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FedEx’s ZapMail Service: Failure to Foresee

Innovation is Not Without Risk

How Federal Express's Zapmail System Works

One of the defining characteristics of great leaders is their knack for seeing into the future.

Innovation is not without risk. There are plenty examples of failures at companies. However, on the other side of the coin, if you’re too cautious and too late—all you have is a dinosaur business. Navigating that fine line between risk and innovation is very important.

FedEx's Zapmail System Case in Point: ZapMail Service was a system that used fax machines at FedEx offices to transmit documents for clients in different cities. After being introduced in 1983, when FedEx was known as Federal Express, the service was soon eclipsed by the rise of fax machines priced cheaply enough that most offices could purchase their own. In addition, ZapMail was based on satellite technology, which needed the space shuttle to work effectively. However, the space shuttle blew up, dealing a body blow to FedEx’s plans. FedEx folded ZapMail in 1986, taking a costly write-off.

No Innovation Without Experimentation

Commenting about FedEx’s ability to integrating new acquisitions into its fold after its purchase of Paul Orfalea’s Kinko’s franchise, journalist Michael Copeland commented in the Autumn-2006 issue of Booz & Company’s Strategy & Leadership magazine:

As with other acquisitions, Fred Smith saw something in Flying Tigers and American Freightways that others didn’t because his point of focus lay far beyond theirs. Mr. Smith doesn’t always get it right when he looks into the future. His expensive and ultimately failed experiment in ZapMail, a dedicated fax network that couldn’t compete in the early 1980s with the new, inexpensive consumer fax machines, is proof. “A guy like Fred Smith doesn’t build a company like FedEx without taking some risks and making some mistakes,” says Mr. Hatfield, the Morgan Keegan analyst, “but clearly the successes far outweigh the failures.”

Federal Express's Zapmail System There can be no innovation without experimentation, and there can be no experimentation without the risk failure. In addition, taking risk goes against the grain of many companies’ cultures. In the corporate world, there are powerful incentives for people to play it safe. However, leaders must work particularly hard to offset these forces and give their teams the consent to fail and the assurance to make their case and go out on a limb. Leaders must not only promote experimentation, but also encourage people to terminate faster on projects that are not working without fear of reprisal. That is to repeat the cliche “fail, but fail as fast as possible” and take the lessons learned to the next experiment.

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Best Books on Creativity

Inspire Greater Creativity

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Posted in Mental Models and Psychology

Books on Creativity Recommended by Ted Leonsis

Creative people often retain a capability to adopt a number of diverse stances or perspectives. When they look at their own work, they focus interchangeably on the technical aspects, the visual design, the ideas, and so on. They develop a set of standards or a checklist that leads their attention and helps them to scrutinize the creative process. Moreover, they master a lexis that enables them to assess their work in multiple dimensions, so that they can pass more qualified judgements than just ‘good’ or ‘bad.’

A multidimensional valuation gives students feedback, which helps them determine their strengths and detect areas in which they need to improve. The scores on such valuations can also help an educational program to review its results, contemplate its position and modify the course if necessary. Although creativity can only make the most of as originality, utility, and surprise all approach unity, the same description indicates that there are seven different ways that creativity can minimize. These alternatives were identified as

  • routine, reproductive, or habitual ideas,
  • accidental response bias,
  • irrational perseveration,
  • problem finding,
  • rational suppression,
  • irrational suppression, and
  • blissful ignorance.

According to conventional wisdom, creativity is somewhat done by creative people. Even creativity researchers, for several decades, seemed to direct their work by this principle, converging predominantly on individual differences: What are creative people like, and how are they different from most people in the world? Although this person-centered tactic yielded some important findings about the backgrounds, personality traits, and work styles of marvelously creative people, it was both limited and limiting. It presented little to practitioners related with helping people to become more creative in their work, and it virtually ignored the role of the social environment in creativity and innovation. In contrast to the long-established approach, the Componential Theory of Creativity assumes that all humans with normal capabilities are able to produce at least judiciously creative work in some domain, some of the time-and that the social environment (the work environment) can manipulate both the level and the incidence of creative behavior.

Books on Creativity Recommended by Ted Leonsis Ted Leonsis, the Internet entrepreneur, former AOL senior executive, and owner of the Washington Wizards and Washington Capitals recommends the following books on creativity.

  • Ed Catmull’s Creativity : 1970s computer animation pioneer and Pixar co-founder Ed Catmull‘s appealingly comprehensive explanation of how the studio he co-founded generated hits such as the Toy Story trilogy, Up, and Wall-E. Catmull closes that it is a leader’s responsibility to stop ambitious and perfectionist staff destroying their health and that of others. Aiming for zero mistakes is the worst possible goal for a creative project. He argues that a company has to appreciate the work of creativity and learn how to navigate the failures that will happen along the way.
  • 'Crossing the Chasm' by Geoffrey A. Moore (ISBN 0062292986) Geoffrey A. Moore’s Crossing the Chasm: Author Geoffrey A. Moore is managing partner of TCG Advisors, a consulting practice that delivers business and marketing strategy assistances to well-known high-technology companies. Moore declared that the greatest change in the marketing approach happens at the chasm—the organizations to the right of the chasm have meaningfully different opportunities than those on the left. Many ideas fail in the marketplace because their enthusiasts are not capable to cross the chasm.
  • Elmira Bayrasli’s From the Other Side of the World: Journalist Elmira Bayrasli posits that brilliant people around the world are conquering insoluble obstacles to build high-growth businesses that are driving wealth and building communities, regions and countries. By means of seven noteworthy stories, Bayrasli shows the next set of successful entrepreneurs could come not only from the as Silicon Valley but also from Nigeria, Pakistan or Mexico. She writes, “Entrepreneurs, by the very nature of what they do—disrupt and innovate—provide a necessary check and balance on government that no one else can—not businesspeople, not NGOs, not civil society organizations. They help remake the social order and help move progress forward, giving rise to new ideas, new industries, and new possibilities and forcing change. That is what has made them both heroes and villains that many in power feel the need to keep in check.”
  • 'Stop Playing Safe' by Margie Warrell (ISBN 1118505581) Margie Warrell’s Stop Playing Safe: When people confront a challenge, they often recoil into inaction. Drawing from the latest research plus dialogues with highly successful leaders and entrepreneurs, Warrell offers practical tools and inspiration needed to enjoy greater confidence, accomplishment and success in work and life. Outline your sense of purpose and engage in more inspiring goals. Circumnavigate uncertainty with clarity and be more decisive in adversity. Surmount the fear of failure and bounce back from setbacks with superior flexibility. Toughen your leadership ability and expand your influence regardless of position. Build a culture of courage in your office that advances bottom line results. As you strive to reach your goals, as you make those tough choices and take risks, look for your enthusiasm, find your power, and aim to make a difference. And know that this attitude—this mindset, this entrepreneurial way of looking at the world—runs though the lives of all successful people.
  • Linda A. Hill, et al.’s Collective Genius: The perpetual organizational challenge is to develop an organization capable of inventing over and over. Outdated, direction-setting leadership can work well when the resolution to a problem is known and forthright. The role of a leader of innovation is not to set a vision and stimulate others to follow it. It’s to create a cooperative spirit that is enthusiastic and capable to innovate. Collective Genius addresses (1) how leaders generate a willingness to do the hard work of innovation, and (2) how leaders can generate the ability to do the hard work of innovation.
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Posted in Management and Leadership Mental Models and Psychology

Creativity: Difference between Innovation and Invention

Creativity: Difference between Innovation and Invention

Creativity involves the creation of a goal-directed novelty. Creativity results in the purposeful production of new things, either ideas or physical objects; the creative process or creative thinking is the psychological means whereby such novelty is brought about. Assuming that the individual’s purpose and meaning is critical in creative production necessitates that one cannot be called “creative” if one creates something new by accident. The consequent utilization of that accidental novelty might comprise processes that we could label as creative. The initial “discovery” did not, according to the delineation assumed here, come about through the creative process. It is normally not useful to contain value in this definition. Defining creativity as the production of novel products that are of value (no matter how one defines value) causes in complexities that represent the definition unusable. The invention process covers all efforts aimed at creating new ideas and getting them to work. Most important, the value of some product can change over time, which means that, if we take account of value in our definition of creative, the products or persons that one generation classifies as creative might not be so classified by the next. That prospect means that our database would be constantly shifting as we tried to mature our interpretation of creativity and associated concepts—an unacceptable set of circumstances.

Innovation involves a product that meets some benchmarks beyond those of intention and novelty; an innovation is a new product that serves some objective. It is here that questions of value become important. Building on the definition of creativity just given, an innovation is a new product that was intentionally produced to achieve some purpose and that succeeds, to a scale that is adequate, in doing so. Design is the process whereby innovation is brought about. So the design process encompasses creativity (the generation of novelty) as well as something more (the correction of that novelty so that it serves some specific purpose).

Innovation, design, and invention are directly related concepts; an invention is also a novel product that has been intentionally developed to achieve some purpose (that is, an invention is also an innovation as defined above). As opposed to innovation the term invention was regarded in the early 19th century as a positive attribute of an endeavor or product. Law protected inventions and patents were issues on the name of the inventor.

But an invention is the first innovation within some class of objects. In other words, a new member of an already existing category of objects is an innovation, but the first of the objects within that category is an invention. The invention process covers all efforts aimed at creating new ideas and getting them to work. The cognitive, conative, and affective processes of the mind are the bases for our perceptions and for our sorting, synthesizing, categorizing, ignoring, discarding and recombining all our sensory input into new configurations.

So, for example, it seems sensible to say the following of the Wright brothers:

  • they invented the airplane
  • they designed the first airplane, and
  • they designed an airplane.

Wright Brothers First Flight: Difference between Innovation and Invention

The individuals who successfully followed the Wrights only succeeded in designing airplanes. Those individuals may have invented things in their work-components of their successful airplanes but they did not invent the airplane. The airplane—or any artifact—can only be invented once.

Thus, the processes of invention and innovation might be the same, excepting the fact that the former results in production of the first of some class of objects (i.e., the first airplane) while the latter results in additional members of the previously populated category (i.e., other airplanes). It is an empirical question as to whether the process of invention is the same as the process of innovation. Experience provides the qualities of the prototypes we employ for interpreting the present. That is, is the same process (or processes) involved in producing the first member and subsequent members of some class of objects?

Invention is not a random process but is the result of research, study or repeated attempts. Invention must be distinguished from discovery. The latter involves finding or highlighting conditions or facts still unknown. The model of the invention system and the downstream commercialization system make it possible to provide some clear answers to important questions. An invention has to be unique worldwide where as an innovation has to be unique locally, in a certain region or area.

Invention represents a worldwide novelty while innovation is a local novelty. Innovation is an improvement or a refinement while invention is a completely new entity. Society is interested in both innovation and invention as innovation is an economically viable invention that can be exploited in order to generate benefit or to obtain profit.

Innovation is a generic term, whose meaning includes both having a new idea and putting it into action. The definition of innovation used here is appropriate when discussing research in science and engineering. It includes both process and product innovations, in both the goods and services sectors. Finer shadings of these innovations into incremental vs. revolutionary, disruptive vs. sustaining is not pursued in the present discussion.

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How to Cross-Fertilize Ideas?

How to Cross-Fertilize Ideas?

Managers can kindle creativity by helping employees to cross-fertilize in their thinking, to think across subjects and disciplines. The traditional office environment often has separate classrooms and classmates for different subjects and seems to influence employees into thinking that learning occurs in discrete boxes—the math box, the social studies box, and the science box. Creative ideas and insights often result, however, from integrating material across subject areas, not from memorizing and reciting material.

Teaching employees to cross-fertilize draws on their skills, interests, and abilities, regardless of the subject. If employees are having trouble understanding math, managers might ask them to draft test questions related to their special interests. For instance, they might ask the baseball fan to devise geometry problems based on a game. The context may spur creative ideas because the student finds the topic (baseball) enjoyable and it may counteract some of the anxiety caused by geometry. Cross-fertilization motivates employees who aren’t interested in subjects taught in the abstract.

One way managers can promote cross-fertilization in the office is to ask employees to identify their best and worst professional areas. Employees can then be asked to come up with project ideas in their weak area based on ideas borrowed from one of their strongest areas. For example, managers can describe to employees that they can apply their interest in science to social studies by analyzing the scientific aspects of trends in national politics.

Allow time for Creative Thinking

Managers also need to allow employees the time to think creatively. Often, creativity requires time for incubation. Many societies today are societies in a hurry. People eat fast food, rush from one place to another, and value quickness. One way to say someone is smart is to say that the person is quick, a clear indication of an emphasis on time. This is also indicated by the format of many of the standardized tests used – lots of multiple-choice problems squeezed into a brief time slot.

Most creative insights do not happen in a rush. People need time to understand a problem and to toss it around. If employees are asked to think creatively, they need time to do it well. If managers stuff questions into their tests or give their employees more homework than they can complete, they are not allowing them time to think creatively.

Instruct and Assess for Creativity

Managers also should instruct and assess for creativity. If managers give only multiple-choice tests, employees quickly learn the type of thinking that managers value, no matter what they say. If managers want to encourage creativity, they need to include at least some opportunities for creative thought in assignments and tests.

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Innovate Around Your Brand

Innovation

The world is filled with brands and products competing for our attention and our dollars. It can be mind-boggling. That makes breaking through the clutter a never-ending battle. So, how can we stand out and own a share of the consumer’s mind?

The answer is through innovation the constant challenge to the status quo, the relentless, restless search for something new and better. Companies grab market share and reinforce positions with fresh ideas that create fresh profits.

Innovation is the life-blood of any industry. And yet, as the economy cooled off, so did funding for innovation. The focus turned from the “next new thing” to the quarter’s earnings. But we have not turned our back on innovation. In fact, innovation is happening at a fast and furious pace.

Our consumers have always wanted choices, and we have always responded. Today, as consumers’ tastes change and their desire for variety, wellness and convenience grows, we continue to respond. Just look at some of the great examples of innovation in our industry. Whether you’re taking about Red Fusion, Mr. Green, Pepsi Blue, Simply Orange, or Vanilla Coke, we’re giving consumers a rainbow of new choices in colas, flavors, juices, nutritional beverages, waters and sports drinks.

When you add 25,000 other product introductions a year from other industries, you know how many consumers feel bombarded.

This brings me to the question we must ask about innovation, about any new product, package, or service we introduce: What is its value? And is it meaningful? To me, that’s an easy litmus test. Meaningful innovation is sustaining. It stands the test of time because it continues to add value.

The problem with the dot-com companies wasn’t a lack of good ideas. Webvan and pets.com were great ideas. But they didn’t have the right business models to support the innovation and sustain long-term value.

Innovation isn’t all about flash and sizzle. Innovation is very much about substance. And that’s the foundation for our vision for innovation: Innovation must be a “difference engine.” It must make a real difference and drive real growth. And for innovation to be worthy of our investment, it must add value to our brands and create long-term value for everyone touched by our business. When there isn’t meaningful innovation, we lose momentum. When we innovate around trademark Coca-Cola, our growth accelerates.

Through our emphasis on innovation, we’ve learned five key lessons:

Innovation comes from listening and from understanding consumers.

Consumer relevance drives everything. To be relevant, we must be observant and understand what’s important in our consumers’ lives.

That’s how Red Bull did it, starting in the early ’80s, when its founder noticed the popularity of a new beverage while on business in Asia. He brought a few samples back to Austria and created not only a brand, but also a new beverage category—energy drinks.

At Coca-Cola, we used to think about painting the world red. Now, we think about painting the world relevant. Vanilla Coke is turning out to be very relevant. It reminds older consumers of simpler times, when they stopped by the soda fountain after school for a soft drink and some fries. And for younger consumers, it’s giving them a distinctive new taste and new look with its Coca-Cola trademark packaging.

Connection with consumers in relevant ways got us off to a great start with Vanilla Coke. We attracted more than 7 million new drinkers and sold more than 60 million cases; and when we learned that many consumers wanted a diet version, we created Diet Vanilla Coke. If you’re listening, your consumers will tell you where to look for innovation.

Brands, not products, create sustaining value.

And innovation builds brands. Brands are made in hearts and minds because brands provide two things that products can’t—time and trust. Brands deliver both by making choices easier and more reassuring. Great companies create and sustaining great brands through innovation.

  • Harley-Davidson, one of America’s great brands, stirs passion in it riders, dealers, and employees. And it translates that passion into profits. Since going public in 1986, its shares have risen 15,000 percent. Forbes named Harley-Davidson “Company of the Year” last year because in its 100th year of industry leadership, Harley Davidson flexed its innovative muscle—a motorcycle with a liquid-cooled engine that revs the bike higher and hotter in each gear and makes you go faster. It was a giant step for a company that made only air-cooled engines for 100 years. It also helped Harley appeal to the audience it was after—young, urban, hip Americans and Europeans.
  • Another innovation-driving brand is PowerAde. After living in the shadow of a formidable competitor, we gave it a complete makeover—new formula, graphics, advertising, and flavors. Now, it’s a serious contender, driven by an innovative consumer proposition—real power.

You really aren’t committed to innovation unless you’re willing to fail.

Thomas Watson, IBM’s legendary chairman, once said, “The fastest way to succeed is to double your failure rate.” Inventors know that failure is a prerequisite to “eureka” moments, but in business we have a hard time with that.

Does anyone remember New Coke? We sure do. New Coke was a lesson. When consumers turned their backs on New Coke, we were reminded of the deep emotional relationship consumers have with great brands. Brands should cherish those relationships. It’s a lesson we value, and one we’ll never forget.

Our former CEO, Roberto Goizueta, used to say: “You can only stumble if you’re moving.” Innovation is about moving, hopefully forward, but occasionally, a few steps to the rear. Often innovation takes us into uncharted territory, where risk goes up. And that’s good. The key is to keep moving.

Innovation is more than products and packaging

Innovation is more than products and packaging—it’s everything and everyone.

Innovation permeates everything—operating strategies, tactics, systems, supply chains, information technology, distribution, and marketing.

When it comes to marketing, there’s always room for innovation. We found a new opportunity with the series “American Idol.” The innovation was in how we integrated the consumer messaging. In addition to customized advertising, Coca-Cola played a role within the framework of the show—in the Red Room, with the Red Couch, and with product placement. The show became a blockbuster hit, leading to an innovative marketing strategy.

If innovation is all-encompassing, it should be done systematically. In other words, define the problem and solve it. What are the objectives? Who will do the work? How will we measure success? Innovation is everyone’s business. At Delta Air Lines, a menu planner noticed that most people never touched the lettuce leaf under their salads. Her suggestion to eliminate the lettuce leaf saved Delta $1 million. A good idea is a good idea—no matter how small it seems.

In Coca-Cola North America, we’re trying to build a culture that encourages innovation through the same sort of observation and curiosity. Our goal is that every employee starts to think about ways they can do their job better—more efficiently, more productively with greater innovation. In such a culture, companies leverage their people and assets to their fullest. One example is our “good answer” program, created to help our Fountain customers handle their customer calls. Our “good answer” team now receives phone calls, emails and regular mail from consumers on behalf of a growing number of our restaurant customers. In addition to responding to the consumer’s issue, they also provide an analysis of the calls to help the operator make better decisions about their menus, facilities and service.

Coca Cola Brand

We must apply innovation to our social contract with communities.

This lesson is bigger than brands, packages, and marketing campaigns. It’s about our reputation and our image. We’re all under constant scrutiny these days regarding the ways we affect our communities. And the focus is intense in two places—the environment and obesity.

Soft drink packages are already the most environmentally friendly recycled consumer packages. We find creative ways to increase the recycled content we use in packages. During the Salt Lake Olympics, for example, our people created a recyclable, biodegradable cold drink cup from renewable resources.

The obesity issue is complex because it’s not just about what you consume—it includes a healthy and active lifestyle. We recently launched an innovative program called “Step with It” in cooperation with the National Association for Sport and Physical Education to increase physical activity in schools.

Pepsi formed an alliance with respected health, nutrition and exercise experts to educate and encourage Americans to reduce health risks through informed choices and an active lifestyle.

Conclusions

We need to be just as innovative in the ways we protect and sustain our business as we are in the way we market and sell our products. These five lessons are our guiding principles—an imperative to continue to delight our consumers with innovative brands, packages, and business systems that create value. When we’re creating the next great innovations, we’re creating sustainable value, and we’re leaving our businesses, communities, and industry a little better.

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Many Award-winning Inventions Are Re-inventions

Innovation

We like to think that invention comes as a flash of insight, the equivalent of that sudden Archimedean displacement of bath water that occasioned one of the most famous Greek interjections, Eureka. Then the inventor gets to rapidly translating a stunning discovery into a new product. Its mass appeal soon transforms the world, proving once again the power of a single, simple idea.

But this story is a myth. The popular heroic narrative has almost nothing to do with the way modern invention (conceptual creation of a new product or process, sometimes accompanied by a prototypical design) and innovation (large-scale diffusion of commercially viable inventions) work. A closer examination reveals that many award-winning inventions are re-inventions.

Most scientific or engineering discoveries would never become successful products without contributions from other scientists or engineers. Every major invention is the child of far-flung parents who may never meet. These contributions may be just as important as the original insight, but they will not attract public adulation. They will not be celebrated by media, and they will not be rewarded with Nobel prizes. We insist on celebrating lone heroic path-finders but even the most admired, and the most successful inventors are part of a more remarkable supply chain innovators who are largely ignored for the simpler mythology of one man or one eureka moment.

Source: Vaclav Smil’s “The Myth of the Innovator Hero” in The Atlantic, 15 Nov. 2011

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Lessons from Jeff Bezos and Amazon

Amazon.com and Jeff Bezos

Amazon has played a key role in the structural shift away from brick-and-mortar retail, and it may lay waste to many other retailers in the years to come.

'The Everything Store: Jeff Bezos and the Age of Amazon' by Brad Stone (ISBN 0316219266) Brad Stone’s The Everything Store—Jeff Bezos and the Age of Amazon quotes Bezos for a foundation of understanding what makes Amazon different: “We are genuinely customer-centric, we are genuinely long term-oriented, and we genuinely like to invent… Very few companies have all those 3 elements.”

  • Customer Focus: Amazon’s mission statement is to “raise the bar across industries, and around the world, for what it means to be customer-focused.” The first of the company’s Core Values is “customer obsession.” Bezos has been known to keep an empty chair at the conference table at meetings to ensure that the decision makers know that the customer needs to be represented at the table.

  • Long-Term Orientation: Jeff Bezos, the founder and chief executive of Amazon, owes much of his success to his ability to look beyond the short-term view of things. In the 1997 IPO documents, Jeff Bezos declared, “It’s all about the long term, … we may make decisions and weigh tradeoffs differently than some companies” and urged them to make sure that a long-term approach “is consistent with your investment policy.” Amazon’s management and employees “are working to build something important, something that matters to our customers, something that we can tell our grandchildren about,” he added.

  • Innovation: Amazon continues to be the most innovative retailer in the world. Amazon has not only continued to revolutionize retail through numerous innovations that improve the customer experience and drive consumers to buy more goods from the company. Not only has Amazon emerged as the undisputed e-commerce champ, but the CEO has embarked on the most ambitious new growth initiatives in the company’s history. The plan to sell access to Amazon’s vaunted computing infrastructure has taken off with startups and recently with some corporations. Amazon is one of the true innovators in Web-based computing, offering pay-as-you-go access to virtual servers and data storage space.

Recommended Book: “Jeff Bezos and the Age of Amazon” by Brad Stone is an excellent introduction to the founding of Amazon and the vision and strategy employed by Jeff Bezos to transform Amazon.com into a retailing powerhouse.

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How Leadership can Learn to Innovate

How Leadership can Learn to Innovate

Why do good people who desire to learn and innovate consistently fail to produce what they intend? If most people come to work truly desiring to make a difference, to gain, as Peter Drucker puts it, a “return on their citizenship,” then the failure to innovate is puzzling. It can’t be blamed on not having the right people.

Peter Drucker has elegantly presented the three ingredients of the discipline of innovation: focus on mission, define significant results, and do rigorous assessment. But if it sounds so simple, why is it so difficult to innovate? It must have more to do with why Peter Drucker’s three core practices are challenging.

Practice #1: Know your purpose

We can start by inquiring into what we mean by mission. You can’t focus on what you cannot define, and there is some fuzzy thinking about mission, vision, and values. Most organizations have mission statements, purpose statements, visions, and values. But few of us can say our mission statement has transformed the enterprise. There is understandable cynicism around lofty ideals that don’t match organizational realities.

The first obstacle to understanding mission is a problem of language. Many leaders use mission and vision interchangeably, or think that the words—and the differences—matter little. But words do matter.

The dictionary, an essential leadership tool, contains multiple definitions of the word mission; the most appropriate being “purpose, reason for being.”Vision, by contrast, is “a picture or image of the future we seek to create,” and values articulate how we intend to live as we pursue our mission. Paradoxically, if an organization’s mission is truly motivating, it is never really achieved. Mission provides an orientation, not a checklist of accomplishments. It defines a direction, not a destination.

This also gives some clue as to why being mission-based is so difficult. It gets to the core of power and authority. It is profoundly radical. It says, in essence, those in positions of authority are not the source of authority. It says rather, that the source of legitimate power in the organization is its guiding ideas. The cornerstone of a truly democratic system of governance is the belief that power ultimately flows from ideas, not people. To be truly mission-based is to be democratic in this way, to make the mission more important than the boss.

While this might appeal to our ideals, living this way is challenging. We are all closet authoritarians. For most of us it is the only system of management we have ever known. To be mission-based and values-guided is to hold up lofty standards against which every person’s behavior can be judged. Moreover, mission is inherently abstract. It is easier to make decisions based on “the numbers,” habit, and unexamined emotions. To be mission-based requires everyone to think continuously. But it can be done, and, when done, it can work.

Practice #2: Define results

This requirement is easier in some ways. Managers by nature are pragmatic; ultimately they are concerned about results and must concentrate on how, not just why. The danger is that short-term goals can obscure larger purposes. Here again, language matters. Vision—an image of the future we seek to create—is synonymous with intended results. As such, vision is a practical tool, not an abstract concept. While mission is foundational, it is also insufficient because, by its nature, it is extraordinarily difficult to assess how we are doing by looking only at the mission. For this we need to stick our necks out and articulate “an image of the future we seek to create.”

Results-oriented leaders must have both a mission and a vision. Results mean little without purpose: a mission instills both the passion and the patience for the long journey. While vision inspires passion, many failed ventures are characterized by passion without patience.

Now, these ideas might sound good, but they are radical statements in today’s society. The return-on-investment orientation—the view that people go to work primarily for material gain—is the bedrock of our beliefs about people in contemporary society. Thus, the real discipline of innovation not only threatens established power relations, it also runs counter to our cultural norms.

Consider, for example, the saying “People do what they are rewarded for.” What management is about in many people’s minds is creating the right set of incentives and rewards so people will do what the enterprise needs them to do. Just ask people if they think the senior management really believes that people come to work every day, as Deming said, “seeking joy in work.” That’s intrinsic motivation, and it is assumed to be in scarce supply in today’s management. Joy in work comes from being true to your purpose. It is the source of the passion, patience, and perseverance we need to thrive as individuals and as organizations. However, people cannot define results that relate to their deeper passions unless leaders cultivate an environment in which those passions can be safely articulated.

Practice #3: Assess results

We must continually gauge how we can best use our scarce resources. Assessment has two components: measurement and interpretation. The second and more difficult component—interpretation—requires understanding, participation, and physical presence. Statistical measures of an activity may be disappointing, but if you’re actually involved, you may see that people are engaged, learning, and on the brink of a breakthrough. Incomplete or premature assessment destroys learning. After assessing results, we must abandon what doesn’t work to clear the decks for trying something new. Yet it is difficult for organizations to abandon what isn’t working, or to remove a person who lacks credibility from a position.

The first step in practicing abandonment is openness—creating a culture in which, at a critical moment, somebody can tell a boss, “This is not working,” without fear of reprisal.

The litmus test for measuring openness is simple: How fast does bad news travel upward? Good news travels upward faster than the speed of light. But failure is denied before the word can be spoken: “Whose failure? What failure? That wasn’t a failure, we just didn’t have enough funding.” Innovation is a process of failure—a continual learning process. You must experiment, assess, reflect on mission, identify results, and experiment more. Yet we are trained to avoid failure, and thus real learning.

Most people learn that to succeed, they must find correct answers and cover up incorrect ones. This undermines the inquiry-skills essential to real innovation and leadership.

From Habit to Discipline

Taken together, mission, vision, and assessment create an ecology, a set of relationships forming the bedrock of real leadership. These tools allow people, regardless of job title, to help shape their future. Drucker is right that innovation is a “discipline,” a word having its root in the Latin disciplina, an old form of “to learn.” Many people have talent, but real learning requires discipline, the process through which we draw out our potential through commitment, practice, passion, patience, and perseverance.

Mastering the discipline of innovation will require working together, learning from one another’s efforts. To do something new, people invariably experience periods of profound discomfort. Confronting the threat and uncertainty such change brings is best done together, not in isolation.

We are all addicted to maintaining control, to avoiding failure, to doing things the way we have always done. We can’t help it. And we need one another to break the habit.

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Customer-Centric Innovation to Deliver Superior Performance

Customer-Centric Innovation to Deliver Superior Performance

Perhaps no industry has contributed more to enhance the quality of life of people worldwide than the technology industry. Our products and services influence every walk of life, the way we work and the way we play. Still, we need to re-focus. The road to recovery is often the road to discovery. The promise of an industry turn-around challenges us to learn how to engineer that turn-around.

What I want to say is “Let’s get real” by creating real solutions for real customer problems-not examples of technology for technology’s sake or digital pies in the sky. Let’s get real with innovative technology that enables people to do what they want to do better, faster, more productively, and more cost effectively than they ever could before.

Rock’s Law and Moore’s Law

Two unique conditions frame the situation we face today:

  1. Rock’s law. The first is an obscure observation about the cost of capital. It was offered by Arthur Rock, a venture capitalist. It says that the cost of capital equipment in our industry will double every four years. That observation has held true to the point where the cost of new high-end wafer fabrication is prohibitively expensive to everyone but the largest players. Developing new and more technically advanced transistors are very expensive.
  2. Moore’s law. Another economic theory, Moore’s Law, states that the average cost of a semiconductor transistor will decrease by half every 18 months. By the late 1970s, the incremental cqst of a transistor had already dropped below a penny. Today, the cost of transistors is approaching one-millionth of a penny. We’re practically giving them away.

Once something is essentially free and it has value, it will find its way into many places. This is true of the transistor. Software and silicon have become the “plastic and steel” of today’s economy. This should make all of us feel better about our long-term macroeconomic prospects. More products are characterized by the features and functionality defined in software and silicon. The IT industry is rapidly becoming the DNA of every industry—and it is changing the competitive dynamics.

We have an enormous influenceand enormous responsibility to ensure that people take advantage of the technology that we create. If we can be criticized for anything, we can be faulted for our tendency to create a lot of technology and very little innovation. What’s the difference? In a word, customers.

Connected Business Model We have been guilty of pushing our capacity to deliver more and more, faster and faster, simply because we can. Sometimes we forget that someone out there has to do something a whole lot better than they could before. Otherwise, what we do is basically irrelevant. It’s high time we refocus around the customer. Adopt a policy that says: “No new technology without real customer input or without real customer demand.” At AMD, we call this “customer-centric innovation,” and it is driving everything that we do these days. Being a “customer-centric” company demands that you understand the needs of both direct customers and the customer’s customers, meaning consumers.

We have seen a dramatic transformation in what consumers want from their technology. With the Internet and improved wireless communication standards, PCs are arguably more connectivity devices than productivity devices.

  • At home, the primary applications for a personal computer are e-mail, instant messaging, and Internet access. The time is fast arriving when we will see the PC become the central hub of the home.
  • At work, productivity is still supremely important, but with the Internet, productivity is seen as dependent on connectivity. Companies know that their scarcest resource is creativity and that the only way to exploit it is to connect people to the resources they need to rapidly bring their idt:as to life. In short, at home and at work, connections are the currency of our lives.

Metcalfe’s Law

While Rock’s Law and Moore’s Law continue to be technically accurate, they have declining relevance because they say nothing about customers and what they might do with that technology. They say nothing about “customer-centric innovation.” If any business “law’ is relevant to our times it’s Metcalfe’s Law, developed by Robert Metcalfe when he was at Xerox PARC. His law states that “the value of a network grows as the square number of the users of that network.”

For example, if you were the only one with a telephone, it would be of little value. However, since almost everyone has a telephone, this device has incredible value. A company is a network of people, capabilities, and ideas. Using Metcalfe’s Law as a model, the value of a company depends not on its size, but upon the number and quality of that company’s connections in the world.

I mention the “quality” of relationships because I believe that in the future, the quality of the connection will count the most I see Metcalfe’s Law as the new Rule of Engagement—one that will set the standard for excellence in our industry and for our customers in the years to come—because it represents a powerful connection between companies, between peoples and between cultures.

Partnerships and relationships are the key to a new business model. Our commitment to this “connected business model” is something we reinforce in everything we do every day. Work with your partners, and deliver compelling technologies that deliver superior performance.

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