From Incremental to Exponential

Vivek Wadhwa and Ismail Amla with Alex Salkever (2020).?From incremental to exponential: How large companies can see the future and rethink innovation.?Berrett-Koehler Publishers: Oakland, CA

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xi?this book is written primarily for executives and managers at … legacy companies

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xii?genuinely sustainable innovation entails attention to its ethics and to its potential to provide social benefit and uplift humanity

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4?legacy companies prize startup experience

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4?obstacles … a mindset of “No” as opposed to “Grow!”

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8?older organizations … whose established processes and products may be their very vulnerabilities … The book is designed to help any organization that wants to hone its innovation chops

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15?Ajay Agrawal, Joshua Gans, and Avi Goldfarb explain in their book Prediction Machines: The Simple Economics of Artificial Intelligence, freely available predictions will fundamentally change how we conduct our lives and how business behaves

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18?In their book The Driver in the Driverless Care, Vivek Wadhwa and Alex Salkever detail a range of technologies

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18-19?Moore’s law … “The Internet of Things” … Industry 4.0

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20?In a decade or so, we will not need doctors to advise us on day-to-day health; their work will be for the complicated ailments

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21?We will be 3D printing not only food but also cars, electronics, houses, and space stations

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21?although advancing technologies enable a lot of good, they also enable large-scale destruction, spying, and unimaginable horrors … the gap between the haves and have-nots widens

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22-25?1995 … Gartner … the Hype Cycle … Everett Rogers’s Innovation Diffusion Model … Geoffrey Moore … iconic business book, Crossing the Chasm … second-order disruption

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27?The smartphone is today the dominant technology platform

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29?An organization’s ability to forgo overly rigid structures and hierarchies and to embrace change in how people work and think, remaking itself as needed, makes it more agile and less fragile than otherwise.?The leader of such organizations trust their smart employees to lead the way

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30?Since 1935, the average duration of membership in the Standard & Poor’s 500 has fallen from 90 years to less than 20 years

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34?Clayton Christensen … book The Innovator’s Dilemma in 1997 … good-enough technological innovation

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35?A host of compounding factors has created an entirely new innovator’s dilemma game

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36?ratings and reviews have become more important than brands and advertising … management occurs through communication and persuasion … Innovation thrives in diversity

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37?innovation is the key to business survival – innovation is a bottom-up process, not a top-down one … first-order exponential infrastructure advancement … third-order disruptions of the way systems fit together

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38?the New Innovator’s Dilemma.?Today, competition and disruption can come from anywhere

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39?Netflix … accounts for more than 12 percent of global bandwidth consumption

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41?Jonah Peretti … BuzzFeed had taken brilliant advantage of its recognition that the modern Internet essentially was a vast marketplace for people’s attention

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44?Because it is so willing to invest large amounts of money in anticipation of long-term returns, Amazon can take gambles that few others will

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44?Despite Google’s dominance in the field of search engines, Amazon has come to dominate product search

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45?Amazon is the largest logistics and transportation company

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46?Amazon is among the leaders … in deploying robots

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47?TransferWise … wire transfers

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48?each Amazon Go store is akin to a human-powered A.I. laboratory … along with its Whole Foods grocery store

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50?Allbirds

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51-53?Teslas are the best-selling electric vehicles on the planet … 2018 … a 12 percent market share … Tesla behaves as if a car were a software product … Tesla treats its cars as an intelligent network … Relying on its own battery factory also gives Tesla much more control over its own fate; nearly all other car makers are ordering batteries from third parties

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54?the rules of the innovation game have changed

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56-57?Erik Brynolfson and Andrew McAfee … the second machine age … for mental power … second industrial age

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59?important lessons for business and governments … Development of innovation centers is and always will be organic, from the bottom up

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60?Money alone can neither buy innovation nor change corporate culture to become more innovative and faster moving .?

????On the other hand, we have strong evidence that creating an innovation culture, or a culture that encourages and prizes key precursors to innovation, will generate improvements.?It is all about focusing on your people

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62?Frederick Terman .. the “father of Silicon Valley,” … transformed Stanford’s young engineering school into an innovation juggernaut.?By encouraging science and engineering departments to cooperate closely, linking them to nearby entrepreneurs and like-minded companies, and tightly focusing applied research on solving industry problems, Terman had created a culture of cooperation and information exchange that quickly took root and today still defines and shapes Silicon Valley

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63?New Jersey … Even though they knew that working together would make them all better in the long run, companies refused to work with competitors … Dallas … failed … too

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64-65?innovation catastrophe … Hundreds of regions all over the world collectively spent tens of billions of dollars trying to build small, top-down replicas of Silicon Valley.?We cannot cite a single success that is truly self-sustaining and innovative in the way that Silicon Valley is innovative.?It was easy to identify the ingredients for innovation.?As it turns out, the recipe was less obvious … a key catalyst in creating Silicon Valley … was the people and the relationships … carefully fostered among Stanford faculty and industry leaders … painstaking and non-transactional process … The Missing Ingredients: Culture, People, and Genuine Connection

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66?Silicon Valley experienced high rates of job-hopping and company formation.?The professional networks and easy information exchange were more fluid and accepted … Valley firms understood that collaborating and competing at the same time led to success

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67?For 1995 to 2005, 52.4 percent of engineering and technology startups in Silicon Valley had one or more founders born outside the United States

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68?This freedom to form relationships and share ideas is, more than anything else, what innovation requires.?The understanding of global markets that immigrants bring with them, their knowledge of different disciplines, and the links that they provide to their home countries have given the Valley an unassailable competitive advantage

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68?The Valley is … far from perfect … First, women and certain minorities, such as blacks and Hispanics, are largely absent from the ranks of company founders and boards … a barrier to … further growth … In addition, venture capitalists have a herd mentality … Also … venture capitalists are willing to overlook repugnant behavior and toxic corporate leadership

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73?The sad reality is that the top talent does not want to work for legacy corporations

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74?China has created a powerful circular innovation engine by working with Chinese nationals who are educated in the United States and Canada and who return to China to work in engineering or research roles in their country of birth.?China is now the fastest-growing pool of venture-backed startups and is racing ahead in innovation

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74?successes are long-term projects that … result from painstaking reciprocal, non-transactional relationship building

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75?Companies with a long track record of innovation usually bend over backward to include everyone as a potential innovator

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76?the vast majority of corporate innovation efforts – more than 90 percent, according to one study by the consultancy Capgemini and Altimeter Group – fail

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76?Changing a business model is far more painful and harder to comprehend than bringing in a new technology

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76-77?Marc Andreessen … neither the quality of the team nor the quality of the product matters nearly as much as market demand … “… a market with lots of real potential customers … The Only Thing That Matters.”

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78?China … Xiaomi … an entirely new and different type of smartphone company, unlike any before it … consults very closely with a community of millions of its customers

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79?For new business models and new ways in which customers interact with companies, it’s often useful to look to China

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79-84?six of the most basic structural marketplace changes that legacy companies struggle with.?

Change 1: Shift in Power from Seller to Buyer … reduction in information asymmetry …

Change 2: Diminished Influence of Brand …

Change 3: Intellectual Capital Is “Leakier” Than Ever …

Change 4: Product Development Cycles Move Much Faster …

Change 5: Technology Shifts Are Opening Massive New Markets … most legacy firms lack both diversity and global perspective … command-and-control structures are ineffective for knowledge workers …

Change 6: How We Communicate Has Changed – Changing Everything

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85?The smartphone is the biggest cost-reduction system ever introduced to humankind

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85-86?Clay Shirky wrote in Here Comes Everybody: The Power of Organizing without Organizations … “Communications tools don’t get socially interesting until they get technologically boring.”

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86?Linus Torvalds in 1991, Linux … Today … is the dominant enterprise software

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98?Amazon has elevated failure to a high art

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100-101?legacy companies … struggle mightily to fix basic, obvious problems in their existing dominant products.?Implementing such reforms would seem an obvious opportunity

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102?book Lead and Disrupt … Charles O’Reilly and … Mike Tushman

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103-114?the Eight Deadly Sins of Stasis … an organization that suffers from these sins probably has a larger cultural problem to overcome.

1.?????Unwillingness to Listen … When a company has a listening culture, the very act of listening opens it to change …

2.?????Lack of Patience …

3.?????Lack of Distance …

4.?????Lack of Resources …

5.?????Wrong People and Wrong Role …

6.?????Lack of Accountability …

7.?????Inappropriate Culture … Lou Gerstner at IBM … “culture is everything” … Microsoft’s … Satya Nadella … “The only thing that’s going to enable you to keep building new capabilities and trying out new concepts long before they are conventional wisdom is culture.” … the New Zealand rugby union team … All Blacks.?The most successful rugby team of all time … refuses to tolerate bad behavior …

8.?????Lack of Political Support … a budget is a bet on the future with clear winners and losers every year

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114?a constant struggle for balance.?Too much is as bad as too little … Recalibrating on a constant basis

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116?research on innovation is of wildly varying quality

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117?Patagonia … 2011 … “Don’t Buy This Jacket.”

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120?recycling … was not as effective in environmental conservation as simply encouraging greater and lengthier use of Patagonia clothes

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122?Marketplaces have existed since time immemorial as places where people gather for commerce

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123?In a variation on marketplaces, platform businesses have emerged as the most powerful forces in global business.?Platforms allow others to build businesses on top of them … As of this writing, the five most valuable publically traded companies in the world – Apple, Google, Microsoft, Amazon, and Facebook – are all platform companies … The seventh- and eight-most valuable are Chinese platform companies Alibaba and Tencent.?The ninth-most valuable company, VISA, is a platform company as well

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124?The most common types are transaction platforms … eBay and Airbnb … Apple … hosts an App Store … Amazon … Uber, and Baidu … A second platform type, the innovation platform … Salesforce … The most powerful platform companies tend to be both transaction and innovation platforms: combined platforms.?Facebook

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125-126?Platform businesses tend to share three further key characteristics: network effects, distribution power, and asymmetric growth

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126?Large platform businesses commonly attract customers by giving away a significant subset of some service, either by monetizing the service indirectly with ads or by selling user data

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129?The power of platforms is very well explained in a book, Platform Revolution: How Networked Markets are Transforming the Economy and How to Make Them Work for You, by Geoffrey Parker, Marshall Van Alstyne, and Sangeet Choudary

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131-132?Innovation is not served by perfect organization or confinement to a program but by a little unpredictability, such as arises in talking with customers or in serendipitous meetings with other units … randomness and external focus are disorganizing forces requisite for shaking old ways of thinking enough to foster novel thoughts and concepts

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133?DeWALT … Perhaps most importantly, senior management spends considerable time and energy interacting with innovators and learning what is happening on the ground

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137?innovation prizes and contests

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139?everyone is a potential innovator and inventor

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140?IDEO, “Design thinking is a process for creative problem solving” with a human-centric approach … agile methodology … “When you sit down to create a solution for a business need, the first question should always be what’s the human need behind it?”?Design thinking uses simple tools – white-boards, pens, paper – to create an inclusive process that puts technical and nontechnical workers on an even footing … design sprints

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141-142?crowdfunding campaign … far less about fundraising than about product validation

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142?Steve Blank and Eric Ries, the “lean startup”

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143?If you are not borrowing ideas from competitors or others, then you are not doing your job … Picasso had a saying: ‘Good artists copy, great artists steal’

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144?Often the best innovators may not look like the most productive employees … Brad Bird … Pixar … black sheep

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148?Amazon … [Jeff] Bezos’s mandate to design any internal service in such a way that external businesses can become its customers

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148?CEOs and leaders must give employees permission to innovate

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149?Innovation and ideas do not … need to be enormous in order to be useful

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150?Eric Hippel, “In just six countries surveyed to date, tens of millions of individuals in the household sector have been found to collectively spend tens of billions of dollars in time and materials per year developing products for their own use.”

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151?The future of company innovation, then, may be to tap into these backyard inventors when they are on their day jobs

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152?entrepreneurship is only a state of mind and does not depend on age, skin color, sex, or background

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153?treating everyone as an innovator is the most basic and essential part of building an innovation culture that works

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153?Workers … hate hierarchies … Smart CEOs understand that enforced hierarchies separate them from what is really going on in the company or organization, often to their detriment or peril, and they know that they’re more effective helping, supporting, and partnering than merely directing from on high … “coaches, not bosses.”?Bosses are prescriptive and definitive.?Coaches question and listen, asking workers to come up with their own answers and guiding them rather than telling them.?This approach … remains in a minority … Julia Milner and Trenton Milner

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154?Telling … workers … how to do their jobs results in unhappy workers … training is necessary … continuing education is vital … Employees crave learning

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154-155?a company environment that lubricates collaboration between employees on interesting work is what leads to serendipity and great ideas

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155?a diversity of viewpoints helps collaboration yield ideas that are more creative and have more economic advantages than those emerging from monocultures

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155?the classic “brainstorming” model … actually produces fewer good ideas than allowing individuals to brainstorm alone.?Brainstorming is more effective when individuals brainstorm separately and then come back together to assess ideas

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156?Is the physical office space designed to foster collaboration?

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157?To build a culture of experimentation that shrugs off failure and congratulates success, the company can hire entrepreneurs to come and work as intrapreneurs; give them one-year contracts; and ask them to build a product, letting them show your team how it can be done on the outside and helping them get it done in the same way on the inside

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159?Part of what can make effective innovation so powerful inside legacy firms and older organizations is the ability to leverage the existing strengths

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163?common incumbent advantages are scale, distribution, data, and expertise: things that are expensive to acquire and difficult for startups to replicate

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163?The world’s largest beer, wine, and spirits company, Anheuser-Busch InBev

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167?Coca-Cola … the Celebrated Failure Award

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169?Dieter Rams’s “Ten Principles for Good Design”

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172?the most important lesson that Steve Jobs taught the tech industry concerned the importance of form … “… it’s technology married with liberal arts, married with the humanities, that yields us the result that makes our heart sing …”

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172?the most disruptive solutions often requires a knowledge of fields such as biology, education, health sciences, and human behavior

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175?Marshall Rosenberg’s Nonviolent Communication, a book

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176-178?Satya Nadella … Microsoft … empathy … Nadella made it clear that the old, aggressive behaviors were no longer welcome … he refused to tolerate anger or yelling in executive meetings … he promoted a culture of curiosity and learning

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179?Microsoft’s … 2016 … purchase of LinkedIn

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180?at … more than $1.4 trillion as of early 2020 … Microsoft has become the most valuable company in the world … the new culture of humility, acceptance of change, and openness to external ideas

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183?[Jim] Robo describes a CEO’s main three responsibilities as capital allocation, execution, and talent development

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185?According to one key U.S. Department of Commerce measure, the spring of 2019 marked the first time ever that online sales exceeded offline tallies

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187?As of this writing, Walmart is continuing to gain ground on Amazon quarter after quarter, both in absolute dollars and as a percentage of transactions

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188?book Nudge … Richard Thaler and … Cass Sunstein … government and businesses could significantly improve outcomes through small changes to human behavior

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189?“If you needed an organ transplant, would you have one??Is so, please help others.”

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190?United Kingdom … experimentation … in part due to extended austerity … do more with less

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190?Innovation management in government is harder than in business but often more valuable

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191?many of the tactics applicable to the private sector work well in the public sector too

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192?2014, Clayton Christensen … five core requisites for public-sector innovation:

·???????Ability to experiment

·???????Ability to replace outdated infrastructure

·???????Existence of feedback loops

·???????Existence of incentives for product or service improvement

·???????Existence of budget constraints on end users

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196?The pressure to do more with less is acute.?Necessity has always been the mother of invention … austerity is now deeply ingrained in government ethos

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200?In time, the Apple Watch will overturn the pharmaceutical industry by keeping track of the effectiveness and side effects of the drugs we take and helping us improve our lifestyle and habits so that we rely less on medication

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201?any company can become an innovation company?