Three horizons of innovation

The point the model is trying to make is that without innovation, eventually a business will be unable to grow profits further. Each time an innovation is applied, the curve starts all over again, but takes off from the prior base of growth. To help think about the types of innovation necessary to achieve this, we can look at the first “three” of these curves. We could look at four, two, twenty. Three conveniently aligns with how many businesses think about strategic planning (short, medium and long) so we’ll use that.

The timeframe associated with each horizon depends on the lifespan of products in a given industry, the time it takes to get a product to market and the maturity of the target market. A first horizon (H1)  market is well established and grows mostly through competition and the sporadic breakthrough into new demographics. A second horizon (H2) market is still expanding – competitors spend more time making the pie bigger than fighting over slices. A third horizon (H3) market is yet to be proven or defined. It might be pie or it might be a hollow crust. In the case of a professional services firm, the first curve might represent 1-3 years out, the second might be 2-5 years out and the third 5-10 years out. For a resources company, these times might be double. For a media company, half.

Mixed horizons

The concept of growth horizons can be applied to any situation where growth eventually will plateau and/or decline without some external impetus. However, one can easily end up in conversations where everyone is talking about three horizons, but with different conceptual models. What a first horizon innovation or business is for one party may be second or third horizon for another. For example, transit systems in Tokyo have been using automated trains for decades. But automating trains for mining operations is still considered a third horizon innovation. The horizon isn’t determined by how edgy the technology is – it’s determined by a given business’s ability to realize and grow profit due to the innovation.

Current business thinking says that to have a sustainable growth strategy there needs to be connected innovation across all of the defined horizons. The horizon model is a continuum – successful third horizon innovations eventually get scaled up and become second horizon innovations which eventually should become core business that is either continuously improved or disrupted by the next big thing. To exploit this continuum a business needs to have a process for supporting innovation in each horizon and for moving those innovations from horizon to horizon.

The capabilities necessary to support growth are different for each horizon. For most businesses, the easiest growth horizon to support is the first horizon. This is often seen as “continuous improvement” and there are numerous general and industry-specific frameworks for achieving excellence. Past the first horizon, things get tricky. Not many businesses really understand the second and third horizons. For many, the third horizon is seen as speculative exploration and therefore an attitude of “anything goes” often prevails. On the upside, this results in edgy types of experiments that can lead to good press. On the downside, this rarely ever turns in to solid core value. The second horizon is also often misunderstood – growing a new market is incredibly tough. It’s easy for the collective leadership of a business to think that because they did it once before (growing their primary market) they can easily do it again. It’s easy to forget how many similar businesses failed where they succeeded. Research by Dan Lovallo (http://hbswk.hbs.edu/archive/3630.html) shows that business leaders are often overly optimistic about their capabilities versus those of their competitors and this is one of the biggest factors in why businesses fail.

Practice makes perfect, which means that businesses need a good supply of innovations in each horizon at all times – otherwise when that perfect H3 innovation is ready for scale up the business might not know how to do it. This means waiting for H3 innovations to make it down the continuum to H1 isn’t enough – there needs to be a good supply of H1 and H2 innovations coming from outside the continuum. For H1 ideas, experience shows that crowdsourcing from business employees, customers and partners works well. They understand the business of today – what could be better and what’s not working – and their ideas for improvement tend to be the most workable. H2 innovations often come from key business decision makers and their advisors. These are the people who are constantly studying market conditions and industry trends – critical factors in successfully scaling up. H3 often comes from people who are thinking outside the box. This could be academia, entrepreneurs or trend-spotters.

In my experience, many companies struggle with H3 but don’t realize it. They either have a bunch of wacky people running around trying “edgy stuff” or they have an oversight committee that won’t let ideas through without a clear understanding of exactly how and when the innovation will deliver revenue. By their very nature, H3 ideas rarely look disruptive to the business they’re disrupting — except in hindsight. Some companies run venture funds to try and get close to startups that have potentially disruptive H3 ideas. Others try to go on early acquisition sprees. However, few corporate cultures can withstand disruptive forces working from within. As a result, the benefits that a large company might bring to a startup (brand, access to markets) can be quickly negated by the policies, procedures and organisational mores that are explicitly designed to protect against such disruptions.

The best current examples of managing H3 innovation are those companies that are comfortable spinning-out and spinning-in. This is where a company lets its employees leave as entrepreneurs but with lots of support. If the startup is successful, the company has the ability to bring them back into the fold when they’re ready for H2 scale-up. If the startup fails, the ex-employees can come back to their previous employer with no hard feelings. When there is a success, the value of the acquired startup can be large – e.g. Google recently spun-in a spin-out for $50m (http://techcrunch.com/2010/02/11/google-acquires-aardvark-for-50-million/). There was a lot of discussion as to whether Google paid too much and would have been better off never spinning this out. It misses the point – this innovation could never have gotten as far if it had stayed in Google. Furthermore, there are many more spin-outs that Google has not acquired but which would have cost Google a large amount to pursue in-house. Once you factor in risk mitigation and opportunity cost, it doesn’t look like a bad deal at all.

In this post you’ll find links to the public waves generated, some of the materials used during the event and a feel for who was there. It was a fun, energy filled day where people networked in a very different way, learned a few new techniques for collaboration and innovation and learned about some companies with very exciting visions. There were event a few ideas developed that we think will have some real potential going forward.

Link to the Public Waves

Each table had its own wave.

Google Table: Wave’s Killer App

https://wave.google.com/wave/#minimized:nav,minimized:contact,minimized:search:in%253AInbox,restored:wave:googlewave.com!w%252B6foTf00zC.6

Better Place: How to drive adoption

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zI

Horizon Power: Multi-Utility Model

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zK

Horizon Power: Sustainable and Profitable Small Community Engagement Models

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zF

UTS UrbanAid: Merging physical and digital media in urban environments

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zM

UTS Business School: What will business education look like in 2050

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zS

The Bionic Ear Institute: Developing a generalized medical bionics platform

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zQ

The Future Table: What new business models will be possible in a world where all these innovations exist?

https://wave.google.com/wave/?pli=1#restored:search:with%253Apublic+fastrack,restored:wave:googlewave.com!w%252B6foTf00zO

Twitter Feed

Hashtag: #fastfuture

Archive from the day: http://sonnenreich.com/ramble/2010/03/twitter-archive-for-fastfuture/

Wordle topic visualization:

Wordle cloud from #fastfuture twitter feed

Visualisation used at conference: http://www.tweetviz.com

Top Games Developed during Rapid Prototype Training

1) Coming soon…

2) Check back later!

3)

Conference Run Sheet

09:00: Introduction, Welcome

Warm-up Networking

This is a quick way for people at each table to get to know one another. Each person will turn to another at the table and discuss the following questions. After each round people will rotate around the table so they can talk with someone different.

09:05: Speed Innovating round 1: If you can fly like superman… but for only one hour what would you do?

09:10: Speed Innovating round 2: How would your life change if you could use 100x the amount of energy you use today at the same cost and environmental impact?

09:15: Speed Innovating round 3: If you could replace any part of your body with a bionic replacement that’s twice as good (faster, stronger, more flexible)… would you replace currently healthy parts of your body?

09:20: Speed Innovating round 4: What’s the best experience collaborating you’ve ever had, what made it stand out?

09:25: buffer

Innovation Introductions

Each innovator will spend 10 minutes explaining the essence of their innovation and the challenges they’re looking to solve.

09:30: Google presents

09:40: HP presents

09:50: Better Place presents

10:00: UTS B School presents

10:10: Bionic Ear presents

10:20: UTS Urban Aid presents

10:30: Future Table presents

10:35: Morning tea break – grab fast and get in for our cafe

Idea Generation

The idea generation session is a facilitated brainstorming session where the first few minutes are spent coming up with ideas seperately, then the ideas are collected and more ideas are generated as a group for a few minutes. Then a few of the ideas are expanded upon by the group. After 3 rounds of this (people rotate tables each round) a single idea is chosen and refined by the original table group for the prototyping round.

10:45: Innocafe explanation – goal is to first get lots of ideas, then explore best ones. Wave lets us do this differently. 1st take 2 minutes to come up with a few ideas on your own. If you’ve got a laptop, put them directly into the wave. Otherwise write them down and pass them to the wavelet. Use the mindmap if you can. While discussing people with laptops can put ideas into the wave

10:50: Innocafe warmup – refine warmup exercises

11:00: Innocafe round 1

11:20: Innocafe round 2

11:40: Innocafe round 3

12:00: Idea refinement (back to original table)

12:20: buffer

12:30: Lunch

Rapid Prototyping Training

Participants will create a board game based on the theme of their table. They will develop this game using a rapid prototyping technique that results in diverse input at early stages of the design process.

If you’d like a copy of our PPT deck and some of the game kits, please email me.

Key things to focus on:

• What are the skills/abilities of your team? How can you use this to best collaborate?
• Test as you go – constantly experiment, refine
• During playtest – who will explain, who will observe?
• Keep it simple till it works, then expand
• What can you learn from your “customers” and “competitors”?
• How will you advertise your game to attract players during the testing phase?

Voting: each person gets one poker chip. After the 2nd playtest round people go around the room and place their chips on the game they liked the best. Top three get to present their idea.

1:15: Instructions for Rapid Prototyping workshop

1:30: Rapid Prototype Game design round 1

1:45: Rapid Prototype Game playtest 1

2:00: Rapid Prototype Game design round 2

2:15: Rapid Prototype Game playtest 2

2:30: Rapid Prototype Game voting/top 3 preso

2:50: Afternoon tea

Rapid Prototyping Workshop

The same process of rapid prototyping will now be applied to the idea that was refined at the end of the morning session. The goal will be to come up with a 2 minute pitch that convinces the rest of the room of the value and feasibility of the idea. This is about creating the simplest prototype to validate the idea – not actually “implementing” the entire idea.

Key things to focus on:

• What is the critical part of this solution that must be demonstrated for a customer to believe?
• How can you test that critical part using the simplest test possible?
• What are the logistics of building and running that test?
• What type of team do you need to execute the test?

Pitch:

• Explain the problem that is being solved.
• Explain why solving this problem is valuable and who it’s valuable to
• Assume you’ve “solved” the critical part identified and talk about “how you solved it”
• Explain how someone could verify that the solution will give them value based on your prototype

3:10: Instructions for Prototype workshop

3:15: Prototype workshop design round 1

3:30: Prototype workshop pitch round 1

3:45: Prototype workshop design round 2

4:00: Prototype workshop pitch round 2

4:15: Table rotate workshop final design round 3

Wrap-up

4:30: Pitchfest + voting – done with chips like the earlier round

5:00: Closing, networking

Partial list of Attendees

1. green_dot RT @apglo Thanks to @jazzmind & Deloitte for a fantasic innovation/collaboration workshop. Corporate AU needs to do more of this #fastfuture about 3 hours ago from web
2. DorisSpiel #fastfuture was great, thanks @rexster, @jazzmind, @rosshill 4 facilitating the innovative explosion. Just now leaving the afterparty prem.. about 12 hours ago from Echofon
3. sopharahma Had an amazing day of innovation working with Google Wave, UTS, Better Place at #fastfuture about 16 hours ago from web
4. apglo I’m still unsure about how google wave works for collaboration after using at #fastfuture. Kudos to google for their efforts for feedback. about 16 hours ago from Tweetie
5. apglo @krista_walter pipes and panels is one heck of a game. Love the finely crafted playing pieces. #fastfuture about 16 hours ago from Tweetie
6. apglo Thanks to @jazzmind and Deloitte for a fantasic innovation/collaboration workshop. Corporate AU needs to do more like this. #fastfuture about 16 hours ago from Tweetie
7. hollingsworth @paulwallbank whats this about #fastfuture and Wave – let us know if you find the URLs /cc @pamelafox @domesticmouse @franciejones about 18 hours ago from Mobile Tweete
8. green_dot RT @jazzmind the waves for each #fastfuture table will be made public tonight and announced at the Hargraves conference tomorrow about 19 hours ago from web
9. krista_walter Just invented the Pipes and Panels board game at #fastfuture to educate about effiecient energy use with #HorizonPower about 19 hours ago from web
10. lukemccormack What will edu look like in 2050? How do we access context & location relevant information in the future? Some of the Qs from #fastfuture about 19 hours ago from web
11. SydneyPlaces #fastfuture the waves for each table will be made public tonight and announced at the Hargraves c… http://schmap.it/rn7YYN (via @jazzmind) about 19 hours ago from Schmap
12. lukemccormack Supplying essential services & sustainable change in regional & remote communities – Horizon Power #fastfuture about 19 hours ago from web
13. green_dot RT @lukemccormack Pitch time at #fastfuture! Google up first… about 19 hours ago from web
14. rexster #fastfuture next pitch community led Multi utility what community needs not what utility supplies or gov will fund about 19 hours ago from Tweetie
15. paulwallbank “a single truth”. I love that phrase #fastfuture about 19 hours ago from TweetDeck
16. rexster #fastfuture first pitch turn Google Wave into Google Meeting … coz meetings are broken about 19 hours ago from Tweetie
17. lukemccormack Pitch time at #fastfuture! Google up first… about 20 hours ago from web
18. rexster #fastfuture Wave will go public tonight we are using them now to create and build ideas about 20 hours ago from Tweetie
19. WildChildinAUS Thanks Paul RT @paulwallbank: @WildChildinAUS @jazzmind tells me each #fastfuture #wave wil be public later tonight. about 20 hours ago from TweetDeck
20. paulwallbank @WildChildinAUS @jazzmind tells me each #fastfuture #wave wil be public later tonight. about 20 hours ago from TweetDeck
21. jazzmind #fastfuture the waves for each table will be made public tonight and announced at the Hargraves conference tomorrow. about 20 hours ago from TweetDeck
22. WildChildinAUS @paulwallbank Is the Google #wave for #fastfuture a public wave & if yes do you have link? about 20 hours ago from TweetDeck
23. jazzmind #fastfuture crunch time – tables refining their final pitch over the next 10 minutes. What will we see from each? about 20 hours ago from TweetDeck
24. paulwallbank RT @jazzmind #fastfuture pitch time – everyone is up and pitching, massive elevator pitch fest! Lot of energy in the room after 6 hrs! about 20 hours ago from TweetDeck
25. peterhau @paulwallbank worthwhile reading this article to see what general approach to both is…. http://bit.ly/bBRIRL #fastfuture about 20 hours ago from TweetDeck
26. jazzmind #fastfuture pitch time — everyone is up pitching each other – a massive elevator pitch fest! Still lot of energy in the room after 6 hours! about 20 hours ago from web
27. peterhau @paulwallbank have seen it attempted a couple of times, based on initial outlay, compared to perceived market value. funny stuff #fastfuture about 20 hours ago from TweetDeck
28. paulwallbank @peterhau @gnoll110 can you calculate the ROI if you don’t know the cost of ownership? #fastfuture about 20 hours ago from TweetDeck
29. peterhau @gnoll110 what is worse, not having a TCO calculation, or stuffing up the ROI? #fastfuture about 20 hours ago from TweetDeck
30. paulwallbank Fascinating watching people’s pitches developing as they practice and brainstorm #fastfuture about 20 hours ago from TweetDeck
31. wittering @lukemccormack BrainWave was the winner that didn’t need bragging rights #fastfuture about 21 hours ago from web
32. lukemccormack How can we develop sustainable ideas based on the learnings from board games? What learnings come from developing games? #fastfuture about 22 hours ago from web
33. lukemccormack A massive 10 votes for the “sustainable communities” team! #fastfuture about 22 hours ago from web
34. lukemccormack It’s all about the twitter sledging between teams! #fastfuture about 22 hours ago from web
35. lukemccormack Team “sustainable communities” clearly winning the board-game creation leg at #fastfuture about 22 hours ago from web
36. lukemccormack Market testing via board game creation at #fastfuture about 23 hours ago from web
37. apglo What makes a good game? Must b fun, simple is better, balance btw luck & skill #fastfuture about 23 hours ago from TweetDeck
38. lukemccormack How can you use serious games to develop business concepts? #fastfuture about 23 hours ago from web
39. apglo Good idea: solve 1 prob, strict time const, show & tell, collab w right ppl, borrow w pride, steal shamelessly, rapid proto #fastfuture about 23 hours ago from TweetDeck
40. rexster @wschumac #fastfuture is an offlline event with people from google, better place, horizon power, bionic ear and uts seeking input about 23 hours ago from Tweetie
41. lukemccormack Rapid prototyping – how to create an awesome product quickly… #Fastfuture about 23 hours ago from web
42. jazzmind #fastfuture – lunch almost finished, time to begin our rapid prototyping training & workshop. Best thing after a meal is some fun and games! about 23 hours ago from web
43. wschumac @rexster innovation cafe drove heaps of ideas, now for rapid prototyping <<- Pete, is #fastfuture an online or offline string of events? about 23 hours ago from Seesmic Web
44. peterhau @gnoll110 sorry, anymore. #fastfuture about 23 hours ago from TweetDeck
45. peterhau @gnoll110 depending on org making sales pitch, most at least know of TCO – I used to use calc for opps. I don’t sell to the EU. #fastfuture about 23 hours ago from TweetDeck
46. gnoll110 @peterhau Yep. And that brings us back to caveat emptor and understanding the basic of TCO & asking the questions @paulwallbank #fastfuture about 23 hours ago from web
47. rexster #fastfuture innovation cafe drove heaps of ideas, now for rapid prototyping about 23 hours ago from web
48. peterhau @gnoll110 the inability to do TCO means that org providing the soln isn’t being true 2 their client. shld be no 1 in discussions #fastfuture about 23 hours ago from TweetDeck
49. gnoll110 @peterhau But isn’t pple inability to do TCO combine with businesses short time frame mean bad decision being made @paulwallbank #fastfuture about 23 hours ago from web
50. WildChildinAUS @jazzmind Can you please tell me where #fastfuture is being held & maybe give me a web link for more info? Thx! about 24 hours ago from TweetDeck
51. jazzmind #fastfuture it’s lunchtime but people are still innovating – We’ve got to force them to eat! about 24 hours ago from web
52. peterhau @paulwallbank paul, the problem is that the only way to compete in some sectors is to be innovative. price won’t win many deals. #fastfuture about 24 hours ago from TweetDeck
53. paulwallbank The total cost of ownership marketing model is problematic. Most people don’t realise the TCO of cars, IT, housing, etc #fastfuture about 24 hours ago from TweetDeck
54. apglo The electric car comes with a lot to things to figure out – infrastructure, manufacturers, useability #fastfuture 1 day ago from TweetDeck
55. jazzmind #fastfuture just finished 3 rounds of brainstorming now idea refinement time. Can’t wait to see the best ideas on each table. 1 day ago from TweetDeck
56. WildChildinAUS @paulwallbank Where are you? #fastfuture sounds v cool. 1 day ago from TweetDeck
57. paulwallbank collaboration and innovation are two different things #fastfuture 1 day ago from TweetDeck
58. paulwallbank Does everybody have to be an innovator? Can we expect that most people are happy the way things are? #fastfuture 1 day ago from TweetDeck
59. wittering Into the brainstorming session for #fastfuture – working with Daniel Clemens from Google. How can wave solve collab pain points? #yam 1 day ago from web
60. lukemccormack The Innovation Cafe clicks into full gear… Stay tuned for some creative collaboration up next! #Fastfuture 1 day ago from web
61. jazzmind #fastfuture innovation cafe time – first some warm-up exercises then some creative collaboration. #innovation 1 day ago from web
62. TomBarkerDesign Excellent intro to 8 collectivised problems, let’s hope the coffee fires up the braincells to fix these.. #fastfuture 1 day ago from web
63. rexster Hafeez Bana thinking virtuoso talking about how we got here through history and what we may be doing in the future #fastfuture 1 day ago from Tweetie
64. jazzmind #fastfuture Hafeez Bana – “play with yourself table” what business models will exist when all the other innovations discussed are common? 1 day ago from TweetDeck
65. paulwallbank Better place asks how energy pricing can maximise use of renewal power and use smooth supply peaks for renewables #fastfuture 1 day ago from TweetDeck
66. apglo renewable energy which is weather dependent is a great fit to charging electric cars during off peak periods #fastfuture 1 day ago from TweetDeck
67. lukemccormack “How can we send energy back into the grid from our vehicles?” – That from Guy Pross of Better Place #Fastfuture 1 day ago from web
68. rosshill What time of day will you charge your electric car, as the energy marketplace fluctuates throughout the day? Better Place at #fastfuture 1 day ago from web
69. apglo Better Place is preparing us for the electric car revolution – massive paradigm shift in thinking #fastfuture 1 day ago from TweetDeck
70. lukemccormack Design, infrastructure and energy are just some of the things Guy Pross & Better Place are thinking about #Fastfuture 1 day ago from web
71. rexster Better Place need to design a smart network for Smart Cars #fastfuture 1 day ago from Tweetie
72. jazzmind #fastfuture guy pross – better place – how to build infrastructure when you don’t know what the vehicles will be capable of? 1 day ago from TweetDeck
73. rexster Guy Pross Better Place – talking about challenges in designing a recharge network for cars that don’t yet exist #fastfuture 1 day ago from Tweetie
74. wittering Peter Blamey; The Bionic Ear Institute is looking to create a bionics platform – they need more people #fastfuture #yam 1 day ago from web
75. lukemccormack Some amazing THINGS coming out of the Bionic Institute right here in Mel York… #Fastfuture 1 day ago from web
76. lukemccormack Some amazing these coming out of the Bionic Institute right here in Mel York… #Fastfuture 1 day ago from web
77. rexster Bionic Ear Institute talking about how problems solved in creating Bionic Ear can be used for other conditions #fastfuture 1 day ago from Tweetie
78. jazzmind #fastfuture Peter blamey – bionic ear institute – talking about using learning from building bionic ear applying to other bionics: eg eyes 1 day ago from TweetDeck
79. lukemccormack “How do we begin preparing for the future?” – That from Martin Kornberger #Fastfuture 1 day ago from web
80. apglo check out Singapore’s new ION Orchard mall http://bit.ly/bHcuTF – has a 117m fascade which is a multi-sensory canvas media wall #fastfuture 1 day ago from TweetDeck
81. lukemccormack If you’re starting work now, you can look forward to being in the workforce until 2060… So what will the world look like? #Fastfuture 1 day ago from web
82. jazzmind #fastfuture Martin kornberger – uts business – he’s a philosopher, so “has a problem for every solution” 1 day ago from TweetDeck
83. rexster Making energy use visual should be easy with smart meters #fastfuture 1 day ago from Tweetie
84. jazzmind #fastfuture rod Hayes – horizon – small regional and remote communities are essential but a pain for most utilities. how to make it work? 1 day ago from TweetDeck
85. lukemccormack Rod Hayes, MD of Horizon Power, takes the stage at #Fastfuture 1 day ago from web
86. paulwallbank cost of LEDs has dropped 95% one interesting use is MITs Flyfire http://bit.ly/ad33Uv #fastfuture 1 day ago from TweetDeck
87. rexster Building costs up 30% cost of pixel down 95% – UTS urban aid #fastfuture 1 day ago from Tweetie
88. lukemccormack UTS Urban Aid are working on visualisation of energy use… What effect will this have on our attitude towards energy? #Fastfuture 1 day ago from web
89. mattjhaigh Cost of construction in AUS up 30% last year, cost of pixel has collapsed. Shame as lattes don’t taste good in a pixelated world #fastfuture 1 day ago from web
90. rexster Uts urban aid – Australia rated 4 in terms of countries that are e-ready #fastfuture 1 day ago from Tweetie
91. apglo Digital media and Creativity – like to see the stats on how they’re correlated. #fastfuture 1 day ago from TweetDeck
92. lukemccormack “We should be leveraging creative industries far better than what we are…” – that from Tom Barker of UTS Urban Aid #Fastfuture 1 day ago from web
93. rosshill Tom Barker from UTS – unlike what I usually say, “I should probably say stop paying attention and use your computers” #fastfuture #wave 1 day ago from Tweetie
94. lukemccormack “The cost of construction in Australia up 30%” – that from Tom Barker of UTS Urban Aid #Fastfuture 1 day ago from web
95. apglo UTS Urban Aid tells us over the last 10 years, the cost of building construction rose 30% – how is that sustainable? #fastfuture 1 day ago from TweetDeck
96. jazzmind #fastfuture Tom barker – uts urban aid – integrating digital media into the outdoor urban environment. 1 day ago from TweetDeck
97. lukemccormack Mike Laughton-smith from Horizon Power talking renewable energy and community benefits at #Fastfuture 1 day ago from web
98. wittering @Green_Dot http://twitpic.com/17ffms – Great use of tweetviz.com at #fastfuture 1 day ago from TwitPic
99. apglo Horizon Power doesn’t just use renewable energy but is integrating community and sustainability initiatives. #fastfuture 1 day ago from TweetDeck
100. jazzmind #fastfuture mike Laughton-smith horizon power: developing integrated utility model for remote communities. 1 day ago from TweetDeck
101. lukemccormack Horizon Power takes the stage at #fastfuture… Following on from Daniel Clemens from Google. 1 day ago from web
102. jazzmind #fastfuture Clemens: collaboration historically limited by physical constraints, shouldn’t be that way. 1 day ago from TweetDeck
103. paulwallbank Daniel Clemens describing how small groups use Google Wave #fastfuture 1 day ago from TweetDeck
104. jwswj spewing I couldn’t make it along to #fastfuture. @rosshill Is there a google wave i can jump on? 1 day ago from TweetDeck
105. jazzmind #fastfuture daniel clemens from google wave: what would email look like if we created it today? 1 day ago from TweetDeck
106. rosshill at @green_dot‘s Fastrack the Future event w/Google, Horizon Power, Better Place, UTS, Bionic Institute #fastfuture http://yfrog.com/j3dp8oj 1 day ago from Tweetie
107. lukemccormack Some great discussion coming out of Deloitte’s #fastfuture workshop. Interesting ideas being thrown around the room… 1 day ago from web
108. wittering Daniel Clemens from Google is talking at #fastfuture #yam – quality questions lead to quality innovation 1 day ago from web
109. jazzmind #fastfuture about to hear from the innovators — first up: Google Wave #innovation 1 day ago from web
110. TweetDiscovered RT @Skimmingstone:At Westin Hotel Melbourne for Deloitte #fastfuture Innovation Workshop. On Bionic Insititute Table. 1 day ago from twitterfeed
111. Skimmingstone At Westin Hotel Melbourne for Deloitte #fastfuture Innovation Workshop. On Bionic Insititute Table. 1 day ago from web
112. green_dot A day of innovation & collaboration ahead with Google, Horizon Power, Better Place, UTS, Bionic Institute #fastfuture 1 day ago from web
113. xeiss At Westin Hotel Melbourne for Deloitte #fastfuture Innovation Workshop. Seems like these tweets are being put on the projector! Cool. 1 day ago from Twitterrific
114. jazzmind #fastfuture what is the best experience collaborating you’ve ever had? What made it stand out? 1 day ago from web
115. paulwallbank finally made it to #fastfuture 1 day ago from TweetDeck
116. mattjhaigh Wes is our superman! Go Wes! #fastfuture 1 day ago from web
117. green_dot Deloitte Innovation team is gearing up for #fastfuture today 1 day ago from web
118. jazzmind #fastfuture If you could replace any part of your body with a bionic part that was significantly better than the best athlete’s… 1 day ago from web
119. lukemccormack The @Green_Dot #fastfuture innovation workshop kicks off for the day… Horizon Power, Better Place, UTS & Bionic Institute in the room… 1 day ago from Echofon
120. apglo hey wow – looks like there’s going to be a twitter backchannel today for the Deloitte #fastfuture innovation workshop. 1 day ago from TweetDeck
121. lukemccormack Gearing up for #fastfuture today at The Westin Mel York. Big day of innovation ahead… 1 day ago from Echofon
122. jazzmind getting ready for our event today – big innovation collaboration w/Google, Horizon Power, Better Place, UTS, Bionic Institute #fastfuture 1 day ago from web
123. wittering Looking forward to Fastrack the Future today at the Westin in Melbourne #fastfuture #yam 1 day ago from web



We’ve covered the earth with it, but we had no idea how it worked… until now…
http://web.mit.edu/newsoffice/2009/cement-0909.html?tr=y&auid=5356791

“Powerful” ideas:
http://web.mit.edu/mitei/news/spotlights/engine-innovation.html?tr=y&auid=5628667

Seriously, games are in my blood:
http://sliceofmit.wordpress.com/2009/07/15/mit-developed-video-games/
http://sliceofmit.wordpress.com/2009/07/30/mit-developed-video-games-redux/

For mummies who want to raise young innovators:
http://sliceofmit.wordpress.com/2009/11/13/pop-up-book/?tr=y&auid=5628968

And some other cool ideas:
http://www.popularmechanics.com/technology/industry/4332914.html?tr=y&auid=5628693

The mistake all these discussions make is equating digital products to physical products. They are not equivalent. Physical objects cost money to duplicate – materials, equipment, labor. They also cost money to get to market. Digital objects cost nothing to duplicate and when sold online, cost nearly nothing to distribute. If you steal a physical object, you’ve robbed the duplicator and distributor of costs they’ve already incurred. If you steal a digital object, these costs never existed.

What about the cost of creation? The value of the design? The reality is, the labor cost of designing a product is a sunk cost, whether digital or physical and almost never factored into the sale price. The price of a good is mostly set by the cost of production, distribution, marketing and consumer demand (what the market will bear). What this means is 3 of the 4 factor (all but demand) are severely minimised in the case of a digital product. Or more simply, digital products are basically priced at what the market will bear whereas there are hard lower limits to pricing on physical objects before the seller incurs a loss on the item itself.

They key to solving digital piracy is understanding where the REAL value lies in your “product”. Why does Apple make a ton of money on ITunes when all the songs they sell are freely available on the net (and they’ve removed DRM from the versions you buy as well!)

The answer is that people aren’t paying $.99 for the song. They’re paying for convenience: ease of finding music they like through the store, ease of getting it onto devices they want to play it on, knowledge that they won’t “lose” their music if their HD crashes or CD gets scratched, etc. The song itself is worthless because you can get it for free a hundred different ways. But Apple makes money off of the song by focusing on the value surrounding it.

How do we do this for games? Steam is a good solution – I buy almost all my games on steam because it makes life very easy for me. No media to deal with, easy install on every computer i own, if I want to share with a friend I give them my steam account (only one of us can play at a time, but that’s fine — it’s just like lending a book).

MMOs offer a different, but equally good value model. I don’t pay for the game – I can hack and slash in similar ways in games I already own. I pay for access to a populous and well-connected multiuser environment. I don’t see the subscription price as fee for content or fee for the game. I see it more like membership to a fitness club. I have weights at home, but the environment of the gym is far more conducive to a good workout.

So what is the value associated with a Real Time Strategy game like AI War? I’d argue that the core game is valueless. There are plenty of games with similar mechanics available for free on the Internet. The true value that AI War brings to the table, and it’s point of differentiation is in the AI. An additional opportunity for creating value is in the way in which co-operative multiplayer matchmaking could be handled.

AI War is currently sold as a $20 game with no DRM – just a license key that lifts restrictions on the free trial. Its main selling points are that the AI is uniquely challenging and that the game has been designed from the ground-up as a co-operative game. There are 10 levels of AI difficulty, with the first “challenging” AI at level 7. Nobody has yet beaten level 10.

Given this, here’s how I’d apply the principles discussed above to sell AI War:

AIs up to level 5 are free. You can play the full game with friends in an unlimited context with these AIs. Level 6+7 AIs are also included, but play as the current free trial does.

AIs from 6-10 cost $4.99 each (6 and 7 are bundled together for $4.99). There could be a couple of AIs for each level, each with a distinct playstyle/personality and these could come with new units as well.

Each purchased AI also would give the player access to a leaderboard that tracks player stats/wins against the AI. It also comes with a matchmaking service that lets players find others online for co-op play. The matchmaking service should track player stats, including whether the player drops out and doesn’t resume, or inversely, whether they’re willing to drop into games that are already started.

There’s a cash reward for beating a level 10 AI. This goes up with the number of people that purchase the AI (e.g. $1 of each purchase goes to the reward pool). The pool keeps filling up w/purchase money until the AI gets beaten, then it’s given to the winner and starts filling again.

This essentially defeats the torrents — the whole game is “free”. It’s highly unlikely people will be torrenting the AIs – and even if they do, without an account on the leaderboard you’d lose the benefit of the matchmaking (which I think would be very useful).

The average player that gets hooked will almost immediately buy the level 6/7 pack. At $5, it’s almost impossible to resist. This will get them REALLY hooked, because they’ll soon beat level 7 and then will be looking for a challenge.

I also think a lot of players will be enticed to buy the level 10 AI… just for a crack at winning the prize pool (seed it with $100-$1000 to start).

I’d be really interested to see if a pricing model like this ended up netting you much better sales. My gut says it will.

The Problem with Problems (Einstein)

All good ideas solve at least one good problem

• It’s much easier to have a good idea if you have a good problem

Relativity applies to problems – there are different solutions for different frames of reference

• An outsider will see different solutions to an insider

• There can be many “layers” of outsiders and insiders. The directly affected, the participants, the observers within the company, the external consultants paid to observe, people looking through the window, etc. (diagram this)

A solution based solely on outside observations will often be less valuable, or unworkable, when applied to, or by, an insider (and vice-versa)

• The solution you sell must be relevant and workable to the frame of reference of the buyer

• Insider experience + outsider perspective = successful & innovative solution

Guaranteed System Failure (Gödel)

There are many “systems” for capturing and developing innovations…

…Gödel inadvertently proved these systems are bound to fail

Given: Innovations are exceptions

• Something that is innovative is new and different, thus the exception to the established rule

Given: Gödel proved that no consistent system can be complete, and vice-versa.

• “This statement is unprovable”
• In a complete system of logic the above statement is possible, but yields inconsistent results when analysed
• A consistent logic system would have to discard the above, and therefore it would not be complete.

Given: Innovation systems are designed to capture identifiable ideas – but you can only identify based on what you know, or what can be defined within the rules

Thus: Innovation systems will miss all the exceptions to the rules, which means they will miss all the innovations.

Q.E.D.

PS: Please note the large bump in my cheek. That’s my tongue.

Innovative Voyeurism (Heisenberg)

Heisenberg says certain pairs of physical properties, like position and momentum, cannot both be known to arbitrary precision.

• This is because the act of observing affects the measurement

Innovation seems to be rife with uncertainty: how much to invest, how long to invest for, etc.

• “Common knowledge” says: Many innovations fail because they were undercapitalised – the plug was pulled right before success (but how do we know that?)
• “Common knowledge” says: Many innovations cost far more money than they should because the innovators are incapable of letting go of their failures (but many of the successes would have never been if the innovators had let go)

The act of observing and analysing the innovation process often has an effect on the process itself

• Effects can be positive or negative, depending on the tools, methods and objectives of the observations
• Introspection is also observation – the innovators themselves are often observers

Do more observations lead to consistently better or worse outcomes, or is the sum effect neutral?

• This is a constant debate between VCs (or program managers) and innovators
• Innovators prefer less observation; however external feedback is often key to preventing long journeys down dead-ends. Of course, external feedback can also lead to short-sighted decisions that can kill an innovation

Three Steps beyond the 1st Horizon

1) Getting beyond 1st Horizon innovation requires a 3-5 year capability for investment

• Organisations managed on 6-12 month performance targets (most) don’t have KPIs that encourage long-term investment of time and capital

2) Recruit, management, and reward strategies need to match the structure that implements this capability

• 90% of ideas will fail at some stage; how do you performance manage someone who does excellent work for 6 months on a failure?
• Project KPIs should match the innovative process – # of prototype revisions, # of potential customers engaged at each round of development, project management skills, etc.

3) An innovation capability must be fed with qualified problems

• Qualified: real customers must be willing to pay real money for solutions to the problem
• Qualified: the parameters of “acceptable solution” should be fairly clear
• Problems: Do we know the current top 10 problems faced by our clients?
• Problems: Have we defined the problems well enough, or are we reverse-engineering problems from the solutions we pulled out of thin air?

On Tuesday I will be returning to MIT. Even though I graduated well over a decade ago, my feelings about the place remain complex. It has left a taste in my mouth that could be approximated by sipping on a lovely barolo right after touching a battery to your tongue. Memories of emotions from that time are a muddled mix of joy and shock – like having a bucket of cold water dumped on your head while being informed you’ve gotten a much larger than expected tax refund. IHTFP (I Hate This …cough… Fabulous …cough… Place) is the nearly-official school motto for many good reasons. Yet MIT has an incredibly strong alumni community that donates heavily. What’s the source of the love/hate? Perhaps a personal anecdote might help explain.

When I was an undergrad, I was having a lot of trouble with my second-semester physics class. As a result I spent a LOT of time getting tutored by the teaching assistant, a very patient graduate researcher named Wolfgang. God knows how often he had to explain the most basic concepts to me only to watch me drool senseless as my mind struggled pathetically. However, his persistance paid off and I aced the final exam, getting the highest grade in the class, which earned me a C for the course. That’s not a typo – at MIT, a 98% on a final can still leave you with a C overall. Refer back to IHTFP.

About seven years later an article about a recent MIT Nobel Laureate caught my eye. To my surprise, it was talking about Wolfgang! He had won a Nobel Prize for the work he did while he was my tutor (he showed the work to me at the time – I thought it was cool because it had lasers but otherwise had no idea what he was getting on about).

Wolfgang wasn’t a professor, or even anyone particularly notable at MIT – he was just one of many researchers working on an experiment and helping out with some entry level classes along the way. He could have easily brushed me off after it was clear I was a physics retard (day one, really). Instead, he devoted many hours to helping me figure out basic physics, even though I was never going to become a physicist.

My story isn’t as unique as you’d think. It’s actually very typical for MIT, and it happens because some of the smartest people in the world are there and are accessible to students. It’s painful to get through (the level of competition is often unbearable), but at the end most people have had similarly remarkable experiences that stand out above all the hardship.

All that said, I’m very happy that I’m returning as an observer and not as a inmate student.I’m really interested in seeing what cool new technologies are being developed. Who knows, I might even meet a future Nobel laureate who will probably need to explain their technology to me in much the same way Wolfgang had to explain basic physics.

1) The display on each brick is very sharp and has a high resolution. Like a mini, square iPhone.

2) The defining feature of a siftable is its ability to be aware of, and interact with,  its neighbours.  If you can think of a way to create an app that uses just one siftable, you’d be better off making it an iphone app. This is also why an iPhone emulator for siftables is not likely any time soon – iPhones can’t sense relative orientation and proximity to each other. Plus two siftables are far less expensive than two iPhones.

3) They are primarily targeting the mass-consumer entertainment/education markets. They are aware that there’s a whole class of apps that are for power users – e.g. the data viz type stuff we’re looking at doing, simulations, art, music, etc. However it’s hard to commercialise those applications vs. creating one “fun” game, or educational tool.

That said, he’s in agreement that they will make a powerful collaborative interface for data visualisation and analytics. As soon as they do a “run” of their beta version hardware, we’ll be getting a bunch.

Panelists

• David Murray, Chairman of Future Fund,
• Julia Connell, Associate Dean, graduate programmes UTS: Business,
• Giam Swiegers, CEO Deloitte
• John Bessant, Imperial College innovation guru, moving to Exeter

Introduction – Roy Green

• What role should business education play in training and developing the leaders of our organisations?
• The real challenge is complacency coming out of crisis.

David Murray

• Have to start with a belief system. If humans are free they will innovate.
• But freedom cannot be maintained w/o government. Governments unfortunately have budgets.
• Annual performance reviews do nothing to improve performance.
• 360 degree evaluation model is a cop out for accountability. Probably best method to lock in nepotism.
• 360s are a good way to lock in a glass ceiling

Julia Connell

• Manpower survey – 16,000 interviews, including 2,000 aussies. 62% felt disengaged.
• Performance management is not rocket surgery, btu so few companies do it well. Why? Because it takes risk and courage.
• Leadership require risk and trust.
• US survey shows that only trait women don’t have that men do is decisiveness
• Q to business: are your programs free of bias? Try to create a level playing field.

Giam Swiegers

• I’m no expert but just a mere accountant with a little bit of passion for this topic
• When I came I was very surprised by number of non-Australian CEOs. Why do outsiders perform better? Tall poppy affects the way Australians think about leadership and how they structure internal systems. Tall poppy causes a lack of self belief. This is why outsiders outperform.
• Example: Lots of resistance developing leadership program for elite teams. HR wanted to make sure nobody was left out – why spend all the money on the elite? But how can a country proud of its elite athletes be unwilling to take pride in their best business people?
• Talent leadership development is the role of the chief executive, not the HR team. CEO must take personal responsibility for IDing and developing talent. Most search teams are more focused on recruiting for capability vs recruiting for talent.
• But even after much effort, there is still something lacking. In a recent firm-wide survey of the best mentors and leaders in the firm, the majority of the top performers came from outside Australia
• 3 questions for leaders: Do you have something to believe in, do you have someone to believe in, do you have someone that believes in you?

John Bessant

• Innovation matters. If we don’t change, we might not be around. The fuel for innovation is creativity. All people are creative. Trouble is, do we really make use of it?
• The group always comes up with more solutions to open ended questions and more types/classes of ideas. More minds is not just more volume of ideas but more variety. E.g. Edison wasn’t a solo act. Had a big think tan with varied input.
• With pair of hands you get a free brain

Questions from floor

Q: If 360 appraisals are flawed, what are the alternatives?

Murray: The alternative to 360 comes down to trust. You must trust leaders to make decisions and they must then make those decisions.

Q: Gen Y wants to be boss on day 2 so they hop jobs until they advance fast enough… how will that impact business and innovation?

Murray: people you hire can either do job or not… but if you don’t keep up with demographic change your dead anyway…

Giam: The Gen X and Gen Y concept is a scam as big as the scam dreamt up by Y2K consultants. They’re great generations that act much like any previous generations that grew up in similar economic conditions. They only job hop when there are boring, uninspired leaders.

Q: How do flaws in the political, regulatory, tax systems affect innovation?

Giam: We don’t have time or energy to fight so we try to win within the system

Murray: of all factors that create engagement, two most important: accountability and authority, and tools to do the job.

Q: Perceive a fundamental gap in basic managerial training.  We let people into these jobs without making sure they understand how to lead. We set our best people up to fail. Issue: people getting promoted based on their tech skill, not leadership.

Giam: Cutting training is the dumbest thing you can do in a downturn. You cannot under invest in developing your people.

Murray: We know in business that stockout is fatal so we keep inventory.  But we don’t keep inventory for development.

Q: What would the panel advise the state about getting rid of business systems that hinder innovation, particularly in the public sector?

Murray: issue is trust. Leader is never trusted to comment on key issues directly. Arms length spokespeople are unworkable.

Too many people employed in interpreting the law… people who do that kind of work burn out by the age of 35…

Closing – Roy Green

• The role of the leader is to design the work of the organisation. That’s what we want to do at UTS: Business
• LSE study to be released in a few months shows that Australia has a long tail of mediocre managers
• UTS is launching b21C – website and magazine designed to develop our proposition to ourselves, students, business community
• You can find out more about the LSE study through our interactive feature that leads the launch home page of http://bit.ly/Hf3Lo
• Thanks to the panel, thanks to the audience, and thanks to all of those in the twitterverse who’ve been following us.

by Wes Sonnenreich, Innovation Director for Deloitte Australia

“These people succeeded because they understand that you can’t let your failures define you – you have to let them teach you. You have to let them show you what to do differently next time.” – Barack Obama, Sept 8th speech to America’s schoolchildren.

A great idea is just the start of a journey to realizing value.

How far that journey goes depends on effort, skill, timing and luck.

Many great ideas will “fail”.

Some fail because the effort wasn’t enough, often because of inadequate funding. Others fail because the team had the wrong skill set to develop the idea. Sometimes ideas are too far ahead of, or behind, their time. And finally everything else could be right but the idea team could just be unlucky.

In perspective: the best venture capital firms only see 30% of their investments in “new ideas” succeed.

These firms have worked hard to select only the best ideas that have the greatest chance of success. They mitigate risks of effort and skill by making sure the team is the right team and they are adequately funded. And still, 70% or more fail.

It’s not a failure if a valuable lesson is learned from the experience.

To be valuable, the lesson has to be new and relevant to future projects. For example, learning that an idea failed because of poor project management is a valuable lesson. It is no longer a valuable lesson the fifth time an idea fails for the same reason.

It’s often best if the idea fails early, as the cost of the lesson learned will still be low.

Fail early, fail cheaply, fail often, but fail valuably by learning something!