Magnus Penker

Interested in innovation? Go to my new blog at Bearing Consulting Ldt, http://blog.bearing-consulting.com/ for the latest news and insights

Social Innovation and sustainable thinking is emerging, business leaders shifting focus using social and sustainable thinking sharpening their competitive advantages. Interested reading more? Have a look at our new trend watch at http://www.dfkompetens.se/trendspaning/veckans-entreprenorskap/2011-08-01_social/index.xml

Joseph Schumpeter, the guru of innovation, addressed the process of innovation with his theory of creative destruction and his definition of entrepreneurs as people who combined existing elements in new ways to create a new product or service. Social innovation is a new potential megatrend, however with roots back in the 60′s and related to strategies, concepts, ideas and organizations that meet social needs such as working conditions, education, community development and health that extend and strengthen the civil society. The term is used in many ways and related to innovations such as microcredit and internet based distance learning as well as social entrepreneurship.

However, recently business people and academics started to connect the dots bring doing well together with doing business, i.e. making the cake bigger before slicing it up. An example is the Canadian center for Social Innovation who clam on their web that ‘The Centre for Social Innovation is a social enterprise with a mission to catalyze social innovation in Toronto and around the world. We believe that society is facing unprecedented economic, environmental, social and cultural challenges. We also believe that new innovations are the key to turning these challenges into opportunities to improve our communities and our planet.’ Read more at http://socialinnovation.ca/

Moreover, Michael E. Porter the Harvard University professor, also recently published paper where he explain why business leaders must focus on shared value – creating products and services that benefit not only the company but also society. Or as like to put it, make the pie bigger… Responsible and smart entrepreneurs understand to create value through actions beneficial for all. Without a working society and environment there is not much business to do. See Porter’s movie in one of my older blog posts http://www.penker.se/michael-e-porter-sends-csr-back-to-the-stoneage-now-it-is-time-for-real-entrepreneurship/

There is also a new book published on the subject, Social Innovation, Inc. by Janson Saul. It is about five strategies for driving business growth through social change. According to Janson there are five key drivers for social capitalism and capital market

1. Corporations are more powerful than governments
2. Consumers are more powerful than citizens
3. Social issues are now business ideas
4. Philanthropy has become a commodity
5. The value of intangible assets is rising

Janson also point out five key path to success,

1. Create revenues through submarket products and services
2. Enter new markets through backdoor channels
3. Build emotional bonds with customers
4. Develop pipelines for talent
5. Influence reverse lobbying

Another interesting trend is place management, also a kind of social innovation, focused on reinventing places, societies as well as business clusters around the globe. There will be blog posts about this exiting topic, and I can promise a lot of interesting material. The international though leader in the subject is Christer Asplund, co-writer to Philip Kottler and senior adviser at Bearing Consulting, who is also launching his new book this autumn.

Over the last year the key topics within the world of innovations has been impacted by social responsibility and sustainability aspects, which can be seen by analyzing the last 12 months of Google searching using Google Insights for Search.  The top area of interest over the last 12 month has been

• business innovation
• open innovation
• innovation management
• technology innovation
• social innovation

US, Canada and KU is dominating all searches except from Open Innovation where Germany is leading. Open Innovation and Social Innovation is also the most top ranked searches, still growing, together with innovation management which also is on its way up. The global top searchers for innovation, in general, and over the last 12 month was;

1. Kenya
2. Ghana
3. Singapore
4. Denmark
5. South Africa
6. Nigeria
7. India
8. Hong Kong
9. Germany
10. Australia

Pretty much give an indicator of where things heating up within the area of innovation…

Last Friday we could read an interesting blog post by Scott Anthony. It was about four typical innovation pitfalls. Great article, and I like to comment upon it.

The first lie is that you can trust the feedback when asking customers, and instead go for what they do today or if they are ready to spend some money on a new idea (on an early stage). This is a very useful way of verifying the real need and according to my experience also to be combined with testing the market with different versions of the idea, of different markets and different prices will do the job even better. This is also how you build successful e-commerce solutions today.

The second lie is that you will ship in six month which do not happened often according to Scott Anthony which recommend to have a look at Scrum and go for incremental releasing. However, here I have some criticism. Many firms do actually have significant architectural issues due to this approach. Instead, put effort in building a sustainable and scalable architecture and then release increment by increment and in some cases even open up for external innovations as an accelerator of ideas and functionality. The architecture can also be released base upon a quick beta version without any forward-compatible promises and in stage two replaced with a stable long-term architecture where all old components are replaced.

The third lies it that the sales people say of course I can sell that. Could not agree more, no further comments needed.

The fourth lie is that executives are open to everything, they are not when i come to money. Always ask for a budget is Scott Anthony’s recommendation. Good point here, but I would actually give the recommendation to bring a client or customer to the meeting when the executives when presenting the idea.

It is a lot of buzz about green innovations and much talk about potential green washing. And we have seen it all before with pink washing and white washing. To understand whether green innovation is washing or not the question to ask is why it exists. To cover up? To gain short term winnings? To move the focus away from other issues? Or is it possible that it really might exist a long term market opportunity here?

Let’s start with low energy light bulbs. It reduces the consumption of energy, but it is also generating a number of new problems with ozone, dirty electricity as well as mercury. On the other hand, LED bulbs that do not have these problems, was probably invented as a result of the increased demand created by its predecessor. Moreover, it is interesting to notice how Philips, vendor of traditional low energy bulbs as well as LED bulbs, just announced that they will pump in 2 billon Euro into green innovation. Most likely due to past green success and increased demands.

Philosophically it is interesting to ask if it is ok to try to go green even if there are short term trade-offs that might even be worse than without it. Like with the case with low energy light bulbs. Or as with hybrid cars; which most likely increases the demand of green cars (now and in the future) but at the same time, considering the complete revolution and present technology, probably is worse for the environment then using the best available traditional technology.

Given above thoughts; How is it with the German stop of nuclear power. Will it, short term, create negative impact on the environment and business climate but long term impact and stimulate new innovations leading to a more sustainable society as well as a comparative advantage for a new green Germany industry? Time will tell.

Innovation is a way of getting competitive advantage which is well known and documented since ancient times, ranging from machinery, war equipment to the beauty industry and all trial building the perpetuum mobile. What´s happened lately is the paradigm shift of opening up the innovation process from being secret and closed towards inviting for collective wisdom and creativity. We call it open innovation or sometimes Innovation 2.0.

Open innovation, is a way to forge closer relationships, gain access to the best thinking and to quickly disseminate ideas and trends by ambassadors are on the rise. In recently blog posts, by me and other bloggers, you have seen examples with Google, Apple and Nintendo. In a recently published MIT article by the Open Innovation guru Henry Chesbrough, he states that Porter’s Value chain need to be extended; as the service interaction (Service Value Web) and innovation taking place between producer and consumer must be taken into account in a greater deep than just  been seen as logistics.

Another interesting innovation observation is that there seems to be a dualistic relationship between profitability and innovation; characterized by kind of market structure.

In a market with perfect competition player gain the benefits of the innovations as following;

• if there is technological leap (so-called disruptive technologies), it can revitalize an entire industry such as the iPhone and Windows did,
• but if it is about improvements, such as streamline or added features, the innovation only provide short-term benefits as the competitors will respond with lower price, imitations or substitutes.

However, if there is an oligopoly, i.e. few players who compete in the market space, innovations tend to very quickly imitated by competitors, sometimes even gets launched before, often leading to long-term reduction in profitability as research and development budgets get astronomically high.

Now, if we add to this trend Open Innovation, say the mobile phone industry which is an oligopoly market structure, already suffering from shrinking margins and increasing R&D costs, it will be very interesting … in an open approach ideas and concepts will move fast between communities, so-called leakage between communities, that in turn means that knowledge, ideas and opportunities move even faster than before when the innovation space was closed. Oligopolistic players now not only has an eye on each other but also dancing with each other’s customers in one big open innovation square dance…

Right or wrong, opportunity or threat, but the world has changed and we with it …

For some time now have Area Of Excellence, where I have the privilege of being Chairman of the Board, developed a certified training program in Talent Management. The training program has been developed, and delivered in collaboration with the Swedish Computer Association. We collected a number of really sharp trainers (Swedish and international) as well as the latest scientific developments in Talent Management. Personally, I hold in the initial block … Will be really fun and challenging.

At its core, talent management is about following;

1. Reduce the aquistion cost of human capital, i.e. strong employer branding and offer to the talent market as well as onboarding programs
2. Increase the return on human capital, i.e. get the most from development, career coaching, performance management, coaching, etc.
3. Extend period of depreciation of human capital, i.e. reduce staff turnover to healthy levels where people come to work and give the iron
4. Optimizing human capital cost structure, i.e. optimize the tax and labor costs by national and international sourcing/allocation

We want to strengthen Sweden’s competitiveness and be better able to attract, retain and develop our talents and you are welcome to help and spread the word by sending the link below through to HR executives, CEOs, directors, business development and perhaps a consultant managers who you think will benefit of this

http://www.dfkompetens.se/ledarskap/kurser/2111058/index.xml

In a recently report Gartner state that games will be used to drive innovations, an old phenomenon but interesting.  One of the most interesting stories is about how LEGO made an amazing turnaround some years back, and in the new spirit started to invited their customers to design and customize their own LEGO via Internet. And not just that, they also released a complete new highly interactive and flexible platform Mindstorm encouraging customers to design and develop their own LEGO-robots. Talk about innovative leap: strengthened relationship, better understanding and customer insights as well as a renewed hype around their products. Just have a look at the clip I found on YouTube.

Today, it seems like many companies and organizations actually try to use internet based games, as an open innovation approach, gaining better understanding of behavior and demand. Another example on how games can be used to get better insights and ideas is how the UK Department of Labor launched a game-like application called ”Idea Street” aiming at collect new insights from their 120 000 users. Read more here.