MIT Sloan Management Review

Last week Twitter debuted a new feature that lets you group your followers, Twitter calls it Lists. To learn Twitter List basics, Josh Catone’s Mashable post HOW TO: Use Twitter Lists is a good place to start. 

Why do lists of Twitter accounts matter? 

Twitter Lists are an efficient way to find Twitter-people that you don’t know, but should. Consider this list of 500 entrepreneurs, founders, startups, CEOs, and influential business people put together by Peter Urbanski. When you subscribe to a list like this, the updates of everyone in the list appear in your Twitter feed—You don’t have to subscribe to each individual account. You may not want to subscribe to a list with 500 active Twitterers, but take a quick look and you may turn up a handful of interesting, thoughtful people you do think are worth following.

More important, Twitter built Lists into its API, so its users can design new features. Already there are new products and services building on the Lists API, among them Listorious, a directory of “the best Twitter Lists” and TLISTS (currently in private beta), which promises a set of tools to help companies curate their Twitter Lists.

Enabling user-generated innovation and then getting out the way is something Twitter does well, as Eric von Hippel, MIT Sloan’s Professor of Management of Innovation, as points out in Twitter Serves Up Ideas From Its Followers:

“Twitter’s smart enough, or lucky enough, to say, ‘Gee, let’s not try to compete with our users in designing this stuff, let’s outsource design to them.’”

Are you using Twitter Lists? What do you think is the most important thing about the new feature? What’s still missing?

Update: via Wilson Raj and Guy Kawasaki, comes this article from Daniel B. Honigman on How brands can use Twitter lists.

Last month we reported on the BIF-5 Collaborative Innovation Summit. We noted that videos for the talks would be posted and that happened yesterday. Here are two well worth your time.

Roger Martin, dean of the Rotman School of Management, talked about fixing MBA education so it no longer produces, as The Economist calls them, “jargon-spewing economic vandals.” He spoke in detail about moving the MBA curriculum from shallow to deep, narrow to broad, static to dynamic.

John Maeda, formerly of MIT and now president of the Rhode Island School of Design, talked about how fundamental “hand-based” knowledge is being lost as part of our transition to new technologies and new models.

If these intrigue you, there are plenty more.

Rita Gunther McGrath (Photo credit: Lisa Berg)

Why do established corporations’ new ventures often fail? The new issue of Business Insight, MIT Sloan Management Review’s collaboration with The Wall Street Journal, includes an interview with Rita Gunther McGrath about problems traditional business planning processes encounter when dealing with uncertain new ventures.

McGrath, an associate professor at Columbia Business School, explains that one pitfall is to “take the untested assumptions that underlie the [business] plan and treat them as facts” — and then make expensive business decisions based on those assumptions.

What’s the alternative? McGrath recommends writing down your assumptions when you write a business plan — so you remember what assumptions you made and can check them. Then figure out ways to test and evaluate your assumptions inexpensively as the business progresses.

I had the great pleasure of attending the first day of the BIF-5 Collaborative Innovation Summit, held in Providence, Rhode Island, by the Business Innovation Factory. That’s a lot of jargon for just the names of a conference and its sponsoring organization, but more to the point is the tag line for the event: “A good story can change the world.” Those are strong words, but, at its best, the packed Trinity Rep in Providence worked hard to live up to them.

I’m embarrassed that such a strong conference takes place almost in the backyard of MIT Sloan Management Review and I didn’t know about it until year five, but “BIF,” as the organizers call it, is full of ambition and purpose. Like similar conferences TED and PopTech, BIF offers what it hopes are world-changing ideas. But, unlike TED and PopTech, which celebrate a wide variety of disciplines and are as intent on entertaining as educating, BIF is all business.

It’s a wide definition of business knowledge. Last week in this spot, I mused on leadership lessons from unlikely places. BIF was all about inspiration from unlikely places, with reports from the frontlines of freelance diplomacy and someone whose job it is to figure out what would happen if a pirate fought a knight. But more than unexpected sources, BIF was about unexpected attitude. Late in the first day of the conference, Saul Kaplan, the event’s “founder and chief catalyst,” said “innovation requires a vulnerability most people are not comfortable with.” Like many good stories, the ones told on the stage of BIF were ones in which the principals revealed their vulnerabilities and then revealed what they learned from them.

The whole day was filmed. These talks will find their way onto the net and we’ll point to them. For now, here are a handful of the highlights from a long, deep day:

• The New York Times recently argued that the term “curator” is being overused, but Museum of Modern Arts senior curator Paola Antonelli made a compelling case for curating, in its widest sense, as the activity in which all knowledge workers will engage. “Curating is no more than sifting,” she said, “sifting, so people can organize information in the best way.”
• Harvard Berkman’s Ethan Zuckerman, introduced as “the geek’s geek,” talked about building cultural bridges, with examples ranging from Paul Simon’s Graceland to the videogame World of Warcraft, and used a not-new term that the business thinkers in the room marvelled over: “xenophilia.”
• Author Don Tapscott gave a variation of his usual talk about digital natives, but added a telling wrinkle. He told of his son building a Facebook group for one of his books and the self-organizing community quickly growing and feeling its oats. One member of that Facebook group asked pointedly, “And how exactly will Mr. Tapscott be contributing to our community?” It was a trenchant note regarding how much ownership community members can feel.
• Helmut Traitler, vice president of innovation partnerships at Nestle, discussed the nuts and bolts of managing open innovation projects. Some companies “give out problems in a disguised way,” he said, “but you have to give out openly to get back more.”
• Roger Martin, dean of the Rotman School of Management, talked about fixing MBA education so it no longer produces, as The Economist calls them, “jargon-spewing economic vandals.” He spoke in detail about moving the MBA curriculum from shallow to deep, narrow to broad, static to dynamic. Similarly, ex-MITer John Maeda, president of the Rhode Island School of Design, talked about how fundamental “hand-based” knowledge is being lost as part of our transition to new technologies and new models.

In a small, packed room, it felt like these notables were, with minimal dressing, simply sharing what they were thinking about lately and telling stories that illuminated their ideas. Early in the day, Kaplan talked about what everyone seems to talk about these days: Twitter. He talked glowingly about its applicability to sharing ideas early on. “It lets you get stuff off white board and on to the ground,” he said. A good conference can do that, too.

On average, investments in information technology are associated with greater productivity for companies — but why do some companies get greater productivity benefits from IT than others? That was one of the questions MIT Sloan Professor Erik Brynjolfsson addressed at a presentation at the MIT Center for Digital Business today.  (Brynjolfsson and Wharton’s Adam Saunders have a new book out, Wired for Innovation, that addresses this topic and others related to IT, innovation and productivity.)

Erik Brynjolfsson

As part of his presentation today, Brynjolfsson discussed findings from research that involved studying 1167 large firms over 10 years — and that concluded that business performance depends on both IT and organizational capital. The researchers found that there is a very measurably different set of management practices that are much more common in IT-intensive companies than in others. What’s more, these practices — which Brynolfsson calls practices of “the digital organization” — are correlated with generally higher productivity and higher market value in the companies that implement them.  

The downside? It’s possible to “spend a lot on IT without getting much of a return,” if you invest in IT without adopting digital organization practices, Brynjolfsson commented. A similar problem, he noted, can occur if you change a company’s work practices to adopt digital organization practices — but don’t make the corresponding IT investments.

What are the practices that characterize the “digital organization”? In Wired for Innovation, Brynjolfsson and Saunders write that digital organizations:

• move from analog to digital processes
• open information access
• empower the employees
• use performance-based incentives
• invest in corporate culture
• recruit the right people
• invest in human capital.

IT-intensive firms, Brynjolfsson observed in his presentation today, tended to put more effort into hiring and, once they hired, into training.

We here at MIT Sloan Management Review are voracious readers. After all, part of our service is to read management literature so you don’t have to read all of it. But it’s not only academic journals that are full of smart management ideas you can act on. This week’s issue of The Economist has a pair of articles in particular that hit the spot:

In “Creative Tension,” the magazine looks at ways Google is trying to make sure that the inevitable bureaucracy that comes with having 20,000 employees doesn’t stifle innovation. The example in question is Google Wave, a still-in-development mix of email, chat, and file-sharing that some think might unseat Microsoft’s SharePoint. How different was the development of Wave from what the company does usually? Quite a bit. “Some Googlers felt this was a betrayal of the firm’s open culture.”

“A Maket for Ideas” looks at how the Eli Lilly startup Innocentive has created an “innovation marketplace.” “Seekers” post problems and quote a fee; “solvers” compete to answer them. It’s turning out to be a successful model, even as the parent Eli Lilly is cutting jobs.

Finally, the magazine also debuted a new column on business and management that it’s calling “Schumpeter.” As you might expect, the column kicks off with an entry on why it is named after Joseph Schumpeter, who the column identifies as “one of the few intellectuals who saw business straight.” We’re curious to see how this new page tries to do the same.

Eric von Hippel of the MIT Sloan School has long argued that users play a larger role in product development than is commonly believed. Now, in a new working paper, Pedro Oliveira and von Hippel take a look at customers’ role in innovation in a service industry: banking.

Oliveira and von Hippel studied the history of 47 commercial and retail banking services that were introduced between 1975 and 2008. Their conclusion: In 85% of the cases, the service was something some customers had previously been doing on their own, before the bank provided the function as a commercial service. For example, before commercial “sweep” accounts existed to transfer money not immediately needed to accounts that earn more, many customers transferred money from one account to another on their own to achieve that effect.

For managers, Oliveira and von Hippel suggest, the study’s findings indicate that one good way for a service provider to innovate is to look at what customers do on their own before and after using the provider’s existing commercial services.  Studying customers’ activities in areas adjacent to current commercial service offerings, they observe, may reveal new business opportunities for service providers.

Conventional wisdom has it that new and better technologies replace old ones — and that companies whose markets are being transformed by disruptive new technologies thus need to figure out how to switch to the dominant new technology. And, of course, that’s often the case.  But, in a thought-provoking paper, two researchers argue that an alternative approach — one that involves rethinking opportunities for the old technology — can sometimes make sense. 

Ron Adner of Dartmouth’s Tuck School of Business and Daniel Snow of the Harvard Business School note in their paper “Old” Technology Responses to “New” Technology Threats, that the idea of new technologies always replacing old is incomplete; for example, pagers and fountain pens still persist long after the development of, respectively, cell phones and ball point pens.  What’s more, the authors point out, the option of a new technology can reveal niche markets where characteristics of the old technology still have value.

To be sure, the authors don’t argue that sticking with an older technology should be the response of most businesses to a new technology — just that, for some companies in some circumstances, it can be a rational response that is often overlooked.  They include an interesting case study of a company in the semiconductor lithography equipment industry that, because its resources were constrained by a restructuring, decided not to compete in the next generation of technology in its market. Instead, the company evaluated other options for its older technology — and found new markets for it in areas such as hard disk drive manufacturing and microprocessor packaging.

If one innovation approach is helpful, you might think using more than one approach to innovation would be even better. Not necessarily, write Frank T. Rothaermel and Andrew M. Hess in an article on innovation strategy in the new issue of Business Insight, MIT Sloan Management Review’s collaboration with The Wall Street Journal. 

In a five-year study of strategies among pharmaceutical companies pursuing innovation in biotechnology, Rothaermel and Hess found that not all innovation strategies are equally complementary — and that companies can risk wasting resources if they pursue certain combinations of strategies at the same time. For example, the authors note, companies that invest simultaneously in cultivating internal human capital and in external alliances may not get the best return on the combined investment  — since the two strategies offer similar benefits.

The best single innovation strategy over all, according to this research? Investing in people.  ”The most effective way to achieve continuous innovation over the long term is to hire and cultivate talented people,” Rothaermel and Hess write. “Companies that innovate through hiring will have stronger control over their intellectual property and often a steadier pipeline of future inventions because they aren’t relying on outside partners for any part of the innovation process.”

Here’s a sign of the times: McKinsey & Company’s ‘What Matters” site hosted an online debate about innovation — except both of the expert authors, Iqbal Z. Quadir and Robert Atkinson, agreed on the central topic of the debate: that Asia could become the world’s innovation center in the 21st century. (Quadir, who directs the Legatum Center at MIT and founded GrameenPhone, focused more on Asia’s strengths, Atkinson more on shortcomings in U.S. industrial policy.)

Meanwhile, Aneesh Chopra, the Obama administration’s chief technology officer, said in an interview this week with the San Jose Mercury News that he is concerned about the U.S.’s competitive position in technology innovation. Asked in the interview if he was worried about U.S. competitiveness in business and technology, Chopra responded: “Absolutely.”  

Chopra cited findings from an Information Technology and Innovation Foundation report earlier this year that reported that, although the U.S ranks reasonably well in current competitiveness, it ranked last among 40 nations in its improvement in various competitiveness indicators.

Two innovation links of note:

1. The new issue of Deloitte Review features an interview with Eric von Hippel of the MIT Sloan School of Management — on the state of open innovation. In the interview, von Hippel covers topics ranging from “open hardware” to why companies often resist open, user-led innovation. Definitely worth reading.

2. In an article titled “Honda’s New CEO is also Chief Innovator,” BusinessWeek highlights a new engineer-CEO: Honda’s new CEO, Takanobu Ito, is also the company’s director of R&D. According to BusinessWeek, Ito will at least temporarily retain both roles, as Honda seeks to better align its technology direction and business strategy.

 What are the personal characteristics of successful innovators? In his new book The Silver Lining: An Innovation Playbook for Uncertain Times, Scott Anthony includes an interesting observation on that topic.

Anthony reports that, according to some new research by Jeffrey Dyer, Hal Gregersen and Clayton Christensen, most successful innovators tend to be very good at seeing connections between seemingly disparate ideas, a trait the researchers call “associational thinking.”

The good news? Anthony argues that would-be innovators can strengthen their innovation skills. One way is by improving the skills that drive associational thinking, such as questioning and experimenting.

Another option Anthony suggests: Try to place yourself in “innovation schools” — in other words, real-life settings that will give you experiences that could relate to new challenges you may face in the future.  Such activities might range from volunteering for an international project at work to using free time on nights and weekends to help a relative launch a start-up.

A new working paper tackles an interesting topic: the relationship between tolerance for failure and innovation. In particular, authors Xuan Tian and Tracy Y. Wang looked at venture capitalists’ tolerance for failure  — and its effect on the innovativeness of the young companies they invested in.

One of Tian and Wang’s interesting findings: Venture-backed companies that eventually conducted IPOs (initial public offerings) and were backed by more failure-tolerant venture capitalists were significantly more innovative than other venture-backed IPO companies. 

What’s more, the researchers’ analysis suggests that what particularly matters is investment at an early stage by a failure-tolerant investor.   Venture capitalists, Tian and Wang conclude, appear to influence the culture of the early-stage start-ups they invest in — and failure-tolerant early investors result in IPO companies that are more innovative. 

Tian and Wang measured VCs’ failure tolerance by looking at how long the VCs continued to invest in prior companies that they eventually wrote off.  The authors’ measured innovativeness by looking at a company’s patents and the impact of those patents.

In the popular imagination, innovation is often associated with creative inspiration that can neither be predicted nor planned. So what happens when two professors of operations and information management (who have also developed products and launched companies) tackle the topic of innovation?

An informative new book, Innovation Tournaments: Creating and Selecting Exceptional Opportunities, is the result. In it, Christian Terwiesch and Karl T. Ulrich, professors at the Wharton School of the University of Pennsylvania, look at innovation process — in other words, a process management approach to innovation.

In particular, Terwiesch and Ulrich focus on “innovation tournaments” as a tool that companies can use to identify promising ideas for innovation, which they term “opportunities.” Much as the American Idol television show is able to use a tournamentlike approach to identify a small number of promising performers from thousands of would-be contestants, companies can use tournaments, Terwiesch and Ulrich argue, to identify new opportunities for their businesses. Ideas may be sought from employees, from people outside the organization, or from a combination of internal and external sources.

You can read more of this book review of Innovation Tournaments in the Summer 2009 issue of MIT Sloan Management Review.

Erik Simanis and Stuart Hart offer an interesting perspective on innovation in an article in the the new Summer 2009 issue of MIT Sloan Management Review.  In particular, they offer a vision of a world in which businesses and communities are more closely intertwined.

The authors contrast “structural innovation” that companies have traditionally practiced — a transaction-oriented model where companies try to create better products to satisfy markets’ unmet needs – with a model they refer to in terms of ”business model intimacy” and “embedded innovation.” In this model, a business innovates by working closely with a community to improve people’s lives. An example is Grameen Bank, with its microlending program in Bangladesh that grew out of founder Muhammad Yunus’ personal experience with Bangladeshi villagers.

Write Simanis and Hart:

At  its foundation, business model intimacy is a kind of relationship in which the identity of a community is fused with that of a company. The glue that binds this shared identity is a jointly constructed vision of a better life and community — a strategic community intent — anchored around a new business.

You can read more about this concept in Simanis and Hart’s article, “Innovation From the Inside Out.”

Relationships between a company’s R&D and marketing departments aren’t always cordial.  According to a survey conducted by Philip Kotler, Robert C. Wolcott and Suj Chandrasekhar, only 34% of mid-level managers describe the relationship between their company’s R&D & marketing departments as collegial. 

The researchers describe their findings in their  article “Playing Well With Others,” which is part of the new edition of Business Insight, a collaboration between MIT Sloan Management Review and The Wall Street Journal.

What are the complaints? Among other things, Kotler, Wolcott and Chandrasekhar found that R&D employees complained about poor data from marketing, while marketing folks felt the R&D people did not include them in the early stages of product development. To address the problem, the authors suggest a number of approaches:

• Make sure people understand each department’s value — and how they complement one another.
• Prevent one group or the other from dominating the company’s new product development process.
• Develop a common language for both groups to use.
• Avoid having people stay strictly in their silos.
• And, finally, stay focused on the customer.   

“When engagement and thinking in terms of customer needs becomes routine, everyone has a common vision for what is being developed and why,” the authors note.

To generate innovative ideas, companies need to look in areas beyond the familiar — and often slightly beyond their core, day-to-day businesses. That’s one of the messages of “In Search of Innovation,” an  article that is part of this week’s edition of Business Insight. which is produced in a collaboration between MIT Sloan Management Review and The Wall Street Journal.

In the article, researchers John Bessant, Kathrin Möslein and Bettina von Stamm describe eight ways companies can spark innovative thinking:

• Create scenarios of the future.
• Use the Web to create “marketplaces of ideas,” as InnoCentive does.
• Work with innovative “lead users.”
• “Deep dive” by closely  observing consumers’ behavior.
• Conduct “probe-and-learn” experiments in market segments you want to learn more about.
• Encourage staff to look for market trends.
• Foster entrepreneurial behavior in employees.
• Get different parts of the organization talking together.
• Seek partners and staff with diverse perspectives.

Vijay Govindarajan

How should companies think about innovation during a downturn like this one? Vijay Govindarajan, an expert on innovation and strategy from the Tuck School of Business at Dartmouth, thinks that businesses should be careful not to  abandon innovation in their quest for efficiency and cost control during a recession — but they may need to reduce their focus on risky breakthrough innovation plans. 

How should a company strike that balance? In  an interview published today  as part of Business Insight, MIT Sloan Management Review’s collaboration with The Wall Street Journal, here’s what Govindarajan suggested:

“I distinguish between two types of innovation: adjacency innovation, which is a little less risky because you are innovating in a business area adjacent to your existing core business, and breakout innovation, where you are going multiple steps outside of your core business. In a normal time, I would say spend about 50% of company resources on the core business and about 50% on adjacency and breakout innovation—perhaps 35% on adjacency innovation and maybe 15% on breakout innovation.

But during times like this, the percentages shift. I would shift to spending more like 70% on the core business and perhaps 25% on adjacency innovations—and maybe 5% on really breakout innovation. The investment in innovation in adjacency areas probably doesn’t change much, but you shrink some of the spending on real breakout innovation. The reason is: Breakout innovations are high-risk and high-payoff. And one thing you cannot afford during this economic crisis is to make a serious mistake.”

You can read more about Govindarajan’s thoughts on innovation and strategy during the downturn in the new edition of Business Insight.

Should established companies even try to launch new ventures regularly? That question was the subject of an interesting discussion between Julian Birkinshaw of London Business School and Andrew Campbell of Ashridge Strategic Management Centre; their discussion was contained in a recent newsletter from MLab, in an article called “Debating Innovation.”

Campbell,in particular, urged established companies to be very conservative in their approach to innovation and pursuing new ventures. He wrote:

Don’t be blindly enthusiastic about doing new things: the cost can easily exceed the benefit. Innovate in a focused pragmatic way in areas where the gains are likely to be bigger than the costs…Don’t set up venturing units or venturing processes unless the opportunities you face are so exciting that you expect to have a continuous stream of new projects that will require processing.

Interestingly, both Birkinshaw and Campbell were coauthors of a 2003 MIT Sloan Management Review article called “The Future of Corporate Venturing.“

Heard an interesting presentation this week by Scott D. Anthony, president of Innosight, the innovation consulting firm cofounded by disruptive innovation expert Clayton Christensen. Anthony, who has a new book out called The Silver Lining: An Innovation Playbook for Uncertain Times,  described the era we’re in as “the great disruption” — a period when competitive advantage is temporary and innovation is thus a necessity.

That may sound somewhat daunting, but Anthony also offered some grounds for optimism, such as:

• “No matter how tough the times, innovation happens,” Anthony observed. In fact, innovative upstart companies may find that in tough times their innovations can gain against “teetering giants.” (Blogger’s note: Admittedly, this may not be grounds for optimism if your company is a “teetering giant.”)
• One of the root causes of struggles in corporations around innovation is about abundance — in that too much time and too much money make innovation seem difficult. So that means, paradoxically, that bad times can be good for innovation. “The scarcity that we are feeling and the discipline it imposes is actually good news for innovation,” Anthony said.
• Companies can prosper by “loving the low end,” in Anthony’s words. That could mean innovation that, say, offers something simpler, cheaper, automated, distributed — or offers something targeted to growing emerging markets, such as India.  (To Anthony’s credit, he was practicing what he preached: I heard his presentation via webinar –an inexpensive, distributed-via-Internet alternative to traveling to traditional conference presentations  – and the webinar was broadcast from Mumbai, India.)