Radio interview on technology

Following the interview on Cliffcentral.com two weeks ago on innovation during The Leadership Platform show, I was asked to return. This time the conversation was about technology. You can download the podcast here.

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Richard, Shawn and Daniel (left to right)

 

After 30 minutes, the attention switched to a small and medium enterprise. I had invited Daniel Paulus, one of my clients, to the show to be interviewed. Daniel is one of the founders of the Louie Daniel jewellery company, a speciality retailer of custom made jewellery and diamonds. They are one of the leadership teams that I have been coaching on technology, innovation, strategy and culture.

I promise to reveal more about my formal coaching programme shortly.

 

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

When innovation centers, technology transfer centers, applied research platforms and other similar organisations want to help industry with innovation, one way could be to assist companies to experiment with new ideas. I will simply refer to these centers from here onward as innovation and technology support centers. In most of the places where I work these centers are often hosted by or associated with universities, applied research organisations or with 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 new ideas. In its simplest form, facilities allow companies to order samples to a certain specification, allowing a company to see whether a particular process can meet a specification or performance criteria. A slightly more intensive form of tech demonstration allows in visitors 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 behave more like agents and can not really demonstrate equipment.

In Germany I saw demonstration facilities where the pro’s showed the enterprises how things works, and then they stood back allowing teams from a company to try things themselves.

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

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

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

a) assisting companies to internally 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 coursework often involve time in a lab. They know basics like isolating variables, managing samples, measuring results, etc. However, engineering graduates often do not have this experience (at least in the countries where I am working most). For many engineering graduates, the closest they 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 comparing results regularly
  • 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 to not only reward success, but to encourage trying 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 bit harder. Management of different organisations have many reasons to hide 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 these experiments are conducted at the supporting institution in a transparent way. All the results (success, 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 at a small scale and at lower cost before going to large scale of testing several variables simultanously. An important heuristic is to prototype at as small as possible scale 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?)

I know this is already a long post, but I will add that Dave Snowden promotes Safe2fail probes, where teams are forced to design a range of experiments going in a range 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.

THOMKE, S.H. 2003.  Experimentation Matters: Unlocking the Potential of New Technologies for Innovation. Harvard Business Press.

 

Instigating innovation in traditional industries

The average manufacturer in a developing country grapples with the notion of innovation. That is why they are often called “traditional”, although almost each industry would have one or two outliers. While governments, like South Africa, offers incentives to stimulate innovation, most manufacturers do not identify with the term the way the 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 (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 from elsewhere (catching up). It also fails to recognize that in many value chains the manufacturers themselves make components or sub-systems that goes into overarching architectures (defined by standards, compliance, specifications), so their design authority is limited in scope.

Innovation_invention

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

  • Modernization – lots of enterprises dream about this but often do not have the many nor the organizational capability to pull it off (one day, next time)
  • contraption – many innovations and most inventions result in one of these. You can see them standing in the 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 gets older, but this behavior is mostly not recognized nor accelerated
  • 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 itself 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 here in South Africa are not deemed to be 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 thin 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 visiting more than 50 manufacturers every year I am always stunned and awed by how ingenious these companies are. They keep old machines running, often modifying them on the fly. They operate with fluctuating and unreliable electricity, inconsistent water pressure and often hardly any specialist support. What policy makers often do not recognize 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 explore “change” beyond what is necessary in the short to medium term is very expensive. The costs of evaluation new ideas, new technologies, new markets and better suppliers are all far more expensive in developing countries than elsewhere. Yet, at the heart of innovation is the ability to combine different inputs, different knowledge pools, 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 use the Horizons of Innovation (my next post) 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 like a change process in an organization must start with understanding current behavior, culture and context. Somehow innovation have become so associated with a contraptions and narrow views on technology that the organizational development body of knowledge and management of change have been left behind.

Four functions of innovation and technology management

I want to continue the “Instigating Innovation” series (see opening post here, where to start and the post about culture here). The idea behind this series is that I explain innovation management concepts that can be used by both enterprises and technology transfer and industry support institutions.

Just to recap. I believe that many industries are struggling to modernize because their supporting institutions use completely different frameworks to manage innovation (or perhaps the supporting institutions make their choices as randomly as enterprises do). One of the first technologies that a tech transfer institute or industry support organizations should transfer to enterprises is “how to manage innovation and technology”. Just because there is an engineer or an MBA/PhD in a company does not guarantee effective or creative management of innovation and technology.

Today I want to focus on the four broad functions that must be managed strategically in every enterprise and supporting institution. Even if someone in the organization has the job title of Innovation Manager or Technology Manager these functions should still be visible throughout the organization. In other words, this is not somebodies job, but it helps if somebody coordinates these activities.

The four functions agreed by most scholars and innovation experts can be summarized roughly as:

  1. Searching and scanning for new ideas and technologies, both within and beyond 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.

When I visit institutions, organizations and companies, I always ask “who is thinking about change taking place beyond your industry or key technology?”. I cannot tell you how often I hear that “the CEO” or “production manager” are on top of new developments and will be attending a tech fair next year. How can this huge responsibility fall on the shoulders of one or two people, who are at the same time biased towards the current strategy and that favors justifying past (sunk) investments? Or ask “How did you choose between two technologies?” and you will be surprised how little time was spent considering new business opportunities, or how few companies asked for onsite demonstrations or samples from their preferred technology providers.

I will refrain from being too critical of technology transfer institutions and industry supporting organizations, except to say that these organizations should be a prime example to industry of how to scan, evaluate, compare and integrate new ideas and technologies. We don’t just want to see the shiny machines and neat facilities, we want to understand how you arrived at your decisions, and how you made the best of your investments after implementing the change. Furthermore, industry wants to know what is next, or what is outside of their vision and how it may affect their industry.

To bring it all together, technological upgrading of industries are plagued by many different market failures. These failures include the tendency NOT to invest due to high search costs, due to fears about making the wrong choices, or because so many decisions and changes must be made at the same time. This while the business continues, markets fluctuates, and technologies change faster and faster. Companies (and institutions) cannot afford to only kick start innovation management just before making a change (or when forced by external forces to make a decision), these functions must be managed strategically on a continues basis, both at the level of top management and within the different functions of the organization. Both companies and their supporting institutions need to manage innovation and technology, not only from an operational perspective (striving for continuous improvement, etc) but also from a strategic strategic perspective.

New series: Instigating Innovation

I have been developing a new capacity building method and training approach that brings together my work in innovation systems promotion  and my work on improving technology and innovation management. I call it “Instigating Innovation”.

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.

Why was this effort firstly necessary and secondary so rewarding?

My work on innovation systems is mainly aimed at assisting meso-organizations such as technology transfer centres, research centres and universities to be more responsive to the needs of the private sector. While it only takes a few interviews by a senior decision maker from one of these institutions to a few leading enterprises to get the organization to improve its offering to the private sector, it does not solve the problem that these institutions often needs a continuous process of innovation itself. So while they can respond to the needs of the enterprises (for instance by launching a new service, or making a key technology available, etc), they often are not able to innovate constantly in order to anticipate what they private sector might need in the future.

With my other hat on, working in the private sector to improve the management of technology and innovation is focused on helping individual and on rare occasions, groups or networks of enterprises to formalize or improve their management of innovation. Here my challenge is that most enterprises innovate by accident, or have elements of an innovation management approach in place without knowing it. But it is not systematic nor is it consistent.

So both supporting institutions and enterprises lack some very basic frameworks to focus their existing development and learning processes to ensure not only short term results (new products & services, process improvements, cost reduction, etc) but to also ensure longer term success (playing in the right markets, selecting the right technologies, investing in the right kind of knowledge, partnering with the right people, etc). Furthermore, most enterprises and supporting institutions have something else in common: they often face resource constraints with the most versatile of their staff being involved in problem solving and not thinking about the future and what may be possible sometime down the line.

I set aside most of March and had great fun reading through my collection of articles, books, reports of past missions, and speaking to entrepreneurs and development practitioners I trust. Based on this investigation I decided on the following criteria for instruments to include in the Instigating Innovation module:

  1. Each instrument or concept must be relevant to both enterprises and meso-level organizations05 building innovative capacity small
  2. Each instrument must provide a very simple framework that can be illustrated on a flipchart
  3. The simple framework must be usable as a workshop format that allows people to reorganize or explore their current and future practices
  4. The frameworks must be scalable, both in depth (allowing pointers for a deep dive into an issue) and in width (useable for a product, issue, portfolio or the strategy of the organization as a whole).
  5. Lastly, I did not want to be the consultant with a project, I want to be the facilitator that enables change and that builds long term sustainability into the organizations that I work with.

This was a very rewarding exercise. Not only do I love reading about innovation, change and technology, I love finding better ways to explain these concepts. It was also great to find a way to connect my work on innovation systems, which often seems abstract, with the tough decisions that the enterprises that I work with must confront and address. I tend to work in the more technical domains dominated by academics, engineers, scientists and manufacturers, so finding a simple yet convincing way to add value to what these clever people do was important.

I will in the next few posts reveal a little bit more of the tools I selected and how it can be used.

Thank you for the EDA team in Bosnia and Herzegovina who motivated me to turn this idea into a capacity building format and who agreed that I try “Instigating Innovation” on their team during my visit to Banja Luka in May 2015!

Instigating Innovation in Banja Luka with the team from EDA

Instigating Innovation in Banja Luka with the team from EDA

Post 5: Various regulatory and environmental factors that shape the behaviour of enterprises

This is the 5th post on building technological capability. I have written many posts before on the environment in which innovation and technological capability development takes place, so this will only be a short summary.

In this perspective, we investigate how various regulatory and environmental factors shape the behaviour of enterprises. It combines the meta level (sociocultural) and macro level (generic framework conditions) of the systemic competitiveness framework (Esser et al., 1995).

Specifically, we seek to establish whether or not firms have to innovate through the incentives created in the broader environment. Firms’ innovative efforts are not usually the result of enthusiasm for innovation but the outcome of necessity – firms have to innovate because their competitors are innovating too, and because they will get forced out of the market if they do not innovate. In turn, this means that firms that are experiencing little competitive pressure will often not be inclined to put much effort into innovation, which is perfectly rational as innovation always involves cost and risk. It is important to note that the enabling environment is not only a function of different kinds of government policy, it is also affected by private sector policies such as decisions to collectively invest, collude and compete.

While some of these issues can be identified through desktop research, interviews with key industry leaders or experts will quickly reveal which socioeconomic factors affect the investment and experimentation appetite of the business sector.

A second dimension relates to the incentives for other actors in the system to support the development of technological capability in formal and informal institutions. For instance, national-level policies direct universities to offer particular kinds of courses, but do they provide the incentive for academics to develop teaching or research programmes that improves the capacity of enterprises or innovators?

Hint: I have learned that when interviewing entrepreneurs to understand their perspective on the innovation system (a.k.a the technological system) around them, never to start with the regulatory environment and the broader environmental factors. You will hear a million reasons why the whole system is conspiring against entrepreneurs to be competitive, innovative and optimistic.

Gaining a deeper understanding of an innovation system and how to build technological capability is not rocket science. I propose that you start with understanding the enterprise perspective on collaboration on competition first (post 1 and 2 in this series), then continue to better understand the relationship between formal education and the industry (post 3), then the creators and disseminators of informal and technical knowledge (post 2) and only then ask about the regulatory systems and the environmental factors.

In the end it is not about the presence of entrepreneurs, institutions that enable knowledge to flow, institutions that address persistent market failure, or an supportive framework conditions. While all of these matters, it is about how they interact. A checklist approach will not work. Having a university or a few innovative enterprises does not guarantee that a society or community has institutionalized technological capability. Technological capability is about the dynamism between these different factors, it is about relationships, spill-overs and trust. These are only created over time as a result of positive interaction between individuals, organizations, both formally and informally.

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