New models of innovation

A feature I wrote in The Financial Times 11/3/10 about new innovation models in mobile.

Bob Ianucci, the former chief technology officer at Nokia, used to give a talk about the evolutionary patterns in the technology industry called “I’ve seen this movie before”. In it he described how every big technological change, from mainframes to minicomputers to PCs, had followed the same path.

PCs, for example, began with several companies – Apple, Commodore, Wang and others – offering their own incompatible hardware and software. Then a standard platform emerged in IBM. Compatible hardware followed – DellHewlett-PackardIntel and Compaq – before the value shifted to software – Microsoft – and finally to services and companies such as IBM, EDS andOracle.

Innovation process of mobile phonesThis pattern appears to be unfolding again in mobile phone technology. First, we had an array of separate systems. Now a platform war is being waged, most aggressively between Google’s Android and Apple’s iPhone operating systems.

Last month, Steve Jobs lashed into Android saying “we think Android is very, very fragmented and getting more fragmented by the day”. Nokia is pitching in with new phones powered by its revamped Symbian OS, and Research in Motion’s BlackBerry OS is another potent rival.

But already we are seeing hardware makers and the developers of software and mobile services circling this piranha tank, trying to decide which platforms will thrive or die, and which to invest in.

The difference between the history of mobile technology and PCs is the pace of the change. Product development cycles are now faster than traditional corporate innovation structures seem able to cope with. And while some, such as Apple and Google, seem comfortable with the speed of change, others such as Nokia and RIM are criticised for playing innovation catch-up with the Silicon Valley swells.

“There are so many opportunities, technologies and ideas, all of which are easily accessible,” says Roberto Verganti, professor of management of innovation at Politecnico di Milano. “So, the key challenge for companies is not having the ideas, but making sense of them and having a vision. The companies that are most successful are the ones that understand the meaning behind the technology.”

As a percentage of revenue, Nokia spent four times as much as Apple on research and development last year, and yet it has no market-changing products to show for it. Companies that try to compete on features or performance, Prof Verganti says, only briefly have an edge before everyone else catches up.

Moreover, consumers are not that interested in the features that might excite an internal research lab. When RIM came up with the BlackBerry, it perceived that what many users most wanted from their phones was e-mail, and they could happily do without the rest of the OS software. Apple was not the first to make an MP3 player, but the good-looking iPod combined with iTunes removed the whiff of illegality around music downloads. Apple was similarly the first to make sense of touchscreen technology with its iPhone. It was more than a gimmick: it changed how people thought of their phones.

Listen to the interpreters

Apple’s edge, says Prof Verganti, stems from Steve Jobs’ experience in the entertainment industry. As the founder of Pixar, when he returned to Apple in 1996 he came at the music, movie and gaming industries as an insider. By being able to interpret the world beyond computers, he could arrange the puzzle of content and technology more successfully than many.

Nokia has tried to break its closed innovation loop by using ethnographers to observe how people use their mobile phones. In Africa they found people trading in calling card minutes, which could be redeemed for cash as a basic kind of banking. In India, they discovered servants were using their mobile phones to find new employers, thereby freeing them from indentured servitude.

Such findings have helped Nokia think about innovative ways of serving huge numbers of customers in emerging markets.

Eric von Hippel, professor of technological innovation at the MIT Sloan School of Management, says a technology company should divide its re search and innovation tasks “into those it can solve internally and those that can most effectively be solved outside”. The ones that can be solved within are “dimension-of-merit” im provements such as better screen resolution, ergonomics or interface des ign. Those that must be solved outside are those that involve new customer needs. In 2007, for example, when Apple first released the iPhone, thousands of users decided to “jail-break” the software in order to customise it. Prof von Hippel says this prompted Steve Jobs to release a software developer kit, which in turn led to the explosion of the App Store. Apple was forced by outside events to open up its platform, although it remains controlled.

“Senior managers have to recognise that the innovation system has to be fundamentally reworked,” says Prof von Hippel. “It’s not a matter of tweaking. There is a fundamental new paradigm out there.” This new model was created by falling design and communication costs, which have en abled more people to be part of the process. Prof von Hippel says managers need to venture out to the leading edges of their market and engage with users. He calls it “democratising innovation”.

Prof Verganti agrees, saying technology companies must listen to “interpreters” – individuals in side and outside the company capable of un derstanding cultural and social forces beyond the immediate world of technology. These are not traditional market researchers, but people from other industries and professions who look at what you are doing with fresh eyes.


Few companies could use an innovation boost more than Nokia. Ari Hakkarainen, a former marketing executive at Nokia, says the company remains a serious business, selling more than 400m phones, from high- to low-end devices depending on the market. In order to avoid becoming just a low-cost competitor, however, it is trying pull off the trick of innovating without upsetting existing customers and profitable lines.

In September, the company replaced Olli-Pekka Kallasvuo, its chief executive, with Stephen Elop from Microsoft. While Mr Elop finds his feet, Nokia lacks a powerful CEO, in the mould of Mr Jobs or RIM’s Mike Lazaridis, who can establish a vision and impose it on an organisation. “You need a strong leader to make these kinds of innovations become reality,” Mr Hakkarainen says.

There is hope. With Apple entrenched at the high end of the mobile phone market, both Mr Hakkarainen and Prof von Hippel see a huge opportunity for Nokia innovating in emerging markets.

Andrew Hargadon, a professor of technology management at the UC Davis Graduate School of Management, worked at Apple in the early 1990s. “We were reinventing the wheel left and right,” he says. “But to do that we built a factory that could never be profitable.”

When Mr Jobs returned in 1996, says Prof Hargadon: “Apple chose not to be a technological leader. It said we’re going to take technologies that are already out there and build a more seamlessly integrated network around that.”

What Apple does, he says, “is identify a vision, then assemble the right team to pull that off”. Such focus on a handful of products and highly tailored processes in marketing and distribution, such as the Apple Stores, is a contrast to companies where “top managers want to to be focused on new business units, but don’t have time, yet refuse to cede authority” – so they end up “with one foot on the dock, one foot in the boat”.

Rather than reorganising existing assets to try to come up with a new vision, Prof Hargadon says, technology companies must have the vision and then assemble the assets needed from outside and inside in order to make it real.

RIM’s unveiling of its iPad rival, the Playbook, he says, is worrying. “I love RIM’s products, which stay true to the original vision and do exactly what they do really well. To the extent they’re trying to turn that hedgehog into a fox, they risk losing it.”


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