Convergent Innovation: Improving Adoption through Multi-Loop Learning

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Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow – William Pollard.

 

Ensuring that innovations are taken up by the marketplace is a challenging problem.  The spread of technological innovations is influenced by a range of factors, from supply and demand factors, to learning-based effects, through to technology substitution and management techniques. The range of factors that affect this spread is very large.  One of the factors that receives relatively little attention however, is the social nature of technological innovations and the environments that supports their adoption.

As a starting point for exploring this issue, consider for a moment what ‘technology’ is.  Technology is often represented by objects, for example, a smart phone, a car or some software.  However, technological innovations are much broader in scope than this.  In addition to ‘hardware’ and ‘software’ (in a general sense), it can include the knowledge required to design, build and utilise the technology, along with socially-defined rules that determine how it is used in practice.

In thinking about this approach, consider the case of smart phones.  At the level of the object, smart phones are a collection of metals, plastic and glass combined with software.  However, what distinguishes technology from other objects we create is that technology serves a purpose and that purpose is defined by people, rather than the object itself.  That is, technology can be defined by how we use it, or what purpose we put it to.  After all, that’s why we create technologies in the first place – to do something we couldn’t do before.  So smart phone technology includes the things we do with it, from tracking our fitness to playing music and talking to friends and acquaintances.  Without those purposes, the hardware would be meaningless.

A by-product of using such a definition is that technology can be seen to change over time, even if the hardware remains static.  This doesn’t occur much in practice though, as people tend to refine technological innovations to better suit their evolving needs.  Returning to the smart phone example, the programmable nature of this technology allows it to evolve quite quickly.  And this has enabled the rapid evolution of the technology based on how it gets used by people, in many cases in ways that couldn’t even have been imagined when smart phones started their relentless rise in 2007.

Following from this, an important observation is that the creation of a technological innovation involves the creation of something that is new in both a technical and a social sense.  New technologies require new habits, routines, expectations and practices to be developed as well the hardware and software.  The technical elements of the innovation can often be created ‘in the lab’, but the other parts of the technology need to be developed by users actually using it.  The problem for innovators therefore, is to work out what these habits, routines, expectations and practices are likely to be before they spend too much time and money on development of the technical innovation.

In this context, approaches to innovation such as lean start-up and design thinking provide much stronger platforms for creating technological innovations than more traditional technology-push or technology-pull approaches.  Lean start-up does this by minimising development work (to create the ‘minimum viable product’) before testing with users, followed by further, rapid evolution of the idea. Design thinking takes this a step further by matching what is technologically possible with user needs at the very outset.  In both cases, the innovation stands a much better chance of being accepted once it’s released into the wild.

However, this approach won’t always be successful.  Users don’t always know what they need.  This is a central idea in the concept of disruptive innovation: it isn’t always possible to predict what the market for an innovation might be and extensive exploration might be required to find a market that works.  In this event, innovations that go on to redefine an industry – or even create new ones – are going to be much more difficult to create using lean or design thinking principles.

What’s required, then, is a way to recognise that all the parts of a technological innovation evolve following the initial creation.  It requires the basic cycle suggested by design thinking to be repeated at a more global level once a first cut innovation is released into the market.  By inserting a deliberate repeating loop into the process (as a type of ‘double loop’ or ‘multi-loop’ learning) it allows for the continued evolution of the artifact and the habits, routines, expectations and practices that accompany that technical innovation; that is, the technology in its entirety.  A modified version of the design thinking process might provide a method to achieve this.

Such an approach would allow the initial social and technical configuration of the innovation to converge with the social context of the marketplace; a process that could be called ‘convergent innovation’. This recognises that the evolution of a technology combines things that the innovator can address (in how the technology functions) as well as things they can’t (how people actually use the technology).  It creates a challenge insofar as innovation becomes a continual process involving relatively uncontrollable use of technology in practice.  But in return, it offers the opportunity to raise the chances that a technology will be adopted – and adopted widely – in the marketplace.

And when companies are looking to extract maximum value from a limited set of valuable ideas who wouldn’t want that…?

Innovation would be easy – if it wasn’t for the people!

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“The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.” – Albert Einstein

Innovation involves people. They’re involved in creating the ideas that underpin innovation and they are involved in using the innovation once it’s in the wild. There’s no getting around people’s involvement in creating and spreading something new.

Which is why it’s odd that the people aspect of innovation gets so little attention. I guess that the emotional appeal of the grand idea tends to attract our attention; or the uber-entrepreneur as the hero of our age that draws our attention from the role that people play in innovation more broadly.

The importance of people in innovation cannot be understated, however. Innovation, by almost any definition you might like to use, involves something new. A new product. A new service. A new process. In all cases, it’s the newness that makes an idea an innovation.

And it’s people that use products, services and processes. Even industrial processes or technologies need people to implement and manage them at some point in time. So their behaviors and attitudes towards those innovations matter. They matter a lot.

Take, for example, innovation in the electricity sector. There’s no shortage of good ideas being developed to better serve users of electricity. Distributed energy, energy storage, smart meters, energy pricing models, and product financing plans. But the electricity industry has been built – and is controlled – by people. People who have been schooled in the centralised management of large, complex and long lived assets. People who take a dim view of innovations which might put power quality or safety at risk. People who are (not unreasonably) tied to what has worked well in the past.

So in this case you can see the problem, when it comes to innovation. The entrepreneur comes up with a brilliant new idea. He toils ceaselessly to prove the concept, develop the value proposition and bring it to market. And the established industry isn’t interested. In fact, they might actively work to squash it. As evidence, look at renewable energy innovation. Modern wind and solar are almost 40 years old. Surely these technologies should have been adopted by now? They’re ‘too expensive’ and they can’t provide ‘predictable power’ says the establishment. True, but these issues could be overcome. If only the right thinking was in place. If only people didn’t get in the way.

As a counterpoint to this, look at the development of wearable tech. The players here are still trying to work out what wearable tech is, what it can do, should do, will do. In this space, there are no pre-existing thought patterns constraining what is possible, and innovation can progress rapidly. However, the boldness of an idea won’t mean that people start using it (Google Glass, anyone?). These people, the users, need to work through what this technology is. They need to use it in practice, and develop expectations and behaviors that support this type of innovation. Eventually we’ll see wearable tech settle into a pattern. Someone will develop a value proposition that kills the others and we’ll start down the path of constrained innovation development.

So, what’s an innovator to do? How do you deal with the role of people in the development and adoption of your brilliant idea?

Well, one place to look is the Lean Startup movement. The approach used here it so quickly and rapidly test your idea in the market and tune it to user needs before committing large wads of cash to full development. And a key part of why that works, is that it allows people to evolve along with the innovation. It allows user expectations and behaviors to evolve along with the technology, so there is a people-to-technology fit. And that’s a two-way process for which there is no shortcut, particularly as an innovation gets more and more radical, or disruptive in nature. Very seldom can an innovation ‘crash through’; it needs to bring people along with it.

So people remain a key part of innovation. They innovate and they adopt. And often people’s behaviors are a more significant challenge for an innovation than any technical hurdles the entrepreneur needs to overcome.

As Albert Einstein pointed out, in order to change the world, people need to change their thinking. And nowhere is that more important than in innovation.

He who controls the past controls the future

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He who controls the past controls the future. He who controls the present controls the past.

GEORGE ORWELL, Nineteen Eighty-Four

What has been done, thought and felt in the past constrains what is likely to be done, thought and felt in the future. In other words, the past has a tendency to shape the future. This might seem an unremarkable thought, but its impacts play out in significant ways when thinking about innovation.

Why? Well, innovation involves something new and something new means adaptation of some kind. And since innovations are used by people, it’s the adaptations that people need to make – at the individual level, as well as the level of the firm and the economy – that determine the fate of most innovations.

At the level of the individual, human beings have evolved to have highly efficient ways of dealing with the world. We start out asking an endless series of questions to help understand the world around us. As we get older though, we start to develop classifications systems for accommodating new information. We also develop heuristics which aid in decision making, so we don’t need to think about every situation from scratch. This allows us to efficiently deal with complex problems, but it also creates constraints in the way that we think.

Warren Berger outlines the problem this presents for creativity in his recent book A More Beautiful Question. In that text, Berger points out that the number of questions asked by children declines significantly after the age of 4 – partly because educational systems discourage questioning (which can challenge authority) and partly because children start to develop systems for dealing with new information, rather than relying on questions. He then points out that a consequence of this change is that we have a reduced ability ask questions that can lead to the creation of truly transformative innovations. Our thought patterns, behaviours and habits also influence our receptivity to new ideas as well as our understanding of them which in turn places constraints on how or whether we adopt those transformative innovations.

At the level of the firm, this process is repeats itself. In their early stages, new enterprises tend to be a hotbed of innovation, as ways of thinking and doing business remain relatively fluid. However, over time these tend to become solidified into what we call corporate culture. In many ways this is a good thing. It reduces the amount of effort required to get things done, it can free up mental capacity to deal with the unexpected and it creates the continuity that allows firms to survive staff changes. However, it also constrains what a business can do.

Clayton Christensen made this point in his seminal text, The Innovator’s Dilemma. In that book, he points out that well run established firms, run by capable people, can fail because of their inability to change and their commitment to the past. This is one of the central tenants of disruptive innovation and a powerful demonstration of how the past can influence the future when it comes to both the production and adoption of innovation.

Finally, a similar pattern occurs at an economy wide level. There are a number of strains of economic theory that use evolutionary models to help predict patterns of economic development. These models assume that change originates from a number of sources, but that the prior state of the system influences the direction it can realistically move in next. At a practical level, this seems entirely sensible. You wouldn’t expect us to move from the internal combustion engine to hydrogen powered hover cars in a single step; the mental leap would be as problematic as the technological one. As a result, economies follow a smooth trajectory of technological development, even when some individual innovations are radical or disruptive in nature.

So what does this mean for the development and adoption of innovations? In terms of innovation, it highlights that unconventional thinking can be needed to develop the breakthrough ideas that underpin high value developments. This idea is regularly explored in discussions of innovation culture and the innovation process more generally. What gets less attention though is that the very people that are expected to be the adopters of an innovation may well be constrained by their prior thinking in adopting that innovation. The translation of novel ideas into practical technologies that are widely taken up needs to consider both the creation of the innovation itself, as well as the context into which it is introduced. Current thinking can constrain adoption, or stop it altogether (with innovations of the alter type often being described as ‘before their time…’).

There are ways around this, of course, but it requires a degree of self-awareness and knowledge of the patterns that direct our decision making. Another good example of how to avoid the past constraining the future is the lean startup movement. This approach looks to place a ‘minimum viable product’ into the market before executing a series of ‘pivots’ to find out what will really work, rather than guessing beforehand. This can still come unstuck if you ask the wrong people based on prior expectations of your market. But it’s a step ahead of being an unconscious slave to yesterday.

Disruptive Innovation – What Boards Need to Know

Disruptive innovation in the form of novel technologies and business models are increasingly driving change in the business environment. Mobile phones, 3D printing and distributed energy, along with digitally enabled business models are examples of innovations that create uncertainty for established organisations. In the attached White Paper, I’ve tried to summarise the issue in plain English (with an emphasis on what Boards of Directors need to know), with strategies that can be used to deal with the threat of disruption. Let me know what you think; and if you like the paper, please share!

White Paper -> Disruptive Innovation – What Boards Need to Know

Steel cage death match? Utilities vs technological innovation

The pace of technological and business model innovation in the energy industry continues unabated.  But what sort of reception is this getting in the utilities?  Can innovation force its way into such a well-established system, or can the system continue to control the rate of innovation adoption?  A couple of posts this week provide some insight into what could become a ‘steel cage death match’ for the utilities as they seek to fight the growing pressures created by technological innovation.

As a starting point for the discussion, it’s worth noting that the electricity industry is an incumbent technological system, which has developed highly standardised technologies, design methodologies, rules and regulations since AC supply won the war of the currents in the 1880s.   As a result, the system exhibits the characteristics of a technological regime, which defines the sorts of innovations that are acceptable within it, and which are not.  The technological lock-in that this creates is an incredibly powerful mechanism for selecting and rejecting new technologies.

Contrasting with this stability are renewable energy technologies and the business models that they enable.  These represent potentially disruptive innovations that may end up replacing incumbent thermal power generation technologies while facilitating the transformation of the electricity industry itself.  According to disruptive innovation theory, the incumbent industry is only likely to react to the transformative effect of these technologies when it is too late to do anything about it.

Returning to the question of innovation versus the system, two posts in reneweconomy last week provide insights into the dynamics of technological change in the electricity industry.  One identified an innovative approach to the management of distributed energy generation and storage that might well support a future business model for utilities that keeps them relevant (see here); the other highlighted how these same utilities are changing the rules to stop the adoption of this type of innovation in an attempt to preserve their 20th century business models for just a bit longer (see here).

The former described how a US based smart energy start-up company is enabling the creation of ‘virtual’ pools of energy through the aggregated management of solar and energy storage technologies.  This approach uses a combination of cloud based technologies with distributed solar and batteries to create dispatchable energy out of an otherwise unpredictable resource. In contrast to the ‘death spiral’ risk presented by distributed energy, this model appear to be an ideal way to keep pole and wire networks relevant into the foreseeable future.

In contrast, the later post described how utilities in Queensland, Australia, are acting to limit the ability of consumers to send energy back into the grid.  While this seems sensible within the constraints of the existing electricity system and its understanding of energy delivery, it denies the advancing trend of innovation in the industry.  The history of technological development suggests that innovation in the industry will continue to advance faster than the current technological system can adapt to it – particularly when that innovation takes place outside the established industry.  Trying to shoehorn technological advances into historically derived operational models is only likely to force innovators to find ways to circumvent the system, leading to its accelerated demise.

The dynamics of technological change within large technological systems differs from those of, say, consumer products, where rapid obsolescence and product substitution seem to take place at a dizzying pace.  A reliance on complementary infrastructure and established expectations around energy supply mean that change takes place at a more measured pace in the electricity sector.  But change does occur and systems can only accommodate a certain amount before a break point occurs.  And in this case, it means that the technological trajectories established over the past 130 years may take a decidedly different direction.  In these circumstances, it’s not just the technology that will change, but the wider system itself, including supply chains, industry structures and the people that determine the future of the system itself.

While this might sound a little apocalyptic, my own research confirms that change like this can occur.  The question though, is what does it mean to the established electricity system and those who seek to develop and promote technological innovations?

Well, the adoption of potentially disruptive technologies within technological systems requires the modification of the system as well as the technology.  This means that technological innovators need to examine the technical as well as non-technical barriers to adoption of their innovations and undertake their product development accordingly.  This can include modifying technology so it functions more like incumbent technologies in some way.  For example, in the case of the electricity industry this can include implementing control systems that more easily integrate into utilities’ normal network management practices.  Sunverge are doing this by allowing the networks to access functionality such as the voltage regulation and frequency control functions of energy storage and solar energy technologies.

Similarly, the system (i.e. the people that run it) needs to recognise that adaptation is required to accommodate technological innovations.  In contrast to the action by Ergon and Energex in Queensland, utilities need to acknowledge that the adoption of technological innovations is not totally in their control and adapt the system accordingly.  The retrograde action described in reneweconomy indicates that these utilities, at least, are looking backwards rather than forwards.  This presents significant risk for them, particularly where disruptive innovations such as energy storage are involved.  In this situation, they risk being excluded from the future of the energy market as these innovations evolve faster than their ability to adapt to them.  While they may think they can anticipate and control where this type of innovation might go, history suggests that rear guard actions to combat disruptive innovation leads to an elimination of the laggards, not the preservation of incumbency.

So like good jujitsu fighters, innovators and the system need to recognise the transformative potential of disruptive innovations and harness the forces that accompany them.  In this way they can remain leaders in the field, rather than becoming defeated antagonists consigned to the sideline of technological history.