Want to innovate? do your clients’ job !

August 26, 2015 harrouet

One of the key skills that innovators need to develop is empathy. Empathy is needed in innovation to understand your customer’s pains and reasons to adopt such or such behavior. At the individual level, empathy is triggered by what scientists call the “mirror effect”: when exposed with someone else’s situation, it triggers the same part of your brain as if you were actually living the scene. But how do you create empathy at the organisation level ? The trick is simple: if you want to innovate, do your clients’ job !

Parrot is well know for its best-selling AirDrone, but it is primarily the world leader in OEM hands-free modules for car dashboards. Its products are so good that they are almost ubiquitous: best sound quality, great design, easy to use… but is that all it should be ? Well, to figure this out, Parrot management actually asked its R&D to develop car dashboards. Does it actually SELL dashboards ? No, as it would be competing with its customers (the car manufacturers). But developing car dashboards is a way to go through all the process its customers are going through, and understand the place of its OEM bluetooth modules in the process. So its OEM modules are also the easiest to integrate, because Parrot understood what its customers are going through.

Now, a lot a people believe that Apple is about to sell a car. Obviously, there is evidence that Apple is BUILDING a car. Does it mean that it will SELL cars? I doubt about it. As Apple bacame a platform company, all it probably wants is to understand how car manufacturers will integrate its platform in the most-elegant possible way. Corporate empathy at its best.

Disruption, Innovation, Leadership, New business

Leadership in innovation

August 25, 2015 harrouet

In a panel I organized about innovation, a major bank’s innovation director explained how the risk for failure had to be borne by the organization itself, not the individual. This raises the question of leadership in innovation, and I would like to illustrate this concept by a concrete example.

Company A is a leader in its market, having internally developed a solution which gathered several awards from recognized institutions. It is widely believed in the company that this solution is key to the commercial success it experiences on its market. So, at the end, everyone feels good about this cost center.

Since company A is so proud about this solution, one considered selling it to other similar companies in different (read: non-competing) geographies. Minimal resources are allocated for over a year to that purpose, and actual revenue objectives given to a business unit. Finally, one day, “out of the blue”, a large company’s top management contacts A to know more about this solution. Their financial advisers had told them about it — always consider investors’ presentation as a marketing tool for your know-how. Company A joins the RFP bandwagon, gets short-listed, and now feels that things are getting serious.

As deal closing gets close to real, everyone at A gets nervous:

the “international” business unit needs to write a contract
the lawyers need to back a deal in a foreign jurisdiction
the technical team worries about committing on a project in someone else’s technical environment
the operations team is wondering how they will work with the customer’s employees and how they will share responsibilities for failures
the CFO needs to deal with a foreign currency and country risks
a “domestic” business unit, whose revenue depend on company A’s solution, fears that it might lose resources and control over the roadmap — with no upside potential.

All this is crystallized when the deal needs board approval as per A’s governance rules. Risks suddenly get over-estimated, and everyone hides behinds the uncertainties. In short, people are telling the board why this new business should be dismissed, instead of explaining how work could be done. So A is in a situation where it spent resources during over a year on a new kind business, but finds itself reluctant to get real when it finally gets a potential customer.

What is needed in this situation is an actual leader.

The role of a leader in innovation is two-fold:

reassure the teams that s/he will be responsible for what will be done. This means protecting the careers of those who will contribute, as well as giving them the right excuse to change the way they work with others. In this case, the domestic business unit has a roadmap and an existing business based on the solution. Having another company profiting from the same technical team means that the engineers will have to priorize some of its requests. These engineers need this leader to explain the hard truth to the domestic business unit, in the company’s general interest. Same thing when/if a feature gets broken as part of incremental software development.
create a team spirit around an ambition. Large structures tend to consider employees as disposable resources, but in this case key resources need to be motivated about this new development. Key contributors need regular updates about the project, a proper kick-off and a good story about where they are heading. Otherwise, why would they bother trading their comfortable, deterministic life against a new set of issues?

As is usually said, leadership is not a given: it has to be taken. Company culture plays an important role in having someone stepping in and be the leader. For example, you may have already seen freshly-nominated directors pretending “to have done that great thing”, much to the deception of the actual do-ers. But when real leadership happens, the impossible gets done: contributors will work smarter and harder to make everyone in the team succeed. Not a given, and not possible in every company, but a clear signal for success.

Society, Uberization

My problem with Uber — and its detractors.

July 20, 2015 harrouet

It might not be politically correct to say this in the innovation community, but I have two problems with Uber:

it is no longer an innovative company, but it became an unethical corporation with deep pockets.
its detractors do nothing to be constructive against Uber, just opposing the old, established world against the digital tide-wave.

Uber is no longer driving innovation — but chose to adopt predatory behavior.

Now let me get more precise: Uber is no longer innovative. I mean, really. Truth be told, it takes just around $2M of founding to start a Uber look-alike. Granted, Uber set the way, but most cities now have many Uber competitors beyond taxis. So no, it is not rocket-science anymore.

With that said, how can Uber be the most valued (i.e. expensive) unicorn ? It raised a total of $5.9 Billions, the last round reportedly valuing the company at over $40B. That’s a lot of money, for a company that seems to lose as much as it has revenues. Uber’s promise may be about self-driving cars and (probably) fully-robotized last-mile parcel logistics. But nothing to be happening for the next 10 years or so, given regulatory and social barriers to launch such services. Meanwhile, the company’s main asset is… its brand: therefore it does everything to install it, including by extensive use of unethical, and sometimes illegal, business techniques:

In some countries, where UberPoP was declared illegal, it keeps the service running no matter what, even paying for the fines of drivers being caught (which is also illegal).
In other countries, it traps the drivers of competing services to either recruit them at higher rates (remember Uber is non profitable already?), or just to generate a no-show.
It goes as far as making battles personal, where mayors bar the service from their city.

Examples like this are plenty. There is even a wikipedia page about it. So let me repeat it: Uber is not about innovation anymore, but about predatory behavior to preempt markets at a loss. I would not want to be a shareholder, unless relying on the greater fool theory.

The debate is about a new way to organize labor.

Now let’s not be mistaken, even blinded by all the reproaches that Uber gets or deserves. For it has one great merit, which is to open a new, necessary debate about how the digital revolution changes our labor organization.

In most developed economies, the industrial revolution introduced a new relationship between the those running the business (“the employer“), and the person actually getting things done (“the employee“). This relationship is generally established with a work contract and, depending on the country, union agreements and/or labor law. It materializes with institutions running this system.

With Uber, as with many examples of the collaborative economy (e.g. AirBnB…), the market built towards filling a need is shifted out of social institutions’ control. There is a price effect to that phenomenon: social institutions have a cost and, by short-cutting those, these services acquire a price advantage which is not about creating value, but about refusing to pay for social institutions. Beyond Uber’s great UX, there is social arbitrage at play.

As a result, it is logical that Uber, arguably being the most aggressive new entrant, is becoming a part of the next US presidential campaign: can society accept a company which provides a great service, in the consumer’s interest, but shows no single sign of Social Responsibility? Indeed, how can companies pretend to do good, when they all optimize their tax scheme so that they don’t pay for schools or hospitals? Answering this question is far beyond the scope of this blog, but this leads to the second problem stated in this article: Uber’s detractors are no more constructive.

Uber and its detractors need to co-design the new world

Detractors of Uber are generally those directly threatened by its activities: taxi drivers (in many countries a rent situation), but also social institution financed by the existing work contract momentum — health insurances, retirement administrations, etc. All these have financial liabilities only viable if workers pay their taxes. Governments sometimes clearly sided with them.

Problem is, these detractors have sometimes fought against Uber to defend the existing momentum. This is doomed to failure, as institutions never win against mass adoption by the people. This is all the more surprising, that in the past institutions have evolved against new services:

Copyright holders found a way to deal with Youtube, making the service fully legal (remember when this was not the case?) in most western countries.
AirBnB agreed to pay the same taxes as hotels in France, and no one pretends that it should be illegal.
BlablaCar, also in the transportation industry, made sure that its drivers could not turn a profit with the service.

Now, maybe Uber likes this situation, where paying fines is seen as a cost of doing business, and a convenient barrier-to-entry for its competitors. But it is time to sit at the negotiation table and find a sane and sustainable way to conduct business. Unless Uber can introduce driverless cars fast enough.

Book references, Digital, Disruption, Foundation

Digital is disrupting the world

July 19, 2015 harrouet

There are many blogs and publications about digital and its disruptive way to change how we live. This one is a modest effort to contribute to the community, with (hopefully) some different points of view than what can be found in mainstream media. With that said, and not least, it is also a tool for self-improvement for the author, by structuring concepts and exchanging ideas with interested parties.

Before going any further, it is worth emphasizing a few bits of context that may be useful to understand the perspective of this blog:

about Digital: we adhere to the vision first formalized by Carlota Perez that the world is going through the deployment phase of the technical revolution of the digital age. In short, this revolution started by the invention of the transistor, and we are now at the point where the technology is sufficiently mastered and cost-effective for it to spread across all sectors of the economy. This is the moment when institutions and legal frameworks are adapting to the situation.
about Disruption: we will stick to Clayton Christensen‘s definition of disruption. That is, a way by which an initially inferior product or service, albeit with a drastically lower price, takes over well established solutions and becomes the standard. You may think of the PC replacing the mainframe: the PC was less powerful, but much cheaper to own and operate. Clayton Christensen very well described how disruption happens for incumbents. There are many examples of the Innovator’s Dilemma, one most remarkable being Kodak — who invented the very technology that made it irrelevant.
about Innovation: we define innovation as a process aiming at generating a comparative advantage in either cost structure and/or product or service features. This is clearly not just R&D, and it may not even involve new technologies, but at the end it translates in market adoption and (let’s dare say it:) S-A-L-E-S resulting from market traction !

Together, the broad availability of digital know-how, the wide adoption of smartphones (shall we say “pocket computers”?), and the understanding by established elites of what is happening, make blue ocean strategies easier to implement, and opportunities aplenty — all of which are candidates for this blog to talk about.

We hope you enjoy reading this blog. Please do not hesitate to voice up where relevant in the comment section, or even contribute by submitting your own post!

HOPSYS – Your future is digital