Strange Bedfellows: Innovation and the Powerful Role of Deep Pockets

cross post with the IBM electronics blog 

There’s a well accepted premise that big companies by and large have an anti-innovation bias. Simply put, they have a vested interest in maintaining the sales pipelines of the products that have put them in the market to begin with — covering the sales top line, and spreading costs protecting the bottom line. There are very few companies where most innovations are going to substantially influence portfolio value rapidly. For most companies, protecting the status quo is the order of the day – and for their shareholders, it’s the right thing upon which to focus.

Startups are unsaddled with the machinery of big companies (plants, executives, salaries, benefits), they conceive of new solutions – or so the story goes. As with most fairy tales, the magic is not necessarily in what you see, but instead the sleight of the storyteller’s hand. In our case, it’s often the investment of successful big companies in start-ups.  Just as fairy tales draw from ancient stories, this investment approach is by no means new.  A similarly viewed patron model has existed since the dawn of civilization, primarily in artist-patron relationships, the most famous of which is likely DaVinci with the Medicis.

This is especially true in one segment of the industrial/electronics sector, a blended category called “green tech.”   A recent report from the Cleantech Group (registry wall), they detail the market and what it means for tech and business.  I spent some time reducing the report to some valuable components for the reader, adding in additional qualifying points and exemplars.  I am broadening this from a clean tech discussion to some bigger implications for the electronics companies.

Cash, Collaborators, Convenience and Commercialization  

Cash is certainly a big benefit of the Innovation partnership. In 2012, roughly 20% of the green tech deals saw corporate participation – roughly 144 deals.

Yet, a case can be made that cash is the easy part, because there is a seemingly endless well of venture money in the category.  Annual venture investments are 5x bigger, with investments amounting to $5B (estimate).   There are also plenty of alternatives for getting cash for small start-ups such as crowd-sourcing.  However, corporate investments bring two other key aspects:  collaboration and convenience.  Startups have great ideas but making ideas real is often the benefit of big companies – especially in areas such as clean energy and large scale automation. Collaboration allows start-ups the access they need while shielding the corporate balance sheet from a lot of the risk. This presents a Convenience element – not needing to deal with a lot of the internal political strife needed to enable a team of employees to pursue uncertain outcomes.  Getting the board to agree can sometimes be easier than a set of executives with specific metrics. Commercialization runs the gamut from concept validation, access to resources, production expertise and distribution networks.

While everyone looks to Nest (disclaimer:  I own and love mine) and the $80mm, they raised, it’s not the norm. The media plays up these rapid ascents – and the rapid declines such as Solyndra – a magnitudes bigger failure (as in $80B).  The reality is somewhere in the middle. Companies like Intel Ventures, Mitsui and ABB play a real role in driving innovation throughout their ecosystems partners.

Building Your Next Business

For companies like Mitsui, these investments are about portfolio differentiation.  They feature a large number of investments in health-related assets. If we do finally embrace a greener future, oil companies will need new market offerings.  Contrast that with ABB Ventures, who is moving toward adjacencies with their investments. Intel – who has a highly successful track record in this area also stays close to its heritage – where it can offer the greatest amount of support, namely introductions to tech execs.  They backed 150 companies, conducted 7 IPOs and acquired or merged in 28 more.

cleantech deal counts

Fear of Failing

Yet, for all this goodness, there are a significant amount of unsuccessful market exits.  These are expected casualties, yet still painful. North of 40% of the businesses in these partnerships see distressed exits, according to Cleantech’s research.  I think that number would hold up across the larger electronics industry as a practical estimation.  In a world where so many businesses fail – especially corporate backed new products which fail 80% of the time or more, that’s still a great success ratio for both sides.

Diversifying your portfolio of investments and expanding your ecosystem are critical parts of the mix.  And in electronics, it’s a better bet than trying to do it all within your own walls.

Finding the Innovation Horizon

At Google Ventures, they talk about the difficulties of not knowing where a product, offering, industry or even the world will be 5-10 years out. That’s the horizon line to value for many of these investments. It’s the difference between the thermostat and generating the energy usage it displays. Still, every electronics company must look beyond its own walls for these types of investments sooner rather than later.

Robust ecosystem partnerships, attachments to University Labs (such as MIT’s indomitable Media Lab), and of course, exposure to the largest private lab with $5B in annual investment – IBM Research – offer you solid places to start.  In addition to IBM Research, there are three other entrants to increase your view and reach toward the horizon line:

  1. IBM AD Lab (Accelerated Discovery) : The IBM AD Lab will improve the technology used for discovery, while at the same time, allowing users to make new discoveries in their fields more easily, at a more rapid pace. The AD Lab supports a set of domain specific “Centers” such as, a Center for Healthcare Analytics. Research will be performed on problems relevant to the Centers (for example, finding the best policies for reducing the incidence of diabetes in a particular population, or the most effective use of limited funding to improve overall longevity, etc), and on the technology foundations for enabling these decisions (for example, tools for automating the discovery of entities and relationships in data, or new machine learning algorithms for detecting interesting correlations or trends, or tools for better visualizing data which has both structured and unstructured elements).
  2. IBM Accelerated Visioning enables Enterprises to embrace their Digital Futures: The e-Commerce Visioning & Roadmap for example defines an appropriate e-Commerce solution for your organisation, supporting growth through online channels for both B2B and B2C relationships. This engagement may include a visualisation prototype, an examination of the commerce architecture required to support your objectives and a roadmap and work-plan to assist you to implement the vision.
  3. The IBM Customer Experience Lab combines advances in IBM Research in social listening, multimedia analytics and machine learning to understand and predict the differences in individual customers across many different touch points.
  4. IBM Global Entrepreneur program within our PartnerWorld ecosystem, offering large benefits for big thinkers and small budgets.

Whether your enterprise is pursuing a venture strategy, a partner strategy or just starting out, we’re here to help.  You can reach out to me through email: cristeneg@us.ibm.com or through social channels: twitter or linkedin.

google #fail – and that’s good

I ask myself, is it better to be early or irrelevant? Early teaches us so much more.

It is not a secret that many people consider Google to be an elegant solution, a finely run company and a bastion of innovation.  I’d say they earn those stripes every day.  Yet, when we talk about the Google Graveyard, it’s as if this is a bad thing.  So much so that earlier this year Slate Magazine allowed readers to put flowers on the graves of its most missed concepts (mine would go to Reader.  RIP Reader, I miss you).  It’s actually a regular feature – they clean the withered flowers off after a period of time – implying that Google has a long and storied history of failures.  They do.

google graveyard

I’d argue instead (contrarian that I am) that it’s a strong part of their success, a review of good ideas.  A mound of learnings I would excitedly dive into. That Google is willing to #FAIL in such a public fashion is a necessity of their business.  Tech changes every day.  Some new product fails every day (see yesterday’s post for two more).

If you are not putting a host of ideas out there, you will have very little understanding and even less to optimize.   See, that’s the funny thing about optimization – you can’t optimize just one thing.  Optimization is contextual.  It requires a benchmark, a baseline, a level.  If all of your benchmarks are external, then you are not learning.  You’re merely applying someone else’s information.  Google is willing to do the hard work of going first.  And that means they learn more than most other companies out there.

The best companies set the bar high.  And that means they will invariably fail.  I ask myself, is it better to be early or irrelevant?  Early teaches us so much more. 

-c-

cjgw || @hermione1 || cristene gonzalez-wertz

PS – 7/24 – this is by the way, a list of all the other stuff Google is doing.  So what if they have a graveyard, they also have a metric ton of coolness:  – thanks to Overdrive Interactive for publishing this remarkable view:  http://www.ovrdrv.com/goog/pdf/Google_World_Infographic.pdf

Scarcity versus Misplaced Abundance

(this is a departure post – meaning it’s not only philosophical, it goes outside our stated scope.  It won’t offend me if you skip it if that’s not what you’re wanting to read today).

So much of what marketing is supposed to do – what we are told we need/desire/cannot live another moment without – is about creating scarcity.  As my dear colleague Gregor McElvogue reminded me the other day, the whole discipline of economics relies on this notion of scarcity – that we might not be able to have that shiny object makes us salivate over it even more.

Yet, just about everything I looked at in my innovation research leads me to think this is wrong.  What if we are trying to solve the wrong problem?  What if we simply have misplaced abundance?  How would we design products, solutions, interactions, if we went into things assuming that we could fulfill most of our needs to a point that we wouldn’t need to fight about it?  How about that most of our needs are already met and we simply need to redistribute?

Sure, marketing is responsible for this grand set of desires where self actualization is associated to our vehicles, purses, green grocers.  We are complicit if not more. We tell people:  “Your clothes are less clean if you don’t use detergent y.” “Your kids are less well fed if you don’t serve them soup brand x.”  And “your teeth are definitely less white than a models unless you use our product.” ” You’re less well rested” and “your neighbor is happier with her car than you are with yours.”  Marketers create that perspective.  On purpose.  However, it’s not just marketers.  It’s the news media, heck, it’s even sports.

In baseball there are generalists, who keep their eye on the ball and see the big picture; football is full of special-duty characters who are very limited in terms of their range but have depth. Baseball represents America before the frontier ended…The game is relaxing and not particularly taxing on the players… Football is tremendously difficult on the players and is so tiring that sixty minutes of clock time–which amounts to several hours of real time–exhausts them. Baseball developed when we thought nature was a limitless reservoir and we would always live in abundance. Football reflects a different world view; everything has to be fought for, resources are precious, hostile people (guards, monster men) are everywhere and in such a world you have to grab what you can. –  Arthur Asa Burger

How different would marketing look if we just focused on merits (the best features) and not creating scarcity?  If we focused on art and not artificial need?  How would things change if we stopped “differentiating ourselves” (marketing speak for putting the other product down) and put more money into endearing ourselves to our customers.  You’ll note I did not use anything about utility – that takes us to a totally different economic conversation.  Endearment trumps utility.

One of the reasons apps are popular is that they focus on need, even tiny slivers of utility.  Some can even rise to that level of endearment.  However, they don’t do so by bashing each other or creating this “have and have not” mentality.  (Maybe because it’s a little piece of code and for the most part, I can guarantee that life will go on without it.)   But at the same time, they behave less like marketers and more like participants in an effective exchange.  I haven’t often seen an app that says “pick our app, we’re better than that app.”  There is a tacit understanding that apps were designed for specific groups of people – there simply is not a totally universal app.  With the apps we have on our devices, we actually celebrate our differences.  We don’t expect that anyone has the exact same set of apps.  And that’s a good thing.  Apps are part of abundance.  They are about sharing – data, experiences, music, interactions…

Maybe if we led our companies based on sharing abundance we would care less about profits and shareholders and more about providing healthcare.  And shareholders would care about providing healthcare – and not for Utopian reasons, but because health leads to productivity.  We would notice all the abandoned retail buildings and offer them to civic groups who could use the space – because the fixed costs are what they are.  We’d focus a lot more on co-creation and collaboration on a less grand scale.  Like a daily one.  We’d measure our reputations on our contributions – free and paid – to others.  The earned would grow to be far more valuable than the paid.  We’re already seeing this.  I am not making up anything, simply pondering how to make it faster, bigger and more accessible.

So much of what once was inaccessible is now accessible in new forms.  The old, less abundant approaches are being redesigned – not by wars (although that is still true) but by committed people and technology.  Ivy League educations on video for everyone, great global pediatric care via great networking and shared protocols, classrooms in containers with solar power, eye-wear companies who do “buy one/give one,” cancer research being advanced by 15 and 17 year olds, retailers who offer discounts for bringing used clothing and then redistributing it…I spent 2012 seeing a lot things and am only now processing what it might mean.

I’ll end where I began:  I really think there is something here and I wanted to get the thought out before I lost it.  Even if it is not fully formed.  Your thoughts are welcome, especially if they’re a little more baked than mine. -c-

Audi Gives Us A Different Kind of “Test Drive”

Imagine walking into an auto dealership that didn’t have any automobiles.  Imagine sitting down in a black leather bucket seat, surrounded only by LED screens – but still somehow looking into a dashboard and out of a windshield.  What if you could reach out, push a button and “start” the car, turn up the music, feel the A/C blow onto your hands?  What if you could “lift” the hood and hear the engine run?

Audi just took a big step towards this type of showroom experience.  The first Audi virtual showroom opened in London for the Olympics.  When you walk into their virtual showroom, you will not be greeted with physical cars – instead, you’ll come across large touchscreens where you can select your preferred Audi options.  From there, your car will be displayed on the wall – yes, the entire wall.  You’ll have the ability to customize your car and purchase it right there – a more enjoyable experience than most of us are used to at a car showroom full of salesmen.

Our take:  Audi is simply the first to the dance when it comes to virtual showrooms.  With rural population reaching an all-time low in America these past couple years (approaching <15%), and metropolitan areas becoming more and more popular, real estate is becoming more scarce and expensive in population dense areas.  In 2008 an average lot size for an auto dealership was 21,000 sqft (dated, I know, but I don’t think lot sizes have changed significantly since).  While one of Audi’s virtual dealerships only take a couple thousand sqft of real estate.  Other automobile manufacturers will follow closely behind as this type of retail outlet is not only extremely engaging, but it is also cost effective in reducing overhead and salaries of traditional showrooms in highly dense metropolitan areas.

So, how does Audi take it to the next level and give an incredible customer experience?  It’s not easy, but the technology does exist.  You might ask how one would be able to “start” the virtual car, or “lift” the virtual hood.  But in reality, gesture recognition isn’t all that new, it’s been around for several years.

However, its applications are growing immensely.  Kinect, is the clear leader here – and I’m sure Audi would love them in their showrooms.  And I even know of a community that could develop the program:

*cough* Kinect Hacks *cough*

Moving even further down the innovation spectrum – what if your contact’s messages, weather updates, and road conditions could be displayed to you on your windshield?  How is that for hands free?  Think it’s impossible?  Think again, Mercedes Benz is already on the way.

What about a huge screen to increase user interaction (I’m a guy, no screen is TOO big)?  Imagine having the ability to dive into the engine, see the pistons, explore the transmission.  South Korea’s “Live Park” gives us a great example of large-scale interaction.  I think Audi (and other auto manufacturers should take note).

And let’s not skip the basics.  App development has only begun to scratch the surface.  What if you could track all of your driving data from your mobile device?  See where your family’s cars are? Aggregate and collaborate with the social world for the best repair prices?  Look for manufacturers to ramp up these types of applications in an effort to have a better data set and more engaging relationship with the customer.  After all, until now, the dealerships have owned the customer data; this gives the customers to the brand.  Ford is already doing a great job of this.

However, what if one of these automobile manufacturers could create an app that allows customers to track usage of an entire family’s vehicles regardless of make?  It may sound strange at first; why would you want to support another brand’s car usage?  But think of all the data they would have access to:  “Hey, Mr. Smith, we see that your Camry is getting 25mpg; our 2013 Fusion can outperform that.”  Talk about targeted marketing that a manufacturer couldn’t execute prior to the advent of mobile applications.  A little upfront altruism will tell you an awful lot in a short period of time.

If you are interested in a deeper perspective on the future of auto and apps, here’s one from a friend of ours: @kalgyimesi who owns industrial and automotive thought leadership for IBM’s Institute for Business Value.

What do you see in the future of automotive retail?  Let me know in the comments.

@cunningham_kev

Un-Loose Change

Rule Number 1:  Any system will move toward chaos.  So, in response you must:

–       actively participate in your organization’s adaptation to something new

–       be forced to change anyway

See, your desire to participate in an organizational change or not has no bearing on the outside world who will continue to adapt or die in a million little ways every day.  So you can participate or face obsolescence – it is definitely a choice.  However, sooner or later a lack of change catches up, and the bed is on fire.  (If you doubt that, maybe ask Research in Motion, or Myspace or CD manufacturers.)

Rule  Number 2: Change is as hard as you make it.

Face it, “change management” is by default an unnatural process.  It involves people who fall across a widely varying spectrum of desires/needs/resistance to actually doing something different.  Organizations, are, by default, designed to do the same thing with some level of repetition and create value in doing it.  Managing change flies in the face of what organizations and the individuals who populate them are made for.  That being said, you can often find enough people willing to take on some level of change.

Our company works at the intersection of marketing strategy and technology.  Over the decades I have done this, I have planned, partnered, prayed, cajoled, pouted, and almost screamed (okay, I think I did actually scream) about organizations that need to change.  Here are four things you absolutely must do:

1.  Analyze your stakeholders.  This means finding not only your enemies, but even more importantly, your frenemies.  You can handle a clarified bad relationship.  The people who are out stabbing the boat later are the ones you need to worry about.  We break these folks into three buckets (consider this a modified approach to Napoleon’s Thirds) :

Tech savvy; the people who understand the benefits of technology and aren’t afraid of breaking something

Process driven; those who accept that a new method is coming and they might not always be entirely comfortable but best to play along

Self-sufficient; these folks have done it the same way for a long time and its not broken.  They don’t like technology, often find every workaround and amplify every challenge

Here’s the thing:  you have to give the tech savvy the loudest voice you can but you really need to just let them do their thing.  They will get it, and bring the process folks along.  Just introduce them.  And then you need to spend the rest of your considerable time and talent winning over and or mitigating the potential for damage by the self sufficients.

2.  Design your education approaches for the self sufficients.  The tech-savvy will watch video or be willing to poke around to get what they want.  They understand that nothing was ever installed and perfected at the same time.  The process driven will use any tools they find, so give them a wide variety.  They will also get the most out of side-by-side education.  Once they get over any minimal hurdles, they’re golden.  But the self-sufficients will require every trick in your education toolkit.  The level of detail will be needed once they realize that the train is moving forward without them.

3.  Report to management using the three groups.  Name names.  Give them an understanding of who is doing well and who is not and where the hang-ups are.  They need to understand the successes and the challenges.

4.  Stay focused on the value of the effort in all of your communications.  The organization invested heartily in the effort.  There was a defined need and benefits case.  The only way the self-sufficients will finally come along is when they start to realize the organization needs the value of the effort to contribute to its success.

And remember:

If you dislike change, you’re going to dislike irrelevance even more. – Eric Shinseki

Increasing Your Speed to Market

It’s interesting how many companies say they want to increase their speed to market.  And then go right on throwing major obstacles in the way doing that.

If you want to move toward the market with the speed of well tuned racing bike, then guess what?  You better make sure you have cleared the road and enabled the racer.

That enablement has a few key parts:

– Allow the racer to make key decisions that move the process forward.  For what good marketers are paid, they really have the credentials to make smart decisions without a ton of oversight.  Executives need to clear obstacles – extra layers of approvals, committee meetings and the like – for the rider, who is primed to get to the market with all speed.  Don’t make smart people navigate, enable them to race forward.

– Benchmark so you understand what the actual time is under varying conditions.  You can’t know if you’ve improved if you’re only using cursory measures.

– Automate wherever you can.  Having a detailed process where everyone flawlessly focuses on the finish line actually allows each person to contribute efficiently.  It also allows you to understand specifically where critical time is lost.  A lack of process is actually a fast way to slower progress.  The sneaker patrol cannot move as fast as the racer needs.  Workflows, QA checks, self service approaches for marketers allow opportunity to move to action more quickly.  Just as there is a pre-race, in-race and post-race checklist, workflows put the right resources at the racer’s disposal at critical points.  They also ensure safety.  When the process is compromised, everything gets a little more (and sometimes a lot more) risky.

– Keep testing new technologies all the time.  Just as new tire materials, different frames, new gear come out, channels will change, messaging approaches will too.  You need to continually allow the racer to combine his expertise with tools that will improve his performance.  Just as racing has become technology intensive, marketing must embrace technology with wonder, delight and head-on engagement.

– Collaboration and market sensing.  It’s how you find those technologies referenced above.  If you’re waiting for them to come to you, you are significantly yielding the potential for an edge in speed.  The things that improve your performance might not come from your ad agency.  In fact, I can pretty well guarantee they won’t.  They may come from China, Russia, Chile or Colombia.  If you aren’t watching, then you’re missing out.

In a marketing department, each person should contribute to creating customer engagement and value.  In the same way, an entire team commits to speed to market – and stops throwing tacks on the track.  Modern racers need clear paths, timed goals, technology and collaboration to win.

-cjgw aka Hermione1

(@erik_d, this one is for you. )

Naked in public

Face it,  you’re naked in public.  It’s not a bad dream, it’s our waking moments exposing our every intent and interest, until we are all well – naked.  Before I realized that Foursquare doesn’t give me very much in return, I was checking in across the planet, I gave them my location to tweet at will.  It let my team know where I was without me having to do it.  Call it convenient, call it lazy, call it risky, but you couldn’t call it unique.  Simply, because I allow Twitter and Facebook and so many other applications and even all of my devices to know where I am that I can be traced every minute of every day.  Or at least most minutes of most days.  I know I am not alone.  A friend accidentally left his phone on during a flight and he checked in over the Pacific Ocean.  Oops.

We share our feelings, our frustrations, our playlists, our reviews, our “pins” and our opinions.  From architecture to recipes to DARPA’s new cheetah robot.   Our kids’ artwork, when we’re having our car serviced.  This whole concept of “big data” is centered on very tiny nuggets, pinpoints in fact that tie together data in neat little bundles and amass it until it becomes insight.  And in the end, it’s the ability to connect the miniscule that will have the most value.  There’s precious little remaining under wraps – especially when Target can predict pregnancy based on a few line items on a receipt.

So, why do we do it? Because it makes us real.  Warts and all.  I can publicly decry USAir and express an overwhelming fear of clowns.  One coffee snob can recognize another in about ten minutes in the morning on Twitter.  The music buffs generate continual playlists.  Bots scan that data and invariably send you Walmart giftcard tweets.  However, the bots are not the big risk.  It’s that *someone* can truly imitate you, knowing where you go, and what you do while you’re there.  While the youngest social media users are likely to take privacy risks that scare even the bravest Gen X’ers, we at least acknowledge the reality of broadcasting our every move across the interwebs.  Marketers preying on the public’s deepest fears (whether of dirty dishes or having a disease the newest drug can treat) by being able to better target information and offers is seemingly small in comparison.

Folks, you syndicate your content to the many people and places you put it.  Once you put it out there, you are offered about as much protection from getting burned as a south american bikini bottom.  I am not saying you have to read 9 pages of the iTunes ToS (or any other ToS, Privacy Policy or Ts&Cs).  However, if you are not willing to read it, you can safely bet your data is being absorbed into the Borg.  There are wormholes and sinkholes and blackholes that will suck your data out faster than you put it there.  And that makes you responsible for doing something about it.

  • Change your passwords, every month.
  • Check your credit regularly.
  • Google yourself every other week.
  • Use a social media dashboard to track your presence.
  • Understand the rules about the content you consume and reuse and share – credit the owners liberally.
  • Check your content and sites frequently.  You never know what anomalies you’ll uncover (such as our little weird hiccup over the weekend).

And by all means, accept the risks that an open digital society poses.