By their very nature, networks - of customers, Web sites, weather patterns, evolutionary systems, or economic competitors - are subject to random and unpredictable movements.

Networks of interrelated things, whether we are talking about the Web or a collection of stock and bond prices, often grow in a kind of "cascading" pattern. For instance, because one person buys a stock, others think it must be valuable, too - so they buy it. Influential customers become more influential at a faster rate than those who aren't already influential. The most visited Web sites gain visitors faster than others, and wealthy people become wealthier at a faster rate than others. The reason this kind of cascading occurs is easy to understand, but the effects of cascading like this can be quite random. Cascading means that two systems could be set up with nearly identical initial conditions, but even very slight, almost undetectable differences between them will inevitably escalate into major differences after just a bit of time, creating what has come to be known as the "butterfly effect."

Continue reading "A Networked World is a More Random World" »

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This is one of my favorite topics, behavioral economics. I already have Ariely's book on my Kindle, and it is queued up next for reading (after I finish The Drunkard's Walk, about randomness). Ariely talks a lot about illusions, emotions, and irrationality as a way to explain human decision making. His point is not that decisions are irrational because they are random and unpredictable, but rather that they are irrational in certain, easily understood ways - ways that make the type of irrationality predictable.

Records show, for instance, that in some countries a very high percentage of people elect to donate their organs after they die, while in others - even similar cultures - the percentage of people who participate in organ donation programs is very low. So his question is: Why?

Continue reading "Dan Ariely: Predictably Irrational - and a Great Presentation" »

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Fred Krupp was up next at the HSM World Innovation Forum, talking about green technology and climate change. He is the author of a book, Earth: The Sequel. According to Krupp, our planet is in dire straits. Global warming is within our control if we act now, but if we don't tackle global warming, it will tackle us. This represents a potential "Gold Rush" for entrepreneurs and innovators. Less carbon will equal more jobs, Krupp says. There are more Americans employed in the wind industry today than in mining coal, he says, so we're talking about a lot of economic activity.

Those of you who read my posts regularly know that I am deeply skeptical of big claims like this. I didn't believe the world was ending because of global cooling when that was the fear back in the 1970s, and I didn't believe it was going to end with Y2K, when that was the fear in the 1990s, and I don't believe it is ending now, due to global warming. See my post from April 1 this year. Climates do change, of course. Our climate is always changing, and at different times in the distant past it has been far warmer than it is now, and it has been far colder. But the science behind man-made climate change is not "incontrovertible" despite what the propagandists say.

Continue reading "Fred Krupp Talks About Green Innovations at HSM Forum" »

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Clayton Christensen classifies sustaining innovations as those that continue to improve a product or service, and move it up and up and up along the customer's need. Often, sustaining innovations achieve a quality far in excess of what most customers actually need, and as quality improves, price and margin improve as well. In fact, Christensen says, competition in sustaining innovations has a tendency to increase the price of the product (in contrast to the common economic wisdom that competition reduces prices). However, at some point below this level of high product quality and innovation, there are disruptive technologies that will always chip away at the higher end products.

Continue reading "Christensen - Part Two" »

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Clayton Christensen's presentation is in two parts, and the first part is just concluded, but it's already clear to me and to several others I've talked to here at the HSM World Innovation Forum that his thoughts on innovation are definitely worth the trip.

Two questions he posed in this initial presentation:
1. Why is it so difficult to sustain success over time (i.e., to innovate again and again)? and
2. Is innovation really as much of a random event as it seems?

His tongue-in-cheek conclusion is that the principles of good management taught in places like Harvard actually sew the seeds of failure and ensure that innovation doesn't succeed.

Continue reading "Clayton Christensen Scores an A+" »

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Emerging markets may offer a tremendous opportunity for companies in more developed countries, but they have to think about their businesses in different models. So, for instance, Ford made a mistake when they tried to adapt an inexpensive car for the Indian market. To cut costs, they eliminated one set of power window options - the front seat would come with power windows, but the back would not. Problem: In India, if you can afford a $15K car, you are defined as wealthy. You have a chauffeur. So for its Indian-entry car, Ford gave the power window to the chauffeur.

Continue reading "Vijay Govindarajan: Innovation and Emerging Markets" »

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Sorry, but on the whole I was deeply disappointed in Prahalad's presentation. I could be wrong, and at lunch I talked with another blogger who said she really liked his talk, although not as much as Saffo's. But for my money, Prahalad struck out.

Next practices, not best practices. Amplifying weak signals. Focusing on value creation process. Changing nature of the firm. Global perspective. These are some of the issues Prahalad put up on his first couple of slides. Mega-issues, it seems to me, but not very illuminating, noteworthy, or even interesting. His perspective on innovation was hard to read from this beginning, and it didn't get any better for the whole hour.

Continue reading "CK Prahalad - Disappointing" »

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One of Saffo's most interesting perspectives is that innovation moves in phases. New scientific discoveries come in waves, and following these discoveries you have new technological applications that change everything. Chemistry innovations in the very early part of the 20th Century led to new giant companies like IG Farben and others. Then physics, in the second or third decade, and then electronics (or IT), in the 1950s. This is the scientific discovery that has shaped the entrepreneurial landscape over the last several decades. Now, we're seeing big discoveries in biology. And of course these industries overlap. The structure of DNA was understood in 1954, then the human genome project came fifty years later, and the biotechnology revolution is starting to happen.

Continue reading "Paul Saffo: Change Comes in Waves" »

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I'm now ensconced in the bloggers' perch, on the balcony overlooking the stage at the Nokia Theater in NYC (two blocks from Times Square), ready to take in the talks at HSM's Innovation Forum - Clayton Christensen, CK Prahalad, Paul Saffo. Big names. BIG conference.

Continue reading "Ready for the HSM Innovation Forum?" »

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Economists used to concern themselves with how an economy settled into equilibrium, looking at the supply or demand for particular products, their prices, and so forth. When there were more products than demanded, prices would fall, production would slow, and vice versa. In this old model of economic thinking, technological progress was thought to be an "exogenous variable" - something imposed from outside the economy by events not really under the control of the individuals and businesses operating within the economy itself.

Continue reading "It's Innovation, Stupid!" »

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