in Innovation

Notes On a Full Day of Innovation

I was at a full day about innovation at Mediaplaza in Utrecht today. We used a room that had a stage in the center and chairs on four sides around it. This is a bit weird as the speaker has to look in four directions to be able to connect with the audience. The funny thing is that it actualy works (also because there are four screens on each wall): each of the speakers could do nothing else than be dynamic on the stage.

Below my public notes on a few of the presentations:

Gijs van der Hulst, Business Development Manager at Google

Gijs kicked off his presentation by showing this Project Glass demo:

The Wall Street Journal has done some research and found out that there has been an increase of 65% in how often top 500 companies mention the word “innovation” in their public documents in the last five years. Unfortunately the business practices of these companies have not really changed. How can you really effect change?

Google has nine “rules for innovation”:

  1. Innovation, not instant perfection. Another way of saying this is “launch and iterate”: first push it to the market and then see if it is working.
  2. Ideas come from everywhere. They can come from employees, but also from acquisitions or from outsiders.
  3. A licence to pursue your dreams. An example of a 20% project that was very succesful is Gmail. This was started by somebody who didn’t like how email was working at the time.
  4. Morph projects – don’t kill them. Google’s failed social efforts (Buzz, Wave) has taught it valuable lessons for its current effort: Google+
  5. Share as much information as you can. This is very different from most companies. The default for documents within the company is to share with everyone.
  6. Users, users, users. At Google they innovate on the basis what users want, not on profit.
  7. Data is apolitical. Opinions are less important than the data that supports them. They always seek evidence in the data to support their ideas. Personal note from me: Really? Really?? You cannot be serious!
  8. Creativity love constraints. Their obsession with speed (with hard criteria for how quickly the interface has to react to user input) is an example of an enabler for many of their innovations.
  9. You’re brilliant? We’re hiring. In the end it is about people and Google puts a lot of effort into making sure they have the right people on board.

Larger companies are more bureaucratic than smaller companies. Google is now more bureaucratic than it used to be. One of the ways this can be battled is by reorganizing which is exactly what Google has done recently.

Sean Gourley, Co-founder and CTO of Quid

Sean talked about our eye as an incredible machine with an incredible range. We enhanced our sight through microscopy and telescopy which opened up views towards the very small and the very big. We have yet to develop something that helps us see the very complex. He calls that “macroscopy”. For macroscopy you need:

  • big data
  • algorithms
  • visualization

He used this framing for his PhD work on understanding war. His team used publicly available information to analyze the war. When wikileaks leaked the US sig event database they could validate their data set and found that they had 81% coverage. His work was published in Science and in Nature. He decided to take it further though as he really wanted to understand complex systems. They needed to go from 300K in funding and 6 people towards an ambition level of about $100M and a 1000 people. He sought venture capital and had Peter Thiel as his first funder for Quid.

Sean then demoed the Quid software analyzing the term “big data”. Quid allows you to interactively play with the information. They extract entities from the information. So for example there are about 1500 companies involved in the big data space which can be put into different themes allowing you to see the connections between them while also sizing them for influence. Next was a fractal zoom into American Express where they looked at their patents portfolio and explored their IP creating a cognitive map of what it is that American Express does.

In 1997 Deep Blue changed the way we discussed artificial intelligence. We were beaten in chess by brute horsepower. As a reaction Kasparov started a new way of playing chess where you are allowed to bring anything you want to the chess table. The combination of human and machine turned out to be the best one. Gourley sees that as a metaphor for what he is trying to do with Quid: enhancing human cognitive capacity with machines, augmenting our ability to perceive this complex world.

Sean also talked about the adjacent possible: the way that the world could be if we used the pieces that are on the table right in front of you (e.g. the Apollo 13 Air Filter and duct tape).

His research on insurgents has taught him that some of them are successful and when they are, it is because of the following reasons:

  1. Many groups
  2. Internal Competition
  3. Long Distance Connections
  4. Reinforce Success
  5. Fail
  6. Shatter
  7. Redistribute

Polly Summer, Chief Adoption Officer at Salesforce

Salesforce was recently recognized by Forbes as the most innovative company in the world. According to Polly the tech industry has significant innovations every 10 years. For each of these ten-year cycles the industry has 10 times more users.

The ingredients for continueous innovation at Salesforce are: Alignment & Collaboration, “A Beginners Mind”, Agility, Listen to customers and Think big.

Polly talked about how she used their social platform called Chatter to collaborate in a completely “flat” way. They now even use Chatter as a means to make the worldwide management offsite meeting radically transparent. The next step in the Chatter platform is to “gamify” it and let the individual contributors rise and recognize their contributions (they’ve acquired Rypple for example).

Agile is about maintaining innovation velocity and delivering at speed. The “prioritize, create, deliver, get feedback, iterate”-cycle needs to be sped up. One way of doing this is by listening to your customers as they are all a natural source for ideas. She showed a couple of examples from Starbucks and KLM:

Polly then shared an example of where Salesforce made a mistake: they announced a premium service that they wanted to charge extra for. Customers complained loudly on social media and within 24 hours they reversed their decision.

In 2000 they asked themselves the questions: Why isn’t all enterprise software like Amazon.com? Right now in 2011 they asked themselves a different question: Why isn’t all enterprise software like Facebook? She would consider 2011 the year of Social Revolution. Salesforce’s vision is that of a social enterprise: allowing the employee social network and the customer social network to connect (preferably in a single social profile).

Bjarte Bogsnes, VP Performance Management Development for Statoil, chairman of Beyond Budgeting Roundtable Europe

On Fortune 500 Statoil rates first on social responsibility and seventh on Innovation.

Bjarte discussed the problems with traditional management. He used my favourite metaphor, traffic, comparing traffic lights to roundabouts. Roundabouts are more efficient, but also more difficult to navigate. A roundabout is values-based and a traffic light is rules-based. Roundabouts are self-regulating and this is what we need in management models too. He then touched on Theory X and Theory Y.

When you combine Theory X with a perception of a stable business environment you get traditional management (rigid, detailed and annual, rules-based micromanagement, centralised command and control, secrecy, sticks and carrots). If you perceive the business environment as stable and you have Theory Y your management is based on values, autonomy, transparency (can be an alternative control mechanism) and internal motivation. If you combine Theory X with a dynamic business environment you get relative and directional goals, dynamic planning, forecasting and resource allocation and holistic performance evaluation.

Finally, if you combine Theory Y with a dynamic business environment you get Beyond Budgeting.

Beyond Budgeting has a set of twelve principles (it isn’t a recipe, but more of an idea or a philosophy):

Governance and transparency

  • Values: Bind people to a common cause; not a central plan
  • Governance: Govern through shared values and sound judgement; not detailed rules and regulations
  • Transparency Make information open and transparent; don’t restrict and control it

Accountable teams

  • Teams: Organize around a seamless network of accountable teams; not centralized functions
  • Trust: Trust teams to regulate their performance; don’t micro-manage them
  • Accountability: Base accountability on holistic criteria and peer reviews; not on hierarchical relationships

Goals and rewards

  • Goals: Set ambitious medium-term goals; not short-term fixed targets
  • Rewards: Base rewards on relative performance; not on meeting fixed targets

Planning and controls

  • Planning: Make planning a continuous and inclusive process; not a top-down annual event
  • Coordination: Coordinate interactions dynamically; not through annual budgets
  • Resources: Make resources available just-in-time; not just-in-case
  • Controls: Base controls on fast, frequent feedback; not budget variances

Most companies use budgeting for three different things:

  • Setting targets
  • Forecasting
  • Resource allocation

When we combine these three things in a single number then we might run into its conflicting purposes. So the first step towards Beyond Budgeting is separating these three things. So for example the target is what you want to happen and the forecast is what you think will happen. The next step is to become more event driven rather than calendar driven.

Statoil has a programme called “Ambition to Action”:

  • Performance is ultimately about performing better than those we compare ourselves with.
  • Do the right thing in the actual situation, guided by the Statoil book, your Ambition to action, decision criteria & authorities and sound business judgement.
  • Within this framework, resources are made available or allocated case-by-case.
  • Business follow up is forward looking* and action oriented.
  • Performance evaluation is a holistic assessment of delivery and behaviour.

From strategic ambitions to KPIs (“Nothing happens just because you measure: you don’t lose weight by weighing yourself.”) and then into actions/forecasts and finally into individual or team goals.