You are currently browsing the category archive for the ‘Innovation Blog’ category.
Innovation Blog
Nickel Pig Iron (NPI): Here come the Chinese, We told you so!
By Shlomo Maital
I hate people who say, “I told you so!”. So do we all.
But, hate to say it, we told you so. We told you the Chinese were hell-bent on moving up the industrial food chain, to higher-value-added innovative products.
Here is an example.
According to the Toronto Globe and Mail (B1, B4, Report on Business Weekend, June 12/2010), Chinese iron producers have found a way to capture the $21 b. nickel pig iron business, taking business away rapidly from large producers like those in Canada’s Sudbury region.
The Chinese use electric furnaces, rather than blast furnaces, and cheap ore, to produce pig iron with 10-12 per cent nickel content. This is vital for making high-qualty stainless steel. Normally the product is sold for its nickel content, and stainless-steel producers add their own pig iron to it. But the innovative Chinese process provides the nickel, and throws in high iron content for free. It’s a winning value formula, one that is hard to compete against. China’s thousands of stainless-steel producers now buy their nickel pig iron at home, rather than import it. Chinese producers’ production costs are now as low as $7 – $8 per pound, and there are now 70 firms producing the innovative nickel pig iron.
Why did not the large nickel iron producers abroad innovate, when supposedly, China is traditionally a low-cost commodity producer?
What we see in nickel pig iron will replicate itself across a great many industrial products in the near future. Those Western producers who are sound asleep will get a rude awakening, and soon. China is not just about low cost. It is now about value-added innovation.
Innovation Blog
CEO: Are You On the Sisyphus Treadmill? Can You Get Off?
By Shlomo Maital
In Greek mythology, Sisyphus was a King who transgressed and was punished. His punishment was to push a heavy rock up a steep hill, and then, just as he reached the summit, the rock tumbled down to the bottom again — and Sisyphus began all over, and continued doing this, until the end of time.
The modern Sisyphus is the CEO. Twelve years ago, in a typically insightful article, McKinsey Global Research revealed what I think is a fundamental flaw of capitalism and capital markets. I think this flaw ultimately helped contribute to the 2007-9 crisis. Here is what McKinsey described, in “The expectations treadmill.” (August 1998)
“… executives labor on a kind of treadmill, whose speed represents the expectations of future financial performance implicit in a company’s share price. Beat them and you not only raise shareholder returns in the short run but also accelerate the treadmill. The better you do, the more the market expects from you; you must pound the treadmill ever faster just to keep up. To learn more about why extraordinary executives often fail to deliver extraordinary share price increases, particularly in the short run…”
Put simply: Suppose you are a highly innovative CEO. You drive top-line and bottom-line growth up substantially. Shareholders are surprised, pleasantly. Your stock price rises, because shareholders factor this growth expectations surprise into expected future earnings, which drives today’s share price. So now, you are expected to continue the sterling outstanding performance you created, through innovation. Indeed, you are expected to accelerate it even further…a classic Sisyphus rock. At some point, even the greatest CEO’s will be unable to maintain accelerated growth. Stock prices then dive, the CEO is sent packing…and a new victim is found. But with vastly exaggerated compensation for short-term success, the CEO departs happy, with a huge golden handshake. He or she has done the job, rewarded himself nicely, even though this behavior endangers the long-run prospects of the company, its workers and even its shareholders. Unlike Sisyphus, the CEO can bail out of the system, leaving someone else to clean up the mess. An irrational system.
What is the solution? Changing capital market behavior, values and expectations, to focus on long-run growth, not short-term ‘surprises’, and to reward CEO’s able to build companies “built to last”, creating shareholder AND mostly customer value for the long haul.
What are the odds impatient shareholders will stop focusing on the quarterly P&L? Pretty small.
Innovation Blog
Creating Experiences in the Digital Age:
From Agrarian to Industrial to Experiences … to VIRTUAL
By Shlomo Maital
B. Joseph Pine II is the prophet of “mass customization” — creating markets of one, by customizing products for each customer, while maintaining efficiency and low costs. He is also the visionary who brought us The Experience Economy, which shows how creating new experiences (memorable ones are known as ‘transformations’, changing who we are) are crucial to the innovation process. Now Pine, co-founder of a consulting firm known as Strategic Horizons, has written Infinite Possibility: Creating Customer Value on the Digital Frontier, a forthcoming book due out soon about using digital technology to create memorable virtual experiences. Joe has given me a preview of his book, in the form of a lengthy white paper.
Pine notes, in this white paper:
“That is what we desperately need in business today: experience innovation. Why? Because we are now in an Experience Economy, where experiences – memorable events that engage people in inherently personal ways – are becoming the predominant economic offering. It eclipsed the Service Economy that flowered in the latter half of the twentieth century, which in turn superceded the Industrial Economy, which itself supplanted the Agrarian Economy. As goods and services increasingly become commoditized, companies must step up this progression to stage the experiences that create customer value.”
Note that even if you are an inventor and innovator of goods, you can greatly enhance the attractiveness of your product offering by accompanying it with powerful customer experiences, some of them digital and virtual in nature. Some companies discover that to grow and to survive, they must transform themselves from product companies into solutions companies, whose offering is an overall package that has at its core an experience: the key experience of gaining peace of mind by having the offering solve a problem, continually and persistently.
Case study: NICE is an Israeli company that sold small video cameras for surveillance purposes, a product that is now ubiquitous, with many many thousands now blanketing, for instance, New York City and London. NICE transformed itself from a surveillance camera firm into a solutions firm, by adding software that will help clients analyze the data from its video cameras, and provide a clear crisp concise report. NICE realized that what clients wanted was not surveillance cameras, but the ephemeral experience of “feeling secure”. It has since greatly prospered. Its business model is summed up as “more to same” — selling higher value-added services to clients, rather than selling “same to more” — more conventional products to different clients.
Innovation Blog
Build Your Supercreativity Machine
By Shlomo Maital
(This is a shortened version of a talk I will give tomorrow, Monday June 7, at the Rotman School of Business, Univ. of Toronto, in the Design Expert Thinkers series, on “Unchain your Supercreativity – Build Your Supercreativity Machine”).
———–
In the past year, I’ve been in North and South America, Europe and Asia. And in 2008 I was in Africa. Wherever I go, I encounter a mass epidemic. It is not AIDS. Nor avian flu, or H1N1, malaria, or any other illness. It is unrecognized and largely untreated.
The epidemic is that of boredom.
I find that masses of people are doing jobs that are routine, uninteresting and deadly boring. As a result, the flame of their creativity has gone out. Many people, especially managers, believe that it has gone out forever. Unlike Prometheus, who brought fire to the world, they feel their creativity fire has been doused by routine and cannot be relit.
So, as a personal mission, I am declaring war on boredom. Not by fighting something negative, but by trying to foster something positive: Creativity. Creativity is the process of building useful novel ideas. Innovation is the process of implementing those ideas, making them happen, and changing the world with them. Every person must have a supercreativity machine. Supercreativity is the quality of being able to produce creative ideas endlessly, as a mighty river, from morning to time, through days, weeks and years. A machine is the systematic process that makes this happen. Everyone needs one. It has to be built. And it CAN be built. I would like to try to provide you with some of the parts.
Warren Buffett once said, “the chains of habit are too light to be felt — until they are too heavy to be broken.” Supercreativity begins with breaking the chains of habit, by trying new things that may be strange or uncomfortable, in all walks of life — food, dress, acquaintances, travel, etc.
A key question to begin: Do you design your life? We are all designers, and our most important design project is our own lives. Yet most of us allow our lives to proceed almost randomly. Randomness is a design idea — but it rarely yields works of beauty. Take control. Design creativity into your life.
Here are some parts for your creativity machine: Curiosity (incessant); Laser-sharp questions; Strong Allergy to Habit; Passion; Empathy; Tunnel Vision (sharp focus on a key question); Wide Angle Vision (zooming out to explore the world and how others deal with the key question).
Here is an example of the ZIZO zoom out / zoom in process that can yield a supercreativity tsunami.
Begin with a simple sentence: A definition of the thing you wish to innovate. Automobile: a car is a vehicle that provides transportation, and is assembled from parts. Challenge each part, each word, in the sentence. (Zoom in). Henry Ford asked: Why should a car, in 1909, be produced by a team of workers from a pile of parts dumped onto a shop floor, and assembled randomly, until there are no parts left. How could it be done otherwise? (Zoom out). Ford visited a Chicago meatpacking plant and watched how carcasses are placed on pulleys, and at each station, processed by a worker, cutting a different cut of meat, until at the end nothing was left. Why not do the same for making cars? Ford asked. Why not pull the chassis with a winch, and have workers at each station add different parts? The result was to create the modern Industrial Revolution.
Here are 11 things you can do, to start your supercreativity machine and put it into action.
* Believe that ideas are only the first step, NOT the last; * Do one scary thing every day * Learn to persist. * Seek new experiences always. * Ask questions, in long series, including follow-ups. * Learn to love the journey, not just the destination (creativity itself is enjoyable, and generates ‘light’, apart from what the fruit it produces); * Think wild, then — back off to reality; * Declare war on boredom * Have fun, and seek fun! Creativity thrives in an environment of fun * Find your passion — then pursuit it. Passion is the rocket fuel for the supercreativity machine. * Seek out your DIScomfort zone. Creativity operates in the geography of discomfort, not comfort.
Innovation Blog
What Business Are You In? BP’s Tony Hayward Under Fire
The disastrous oil spill that has dumped thousands of barrels of crude oil into the Gulf of Mexico for the past 47 days has focused attention of British Petroleum’s CEO Anthony (Tony) Hayward and on his handling of the crisis. He has not been given high marks. Press reports note that “a series of Hayward misstatements since the April 20 explosion that killed 11 people haven’t helped his case with the general public — and investors have been fleeing BP’s stock.” Since many British institutional investors (pension funds, etc., ‘widows and orphans’) hold BP stock, the damage has been enormous, and not just to the environment.
In Sept. 2009 we brought a group of Israeli managers on a benchmarking visit to London, and heard from senior BP officials. They were astonishingly frank. They noted that BP’s legendary leader John Browne focused on mergers and acquisitions, including the huge one of ARCO, and had neglected operations — the fact that BP is an oil company and is in the business of producing and discovering oil, not just rearranging deck chairs on the deck of Wall St. The result: Operational decline, and an explosion and fire at a Texas refinery that killed a number of workers. The aftermath was to fire Browne, despite his achievements, and appoint an internal engineer, Tony Hayward, with long experience in the field in operations.
Now comes the Gulf of Mexico disaster. Hayward has been on the scene. But like many engineers, he has not been trained for situations like this. He has clearly been counseled by lawyers, not to admit liability, at a time when what ordinary people wanted to hear was: We screwed up, here is how, and here is what we’re doing to fix it. (A ‘screw up’ confession, of course, is the last thing lawyers want CEO’s to say).
BP’s future is in doubt. It will become a widely-taught case study of what happens when a company neglects its core business, lets the pieces of paper and finance people gain control, lets its operational excellence decline — and pays a heavy price when disaster strikes.
Let BP remind itself. We discover and produce oil. We must do this with superb excellence and with zero mistakes. Let every one of BP’s nearly 100,000 employees refocus on this fact. Let Tony Hayward, as long as he is CEO, refocus the company on this. And let us all remember that operational excellence is one value discipline no company can ever neglect.
Recall what Harvard Business School Professor Ted Levitt taught us: Every day, ask, ‘what business am I in?’. Remind yourself — and then do it. BP forgot.
Innovation Blog
Wanted: Creativity in Creativity Depts.
By Shlomo Maital
A Wall Street Journal report by Suzanne Vranica (“Help wanted: creative executives”), WSJ Friday-Sunday June 4-6, p. 20, reveals a remarkable paradox: There is a shortage of creativity precisely in the place known as “creative departments” in advertising agencies.
According to Vranica, as the recession eases and advertising spending slowly recovers, big advertising agencies are struggling to fill a crucial position: Head of creative departments. These are the departments that come up with the big ideas for campaigns, which are then transferred to the production departments for implementation.
These jobs get salaries of $1 m. yearly and more. Top agencies like WPP and Interpublic are searching for talent.
According to Nick Brien, CEO of Interpublic’s McCann Worldgroup, “Creativity is now far broader and far more complicated than it used to be. This is where art and science are meeting and it can be either a beautiful thing or a painful one.”
Painful? Why painful?
Because what is needed today is not just creative ideas for campaigns (like the masterful campaign for Mastercard, “XXX, $4.95, real conversation, priceless”), but indeed, a new creative idea for an innovative business model for advertising, to combat Google and Yahoo.
And this is where even highly creative people, whose job definition is ‘creative’, stumble. Because many ad agencies are stuck in the past, unable to escape from the constraints of how advertising was in pre-history, and how it must transform itself in the age of Web 3.0.
Such transformations have occurred before in the advertising business. A group of talented people transformed advertising in the ’80s, from “better, sweeter, stronger, nicer”, to emotional branding (“I Love NY”). But this new transformation must be even more sweeping, and there are few signs that anyone has come forward with strong creative ideas on how to transform conventional print and media ads. It must innovate advertising’s business model, not just its content. This is always tough to do.
If you have some good ideas — try applying. These are fascinating, highly paid, highly stressful positions, and success is quickly measurable and well compensated.
Innovation Blog
Trivial Pursuits Is Anything But Trivial —
In Memory of Chris Haney 1951 – 2010
A Canadian high school dropout had an idea. He joined with a fellow apprentice journalist named Scott Abbott — and in 1981 created a huge fad: a board game that tests whether you can answer the most trivial unimportant questions. The game was perfectly named: Trivial Pursuit. It comprised some 6,000 questions, none of which was about anything of importance. E.g., Who was Howdy Doody’s twin brother? (Double Doody). [Who has Howdy Doody? Star of a kid’s TV program in the 1950’s….].
According to the Global New York Times, Trivial Pursuit has sold more than 100 million copies in over 26 countries and in 17 languages. Haney, who struggled to implement his dream, died a millionaire, owner of gol courses, vineyards and race horses.
In 2008 the global game company Hasbro bought Trivial Pursuit for $80 m.
Haney died Monday, at a relatively young age, after a long illness.
I wonder how many people have thought about making a game out of trivia. Why then was it Haney, and his partner, who made it a success?
The key is the Nike mantra: Just Do It! Creative people who change the world have a passion to see their inventions come to life and find use. Creative people who fail to change the world get great mental satisfaction out of coming up with ideas, without the need or passion to actually bring them to the marketplace. It’s great to have ideas. It’s even better to make at least a few of them a worldwide hit — definitely, non-Trivial.
Innovation Blog
Competing for ‘Clean’: Singapore Leads the Way
By Shlomo Maital
Goh Chee Kiong
A global business and technology race is underway, and has been for some time — to achieve leadership in clean technology. As has happened before, a rather latecomer with many disadvantages has entered the race and is now taking many of the spoils.
The entrant is Singapore. The question is: How has it succeeded?
According to the Global New York Times, Singapore has singlemindedly and determinedly made itself attractive for global investment in CleanTech, just as it did in semiconductor production and in biotechnology. [1] Singapore just won a global contest for a $1.85 b. plant, largest of its kind, for making solar wafers, cells and panels, by REC Renewable Energy Corp. of Norway. REC received over 140 proposals from around the world. Why did it choose Singapore, a nation with only some 700 sq. km. of land, distant from everywhere?
The head of clean technology at Singapore’s Economic Development Board, Goh Chee Kiong, says simply, “Asia is going to be a huge market for clean-tech products and solutions, and we want to make sure Singapore is plugged into this entire marketplace”. Singapore offered REC skilled labor, tax incentives, government support and a favorable investment environment. Singapore has set aside a fund worth $700 m. for R&D on cleantech. It has also created a solar research institute and a clean-tech park. Other top countries drawn to Singapore include Vesta, world’s top wind turbine marker, which will spend $500 m. in Singapore over the next decade to build a major R&D center. Singapore has everything needed to attract clean-tech people and money — great living conditions, legal, banking and accounting firms, and other services support. It is a Southeast Asia hub.
Singapore’s government wants Singapore to be a testing ground for new technologies — electric vehicles, smart microgrids, solar panels, etc. “Our next step is to make Singapore a living laboratory,” Goh says, ” …a site of first adoption, demonstration, test-bedding. This is a key selling point.”
Keep in mind that with GDP per capita of some $35,000, Singapore is a high-wage country. Despite this, it is a clean-tech site of choice of investment and production. Let no country ever again site its high wages as an excuse for losing the clean-tech race.
[1] “Singapore aims to become a hub for clean technology,” by David Fogarty, Reuters, Global NYT May 31, 2010, p. 18.
Global Crisis/Innovation Blog
High Frequency Trading: One More Reason to Worry
By Shlomo Maital
Global markets and those who wheel and deal in them seem able to provide ordinary people with newer and better reasons to worry, far faster than regulators can bandage wounds and patch up the leaks. High Frequency Trading (HFT) is an example. HFT is an innovation, in which computer experts use super high-powered computers to identify small profit opportunities, and capture them within milli-seconds, far faster than human eyes, brains and fingers can move. These experts care nothing about fundamentals or companies, simply seek small arbitrage profits. HFT crashed the markets on Thursday May 6, now known as Hysterical Thursday. The US stock market fell 6 per cent…in 20 minutes! And it will likely happen again.
Here is what happened according to Nina Mehta, Lynn Thomasson and Paul M. Barrett
Bloomberg Business Week, Features, May 20 (“The machines that ate the market”):
“Once upon a time, human beings oversaw the trading of stocks. They’ve been replaced by a complex system of computers that can produce a scary new kind of mechanized panic. Hysterical Thursday did no apparent long-term harm. Some venerable stocks dropped to a penny apiece before bouncing back. Overall, the Standard & Poor’s 500-stock index declined 6.2 percent, from 1,136.16 to 1,065.79, in a 20-minute span—an $862 billion paper loss—before recovering to finish down 3.2 percent. The brief crash threw up a flare that illuminated a financial topography that was unfamiliar even to many experienced investors.
A Bloomberg Businessweek investigation into those harrowing minutes revealed the extent to which the market is now dominated by quick-draw traders who have no intrinsic interest in the fate of companies or industries. Instead, these former mathematicians and computer scientists see securities as a cascade of abstract data. They direct their mainframes to sift the information flows for minute discrepancies, such as when futures contracts fall out of sync with related underlying stocks. High-frequency traders (HFTs), as they’re known, set an astonishing pace. On May 6, 19 billion shares were bought and sold; as recently as 1998, 3 billion shares constituted a very busy day.
This is not the first time computers have wreaked stock market havoc. On Oct. 19 1987 the NYSE fell 20 percent in one day, because of ‘programmed trading’ — computers programs that traded spot (stocks for immediate delivery) and derivatives (options and futures). Problem was, the spot trading was on the NYSE and the derivatives, on the Chicago exchange. A doom loop was created in which falling spot prices triggered selling, and that in turn triggered derivatives selling, which triggered spot selling, etc… Eventually authorities put a stop to it with “circuit breakers”. On May 6: “The SEC and the Commodity Futures Trading Commission stated, ‘We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges.’ It’s that old déjà vu all over again.
I often ask financial traders and speculators what is the redeeming social value of what they do. I always get the same vapid answer: Liquidity. Apparently, HFT creates “liquidity”. Let me translate.
Liquidity means generating huge volumes of traffic, meaning that small profits on each transaction, multiplied by billions of transactions, yields huge profit. The activity draws in unsuspecting amateurs into the game, bringing new money, much like suckers pulled into a poker game manned by hardened professionals who take their money with glee.
Eventually the regulators will get control of HFT. Until they do, if you’re in the market, expect more Hysterical Thursdays..and Mondays, Tuesdays…… or simply, stay out of the market.
Innovation Blog
Hello, Cynthia! First Man-Made Cell!
By Shlomo Maital
Meet Cynthia!
Today’s Wall St. Journal carries an amazing piece about what can almost be termed “the creation of life”. Craig Venter, whose work greatly accelerated the human genome project, and his Center have come up with the following remarkable breakthrough: a synthetic cell, completely controlled by man-made genetic instructions. Scientists call the cell “Cynthia” (Synthetic Cell), following the nickname Dolly given to the first cloned sheep.
Here is what the Venter scientists discovered:
“We call it the first synthetic cell,” said genomics pioneer Craig Venter, who oversaw the project. “These are very much real cells.” Created at a cost of $40 million, this experimental one-cell organism, which can reproduce, opens the way to the manipulation of life on a previously unattainable scale, several researchers and ethics experts said. Scientists have been altering DNA piecemeal for a generation, producing a menagerie of genetically engineered plants and animals. But the ability to craft an entire organism offers a new power over life, they said. The new cell, a bacterium, was conceived solely as a demonstration project. But several biologists said they believed that the laboratory technique used to birth it would soon be applied to other strains of bacteria with commercial potential. “I think this quickly will be applied to all the most important industrial bacteria,” said biologist Christopher Voigt at the University of California, San Francisco, who is developing microbes that help make gasoline. Several companies are already seeking to take advantage of the new field, called synthetic biology, which combines chemistry, computer science, molecular biology, genetics and cell biology to breed industrial life forms that can secrete fuels, vaccines or other commercial products.
Venter said he intends to patent the device, because “it is a human invention”. His Center funded the research, with a private investment of $30 m.
TIMnovate 