Category: Theory

Steve Jobs famously said that Apple stands at the intersection of of Technology and the Liberal Arts. He said it more than once because he thought it was an important distinction of the company.

In an intuitive way, the message may have gotten through to the average person, but I don’t think professional observers and managers of technology have quite grasped what he meant.

It’s not a glib throw-away marketing phrase. I can imagine many other, more evocative ways of saying that Apple blends the hard and the soft; the heart and mind, if you will.

His choice of words makes me believe that he meant it as a fundamental blending of two disparate and considered-opposite concepts, rather like yin-yang: things which do not naturally mix but which are complementary, interconnected, interdependent, and give rise to each other.

This interaction however is not well understood and even more rarely exploited. The reason they don’t mix well in business in particular is that individuals are typically not trained in both. Our education systems (from where these phrases originate) are unwilling or incapable of providing us with a grounding in both, so individuals tend to absorb only one or the other.

But it turns out that the interaction between these nominal opposites have determined our world to date and will continue to determine our fate. A cursory review of history shows that the “soft”, perceptive and feeling-based disciplines always combined with the analytical and judgmental to create a future which neither could create alone.

I note how Apple uses this combination to an advantage and have also used this methodology myself to understand and sense the future. Taking this method further, I would like to share it with others. I would like to recognize some faint but powerful patterns and bare some of the more audacious conclusions of my analysis.

The method chosen is a forum we are convening called The Post Modern Computing Summit.

It’s a small gathering where we are inviting the most enlightened thinkers of the future of computing to lead us into its next age, and perhaps, tentatively, the next era of civilization.1

1. We’ll also answer the questions of where tablets are going, and where they will takes us, what is the future of apparel computing, what does intimate computing mean and who will benefit and who won’t. [↩]

Illiteracy is the inability to read and write. Though the percent of sufferers has halved in the last 35 years, currently 15% of the world has this affliction. Innumeracy is the inability to apply simple numerical concepts. The rate of innumeracy is unknown but chances are that it affects over 50% of us. This tragedy impedes our ability to have a discourse on matters related to quantitative judgement while policy decisions increasingly depend on this judgement.

But there is another form of ignorance which seems to be universal: the inability to understand the concept and role of innovation. The way this is exhibited is in the misuse of the term and the inability to discern the difference between novelty, creation, invention and innovation. The result is a failure to understand the causes of success and failure in business and hence the conditions that lead to economic growth.

My contribution to solving this problem is to coin a word: I define innoveracy as the inability to understand creativity and the role it plays in society. Hopefully identifying individual innoveracy will draw attention to the problem enough to help solve it.

One example is in the following quote:

“Lastly, nationally circulating tabloid Ilta-Sanomat gets a look at Nokia’s fabled tablet computer that was developed nine years before the iPad hit the market. According to the paper, Nokia had its own innovative tablet device ready in 2001, but unfortunately it never made it to the shops. A former Nokia expert Esko Yliruusi says that the project was suspended a heartbeat before the tablet hit the market because it was thought that there was insufficient demand for such a device.”1

To explain what’s wrong with this usage we need some definitions.

The definition of innovation is easy to find but it’s one thing to read the definition and another to understand its meaning. Rather than defining it again, I propose using a simple taxonomy of related activities that put it in context.

• Novelty: Something new
• Creation: Something new and valuable
• Invention: Something new, having potential value through utility
• Innovation: Something new and uniquely useful

The taxonomy is illustrated with the following diagram. The position of the circles shows the embedding of meaning2

To illustrate further, here are some examples of the concepts.

• Novelties: The choice of Gold as a color for the iPhone; the naming of a version of Android as “Kit Kat”; coining a new word.
• Creations: The fall collection of a fashion designer; a new movie; a blog post.
• Inventions: Anything described by a patent; The secret formula for Coca Cola.
• Innovations: The iPhone pricing model; Google’s revenue model; The Ford production system; Wal-Mart’s store design; Amazon’s logistics.

The differences are also evident in the mechanisms that exist to protect the works:

• Novelties are usually not protectable but since their value is very limited the copying is not seen to cause harm.
• Creations are protected by copyright or trademark but are not patentable since they lack utility.
• Inventions can be protected for a limited time through patents but can also be protected indefinitely by being kept secret. Their uniqueness may also be the means by which they can be kept a secret.
• Innovations can be protected through market competition but are not defensible through legal means.

Note that the taxonomy has a hierarchy. Creations are novel, inventions are creations and innovations are usually based on some invention. However inventions are not innovations and neither are creations or novelties. Innovations are therefore the most demanding works because they require all the conditions in the hierarchy. Innovations implicitly require defensibility through a unique “operating model”. Put another way, they remain unique because few others can copy them.

To be innovative is very difficult, but because of the difficulty, being innovative is usually well rewarded. Indeed, it might be easier to identify innovations simply by their rewards. It’s almost a certainty that any great business is predicated on an innovation and that the lack of a reward in business means that some aspect of the conditions of innovation were not met.

The causal, if-and-only-if connection with reward is what should be the innovation litmus test. If something fails to change the world (and hence is unrewarded) you can be pretty sure it was not innovative enough.

Which brings us to the quote above. The fact that the Nokia tablet of 2001 not only did not succeed in the market but was not even released implies that it could not have been innovative. The product was only at the stage of perhaps being an invention (if it can be shown to be unique) or merely a creation (if it isn’t.) Furthermore, if the product is so poorly designed that it is literally unusable then it is just a novelty. A design, sketch or verbal description might be novel but it does not qualify as an innovation or an invention or even a creation. How far the depiction went toward making a dent in the universe defines its innovativeness.

Why does this matter?

Understanding that innovation requires passing a market test and that passing that test is immensely rewarding both for the creator and for society at large means that we can focus on how to make it happen. Obsessing over the mere novelties or inventions means we allocate resources which markets won’t reward. Misusing the term and confusing it with activities that don’t create value takes our eye off the causes and moves us away from finding ways of repeatably succeeding.

Recognizing that innoveracy is a problem allows us to address it. Addressing it would mean we could speak a language of value creation that everyone understands.

Wouldn’t that be novel?

1. A video showing the device is here, in Finnish. [↩]
2. The size of the circles also suggests degree of effort required and potential reward. Note that this is not a Venn diagram. [↩]

On a recent podcast I noted that Google was perceived as invulnerable. In contrast, Apple is seen as temporarily enjoying a stay of execution.1 This is not necessarily a bad thing for Apple. The more gushing the loathing or scorn, the more likely it’s a reaction to love and attraction. A brand dies not from hate but from apathy.

But nor is it necessarily a good thing for Google be be seen as invulnerable. There might be no “Google death knell counter”. There might not be a “Google is doomed” trope. If an executive from Google quits or is fired there is no investor panic. If a product is withdrawn there is no mourning. There are no journalists pursuing Pulitzer prizes by describing some seamy underside of Google. But there are no overt displays of affection either. Google is seen, on balance, as benevolent and hopeful. The discussion on business robustness is simply missing.

I suspect the absence of scrutiny comes from Google being seen as an analogy of the Internet itself. We don’t question the survival of the Internet so we don’t question the survival of Google — its backbone, its index, and its pervasive ads which, somehow, keep the lights on. We believe Google is infrastructure. We don’t dwell on whether electric grids are vulnerable, or supplies of fuel, or the weather(!)

Too complex, too pervasive. These are systems, not things. And people are not designed to contemplate systems. We leave that to experts, or better yet, computers.

The reason Apple is contemplated at all is that it’s not seen as a system. Even the suggestion that Apple is a system is implicitly treated as an impossibility. Because it’s not a system it’s fragile. It’s a person, or an idea, or a product or a singular “key” to something. It is, ultimately, mortal. The only debate is when it will die and points are earned for calling it sooner rather than later.

But what if Apple were a system? And what if Google were a person (or three?)

 

1. The list of Apple Achilles’ Heels is so long and creatively composed that it would take ages to compile, but here are just a few: the Mac (vs. Windows), Digital Rights Management (which kept the iPod alive), dozens of lawsuits (including from The Beatles), the Mac (when it ran Windows), PlaysForSure, Music Labels retaliation, the Zune, Android and clones, the Kindle and Amazon in general, more Mac, iTunes, iPod and iPhone and iPad killers than can be counted; Steve Jobs is ill, Jony Ive will quit, Tony Fadell quit, Rubinstein quit, Forstall was fired, etc. Feel free to add more through comments. See also Apple Death Knell Counter. [↩]

A company is nothing more (and nothing less) than three things: people, processes and purposes. In the language of the software engineer these would be inputs, algorithms and specifications. In the language of classical business analysis they are assets (or resources), organization structures and business models. In military theory, these are logistics, tactics and strategy.

This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.

When approaching any analysis problem, these questions form the foundation of causal inference. What is it, how does it work and why does it exist?

When analyzing nature the sciences often help with the what and the how but rarely address the why.1 In contrast, man-made systems (e.g. systems of law, religion and commerce) require an answer to the why as there is a presumption of a will in their creation and preservation. The why allows ultimate judgement on the merit of an enterprise. The why may escape us but it’s assumed to always be there. For instance, in criminal law the motive is often a crucial piece of evidence but it’s not always found. In business, the motive for action or for organization is a crucial piece of the puzzle which often explains the what, who and how, but here the ultimate why is usually profit. This the characteristic of a for-profit business, the purpose is explicit.

Continue reading “Google’s three Ps”

1. Religion attempts to answer the whys which science leaves as unanswerable. [↩]

When describing the process of disruptive innovation, Clay Christensen set about to also describe the process by which a technology is developed by visionaries in a commercially unsuccessful way. He called it cramming.

Cramming is a process of trying to make a not-yet-good-enough technology great without allowing it to be bad. In other words, it’s taking an ambitious goal and aiming at it with vast resources of time and money without allowing the mundane trial and error experimentation in business models.

To illustrate cramming I borrowed his story of how the transistor was embraced by incumbents in the US vs. entrants in Japan and how that led to the downfall of the US consumer electronics industry.

Small upstarts were able to take the invention, wrap a new business model around it that motivated the current players to ignore or flee their entry. They thus successfully displaced the entrenched incumbents even though the incumbents were investing heavily in the technology and the entrants weren’t.

In the image below, the blue “path taken by established vacuum tube manufacturers” is the cramming approach vs. the green entry by outsiders who worked on minor new products which could make use of the rough state of transistors at their early stages of development.

The history of investment in transistor-based electronics shows how following the money (i.e. R&D) did not lead to value creation, quite the opposite. There are many such examples: The billions spent on R&D by Microsoft did not help them build a mobile future and the billions spent on R&D by Nokia did not help them build a computing future.

There are other white elephant stories such as IBM’s investment in speech recognition to replace word processing, the Japanese government spending on “Fifth Generation Computing” and almost all research into machine translation and learning from the 1960s to the present.

But today we hear about initiatives such as package delivery drones and driverless cars and robots and Hyperloops and are hopeful. Perhaps under the guiding vision of the wisest, most benevolent business wizards, breakthrough technologies and new infrastructures can finally be realized and we can gain the growth and wealth that we deserve but are so sorely lacking.

Continue reading “Moonshot”

This was initially posted on LinkedIn December 16, 2013.

Innovation comes in many forms. Many times innovation is thought of as technological improvement or as invention. We can all cite examples of inventions which turned into industries which re-defined civilization. The steam engine comes to mind but there were many others before and after. Inventing something is certainly a way to create value but it’s not as common or as reliable a method as it might seem. Creating Intellectual Property is one thing, finding a defensible market and business model is quite another.

More often companies innovate in terms of processes or the “algorithms” which are used to deploy existing resources. Wal*Mart was immensely innovative in the way it organized itself and laid out a low-cost business model. More recently Amazon has innovated in distribution and fulfillment based on the ability to dispense with showrooms for products and sell directly online. There is little in terms of technology which Amazon “invented”. Rather, it deployed off-the-shelf technology in a novel way.

But what I want to address is a more mundane sort of innovation: marketing innovation, specifically pricing. Few would consider a price model to be an innovation but in fact it’s a core lynchpin to many breakthrough innovations. It was pricing which permitted Henry Ford to build an industrial empire. He could have built cars for those who could afford them as cars were defined in 1907 but he chose to build a car around a price point which was around the median of the population. A car “so low in price that no man making a good salary will be unable to own one.” His business logic began with a price and the product and process followed.

Continue reading “Bundling and Pricing Innovation”