th, 2009 at 5:42 am

Fantastic post, Paula!

I agree with you that we need a lot more doing in innovation than focus on simply the outcomes. If you want real innovation to happen around the way people communicate & collaborate with each other, you need to give them a set of tools to enable it to happen and build a reinforcing system–then get out of the way. You might need to give them some guidelines up front, but if the tools are the right tools, the community involved should be able to figure out the best way to apply them within their own contexts fairly quickly. Look at the Twitter evolution as a real-world example.

Having done some focused research on enabling collaboration & communication in decentralised work teams a while ago, I think there’s still a lot to do in this space. Rather than the vendors trying to push more products, I think what we really need are some good examples where communities have employed these tools to produce a measurable reduction in the transaction costs of performing their daily activities, and where this has been done by using the tools in non-standard or innovative ways. I haven’t seen any of these yet, but would love to have pointers to them if they exist.

In a way, you’re really talking about the convergence of things SOA, E2.0 & Cloud, presented in an accessible way that allows people to focus on getting things done vs. how or what the tools are or the services they provide. Unfortunately, I think we’re a ways away from where the tools are natural extensions of the knowledge worker in the same way the hammer is the extension of the blacksmith’s arm. Many opportunities for innovating, however.

Paula ThorntonJuly 15th, 2009 at 3:14 pm

Andrew: You are absolutely right! Because of the overall impact of this potential, it HAS to be a solution based on elements of E2.0, Cloud and SOA — but with so few people able to speak about any one of those intelligently, the synthesis of the three would just seem ‘crazy’ (and I have enough problems with such perceptions already : )

As well, ‘most’ of it is design specific — being able to bring all of the elements together. We actually faced very similar issues when attempting to deliver Data Warehousing. With a major vendor conference held at MCI (with then DW-practice colleagues from BT [British Telecom] and MCI Systemhouse [a consulting arm]) we told vendors that what we really needed for them to do was to STOP building applications/solutions and start building components so we could assemble them all, as needed, and put our own UI on the front — in 1996!

Having lived with this same architectural vision for over 15 years, it’s so hard to be patient. But I continue to learn a lot more as I wait.

Luis AlberolaJuly 15th, 2009 at 3:56 pm

A very interesting post !

There is one sentence I really like : “In reality, for the average worker, the only thing about an enterprise that is real to them is their workspace that sits before them”. I would add, their workspace, their office and probably the water cooler and the copymachine …

One of the challenges for E2.0 professionals is to think of their collaborative platforms and social media tools as “places” and not applications. We have already moved, I think, from individual – focused applications. We are designing the tools that allow for collective thinking and action (I also like “Clay Shirky very brilliantly points out that the true potential is in moving “from Sharing to Cooperation to Collective Action”).

To my mind, collective thinking and action really happen when people meet physically, are able to engage with one another and AFTERWARDS, keep working together, meeting when necessary. And then, the challenge for the new E2.0 environment is to appear as places where people that have little opportunity to meet physically are able to really engage and share their thoughts and issues.

It all boils down to replacing the “desktop” with a variety of access into an ecosystem of collaborative places, where real and virtual melt seeminglessly. It’s why I think 3D and virtual reality are needed to reach all promises of E2.0

Paula ThorntonJuly 15th, 2009 at 10:28 pm

Luis: Thanks for your input. There are some vendors hanging on your words.

I once was was very accepting of the ‘community’ model. You’ve updated that a bit with the ‘collaborative places’ concept — far more flexible.

I’ve discovered that there are often situations where the ‘collaborative places’ are separate from the individuals — which is one scenario of relevance. But they often fail to address the collective space of the individual — which is different than, but inclusive of, a profile.

I’ll diverge from your belief in 3D and VR. While there are some cases where they are justifiable, in general ‘real’ is far cheaper (video and the like). The cost-benefit of VR doesn’t weigh out.

We did come up with a case tonight where we yearned for a VR situation — leveraging the writings of dead people to create personalities that can adapt to a conversation based on the patterns of their existing logic. But then we figured if we were going to go down that path we’d just as soon engage in the exchange of Q&A with them on a Holodeck : )

GlennAugust 2nd, 2009 at 2:33 pm

What a great discussion going on here. I’m glad that I ran across it.

There is all this innovation going on and yet conditions are not changing in the workplace. What is happening? I believe that companies who wish to increase the quantity and quality of meaningful collaboration amongst its knowledge workers are going to have to be willing to change the way that they do business. Innovation isn’t just another line item in the budget. It is a profound and systemic alteration of the corporate culture. One without the other is just a waste of time and money.

Paula ThorntonAugust 5th, 2009 at 4:03 pm

Glenn: Thanks for your additions (and for the head-up and sneak-peeks) into McAfee’s book. I agree totally with your comments here. I realize now that my additional comments below are more relevant to your post, than your comments here : ) [so do with them what you will -- including ignore them!]

As well this new research might add at least one question mark on our assumptions, “Cozy Social Networks are Stifling Innovation” http://twurl.nl/gy2n6x

Adoption is a whole ‘nuther subject I’ve addressed previously http://www.fastforwardblog.com/2009/07/09/adoption-cant-be-driven/

Resistance is the same thing in physics as ‘noise’. It’s there to tell us something. We have to both listen and seek to understand what it’s telling us.

People are not resistant to change…they’re resistant to being changed without cause. There are plenty of things they’re dying to have changed.

esteban kolskyAugust 7th, 2009 at 2:26 am

Great post Paula, as usual.

Couple of things:

1. I found my new favorite paragraph to explain why E20 and all related tools and terms matter.

Incredible insight into the changes to come.

As I said to you before via Twitter, time to stop talking and start doing – unfortunately. The difference between this version and the past is that two key things happened now. First, people became aware of their power, position, and the awesomeness (for lack of a better word) of the internet. They get it, and they use it. Last time we went through this the movie “The Net” had given people the totally wrong idea about it and the fear was still there. No longer, now we know what it is, what it can do, and how to use it. Second, we have (to quote your post) the working platforms — which we did not have last time. This is what is going to make it easy: KB, KM, User Management, CM all in one place and managed very well. That platform if what is going to drive the changes.

And those platforms (for all companies involved in a short term) are communities.

Think about how a community comes together, communicates, collaborates, and even defends itself. That is what you want to bring out from people so they can contribute to the community thriving. and flourishing, And, btw, if we get it all this working together and happy with each other, we will go back to the basic tenets of making the changes you highlight above – but faster, easier, and better.

esteban kolskyAugust 7th, 2009 at 2:35 am

btw, something went screwy with my previous comments… a whole paragraph is missing… here it is.

This goes before the box (which i am not sure where it came from…