For a start, Alex Osterwalder has published two more Arvetica podcasts of note (mp3), here he’s talking with Scott Anthony of Innosight, and here he’s talking with John Hagel. How cool is that.

Some notes from the talk with Scott:

a first simple recipe to avoid falling victim to disruptive innovation:
- we must keep looking a the world through our customer’s eyes not by the way our companies are organized internally
- we shouldn’t just focus on our best customers. We must keep looking at the fringes, because it is there that disruptive innovation occurs.
- we have to create the organizational space for innovation. Else, the importance of running the core business will crowed out any innovative activity

And here’s the gist from the talk with John:

The podcast is about three distinct topics John has worked on: first, his approach to strategy, second, a concept he developed called “unbundling the corporation”, and third, “IT as a tool for strategic differentiation”. [...]
IT as a differentiator: John points out that IT is today becoming even more strategically important as a foundation for rapid incremental business innovation than previously. He explains this through new and flexible architectures which allow companies to continuously achieve IT innovation and keep a constant head start. This contrasts with the past, when companies made heavy punctual investments in IT innovations every few years, but were then copied. Finally, John also refers to the innovation potential of newer technologies that help people come together, collaborate and create value rather than just create savings through automation.

Pretty much what I am recommending all the time, especially when consulting.

The same topic is dealt with here (mp3), in a new favourite podcast of mine called Spark, which is published by CBC. It’s an interview with Nicholas Carr who speaks about his new book (“The Big Switch: Rewiring the World, From Edison to Google”):

[...] The Big Switch is about the massive changes this move to what’s called ‘cloud computing’ may have. For Carr, its effects go beyond the business of technology. Just as electrification changed North American life profoundly, the ‘big switch’ will change economics, culture, and society, raising questions about security, privacy and more.

Knowledge@ Wharton has excellent stuff too, see e.g. this podcast with Larry Huston, formerly of Procter & Gamble on their Connect + Develop program, and the challenges of making a company into a connected innovation company, i.e. building up the strategic capability to cooperate (here’s themp3). In the same direction here’s a short BBC In Business podcast called “Men In White”, asking if giant corporate research laboratories have outlived their usefulness (mp3):

Peter Day visits Xerox’s Palo Alto Research Centre in California, where the scientists hope their inventions will lead the next wave of technological innovation.

Then there’s an older interview (mp3) in the Knowledge@Wharton series on business model innovation that’s fueled by communities and social networks (“trying to harness communities to reshape their businesses”). John Spector of the Wharton School talks with Craig Newmark of Craigslist, more here.

I like Craigs approach to business, he disrupts and redesigns this media industry, while valuing corporate ethics and keeping “serving the community” at the center of business. More on him here.

Some are compiled by Harvard Business School’s Working Knowledge who have put together some classic articles on innovation (“Sharpening Your Skills: Managing Innovation“), among them articles on user innovation, and how to harness disruptive change:

Sharpening Your Skills dives into the HBS Working Knowledge archives to bring together articles on ways to improve your business skills. Questions to be answered:

- Can innovation and creativity be managed?
- Where do creative ideas come from?
- Can I take advantage of disruption?
- Where can I find innovative solutions?

Can innovation and creativity be managed?, see High Note: Managing the Medici String Quartet:

Many managers in business experience difficulty dealing with their best creative thinkers. So how does violinist Paul Robertson, who leads one of the great string quartets in the world, manage himself and 3 colleagues? One idea: Don’t make life too comfortable for them.

Where do creative ideas come from?, see How Kayak Users Built a New Industry:

Users have produced some of the most important innovations in industries ranging from oil refining to scientific instruments. But how do user innovations take place? How do they get to market? HBS professor Carliss Baldwin discusses her research on the rodeo kayak industry to understand the world of user innovation.

Can I take advantage of disruption?, see Jumpstarting Innovation: Using Disruption to Your Advantage (recommended):

Mature companies understand that to compete they need to innovate. But finding sources of innovation while still paying attention to the current business can be a struggle. The good news, says HBS professor Lynda Applegate, is that one of the forces that threatens established companies can also be a source of salvation: disruptive change.
[...]
Key concepts include:
- Jumpstarting innovation is a critical business imperative. Executives realize that radical change is needed, but do not feel equipped to be able to make those changes.
- Disruptions in the business environment allow new entrants or forward-thinking established players to introduce innovations that transform the way companies do business and consumers behave.
- Disruptive changes that might serve as the source of innovation include technology shifts, new business models, industry dynamics, global opportunities, and regulatory changes.

And finally Where can I find innovative solutions?, see Open Source Science: A New Model for Innovation, looking at practices in the open-source software community that might inform corporate innovation practices.

I’ve referred to Kodak’s strategic errors and all, but now look at this:

This is a commercial that was produced for internal use. But it has become so popular, especially with employees, that Kodak has released it for external viewing. It demonstrates that Kodak not only understands it’s changing business but also has a sense of humor.

I know this is just a clever viral marketing move (“produced for internal use”, oh well) – but still, I like it.

Mature companies understand that to compete today they need to innovate. But finding sources of innovation while still paying attention to the current business can be a struggle. The good news, says Harvard Business School professor Lynda M. Applegate, is that one of the forces that threatens established companies can also be a source of salvation: disruptive change.

[...]

This excerpt from a recent presentation encourages executives to leverage disruptive change as a platform for innovation.

I like this understanding and rationale, here’s the executive summary:

Fostering innovation in a mature company can often seem like a swim upstream—the needs of the existing business often overwhelm attempts to create something new. Harvard Business School professor Lynda M. Applegate shows how one of the forces that threatens established companies can also be a source of salvation: disruptive change.
Plus: Innovation worksheets.
Key concepts include:

* Jumpstarting innovation is a critical business imperative. Executives realize that radical change is needed but do not feel equipped to make such change.
* Disruptions in the business environment allow new entrants or forward-thinking established players to introduce innovations that transform the way companies do business and consumers behave.
* Disruptive changes that might serve as the source of innovation include technology shifts, new business models, industry dynamics, global opportunities, and regulatory changes.

The second article is called “Innovation through Global Collaboration: A New Source of Competitive Advantage” by Alan MacCormack, Theodore Forbath, Peter Brooks, and Patrick Kalaher:

Executive Summary:

Collaboration is becoming a new and important source of competitive advantage. No longer is the creation and pursuit of new ideas the bastion of large, central R&D departments within vertically integrated organizations. Instead, innovations are increasingly brought to the market by networks of firms, selected according to their comparative advantages, and operating in a coordinated manner. This paper reports on a study of the strategies and practices used by firms that achieve greater success in terms of business value in their collaborative innovation efforts. Key concepts include:

* Consider the strategic role of collaboration, organize effectively for collaboration, and make long-term investments to develop collaborative capabilities. Successful firms found that attention to these 3 critical areas generated new options to create value that competitors could not replicate.
* Successful firms went beyond simple wage arbitrage, asking global partners to contribute knowledge and skills to projects, with a focus on improving their top line. They redesigned their organizations to increase the effectiveness of these efforts.
* Managing collaboration the same way a firm handles the outsourcing of production is a flawed approach. Production and innovation are fundamentally different activities and have different objectives.

Yes, networking capabilities gain importance when innovation processes span corporate boundaries, and social software offers opportunities as it provides both flexible and lightweight infrastructure …

In the first of a new series in which the world’s leading thinkers outline their personal vision of where technology could be leading us, the co-founder of net telephony service Skype, Niklas Zennstroem explains how the collaborative aspect of the internet will shape the technologies of the future.

Some notable quotes:

For me, a disruptive technology is only worthwhile if it gives people something they didn’t have or couldn’t do before

[...] I’ve seen many technologies come and go.
The ones that fail tend to be too hard to use and impenetrable to the average consumer.

[...] What intrigues me in particular, are disruptive technologies. Disruption can come in many guises. It is at its most powerful when it comes in the form of a software platform that genuinely alters the status quo for the better.

[...] And disruption – if it’s working – makes it even easier and more valuable. [...] a disruptive technology gives you what you want and at the same time, a better experience.

It sounds so straightforward. However, the exciting part is when you try and build a business on the back of this disruption. It’s not always as easy as it sounds.

Among them

- Amazon’s Jeff Bezos:

It was a classic Bezos move: Give something away for free, but do it in such a way that it ends up expanding the business. That’s because he was one of the first people to stop thinking of the world of retailing as bricks and mortar, and to see it instead as databases and fulfillment mechanisms.

[...] Now Bezos is exploring yet more crazy ideas — and making Wall Street nervous all over again. He’s shifting his focus from the storefront to the back office, spending millions on Web services that look a lot like money-draining distractions.

Take Amazon’s Simple Storage Service, or S3, which charges 15 cents per gigabyte per month to store data on the company’s servers. It seems miles away from his core business of retail. But Web 2.0 startups have flocked to Amazon to save money and get to market more quickly.

- Craig Newmark of Craigslist:

- Dov Charney, founder of American Apparel:

[...] American Apparel has perfected a different model. The company manufactures all its hoodies, T-shirts, and underwear in a Los Angeles factory that pays its workers an average of $12 an hour. Then it ships the clothes to wholesalers and 150 company-owned stores worldwide. Charney calls it the “vertically integrated clothing company” and claims his gross margins are among the highest in the industry.

[...] “We’re going direct to consumers on one end, and direct to labor on the other,” Charney says. “There are no middlemen.”

[...] the speed with which he can deliver the latest cut is his competitive advantage. He can produce 100 variations of the same shirt, test them in a few stores, and then roll out the ones that sell best nationwide. A new design can get to the shelves in four days, something that would be impossible if Charney relied on outsourced factories.

Every company innovates until it finds a cash cow. At that point only innovation that supports the cash cow is promoted. Further, any innovation that threatens or does not support the cash cow languishes or is actively killed. Eventually, most of the true innovation ceases as the innovators leave and start new companies and the cycle repeats.

Yet I would hesitate to declare it a “business law”. But it’s a robust perspective, that rings true most of the time, if only because it reflects that most companies put a premium on stability and countability, and try to avoid change and any “rocking the boat”. There are not many firms that are able to renew themselves repeatedly, they are the exceptions that prove the rule.

This finds support e.g. in the thinking of Clayton Christensen (some BMID-coverage), who holds that companies try to hold on to their old (obsolete) business models and ways of operating as long as possible. They have a hard time understanding (or appreciating) upcoming technological innovations, mainly because these are not yet as powerful and capable as the older technology, i.e. the cash cow.

[...] gets to grips with the virtual universe and Guardian writers interview the smartest and the luckiest entrepreneurs who demolished the old internet and built a brand new one.