Future Lab – Q & A

Future Lab

I was recently asked by the super clever Future Lab team of LS:N Global to do an interview on a few topics including: The New Australian Consumer, Crowd Finishing or Pre- Hacking (a theme in my book) The Sharing Economy (A former startup I had rentoid.com was early in this space), Reverse Retail, and Innovation via Skunk Works.

While writing up some thoughts in my note pad, I thought it would make a good blog entry. And then I wrote ‘blog this’ on the first page of my notes. And that is exactly what I have done – literally. It will take some interpretation (hand writing, typos, order) as it is just a mind stream of half sentences, but often the unfinished nature of things is what makes them valuable.

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 New Book – The Great Fragmentation – out now!

When innovation is not really innovation

Innovation is an interesting word which gets thrown around lot in organisations. No one seems to disagree that it is the life blood of long term organisational survival, but I think it’s clear that the definition of what it actually is happens to be wrong. The definition tends to be most wrong in large stable industrial companies. I should know, once upon a time I was the ‘head of innovation’ in one such large organisation. I was recently pointed to this article which goes a fair way to demystifying innovation, versus novelty and invention. But for me it doesn’t go far enough. I think the problem with innovation in many large companies is this:

They confuse Asset Utilisation with Innovation.

A colleague of mine works in a large industrial concern heading up the product innovation area. Here’s a bunch of constraints they’ve placed upon him:

– All innovations must be able to manufactured in their existing factory.

– All innovations must use the existing machines in the existing factories.

– All innovations must focus on the existing core users of the brand.

– All innovations need to be able sold in the existing sales channels and retailers.

– All innovations should have a price point in and around the existing price points their range of products are already sold for.

– All innovations have exactly 13 weeks to prove themselves in market, because that’s what the reseller demands.

Clearly constraints like this prove that the core task is not at all about innovation and much more about business management within a set set of structured parameters. In simple terms it’s an asset utilisation program. There’s nothing wrong with asset utilisation. It’s a valid, profit centric, strategic imperative. It’s what companies must and should do to reach their financial potential. What’s foolish though, is confusing it with innovation. Such confusion can only lead to a long term displacement of brand relevance.


Short media memory & piracy

Kim Dotcom sent out a tweet a couple of days ago on how to stop digital piracy. It was the most succinct realistic view of the digital market place I’ve read. While the stop part might be an overstatement, it would certainly minimise it. I’ve taken his points and listed them below:

How to stop piracy:

  1. Create great stuff
  2. Make it easy to buy
  3. Works on any device
  4. Same day global release
  5. Fair price

The last four on this list really speak volumes. But the thing which is really standing out to me on this list, is that most media companies seem to have forgotten the reasons why they did things a certain way prior to the digital era. Most of their decisions were based on what was possible. The limitations on selling their goods were physical realities. Although these physical realities no longer exist, they seem to have forgotten why they did things a certain way. That way was the only way. The stability of the media system pre-web seems to have distorted their minds to the point that they forget the ‘why’. I’m going to reference the recorded music business to show how their rigidity has failed them. In fact the digital world is actually what they always wanted, and that piracy is not the problem, but the industry’s poor memory.

Make it easy to buy: In a digital age, the best advice anyone can give, is to sell it in as many places as possible. This is always the case for any mass market product. Rewind back to the pre digital music industry and you’ll remember that record companies would sell their records in any store that would stock it. Kmart, Target, Walmart, the local independent record shop. So long as it was out there they were happy. Sales representatives were judged on the number of distribution points they got their stock into. But for some reason they seem to have forgotten this fact. They now decide to hold back on potential distribution points for no apparent reason. The early iTunes revolt being the easiest example we can all remember. Totally counter to what they did before the format changed. So why the music industry don’t embrace this and make it ‘easy to buy’ is beyond me.

Works on any device: It used to be really hard for the music industry to do this before digital. They had to invest in manufacturing for vinyl records, then cassette tapes, then beta, then VHS, then CD…. but they did it and moved quickly to have their content available in all formats. So why the change of heart now? Why don’t they move as quickly as they used to? This is especially strange given that they no longer have to make physical stuff to make their content available on any device. Or even worse, when it’s already loaded up onto a content platform and they restrict usage depending on the device you a re retrieving it from. Vevo on youtube is the classic example. If a song won’t play on my mobile via Vevo, I’ll just listen to a another song. No revenue for you! It’s much easier to do now than it was then.

Same day global release: If you can, then you should. Simple. Here’s the thing the recording industry has forgotten about their pre digital staggered global release programs. Every new market (country) they entered had extra associated costs with it. They used to have to make more stock (records, CDs) to sell. Pay to get their content promoted on TV and radio. (Now we’e all immediately aware of of any big music launch once it happens) They had to change the formats to suit particular markets. They had to ship records on boats for 4+ weeks across oceans. They wanted to be sure the record would be a hit before they invested all the money into wider market expansion. They had reasons to delay global release plans. Reasons largely around stock, promotions, production and mitigating financial risk. None of these reasons exist today.

Fair price: When people get a raw deal, they find an alternative. They even cheat. People know the costs of content distribution are minuscule compared to the pre-digital era. This ought be recognised more than it has been in many digital channels. I truly believe most people will pay a fair price. And in the words ‘fair price’ I would like to add the idea of purchase without friction. Simple ways for us to give you our money so we can get on with enjoying the content. Not a million hoops to jump through. I’d go as far as saying that most people want to pay those who bring them joy with their output. In a world of zero cost digital duplication, then fair pricing  would mean taking out 100% of the now removed physical production costs.

Once we get over the fact that anything which is both digital and good will be pirated by some people, then we can get on with business and just know it’s a fact of life. A cost of doing business. We shouldn’t let it paralyse us into avoiding new methods.

The laws of nature tell us much about piracy or lost revenue. If we don’t distribute the output it goes bad. Stored water which isn’t sent out via distribution channels evaporates, natures form of piracy. The longer we wait, the more we lose.  We can add to this the frustration distributors have with non global release plans.  So much so that distributors are becoming makers (Netflix) because they can’t get what they need.  The end result is a great demarcation with all things digital. If we can’t get it, we’ll make it ourselves or source it elsewhere. The best approach would be to embrace the reality omnipresence and immediacy. 


A mist of innovation

Today is a hot day in Melbourne 34 degrees celsius or 93.2 degrees fahrenheit. It seems though it is never too hot to retail coffee in our fair city of Melbourne. Looking for a java fix I quickstepped down to the nearest caffeine haunt in docklands. I happened upon a new outfit called Cafenatics. Their coffee and food were both good. Their outdoor air conditioning was the total bomb. I freaking loved it.

They had set up a nice water misting system in both their outdoor dining area and even inside. It was just perfectly soft so that you didn’t feel wet, just cooled down. So amazing, I tweeted about it, posted in on Foursquare and even made the effort to write this and share some pictures of it (below). A simple idea I’ve never seen before.

The thing I like just as much is that this is clearly not a new technology…. the Romans probably invented it. Proving again that innovation is an attitude and there are probably a thousand low cost ways any of us could employ tomorrow to wow people. This certainly got me talking.


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The curious thing is that, their coffee is what I came for, and their mist cooling system is the story I left with.


Innovation is an attitude

Last night we announced at Tomcar Australia that we’d be accepting bitcoin as a payment method when selling our vehicles. Not surprisingly we got a lot of coverage globally in news and technology circles.

The reason I came up with this idea was multi-layered. Firstly, as a new car startup (the first in over 30 years in Australia) our budgets are skinny and our brand awareness is low. It was a damn cheap way (a few dollars on coding in bitcoin payments to our e-commerce platform) to get many millions dollars worth of PR. But there is more to it than that. And this is the key reason:

Innovation is just not about what we make. It is an attitude.

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At Tomcar Australia we are hell bent on disrupting the auto manufacturing industry because the model is broken and it needs fixing. It needs not only new cars better suited to their environments, but new go to market methodologies. While we know our cars are best in class, we want to be best in class in our approach to everything. To push the boundaries of commerce. Ideas and methods that seem flunky today, become the norm tomorrow. I’m old enough to remember when credit cards seemed like a crazy and risky way to take payment from customers. One of our favourite questions is this: What would the legacy auto industry never do? It’s very cool to be involved in an organisation that embraces and considers the possibilities of every suggestion, and finds a way to make it work.

A key question for start up entrepreneurs is this: where can we innovate outside of what we actually sell?


The story of ice

Most everyday products we use and take for granted have a deep story of innovation underneath them. Once such product is that of simple household ice. What’s interesting about ice is that it went through a number of disruptions. New methods and players arrived to usurp yesterdays heroes. Much like the industries did in this post.

The original startup thinker and bootstrapper Guy Kawasaki tells the story of ice and how it pertains to curve jumping. I’ll do my best to remember how the story is told.

If you truly want to be an entrepreneur or an uber innovative intrapreneur, you have to jump curves. You can’t do things 10% better, you must do things 10 times better.  Originally ice was sold through an ice harvesting business. In the ice harvesting business in the early 1900’s, this meant that Bubba and Junior would go to a frozen lake or a frozen pond during the winter time and physically cut out large blocks of ice. And in 1900 over 900 million pounds of ice was harvested in the USA. Then 33 years later was the beginning of the first curve jump in the ice industry. This was the start of the ice factory era. Operating on the ice factory curve then meant that ice harvesting didn’t have to happen in the winter and it also meant that you didn’t have to be in a cold climate. You could freeze water centrally any time of year and any place you decided to set up an ice factory. (In fact, ice factories for obvious reasons did a better trade in warmer climates – a counter intuitive shift) And then once the water was frozen in the factory, the ice man would deliver ice to your house or business. So imagine the advantage of going from ice harvester: a cold city in a cold time of year, labour intensive – to moving to an ice factory, any city, any time of year, with dramatically lower labour costs.

Fast forward another 30 years and we move into the second curve jump. The refrigerator ice curve. This becomes ice 3.0 where an ice factory becomes a legacy cost infrastructure. People started to have refrigerators in their own home that could create ice on demand in a matter of hours, with no wastage, at the cost of a small amount of electricity. No need for factories or deliveries to your home when you have a personalised ice factory.

So if we look at this closely, the great value that was achieved was because the new method jumped across to the next curve. Incremental innovation was entirely usurped. It didn’t matter if you improved your efficiency dramatically on the previous curve because the entire market moved. And very few (if any) producers went from ice harvester, to ice factory, to refrigerator manufacturer. As you can imagine most ice harvesters didn’t see the disruption coming. So too with the ice factories and their owners. And in all probability refrigerator companies are not looking at bio tech or what is likely to come next in freezing water or ‘things’.

So the lesson for entrepreneurs (and more so for business owners & industry stalwarts) is that we simply cannot and will not change the world on the business curve that we are on. We have to jump it, and if we don’t someone else will. Incremental improvement is just not enough. Sometimes we must jump curves to merely survive. Makes me think that car companies are playing a very incremental game with their hybrids… What I really want is a self driving electric car or personal transport drone!

Worth Noting: In many ways all industries move from the macro to the micro. We’ve seen it with computers, music, many forms of manufacturing. We can only assume that the future will be continue the current trajectory to ‘personal’. Most curve jumps involve taking the macro to the micro.

Startup blog says: Get out there and curve jump!


Houses and technology

I was discussing with a colleague the inevitability of supermarket retailers being disrupted the same way department stores have been . I contended that in a few short years the technology will arrive that allows a supermarket shopping experience on line that is cheaper and better in every way than entering a store – not even considering the time saved. Their retort I found to be an interesting one….

They claimed it was too difficult logistically. That the shift would even need to involve some kind of one way cupboard and or refrigerator being installed at the door of every house to take delivery of the goods. They even made reference to the fact that the goods would need to be segmented into different delivery boxes based on their temperature storage requirements. Besides the fact that this person had terrific ‘solutions’ within their proposed issues scope – it made me think about how the places we live in have already changed significantly based on technology, social and commercial innovations. Innovations which have been pushed into homes based on an entrepreneurial imperative.

The simplest example is the driveway. Something that no home in the history of man had before the nineteenth century. A simple yet expensive convenience all new homes were built with after WW2.  Based the desire of home owners to have the convenience of a private transport device, adjacent industries responded with solutions. In fact, a large part of the Henry Ford strategy was to convince government to pave the roads of America and accommodate his burgeoning industry. So it isn’t silly to believe that the impending upheaval in the supermarket industry will involve a great deal coalescing from the ‘new supply chain’ and home designers and builders. Through history this has happened in both large and small ways. But to jog your memory, here’s a few more examples of technology placed into homes to assist homeowners and new industries:

  • the letter box
  • the kitchen
  • the inside bathroom
  • the inside toilet
  • telephone cables
  • internal plumbing & gas fitting
  • internal electricity
  • heating & cooling systems
  • wifi systems
  • garages

In fact we could probably add everything under the roof that doesn’t involve the primary idea of housing – providing shelter.

The insight for startups is two fold: Firstly, we can inspire and believe that the infrastructure will arrive to support an innovation which makes life better for people. And secondly, we can be the provider of that infrastructure to make the next growth industry possible.

New startup idea for free – One way in home front door fridges!