Ultratopia

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Innovation in Banking? - Yes!

Despite their staid image, bankers are innovators too. Well, at least some of them are. For example, there's that well-known banking innovator Jack Welch, who transformed General Electric from an industrial company into one from which half the revenues come from banking through its GE Capital arm.

Then there's Muhammad Yunus, founder of Bangladesh's Grameen Bank, a micro-credit lender. Over its 30 years of innovation the bank has loaned more than $5 billion to more than 6 million people through its more than 2200 branches across the country. Loans are made without collateral, and the repayment rate is 98.8%. Yunus and Grameen were awarded the Nobel Peace Prize this year - and who would have ever expected a banker to win that one!

GE Capital's $500 billion in assets dwarf Grameen's, and its profits are many times greater as well, but look at how Grameen uses its profit: It made a profit of $ 15.21 million in 2005, and the entire profit was transferred to a Rehabilitation Fund created to cope with disaster situations. "This is done in fulfillment of a condition imposed by the government for exempting Grameen Bank from paying corporate income tax."

In San Francisco, meanwhile, a new bank has just opened, the New Resource Bank, which focuses on providing financing for green and sustainable businesses.

Yes, bankers innovate, too, and lot of them do it quite successfully!

China and the Long March

Lately I've been reading a book about the Long March, the epic journey of the Red Chinese Army across southern, western, and finally northern China in 1934 as they struggled to evade the Nationalists and preserve their incipient revolution. (The Long March by Harrison Salisbury) During the course of a year they marched thousands of miles, and finally a force of less than 10,000 had survived in tact across mountains, rivers, marshes, and deserts.

To survive they were forced to innovate in countless ways, and one small detail typifies their experience: The army was mostly illiterate at the outset, but not at the end. How? Each day, each soldier wore a cloth on their back with a different character in the vast Chinese alphabet printed on it. So day by day as they marched, they learned to read.

The survivors of the Long March became China's leaders for the next two generations, among them Mao, Zhou Enlai, and Deng Xiaoping. Now that China has sets its sights on the path to becoming a world leader, the events of its origins, and the psychological roots of its founding events become more and more relevant for the rest of the world to understand.

For a more contemporary view, I can also recommend One Billion Customers by James McGregor, which presents the epic journey of western companies venturing into the vast Chinese marketplace. The book details the art of negotiation in China, which anyone considering a deal there must consider carefully!

New Business Models in the Fashion Industry

In case you missed it - - - In September Wal-Mart held a fashion show in New York during Fashion Week, the same week as the big designer shows. Their most expensive item was a $99 leather jacket, as contrasted with designer wares costing maybe 4 to 10 times more. They call it the "democratization of fashion."

A UPI report suggested that the Wal-Mart clothes were "very similar" to the designers'.

Years ago Benetton came up with the innovation of making all their clothes in white, and then dying them at the last minute to stay current with changing styles. This also led to the brand and values positioning as the "united colors." Year later, Zara began clandestinely taking digital photos at fashion shows, and then they very quickly copied the designer offerings, and in some cases the Zara knock-offs got into the stores faster than the originals! And of course at a small fraction of the price. And now Wal-Mart is challenging the fashion world head on.

We wouldn't necessarily call fashionable clothes innovations - they're more like fads. But clearly the industry is exploring new business models which are definitely very innovative. It's war out there!

Joining a Community: Toyota & Missha

I got a post card in the mail this week from Toyota. They're promoting their Hybrids web site, which, when I visited it, appeared to be a massive attempt to provide a gathering place for existing and would-be hybrid drivers. The mailing is pretty sophisticated - it was done using mass-customization equipment that printed my name on both sides of the card, and aside from slogans and graphics, consists of just 2 sentences: "As a member of the Prius family, you're invited to join us at the completely new website experience for Hybrid Synergy Drive from Toyota. Your feedback will help us build an exciting community for change."
www.toyota.com/hybrids

With nearly 400,000 hybrids sold in the US over the last few years, this has the potential to be a large community. (Remember how hard the US auto companies have been fighting for years against Federally-mandated mileage MPG improvements? Well, Toyota's success shows how badly that strategy has backfired!)

However, even though I have a broadband connection, the hybrid site was still painfully slow, and the way it's organized is confusing. I'll be interested to see how quickly they improve the site, and to see if hybrid owners really want to be part of that community.

Speaking of successful online communities, have you heard of Missha? This South Korean cosmetics company began as a web-only presence, and has developed an engaged customer base of 1.8 million customer-partners, who test company products, suggest ideas, and are active members of the Missha community. Their web site says, "Missha is a strictly pro-consumer brand that is made through suggestions and criticisms by over 1.8 million customers who make Missha today."

Having proven the power of the web as a company and community-building strategy, the company's now moving into storefront retail based on the strength of its web presence. You can visit them on 5th Avenue in New York, and in 4 other locations around the city.

So how long before there are hybrid-only auto stores? If I were Toyota, I think I'd open one on 5th Avenue, too, or maybe in Times Square. Now that they've developed the hybrid technology innovation, a new business model for auto industry retail would be warmly welcomed by the millions of people who must suffer through a visit to their awful dealerships every year. It's an industry ripe for sweeping change.

Open Innovation

What is Open Innovation? For many large organizations innovation has been the perview of the R&D department or the "creative types" off in the corner. Or for some companies innovation has come from the executive team. Open Innovation is an attempt to break out of traditional practices and remove the limits from where innovation comes from nor how innovations get to market.

One of the first steps companies take in opening up innovation is an attempt to engage the entire organization in idea generation and developing new business opportunities. One of the most famous internal, open innovation processes is Shell's GameChanger. Originally conceived as an internal process to generate new ventures, GameChanger is now opening up to include ideas from anywhere.

As a result, says Harvard Business School Professor Henry W. Chesbrough in his book Open Innovation, the traditional model for innovation--which has been largely internally focused, closed off from outside ideas and technologies--is becoming obsolete. Emerging in its place is a new paradigm, "open innovation," which strategically leverages internal and external sources of ideas and takes them to market through multiple paths.

Nokia Opens Research Center in Silicon Valley
Nokia has opened a new research center, in California's Silicon Valley. To foster open innovation, Nokia also announced a three-year agreement with Stanford University, to develop joint research projects on collaborative mobile computing and applications. Given their close proximity, researchers from Nokia and Stanford will work together using the Stanford campus community as an experimental testing ground for new technologies and services developed by
Nokia Research Center.

Nokia is one company that is riding this wave. Are you? If so, what are examples of how you and/or your company are practicing open innovation?

Informal Interaction, Coffee Breaks, & Innovation

Years ago, in the late 1990s, I was talking to a retired HP executive about the great days he remebered at HP Labs, and he commented that one of the best parts of working there were the coffee breaks, when researchers would come out of their labs and offices to share a cup of coffee. He thought that those twice-a-day times of informal interaction were one of the big contributors the HP Labs' innovativeness.

Well, I just finished reading Steve Wozniak's new autobiography, iWoz, and he says exactly the same thing of his time there in 1973: "Every day, at 10:00 am and 2:00 pm they wheeled in donuts and coffee. That was so nice. And smart, because the reasons they did it was so everyone would gather in a common place and be able to talk, socialize, and exchange ideas."

For HP Labs the story takes an interesting twist. The retired exec I was talking with went on to blame the downfall of HP Labs on the small, personal coffee machines that became common in the 1980s, because once they became cheap and widely available, people stopped coming to the coffee break. Pretty soon HP stopped the formal coffee and donuts, and as a result the frequency of informal interaction declined, and so eventually did the innovation output of the Labs.

The Essence of Innovation: 5 Principles

An article for Bob Rosenfeld Innovator in Residence at The Center for Creative Leadership Compare his 5 principles to those Langdon has defined in Chapter 7 of Permanent Innovation. Center for Creative Leadership - CCL e-Newsletter October 2006: The Essence of Innovation: 5 Principles