I know hundreds of people who know and love the Citymapper app, but they did something recently which really impressed me. As you know the app uses a number of public data streams to help you navigate your city – London being a good example. So you just have to say ‘get me to work’ or ‘get me home’ or any other destination and it tells you the best ways across buses, trains, walking, cycling, or driving. It also helpfully offers an Uber connection and for good measure includes a futuristic option such as ‘catapult’ or ‘teleportation’ to appeal to your quirky side.
Every discussion on the power of computers is bracketed by the comparison to the human brain and the dwarfing of any known computer by the fantastical power of the human brain. Estimates by Ray Kurzweil suggested a calculations per second (cps) capability of 10 16 or 10 quadrillion cps. And it runs on 20 watts of ‘power’. By comparison (according to this excellent article that everybody should read) the worlds best computer today can do 34 quadrillion cps but it occupies 720 sq meters of space, costs $390m to build and requires 24 megawatts of power.
Besides, that’s just the ‘hardware’ so to say. The brain’s sophistication is far, far ahead of the computers, considering all the miraculous things it can do. We know now that the biggest evolution of the human brain was the growth of the prefrontal cortex, which required a rethink of the interior design of the skull. Also, a key facet of the brain is that it is a neural network – capable of massively parallel processing – simultaneously collecting and processing huge amounts of disparate data. I’m tapping away on a laptop savouring the smell and taste of coffee while listening to music on a cold cloudy day in a warm cafe surrounded by art. The brain is simultaneously assimilating the olfactory, visual, aural, haptic and environmental signals, without missing a beat.
It would appear therefore that we are decades away from computers which can replace brain functions and therefore, jobs. Let’s look at this a little more closely though.
The same article by Tim Urban shows in great detail how the exponential trajectory of computers and software will probably lead to affordable computers with the capacity of a human brain arriving by 2025, and more scarily, achieving the computing capacity of all humans put together by 2040. This is made possible by any number of individual developments and the collective effort of the computer science and software industry. Kevin Kelly points to 3 key accelerators, apart from the well known Moore’s law. The evolution of graphics chips which are capable of parallel processing – leading to the low cost creation of neural networks; the growth of big data, which allows these ever more capable computers to be trained; and the development of deep learning – the layered and algorithmically driven learning process which brings much efficiency to how machines learn.
So the hubris around the human brain may actually survive another decade at best and thereafter the question might not be whether computers can be as good as humans but how much better than the human brain could the computer be. But that has been well argued and no doubt will be so again, including the moral, ethical and societal challenges it will bring.
I actually want to look at the present and sound a note of warning to all those still in the camp of ‘human brain hubris’. Let me start with another compliment to the brain. Consider this discussion between two friends meeting after ages.
A: how have you been? What are you doing nowadays?
B: I’m great, I’ve been playing chess with myself for ages now.
A: Oh? How’s that? Sounds a bit boring.
B: Oh no, it’s great fun, I cheat all the time.
A: But don’t you catch yourself?
B: Nah, I’m too clever.
One of the most amazing thing about the brain is how it’s wired to constructively fool us all the time. We only ‘think’ we’re seeing the things we are. In effect, the brain is continuously short circuiting our complex processing and presenting simple answers. This is brilliantly covered by Kahneman, and many others. Because, if we had to process every single bit of information we encounter, we would never get through the day. The brain allows us to focus by filtering out complexity through a series of tricks. Peripheral vision, selective memory, and many other sophisticated tricks are at play every minute to allow to function normally. If you think about it, this is probably the brains’ greatest trick – in building and maintaining this elaborate hoax that keeps up the fine balance between normalcy and what we would call insanity. Thereby allowing us to focus sharply on specific information that needs a much higher level of active processing.
And yet, put millions of all of these wonderful brains together, and you get Donald Trump as president. You get Brexit, wars, environmental catastrophy, stupidity at an industrial scale, and a human history so chockfull of bad decisions that you wonder how we ever got to here. (And if you’re pro Trump then consider that even more people with the same incredible brain voted for Clinton). You only have to speak with half a dozen employees of large companies to collect a legion of stories about mismanagement and how the intelligence of organisations is often considerably less than the sum of the parts. I think it would be fair to say that we haven’t yet mastered the ability to put our brains together in any kind of reliably repeatable and synergistic way. Very much in trial and error mode here.
This is one of the killer reasons why computers are soon going to better than humans. In recent years, computers have been designed to network, to share, pool and exchange brain power. We moved from the original mainframe (one giant brain), to PCs (many small brains), to a truly cloud based and networked era (many, connected brains working collectively, much, much bigger than any one brain). One of the most obvious examples is blockchain. Another is in the example of the driverless car. Now, most of you might agree that as of today you would rather trust a human – (perhaps yourself) rather than a computer at the wheel of your car. And you may be right to do so. But here are two things to ponder. Your children will have to learn to drive all over again, from scratch. You might be able to give them some guidance, but realistically may be 1% of your accumulated expertise behind the wheel will transfer, from your thousands of driving hours. Also, let’s assume you hit an oil slick on the road and almost skid out of control. You may, from this experience, learn to recognise oil slicks, deal with them better, perhaps learn to avoid them or slow down. Unfortunately, only one brain will benefit from this – yours. Every single person must learn this by experience. When a driverless car has a crash today because it mistakes a sky blue truck for the sky, it also learns to make that distinction (or is made to). But importantly, this ‘upgrade’ goes to every single car using the same system or brain. So you are now the beneficiary of the accumulated learning of every car on the road, that shares this common brain.
Kevin Kelly talks about a number of different kinds of minds / brains that might ensue in the future, that are different from our own. But you can see a very visual example of this in the movie – Live Die Repeat – where the protagonists must take on an alien that lives through it’s superbrain – which is all seeing. It gets better. If, like the airline industry, automotive companies agree to share this information – following every accident or near-miss, then you start to get the benefit of every car on the road, irrespective. Can you imagine how quickly your driverless car would start to learn? Nothing we currently know or can relate to prepares us for this exponential model of learning and improvement.
It’s not just the collective, though. The super-computer that is the brain, fails us in a number of ways. Remember that the wondrous brain is fantastic as the basic hardware and wiring, and possibly, if you will allow me to extend the analogy, the operating system. Thereafter, it is the quality of your learning, upkeep and performance management that takes over, and this where we as humans start to stumble. Here are half a dozen ways in which we already lag behind computers:
Computation: This is the first and the most obvious. Our computational abilities are already infinitesimally small compared to the average computer. This should require no great elaboration. But when you apply it to say, calculating the speed of braking to ensure you stop before you hit the car that’s just popped out in front, but not so fast that you risk being hit by the car behind you, you’re already no match for the computer. Jobs that computers have taken over on the basis of computation include programmatic advertisement buying, and algorithmic trading. Another type of computation involves pattern recognition – for example checking scans for known problems, as doctors do.
Observation: Would you know if the grip on your tyres has dropped by 10%? 5%? What if your engine is performing sub optimally, or if your brakes are 3% more loose than normal? Have you ever missed a speed limit sign as you come off a freeway or motorway? Have you ever realised with a fright that there was something in your blind spot? This is a particularly obvious observation as well. A computer, armed with sensors all around the car is much less likely to miss an environmental or vehicular data point than you are. With smarter environments, you may not need speed limit signs for automated cars. All this is before we factor in distractions, or less than perfect eyesight and hearing, and just unobservant driving. Other observation based professions include security and flight navigation, where computers are already at work.
Reaction time: any driving instructor will tell you that the average reaction time is a tenth of a second for humans. In other words, at 40 mph, you will have covered 17 meters before your brain and body starts to react. By the time you’ve actually slammed the brakes or managed to swerved the car – you may well be 20-25 meters down. By contrast there is already evidence of autonomous vehicles being able to pre-empt a hazard and slow down. Even more so if the crash involves another car using the same shared ‘brain’. There is a lot of thought being given currently to the reaction time of a human take over if the autonomous system fails. This is of course a transient phase, until the reliability of the autonomous system reaches a point where this will only be a theoretical discussion.
Judgement: the problem with our brilliant brains is that we rarely allow them to work to their potential. In the US, in 2015, 35,000 people were killed in traffic accidents. Almost 3500 crashes were caused by distracted driving. Or where the driver is cognitively disengaged. There are an endless number of reasons for why we’re not paying attention when we’re driving. Tiredness, stress, anger, conversing with somebody, or worse, alcohol or being distracted by our phones. There have been studies that show that judges decisions tend to be more harsh as judges get hungry. Great though our brains are, they are also very delicate – and easily influenced. Our emotional state dramatically impacts our judgement. And yet, we often use judgement as a way of bypassing complex data processing. Invaluable where the data doesn’t exist. But with the increasing quantification of the world, we may need less judgement and simply more processing. Such as ‘Hawk Eye’ in tennis and ‘DRS’ in cricket.
Training: how long did it take you to learn to drive? A week? A month? Three? How long did it take you to be a good driver? Six months? Going back to my earlier comments – this needs to be repeated each time for each person. So the collective cost is huge. Computers can be trained much faster and do not need the experiential component one computer at a time. So in any job where you have to replace people, a computer will cut out your training time. This can include front desk operations, call centres, retail assistants, and many more. The time to train an engine such as IBM Watson has already gone from years to weeks.
So while we should agree that the human brain is marvellous for all it can do, it’s important to recognise it’s many limitations. Let’s also remember that the human brain has had an evolutionary head-start of some 6 million years. And the fact that we’re having this discussion suggests that computers have reached some approximation of parity in about 60 odd years. So we shouldn’t be under any illusions about how this will play out going forward. But I wrote this piece to point the out that even as of today, there are so many parameters along which brain already lags behind its silicon and wire based equivalent. A last cautionary point – the various cognitive functions of the brain peak at different points of our lives – some as early as in our 20s and some later. But peak they do, and then we’re on our way down!
Fortunately, for most industries, there should be a significant phase of overlap during which computers are actually used to improve our own functioning. Our window of opportunity for the next decade is to become experts at exploiting this help.
Fundamentally, we’re wired to think linearly in time, space and even line of sight. We are taught compound interest but we get it intellectually rather than viscerally. When you first encounter the classic rice grains and chessboard problem, as a smart person, you know that it’ll be a big number, but hand on heart, can you say you got the order of magnitude right? i.e. the total amount of rice on the chessboard would be 10x the world’s rice production of 2010? Approximately 461,168,602,000 metric tons? This problem of compounding of effects is incredibly hard to truly appreciate, even before you start to factor in all the myriad issues that will bump the rate of change up or down, or when the curve hits a point of inflexion. The Bill Gates quote – ‘we over-estimate the impact of technology in 2 years, and under-estimate the impact over 10’ – is a direct reframing of this inability to think in a compound manner.
Then there’s the matter of space and line of sight. The way the future unfolds is dramatically shaped by network effects. The progress of an idea depends on it’s cross fertilisation across fields, geographies and disciplines, across any number of people, networks and collaborations. These collaborations can be engineered to a point or are the result of fortuitous clustering of minds. In his book ‘Linked’ – Ablert-Lazlo Barabasi talks about the mathematician Erdos who spent his life nomadically, travelling from one associates’ home to another discussing mathematics and ironically, network theory. Not surprisingly, a lifestyle also practiced for many years by a young Bob Dylan, if you substitute mathematics for music. Or consider the story of the serial entrepreneur in Rhineland in the 1400s, as told by Steven Johnson, in ‘Where Good Ideas Come From’. Having failed with a business in mirrors, he was working in the wine industry, where the mechanical pressing of grapes had transformed the economics of winemaking. He took the wine press, and married it with a Chinese invention – movable type, to create the worlds first printing press. His name of course, was Johannes Gutenberg. This kind of leap is not easy to predict, not just for the kind of discontinuity they represent (more on that later), but also because of these networked effects. Our education system blinkers us into compartmentalised thinking which stays with us through our lives. Long ago, a student of my mothers once answered a question about the boiling point of water by saying “in Chemistry, it’s a 100 degrees Centigrade, but in Physics, I’m not sure”. We are trained to be specialists, becoming more and more narrow as we progress through our academic career, ending up more or less as stereotypes of our profession. Yet human progress is driven by thousands of these networked, collaborative, and often serendipitous examples. And we live in a world today with ever expanding connections, so it’s not surprising that we have fallen behind significantly in our ability to understand how the network effects play out.
If you want to study the way we typically make predictions, you should look no further than sport. In the UK, football is a year round sport, so there are games every weekend for 9 months and also mid week for half the year. And with gambling being legal, there is an entire industry around football gambling. Yet, the average punter, fan or journalist makes predictions which are at best wilfully lazy. There is an apocryphal story about our two favourite fictitious sardars – Santa Singh and Banta Singh, who decide to fly a plane. Santa, the pilot, asks Banta, the co-pilot to check if the indicators are working. Banta looks out over the wing and says “yes they are, no they aren’t, yes they are, no they aren’t…” – this is how a lot of predictions are made in the world of premier league football today. Any team that loses 3 games is immediately in a ‘crisis’ while a team that wins a couple of games are deemed to be on their way to glory. Alan Hansen, an otherwise insightful pundit and former great player, will always be remembered for his one comment “You can’t win anything with Kids” – which he made after watching a young Manchester United side lose to Aston Villa in the 1995-96 season. Manchester United of course went on to win the season and dominate the league for the next decade and a half. Nobody predicted a Leicester City win in 2016 of course, but win they did. The continuous and vertiginous increase in TV income for football clubs has led to a relatively more equal playing field when it comes to global scouting networks, so a great player can pop up in any team and surprise the league. Yet we find it hard to ignore all the underlying trends and often find ourselves guilty of treating incidents as trends.
The opposite, is amazingly, also true. We are so caught up with trends that we don’t factor in the kinks in the curve. Or to use Steve Jobs’ phrase – the ding in the universe. You can say that an iPhone like device was sure to come along sooner or later. But given the state of the market – with Nokia’s dominance and 40% global market share, you would have bet your house on Nokia producing the next breakthrough device eventually. Nobody saw the iPhone coming, but when it did it created a discontinuous change that rippled across almost every industry over the next decade. The thing is, we like trends. Trends are rational and they form a kind of reassuring continuity so that events can fit our narratives, which in turn reaffirm our world view. And unless we’re close to the event, or perennial change seekers and nomads ourselves, it’s hard to think of countercyclical events. It’s now easy to see how in 2016 we were so caught up in the narrative of progressive liberalisation and unstoppable path to globalisation, we failed to spot those counter-cyclical events and cues that were right there in our path.
Innovation slows down in mobile devices but ramps up in bio-engineering. Voice goes mainstream as an interface. Smart environments and under the hood network and toolkit evolution continues apace.
For most people I know, 2016 has ranged between weird and disastrous. But how was it for the evolution of the digital market?
The iPhone lifecycle has arguably defined the current hypergrowth phase of the digital market. So it’s probably a good place to start. In the post Steve Jobs world, it was always going to be a question about how innovative and forward thinking Apple would be. So far, the answer is not very. 2016 was an underwhelming world for iPhone hardware (though Apple has tried harder with MacBooks). Meanwhile, Samsung which you suspect has flourished so far by steadfastly aping Apple, ironically finds itself rudderless after the passing of Steve Jobs. It’s initial attempts at leapfrogging Apple have been nothing short of disastrous with the catastrophic performance of the new inflammable Note phones/ batteries. Google’s Pixel Phone could hardly have been timed better. By all initial accounts (I’m yet to see the phone myself) it’s comparable but not superior to an iPhone 7, Google’s wider range of services and software could help it make inroads into the Apple market. Especially given the overwhelming dominance of Android in the global OS market. The market has also opened up for One Plus, Xaomi and others to challenge for market share even in the west. Overall, I expect the innovation battleground to move away from mobile devices in 2017.
While on digital devices, things have been quite on the Internet of things front. There have been no major IOT consumer grade apps which have taken the world by storm. There have been a few smart home products, but no individual app or product stands out for me. As you’ll see from this list – plenty if ‘interesting…’ but not enough ‘wow’. I was personally impressed by the platform capabilities of enabling IOT applications, form companies such as Salesforce, which allow easy stringing together of logic and events to create IOT experiences, using a low code environment.
AR and VR have collectively been in the news a lot, without actually having breakthrough moment. Thanks to the increasing sophistication of VR apps and interfaces, with Google Cardboard and the steady maturing of the space. But the most exciting and emotive part of AR / VR has been the hololens and holoportation concepts from Microsoft – these are potentially game changing applications if they can be provided at mass scale, at an affordable cost point and if they an enable open standards for 3rd parties to build on and integrate.
Wearables have had a quiet-ish year. Google Glass has been on a hiatus. The Apple Watch is very prominent at Apple stores but not ubiquitous yet. It’s key competitor – Pebble – shut shop this year. Fitbits are now commonplace but hardly revolutionary beyond the increasing levels of fitness consciousness in the world today. There are still no amazing smart t-shirts or trainers.
The most interesting digital device of 2016 though, has been the Amazon Echo. First, it’s a whole new category. It isn’t an adaptation or a next generation of an existing product. It’s a standalone device (or a set of them) that can perform a number of tasks. Second, it’s powered almost entirely by voice commands “Alexa, can you play Winter Wonderland by Bob Dylan?”, third, and interestingly it comes from Amazon, for whom this represents a new foray beyond commerce and content. Echo has the potential to become a very powerful platform for apps that power our lives, and voice may well be the interface of the future. I can see a time the voice recognition platform of Echo (or other similar devices) may be used for identity and security, replace phone conversations, or also become a powerful tool for healthcare and providing support for the elderly.
Behind the scenes through there have been plenty of action over the year. AI has been a steady winner in 2016. IBM’s Watson added a feather to it’s cap by creating a movie trailer. But away from the spotlight, it has been working on gene research, making cars safer, and even helping fight cancer. But equally, open source software and the stuff that goes behind the websites and services we use every day have grown in leaps and bounds. Containerisation and Docker may not be everybody’s cup of tea but ask any developer about Docker and watch them go misty eyed. The evolution of micro services architecture and the maturing of APIs are also contributing to the seamless service delivery that we take for granted when we connect disparate services and providers together to order Uber cabs via the Amazon Echo, or use clever service integrators like Zapier
All of this is held together by increasing focus on design thinking which ensures that technology for the sake of tech does not lead us down blind alleys. Design thinking is definitely enjoying its moment in the sun. But I was also impressed by this video by Erika Hall that urges us to go beyond just asking users or observing them, and being additionally driven by a goal and philosophy.
2016 has also seen the fall of a few icons. Marisa Meyers has had a year to forget, at Yahoo. Others who we wanted to succeed but who turned out to have feet of clay, included Elizabeth Holmes at Theranos, and the continued signs of systemic ethical failure at Volkswagen. I further see 2016 as the year when external hard drives will become pointless. As wifi gets better, and cloud services get more reliable, our need to have a local back up will vanish. Especially as most external drives tend to underperform over a 3-5 year period. Of course, 2016 was the year of the echo-chamber – a reminder that social media left to itself insulates us from reality. It was a year when we were our worst enemies. Even through it was the Russians who ‘Hacked’ the US elections and the encryption debate raged on.
One of the most interesting talks I attended this year was as the IIM Alumnus meeting in London, where a senior scientist from GSK talked about their alternative approach to tackling long term conditions. This research initiative is eschewing the traditional ‘chemical’ based approach which works on the basis that the whole body gets exposed to the medication but only the targeted organ responds. This is a ‘blunt instrument’. Instead, the new approach takes an ‘bio-electronic’ approach. Galvani Bioelectronics, set up in partnership with Alphabet will use an electronic approach to target individual nerves and control the impulses they send to the affected organ, say the pancreas, for diabetes patients. This will be done through nanotechnology and by inserting a ‘rice grain’ sized chip via keyhole surgery. A successful administration of this medicine will ensure that the patient no longer has to worry about taking pills on time, or even monitoring the insulin levels, as the nano-device will do both and send results to an external database.
Biotech apart, it was a year when Google continued to reorganise itself around Alphabet. When Twitter found itself with it’s back to the wall. When Apple pondered about life beyond Jobs. Microsoft emerged from it’s ashes, and when Amazon grew ever stronger. As we step into 2017, I find it amazing that there are driverless cars now driving about on the roads, in at least one city, albeit still in testing. That we are on the verge of re-engineering the human body and brain. I have been to any number of awesome conferences and the question that always strikes me is, why aren’t we focusing our best brains and keenest technology on the worlds greatest problems. And I’m hopeful that 2017 will see this come to fruition in ways we can’t even imagine yet.
Here are 5 predictions for 2017. (Or around this time next year, more egg on my face!)
- Apple needs some magic – where will they find it from? They haven’t set the world alight with the watch or the phone in 2016. The new MacBook Pro has some interesting features, but not world beaters yet. There are rumblings about cars, but it feels like Apple’s innovation now comes from software rather than hardware. I’m not expecting a path breaking new product from Apple but I’m expecting them to become stronger on platforms – including HomeKit, HealthKit and to seeing much more of Apple in the workplace.
- Microsoft has a potential diamond in LinkedIn, if it can get the platform reorganised to drive more value for its, beyond job searches. Multi-layered network management, publishing sophistication, and tighter integration with the digital workplace is an obvious starting point. Microsoft has a spotted history of acquisitions, but there’s real value here, and I’m hoping Microsoft can get this right. Talking about Microsoft, I expect more excitement around Hololens and VR based communication.
- I definitely expect more from Amazon and for the industry to collectively start recognising Amazon as an Innovation leader and held in the same esteem as Apple and Google. Although, like Apple, Amazon will at some point need stars beyond Bezos and a succession plan.
- Healthcare, biotechnology, genetics – I expect this broad area of human-technology to get a lot of focus in 2017 and I’m hoping to see a lot more news and breakthroughs in how we engineer ourselves.
- As a recent convert, I’m probably guilty of a lot of bias when I pump for voice. Recency effect, self referencing, emotional response over rational – yes all of the above. Voice is definitely going to be a big part of the interface mix going forward. In 2017, I see voice becoming much more central to the interface and apps planning. How long before we can bank via Amazon Echo?
What to do when the elephant in the room is a 600-pound gorilla?
Once upon a time, there were 4 high street electronic retailers. Now, they are one. Dixons Carphone, which also includes PCWorld and Currys, now employs some 42,000 people and manages 17 brands across Europe. Yet, while the company continues to innovate and do a lot of the things you would expect from a leading retailer, they are fighting a very different kind of opponent. Like the movie Predator, this is an almost invisible creature, capable of superhuman strength, focus, and accuracy. This is Amazon.
It’s not just retail, the story is repeating itself in other segments too. In some cases, the commercial model has changed as well – for high street music retailers, see Apple and Spotify. For Blockbusters, it’s Netflix. But for most categories, such as for Book chains like Borders, its still Amazon. And given Amazon’s relentless strategy of growth and customer intimacy before profits, its the question every retailer must ask – how to compete with Amazon?
Everyone knows a few legends about Amazon. Many are about the maniacal customer focus – how Jeff Bezos and his family spent Christmas packing gifts by hand. Or how, when asked about why Analysts weren’t buying his stock, he said that as long as customers were buying his products, he didn’t care if analysts bought the stock. The fact is that Amazon is the 600-pound gorilla in the retail business. In 2015. 50% of all e-commerce growth in the US went to Amazon.
What lies behind Amazon’s relentless growth? A combination of the obvious and perhaps less obvious. Global distribution centres, world leading warehouse automation, customer experience par excellence, recommendation engines, one-click purchasing. Kindle readers, prime membership, all you can eat subscriptions. All of this is known and well documented. But there are three key areas where perhaps less attention is paid.
First, Amazon is arguably the worlds most effective innovation company. Its string of relevant and successful innovations from automated warehouses to Amazon Echo, speak for themselves. Second: Amazon deeply understands what it means to be truly committed to an excellent customer experience – and they execute this across payments, site design, offers, delivery, and returns. Third, and most importantly it’s a digital native company. This means that all its core processes are run by software and algorithms, rather than people. Software behaves more consistently, doesn’t suffer fatigue or human errors, and can be improved relatively easily, compared to upskilling humans. Amazon can decide where to introduce human intervention rather than worry about where to automate.
Quite a few brick and mortar businesses have enjoyed success in the past decade, in the UK, through differing strategies. Tesco’s rise and fall with the Dunnhumby data business have been well documented. John Lewis continues to focus on customer service delivered via its partnership model. Halfords focuses on the cycling and travel niche. Each of these businesses will face the same Amazon question and have to figure out how to compete, especially if Amazon decides to open physical stores in future.
So How Should Brick & Mortar Stores Fight Amazon? Here’s a starting 5 point list:
- Dominate your segment – make sure that you define a sustainable market (e.g. kitchenware in the UK) and can be the dominant brick and mortar store in that segment, or as consolidation sets in, the last one standing.
- Build a strong digital proposition – one that spans the web and mobile, both deeply integrated into your business model. make sure you invest both in digital marketing and in your e-commerce platform. Exploit online communities and design around customer needs.
- Build powerful experiences which cannot be created online. Tactile, immersive and human experiences, which can exploit your physical store. You may redesign significant parts of your physical store and even allow customers to comparison shop and complete the purchase online, in some cases.
- Bring your physical and digital retail universes together – and ensure that this omnichannel experience becomes a source of data for sharpening your customer experience, in addition to contributing to your sales and profits.
- Automate your core processes – from merchandising, offers, check out, payment, delivery and returns, and then focus specifically on where human inputs will improve the process. Invest in developing algorithms that are valuable to your business.
Of course, this is only a beginning and you’ll need to keep investing and building competence in any number of new areas. Some that spring to mind include: trust models, building strong data stewardship, creating a lifetime value of customers, providing technical support for the increasingly smart products you’re likely to be stocking, creating new commercial models – perhaps around the idea of leasing or renting rather than outright purchase, understanding immediacy and real-time business models, advanced security modelling, designing of smart experiences, and deep supply chain visibility – these are just some of the areas you will want to ensure you understand well.
We should also expect to see other market patterns emerge – for example, corner shops/ convenience stores could be pulled together with a common platform which allows them to run independently but provide a shared platform for online & mobile ordering, stocking, supply chain and even leasing drones for delivery. After all, you would go to your corner shop when you need something quickly – when your sugar runs out, in the middle of making tea, for example. What better way for them to deliver to these urgent needs by having drones drop a packet of sugar to your doorstep even before you finish making the tea?
Because of course, if corner shops won’t do it, and the high street groceries dilly dally, this is something Amazon are already planning to do. And frankly, as a consumer, I’ll go to whoever meets my needs in the most painless way.
I realised something very important while I was a the innovation event organised by EditorEye at the General Assembly recently. It became clearer to me why, despite spending a lot of time and effort on innovation and hiring some excellent people, organisations are still struggling to get the results out of innovation. The speakers at the event, by the way, were all very good and were all covered the topic extensively. But there are some aspects of innovation which are simply not talked about, while others get a lot of focus, as I’ll show you later in this piece.
But the problem, I believe starts at the root. What is innovation? You can get as many definitions as there are people in the room. Is it new product development? Is it new ideas? Is it creativity? Is it bringing ideas to market? My definition is simple – it’s doing more with less. If it takes 100 units of resources to solve a problem, and you figure out a way of doing it with 80, that’s innovation. We can debate this later, but let me ask you a different question. Is all product development innovation?
Let’s suppose you are an insurance company and you figure out that increasingly there are older people whose lives depend extensively on technology. You survey the market, and you create a new product which looks at a comprehensive technology devices cover for this audience. You create an app and website for it, which is designed to be used by older people – simpler interfaces, larger fonts, etc. You spend time with prospective customers to understand their specific behaviour and problems and design your product to deliver their key unarticulated needs. Your product is a success. Was this an example of innovation? Let’s assume this product was prototyped in your ‘innovation lab’ which has been set up for bringing such new products to market. Still, is it innovation? Which part of this is innovative, given that all these processes are now standard practice for product development? It may be an excellent example of product development, but I repeat, is it really innovation?
Similarly, you might argue, is every successful advertising campaign ‘innovative’? Is every market research that delivers customer insight an act of innovation? What about a new business, or start up? The reality is that you’re perfectly justified in saying yes to all of these questions. And if your innovation lab delivers successful products, then surely it’s justified, irrespective of what you call it. And I’m not disagreeing with that.
However, to miss the point of innovation is also to walk away from a lot of value. Let’s suppose the typical new insurance product costs £2m to develop and test and £10m to market, hypothetically speaking. Let’s say that the numbers here represent the comprehensive resource cost, and not just actual cash outflows. Now if your new product took about the same, and was averagely successful, you’re at par. But what if you could deliver similar success with 20% investment? Or much better returns? And what if you could build a methodology for doing this consistently? That’s innovation! That means you can deliver more for less and on a consistent basis.
Most organisations look at innovation as a way of delivering new products, or new businesses. It’s also common to look at it as a process that follows a standard path: brainstorm ideas, prototype in a lab and then scale through the organisation. I challenge both of these premises. First, looking at innovation as an idea to market process limits our thinking. Innovation needs to be seen as a problem solving methodology. And specifically, a methodology that looks to improve on the expected resource requirement for solving the problem. And to the second, if everybody is replicating this model, then it stops being innovative. Not that it becomes less valuable if the new products work. But the reality is that most innovation initiatives in most companies don’t lead to success. And wouldn’t it be great if we could increase the success rate?
My model of innovation therefore starts earlier, with Problem Definition. If you’re thinking of a new product, why? Is it to ensure coverage of the market? is it opportunistic? Do you believe that there will decline in current products & revenues? Is it a strategic response to competition? Do you feel you underserve the market? Is the problem financial – your return on capital is too low and you’d like to improve this? Are you missing out on more profitable customers or a growing segment? As you can see there are many, many ways of framing your new product development effort and the problem you’re trying to solve may vary significantly. 3M for example, has a commitment to drive 30% of revenues from ‘new products’ – i.e. those built in the last 4 years. For a pharmaceutical company a new product that better addresses a disease or a family of problems, is a protectable revenue stream that can run for over a decade, even as older revenues decline through patent expiration. Whereas Google (Alphabet) just wants to solve bigger problems. That allows it to be mission driven but even there, for example there are specific problems. Arthur Levinson, ex CEO of Genentech leads a platform in Alphabet to combat ageing. Whereas in the new famous example of British Cycling, the marginal innovations are aimed at driving higher performance, and nothing to do with a product at all. This is where we step away from product development and recognise that innovation is a methodology for solving any problem in a ‘do more for less’ way, not just product development. To do this well, try approaching this problem as at least two out of a CFO, a CEO and a head of Operations, or Marketing. Or apply design thinking principles to see how the people impacted by this problem think about it. This award winning redesign of the ambulance started by looking at the ambulance as an extension of the hospital, and the start of the medical process, rather than just a form of transportation to the hospital. Kees Dorst’s book ‘Frame Innovation’ is a good starting point for thinking about problem framing.
The next step is the Research and Baselining phase, so we know what benchmark we’re trying to beat. It is likely that your ambitions are not at the same scale as Google’s (or Alphabet’s), Amazon or Elon Musk’s. In fact you may just be looking to solve an punctuality problem in your department in a way that nobody in your company has done yet. If you define your context as your company, department, industry or the world, you can accordingly set your benchmarks. This is critical because what’s innovative for a government agency (say agile development) could be very old hat for a Silicon Valley company. But this my second key point. Innovation is surely about being different, and not replicating a tried and tested method. So you need to clearly set out what you’re going to do differently (better!) from other similar efforts, before you start. It’s worth noting that of the 5 stages, this gets the least amount of attention because it’s probably the least sexy part of innovation. But it could save you a lot of effort and also dramatically sharpen the subsequent phases. In fact, often, you will be able to find a lot of examples workable ideas in other industries and organisations. No better example of this than the Great Ormond Street Hospital for children learning from Formula 1 pit stops, about swift handovers from surgery to intensive care. This represents a huge reduction of risk, in the innovation journey.
It’s only once you’ve done stages 1 and 2 that you should then get to the Creative Spark stage. For most organisations, this equates to a brainstorming exercise. One of the biggest mistakes in the area of innovation is that people jump into brainstorming with a loosely defined problem and no benchmark. To make it worse, you then get a lot of people with very little knowledge of the context of the problem state coming up with ideas many of which clearly won’t work. I know of a company which was keen to ‘pitch’ ideas to Transport for London. They ran a competition internally, generated hundreds of ideas, evaluated them and drew up a short list of 10. But the brainstorm was run with a global team, not based in London, and consequently many of the ideas, such as mobile app based solutions for contactless ticketing did not factor in the actual challenges of rush hour volumes, or the speed of response required. Besides, many of the ideas were already at play at TFL, which hadn’t been researched well enough. Running pure-play brainstorms is also of limited use if the team doesn’t have enough context of the problem. You can’t brainstorm ways of improving care pathways in the NHS, or supply chains for broadcast equipment, if you don’t know much about them, or the problems they face. There are, however, plenty of techniques for running more effective brainstorms and idea sessions. Additionally, there are other ways apart from brainstorming for the creative spark phase. Best results are often achieved through having creative people in the mix along with experts, or building unpredictability into the process. Tim Harford’s book ‘Messy’ suggests some excellent ways in which this happens.
Once you have ideas you want to take forward, you can then push them through the Innovation Lab stage. Of the 5 phases of this methodology, this is the one most organisations have invested in already and are doing with a lot of focus. Setting up a lab environment, running ‘Google sprints’, ensuring that small teams turn around quick prototypes, building design thinking into the mix and fusing the efforts of creative technologists with deep experts, a lot of companies are able to do a reasonably good job of taking new ideas through a laboratory process to an MVP stage. When I was working at Cognizant, in 2015 we conducted a quick research of ‘innovation labs’ and were not surprised to find that an overwhelming majority of leading banks and retailers already had an innovation lab of some kind. If you haven’t yet been exposed to or been a part of an exercise like this, grab hold of ‘Sprint’ by Jake Knap et al.
But even that is not enough because a lot of initiatives can fail even after lab success. Be they new products or internally facing solutions. Scaling innovation is fraught with risk, and even Google is famous for the number of initiative it has killed after promising starts. This is the key reason that many organisations prefer to buy in the finished product rather than try to build it in house. What the newly created and lab-tested idea needs is not just organisational support, but often a network in which to flourish. The best results are created when the new idea has a life of it’s own and is allowed to grow and morph independently, not simply scale to a larger replica of it’s initial form. The perfect baby needs to grow into a healthy human adult, not a full sized replica of the baby. Most businesses are unable to provide this kind of sustaining network. Steven Johnson’s excellent book ‘Where Good Ideas Come From’ beautifully elucidates this idea of a sustaining networks. When GE set up it’s fledgling IOT business in Silicon Valley, it was not just allowing it to flourish outside of the corporate headquarters, but also allowing it to sustain and nourish itself in a high tech network. In organisations such as Google and 3M, there isn’t a small and tightly defined number of ideas being pipelined to the market, there is a huge internal innovation network, where dozens or even hundreds of ideas feed off each other, combine and morph on their way to a handful becoming successful products. If it’s new product and new business development that defines innovation for you, then you could do well to keep at hand the Innovators Solution, by Clayton Christiansen.
This is just the tip of the iceberg, in a way. Innovation is hard work, and much of it is done away from the public eye, and the adulation of success. But more importantly, innovation is a methodology, which when applied, dramatically improves your ability to problem solve in a way that is ahead of the competition.