I was reading a report by the IBM Institute for Business Value’s “Fast Forward: Rethinking enterprises, ecosystems, and economies with blockchains”. In IBM’s thinking, they have clearly taken friction as part of the need to be broken down within any rebuilding of the supply chain. Well, I also believe these apply equally as innovation frictions. Reducing any frictions that get in the way is good, right?
So I decided to builds out of their friction analysis, building on the thoughts offered in the report, adding the innovation perspective.
So here I am suggesting constraints that need tackling in reducing the innovation friction points, theirs was for blockchain. I did like a comment in the report stated: “Friction, in theory, could be digitized away” (page 3) and partly why I looked at the report in this digital perspective for future facing innovation solutions. The frictions hold true for innovators to resolve.
So adding onto the views of IBM from an innovation perspective:
Information frictions (imperfect, inaccessible and full of risks)
- Imperfect Information. Participants in a transaction don’t have access to the same information. In the age of big data, that can put them at a disadvantage, potentially diminishing the value of their full ecosystem. Too often, information may also be incorrect or inconsistent, leading to bad decisions or delays while reconciling it.
- The Innovation Perspective view here is this : Innovation equally suffers constantly from this search for perfection, expected by organizations used to measuring value on established business (and metrics), Often it is not just the “diminishing value for their full ecosystem” but failing to connect it all up and appreciating or building in the “value at stake” by not investing in new seemingly risky innovation projects that have limited ‘hard’ quantified returns prior to market entry. Big Data can reduce this imperfect information
- Inaccessible information. “The potential value of abundant data and information is greatly constrained by the technical challenges of storing, processing, sharing and analyzing it. As a result, much information is not collected or remains inaccessible”.
- The Innovation Perspective view here is this: For innovation, this is the looking across borders and connecting understanding. Losing time in the debates and not determining the decision parameters sufficiently enough.
- Information risks. Technological risks to information, from hacking to cybercrime and privacy concerns to identity theft are on the rise. These incur growing costs, as well as damage to brand reputations.
- The Innovation Perspective view here is this: For innovation, these increasing concerns of “information risks” are slowing down the need to experiment, to test, pilot and trail innovation concepts. The fear of risk, of failure, of experimenting, is the largest contributor to innovation’s often lackluster in performance. Fear is holding us back and we are not sharing as openly as we should be doing.
Interaction frictions (transaction, separation degrees, and inaccessible issues)
- Transaction costs. The cost of conducting business is a function of its complexity and grows with scale, its size and the resources that need to be managed, including intermediaries. In almost every case, the cost of complexity yields diminishing returns.
- The Innovation Perspective view here is this: Innovators face this complexity and scaling dilemma but mostly today they are constrained by the inability to deliver on the promise of innovation as it still does lie at the core of the business. Its return is greatly diminished by the lack of understanding of the true value at stake as it can’t be easily quantified, so it constrains scaling and competition can simply copy and catch up, so you have the unrealised return.
- Degrees of separation. As the world flattens and digital platforms connect disparate parties, distance has shrunk, but delays remain due to arcane business processes. Business transactions that take days and are costly to manage via intermediaries are prime for disruption by nimbler competitors.
- The Innovation Perspective view here is this: Innovation suffers from a lack of automating the innovation process, something I find not just arcane but nonsensical in today’s technologically connected world. We still rely on an innovation process that is not fully connected up. Organizations failing to invest in connecting innovation up will run the risk of losing out to nimbler, more savvy competitors knowing the value of a connecting innovation from concept, through ideation and prototyping into the commercialization and pipeline, through to the end execution into the marketplace, connecting this to customer engagement all along the way.
- Inaccessible marketplaces. Many local economies lack access to an efficient or trusted marketplace, unable to exploit their assets. Even large enterprises are confronted with barriers and have assets that remain dormant and don’t contribute to revenue growth or the creation of wealth.
- The Innovation Perspective view here is this: Innovation activities are constantly constrained by not discovering the best ‘point of expertise to contact’ and can’t put to use those multiple idle assets that have so much expertise to work, they are locked in, frustrated and never listened to or leveraged in imaginative ways. Trust comes from reaching out and listening to experts who can contribute valuable insights into ‘something’ that creates better value.
Innovation frictions (inertia, regulations and invisible threats)
- Institutional inertia. With success, organizations calcify; legacy systems and bureaucratic processes slow down their responsiveness and ability to change. This sclerosis renders them particularly vulnerable to digital disruption and impedes their ability to innovate and adapt.
- The Innovation Perspective view here is this: Innovations simply gets utterly caught up in this ‘calcifying effect’ slowing everything down towards a potential solution, the board or decision makers tend to freeze. The pioneering spirit continues to diminish, risk reduction dominates and the entrepreneurial spirit continues to retreat as ‘maturing’ organizations become safety first. Original ideas and innovation simply suffer, it gets knocked back, whereas in the past it got enthusiastically and tested.
- Restrictive regulations. Highly regulated industries are stifled by delays; cross-border operations are curbed by conflicting regulations. Of course, some frictions are by design and are intentionally built into the system. While automation can lower costs and speed up regulatory processes, it cannot entirely eliminate governance through regulation.
- The Innovation Perspective view here is this: Innovation is slowed down by these external constraints, it is necessary to look at these in different ways. The nature of this constraint or friction becomes not justthe innovators to resolve but also the boards. They need to attempt to clear the innovator’s pathway by lobbying, campaigning, being creative in ways to reduce these barriers to innovation, within the bounds of their governance. Innovation needs a sound, engaged governance to encourage actions and clarity to break down the barriers and constraints, both internally and externally. We can often innovate around a constraint or something deemed as ‘restrictive.
- Invisible threats. New competitive business models made possible by new technologies are threats for which organizations can’t plan. For many, this growing uncertainty will disrupt continued business success. Both small organizations and nimble larger ones will try new approaches. And although many will fail, some will redefine entire industries.
- The Innovation Perspective view here is this: Innovation is not just about products and services, it is about developing the potential for new business models, actively seeking them out and exploring all the options, in a rapidly changing and technology-lad world. We can learn fast and respond by making the invisible more visible. Innovators need to not just focus on the core of today (horizon 1) but look towards the future through transforming steps and learning (horizon 2) to constantly build those new innovative solutions and their capacity to meet the future (horizon 3). To achieve this the innovators needs a very clear pathway of understanding and vision direction. We need to actively search for threats appearing on our business horizon.Today most innovators don’t, they just are spending their time in the trenches battling the ‘today’ business needs. We do need to build the three horizon perspective. It takes the invisible into the visible to knowingly do something about it. It replaces friction with positive motion.
Frictions occur all around us, it is recognizing them and addressing the problems to reduce them down.These frictions discussed here drag innovation performance down.
Without a doubt, friction applies to innovation equally. We need to reduce these friction points significantly down.
***updated on 28th July 2017 due to some errors in the original post***