Crowdfunding Platforms – Foresight for Business Model Innovation

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2014

As we continuously seek to make sense of the world around us, seeking patterns that might indicate something, the one most frequent source we rely on is trends. In the world of technology, not a day goes by without some article or post on trends.

I came across this interesting post on the trends to follow in the coming year. The post suggests that funding patterns for successful projects on Kickstarter provide guidance on trends to follow.

The chart below shows the 100 most successful projects – The analysts (at SimplyZesty) used various measures such as total value of pledges, average pledge size, number of pledges received and so on (see original post for more details).

Categories of 100 most successful technology projects

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Fig 1: 100 most successful technology projects on Kisckstarter

The following chart shows the projects with the highest number of individual backers.

Most backed projects

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Fig 2: Top five projects with the highest number of individual backers

People who fund projects on Kickstarter are a combination of entrepreneurs and consumers. They like a product idea, understand the risk that even though they have seen some evidence, the idea might eventually not make it or work.

Some of the projects on Kickstarter are there because conventional methods of raising money did not work, and others because they consciously chose this crowdsourced funding channel.

In any case, the people that fund these projects are pioneers or early adopters in marketing parlance. If we trust their judgment, and we have to look at this information somewhat differently from the situation than if these graphs had showed projects that had received funding through formal financing channels such as VCs.

The questions this analysis raises are: who then benefits from looking at this information and following these trends? What sort of action should one take as a result of this analysis? Is this a test for the formal financiers to step in? As an individual, does this give me some confidence in investing in upcoming firms? Should these trends be triggers for examining how something might impact a business model that you are invested in?

The answer is of course yes, depending on what your interests are. The key insight is that indirect sources such as Kickstarter and other similar crowdfunding platforms are crucibles for emerging interests and an important new resource for developing foresight, understanding implications for business models and anticipating opportunities for disruptive innovation.

Is the Corporation at odds with the Future?

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2014

It is common knowledge that the horizon beyond which the fundamentals of the context in which any entity, business or otherwise, operates is shrinking in an accelerated manner. The Future, the one that you did not design the organization for, comes closer every day. Note how I define the future here – it is just past the boundary of what you know with certainty.

To a large extent the pieces and fragments of what will be the future are public knowledge. The contextualization of those pieces to one’s own situation and filling in the few gaps that remain, is what corporations do not do well enough. The surprises are mostly always context-specific; such as the invalidation of a business model. The business model in fact is an excellent framework with which to understand and evaluate implication of developments.

The challenge then is firstly one of cognition, the well-known reluctance to override or get around the filters that define prevalent business models and prevent one from seeing the implications of an emerging future.

Secondly, there is the reluctance to take the specific steps required to contextualize the knowledge in one’s own domain of interest.

Finally, the real challenge is the lack of motivation to mobilize action that requires stepping into a reality of ongoing paradox.

I came across this article by Grant McCracken that exhorts organizations to become future-sensitive being as he says, at odds with the future. (The language quite borders on the poetic.)

In a nutshell, I recommend that organizations develop a systematic foresight practice. But that alone is not enough.

The enterprise must also develop a number of other capabilities that form the platform for living with accelerated change. Without some competence in that space, the enterprise is paralyzed into inaction. It tends to procrastinate and delays action till a point when the only course has to be drastic and radical.

There are a lot of developments happening today that would enable the increasingly fluid and liquid enterprise architectures that the future demands. These designs are on the horizon today.

With the focus on developing the required capabilities and competencies required the enterprise will give itself a better shot at longevity.

The Innovation Cosmos and Total Innovation Management

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2014

The urgency and necessity of Innovation is now common knowledge. We are hearing the term on many fronts – even President Obama finally mentioned it in his speech on election night.

Just as Total Quality Management (TQM), several years ago, managed to create a pervasive awareness and discipline, that enterprises now practice as a matter of routine, so I believe, there is a need for a Total Innovation Management (TIM) movement, with its unique Bodies of Knowledge (BoK) and a commitment to the systematic effort required to achieve desired outcomes.

Just as the previous initiative understood that it would need to be a system-wide transformational effort, the TIM movement will promise rewards to those who take on the challenge of making deep rooted transformational changes in the entire innovation cosmos.

The Innovation Cosmos! I use the word ‘cosmos’ carefully and deliberately here, distinguishing it from ‘ecosystem’. A cosmos is encompassing and includes many ecosystems. We need this distinction since there are ecosystems associated with the Value offering and its architecture, and most large enterprises have many value offerings with distinct architectures, each with their own constellations or ecosystems.

The word ‘cosmos’ is tempting too – for it leads me to the trinity idea, the three pillars of a comprehensive Total Innovation System: The Value System, The Renewal System (Creative Destruction – detached from the Value System), and the Strategic System.

The Value System is the totality that creates value in a given context. It includes the constellation or ecosystem of entities that together produce value on an ongoing basis. Embedded in this complexity are many nested levels of entities, all of which are involved in bettering themselves, innovating, exploring and exploiting. In an ideal situation, the Value System is self-renewing. However, creative while it is, it is also committed to the Value it delivers, and in that commitment, does not stray far from its original design.

The Renewal System is however an idea that is detached from the operational concerns of the value system. It has its eye on the dynamics of the context, and understands the constant shifts in the need spaces (Value fulfills Needs! The need space is a broad idea into which many value systems coexist). Should the need arise to create a distinctly different value, a “Blue Ocean” moment, it dispassionately deconstructs the existing Value Systems and creates a radically different one, serving in the process the interests of the superordinate Strategic System.

The Strategic System establishes the purpose for the Innovation Cosmos. It establishes the parameters within which the multiplicity of Value and Renewal systems must harmoniously operate. It decides which ones may or may not exist that align with its intents and values. The strategic system has a higher cognitive complexity, it has a sense for the whole, it has insight and foresight and makes available the oceans of resources and assets that the rest can draw upon.

While it seems as if these three systems are distinct entities, they are only conceptually so.

It would be an indicator of the maturity of an Innovative Enterprise, where these functions are indistinguishable, where there would be a pervasive awareness of the whole and the capacity to evolve and transform well-developed at all levels.

However, while that would be a desirable end-state, organizations must develop each of these systems individually and in tandem, mastering each consciously before they eventually become routine practice.

Are there short-term low-hanging fruits to be picked? Of course there are, and no one should ignore those opportunities. But also realize that to create a sustainable edge, a true competitive advantage over the long-term, you will need to a Total Innovation Management initiative.

10 Rules for Strategic Innovators – 2

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2014

This is the second part of my reflection on the 10 Rules for Strategic Innovators book.

The fundamental argument of the book as I had said earlier was that the complexity of strategic innovation, the fact that there is no experience to draw upon, makes it necessary to use an experimentation-oriented approach.

This would lead me to think of a couple of things:

Experiments are risky, there being no guarantees of success
There are no well defined viable paths to specific goal, in fact, it might not even be possible to foresee the exact outcome or end-state of the experiment
The old organizational designs and business models cannot be relied upon, and one must architect new designs appropriate to the context
Being that it is an experiment, and that the risk is high, one would need to learn and react quickly when the outcomes are not aligned with the business objectives.
Rallying a team to a somewhat fuzzy and risky cause might not be easy
A new set of management skills are called upon to handle the fuzzy and complex initiative

This understanding of the nature of the challenge at hand would then lead us to the approaches we need to take to mitigate the risks and ensure success. In fact, the definition of success would need to be flexible and iterated as well.

The experiment however is being executed within the larger confines of an existing enterprise, with its own ways of doing things. Strategic decision-making, approaches to risk, rewards and recognition and the implications of failure are all aligned to existing and perhaps successful business models. Applying the same lenses and frameworks to a strategic experiment would naturally run counter to what we have listed as the distinguishing characteristics of the effort. These aspects of the potential obstructive influence of old practices on the strategic experiment are not recognized and might get carried into and applied to the new venture, thereby creating a risk.

In a nutshell, the strategic experiment is a nascent enterprise in a radically different context as far as the existing enterprise is concerned. In order for it to succeed it must be designed so that all aspects of the enterprise system are aligned to its purpose, and if they are to be shared with the parent, must be modified or flexible enough to meet the new requirements.

The authors identify three challenges in this regard; forgetting, borrowing and learning.

Forgetting refers to the need for the organization and the new venture to forget what it might have learned from experience in other contexts. The new effort calls for a new context including customers, business model and competencies – and most importantly the assumptions and mental models of the old business would not apply.
Borrowing refers to the fact that the new venture would need to use some of the resources and assets of the existing enterprise, but should do so thoughtfully. These assets include customer relationships, partnerships, systems, shared services etc
The Learning challenge refers to the fact that being an experiment, it is crucial to learn and incorporate learning rapidly. The authors suggest that the way to know if learning is happening is through the improved accuracy of predictions. This is a way to reduce performance and business uncertainty, a key strategic metric from the perspective of assessing the investment. Till the new venture is properly established, the systems must value learning over accountability.
Doing these three things well, and creating a new DNA of Staff, Structure, Systems and Culture will ensure that the new venture will be nurtured with the mindset appropriate for a strategic experiment.

10 Rules for Strategic Innovators – 1

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2014 I am in the midst of reading “10 Rules for Strategic Innovators” by Vijay Govindarajan and Chris Trimble. As I reflect on what I am reading I will write a series of posts – not so much as a review of the book, but the thoughts it triggers.

Before I picked up this book, I was revisiting “Blue Ocean Strategy”, “Business Model Regeneration” and a number of other well-known texts on Strategic Innovation. ‘Blue Ocean’ certainly is about Strategic Innovation, in that it looks at the architecture of value as a starting point before it gets into business models.

Accordingly, once you have understood the dimensions of value you can play around with them in different ways to create unique uncontested configurations, which then become the basis for one or more business models. I will reflect on Blue Ocean Strategy shortly, so will leave this topic for now. My intent of bringing that reference and other books was that there are a number of other sources that discuss “Strategic Innovation”.

The subtitle, which you see on the inside cover flap (should you have a physical old-fashioned object), gives you an accurate gist of what this book is about – “How to build a breakthrough business within a profitable old one”. This book is focused specifically on those businesses that are currently profitable, and for various reasons are pursuing a new strategic opportunity that is distinctly different from the existing business. It therefore does not discuss ways of identifying breakthrough ideas, but focuses rather on execution.

The term ‘Strategic Innovation’ is mentioned often in the context of innovation, though as one can expect, interpretations vary. I have been thinking of it more in terms of the nature of impact innovation has on the enterprise. Strategic Innovation is not just about the degree of impact, or about business models, but rather that which is radically distinct from anything the enterprise is currently doing or done before, and therefore transformational. Strategic Innovation would certainly involve new business models, but the reverse, in my opinion, is not true. One could innovate an existing business model with a significant impact, but it may not necessarily take the enterprise on a radically different strategic path.

Similarly, management researchers seek an organizational code—a set of rules that can reduce dysfunctions, sustain growth, and lengthen the average corporate life span beyond that of a human being. The code will have to enable strategic innovation: a process of exploring experimental strategies.

Strategic innovation involves testing new unproven, and significantly different answers to at least one of the three fundamental question strategy: who is your customer? What is the value you offer to the customer? How do you deliver that value?

I like the notion of organizational DNA. I have been thinking of business architectures as “value design systems” – design systems that once put in place can create a range of value within a range of contexts. The second line in the quote above puts the emphasis on experimentation and testing. I think experimentation is very much a part of the whole innovation process. However, I do not think you can exclude the critical activity of identifying significant opportunities to pursue from the overall umbrella of strategic innovation. ‘Strategic Experimentation’ though is what the authors emphasize on as critical to making strategic innovation real.

Underlying this emphasis on experimentation is the thinking that strategic innovation requires dealing with a significant amount of ambiguity and uncertainty. It is therefore not possible to make concrete plans to execute an idea in the conventional sense, and experimentation therefore is integral to the execution approach, at least in the beginning.

The approaches discussed describe ways to work through this uncertainty, a process termed ‘strategic experimentation’. Correspondingly, if the uncertainty does not exist or has been reduced due to for example another competitor having already tried the approach, then it does not qualify to be termed “strategic innovation” according a list of several criteria in the introduction. Distinguishing strategic innovation from other forms such as process or service innovation, the authors specify that such innovation always involves unproven business models. I wonder if this is necessarily true. Is it possible to come up with a strategic innovation, but you are able to replicate or borrow from a business model from some other domain.

Strategic Innovation is critical in the increasingly challenging business context in order for enterprises to stay ahead and be able to influence their own destiny. With the shift in emphasis in strategy from planning to innovation and change it is a competence business must develop, and this book proposes to show you how.

Value Architecture – Building an Innovative Enterprise

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2014

As I think more about Enterprise Innovation, I am of the opinion that the place to start is the Architecture of Value. I was researching what others might have said about the topic, when I came across this post – Value Architecture – Building an Innovative Organization.

The article gets close to my thinking but still has some significant differences. Here are some highlights from the article:

Even though the context of business has changed, strategic thinking, creativity and innovation remain on the minds of executives. In particular innovation needs to be incorporated at the highest levels and executive education programs have started reflecting that emphasis. It goes on to say that it is not enough to focus on product and service innovation, and focus on business models. It then brings up the concept of “value architecture”.

“Every company has ‘value architecture,’” says Williams whose research focuses on business model innovation. According to Williams, this value architecture defines how a company manages its resources and the unique ways it adapts and changes according to the external environment. Today’s leading companies are redefining their value architecture and building new business models, now becoming predators not the protectors of the traditional models that made them.”

I have a different notion of what that term means. Perhaps drawing from “Designing Interactive Strategy – Normann and Ramirez“, I would like to consider the ‘Architecture of Value’ in terms of its dimensions, the attributes that matter, the end-users and other stakeholders that form the extended constellation, and the distribution of activities among the various players. It is the understanding of what is important, the extended ecosystem that value touches, and therefore who participates and how in the lifecycle of value creation, that begins the process of strategic innovation.

Clearly the enterprise is one player in this ecosystem and must understand this relationship. The allocation of activities in the constellation is the first step in the design of the value creating system. Once we understand the role that the enterprise will play, only then can be begin to design an enterprise that manages its resources effectively while it flexes and adapts in response to its environment.

Often the opportunities for innovation begin with the re-architecture of the value constellation. Business models only relate to your specific role in the redesigned constellation.

I do agree with the fact that innovation is a pervasive practice. It applies to everything an enterprise does, and certainly therefore to business models. What differs though is the extent of impact that you can expect. Business Model Innovation is strategic and therefore it has the potential of creating significant impact. It is therefore also the most challenging and non-trivial. Without executive sponsorship, such innovation would be impossible to execute. The focus on business model innovation in executive education therefore makes perfect sense.

Community Management – Bodies of Knowledge

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2014
Much has been written about Community Management. Some time back I was thinking about some key Bodies of Knowledge a Community Manager must possess.

In the context of an Enterprise, which is a purposeful entity, the Community serves a specific purpose.

Ensuring that the community does indeed deliver on the purpose therefore is I think the primary role of the Community Manager.
The Community Manager must be personally committed to the purpose – have a passion (compassion) for it and a reasonably deep understanding of the domain.It is by drawing upon this passion and understanding that the CM will be able to identify with the members, make decisions about what activities are in alignment or not and provide leadership and guidance.
The identification with the community’s values leads to the notion of servant leadership.
The Community Manager must be a master at orchestrating community dynamics in an agile manner to keep it on course. Communities have life-cycles. The dynamics and interventions differ depending on the stage of the life-cycle and maturity of the community.
The key underlying concept of a purposeful community is voluntary participation. The traditional models of command and control that are used in the hierarchical enterprise to achieve purpose obviously do not work well with this concept.

Therefore the community manager must be aware of:

How to achieve purpose by creating conditions for voluntary participation, and, cooperation
How to provide the right Resources – in the form of Information, Content etc
How to shape those interactions towards the desired purpose, as a facilitator – acting appropriately in different contexts, such as crisis, conflicts, using influence mechanisms etc – strike the right balance.

Others have listed excellent examples of Skills, Attributes, Personality traits etc.

I will list some key Bodies of Knowledge that I believe are important to understanding communities (not exhaustive):

Social Architecture – The role of identity, reputation, power, influence etc, and how to use the elements of architecture to ‘design’ the community. Not all these elements are equally important for all designs.
Social Interactions – Cooperative Action, Collaboration, sharing, communication, affiliation and the formation of groups etc. Understand the role of language/symbols, and how stories, narratives and rituals shape knowledge, learning and understanding.
Social Networks – and their role in shaping knowledge, sense-making, diffusion of information etc, how to leverage existing ones, and how to change structures to achieve desired outcomes
Social Structures – The nature of teams, groups, mobs, crowds, communities and how they function
Sociality Online – Social Dynamics are different in online worlds. Understand the role of the interface, navigation, presence and representation of identity, security etc.The notions of interaction spaces and how to create the right commons or private spaces.
Governance – the role of moderation and policy, Measuring in objective terms as well as through other means, the role of policy – norms and rules. The role of the CM is primarily Operational Governance – must listen for feedback, learn rapidly and anticipate changing needs.
The above list makes the role seem very complex of course, and I do not imply that the CM must be a scientist/expert in each of these areas. CM’s are embedded practitioners – Some people get these aspects intuitively and are natural ‘artists’. If you happen to find the right one you are indeed fortunate. However, as students of the game we are interested in turning the art into a science. It probably helps to deconstruct what goes into the making of a master practitioner.

The negative side-effects of Social Technology

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2013

The New York Times has an article on how the web is creating unwanted side effects in small towns – http://tinyurl.com/44q8bzk

As the web becomes increasingly pervasive, interactions even in small towns, that used to take place in diners and cafes are becoming public. While gossip around these tables did indeed happen before the web – after all what is small-town life without gossip; in fact what is any social life without gossip? However, gossip has a different effect in small town setting, where there are different implications to identity, highly personal interactions in daily life, and the meaning of relationships that often span the real and virtual worlds in a smaller space.

So, while transparency and the free flow of information have demonstrated beneficial effects, in this case, gossip, which perhaps serves a beneficial purpose in society, takes on an undesirable avatar on the web.

It goes to the point, that social technologies must be used with more thought. There are appropriateness and readiness issues to be considered. In this case, without appropriate governance mechanisms, and new approaches to verifying information, new identities etc, the negative consequences can far outweigh anything positive.

Introducing the LOTUS enterprise

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For some time now I have been working on developing a framework for the Agile Enterprise – recognizing how the emerging enterprise is more than just Social or Open, or driven by purely a temporal innovation in technology. So, here are my thoughts on how this all comes together. I will elaborate more as I go forward, so consider this a high-level introduction, and of course, would love to engage you in a conversation too.

Enduring advantage is the result of enduring capability – it is an outcome of something more fundamental. I believe that such enduring capabilities do not result from emulating the ‘best practices’ of others, captured in prescriptive/normative checklists. In that spirit my answers here are guiding principles only.

The fundamental characteristic of such an enterprise is Adaptability – which results from three critical abilities:

Cognitive Excellence,
Collaborative Excellence, and,
Learning Excellence.
The first two capabilities, give an enterprise the ability to sense and respond appropriately to the context in which they find themselves.

Cognitive excellence gives it strategic foresight, the ability to anticipate and discern patterns and discover opportunities – to give a few examples. Collaborative excellence is the foundation of the open, creative enterprise at all levels.

Excellence is the result of Practice, and organizations that practice these two disciplines, a concept that is embedded in the notion of Learning Excellence, will be able to remain agile. They usually do so by establishing explicit or implicit Centers-of-Excellence.

An Agile enterprise, has utmost clarity in its Strategic Architecture – it is clear in its Purpose, Mission and has a set of Design/Guiding Principles which it refines through Learning as necessary. Most importantly, it exists to serve, and thereby is focused on its clients.

An Agile enterprise in the ever increasing complex environment of the future, is what I call a L.O.T.U.S enterprise:

Living – modeled on organic principles
Open – an in with flexible boundaries, open, diverse and inclusive, usually an extended enterprise – It expands its ‘value spaces’ – creating and capitalizing on cognitive and collaborative surpluses.
Technological – More than just an efficient user of technology, it is a master at embedding technology in its being. It co-evolves with technology.
Ubiquitous – It is increasingly present widely in space and time, global, mobile and dispersed
Social – It recognizes that all enterprises, value producing and consuming systems are essentially human and social.
Finally, an Agile enterprise has mastered the fine art of living on the edge as well as having a stable core. It knows how to walk the tightrope of Exploration and Exploitation, not considering it a dilemma, but moving effortlessly between the two with a fine sense of timing. Those organizations that focus on Exploitation Excellence invest in disciplines such as 6-Sigma. Those that are Exploration focused think of things such as Open Innovation.

The Agile Enterprise is also a master in creating innovative value – through its products and services and through its Business Models.

Sustained Excellence and Enduring Strategic Advantage are the privilege of those who invest for advantage over time, rather than just the here and now.

Engineering or Liberal Arts?

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This morning I came across an article in TechCrunch by Vivek Wadhwa on where investments in education should be focused – Engineering or the Liberal arts?

Wadhwa an entrepreneur turned academic, was initially inclined himself towards the engineering side of the debate. Bill Gates in a recent address, according to the article had argued that education investments should be diverted from the Liberal Arts since they do not contribute to innovation or job creation. Steve Jobs of Apple on the other hand had talked about his company’s work being a synthesis of Technology, Engineering and the Humanities. Wadhwa in his own research at Duke University, has found that successful entrepreneurs and innovators do not necessarily have a background in Engineering or Technology and often come from diverse non-technical fields. He does state though that graduates with liberal arts degrees have a harder time in the employment market. He however advises his own children and students to follow and excel in their own sources of passion – implying perhaps the importance of excellence and its role in employability and success.

I completely agree with Wadhwa’s position on this topic. Like Wadhwa my own background is in Engineering. I spent several early years of my career designing and building sophisticated industrial control systems. I enjoyed that experience significantly and was proud of the contributions we made to society and the economy. I learned a lot about the design and engineering of complex systems in the process, particularly from German, Swiss and American engineers with whom my company in India collaborated. (In particular I still treasure the rigor and discipline involved in building such systems, and worry that the same rigor is often not seen in the Information Systems building discipline – however, that is besides the point for this post).

When I made a career transition into the Information Services industry, I increasingly realized the role and importance of socio-technical systems. Success with information technology required a greater understanding of the people and social aspects of organizations. Over the years of work in the IT industry, I was involved in building information systems that touched nearly all aspects of creating Innovative, Smart and Collaborative enterprises. Delivering successful outcomes with Information Technology necessarily demanded a keen insight and knowledge of the people side of the equation.

We all know that enterprises exist for customers (Levitt). Businesses design Value Creating Systems to help their customers solve problems. What customers value and how they consume and experience value too requires sophisticated understanding of human psychology, motivation, desires etc, requiring us to understand various social and psychological aspects of the value interface.

It is only through the purposeful and meaningful synthesis of our understanding of these vectors – the human, organizational and technological, can we build socio-technical systems that deliver sustained value. It is through the understanding of the enterprise as a socio-technical system can we build an Agile enterprise that can participate in sustained value creation by being Smart, Innovative and Collaborative.

In my mind too, the debate of Engineering vs. the Liberal Arts therefore is misleading. We continue to move at an accelerated pace into a world where only holistic systems that incorporate and integrate humans will succeed. The humanists will have to work side-by-side with the engineers to create a better world. We need everyone involved in that process. There will be jobs for the liberal arts too, for their will bring critical skills to the value equation and companies that do leverage those competencies will be in business long.