Notes from the opening session on the second day of Supernova 2005. First, a perspective from John Seely Brown on Innovation Ecologies: long tails, swarms and path dependencies. Curious that the last two days that the ideas discussed will play out in real ecosystems at work. John Hagel, his co-author of The Only Sustainable Edge, was stuck in London.
Four kinds of disruptive process innovations in india: what we drive, buy and wear.
Toyota taps the creativity of thousands of suppliers and their employees through productive friction. Lowest cost is not necessarily the lowest price. Bring us new ideas/innovation. Respect. An ongoing network of conversations and productive friction.
Exception conditions are the action points: when a defect is found the person who finds it stops the entire production line -- freezing the context -- until the source of the problem can be discovered. Context propagates all the way to the supplier lets them do instant problem solving. Contrast the following:
Toyota Way -- Productive friction
- lowest cost,
- deep dialog and collaboration
- bring us new ideas
- respect
The Detroit Way (little innovation) -- Destructive friction
- Lowest price,
- diode, not dialogue
- do it exactly as we say,
- shop around new ideas from one supplier to others
Motorcycles in China. The Chongquing Mototcycle Ecosystem. One entrepreneur broke out of a top down design system run by the state to make innovation modular. Locally modular architecture (based on a focal model). No detailed drawings from the assembler but rather a bottom up swarm ecosystems with path dependent practices, emergent process networks and tea houses. Now 50% of all global production of motorcycles. Evidence of disruption: Honda 90% in 1997 to 30% in 2002 market share in Vietnam. No one can compete with the cost structure. This is a lot like open source development where focal model is like a reference implementation.
Tiawan ODM Process Networks -- Digital Still cameras. Customers provide general requirements (some features, price) and a network adapts to produce the good. Customers do not determine what they want, not how.
Li& Fung's process networks. $5B revenue in 2002, $1 million per employee. 30-50% ROE, 7500 suppliers, 37 countries. A major orchestrator that picks up deep specialization in hundreds of ecologies to put together a unique garment at an almost un-matchable price point. Once they know what the customer wants, they take their expertise of ecosystems to find out what alternative inputs and processes generate a better output. The ecosystem is a learning architecture. Beyond performance metrics, benchmarking across them, let's the information be shared across the network. Orchestrating learning, not just the supply chain.
On capability building: Offshoring is not just wage arbitration, it is accessing distinctive skills. Learning is critical. A call center called eTelecare has a a management philosophy that started with low cost operations to higher skilled services within 18 months. In the US you have a 50:1 ratio of call center employees to managers, eTelecare has a 8:1 ratio with he purpose of middle management is to accelerate learning and advancement of employees. Infosys in Bangalore focused on learning, executive management spends 25% of their time on it.
An enabling confluence of IT architectures
- Interaction tools (productive friction): Collaboration on demand with social software, wireless access and eLearning
- Service Oriented Architectures
- Virtualization
We don't talk much about how you take social software tools and wrap them around SoA architectures. Because as the only thing to expect is the unexpected. We spend our time handling exceptions. But we don't build tools to support exception handling. May try to build rules for exceptions, but how do you freeze the context, use an action point, call the stakeholders together and resolve the breakdown. The fabric underlying an accelerating capability.
A new strategic triad:
* accelerate capability building
* dynamic specialization
* access complementary capabilities
The only sustainable edge is figuring out how to accelerate capabilities better than anyone else. Do this through partnerships that have mutual learning as an objective. Real purpose of the firm is not lowering transaction costs ( ac commodity), but how to accelerate through productive friction, the ability to learn and innovate.
Q&A out-takes: Doesn't think that Detroit will adapt in time. Dell and HP have. An executive visiting Bangalore was asked what they learned, and he said "no, we where here to show them how to do it." Many are doing it without thinking about what and how they can learn.
Amy Whol asks, does this work better if we wrap the social software tools around the processes formally or less formally? Fundamental intuition is that processes basically work for machines, it is work practices that we humans do. Handling exceptions is the basis of our practices.
Look at Cisco and how they work with their platinum dealers. They apply sophisticated eLearning tools to help them get better. Using those learnings get you to talk and see the world in a different way. How do you use assets that you don't control? Think about how you can work from an influence point of view and it will reveal a change of mindset that requires trust and respect. Need a transition from transaction thinking.
