Sunday, May 30, 2010

Prototyping to clarify requirements: a 747 experience

India is building a prototype civilian aircraft through a public-private partnership. Expected time? 5-6 years. Expected cost? Rs. 5000 Crores ($1Billion)! Doesn’t quite fit into our image of “quick & dirty”, does it? What kind of prototyping is involved in developing a jetliner? Joe Sutter, Boeing’s retired chief engineer, has written a beautiful narrative on what it meant to develop a jumbo-jet back the 60s in his book: 747: Creating world’s first jumbo jet and other adventures from a life in aviation. Let’s look at three prototyping stories during 747’s evolution.

It all started in August 1965 with a requirement from Boeing’s biggest customer and the most influential international airline then: PanAm. It had already launched two large airlines - Boeing’s 707 and Douglas’s DC-8 – each carrying about 140 passengers. PanAm now wanted a really big jet carrying upwards of 400 passengers at one time. That’s two and a half times the 707 capacity! Knowing PanAm’s chairman Juan Trippe’s bias for “ocean liner paradigm” people knew he is expecting a double-decker jet. Here is how Joe & his team used prototyping to clarify the requirements.

First thing was to get the size of the plane clarified. So Joe’s team worked out preliminary parametric studies to generate airplane weight, size and performance figures. They also asked other customers, TWA, British Airways, Japan Airlines and other international carriers what they felt they needed in the way of a big jet. But they didn’t get meaningful response. So Joe & team did something interesting. They proposed three different airplane sizes to the airlines, a 250-seater, a 300-seater, and a 350-seater. They also supplied basic weights, performance parameters and operating economics for each of the options. This approach worked and the results were surprising. Every single airline had chosen the largest size (last option).

Boeing engineer Rowland Brown drew hundreds of double-decker drawings. But none were satisfactory to Joe and Milton Heinemann, a payloads engineer. FAA regulations required that it should be possible to evacuate all passengers within 90 seconds, in case of emergencies occurring on the ground. It wasn’t clear how this requirement could be met with a double-decker. Finally, Joe suggested, “Why not put a wide single deck fuselage onto the drawing board by way of comparison?” Row Brown started drawing single-deck cross sections. In Joe’s words: We did rapid studies of the “cut to the chase” variety, with a healthy dose of horse sense factored in. The wide single deck idea indeed made more sense.

To give an idea of what the single deck cabin and the double deck cabin would look like, two lumber and plywood mock-ups were built (see picture above for the single deck mock-up). PanAm chairman & his team flew down west to evaluate the options. “Would PanAm agree for the single deck?” It was a tense moment for Joe. After reviewing the mock-ups Trippe told Joe, “You made the right decision”.

As the saying goes, “If a picture is worth a thousand words, a prototype is worth a thousand pictures.” To reiterate from my earlier article on prototyping, “Stop talking, start prototyping”

Friday, May 28, 2010

When Warren Buffett invests in a technology innovation: story of BYD, China’s innovative car company

I got interested in BYD when I read about Reva promoter & CEO Chetan Maini mentioning about Warren Buffett’s investment in an EV company. Maini recently sold Reva to M&M because he sees market is getting ready for electric cars and Reva needed a father with deeper pockets and farther reach. I thought, “Why would Buffett, who is so averse to investing in technology innovation, invest in an electric car company? What is so special about this company that it has managed to do to Buffett what Intel, Microsoft and Google couldn’t do?” As I started browsing through the Net, a few answers started presenting themselves. Let’s start with the company: BYD.

Interestingly, BYD was started around the same time as Reva Motors, in 1995. Reva has put around 3500 cars on the road so far since 2001. In contrast, BYD’s F3, a 4-door compact car that retails for about $9300, has sold 448,397 units in 2009 alone (just for comparison Nano has put 35000 cars on the road since July 2009). But BYD didn’t start as a car maker. Wang Chuan-Fu, a chemist and a government researcher, started BYD in Shenzhen to manufacture rechargeable batteries to compete with imports from Sony and Sanyo. He raised $300,000 from relatives and rented 2000 square meters of space. By 2000, BYD had become one of the world’s largest makers of cellphone batteries. BYD’s customers included Nokia, Motorola, Sony Ericosson and Samsung (was anyone else there?). Today BYD makes about 80% of Motorola's RAZR handsets, as well as batteries for iPods and iPhones and low-cost computers. Revenue, which has grown by about 45% annually during the past five years, has reached $4 billion in 2008.

Wang entered the automobile business in 2003 by buying a Chinese state-owned car company that was all but defunct. He knew very little about making cars but proved to be a quick study. In October 2009 BYD’s F3 became the bestselling sedan in China, topping well-known brands like the Volkswagen Jetta and Toyota Corolla. Today BYD employs 130,000 people in 11 factories, eight in China and one each in India, Hungary, and Romania. Essentially Wang is doing to electric vehicles what Henry Ford did to automobiles – making it a product affordable to mass market.

Let’s come back to Buffett. Well, it turns out that the investment idea didn’t originate with Buffett. So it’s not as though Buffett suddenly started understanding technology at the ripe age of 78. The idea came from Buffett’s friend and longtime partner 85-year old Charlie Munger. Apparently Munger seems to have sold the man behind technology harder. Munger says, “This guy [Wang] is a combination of Thomas Edison and Jack Welch”. A master problem solver and a master executor – a deadly combination. Buffett sent another trusted partner David Sokol, chairman of a Berkshire-owned utility company called MidAmerican Energy, to travel to China and take a closer look at BYD.

“I don't know a thing about cellphones or batteries," Buffett admits. "And I don't know how cars work." But, he adds, "Charlie Munger and Dave Sokol are smart guys, and they do understand it. And there's no question that what's been accomplished since 1995 at BYD is extraordinary." BYD investment has already given Buffett’s Berkshire a 500% returns in less than 1 year. Yesterday Daimler announced its partnership with BYD and an investment of $88 million for product development. In 2010, BusinessWeek ranked BYD the 8th most innovative company in the world, ahead of Ford; Volkswagen and BMW.

I guess Bill Gates didn’t sell hard enough when he suggested Buffett to invest in Microsoft and Intel back in 1991. Did I mention that Buffett is planning to visit India next March?

Sources: Warren Buffett takes charge from, Buffett’s BYD soars by Lauren Cooper, BYD CEO Wang’s interview on YouTube.

Monday, May 24, 2010

My second 10K run: finding a rhythm & black-n-white goals

Thanks to my wife Gauri who managed a last minute spot registration for me last Thursday, I ran 10K in Bangalore this morning. This was my second 10K run. I wrote about the last one two years back. I took 1 hr 10 minutes in 2008. I was hoping to do this one under an hour. I wish I could say I achieved my goal. I didn’t. But my timing of 1 hr 2 minutes came pretty close. Gauri did well too with a timing of 1 hr 11 minutes. It was certainly a personal breakthrough for me. I have mentioned earlier that I feel innovation is more like a marathon than a sprint. What did I learn in this 10K run that is applicable to innovation as well?

It would be cool to say that I don’t do any regular exercise and land up at Kanteerava stadium every year for the 10K run and do well. But that isn’t the fact. In the last six months I and Gauri had two Sunday morning runs which were at least 6km. I am also doing 5K once a month on the treadmill for the past few months. But what is perhaps most consistent is my 2-3km run twice a week for the past 22 years! That’s a little over half my age.

Breakthrough innovation is a noble goal. It is sexy and perhaps easier to get funding approved for. After all, who doesn’t like to show that they can hit sixers like Nano-iPod? Unfortunately, aiming for a breakthrough innovation without building relevant internal capabilities is like running long distance without building relevant stamina. You may be lucky and finish it. But chances are high it won’t sustain and it could also result in an injury. Remember Motorola’s situation after the successful Razr?

There are two things about today’s run that I find interesting. One is about an experience that is not new to me but still I find it fascinating every time I experience it. It is about “finding a rhythm”. I was lucky to find it this morning. Once I found a rhythm, everything seemed easy. Perhaps it is true for innovation as well and I mentioned about it here earlier. The second thing is an experiment I tried. I set a goal – something Heath brothers call “Black & White goal” in their book Switch. The goal was “not to walk during the run”. A slow run is ok but not a walk. I thought it worked pretty well. According to Heath brothers, a B&W goal doesn’t leave any room for the analyzing part of our brain.

Could I have predicted my performance in today’s run? Again, it is tempting to say that I saw it coming. It isn’t true. In spite of all the preparation, it could very well have been a bad day – a cramp in the stomach or pain in the knee – both of which I have experienced before. There is always an element of chance which is beyond my control. But today the chance was high that I would have finished the run within 1 hr 15 min. I salute Louise Pasteur for saying, “Chance favors the prepared mind”.

Tuesday, May 18, 2010

Switch: My favorite textbook on change management

In a tragic incident at the New Delhi railway station last Sunday, last minute change of platform for two Bihar-bound trains triggered a stampede, leaving two dead and a dozen people injured. Mamata Banerjee, India’s railway minister, says, “It is not a failure of administration. People are responsible for such chaos." Mamata Banerjee’s knee-jerk reaction to this incident is, in fact, a common phenomena known in psychology as “Fundamental Attribution Error”. It says we have a systematic tendency to ignore the situational forces that shape other people’s behavior. However, the fact is - What looks like a people problem is often a situation problem. Is it possible to look at the situation that caused this tragedy? And is it possible to improve things at the platform so that chances of such a tragedy are reduced not only in Delhi station but all stations in India? The book “Switch: How to change things when change is hard” written by two brothers, Chip & Dan Heath, gives us a hope. In fact, the book gives a lot more than just a hope. It is gives a sound framework which is actionable.

Switch is a book to help you change things. It considers change at every level – individual, organizational and societal. May be you want to help your brother beat his gambling addiction. May be you need your team to become more innovative. May be you want to reduce stampede injuries in temples and railway stations. Heath brothers point out that the underlying principles in all kinds of changes are the same. It involves the same mission: Can you get people to start behaving in a new way? Unfortunately, we all have a built-in schizophrenia. One size of the brain is emotional and the other side is rational. And most problems arise because the two sides often don’t agree.

One of my favorite stories from the book is about a social worker, Jerry Sternin. In 1990 Sternin working for Save the Children, the international organization that helps children in need, arrived in Vietnam to help the country fight malnutrition. The minister told Sternin, “You have six months to make a difference”. Sternin did not get into solving the root-causes like the poor sanitation, poverty, education etc. Instead, he mobilized village moms into finding kids who are poor & healthy. Then he asked, “What are the moms of these kids doing differently?” It turned out that the poor-and-healthy-kids moms were doing a few things differently. One, they were feeding their kids four meals a day (using the same amount of food as the other moms). Two, they were proactively feeding their kids rather than letting the kids decide how much to eat. Three, they were feeding different kinds of food – tiny shrimps and crabs from the rice paddies and mixing them with rice. With this knowledge, Sternin designed a community program in which fifty malnourished families, in groups of ten, would meet at a hut each day and prepare food. The families were required to bring shrimp, crabs and sweet-potato greens. The mothers washed their hands with soap and cooked the meal together. Sternin says, “The moms were acting their way into a new way of thinking”. Six months after Sternin had come to Vietnamese village, 65 percent of the kids were better nourished and stayed it that way.

Heath brothers call Sternin’s method “Follow the bright spots”. It asks the question, “What is working already? And can we do more of it?” Perhaps a solution to Mamata Banarjee’s railway station stampede problem already resides in Chennai or Kolkata or Mumbai. Like Sternin, we may have to find the bright spots first.

Switch gives several techniques such as “Follow the bright spots” in bringing about a change. There are several resources including the first chapter of the book available free at Heath brothers’ web-site. I consider change management to be one of the three pillars of systematic innovation. I won’t be surprised if Switch becomes one of my textbooks.

Saturday, May 15, 2010

A low-cost experiment that crystallized Deccan Aviation's vision

I have mentioned earlier that experimentation is at the heart of systematic innovation. We can imagine building prototypes when it comes to new products such as iPod or Nano. But what kinds of experiments are involved when you are launching a new service? Well, one dimension where you need to experiment is called “customer experience”. How does an experiment for a service look like? Let’s see one such experiment that crystallized the vision for Deccan Aviation – a pioneer in low-cost airline business in India.

Deccan Aviation was registered in Bangalore in May 1995 by Captain Gopinath and his friend Sam with a vision of, “Getting a helicopter easier than finding a taxi”. There were a number of questions yet to be answered. Can helicopter be brought to the sphere of public use? Could we make it possible for just about anyone to fly – and at a short notice? Gopinath soon got a chance to verify this assumption.

One day an old army friend Capt. Vishnu called Gopinath. Vishnu was nick named “Flying saucer” because of his passion for flying. After 15-20 years of service typical pilots do 1,500 to 2,000 hours of flying. Vishnu had done 6,000. He had quit the army and joined the UP government as a helicopter pilot. Vishnu was in Bangalore to fly a UP government helicopter that had been brought to HAL for routine maintenance. He was to take off the following day and offered Gopinath a joy-ride. Gopinath asked him which route he was taking to go back. Vishnu said he would be doing a zig-zag detour – Mangalore, Goa, Pune, Nagpur and on to Lucknow. Gopinath realized that the route is going over his village near Hassan. Gopinath requested if Vishnu could drop him to his farm-house on the way and whether he could get his wife Bhargavi and as well as his friend Jayanth and his wife Ponnu with them. Vishnu happily agreed.

In preparation for the landing on the farm, Vishnu asked for a field to be cleared and a fire lit up to help him locate the smoke and find the landing spot as also the direction of the wind. Gopinath called his village friend Raju in Javagal and asked him to make the necessary preparations for their arrival the following morning. They all took off at 9:30 am in Chetak, a helicopter made by HAL under French license and offering 180 degrees aerial view. Vishnu asked Gopinath to sit next to him in the cockpit to help with micro-navigation when they approach Javagal. He sat with his map spread out on his lap.

Within fifty minutes the helicopter reached the farm-house. Raju had lit a fire in a nearby ragi patch from which smoke was visible. A host of neighbors and many others in the village were crowded around the patch. It was the first time in their life they were going to watch a helicopter from such a close distance. As soon as they alighted Raju brought them tender coconut to drink.

Vishnu left after a short break and a meal. Gopinath and the rest headed back to Bangalore in Gopinath’s Tata Mobile pick-up truck. The journey back took six hours. Gopinath recalls, “I knew after the aerial journey in the helicopter that there was no going back.”

What happened here? First one is that an opportunity landed on Gopinath’s feet for a joy-ride, a lucky break. But what Gopinath did was to convert the opportunity into an experience that will validate his assumption about “flying to a small village on a short notice”. This was no ordinary experiment. For a person dreaming about starting a helicopter charter service, it was an ultra-low cost experiment. Low cost experiments like these are extremely important in systematic innovation because they help you validate various assumptions about your idea. They help you course-correct and they enable you to fail and learn from the failures.

source: Simply fly by Capt. Gopinath

Friday, May 14, 2010

Why does Geoffrey Moore say, “Being innovative is not the goal”?

I sell innovativeness. In fact, I promise my customers that I can help them become more innovative. And hence, when Geoffrey Moore says, “Being innovative is not the goal”, I want to know why?

Geoffrey Moore is a venture partner at Mohr Davidow Ventures, Menlo Park, California and author of bestsellers like Crossing the chasm, Inside the tornado and Dealing with Darwin. Geoffrey was interviewed at in 2007 and asked a question, “How should companies be trying to become more innovative?” Geoffrey began by saying, “Innovation is a neutral substance. Being more innovative is not necessarily the goal. The goal is to be more effective in economic competition. You want to achieve competitive advantage. In order to do that you need to differentiate yourself from your competitors. And in order to do that you need to innovate. So innovation that does not lead to differentiation from competitors does not get repaid as much

What Geoffrey is saying is that innovation is a means to an end. That end is to do better than competition in an economic scenario. So let’s ask this question, “Under what circumstances, I may become more innovative and yet not enough to beat competition?” Let’s look at two such scenarios:

· No sixer: I have seen organizations whose innovation programs are several years old. Thousands of ideas are generated and several of them are implemented. But there is only one catch – all the ideas are incremental in nature. They haven’t had a sixer and in fact, there is nothing in the pipeline which can potentially be a sixer. If you take a parameter like “idea per person” the organization may claim “innovativeness” but such “innovativeness” is not good enough. In the innovation dashboard I presented earlier, such a situation will result in a poor “portfolio”.

· Inefficient innovation: We have seen earlier the story of an innovative company – Lego that forgot the cost of innovation. In 2003, Lego was churning out new products but at what cost? The company designers were dreaming up new toys without factoring in the price of materials or the costs of production. For example, a pirate kit included eight pirates with 10 types of legs in different attire and positions. Lego group had 11,000 suppliers, nearly twice as many suppliers as Boeing uses to build its aircrafts. Lego was certainly trying to be innovative but not being competitive. In the innovation dashboard, such a situation will result in poor “success rate” when success is measured in terms of profitability of the new products.

What can we do so that we don't forget the end-goal? We devise a strategy – a broad approach to “where to play? And how to win?” And I feel it should be an important element of your innovation ecosystem. And not losing sight of the ultimate goal matters.

Sunday, May 2, 2010

Organizational Innovation Ecosystem

I have a fascination for ecosystem view. I wrote first about an ecosystem two years back in an article titled “technical leadership ecosystem”. In this article we explore a similar question in the context of innovation. The question is: What are the elements of an organizational innovation ecosystem? The view presented above is a work-in-progress. It is currently being used to study how various elements contribute to organizations becoming more (or less) innovative. To understand how innovative you are, you can check a simple innovation dashboard. Each of the 5 elements of the ecosystem - strategy, process, structure, climate and competency - is briefly presented below.

Strategy: At the heart of this view is “strategy” which answers following three questions: Where do we want to go from here? What are the choices do we have? What broad approach will we take? Strategy is not written in stone. In fact, it is more like surfing a wave and constantly evolving. Whether you begin your innovation journey by identifying a strategy is debatable. However, without a clear strategy, it is difficult to go very far in your innovation program.

Process: Every innovation program needs a process for generating, selecting, prototyping, funding, implementing and commercializing ideas. In most organizations this process is supported by various sub-processes. For example, P&G has a process where every business identifies top 5 business challenges which help in generating business relevant ideas. P&G also has another process called immersive research by which employees spend several days at consumers’ house or in a retail shop. This enables insights which are not easy to find through market research. P&G also has a rigorous innovation review process. A process is not effective unless it is supported by appropriate structures, climate and competencies.

Structure: Laboratories are places that enable rapid experimentation. Tata Motors has labs like Engineering Research Centre (ERC), Chassis Dynamometer Emission Lab, Instrumentation Lab, CAD centre for designing and styling etc. It has multiple platforms including the small car platform. Nano is the first product derived from the small car platform for Indian market. Corporate venture fund is a structure that funds innovation projects. A specialist ladder (also called technical ladder) provides a career path for specialists to grow. P&G has also created various structures that enable innovation.

Climate: Innovation fosters in spaces that are open and conducive for collaboration especially among diverse functions. Informal or self-organizing groups like SIG (Special Interest Groups) or Quality Circles or other Communities of practice (CoP) enable innovation. Mindtree, an IT services company in Bangalore, has 53 CoPs – not all equally active. Each CoP organizes knowledge sharing sessions, competitions and news letters. Mindtree also organizes an innovation day called Osmosis where innovators present their ideas and prototypes.

Competency: Innovation needs ambidextrous leaders, those who can focus on efficiency as well as new ideas. P&G puts individuals through a series of experiences where they learn to operate and innovate. Lafley identified specific competencies like design that play a crucial role in innovation. P&G created a design function and kept it outside the business units so that it could be leveraged across the company. They recruited top designers from outside. P&G also offers training courses in design thinking and improving innovation success rates. Clay Street is another place where employees spend 6 to 12 weeks and experience ideation and prototyping.

Innovation ecosystem view forces us to think on multiple dimensions while running our innovation program.

Note: I would like to thank my friend Prof. Rishikesha Krishnan for pointing out the missing element of "strategy" in an earlier version of the ecosystem view.

Saturday, May 1, 2010

How innovative are you? A simple innovation dashboard

When it comes to health check, triglyceride test is important, especially if you are a high cholesterol person. However, for most people, a weighing scale works just fine to get a quick feel of the health. What would be a “weighing scale” for innovativeness of an organization? Can we have something simple and yet representative of innovation health? In the table above I have tried to present a simple dashboard. I find this useful while working with my customers as well as while studying evolution of innovative organizations like 3M, Toyota and P&G. Let’s look at the four parameters.

· Pipeline: This is an indicator whether idea funnel is getting filled regularly. A lead indicator would be the number of ideas generated last few months. A lag indicator would be the number of ideas entered the funnel in the past 2-3 years. “idea per person per year”, a parameter Toyota uses, is also a good indicator of pipeline. For Toyota, it went from 0.1 in 1951 to 48 in 1986. INSSAN data suggests that the average “idea per person per year” is around 5 for the 30 odd participating Indian organizations in 2009. Ideas generated through Cisco’s i-zone + i-prize collaboration portals went from 80 to 1100 in one and a half year’s time.

· Participation: This parameter tells us where the ideas are coming from. The more people and the more types of people (customer, partners) contribute the better. Toyota’s idea management system tracks the percentage of employees suggesting the ideas. In Toyota, employee participation went from 8% in 1951 to 95% in 1986. This number is 100% for TVS Motors and the average hovers around 60% for the participating companies in INSSAN survey in 2005 to 2009.

· Prototypes: What happens to the ideas after they are generated? Do they remain as just ideas or move forward as experiments? This parameter represents the experimentation capacity of the organization. For a leading captive center in India of a global European firm, for the 400 ideas in 2007, there were 45 prototypes built (roughly 1 in 10 ideas got prototyped). Ideo, a leading design firm from US, prides itself in developing several hundreds of prototypes every year (exact number is not known). Note that for a services firm, a prototype may be a video showcasing a new customer experience.

· Portfolio: Are all your ideas incremental? Or on the flip side, are all your ideas potential sixers? Every organization needs to balance between risk and rewards. You need a number of incremental ideas that are low-risk, you also need a few ideas that are potentially your “iPod” or “iPad” category. A portfolio also needs to be assessed for potential hazards. For example, patent infringements (TVS-Bajaj battle) or possible product recall (recent Toyota recall). Finally, you need to check your success rate or what A G Lafley calls “batting average” – What percent of your implemented or launched ideas succeed? AG is happy with 50% while Martin De Beers of Cisco has set a goal of 75% or higher and currently running with a batting average of 90%.