Category: Innovation

How to figure out how technology is changing

In everyday English, technology can refer to a gadget, artefact, know-how, or software application. In contrast to this colloquial understanding, Professor Brian Arthur[1] emphasises the importance of a broader understanding in which technology is seen as a means to harness natural phenomena and arrange processes to produce something or achieve a specific purpose.

To substantiate this broader understanding of technology, Brian Arthur[2] provides three different definitions of technology:

  1. The most basic definition is that technology (in a singular sense) is a means to fulfill a human purpose by harnessing natural phenomena. For some technologies, this purpose may be explicit; for others, it may be vague. As a means, a technology may be a method, process or device. A technology does something, it executes a purpose. It could be simple (a roller bearing) or complicated (a wavelength division multiplexer). It could be material, like an engine, or nonmaterial, like a digital compression algorithm. Some technologies combine with other technologies into technology architectures, which may form part of even larger technological systems. For example, an engine is part of a car, which is part of a more extensive transport system. However, an engine itself consists of an assembly of complementary technologies. Generating energy with a photovoltaic panel, using MS Teams/Slack/WhatsApp to coordinate a team or designing with computer-aided design (CAD) software are examples of technologies at this level.
  2. A second definition is plural: technology as an assemblage of related practices and components. This covers technologies such as electronics or biotechnology that are collections or toolboxes of individual technologies and practices. These assemblages can also be called bodies of technology as they harness related phenomena. Examples are the catalogue of ways alternative energy can be generated or how different sensors and control systems can be deployed in a manufacturing plant. When solving a problem, it is possible to choose between alternatives from this toolbox or different toolboxes.
  3. A third definition is technology as the entire collection of devices and engineering practices available to a society. As new technologies become available, new institutions, norms, and supporting technologies are needed to make them feasible. In other words, the economy expresses its chosen technologies.

Arthur argues that we need these meanings because each category of technology comes into being, and evolves, differently (Arthur, 2009:29).

As technologies are absorbed or deployed, complementary technologies, including regulations, institutions, and norms, are deployed or developed. This is a process of structural deepening, where old technologies are increasingly substituted with new combinations of technologies and institutions, and industries, markets, and institutions adjust or reorganise.

These three definitions are shown in Table 1. Changes in the first category are relatively easy and fast, becoming progressively more difficult in the second and third categories. The third category is marked by an ongoing change process often carried over generations or extended periods.

Table 1: Definitions of technology

Definition of technologyExamplesRelevance to tracking tech change
Technology as a method, process or device.CAD software, Enterprise resource planning (ERP), Industrial robotics, recycling.Identifying technologies that are affecting companies, or that require coordination beyond a single firm.
Technology as an assemblage of practices and components – toolboxes.Digitalisation of manufacturing, greening of manufacturing, supply chain integration.Identifying technologies that require many simultaneous changes in one or many organisations. Structural deepening would require coordination between industries and enabling institutions.
Technology as the entire collection of devices and practices available or the economy as an expression of its technologies.The societal preference for greener solutions, a growing sensitivity towards the effects of mankind on nature, a new awareness of healthier living.The structural change processes that shape what the economy is evolving towards as technologies, institutions and markets co-evolve. New institutions create the stepping stones to the future, while old institutions try to maintain the past.

Tracking technological change at the first level is almost futile. This is where companies, or perhaps individuals in companies, procure or design a new solution that can solve a specific problem. This is hard to measure or track. People also describe their actions differently. I once met a CEO who called this R&D, while the financial director called it “investment” and the production manager called it “replacing something that we could no longer fix”.

As more and more people invest in a given technology, an assemblage or toolbox starts to develop. As time goes by, more and more technologies in this toolbox can connect with each other as standards and common sub-modules are developed. Alternative technologies that approach the same problem or draw from the same principles will emerge. The result is that companies can choose different configurations of related technologies within the same industry or market. However, it is also possible that companies can choose from different toolboxes in the same industry. Service providers that can help companies choose alternatives or implement solutions enter the marketplace. Enabling institutions that provide technological services, shared infrastructure, or education programmes may emerge around the technological toolboxes. A new technology language has formed. From a measurement perspective, tracking this kind of change in economic statistics is tricky because the changes are still mainly within companies, and economic statistics tend to lump all of the companies in a sector together. The implication is that while the first level of technological change is too detailed, the second level may be too generic.

One point is worth expanding further. Even if a new technological assemblage is available and well supported, some companies or industries might be unable to reach it. This is mainly because the new competencies required might be too far from what they have in place, and adopting these new competencies would require a completely new business model. These companies might actively resist and advocate against the new technological paradigm, but resistance might simply delay the inevitable.

At the third level of technology, the society and the core technological arrangements that make it distinct needs to be considered. At this level, it is not only about the technologies, but also the web of enabling institutions, social norms and markets that shapes the everyday choices of consumers, investors, businesses and the government. For instance, you could compare the public transport options in the Netherlands with those in South Africa and describe the differences in technological terms. At this level, it is again easy to identify the technologies, but it is hard to figure out how to replicate the outcomes or the pathways that led to a certain outcome.

[1] Arthur, W.B. 2015. Complexity and the economy. Oxford, New York: Oxford University Press.

[2] Arthur, W.B. 2009. The nature of technology: what it is and how it evolves. New York: Free Press.

This blog was first published on the TIPS Technological Change and Innovation System Observatory website.

Technological architectures

An important distinction can be made between architectural innovation and component-level innovation. The architecture defines the way different components or subsystems are organised and how they interact with other components. Often architectures themselves form part of even larger webs of architectures.

Innovations at the component level, which is a physically distinct portion of the technology that embodies a separate design concept, mostly reduce costs of production, and often take place at high frequency with a wide range of choices available. While the organisations that innovate at the component level are more dependent on past experience as well as economies of scale, the organisations that determine the architecture are able to depend far more on their value addition, as well as the sunken investments of many other agents into the system.

To change the architecture of a system requires many simultaneous changes to different sub-architecture and component levels, which may be beneficial to some agents in the system, but not to others (thus vested interests often create a path dependency). A change to the architecture could even disrupt industry structure, and it changes the way the markets judge whether a specific architecture is suitable for the function or tasks it fulfils. A combination of path dependency and architectural change can be used to describe why many industries (or architectures) have disappeared.

However, architectures such as the vehicle example in the figure above change slowly over time and can certainly be influenced by improvements at the component level. For instance, better electronic management of the engine may result in less frequent services, but the architecture hardly changes. Interestingly, the architecture of the vehicle also forms part of a wider architecture of road networks and urban designs, again reinforcing another higher level of path dependency. This nested nature of technologies at the level of architectures is what slows down massive technological change. To continue with the example of a car, passenger vehicles depend on the architecture of a road network. It is also dependent on fuel and maintenance systems, parking arrangements, insurance and all kinds of traffic and safety laws.

I find it interesting that two decades ago, electric vehicles were described as being massively disruptive resulting in the demise of the fossil-fuel vehicle. Now, many established car manufacturers have jumped onto the bandwagon and are investing heavily in their own electric vehicle technologies, and in doing so reducing the disruptive effect of alternative fuels. In doing so, they are making massive strides in fuel efficiency, reducing the weight of their cars and substituting harmful and heavy materials with materials that have less impact on the environment. The component and sub-system level innovations offered by electric vehicles are being incorporated into the designs of the older fossil fuel architecture, while the architecture itself is only changing slowly. In South Africa, the network of charging stations and points are slowly expanding, but the use of electric vehicles is still minute compared to the fossil-car usage.

Some examples of architectures and components are computers (architecture) and an internal graphics card (component) or a jet airliner (architecture) and in-air entertainment systems (components).

The reason why I thought it a is a good idea to go back to such a basic distinction as the difference between architectural innovation and component level innovation is that in much of the popular discussion about technological disruption (the fourth industrial revolution-talk) this distinction is not made. What I appreciate about the World Economic Forum is that they are raising awareness of what will happen to social arrangements when one architecture displaces another. But what is not receiving enough attention are the many challenges that we will face in developing countries at the level of sub-systems and components. This is where competitiveness, resilience and innovation are critical because this where the disruptions and discontinuities of industries will occur. This is also the area where developing countries usually follow (as outsourced manufacturers) and where we are the most vulnerable to the design capabilities and dense networks that existing in clusters in the developed world.

I will explore how these changes occur in the next few posts.

Elon Musk on keeping on keeping on

As a promoter of innovation and good decision making, I am always hesitant of getting too attached to what the icons like Google, Tesla, GE and others are doing. People take ideas from these organisations while forgetting about the culture, the context and the past of these organisations. Trying to copy and paste things that work in a US firm into a South African one is simply not that straightforward.

A few months ago I received this URL about an interview with Elon Musk from a friend. I filed under “to do when I have nothing important to do”. My friend raved about this video because it showed that even superheroes like Musk can cry on camera. This did not convince me to make space (!!) for this video.

So this morning, while attending to some administrative things, I watched this youtube video of an interview with Musk. I liked it very much. He talks about the difficulties of promoting an idea that is not supported by people that he admired. Yes, he gets a bit moist, but that is certainly not the main reason to watch this clip. Watching the SpaceX rocket return safely to the landing pad was just breathtaking!

So here it is. Take a look.

For me, the moral of the story is this. Don’t think that the current thought leaders will always appreciate your genius, your progress or your ideas. Challenging the Status Quo is tough. Even with lots of money it takes time, probably much longer than we all think.

I hope that you can today also decide to push harder despite not always receiving the recognition and the admiration that you believe you deserve!

How difficult it is to change an organization around a simple insight

In the last few months I have been going back to my change and organizational development roots. I have been on a journey to reconnect my more recent insights on systemic change and innovation systems with my earlier experience in process consulting, supporting organizations to change. I have rediscovered many old ideas that are still extremely valid and useful. I even have to wonder how I forgot some things that once were so important to me. Also, some things that did not seem all that important 10 years ago now seems far more important, but I digress.

Let me share an example of how a more recent insight about innovation became more powerful when I looked at it from an organizational development perspective. In my training work on innovation systems, I often lay a foundation with some simple concepts. One such building block is the idea that there are three kinds of innovation: product, process and business model. Product innovation is the easiest (you need to mainly be creative, know something about either a key technology or a key market), with process and business model innovation often being more difficult because you might need more abstract thinking capability, technical and others skills from beyond your organizations as well as a creative imagination. Easy enough, all the participants nod their heads in agreement and indicate that I can move on. Yet, back at the office this was not so simple.

I noticed that a few of my favorite technology and R & D centres here in South Africa were struggling with this very simple idea. They were mainly focused on product innovation, arguing that their behavior is shaped by the incentives created by public grants that supported them to develop products for wanna-be entrepreneurs (I wrote about the importance of technological capability here). It was convenient to blame the public grants for this incentive, and everybody knew that the results less than ideal (many of these wanna-be entrepreneurs did not stand a chance in the market as they lack technological capability and or business experience). Thus the Status Quo was maintained with everybody talking about changing but not really making the shift.  Until the easy funding became less easy. It was at this point that some management teams realized just how entrenched the culture of product innovation was, and how dependent these organizations have become on public grants.

So I had the task of coaching a team to think through this change process, to reduce their dependence on public funding by helping their team to shift to process innovation from a mainly product innovation focus. This meant that instead of designing, prototyping and manufacturing a particular product for a wanna-be entrepreneur, they shift their attention to helping existing companies or entrepreneurs with a track record improve, enhance or expand their process technologies so that they can themselves develop, prototype and manufacture new products.

Interestingly enough, the technological capabilities for product innovation and process innovation for this particular engineering group have a lot in common. It is mainly the internal processes, arrangements of teams, self assessment criteria (are we making progress?) and the identity of the organization that had to change to make this shift. This in itself meant some business model innovation was required. They also had to become better in forming partnerships with other technology providers. In complexity thinking language, the physical technologies and entrepreneurial technologies will remain largely the same, but many additional or different social technologies would be needed. For instance, some additional skillsets are needed that are more expensive and not typical to technology centre at universities. Lastly, this process focus shift would require far more work on the premises of the client, and also working with many other unknown technologies and sectoral requirements, which meant that concepts such as self-management, temporary work teams and many parallel projects also had to be tried out. It started sounding more and more like a completely new organization and a major disruption that this client could not afford. Starting over was simply not an option. And the individuals in the current team was a real asset.  If this team could not make this shift then very few would be able to make it.

It was agreed that we needed an adaptive process, a series of small experiments that allowed them to try some process innovation applications. The horizons of innovation provided a useful framework (Tim Kastelle inspired me about this model, recently Ralph-Christian took it further). We captured their current technological and market capabilities and agreed that this focus had to be maintained while we find ways to explore the adjacent technological and market spaces without breaking the bank. Tim Kastelle always say 70% of the focus should be on the current block (horizon 1). We did this by first looking which process innovations would be interesting to some of their existing markets (we found a few). The we looked at where their current technological capability could be used in new markets, but in a process innovation way. This could be done by investigating some economic sectors a little deeper.  Thus most of the energy of management remains on the current technological base and markets, with an additional focus on process innovations in an adjacent markets and technologies. We were all surprised that these ideas required very little additional funding (at first), with more specialized equipment and skills required if any of these ideas took hold.

The moral of the story is this. It sounds simple to say “shift attention from product innovation to process innovation”. People might actually agree this is important. But to make this shift requires many internal changes. A process of exploration and mental simulation using a simple framework was all it took to identify some areas where the current management team with its current resources could try several new ideas, without much change to the business plan or operations of the organization. I am very pleased with this outcome.

Thanks to the team for trusting me to facilitate this process. You know who you are!

Who should be thinking about innovation in your organization?

I am often asked whether one person or function in an organization is sufficient to coordinate and manage innovation. The answer is “no”. While I agree that it is very hard to get whole organizations to think about innovation, it certainly is a distributed capability.

Let me just recap. Back in 2015 I wrote that most innovation gurus identify four functions of innovation and technology management:

  1. Searching and scanning for new ideas and technologies, both within and beyond4 functions of innovation management - Page 1 the organization. This includes looking at technologies that could affect the clients of the organization, and technologies that could disrupt markets and industries.
  2. Comparing, selecting and imagining how different technologies could impact the organization, its markets and its own innovation agenda.
  3. Next comes integrating or deploying the technology or innovation into the organization. This includes adjusting processes and systems, scaling up implementation, and project managing the whole change process.
  4. The last step is often overlooked, but new technology and innovation often makes new ideas, innovations and improvements possible. I call this last step exploiting the benefits of a new technology or idea. This could involve leveraging some of the additional benefits or features of a technology, perhaps by creating a new business unit focused on an adjacent market or particular offering.

Now these four functions could obviously be coordinated at a central or top management level, but at that level it would probably look at broader innovations in terms of high level product positioning, reforming key business processes, or considering different business models. Some would call this strategic innovation management. However, this function depends on many other decision makers, technicians, business unit managers and experts distributed throughout the organization to be repeating these four functions within their own context. Perhaps some individuals or units are more focused on certain technological capabilities, while others may be more focused on specific markets, territories and client types. Within each of these focus areas, individuals or teams responsible for the coordination of innovation would have to make sure they tap into the knowledge and understanding of their internal experts and staff, their external networks and even beyond. So the four functions are repeated at lower levels, each time more granular or domain specific (or context sensitive) than levels higher up.

Perhaps innovation coordinators at higher levels would be more focused on trends beyond the organization and even beyond their clients or markets, and most certainly the higher up you go the longer the planning time horizons would be. A great example of this kind of structure is explained in a forthcoming article by Jeffrey Immelt of GE in the Harvard Business Review. In GE they had both the top down functions, but then they also paid great attention to creating from the bottom up similar functions. During this process Jeffrey explains that they realized they needed to create these structures within sub regions, with more autonomy to make context specific decisions.

Within a larger organization, good ideas (a.k.a innovations) from one unit is not immediately copied elsewhere. This is the wrong approach to scaling. Instead it goes in at the first function (Scanning) of other units, where the suitability of the idea and its effect on the business unit or technological capability is assessed. This means that top management can detect good ideas in how rapidly they are taken up within the organization. Perhaps they need to play a role in making innovations that seem to be working in one area known to others. This reduces the dependence on “strategic bets” by top management. Also this means that scanning is not only about looking beyond the organization, it could also mean scanning internally in other units or over the whole organization to try and detect ideas that are being tried out, taken up or discarded.

You cannot centralize innovation at the levels of product, process and business models only at the top of an organization, even in a small company. So you have to find ways to distribute this capability throughout the organization. It is not smart if only higher levels of management are scanning the horizon, trying to wrap their minds around emerging trends like the impact of Amazon on an industry, Industry 4.0, the internet of things or additive manufacturing. Perhaps at higher levels there should be a push to get more people elsewhere in the organizations empowered and mobilized to make sure that the four functions of innovation are distributed, that more people are scanning, more people are thinking about the future, trends and change.

In the image included in this post, the arrows are flowing down, because I believe that leaders need to push the push functions down in their organization. As these functions are distributed through the organization, it would become more important to figure out how to feed the ideas, insights and innovation from the distributed organizational system to improve organization wide strategic insight. Also, the up arrows would make it possible for cross pollination, where ideas that works in one area are fed into the scanning functions of another business unit.

A final point is that learning is not only about what works (down arrows and up arrows). Learning is also about remembering what did not work, but also, what was not tried (arrows ending in space). Organizations that maintain up a repertoire of (failed or half-baked) ideas have a better stock of concepts that they can consider, recombine and re-imagine as they go forward.

A final word to technological institutions, industry associations and programs aimed at improving industry or regional innovation and competitiveness. These four functions are not only for inside a firm, they are also relevant to your organization. But these four functions typically play out a the level of the innovation system, the network or industry. Somebody somewhere better be scanning the horizon for what is coming, what is being tried and what seems to be working, and so on. If your industry is not scanning, then the long term viability of the industry you are trying to promote is under threat. This is where think tanks, academic research centers and strong industry associations (meso organizations) that can promote industrial change, collaboration and modernization become very important.

Contact me if I can help your organization improve the four functions of innovation within your organization and between your organization and others.

Instigating Innovation: Tech push fallacy is still alive

Let me continue with the Instigating Innovation series. I will slowly shift my attention to the technology intermediaries, research centres and technology transfer organisations that exist in many countries to overcome persistent market failures in the private sector. Yes, I know it is a shock for some, but these centres do not really exist to promote the technical careers or the of these people in these centres, nor to promote a specific technology in itself. From a systemic perspective, these kinds of technological institutions exist because they are supposed to overcome pervasive causes of under investment in technology (and skills development) and patterns of poor performance of enterprises. Economists describe the last two phenomena as the result of market failures, mainly caused by information asymmetries, a lack of public goods, high coordination costs, economies of scale and a myriad of other challenges faced by enterprises (hierarchies), markets and networks.

The challenge is that very often the technology these intermediaries promote become an objective in itself. The technology, embodied in equipment, processes and codified knowledge, becomes the main focus. So now we see technology centres being created to promote Industry 4.0, or 3D printing, or environmentally friendly technology. While I am the first to admit that I am helping many of my clients come to grips with industry 4.0, additive manufacturing or environmentally friendly technology, we must not confuse means with ends.

About 20 years ago, my late business partner Jorg Meyer-Stamer and his colleagues at the German Development Institute developed the Systemic Competitiveness framework. Many of my posts on technological capability and innovation systems are based on this Systemic Competitiveness, but I wont go into this right now (perhaps I can do that in a later post), but will only state this this model has greatly influenced my thinking of how technological capability can be developed in order to upgrade, improve or stimulate the competitiveness and innovative behavior of enterprises and state institutions. In one of my current research contracts I had to retrace the evolutionary economics origins of this framework and I found the following paragraph in one of the early publications:

“A further fallacy also played a role in the past: the establishment of technology institutions was based on the technology-push model, according to which breakthroughs in basic research provide impulses to
applied research, which these in turn pass on to product development. In fact, however, research and development is for the most part an interactive process; and it is frequently not scientific breakthroughs
that impel technological progress, but, on the contrary, technological breakthroughs that induce scientific research, which then seeks to interpret the essence and foundations of a technology already in use.”

What struck me was the past tense in the first sentence. So many of the technology institutions I am working with are still established on these same grounds. A technology push model. Actually, much of economic development has the same mindset, a solution-push model. It implies that clever solutions are developed in a clinical and carefully managed environment, and then is made relevant to business people (as Jorg often said “stupid business people”) through iterations of “simplification” and “adaptation”. Don’t get me wrong. I am the first to promote scientific discovery. But this has its place. Modernisation of industry must start from the demand side:

  • where is the system now?
  • What is preventing companies from competing regionally and internationally?
  • What kind of failures, both in business models but also in markets are repeating over and over again?
  • What kind of positive externality can we create?
  • How can we reduce the costs for many enterprises to innovate and become more competitive?

Only then do you start asking what kind of technological solutions, combinations, coordination effort or demonstration is needed. Perhaps no new equipment or applied research is needed, maybe something else must first happen. Some non technical things that I have seen work are:

  • mobilising a group of enterprises into a discovery process of common constraints and issues
  • arranging exchange between researchers, academics and business people at management and operational levels
  • hosting interesting events that provides technical or strategic inspiration to the private sector
  • helping companies overcome coordination costs
  • making existing technology that is not widely used available to industry so that they can try it
  • placing interns at enterprises that have different skills than the enterprise use at the moment
  • arranging visits to successful enterprises; and many more.

The truth of the matter is that the innovative culture of the technology institution, and its openness to learn from the industries it is working with are much better predictors of whether the industries around them will be innovative. If the technology institutions are bureaucratic, stale or rigid, nobody in industry will be inspired by them to try new ideas, new technologies, explore applying technology into new markets, etc. Just like we can sense when we arrive (or contact) a succesful enterprise, so we can all sense when we have arrived at an innovative technology institution. It looks different, there is a vibe. It is information rich, everywhere you look you can see ideas being played with, things being tried, carcasses of past experiments can be seen in the corner.

I can already hear some of my customers leading technology centres reminding me that I must consider their “funding mandate from government” and their “institutional context in universities” as creating limitations in how creative they can be, and just how much demand orientation they can risk taking. Yes. I know this. In the end, leaders must also create some space between the expectations of their funders (masters?), their teams and their target industries. In fact, how leaders balance these demands and what is needed by their clients, students and staff can probably be described as business model innovation. If you cannot get funding from government for what you believe is required, just how creative are you to raise this funding through other (legal) means?

We have seen over and over again that it is not the shiny new piece of equipment in the technology centre that inspires industry; but the culture of the technology centre, the vibe, the willingness to try crazy ideas to make even old stuff work better or combining old and new. Ok, I agree, the shiny equipment excites geeks like me, but this is not all that matters.

My main point is this. Technology Institutions should focus on understanding the patterns of performance or under-performance in the industries and technology domains they are working in, and should then devise innovative products, services and business models to respond to these. This means working back from the constraint to what is possible, often through technology. To be effective in helping entrepreneurs overcome the issues they are facing would require that these technology institutions are innovative to the core. Not just using innovative technology, or offering some innovative services, but also in how these institutions are managed, how they discover what is needed and in how the collaborate with other institutions and the private sector.

To instigate innovation in the private sector, publicly funded technology institutions need to be innovative themselves.

 

Source:

ESSER, K., HILLEBRAND, W., MESSNER, D. & MEYER-STAMER, J. 1995.  Systemic competitiveness. New patterns for industrial development. London: Frank Cas. Page 69

 

 

Instigating Innovation: Accelerating Experimentation in industry

Originally published Feb 2016, revised March 2018

When innovation centres, technology transfer centres, applied research platforms and other similar organisations wish to help industry with innovation, one way could be to assist companies to experiment with new ideas. I will simply refer to these centres from now on as innovation and technology support centres. In most of the places where I work these centres are often hosted by or associated with universities, applied research organisations or technology transfer organisations.

One way to support industry to experiment is through various technology demonstration-like activities, allowing enterprises access to scarce and sophisticated equipment where they can try out new ideas. In its simplest form, a facility allows a company to order samples to a certain specification so that the company can see whether a particular process will be able to meet a particular specification or performance criterion. A slightly more intensive form of technology demonstration allows visitors in and a technology and its application is demonstrated (eyes only, no touching!). Very often equipment suppliers play this role, but in many developing countries equipment suppliers act more as agents and cannot really demonstrate equipment.

In Germany I saw demonstration facilities where the pro’s showed the enterprises how things work, and then they stood back to allow teams from companies to try things out themselves.

A critical role of innovation support centres is to provide industry with comparative studies of different process equipment. For instance, an innovation centre supporting metal-based manufacturers, providing the industry with a comparison of the costs and uses of different kinds of CAD systems could be extremely valuable to the industry.

Maker labs, Fablabs and similar centres all make it easier for teams that want to create or tinker with an idea to have access to diverse technologies, reducing the costs of experimenting. However, the equipment in these labs is often not so advanced, but it can often be very diversified. In my experience these centres are very helpful when it comes to refining early idea formation and prototyping. However, helping manufacturers to experiment with different process technologies, different kinds of materials, substitute technologies, etc. is a binding constraint in many developing countries. The costs of gaining new knowledge is high, and the high costs of failure make companies wary of experimenting.

Innovation support centres must be very intentional about reducing the costs of various kinds of experiment if they want manufacturers, emerging enterprises and inventors to try new ideas. These innovation centres can play a role by:

a) assisting companies to organize themselves better for experimentation internally

b) assisting many companies to organize themselves better for experimentation collaboratively

c) conducting transparent experiments on behalf of industry collectives.

In my experience, graduates from science disciplines often understand how to conduct experiments because their course work often involves time in a lab. They know basics such as isolating variables, managing samples, measuring results, etc. However, engineering graduates often do not have this experience (at least in the countries where I have mostly been working). The closest many engineering graduates will ever get to an experiment is a CAD design or perhaps a 3D printed prototype.

Therefore it is necessary for a range of these innovation and technology support centres to assist companies at various hierarchical levels to experiment.

At the functional or operational level, organising for experimentation involves:

  • creating teams from different operational backgrounds
  • creating multiple teams working on the same problem
  • getting different teams to pursue different approaches
  • failing in parallel and then regularly comparing results
  • failing faster by using iterations, physical prototypes and mock-ups.

According to Thomke, results should be anticipated and exploited – even before the results are confirmed.

At a higher management level, organising for experimentation involves:

  • Changing measurement systems not only to reward success, but to encourage the trying of new things (thus encouraging learning and not discouraging failure).
  • Moving from expert opinion to allow naivety and creativity.
  • Preparing for ideas and results that may point to management failures or inefficiencies elsewhere in the firm (e.g. improving a process may be hampered by a company policy from the finance department).

Getting multiple companies and supporting organisations to experiment together is of course a little more difficult. Management of different organisations have many reasons to conceal failures, thus undermining collective learning. One way around this could be to use a panel or collective of companies to identify a range of experiments, and then to have these experiments conducted at the supporting institution in a transparent way. All the results (successes, failures and variable results) are carefully documented and shared with the companies. However, to get the manufacturers to use these new ideas may require some incentives. In my experience, this works much better in a competitive environment, where companies are under pressure to use new ideas to gain an advantage. In industries with poor dynamism and low competition, new ideas are often not leveraged because it simply takes too much effort to be different.

Promising ideas from experiments can be combined and integrated after several iterations to create working prototypes. Here the challenge is to help industries to think small. First get the prototype process to work on a small scale and at lower cost before going to large scale of testing several variables simultaneously. An important heuristic is to prototype on as small a scale as possible while keeping the key mechanical or scientific properties consistent. More about this in a later post. (Or perhaps some of the people I have helped recently would not mind sharing their experience in the comments section?)

I know that this is already a long post, but I should like to add that Dave Snowden promotes Safe2fail probes, where teams are forced to design a range of experiments going in a variety of directions even if failure is certain in some instances. In my experience this really works well. It breaks the linear thinking that often dominates the technical and manufacturing industries by acknowledging that, while there may be preferred solutions, alternatives and especially naive experiments should be included in the overall portfolio. To make this work it is really important that the teams report back regularly on their learning and results, and that all the teams together decide which solutions worked best within the context.

 

Source:

THOMKE, S.H. 2003.  Experimentation matters: Unlocking the potential of new technologies for innovation. Harvard Business Press.

 

 

How I teach the topic of innovation systems

IMG_2533One of my favorite subjects to teach is about the promotion of innovation systems. I love it because it combines abstract elements that most people grasp, and practical elements that most people enjoy. Most academic literature on innovation systems are quite abstract, and our approach to identifying ways to improve an innovation system from its current state is quite pragmatic. The literature on managing innovation is very broad and contains millions of tips, theories, myths – actually it is overwhelming for practitioners wanting to support industries, firms and organizations to become more innovative. Therefore I try to explain the principles of both innovation systems and innovation management so that people can re-organize and use what they already know, and know where to relate new knowledge that they may encounter along the way.

SC_in_action
Trying to explain how to get exploration and safe 2 fail experiments to work

I typically start by laying some foundations, often using puppets, props or cartoons to make it slightly less serious (I use sheep characters, don’t ask why):

While most people intuitively understand that there are different kinds of innovation, most practitioners are surprised by how different product innovation, process innovation and business model innovation are. A great discussion usually takes place when people reflect on why business model innovation (Tim Kastelle states that it is easy but really hard) is really what hampers growth and productivity improvements, but how most industrial and innovation policies typically targets mostly product and process improvements.

Now that the foundation is in place, I typically move on to the more abstract issue of innovation systems. After explaining the definition (see the bottom of the post) that I like most, it is necessary to explain the importance of the dynamic between the different elements. It is natural to create checklists of institutions and actors and tend to forget that even in economic development weaker actors that interact more dynamically can trump first class institutions that are not accessible to most people that need support.

The importance of building the technological capability beyond the leading firms is important. I have written many posts about this so will not repeat this here, but for me the systemic nature of innovation and knowledge accumulation is critical. But typically we use 6 lines of inquiry to investigate how the dynamism in the system can be improved. There are four really important aspects which include:6 Four lines of inquiry_web

 

The agenda concludes with different ways practitioners and policy makers can intervene in the innovation system to improve the dynamics, the flow of information, the exchange of knowledge and the increased innovation appetite of entrepreneurs.

Duration

To present this agenda can take anything from 2.5 hours to three days. When the participants are experienced in diagnosing enterprises and public institutions, the exercises tend to be more meaningful and fun. When nobody in the room knows anything about the problems companies face on a day to day basis this kind of training is much harder. When I have more time then topics such as mapping formal knowledge flows, detecting unmet sophisticated demand, collaborating for research and development, etc can be included.

I have been presenting this session is various formats at international training events like our Annual Summer Academy in Germany, at different academic departments in universities. I frequently present this in some form to science, technology and industry government officials. In other occasions I have presented this to practitioners, development staff and even to the management of a university wanting to become more innovative itself.

The definition I work from:

The definition of innovation systems that I work from is the one of the earliest definitions on this subject. Freeman (1987:1) defined an innovation system as “the network of institutions in the public and private sectors whose activities and interactions initiate, import and diffuse new technologies.” The emphasis is mainly on the dynamics, process and transformation of knowledge and learning into desired outputs within an adaptive and complex economic system.

The textbooks I teach from:

My favourite textbook that I use when teaching at universities remains FAGERBERG, J., MOWERY, D.C. & NELSON, R.R. 2005.  The Oxford handbook of innovation. Oxford ; New York: Oxford University Press.

If I have more of a business management audience, then I prefer to use a book with more innovation and technology management tools in it such as DODGSON, M., GANN, D. & SALTER, A. 2008.  The Management of Technological Innovation. Oxford University Press.

Of course, this agenda follows the logic of my own book on the promotion of innovation systems that I have published!

 

 

Instigating innovation in traditional industries

Originally published in January 2016, revised in March 2018

The average manufacturer in a developing country often grapples with the notion of innovation. That is why such industries are often called “traditional“, although almost all industries will have one or two outliers. While governments, such as the South African government, offer incentives to stimulate innovation, most manufacturers do not identify with the term “innovation” the way governments use it. For instance, when governments use the word “innovation” they often mean “invention“, in other words something that can be protected, copyrighted and owned (see more about the differences between innovation and invention here). While I understand the argument for patenting and protection, I think this narrow definition of innovation is inhibiting many industries from increasing their productivity and competitiveness by copying what works elsewhere (this is just a process of catching up). It also fails to recognize that in many value chains the manufacturers themselves make components or sub-systems that go into overarching architectures (defined by standards, compliance, specifications), so their design authority is limited in scope.

Innovation_invention

Here is a list of synonyms from thesaurus.com for innovation that I have assessed to see how enterprises might understand or react to these words:

  • Modernization – many enterprises dream about this but often do not have the financial means nor the organizational capability to pull it off (one day, some other time)
  • Contraption – many innovations and most inventions result in one of these. You can see them standing in  corners in most factories
  • Mutation, addition, alteration, modification – this is what most innovations in traditional industry would look like. They are doing this all the time as their machines get older, but this behaviour is mostly not recognized nor speeded up.
  • Newness, departure, deviation – the bolder enterprises with more financial and organizational capability might try these, but it takes capital to maintain.

Most people understand innovation as an outcome, but the word is a noun that implies change and novelty. It is about a shift, even if it is often incremental. The reason why so many of our enterprises in South Africa are not regarded as innovative is because they struggle (or perhaps do not have the organizational capability) to manage several simultaneous change processes. As Tim Kastelle posted some years ago, change is simple but not easy. Although this is often described as a technology problem it is really a management problem (see some older posts here). I would go even further and state that in many industries the margins are so narrow that even those enterprises that have a reasonable management structure would struggle to finance many innovations at the same time.

However, in my experience of having visited more than 50 manufacturers every year since 2009, I am always stunned and awed by how ingenious these companies can be. They keep old machines running, often modifying them on the fly. They operate with a fluctuating and unreliable electricity supply, inconsistent water pressure and often hardly any technical support. What policy makers often do not realize is that in developing countries it takes a lot of management time and capacity just to keep the throughput going. The time and effort to go and explore “change” beyond what is necessary in the short to medium term is very costly. The costs of evaluating new ideas, new technologies, new markets and better suppliers are all far greater in developing countries than in developed countries. Yet at the heart of innovation is the ability to combine different inputs, different knowledge pools, and different supporting capabilities with different market possibilities.

There are two implications for innovation promotion practitioners.

  1. The process of instigating innovation must start with recognizing how companies are innovating NOW. How are they modifying their processes (and products), and how much does it cost? What are the risks that are keeping them from introducing more novelty? Perhaps they could use the Horizons of Innovation to create a portfolio of innovation (change) activities that can be identified at the enterprise or industry levels.
  2. It is hard if not impossible for different manufacturers in most countries to figure out what others are struggling to change at a technological level. Use your ability to move between enterprises to identify opportunities to turn individual company costs into public costs (this is often cheaper). Do not take the innovation away from enterprises, but use your meso level technology institutions to try and accelerate the learning or to reduce the costs of trying various alternatives. Be very open with the results to enable learning and dissemination of ideas.

The process of instigating innovation must start with recognizing where manufacturers are naturally trying to change, just as a change process in an organization must start with understanding current behaviour, culture and context. Somehow innovation has become so associated with contraptions and narrow views of technology that the body of knowledge of organizational development and management of change have been left behind.

Stock take of the Instigating Innovation series

Last year I started writing a series about Instigating Innovation. To make it easier for regular and irregular readers the previous posts are summarized here.

The first post in the series was published in June 2015. I chose “instigating” because it has a more positive ring to it than provocation or incitement. While it is a noun with mainly a positive tone, it is a bit more aggressive than support, enable or encourage or even stimulating. I have been referred to in my past as an instigator of change so I thought this was a good idea.

Bear in mind that the content of this series is aimed at meso-level industry supporting institutions and programmes as well as enterprises themselves.

A second post explored where people wanting to instigate innovation can possibly start. My personal takeout from that post is the last paragraph:

“A quote that is attributed to William Gibson goes “The future is already here – it’s just not evenly distributed”. Step one is to get more people involved in searching for what is already here, it is just not recognized inside the firm or industry.”

Then I wrote two posts (innovation culture and cultural change) about innovation culture in enterprises. When I teach about innovation I am always struck by how executives think that by creating a function in an enterprise strategic problems will be solved. This is especially true for innovation, but it also applies to other management areas such as strategy, operations and marketing.

The last post of 2015 in the series looked at the four universal functions that management must attend to in order to institutionalize innovation.

I have planned a further five posts in this series, but have already started writing this up as a working paper. Thank you for the constructive feedback from Ulrich, Frank, Goran, Larry, Liza and the “likes” from many of my regular readers!

Please let me know which ideas you have already implemented or tried in your organization!