On past and future innovation – Disruption, inequality and robots

How to define innovation, how has it been studied in the recent past, and what does future innovation hold for the human race?

Sometimes the word innovation gets misused. Like when people use the word “technology” to mean recent gadgets and gizmos, instead of acknolwedging that the term encompasses the first wheel. “Innovation” is another tricky one. Our understanding of recent thoughts on innovation – as well as its contemporary partner, “disruption” – were thrown into question in June when Jill Lepore penned an article in The New Yorker that put our ideas about innovation and specifically on Clayton Christensen’s ideas about innovation in a new light. Christensen, heir apparent to fellow Harvard Business School bod Michael Porter (author of the simple, elegant and classic The Five Competitive Forces that Shape Strategy) wrote The Innovator’s Dilemma in 1997. His work on disruptive innovation, claiming that successful businesses focused too much on what they were doing well, missing what, in Lepore’s words, “an entirely untapped customer wanted”, created a cottage industry of conferences, companies and counsels committed to dealing with disruption, (not least this blog, which lists disruption as one its topics of interest). Lepore’s article describes how, as Western society’s retelling of the past became less dominated by religion and more by science and historicism, the future became less about the fall of Man and more about the idea of progress. This thought took hold particularly during The Enlightenment. In the wake of two World Wars though, our endless advance toward greater things seemed less obvious;

“Replacing ‘progress’ with ‘innovation’ skirts the question of whether a novelty is an improvement: the world may not be getting better and better but our devices our getting newer and newer”

The article goes on to look at Christensen’s handpicked case studies that he used in his book. When Christensen describes one of his areas of focus, the disk-drive industry, as being unlike any other in the history of business, Lepore rightly points out the sui generis nature of it “makes it a very odd choice for an investigation designed to create a model for understanding other industries”. She goes on for much of the article to utterly debunk several of the author’s case studies, showcasing inaccuracies and even criminal behaviour on the part of those businesses he heralded as disruptive innovators. She also deftly points out, much in the line of thinking in Taleb’s Black Swan, that failures are often forgotten about, and those that succeed are grouped and promoted as formulae for success. Such is the case with Christensen’s apparently cherry-picked case studies. Writing about one company, Pathfinder, that tried to branch out into online journalism, seemingly too soon, Lepore comments,

“Had [it] been successful, it would have been greeted, retrospectively, as evidence of disruptive innovation. Instead, as one of its producers put it, ‘it’s like it never existed’… Faith in disruption is the best illustration, and the worst case, of a larger historical transformation having to do with secularization, and what happens when the invisible hand replaces the hand of God as explanation and justification.”

Such were the ramifications of the piece, that when questioned on it recently in Harvard Business Review, Christensen confessed “the choice of the word ‘disruption’ was a mistake I made twenty years ago“. The warning to businesses is that just because something is seen as ‘disruptive’ does not guarantee success, or fundamentally that it belongs to any long-term strategy. Developing expertise in a disparate area takes time, and investment, in terms of people, infrastructure and cash. And for some, the very act of resisting disruption is what has made them thrive. Another recent piece in HBR makes the point that most successful strategies involve not just a single act of deus ex machina thinking-outside-the-boxness, but rather sustained disruption. Though Kodak, Sony and others may have rued the days, months and years they neglected to innovate beyond their core area, the graveyard of dead businesses is also surely littered with companies who innovated too soon, the wrong way or in too costly a process that left them open to things other than what Schumpeter termed creative destruction.

Your new boss

Outside of cultural and philosophical analysis of the nature and definition of innovation, some may consider of more pressing concern the news that we are soon to be looked after by, and subsequently outmaneuvered in every way by, machines. The largest and most forward-thinking (and therefore not necessarily likely) of these concerns was recently put forward by Nick Bostrom in his new book Superintelligence: Paths, Dangers, Strategies. According to a review in The Economist, the book posits that once you assume that there is nothing inherently magic about the human brain, it is evidence that an intelligent machine can be built. Bostrom worries though that “Once intelligence is sufficiently well understood for a clever machine to be built, that machine may prove able to design a better version of itself” and so on, ad infinitum. “The thought processes of such a machine, he argues, would be as alien to humans as human thought processes are to cockroaches. It is far from obvious that such a machine would have humanity’s best interests at heart—or, indeed, that it would care about humans at all”.

Beyond the admittedly far-off prognostications of the removal of the human race at the hands of the very things it created, machines and digital technology in general pose great risks in the near-term, too. For a succinct and alarming introduction to this, watch the enlightening video at the beginning of this post. Since the McKinsey Global Instititute published a paper in May soberly titled Disruptive technologies: Advances that will transform life, business, and the global economy, much editorial ink and celluloid (were either medium to still be in much use) has been spilled and spooled detailing how machines will slowly replace humans in the workplace. This transformation – itself a prime example of creative destruction – is already underway in the blue-collar world, where machines have replaced workers in automotive factories. The Wall Street Journal reports Chinese electronics makers are facing pressure to automate as labor costs rise, but are challenged by the low margins, precise work and short product life of the phones and other gadgets that the country produces. Travel agents and bank clerks have also been rendered null, thanks to that omnipresent machine, the Internet. Writes The Economist, “[T]eachers, researchers and writers are next. The question is whether the creation will be worth the destruction”. The McKinsey report, according to The Economist, “worries that modern technologies will widen inequality, increase social exclusion and provoke a backlash. It also speculates that public-sector institutions will be too clumsy to prepare people for this brave new world”.

Such thinking gels with an essay in the July/August edition of Foreign Affairs, by Erik Brynjolfsson, Andrew McAfee and Michael Spence, titled New World Order. The authors rightly posit that in a free market the biggest premiums are reserved for the products with the most scarcity. When even niche, specialist employment though, such as in the arts (see video at start of article), can be replicated and performed to economies of scale by machines, then labourers and the owners of capital are at great risk. The essay makes good points on how while a simple economic model suggests that technology’s impact increases overall productivity for everyone, the truth is that the impact is more uneven. The authors astutely point out,

“Today, it is possible to take many important goods, services, and processes and codify them. Once codified, they can be digitized [sic], and once digitized, they can be replicated. Digital copies can be made at virtually zero cost and transmitted anywhere in the world almost instantaneously.”

Though this sounds utopian and democratic, what is actually does, the essay argues, is propel certain products to super-stardom. Network effects create this winner-take-all market. Similarly it creates disproportionately successful individuals. Although there are many factors at play here, the authors readily concede, they also maintain the importance of another, important and distressing theory;

“[A] portion of the growth is linked to the greater use of information technology… When income is distributed according to a power law, most people will be below the average… Globalization and technological change may increase the wealth and economic efficiency of nations and the world at large, but they will not work to everybody’s advantage, at least in the short to medium term. Ordinary workers, in particular, will continue to bear the brunt of the changes, benefiting as consumers but not necessarily as producers. This means that without further intervention, economic inequality is likely to continue to increase, posing a variety of problems. Unequal incomes can lead to unequal opportunities, depriving nations of access to talent and undermining the social contract. Political power, meanwhile, often follows economic power, in this case undermining democracy.”

There are those who say such fears of a rise in inequality and the whole destruction through automation of whole swathes of the job sector are unfounded, that many occupations require a certain intuition that cannot be replicated. Time will tell whether this intuition, like an audio recording, health assessment or the ability to drive a car, will be similarly codified and disrupted (yes, we’ll continue using the word disrupt, for now).

They think it’s all over. It never even started.

The lessons marketers can learn from Englands World Cup bid.

One of the things Zeitgeist likes to do when not identifying first class insights is finding inspiration in the real world that can be brought into the world of marketing.

Sometimes it is as simple as this deconstruction of the Rolling Stones Gimme Shelter that demonstrates how a fantastic creative execution is made during the fusion and collaboration of individual genius contributing their own part to the mix.

However over the past week one half of Zeitgeist has been lucky enough to be given an insight of their own into the pitch process.

Last week I was lucky enough to attend the excellent APG Battle of Big Thinking which pitted planners from around the industry against each other as they debated their big thoughts.

In the semi-informal atmosphere of the architecturally interesting British Library the style and charisma of the presenters was often more influential that their actual idea.

Trapped by the snow and a lack of faith in the UK rail infrastructure, Zeitgeist was able to watch the doomed English bid for the FIFA 2018 World Cup from the comfort of the sofa.

It is rare to be able to watch another team pitch and in the much more serious arena of the Messe Zurich it provided a few more lessons that we can bring into our own business.

Lesson One
The most important of which is to understand the criteria against which you will be judged. This isn’t always as simple as looking at the brief. You have to understand what your audience really want and why you are there.

England received a glowing report for infrastructure and facilities and a 100% rating by McKinsey. They were even acknowledged as being the only bidders who could ‘hold the World Cup tomorrow‘.

However a quick look at previous World Cup hosts suggests that much of that is irrelevant and what FIFA want is to enter new markets and leave a legacy.

Up to 1990 the World Cup was alternatively hosted between South and Central America and Europe. In the 90’s with the break up of the Eastern Bloc and growth of technology like the internet and mass broadcasting the world and the world of football changed dramatically.

By the time those changes began to take effect the 1994 and 1998 World Cups had already been awarded to USA and France respectively.

Then in 1996, FIFA awarded the 2002 World Cup to Japan and South Korea for what was the first Asian World Cup.

The 2006 World Cup went to Germany but was supposed to go to South Africa. The influence of Kaiser Franz Beckenbauer and other shenanigans saw to that.

In 2010 the World Cup was indeed held in South Africa breaking a new frontier.

In 2014 it will be held in Brazil, the nation that puts the ‘B’ into ‘BRIC’. They haven’t hosted it since 1950 and it will be the first time the event has been hosted in South America since Argentina invited the world to sample the delights of a military dictatorship in 1978.

So with this knowledge at hand the question arises as to whether England really thought they stood a chance of winning the 2018 bid. All the attributes that would have made them a stand out candidate as hosts before 2000 now count against them. The irony is that before then, the Taylor Report had only just forced clubs to upgrade their dilapidated facilities so they wouldn’t have been ideal candidates for earlier World Cups either.

The pitch itself was excellent.

If FIFA president Sepp Blatter was a balloon he’d have popped as he introduced the future King, current Prime Minister and icon David Beckham to plead with him and his mates for the right to host the World Cup.

Opened by the excellent Eddy Afekafe the presentation answered exactly what England would have wanted to see if they were choosing the venue.

Unfortunately FIFA’s criteria was different and that’s why the bid failed.

So what other lessons can we learn that will help us when we pitch to prospective clients?

Lesson Two
It doesn’t matter how well you present if you don’t tick their requirements.

Lesson Three
It doesn’t matter who pitches if you don’t meet their requirements.

Lesson Four
It doesn’t matter how in love you are with your own solution if it doesn’t meet their requirements.

For all the claims of corruption and a stitch up, England were fighting a losing battle from the beginning. In any case, the idea that good Olde English values of fair play would somehow infect an international cabal of sports administrators when national and personal fortunes are waiting to be made does seem naive to say the least.

With the newly branded St George’s Park finally getting the go-ahead after years of delay it looks as though we might finally be investing in training a team of World Cup winners rather than trying to get home advantage. Maybe our efforts should have been spent getting it finished sooner instead of chasing impossible dreams.

And that’s the fifth and final lesson for agencies. Next time you get the chance to pitch, stop and think about whether you actually really stand a chance.

Does this company always appoint local or global agencies? Is the pitch just an excuse to justify giving it to the incumbant? What is your role in the process? Are they just after some new ideas? Who is actually making the decision?

Be brutally honest. If you don’t think you stand a chance, work out how much you would have wasted pitching and instead invest it in developing your own staff and boosting their morale. They already believe in you and will service your existing accounts all the better for it.