Public Libraries Disrupting the Likes of Amazon

When you think of the modern iteration of your local public library, a couple things might spring to mind, such as the perverts sitting at the computers offending everyone around them in the name of free speech. But another might be the question, how long can this model of an institution last? Well chalk one up for another blow to the hard and fast rule of disruption. I have observed the growing catalogue in recent years of digital material available for check out, including audio as well as e-books. But in the age of streaming versus download, the for-profit sector has started rolling out its own version of subscription based reading, and they face headwinds of an unlikely competitor, as noted in the Wall Street Journal, Why the Public Library Beats Amazon—for Now:

A growing stack of companies would like you to pay a monthly fee to read e-books, just like you subscribe to Netflix to binge on movies and TV shows. Don’t bother. Go sign up for a public library card instead. Really, the public library? Amazon.com recently launched Kindle Unlimited, a $10-per-month service offering loans of 600,000 e-books. Startups called Oyster and Scribd offer something similar. It isn’t very often that a musty old institution can hold its own against tech disrupters. But it turns out librarians haven’t just been sitting around shushing people while the Internet drove them into irrelevance. More than 90% of American public libraries have amassed e-book collections you can read on your iPad, and often even on a Kindle. You don’t have to walk into a branch or risk an overdue fine. And they’re totally free. Though you still have to deal with due dates, hold lists and occasionally clumsy software, libraries, at least for now, have one killer feature that the others don’t: e-books you actually want to read.

E-books you want to read? That’s right. So instead of an all-you-can-read list of digital titles with the equivalent of Smokey and the Bandit III, you have access to many of the titles from Amazon’s top 20 Kindle best-sellers of 2013 list with the following impressive results:

Percentage of Top 20 Kindle Titles of 2013

See the full grid from the WSJ article here. The article goes on to explain an interesting history of this windfall for local libraries:

How did library e-book collections get such a leg up? Amazon is locked in a hate-hate relationship with many publishers, so none of the five largest will sell their whole collection to Amazon for its subscription service…Over at the library, the situation is different. All of the big five publishers sell their e-book collections for loans, usually on the same day they’re available for consumers to purchase. They haven’t always been so friendly with libraries, and still charge them a lot for e-books. Some library e-books are only allowed a set number of loans before “expiring.”

There are obvious limitations to free services, such as availability, wait lists and time span for checked out materials. But for now, this is a terrific example of a public institution in the local community showing itself able to respond to disruptive forces, and provide viable resources to a wider audience with limited resources. It is also an excellent example of how a business model can benefit from adapting to a model that helps a local community as “publishers have come to see libraries not only as a source of income, but also as a marketing vehicle…since the Internet has killed off so many bookstores, libraries have become de facto showrooms for discovering books.” See brief overview here:

Innovation Is Not Invention

“Above all, innovation is not invention. It is a term of economics rather than of technology. Non-technological innovations – social or economic innovations – are at least as important as technological ones.” Peter Drucker

Based on Drucker’s definition of innovation, when we as an organization, identify community needs and convert them into real-life solutions that affect the health, well being and happiness of a community, that is organizational innovation. This is what is particularly satisfying about working in the public or the non-profit sectors of business. These areas of work lend to mission oriented, values driven activity. But it does not have to be limited to there. With a different application of course, private sector (while a little less public mission oriented), can  be just as values driven and possibly contribute even more in certain contexts. This is the very positive side of understanding how we used to describe commercial activity years ago: business and society.

More Notes on Tesla’s Patent Sharing

Tesla surprised most readers with its blog post announcing in essence, and open source of its patented technology,

Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.

Immediately, our minds [rightly] go to the risk this represents, but in a post last month, the point was made that by tapping into the sharing power of the social era, Tesla may diffuse billions in costs it now shoulders alone:

Lured by the higher volumes, auto suppliers would also develop new parts, components and systems —software, brakes, charging devices—that would make Teslas run more effectively and lower production costs. Gas stations, start-ups, office buildings would build many more charging stations to accommodate the larger number of electric vehicles on the road. Utilities and real estate developers would start making home-charging stations standard rather than expensive extras. All of this would be a boon to Tesla. And the company might find it could start charging drivers of other electric vehicles for access to the super-charging network it has already built. And if electric vehicles were to rise in popularity, the government would likely offer increased support. Imagine if every rest stop on an interstate housed a rapid-charging station.

Navigant Research shows the following projections with a few continued, sluggish years that may be followed by a ramp up as collaboration pays off:

EV Sales Projections - Navigant Research

In a post on this topic, Navigant shares the possible benefit of collaboration among large manufacturers:

While the patent release by Tesla will surely increase collaboration with the major car manufacturers already producing EVs, it’s much less clear that open patents will move the dial on the major automakers who have largely steered clear of EVs in the past. Toyota, GM, and several other major players are hedging their bets on EVs, and Tesla’s patent release is unlikely to change their position…Increased collaboration between the major EV players could lead to this figure being achieved ahead of schedule.

Only time will tell of course, but this example of a fundamentally different way of doing business will be interesting to watch and hopefully, will turn out to some degree as expected.

The Future of Problem Solving

In our time, there is a new requisite skill set: being a futurist. A futurist was once only an avocation among the best of thinkers, and somewhat of a novelty and a subset of sociological and economic studies. It is very interesting to read authors like Alvin Toffler or Peter Drucker (along with a number of others) and observe how they saw things sometimes dimly, but often very clearly that were seemingly hidden to others. But it has been decades now since the advent of the information age and the decline of the industrial era. What this has created is an environment where it is no longer an option but to take charge of one’s future, in terms of actively, deliberately and even aggressively engaging in activity that is inherently future in its benefits. To a certain degree, success means understanding the future is simply not an option.

Problem solving has always been a core skill of leadership, but increasingly, this skill as a requirement has migrated to the average employee. To make this even more complex, the motif we hear regarding the next generation of leaders is the ability to solve problems that do not yet exist. Just to name a few, an article from futuristspeaker.com from several years ago cites:

Alternative Currency Bankers – According to Javelin Strategies, 20% of all online trades are already being done with alternative currencies. The stage is being set for next-gen alt-currency banks.

Waste Data Managers – To insure data integrity in today’s fast evolving information storage industry, multiple redundancies have been built into the system. Achieving more streamline data storage in the future will require de-duplication specialists who can rid our data centers of needless copies and frivolous clutter.

Privacy Managers – If you think you have lost most of your privacy already, we’ve only scratched the surface. We are all terminally human, and as such, we do not always make good decisions. Striking the perfect privacy-transparency balance will require far more than amateur insights. It will require a privacy professional.

Government Agency Dismantlers

See the full post from 2011 here. Some of these ideas might have seemed absurd a few years ago, but have already come began to be put into practice. Years ago Alvin Toffler warned,

Perhaps the greatest cost of wave conflict in America will be paid by the millions of children currently compulsorily enrolled in schools that are attempting to prepare them – and not very successfully at that – for jobs that won’t exist. Call that stealing the future.

The takeaway? Try something new as an antidote to paralysis or as Toffler also warned,“if you don’t develop a strategy of your own, you become a part of someone else’s.”

The Innovator’s Dilemma and the Disruption Machine

This month in the New Yorker, Jill Lepore has written an excellent (and lengthy) article, The Disruption Machine: What the gospel of innovation gets wrong. In it, the author has treated a subject that has been held up time and again during countless economic and technology discussions as the paradigm through which we are to view modern history: Clayton Christensen’s theory of disruptive innovation as summarized and popularized by his best-selling book From the 1990s, The Innovator’s Dilemma. Lepore has not only treated this subject in a very thorough manner, but you might say, used Christensen’s theory relentlessly as a chopping block, illustrating that it is fraught with truncated samples to support the theory, but more importantly, the theory itself fails time and again as a predictor of market trends. It’s one thing to point out flawed logic, as most any theory can be guilty of. But it’s much more problematic to demonstrate the failure of the theory to deliver on what it’s core principles are built around. Combine this with the frenetic activity in technology sectors that has put disruption on par with invention, and it would seem that a counterpoint to the current zeitgeist is both well-timed and much-needed.

I think much of Lepore’s treatment of the theory could be summarized in the argument that there is more interpreting of history using the disruption model than actual prediction, where people have not used the disruption model,

…to make accurate predictions about things that haven’t happened yet than because disruption has been sold as advice, and because much that happened between 1997 and 2011 looks, in retrospect, disruptive. Disruptive innovation can reliably be seen only after the fact. History speaks loudly, apparently, only when you can make it say what you want it to say. The popular incarnation of the theory tends to disavow history altogether.

I take this to mean that it is not as though disruption, as an independent action, does not occur as a part of the innovation, technology and general advancement of organizations and industries. But it is problematic to say that this is the model whereby you go about innovating: the way of destruction. Again,

The logic of disruptive innovation is the logic of the startup: establish a team of innovators, set a whiteboard under a blue sky, and never ask them to make a profit, because there needs to be a wall of separation between the people whose job is to come up with the best, smartest, and most creative and important ideas and the people whose job is to make money by selling stuff.

I think this is actually a fair assessment of much of the current state of being enamored with startups. I recall an interview where tech executive was questioned about the lack of profitability and future sustainability of one of the current social media giants. In a dismissive response, a comment was made along the lines of, “when you have millions of eyes on a service, how to make money is the least of your worries.” That illustrates a complete lack of real and essential business experience and leadership. But to the point, what exactly is [and you might go on to ask, is the value of] disruptive innovation according to Lepore? It is, “a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.”

That is a rough assessment. And Dr. Lepore is even tougher on startups if you ask me. Again, I not only think this criticism is warranted, but a compelling argument. I’m just not quite certain that in spite of a few places where there is convergence of ideas, the author might be conflating two things that are still distinct: disruption and the spirit of startups in general. Regardless of your conclusion, this is a very well written argument that gives pause, and personally, as someone who continuously strives for organizational innovation, it’s likely to challenge a few core ideas.

Inspiring Progress From Current Resources to Future Aspirations

This post is my exposition of a keynote address at a conference for finance professionals I attended earlier this year. The context was interesting because the audience was made up of municipal finance leaders, many of whom have spent much of their careers in the context of local government. The speaker is a very successful corporate entrepreneur and leader whose keynote was aimed at addressing the challenges of bringing about the best within an organization during times of great change, limited resources and all subsequent challenges. The challenge was, how do we reach our aspirations? From one professional to another, here are what I considered to be some excellent points along with my thoughts:

What Matters Now in the Era of Post-Revolution – We have experienced the industrial, information, and now the vocational revolution (so to speak). This creates a radical and essentially different set of challenges that are particular to today’s leader. Some things (such as human nature) have not changed, but among those that have are fragility in the financial markets, globalism, technology, sociology and now most particularly, the rapidity of change. Change management has always been a struggle, but what has intensified is the speed at which things occur. We have to be mindful of this, ahead of the curve and ready to respond.

We Need CREATIVITY to Solve Problems – Every leader must provide a certain level of inspiration to bring about this creativity. My takeaway: every person (position) needs to be inspired. This is OUR job as leaders. Some years ago I was watching an interview regarding getting accepted into a business related doctoral program at Stanford. I was surprised to hear that one of the things they look for in a candidate is creativity. But this makes perfect sense and it is no different in the daily grind of business. Creativity in financial or business operations does not mean a lack of compliance with laws, guidelines or other controls. But it does mean viewing operations considerably different, then applying innovation, sometimes within the scope of the same resources already available.

All Roads Lead to Change Management – We NEED disruptive innovation, this is where progress is made. This is a required flexibility that does not have a shelf life; it is ongoing and continuous. Speed, efficiencies and breaking down orthodoxies – these are the requisite skill sets. Failed organizations fail by change outstripping their strengths (which then becomes their liabilities).

Think Lean – Distributed leadership means ownership and FORWARD contributions by every employee, not simply a dictate by the hierarchy. We want employees to think, not just do! Those in leadership need to accept ideas, respectful input and feedback. Organizations will move forward with a creative, rule-breaking mindset, not the construction of hierarchies, which is how our systems worked in the past.

Pursue Greatness, Whatever Your Interests – Encourage your team to pursue personal greatness in terms of learning, interests and what motivates THEM. This motivates greatness as an organization. We need to believe the extraordinary is possible. The trick is understanding how a support function (such as operations in a finance department) may not directly experience radical innovation (versus incremental service innovation since accounting rules must be obeyed, for example), but how we may contribute. Leadership is about defining our organizational culture for this type of greatness and the ability to be adaptive. The obvious hesitancy is that an employee will pursue education and training, then apply it somewhere else. Are we sure about this? It may inspire creativity, problem solving and innovation. We can only know for sure if we try it out.

Moneyball Clip: Challenging the Established Orthodoxy

When Moneyball was released few years ago, it popularized what Michael Lewis had researched and wrote about more than a decade ago with the subtitle, The Art of Winning an Unfair Game. Of course, those who read the book years ago realized what became so overwhelmingly popularized in terms of statistical analysis and the ultimately, the search for value. I think there is a real connection between this principle and the message of Benjamin Graham’s classic, Security Analysis first published in 1934, as well as many other lessons that can be applied to business and organizational leadership.

For me, Moneyball is a film you watch over and over for one reason or another. And there is a lesson I had not heard articulated (at least in this respect) that I found remarkable that took place in one of the final scenes. It speaks to the difficulty that all organizations face when there is the challenge of change taking place, which is pretty much the spirit of our age and for any foreseeable future. In a previous post I addressed the issue that all attempts at organizational innovation lead to: the difficulty of people adapting whether the motivation is fear, protection of turf, perceived livelihood or any other concern whether rational or irrational. I think the dialog is worth the price of admission:

http://youtu.be/TnRUZsb8C1k

Thoughts on Relevance, Change Management and Effective Leadership

In the industry where I work, a recurring theme is the application of change management, and how frequently it appears more difficult to make a best decision, versus being hamstrung by paralysis and resistance to moving forward. It might be tempting at times to think resolution is simply not possible. In other words, that things can’t change or will occur so slowly it won’t matter. But I don’t believe this, and I refuse to give in to this kind of cynicism that is right out of the Peter Principle. It is possible to be fresh, relevant, effective, adaptive to change and full of life at nearly any age, or stage of career, if the mental and physical health are present to do so. I am writing this as someone who is not a young person and I am more convinced of it than ever. Deficiencies or strengths in these areas are really matter of one’s determination to stay engaged and current (for whatever purpose or specialization) through continuous learning, then apply the mental energy to implement such things. Resistance to change can also be equally present in the young. We tend to miss this observation because frequently, age often compounds the problem of resistance to change, so we automatically conclude that one presupposes the other. But this too is simply not the case. A person can be narrow minded and adverse to innovation, technology, improvement and change at any age. This is a critical point of understanding for leaders since it is people who make up the team, and they are the leverage to accomplish anything.

In The New Leader’s 100-Day Action Plan, the authors discuss the importance of  the “vision of building tactical capacity in a team” - that is, the ability to span between vision and execution, and the need for building loyalty, trust, and commitment. Tactical capacity is a tremendous discussion in itself, but I will limit the quote to a short, but excellent imperative for leadership,

[Tactical] capacity — this flexibility, energy, and skill — comes first from leadership. Your goal as a leader is to build it in each and every team member. This kind of leadership is far from intuitive. And the lack of it, in the end, is a fatal stumbling block for many leaders of new ventures. The entire process needs to be driven by an awareness of the kind of leadership that ensures success in the challenging circumstances of a transition.

This is great advice for accelerating a transition, but is is also guiding principle for ongoing process innovation of any kind. This will sometimes involve hiring and fully utilizing managers who are more skilled at given aspects of leadership and/or various areas of expertise than they are. Focusing on transformation and inspiration, and not being afraid of these skill sets, even if the senior manager does not fully understand them is key to personal and organizational success. Frequently though, there is a fear of competence, or what is simply a stylistic difference, which is rooted in human nature. The motivation could be jealousy, fear of being upstaged or even replaced. But the opposite should actually be true. If a senior leader has enough vision to identify the right talent, managing and implementing such people should only strengthen their position of leadership and produce the very best results for the organization. That is an expression of effective leadership.

Innovation and Finance – Making the Connection Part 2

In the first post on this topic I cited a recent article in Strategic Finance titled, Innovation is for CFOs, Too, and I’ll use that article to highlight what I believe to be some very relevant points to the operational aspects of financial reporting. The article begins with the comment that financial reporting is grounded in a 500 year-old system, and that is remarkable. It actually gives pause to the effectiveness of such a system. After all, how many of us could codify a system that would remain a functional model for centuries? I don’t know if introductory accounting texts still include this history but I was fascinated with it when I first read it twenty years ago. But the trade-off for a system that works well in times of stability is its inverse relationship to innovation and forward movement. This is a well-known topic of strategic planning. That is, a highly systematized organizational model that follows a highly structured hierarchy worked well in a marketplace where change was gradual, incremental and even somewhat predictable at times. But in a global market with an avalanche of information available to many, the model simply does not facilitate the rapid response that is needed in a post-industrial era. So while many of the processes involved in financial reporting have been accelerated and automated as a result of technology, this is really is only part of the solution. The goal, as outlined as a major premise of the article is for senior finance executives to “drive improved results by making significant innovations in the finance function.” The challenge for leadership is that most financial staff do not think in these terms. This is likely due to the detail oriented nature of the average functional operational area within finance. So how can details translate into value?

Although geared toward a for-profit model, the authors cite principles than are applicable to any organization, with their first suggestion under the broad heading of change to the business model. That seems simple enough, and it is with the right mindset. It is suggested that leadership should consider what is being currently offered to customers, yet emphasize those things that are “critical in the value they currently offer customers and consider how they can enhance that value by offering it in a different or a better manner.” This may take the form of expanding product or service offerings, or as is the case with  many successful models, reducing them in order to deliver exceptional performance. I recently spoke with a software provider who was recounting the history of their success as a firm, and what I was struck by was how many things they decided against pursuing, in order to produce an exceptional core business that is unique to their industry. Another interesting modification is to the target customer. Specificity in customer base has been a topic for decades, but from the perspective of innovation, this may be a moving or changing target. This is frequently seen in the re-branding of products that historically appeal to one gender over another, but are then flipped with little more than a change in emphasis. But integral to the previous two are changes in technology. Breakthrough or significant changes in technology can offer the benefit of an immediate pop that can be leveraged, but many other times, existing technology available to an organization can be used by simply changing the approach, mindset and culture of an organization. I have experienced this firsthand with the conversion to paperless reporting using technology that was already in place.

But most significantly for financial leadership are changes that are often the least noticeable to those outside the organization, “enabling technologies, such as information technologies, can be very important because such changes help ensure better decision making and financial management.” I have frequently cited the tension between time that is chewed up looking for the right data, rather than its ready access resulting in thinking and influence for the organization and its strategy. I think this is the most significant contribution of technology and innovation for financial managers as their roles interface with the operational leaders. This changes the financial reporting functions from an inherently backward looking exercise, to energy that is spent engaging in the ongoing process of innovation.

Reference:

Davila, T., Epstein, M. & Shelton, R. (2013). Innovation is for CFOs, Too. Strategic Finance. http://www.imanet.org/PDFs/Public/SF/2013_07/07_2013_davila.pdf

Possibilities at the Local Level: Coding a Better Government (TED)

This TED Talk delivered by Jennifer Pahlka, the founder and Executive Director of Code for America, was inspiring for a number of reasons. It was far more about collective solutions than about technology and shiny mobile apps skinned with our local government branding. The concept of collective solutions was applied to public connections and discussions that provide a platform (not necessarily in the sense of technology) to engage and provide everyday solutions at little or often no cost, simply by the availability of this platform, framework and mindset.

A powerful theme within this discussion is the idea of change management in ways that may have been previously unheard of. Consider the comment that, “politics are not changing, government is changing.” Could this possibly be better illustrated by the current Federal gridlock, contrasted with the possibilities at the local levels of government, with real solutions being provided not simply by technology, but innovative thinking and ideas that leverage available technology in very simple, solution-oriented ways. An example of how this is accomplished is the public nature of requests for information. If a question or concern is available for a number of people to see and engage in, the possibility for a solution is multiplied many times over. Imagine this idea expanding from one local government to another, sharing informational or other resources at reduced, little or sometimes no cost at all.

I thought the “application” section was remarkable, where ideas were put forward for actually engaging in the hierarchy that is inherent in any governmental system. Rather than sitting back as a distant critic of all forms of bureaucracy, it is possible to be a part of real and essential change within that mechanism. Thus changing the term bureaucracy from an inherent negative to one that exists for specific purposes, and that can be improved thanks to the advent of the social era, technology and sociological shifts that have come about from an entire generation that has grown up on the Internet.

Institutional Innovation: White Paper Overview

For more than two decades now we have been trying to adjust, sometimes unsuccessfully to a changed market place that in many respects does not reflect its predecessor, The Industrial Era. Some have labeled our present time the Social Era, which is a sociological outworking of a surge forward in the information age, a service based economy and global business. The dilemma for many organizations is that what worked in the past era is failing to get traction mainly due to an inability to adapt and respond in a timely manner and this results in negative effects on earnings, cost containment and an inability to innovate. This holds true in the sectors of non-profit, for profit, governments and virtually any other organizational type. Authors John Hagel and John Brown with Deloitte Center for the Edge have written a white paper, Institutional Innovation, Creating Smarter Organizations to Scale Learning that addresses a contrast between these two epochs of economic history with a focus on the historic benefits of “scalable efficiency” (benefits of economies of scale) and a new and requisite organizational characteristic, “scalable learning.”

A compelling hook at the very beginning of the paper describes the organizational structure that seeks to govern scalable efficiency: command and control. To the average person who has read any degree of managerial trends in the last decade (or two), the very term, command and control bristles against almost anything considered effective in our present time. When I say effective, I don’t mean can it exist or can you get away with it. What I mean is, does such a structure really translate into organizational value and draw out the best in people, or does it cause people to become professionals at observing the boss, and avoiding them accordingly? The upside of this structure is that it puts systems in place (assuming managerial competence) that create predictability, which worked out well when social, political and economic trends changed more slowly. The problem is, this is no longer the case. The compelling resolution that the authors suggest is “a new rationale of ‘scalable learning’.” The result, they argue (with examples), is that smarter organizations actually benefit from radical and essential change, rather than be harmed by it. The key to this is “increased learning and adaptability” that will result in coveted product and process innovations through the advent of “creation spaces,” which is not a new concept, but may be better suited than ever for addressing the future challenges of organizations of all types. Get your copy of this excellent paper here, or if you would like a quick reference copy with highlights and a note or two, drop me an email.

Reference:

Hagel, J. III & Brown, J. Institutional innovation: Creating smarter organizations to scale learning. http://dupress.com/articles/institutional-innovation/

The Shelf Life of Innovation

For a visionary, a perfectionist, an idealist or someone who is driven by simply tying to get things right organizationally, there is a great deal of satisfaction in driving innovation whether it be product, process or service. But just about everything we work with was once an innovation. Everything was new once. It is not enough to fix something, and then create a monument to it in the form of a process that soon becomes dated and ineffective. Or worse, protect that monument rather than allow the present order to be disrupted with ideas that we may not quite understand. What needs to happen is outlined in The Case for Institutional Innovation,

In today’s environment of exponential technology change and market uncertainty, institutions that can drive accelerated learning will be more likely to create significant economic value on a sustainable basis… As institutions are rearchitected to take advantage of rapidly evolving technology infrastructures to scale learning, they can become more adept at generating richer innovations at other levels, including products, services, business models, and management systems.

This goes for every type of organization, including governments. This is perhaps especially true for smaller governmental entities even though such organizations are being challenged due to overall economic trends and possibly, long-term shifts in revenue. However, due to their manageable size, the above stated innovational trends are entirely possible if such an organization adopts and aggressively implements a philosophy of learning from top to bottom. This can be largely implemented through scaled learning, rather than simply turning to economy of scale. It does not necessarily have to be a choice between the two, scaled learning can take place in any context, and it does not require of formal system in place. This is the nature of a learning organization and the characteristic that emerges within an organizational culture that leverages learning opportunities. And it begins with leadership and willpower.

Reference:

Hagel, J. III & Brown, J. Institutional innovation: Creating smarter organizations to scale learning. http://dupress.com/articles/institutional-innovation/