Outside Innovation

The “New Work” of the IT Architect: Innovation Labs and Incubators

Last week I enjoyed my semi-annual “whack on the side of the head” meeting with my Pioneers—our lead users who are veteran technology and business architects. This small band has been gathering twice a year since the early ’90s. What they have in common is a way they view themselves and the world. This worldview evolves over time, of course, but there seem to be some basic principles that are wired into their nervous systems/perceptual filters.

They were all pioneers in the early days of distributed object computing—so they view the world as a place in which intelligent robust services come together dynamically to empower and enable complex operations. They have designed and implemented a variety of very impressive systems over the years—from nuclear power plants to global banking systems, from complex logistics systems to derivatives trading systems. Their IT designs often feature large shared memory in which big abstract models can run—these abstractions are connected to the physical world and instrumented with real-time events. The designs often incorporate rules engines. Yet they love simplicity. Every element is self-contained and self-describing. 

Tools for Lead Users to Use

OK. Mash ups are nice. But what’s next? Meg Lewis, one of my Pioneers and a veteran technology architect, asked me a question that reminded me to rekindle my search for end-user “development tools.” “Apart from Microsoft Access and Excel, what tools are there for business end users to use to develop multi-user analytical and database applications?”

What roles are your customers playing in shaping your business?

This week as “Outside Innovation” finally hits the bookstores in the United States (as far as I know nobody has bought the rights for international distribution from Harper Collins--Random House did a much better job of getting international distribution and translations with my last two books!), we are publishing the first in what will be a series of “Customer Innovation Guides”--tools you can use to see where your organization (or your team or your department) stacks up on the customer innovation maturity curve.

One thing I noticed in researching the book was that the most innovative companies and the ones that are most customer-adaptive have customers playing active roles in many different parts of their business. Take Mozilla for example. As I described in my article about Mozilla’s evolution, customers play all the roles at Mozilla--they write code (lead users, contributors), they debug code (consultants), they make suggestions about next-gen features (consultants), they market the products (promoters), and they support the products (guides). As Mitchell Baker, Mozilla’s Chief Lizard Wrangler, said at our last Visionaries’ meeting, somewhat puzzled by our discussions about porous organizational boundaries, “there’s no inside and no outside at Mozilla.”

That’s a true outside innovation organization!

SPOTLIGHT ON OUTSIDE INNOVATION AT THE BBC

Matt Locke has the enviable (truly!) job of being Head of Innovation for the BBC’s New Media Group. Matt presented an update on his work at Eric von Hippel’s MIT Innovation Lab conference in early September. I had chronicled a couple of these BBC projects in my new book, “Outside Innovation,” so I was pleased to have the opportunity to learn more and to get an update from Matt. With Matt’s help, I was able to turn my stream of consciousness notes into a Q&A format, spotlighting his work in outside innovation at the BBC. This story is well worth a read [download here] no matter what industry you’re in. It’s a great look into work in process as the BBC struggles to reinvent itself in an era of interactive digital media--from the outside in.

Take-Aways: Here are some of my take-aways from listening to Matt tell his story.

What’s the Value of Customer-Contributed Content? $1.65 Billion!

Customer-created content is good business. Letting customers strut their stuff is profitable.

Google’s acquisition of YouTube is proof that customer-contributed content is shrewd business practice. Going from zero to $1.65 billion in 24 months is an admirable accomplishment. It’s the kind of accomplishment that makes most business people both jealous and incredulous. Yes, letting customers strut their stuff makes very good business sense, indeed! The content is free. Customers flock to the site to see and be seen. Visitors’ viewing, tagging and downloading habits create a natural merchandising engine. It’s cool because others thought it was cool. I can find it easily because others have tagged it.

Customers are playing the roles of Lead Customers/Users, Contributors, Guides, and Promoters.

 
Customers’ Behaviors have Changed the Business Model for the TV Industry

Customer-led merchandising is great marketing. Letting customers strut your stuff reaps advertising revenues and free publicity.

What tickles me is how fast the entertainment companies ran around in front of the customer parade. After years of posturing and hand-wringing about intellectual property protection in the era of file-sharing and easy downloading, all of the major entertainment companies signed up to take part in the spoils.

As the Google/YouTube deal was going down, the dominos fell throughout the movie biz. According to Hiawatha Bray, YouTube deals hint of new era for Net media - The Boston Globe, Universal Studios, Sony BMG, CBS, Warner Music, et al all quickly inked deals with YouTube and Google that go something like this: “It’s OK with us if customers pirate video clips from our movies and TV programming, you (Google-YouTube) tell us about them and give us 50% of the ad revenues.”

This is “found money” – additional revenues they wouldn’t have gotten. It’s also customer-led merchandising. Customers will vote with their eyeballs and their tagging and rating, highlighting as noteworthy programming that might otherwise lag in the Nielsen ratings.

Now, what about all those home videos? Will amateurs also get 50% of the ad revenues for their amazing pet tricks’ videos?

The Big Idea: Focus on Customers' Outcomes!

Paul Brown's "Off the Shelf" column in this Sunday's New York Times, The Season of the Sage - New York Times, comments on three new business books: John Naisbitt's MindSet!, Stephen Covey's The Speed of Trust, and my Outside Innovation. Of the three, Paul likes Covey's best. Mine least.

"The good news is that she offers intriguing insights through her new book, Outside Innovation, Innovation occurs, she says, 'when customers lead the design of your business processes, products, services and business models.'

For example, she argues 'you no longer win by having the smartest engineers and scientists; you win by having the smartest customers.' "

Later, after saying that:

"readers...won't find much new ground broken here if they are hoping to learn how to become even more customer-centric."

Of course, he neglects to mention the over 20 case studies in the book!

He closes by saying:

"While Ms. Seybold is fine at providing a broad framework--identify and study your smartest customers, for example, and provide them with tools so they can use your products and services the way they want--specific "how to's" are hard to come by, or are confusing. Consider:

'For each group of customers you choose to serve, there will be several scenarios that are critical (read valuable) to them at any given point in time. A good rule of thumb is to focus on one to three customer-critical scenarios for each target audience. Then move on to the next scenario for that audience (since you've made it easy for them to accomplish their outcomes, they're ready for the next transformational experience).'

Sometimes what is clear to a guru isn't clear to the rest of us. Unfortunately that is as predictable as fall foliage tours this time of year."

Ouch! Of course, I appreciate the ink. And even more so, I appreciate the fact that Paul actually TRIED to understand one of the core prescriptions of the book--focus on your lead customers, work with them to figure out what outcomes they're trying to achieve and either provide them the tools to "do it themselves" -- thereby sharing their innovations with you, and/or work with them to co-design how they'd ideally like to achieve their outcomes--thus unleashing lots of innovative new ideas you'd never come up with on your own.

A simple idea: Customers' Outcomes Drive Innovation

It really boils down to this: Find your most insightful and passionate customers, find out what outcomes they're trying to accomplish and help them do so.

By focusing on customers' outcomes--what they'd ideally like to accomplish--and helping them achieve those outcomes in the easiest, most enjoyable way, your firm becomes an engine of innovation: customer innovation.

 

THE NEXT DISRUPTORS

There’s a great article in this month’s Business 2.0, called The Next Disruptors. It describes 11 companies that have come up with breakthrough innovations that disrupt industries. One of these is Zopa, the peer-to-peer lending exchange that I described to you in February 2006 and which is featured in my new book, “Outside Innovation.”

I haven’t had a chance to research all of the companies and products described in Erik Schonfeld’s and Jeanette Borzo’s article, but it looks to me as if at least half of them fit the “outside innovation” mold. They were either co-designed by lead users and/or the innovations themselves are tools that enable lead customers to innovate. Here are the four that look particularly appropriate as examples of customer-led innovation and platforms for customer-led innovation:

* Netvibes is a do-it-yourself customizable start page creation tool. “The real threat to established portals…comes from the impressive speed and unprecedented drag-and-drop simplicity of the site’s customization tools.”

* Coghead is an end user-friendly application development tool for developing Web applications. (This may be the one I’ve been waiting for!)

* Salesforce.com has made a success of its AppExchange, building a vibrant marketplace for lead user- and consultant-created application extensions to Salesforce.com.

* Zopa the peer-to-peer lending exchange that lets lenders and borrowers bypass banks entirely, yet spreads the risk and yields higher returns.

My hunch is that of the remaining seven companies profiled in the Disruptors article Applied Location, BlueLithium, Clearwire, EEStor, Jajah, NanoLife Sciences, and NextMedium, at least another couple of these were probably co-created with lead users, or stemmed from lead users’ explorations and innovations.

Disrupting an industry is a great barometer for real breakthrough innovation.