The Business Innovation Insider

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November 11, 2005

November 11 Innovation Linkage, the Veterans Day edition

Where is innovation happening? [Innovate on Purpose]
The manifesto of The Creative Generalist [Change This]
MBA: The board game [Mary Schmidt via Business Opportunities Weblog]
Toby Bloomberg on innovation [Diva Marketing]
Glossy rut-busters [Worthwhile Magazine via Innovation Weblog]
The Best Companies to Work for in India [Gautam Ghosh]
Bottom Line Design Awards [Business 2.0 and Frog Design]
Centers of Innovation and Excellence [Remote Access]
The Perfect Productivity Tools [Lifehacker]

[photo credit: Ali Bear's "Salute to Veterans" on Flickr]

Douglas Rushkoff and "Social Currency": Contest #2

The FORTUNE Business Innovation blog is pleased to announce the second of its "Get Back in the Box" contests. Douglas Rushkoff, a globally-recognized thought leader on media, marketing and Internet culture, has created a second reader contest based around the notion of "social currency" as described in his forthcoming book Get Back in the Box: Innovation from the Inside Out:

"Today’s marketers believe that the way to capture and retain customers is by engaging in a conversation with them. The strategy is to create a brand so compelling and layered that people want to have a relationship with it. Detroit’s brand managers believe that kids will develop loyalty to one car brand by the time they are 10, and then — if properly engaged over the years — maintain brand “fidelity” throughout their adult lives. Homemakers are to pick one brand of fabric softener over another because they are endeared to the market-research-generated bear that appears in its commercials. Such surface distinctions are no longer enough. The commodification of brands, combined with the widespread use of brands as social connectors, rather than ends in themselves, has made this strategy obsolete.

In an age of interactive media, customers don’t want to communicate with brands or their spokespeople, anymore. They want to communicate through them. Brands for this era can become a form of social currency, offering opportunities for affiliation and, at best, even authorship.

Choosing a brand, today, is more like joining a club. It conveys not simply a willingness to be associated with that brand’s values, but a desire to associate with the people who have already joined. Those brands that can appeal to people on this level — as social facilitators and meaning systems — rise to the level of secular cults. The best brands today are not merely names on products consumers can own, but cultures to which people feel they can belong. And cultures begin with real people."

Based on that description by Rushkoff, "What is your favorite example of a brand that serves as social currency - a way for customers to communicate not with the brand itself, but with one another?"

Submit your selections over the next few days for your favorite example of a "social currency" and you could win a free, autographed copy of Get Back in the Box: Innovation from the Inside Out by Douglas Rushkoff. The most innovative entry, as judged by Douglas, is the winner. That’s all you need to know – so start submitting today (either by adding comments to this blog entry or sending email responses with "CONTEST" in the subject line to: basulto@gmail.com).

How Finnish companies like Nokia became so innovative

Jak Boumans of the Dutch blog Buziaulane has a fascinating explanation of how the culture of innovation started in Finland during the 1990's:

"The Finnish innovation model has a history, which started in 1991. The Berlin wall had fallen and perestroika was all around Russia. As Finland shares the border with Russia and influenced the economy with Russian orders, it became clear to the Finns that they had to do something and find new orders in other parts. It also meant that the structure of the industry and of the collaboration model between government, universities and industry [had to change]. So industry started to organise itself to become more competitive by cutting away the clay layers in the organisations and making the organisations flatter. The model between industry and universities became more intensive. The government [began] offering money to universities and industry to get students involved in industry from early days in their study. Students at the Tampere School of Art and Media are present at the school for 50 per cent of their time; for the rest of the time they work in companies, usually with a government grant."

See also Finland: The Country That Innovates, which traces Finnish innovation back to 1945, when a Finnish scientist won the Nobel Prize. [For some reason, though, we like the Russian story better.]

[graphic: Nokia]

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A little bit of craziness goes a long way

On his blog, Tom Peters interviews John Gartner, author of the wildly-popular business book The Hypomanic Edge: The Link Between (a Little) Craziness and (a Lot of) Success in America. The book has been given rave reviews by the mainstream business press and has even been selected to be featured in the New York Times Magazine's annual "Year in Ideas" issue, which highlights the "most innovative, controversial, and exciting ideas of the year."

In the Tom Peters interview, Gartner outlines his theory of hypomania:

"There's a mild form of mania that is very common, but very little understood, called hypomania. It's not a pathology; it's not an illness. It's really more of a temperament. But it is genetically based, and it runs in the same families as mania. Manics and hypomanics tend to be related to one another. The difference is that it's a predominantly productive level of mania. These are people who are incredibly active...

In addition to the energy, they're also very driven people with a very high level of self-motivation. They have an almost insane level of self-confidence. These are people who have incredibly ambitious, almost grandiose goals and are absolutely 100 percent confident they can achieve them. And they're people who think fast, talk fast..."

Earlier in the year, Louise Witt of FORTUNE Small Business magazine reviewed the book, which offers examples and anecdotes from well-known business leaders like Steve Jobs (Apple) and J. Craig Venter (biotech firm Celera Genomics).

[graphic: The New York Times]

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How feedback loops foster innovation

Rod Boothby of the Innovation Creators blog discusses why innovation creators can only thrive in an environment that encourages dialogue:

"Emergent intelligence requires feedback loops... Emergent intelligence works when independent agents interact with each other according to a simple set of rules, and where the independent agents adjust their behavior according to direct feedback from other agents... Just as a free market would fail to produce optimal resource allocations if consumers could not provide direct feedback (or at least, vote with their wallets), innovation creators cannot succeed in developing true improvements unless the environment fosters direct feedback."

Using this idea as a springboard, Rod analyzes the feedback loops in academia and the medical community, looking for ways that companies can incorporate (pardon the pun) some of these ideas into their organizational DNA. Not only must there be a feedback loop, says Boothby, there must also be a way for innovators to challenge the status quo: "That means that the guy from the shipping department with a good marketing idea must be able to provide it to the marketing department in a way that garners praise and the likelihood of advancement, not a fast track to the exit."

[graphic: Principia Cybernetica]

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Budget Car Rental and the "brand roadblock" problem

On October 24, Hugh MacLeod of Gaping Void announced the launch of an innovative marketing campaign for Budget Car Rental called Up Your Budget. The marketing campaign is being completely managed and run via the blogosphere - there was no press release, and no trappings of a typical marketing campaign - and this was for a major company that ranked third in its industry! It was, as Henry Copeland pointed out, "the first blue-chip marketing campaign created by a blogger, illustrated by a blogger, run on blog software, advertised exclusively on blogs and first reported by blogs."

While the marketing campaign has attracted a lot of blog support, some bloggers - like Evelyn Rodriguez of Crossroad Dispatches in a blog post called Dear Budget-Train Clue Rental - questioned the rationale of such a marketing campaign:

"As a blogger, I couldn't help noticing your new marketing campaign. But I write now as a customer, not as a blogger... I have a time budget. I've no time for contests. Yet give out $160,000 to the most disruptive ideas - from employees or customers - who cares where the best ideas come from? - and I'd been intrigued to participate in investing in my own future customer experience. Why not incent us to come up with reasons so that a mere $3/day or $5/day or $15/day difference won't make us fickle? (You know you're a commodity when I have to look for the rental agreement jacket to remember which agency to return the car to at the airport.) It's self-evident that I like, trust and read blogs, but I ain't changing my rental car buying behavior one iota. Next time I'm going right back to the comparison engine, 100% blog campaign or no... Ah... but give me a remarkable distinguishable service and experience, and then you're conversing."

The key, I think, to understanding the innovative new Budget marketing campaign is realizing that Budget's brand had become a "roadblock." The very name implied cost savings - and customers had a difficult time looking beyond the notion of cost savings when deciding whether or not to use Budget. Hence, Budget was perenially the third-largest American car rental agency, year in and year out. Customer who wanted superior customer service or a "hip" car rental experience or anything else simply looked elsewhere.

What happened, though, was that Budget finally realized that its brand had become a "roadblock." With that in mind, they went out and tried to change things. At Budget Truck Rental, for example, they changed their advertising style to include cute cartoons pasted on the sides of trucks. (To see how effective this is, check out Budget Truck Rental's actual moving guidelines in dry, bland text.) This was the first step - convincing customers that the company had more to offer than just cheap prices - that there was a personality inside the company. The second step was to change the very perception of the brand: the whole point of the blog-inspired Up Your Budget contest was not to increase brand consciousness - it was something more profound: to alter the very notion of "budget" through the Up Your Budget Treasure Hunt. The third step, no doubt, will have to do with the unlocking of value at Cendant, the huge travel and real estate conglomerate that owns Budget. Once Budget breaks free of the huge umbrella company, one can only expect more innovation and more original thinking from the car rental company.

As an interesting footnote: at the upcoming FORTUNE Innovation Forum in New York City, there's a panel discussion about "Brand Roadblocks," in which executives from Avon Products and Yum Brands discuss ways that brands can typecast or pigeonhole a company into standard ways of doing business. A brand, as Budget found out, can actually block you from pursuing dynamic, new paths to innovation and growth. The question becomes: How do you break through this roadblock?

(photo credits: Gail on the Web and happysteve via Flickr)

Malcolm Gladwell: What a cookie bakeoff can teach you about innovation

In a recent issue of The New Yorker, Malcolm Gladwell (author of The Tipping Point and Blink) described the efforts of Project Delta to find the perfect cookie that would be both healthy and great-tasting. Moreover, the perfect cookie would have to "delight" consumers, not just provide nutrients. What, you may ask, does creating the perfect cookie have to do with innovation? As is always the case, Gladwell looks at the mundane events around us and finds inspiration: in this case, it appears that Project Delta was a cookie "bakeoff" that was all about finding the best, most innovative method for making the cookie. There were three teams, each representing a different methodology of invention: the XP (extreme programming) team, the open-source team, and a "managed R&D" team that would employ a traditional, hierarchical approach. The winner might surprise you - the "managed R&D" team won, with 44% of the vote!

If you're still scratching your head about why a traditional R&D team was able to outsmart a "Dream Team" of the industry's best cookie thinkers employing an open-source innovation model, Noise Between Stations has an excellent analysis:

"For anyone thinking about how to arrange people to create innovative products I’d say [Gladwell's article] is a must read primer. With a couple caveats:

1. The “open source” and XP methods are for building products, not for inventing new ones. The article illustrates why they don’t work well for inventing new things. We need some vocabulary to distinguish between innovation teams and building teams.

2. Either the implementation of the methods or the description of them lacked key elements of what make them work. Open source is not simply an unstructured group of people contributing independent pieces. In Linux, for example, code is tested and reviewed by a central committee. And XP uses structured roles for programming vs. reviewing.

The explanation of getting team size right alone is worth reading the article for. Some expertise on the team is good, but too many people create friction in the process and impedes progress."

[pic: Chocolate.com]

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People-inspired innovation

On the Putting People First blog, Mark Vanderbeeken does an excellent job of wrapping up insights and findings from the People-Inspired Innovation conference in the U.K. The people-inspired innovation movement attempts to design better and more commercially successful products and services by incorporating information about the needs of real people into the design process. Among the companies mentioned for making people (i.e. users) part of the innovation process: BMW DesignWorks, the BBC, Pitney Bowes and Intel's China research group. One of the examples is the Pitney Bowes SmartMailer, which was developed in coordination with real users.

Vanderbeeken also posts about the HomeLab from Philips Research, which also appears to be putting some of the principles of people-inspired innovation to work:

"The new HomeLab allows Philips to test its new home technology prototypes in the most realistic possible way... Philips researchers carefully watch how tenants are living with these technologies 24 hours a day through tiny cameras, microphones and two-way mirrors that are hidden unobtrusively throughout HomeLab. According to the scientists who developed Philips HomeLab, being able to study people in their natural home environment for long stretches of time will help them to develop better products, faster. It gives them a true sense of how people are interacting with technology beyond the initial “newness” euphoria, and the test subjects act naturally because they are in a comfortable home setting—not a stuffy laboratory."

[photo: 10meters.com via Philips]

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November 10, 2005

What's your innovation bandwidth?

Jeffrey Phillips, who writes the Innovate on Purpose blog, recently discussed how innovation bandwidth impacts the innovation output of a company:

"According to most theories about process and process management, every process has a theoretical bandwidth - that is, the maximum amount of units per hour that the process can sustain. According to The Goal and other theory of constraint systems, every process has a bottleneck which limits throughput.

What's that got to do with innovation? Well, maybe quite a bit if your innovation process is limited in its throughput capability. If you need to manage several ideas at the same time and bring them forward as new products and services, does your firm have the bandwidth to do that successfully?"

Later, Phillips outlined the steps that companies can take to increase the throughput of good ideas:

"There are several strategies for moving a good idea through a process to become a new product or service. One of the more common approaches is to assign a "champion" who acts like a guide and wrangler, moving an idea forward through incubation, evaluation and new product development. This is a fine and accepted approach, but is clearly not an optimal approach for any business with more than a few ideas...

Another strategy is to implement a defined process and supporting systems to move ideas through an incubation and evaluation framework. While this approach is not a panacea, it can provide more innovation bandwidth as many people can participate in their specific phase or section of the process, rather than the entire process...

A hybrid strategy that we've seen connects the "Champion" model with defined processes and systems. In that case, a champion is responsible for moving the idea with the participation of others using the established systems and processes..."

[graphic via bandwidth, a South African digital media design agency]

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Innovation, productivity and economic growth

In an essay called "Compete - or Else" (available as a PDF from the Innovate America site), William Brody, the President of The Johns Hopkins University and the co-chair of the Council on Competitiveness's National Innovation Initiative, describes why innovation is so important for future U.S. economic growth. Failure to innovate, says Brody, could lead to a decline in U.S. economic competitiveness:

"The need to be competitive with all comers is not an abstraction. It’s not some future worry we have time to ignore in the present. American economic competitiveness is a real issue, right now, one that’s tremendously important to us all. In recent years, productivity gains have accounted for about two-thirds of the annual growth of our gross domestic product. Much of this gain has come from innovation in the application of technology to business. And this is where the calculus of innovation comes in.

The calculus of innovation is really quite simple: Knowledge drives innovation; Innovation drives productivity; Productivity drives our economic growth.

That’s all there is to it. In the roaring 1990s, our knowledge enabled us to innovate, and our innovations increased American productivity, and hence, American economic growth. But there is no guarantee that these productivity gains will continue. And based upon studies I have seen at the Council on Competitiveness, it looks as though the innovation pipeline is slowly being squeezed dry. If current trends continue, many of us on the council believe there is a good chance that U.S. competitiveness in vitally important hightech areas will fall behind that of China, India and even a resurgent Western Europe."

Which invention came first?

Inventing Modern America.gif The Lemelson-MIT program, which was established at MIT approximately 10 years ago as a way to boost public awareness of inventors and to inspire a spirit innovation among the nation's youth, has a number of games, trivia challenges and brainbogglers on its site that are, ahem, surprisingly addictive even for adults. One game is called the "Invention Connection," which allows you to follow the thread of invention across history (e.g. How did the microwave oven lead to the computer mouse?).

Another game is called "Which came first?" You know, as in, "Which came first: the chicken or the egg?" As the site explains, "Some inventions happened just when you expect they did, but many came surprisingly early—or late! Which Came First? challenges you to pick the earlier invention in each pair." So, which came first? Rayon or Nylon? Coca-Cola or the subway? Instant photography or instant coffee?

[graphic: Inventing Modern America, via The MIT Press]

How to move from the Local Max to the Big Max with innovation

Yesterday, Seth Godin released a meme into the blogosphere about how to get from a Local Max ("the point where your efforts really pay off") to a Big Max (your real, as yet unattained potential), illustrating the idea with a graph showing how hard it is to move from Point A to Point B to Point C to Point D (and beyond). The idea seems intuitively easy to grasp at first (doesn't everyone want to hit that Big Max by choosing the right strategy to maximize results?), but there are a number of nuances that bloggers are starting to pick up on. It just ain't that easy, as Seth points out: "The problem is that to get to Big Max, you need to go through step C, which is a horrible and scary place to be."

Michelle Golden.jpg Michelle Golden of the Golden Practices blog parses through Seth's Local Max/Big Max idea in a blog posting called What Innovation Really Looks Like, emphasizing that the key to getting past the "scary" Point C is innovation: "Big Max is the innovation you bring to your clients. AND your firm. Innovative firms strategize on how to get through C and on to Big Max."

After detailing three common innovation killers ("But this is the way we have always done things"), Michelle explains why it's so important to encourage innovation within firms by neutralizing or eliminating these innovation killers:

"These firms will NEVER get past C until they untie those ropes of control and actually INVITE and ENCOURAGE the people who see potential "opportunities for betterment" to share their ideas for new and better ways to do things, serve customers, create new solutions. Stifling creative people (aka knowledge workers) is business suicide. So, sever the control ties, listen to your young people with an open mind, and don't panic and retreat back to B or A when you're in the "C" lull. Press forward with confidence because you have good stratgies and really damn smart people...if you'll just listen to them!"

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Yahoo! Think Tank: an innovation reality show Down Under

Want to see innovation in action 24 hours a day? Yesterday, the Innovation Weblog pointed to the Yahoo! Think Tank, a cross between a real-time innovation reality show and a publicity stunt for Yahoo:

"Yahoo Australia is sponsoring a two-week experiment in online creativity called the Yahoo! Think Tank. Rotating teams of creative people from ad agencies in Australia and New Zealand are living and working in a transparent, fully-functioning creative studio, complete with a desk, PC and whiteboards. Six webcams enable people from around the world to watch these creatives at work, 24/7. It's quite interactive: You can submit creative briefs (concepts you'd like them to brainstorm on) via an online form and submit messages to be displayed on a plasma screen in their "think tank." You can also view a gallery of previously submitted briefs and the ideas the teams came up with..."

Right now, there are two design students from Sydney in the Yahoo! Think Tank, churning out innovative solutions to creative briefs that online visitors give them. The above cartoon, for example, was churned out in response to the following request: "Re-launch of successful UK PR company to generate new clients & contracts." Past solutions have ranged from the brillant, to the off-beat ("start a rumor that Princess Diana is still alive"), to the audacious ("plan a fake hostage situation"). The Yahoo Think Tank will be up and running until the 17th, so there's still time to peek in on Australia's creative types at work.

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How to sell more cars with a Blue Ocean Strategy

Gabor George Burt.jpg On the Creating Blue Oceans blog, Gabor George Burt has offered another interesting example of a Blue Ocean Strategy, this time using the example of the automobile industry. According to Gabor George Burt, companies need to start thinking in terms of customer perceptions and associations in order to arrive at a Blue Ocean Strategy:

"Few products and services are used in a vacuum. In most cases, other products and services affect their value, or perception of value. So you should think about what associations your customers make between your offerings and what they perceive as complementary ones, and what you could bundle together to provide him/her with a more complete solution."

The basic rule of any Blue Ocean Strategy is that a company must search out and find uncontested market space (the "blue oceans"), thereby making the competition irrelevant. So, how would an automaker discover a "blue ocean" that would enable it to sell more cars? Gabor George Burt explains one idea:

"It's curious that car advertisements give so much weight to describing the stereo system of a new car model. The stereo must represent a relatively small part of the overall cost and complexity of a vehicle, but often commercials say things like: "the care features a roaring 24 valve, 6 liter engine and an impeccable six speaker, high fidelity stereo system". This is presented as if the two were of equal importance. The reason must be that consumers have acquired the notion that the quality of a car's audio system closely reflects its overall driving performance.

If this is the case, it may open up a great product packaging opportunity: Offer Yugo-quality cars, but equipped with a previously unheard-of, thirty-six speaker stereo system, and in advertisements de-emphasize driving performance while greatly up-playing the dream-like musical experience. Taking this further, the marketing campaign could eventually advertise a top of the line stereo package with a car attached to it."

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Darrell Zahorsky: On Small Business and Innovation

In this Q&A for the FORTUNE Business Innovation blog, Darrell Zahorsky of the About.com Small Business Information Guide shares his viewpoints on how innovation occurs within the small business sector. Darrell is a recognized expert on small business issues and trends, with a background that includes experience as a business plan writer, a sales director of a FORTUNE 3000 firm and a small business owner. On the About.com Small Business Information Guide, Darrell has recently posted about million-dollar business ideas and the 10 commandments of a great business name.

Q: What are the key factors required for a small business to create a thriving, innovative culture?
Darrell Zahorsky: In my observations, small companies need at least the following 3 factors for an innovative culture:

(1) Thrive Mentality: The small businesses that have developed innovative cultures have a thriving versus surviving mentality. Innovators rapidly grow, adapt, and change; along the way, they are setting big visions. If you're not growing your business, you’re just trying to survive.

(2) Reach Outside: No matter how good an innovation is, innovative small businesses know that they need outside resources to succeed - in the form of capital, joint ventures, strategic alliances, and strong relationships with suppliers.

(3) Nurture New Ideas: Innovative ideas are delicate things. The worst thing an idea needs is tough-minded MBA problem solving. It takes time for ideas to incubate. Ruta Fox of DivineDiamonds.com created a whole new category in the diamond business, “The Ah Ring,” the ring you buy for yourself to wear on your pinkie when you're single. It took months for Fox to realize she had the breakthrough idea. Innovative cultures don’t shoot down new ideas but give them a chance to percolate.

Q: What can "big business" learn from "small business" about big-time innovation?
Darrell Zahorsky: To really understand small business, imagine every business is a house. The house of big business is vastly different from the house of small business. In the big house, each room has a separate team, which on occasion, spends time in other rooms but really has no in-depth understanding of the other rooms. The small business owners have the innovation edge because they have to spend time in each room and must understand it fully to operate a successful company while spending up to 80% of their time at the innovation point meeting customers.

The “big house” CEO has the knowledge of how the rooms interact to put the innovation in context but lacks the time with customers and outside information required for big-time innovation. As Peter Drucker says, “In the next 10 to 15 years, collecting outside information is going to be the next frontier.”

I had the opportunity to work as a small business owner and in $5 million, $500 million and $5 billion dollar companies. The communication channels for innovation were seriously impeded in the large organizations. Managers and middle management created barriers to communication and often shot down ideas. It was almost an attitude of good ideas can’t come from the front line or outside: “We’re smarter than them or else they would be in our position.”

Big company CEOs have to break down the barriers so the frontline staff can share insights. Big business needs to do a better job of creating the right incentives and environment to move frontline information up to the highest level. Forget the coffee with the CEO. In these environments, everyone is intimidated and posturing, not conducive to innovation. A CEO would garner more real information from an informal one-on-one with a part-time staffer.

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November 9, 2005

Shantanu Narayen interview: Innovation at Adobe

At the upcoming FORTUNE Innovation Forum in New York City, Shantanu Narayen, President and COO of Adobe, will be participating in a roundtable discussion on whether the United States is still a "hotbed" for IT innovation. As a senior executive at one of the leading U.S. software companies, Shantanu Narayen is uniquely positioned to offer his views on whether the U.S. can stave off the competitive challenge from India and China.

Narayen oversees Adobe's day-to-day global operations and sets the vision for Adobe's diverse product lines. Together with CEO Bruce Chizen, Narayen has grown Adobe's business to more than $1.67 billion in annual revenues. In addition, Narayen has been a driving force behind Adobe's innovation and expansion into new markets. He has also played an instrumental role in growing Adobe's India technology development center and starting Adobe's Product Technology Integration Group to focus on customer workflows. In 2005, Adobe was ranked as one of the "100 Best Companies to Work For" by FORTUNE magazine.

With three weeks to go before the FORTUNE innovation event, Shantanu Narayen has generously offered his take on the current state of business innovation, including insights into product innovation at Adobe:

Who should be responsible for innovation inside of a large corporation? Why?
Shantanu Narayen: It’s important to have a senior-level champion of new ideas who can help build support for initiatives that otherwise might not surface. That said, at Adobe we believe new ideas and inspiration can come from anywhere inside the company. Innovation is an inherently unpredictable, organic process and the challenge for companies is to invest wisely in the future.

What is the most important thing that needs to happen before innovation inside a company can occur?
Shantanu Narayen: Employees must be given the permission to innovate. The spirit of innovation has to be a core value of the corporation, and it has to be applied systematically. Innovation must be recognized and failure must be tolerated. Also, one should consider innovation across product, financing, marketing, personnel and other functions. Don't just think of traditional forms of innovation. Even employees who aren’t responsible for developing new technologies or product breakthroughs can innovate by identifying ways to do things better. If a company truly values innovation, then that philosophy should inform everything from hiring choices and major strategic decisions to the way people approach day-to-day challenges – and everything in between.

It’s also vital to know where to focus your innovation efforts. Just because you can innovate in a particular market doesn’t mean that you should. Every company has to identify where it can make a unique difference, and have the will to allocate the resources required to capitalize on those innovations.

Is there an innovation success story within your business that you are most proud of?
Shantanu Narayen: The invention of Acrobat software and the Portable Document Format (PDF) is a prime example of a powerful idea that was ahead of its time, and where we anticipated a market before it even existed.

Soon after the founding of Adobe in the early 1980s, our co-founder John Warnock wondered whether he could use Postscript – Adobe’s core technology that enabled reliable, high-quality printing from computer desktops for the first time – to also recreate a complex image on the screen. He tested the idea by programming an IRS tax form, and it worked.

But he put the idea on the shelf until 1991. Warnock then began thinking about the proliferation of networks – even before the explosion of the Internet – and the need for a way to share information and documents across different platforms. The gulf between Macs and PCs was especially problematic at that time.

The project led to the invention of Acrobat, which could produce these universally viewable documents, the Adobe Reader, which allowed a user to view and print the document, and PDF, which was the new file format that created this new paradigm in technology. Acrobat and PDF were a real departure for Adobe when they were first introduced. Customers had a hard time understanding their value, partly because they didn’t seem like an obvious fit with our other graphics products. Although we realized that new products take time and investment to be successful, some people inside Adobe questioned whether it made sense to keep investing in this area, and there were many inside the company who wanted to kill the product.

Ultimately, we continued to invest and believed that if we created a standard we would have a major advantage in building applications that could take advantage of it.

Now, Acrobat has become one of our most profitable products, Reader and PDF have become essential to online communications and we’ve created a franchise and market reach for Adobe that few others can match. PDF has become so entrenched in day-to-day life that people take it for granted.

We’re continuing to innovate with PDF technology to enable new business opportunities, particularly by offering server software solutions. For example, last year we introduced a 2-D barcode technology that captures all the information as someone fills out a PDF form and then populates that data into a barcode at the bottom of the document that can be scanned – kind of like a UPC symbol in the grocery checkout line. If the user needs to print out the form to sign it – for example, in a tax form or mortgage application – the employees who then process the form can just scan the signed paper copy and have all that data go right into their back-end systems without having to re-key it. The impact on costs and productivity are enormous, and that is only one of many solutions that we have built around PDF. We see even more exciting opportunities for Acrobat and PDF ahead.

Is there a formal process for tapping into the knowledge of your workforce?
Shantanu Narayen: We have several ways to capture and act on new ideas. One of the main ways is a dedicated organization for cross-company innovation called the Office of Technology. The Office of Technology develops new technologies critical to the long-term success of Adobe and transfers these technologies into existing and new Adobe products. This is similar to the “labs” that reside in some of the largest tech companies, but our focus is a tighter working relationship between the product organizations and the scientists.

We also have a process to identify and fund new ideas inside the company, outside of the Office of Technology. These could be entirely new product line ideas, or technologies that are promising but too early to match with products. We handle these ideas much like a venture firm manages its portfolio of startup businesses, with “seed” funding for promising ideas and checkpoints prior to additional funding to make sure that the ideas are progressing into worthwhile business opportunities. Once a quarter we review all the seed projects to demonstrate company-wide commitment and backing for innovation.

One key driver of internal innovation is hiring the right new talent. We’ve built a program called Entrepreneurs in Residence, which is focused on identifying very senior entrepreneurs who have founded and run successful startup companies in the past, and bringing them into Adobe to find the next “big idea.” Our Entrepreneurs in Residence program gives us a way to infuse fresh ideas and nurture new products and business opportunities.

How much do you rely on research and analysis to guide the development of new innovative services and products?
Shantanu Narayen: Research and analysis have their place but can’t drive innovation on their own, particularly if you want to be a “first mover” in the market. To be successful as a first mover, you have to get into your customers’ heads. There’s no research that will tell you absolutely whether the market is there for something that’s truly new. It’s always a leap.

What innovative companies do you most admire?
Shantanu Narayen: Yahoo and Apple certainly come to mind. 3M also has a history of innovation.

How can failure lead to innovative breakthroughs in business?
Shantanu Narayen: Failure provides an important learning opportunity. For example, when we first launched the Adobe Reader, we charged for it. Adoption was slow. The problem was that there wasn’t enough of an incentive at the time for people to purchase it. Yet proliferation of the Reader was critical in order for Acrobat to catch on. And, the whole value of PDF was in everyone being able to access content no matter what system they were using or where the content came from.

We went back to the drawing board to re-think our strategy and ultimately decided to distribute the Reader for free. This was a significant policy shift and a radical approach at the time. The move was a controversial one inside Adobe… many didn’t believe in the idea of giving away such sophisticated technology. It was a strategic decision to sacrifice revenue in order to make the Reader universal and establish PDF as a standard.

Now it’s a major competitive advantage for the company. It drives the adoption of our products, from creative tools like Photoshop and Illustrator software to our rapidly growing line of enterprise server technologies. Customers know that anyone who needs to view, print and interact with their information can do so because the Reader is ubiquitous.

Does the importance of innovation to your organization vary depending on where you are in the business cycle?
Shantanu Narayen: You have to invest in innovation during good times and bad – it has to be a consistent commitment. You have to keep that core talent no matter what. Our R&D investment has remained steady over the years, between 18 and 21 percent of our revenue, and we have credited that with our continued market success.

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Mind maps for visualizing innovation

As corporations look for more ways to tap into the creativity and innovation of their workers, some are embracing software tools like "mind mapping" as a useful and intuitive way of visualizing and managing ideas. In fact, mindmaps have recently been featured in The Times Online (U.K.), the New York Times and the Financial Times -- and innovation blogger Chuck Frey has a new book out called Power Tips & Strategies for Mind Mapping Software.

PowerPoint presentations are apparently so 1990's and vendors like Mindjet are now snagging business clients who want better ways of tracking information flows throughout the business and jump-starting employee creativity. In fact, Mindjet claims to be signing up 15,000 new customers a month, including big names like Radio Shack and Air Products & Chemicals. For more on the world of mindmapping, Mindjet has a nifty blog that updates frequently. One recent posting explained how mindmaps are similar in nature to Harvard Business School case studies:

"Mindjet MindManager amplifies the benefits of this “action-learning” model and follows the exact same logic that case studies do: capture, organize, and then share information. With MindManager, learning groups can distill complex issues into manageable “business topics,” chunks of information that can be easily re-arranged and interconnected in the way they make most sense to the students. The visual map interface allows your group to consolidate all information it gathers from various sources onto one single map (divided into main topics, sub-topics, call outs, and text notes), include all team members’ perspectives in a truly collaborative fashion, and then filter out information that is relevant from information that isn’t."

[graphic: Mindjet]

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The next big thing in innovation: "Pull" models

Last week, the FORTUNE Business Innovation blog featured several items about the new "pull" model of innovation pioneered by John Hagel (a guest speaker at the upcoming FORTUNE Innovation Forum) and John Seely Brown. After an article appeared in the McKinsey Quarterly and John blogged about "From Push to Pull" on the Edge Perspectives blog, it looks like many of these ideas are starting to circulate around the blogosphere. The latest: Bubble Generation's excellent summary of John Hagel's thought-provoking ideas about "pull" vs. "push" models of innovation:

"I've been reading quite a few papers lately, and was recently thinking how big ideas have been few and far between. John and John Seely Brown's latest idea is killer. It's the kind of big idea that you can literally think for a looong time about, and not exhaust the ramifications. It's beginning to inform a huge amount of my new work.

It's about how pull models - models that let resources be pulled through the value chain, or more complex ecosystems, like what John calls global process networks, rather than pushed through them - are emerging as dominant designs in what I would call a world of cheap information and cheap coordination (or what John calls a world of abundance and uncertainty).

This is hyperefficient for many reasons. Pull models naturally evade traditional sources of friction, like transaction costs. Because they rely on minimal coordination - coordination is ex post, not ex ante, huge specialization gains are unlocked (i.e., you pull a learning module you need, rather than having it pushed to you by a costly training manager)... This is a huge concept, that ties together many, many threads of emerging thought."

[pic via National Tractor Pullers Association]

More on John Hagel and "Pull" models of innovation:

From Push to Pull [JohnHagel.com]
From Push to Pull: The next frontier of innovation [McKinsey Quarterly]
From Push to Pull (a working paper) [John Hagel and John Seely Brown]
Edge Perspectives [John Hagel's blog]

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Another innovation tip: gather around gemba

In a discussion of how to solve problems in a manufacturing environment, Mike Wroblewski, a lean manufacturing expert who writes the Got Boondoggle? blog, taps into the Japanese management principle of kaizen. Instead of holding a meeting or conference call at a place like the manager's office, says Mike, sometimes it's better to gather around gemba (the Japanese word for location or workplace). Doing so will spur the creative problem-solving process:

"Forget the conference room, gather around gemba. If the issue is a broken machine, gather around this machine. If the issue is on the assembly line, go to that work station. The employees that are closest to the issue are at gemba. Utilize their experience and wisdom which is not always included in traditional American business problem solving. By seeing for yourself at gemba, you will better understand the process, arrive at the root cause and formulate a solution. Next time a crises occurs in your facility, try calling the meeting at gemba."

(Hat tip: Superfactory's Carnival of Lean Leadership)
(Graphic: NPCC)

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Innovatively Fabulous: MIT and the rise of the citizen inventor

Yesterday, CNN featured an inside look at the new MIT Fab Lab program, in which teenagers from around the world are empowered to become do-it-yourself inventors with the help of MIT. Currently, there are seven Fab Labs that MIT has established all over the globe, in places like Norway, Ghana and India. By granting teens access to tools and gadgets (including lasers!) worth over $25,000 at each fabrication lab, MIT hopes to spur the next great round of creative output:

"Advocates of such Fab Labs think they have the potential to vastly expand the creative powers of tinkerers and usher in a revolution in do-it-yourself design and manufacturing that can empower even the smallest of communities. "If you give people access to means to solve their own problems, it touches something very, very deep," said Neil Gershenfeld, an MIT physicist and computer scientist who is among the movement's chief proponents."

Some of the products created are already quite impressive: "Herders in northern Norway erected a telecommunications network to track their sheep's wanderings with radio antennas and electronic tags... In India, farmers created measurement tools to ensure a safe milk supply and measure fat content... Villagers in Ghana, meanwhile, harnessed solar power to make electricity and cook food rather than relying on firewood."

(photo: CNN)

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