A billion-mind economy

Competing in the global knowledge economy means that your organization must learn and innovate as fast as change in the marketplace. Here’s why. In the raw materials sector, the value of products follows trends measured in years. Shelf life is relatively stable. For example, owners of coalfields can keep their product in the ground, with no leakage of inventory, until the market price is favorable. Because coal deposits are millions of years in the making, no new coalfields can be created. They can only be discovered.

Avocados, by contrast, are fragile, with a very narrow time window for harvesting, and an equally limited shelf life. However, unlike coal, anyone who owns land, with the right soil and climate, can plant and cultivate avocados.

Now let’s take a look at knowledge. You don’t need to own any land ... just a brain and a computer with Internet access. That creates a radically different competitive environment. If you own a coal mine or an avocado farm, you are one of about 100,000 in the global marketplace. Care to guess how many potential competitors you have as a knowledge worker? Try 1 billion, and growing.

Let’s say you come up with an innovation, and are able to sell it on the open market. How soon do you think it will be before your work gets copied and sold halfway around the world? How soon will it be before your innovation is rendered obsolete, by someone else’s improved version? If you’re working in a knowledge-creating organization, and you’re thinking that the time pressures you’re facing make coal look like avocados, you’re getting the right:

Product: Coal

Approximate number of competitors worldwide: 100,000 mines

Average product shelf life: Eons

Product: Avocados

Approximate number of competitors worldwide: 100,000 farms

Average product shelf life: 1 to 4 weeks

Product: Knowledge

Approximate number of competitors worldwide : 1,000,000,000 minds connected to the Internet

Average product shelf life: Varies widely, but can be minutes or hours (e.g., options and commodities trading, crisis response, computer virus attacks)

There’s no way around it. You need to innovate: early, often and fast.

If you don’t already have one, you must establish a process for innovation. An army commander in combat doesn’t just say, "OK, soldiers, take that hill." Such an operation requires training, planning, coordination and a host of other elements. In the same way, you can’t just tell your people, "We need to innovate more." Instead, innovation must be systemically and culturally ingrained. Here are three basic steps for getting started.

The most important, yet often overlooked, step is to first define the beneficiary of the innovation. That moves you beyond brainstorming to focused brainstorming. Product innovation is client-focused, while process innovation is internally focused. Process innovation that ultimately benefits the client works even better.

Regardless of whether the target beneficiary is internal or external, you are looking for ways to close a gap, or overcome an obstacle or barrier. The value potential created by partially or completely closing the gap should be measurable in terms of cost, time, risk or performance improvement, such as quality, accuracy, etc. The width of the gap, multiplied by the number of beneficiaries, equals the potential value of the innovation. 

You also must estimate the costs, including the time and effort to develop, test, implement and support the innovation, vs. the benefits. That is an effective, but not the only, way of prioritizing ideas. As your innovation process takes hold, you can begin to look deeper into the value network and consider long-term strategic and intangible benefits as well.

Step 2 is to create a shared, safe proving ground. Innovation means allowing mistakes. But to minimize the impact of those mistakes, you must have a robust system of integrated processes that support the rapid formulation, design, piloting and market testing of new ideas. The costs of innovation can quickly eat you alive if you end up duplicating effort (paying multiple times for the same breakthroughs) and repeating errors. Make sure you have a tried-and-proven approach for quickly learning from mistakes (see article on lessons-learned in the September 2007 issue of KMWorld).

Step 3 is to organize into small teams, networked together to promote idea sharing and cross-collaboration among disciplines. The notion that large organizations can’t innovate is mostly a myth, because those that do have found ways to remove bureaucratic hurdles, work in small teams and network across those teams. A closely aligned IT infrastructure can help you quickly identify, across your entire enterprise, who is doing what, how they are doing it and with what results.

Implementing all those steps demands a strategy; streamlined, integrated business processes; supporting infrastructure; and most important, a highly trained knowledge work force, skilled in creative problem solving and decision making.

But you need to start somewhere. Whatever your starting point is, your immediate goal is to increase the speed and frequency of innovation within your enterprise, if you are going to survive in a billion-mind economy. Focusing on benefits and their recipients, encouraging failing forward by learning from small mistakes, and thinking small, while being highly interconnected, will get you well on your way.