Sept/Oct 2012

Starting in the May/June 2012 edition of Connected World, Gregg Garrett began to explore how the emerging connected world is beginning to demand the attention of the C-level executives in established companies. Like the Internet did in the 1990s, the connected world is demanding structural changes to realize emerging strategies in this new environment.

The term “innovation” is quickly approaching buzz-word status, taking on the likes of “digital business,” “X-as-a-service,” “social,” and “I-anything” as this decade’s most sought-after phrase for the en vogue tech-minded executive. Please don’t misunderstand; innovation is a core ingredient to any company’s long-term survival. The issue is that too many companies behave like innovation is “magic.” Almost as if as long as the term is used often enough and takes centerstage on important PowerPoint slides, then the creativity in the culture will auto-magically transform towards a new competitive advantage.

The interesting part is that in the markets of the recent past, this may have held true. Heroic efforts of top designers or mindful product managers could bring ideas to life, and markets would reward them with growing revenue. Adjustments to the underlying business model and accompanying resources could almost be made after product development neared completion. In that era, products/services were fairly separated into siloed user experiences. Each experience was at a particular point in time and users didn’t have expectations that one product experience should be meshed with the next throughout their day or life. At times, this has actually been the key ingredient for major brands’ relationships with consumers. They demanded the attention of a customer and saw brand success as defining a moment in their life that was all about their product space, not about being an integral part of a broader system of their life. A system made up of many experiences that mesh to make all experiences better.

If that is how your company or your favorite brands are still positioning themselves, then let me be the first to welcome you to the connected world, a world where experiences are blurred and innovation requires a more systemic approach.

Innovation in the Connected World
Innovation is not some sort of magic. It isn’t simply about takeout meals at 2 a.m., leading to the next big idea (although that is part of the creative process many times). Today’s innovation is about establishing a process that an organization can follow. It is about investing in core building blocks that can be repeated so that innovation embeds itself into the cultural fabric of the firm. It is about tapping a broader idea pool to ensure external and internal innovation work in harmony. There is not necessarily one equation for innovation, but there are definitely patterns emerging that help define some of the core aspects that should be included.

As we continue down the “connected” path, even the approach to innovation is in need of disruption. In a connected world, everything from who is the innovator, to where innovation occurs needs to be reconsidered.

For a long while, corporate innovation has been entrusted to a small group of professionals, such as R&D teams, working inside of locked rooms far away from other employees or the market. Often focused on technical development, these teams are being shut off from so many tools necessary to compete in the emerging connected market. It is not to say that centralized groups entrusted with inventing or applying invention is not valuable, it is just not enough anymore.

Being in a connected world requires a more open approach to innovation, one that is inclusive of a broader array of contributors. This ranges from a broader set of employees, to partners in the value chain, to adjacent industry partners, to the end user/consumer. A “connected innovation” program can be recognized by a strong focus on ecosystem rather than any specific innovation. This trend is not unique to the innovation space, but really has been observed in many improvements during the last decades. In the early 1900s, competitive advantage was made by vertically integrating an industry to secure access to all necessary parts of a product.

For example, manufacturers controlled everything from core materials (ore, refineries, etc.) to power generation, through manufacturing and assembly. Mid-last century, firms specializing in a step of the value chain could partner together to revolutionize the supply of products, shattering the previous vertical-integration theory. At the end of last century, this same revolution took place in the software and IT services industries. Open innovation is continuing this trend with some twists. It is taking this concept of reaching outside the internal supply chain, way upstream to the “ideation” phase and suggesting the innovation of experiences requires collaboration very early in the process, in a much more “open” style.

No matter if your firm believes it needs partners during this idea formulation phase or not, the basic premise of the connected world is forcing companies to rethink how they test and deploy new products. No longer is a simple “test” environment good enough. Now you need to understand how different parts of the connected world may affect your newest innovation, in a complete sandbox.

For years, large companies have been testing products at their own facilities. They test in closed environments that are made to simulate usage of their own products. Once these closed tests have been successful, then beta or prelaunch editions are taken into the “real world” for more tests. But what if you are creating a product to compete in the yet-to-be-completed connected world? What if you wish to define not just a standalone experience, but one that meshes with others in a consumer’s connected life? Then it’s time to disrupt the innovation process itself!

A city CITE that is Better than EPCOT?
On March 27, 1966, Walt Disney produced his final film, a film that was intended to describe to Florida residents his vision of a major investment by his corporation in the center of their state. In the film he described that the heart of the Florida campus would be an Experimental Prototype Community of Tomorrow—or as it is known today, EPCOT. He envisioned a city where people lived and worked that would be built using tomorrow’s design principles for city layout, transportation, general living, and usage. He wanted to transform the way people lived in the U.S. and in the world by having a real place where new technologies could be put to use. His vision was never realized. Although the corporation that bears his name did produce an EPCOT, it morphed into a park to “celebrate human achievement (cultural and technological).” Fast forward almost 45 years and a new conceptual city is being planned, one that helps to realize the connected era, and ensures we understand how to get there.

Up until now, Bob Brumley and his partners have not been the focus of a lot of public attention. Bob grew up in the telecom industry. He has most recently been focused on solving unique problems for U.S. government through the application of unique technologies. Bob and his partners at Pegasus Global Holdings are now planning to turn their attention to developing a massive community in New Mexico. Much like some of the other massive planned community projects that have existed throughout the last 25 years, it will include residential, retail, and recreation areas, plus a small downtown. All the roadways and infrastructure will be funded by the developer, who is working closely with local and state governments to ensure the development is welcomed properly. When complete, Bob and his firm will look to attract people to his community to visit. One big difference from most community projects is that he is not inviting a single person to live there.

Let’s explain: Bob is planning to build CITE (Center for Innovation, Testing, and Evaluation), a giant and very realistic test lab environment for the emerging connected world. This is not a theme park, but like Disney’s original vision, Bob sees the value in having a place to try new things, apply technologies, learn, and in the process, teach. CITE will be massive. It is planned to be approximately 15 square miles made up of a combination of different “site labs,” that, when added together, compile all the physical attributes of average North American life (except for the people themselves).

Bob’s vision may be even more brilliant than the original EPCOT plan. Here is why:

  1. The “Smarter Planet” (as coined by IBM) has to learn – There are a bunch of smaller environments out there that were built from scratch as “smart” environments. They use the latest technologies and were built in a green-field approach. These environments help to envision what a connected world end state may look like, and may model a growth plan for newer economies where little infrastructure has been invested (e.g., Middle East, China, and Africa). It doesn’t, however, truly assist in helping evolve developed markets. Bob explains that “building a dumb city and seeing if you can raise its IQ proves everything.” I can’t agree more. EPCOT and other environments help to “vision-cast” and imagine the future. Unfortunately, vision is worth little if a path can’t be found to implement it. CITE allows companies to test those transition paths and sets innovations into today’s world with a predefined route to success.
  1. Labs inside labs – Many companies with extensive R&D facilities will likely come to CITE not to prove concepts of usability about their core product, but rather to prove how their products work with other products or services from an adjacent industry. Let’s consider the automotive industry. Every major company in the auto market already has a test track with significant roadways and test situations. What CITE offers is an environment where in addition to test-road surfaces, cars can interface with other infrastructure (construction equipment, homes, offices, and energy sources). The value won’t only be about core driving elements, but how that new transportation experience meshes with other technologies and services. Bob points out, “testing an autonomous vehicle can also be done safely at CITE, as there are no citizen’s safety issues to be concerned with.”
  2. Meta information will FINALLY be available – Connected products have been very focused on “new features” for some time. A different value is also available as information flows from one product to the next. This value may be realized by the consumer, the product company, or an entirely new entity. Nonetheless, CITE will be in an incredible position to look at how all of these new connected systems work in concert. This may be more important than any single innovation being tested. The Pegasus team realizes this and is putting a lot of focus under the city where the backbone of CITE will function, and where new discoveries are expected to be realized.

Continued Disruption
CITE is seemingly a great first step; if realized, it will be a giant leap forward for making the connected world a reality. Over time, however, CITE will need to wrestle with continued innovation of its own. Here are two critical aspects that may need to be addressed to make this investment continue to drive the value it promises:

  1. The integration layer – Bob and his team have spent a lot of time working on a complex plan for how to create an integrated management system for many aspects of a connected world, especially as it comes to traditionally public or once-regulated industries (power, water, telco, safety, etc.). This is no small endeavor and needs to be noted as one of the most important aspects of our emerging “smart cities.” However, that integration is going to have to go well beyond this to truly enable a “connected world.” The siloed or walled gardens of our private sectors may need to have well-defined interfaces to properly share key elements of a consumer’s connected life ensuring relevancy as they move from one role in their lives to the next 

Throughout the day, an average person takes on five or more roles in life: mother/father, cook, driver/pilot, employee, friend, athlete, etc. Each of these roles has unique sets of information required to perform it, but many have a set of shared information that make the act “their own,” or could make interactions throughout their day more meaningful. It is this shared information that currently has no standard for sharing, no platform for secure transaction, no “clearinghouse or gateway.”

  1. Where are the people? – The most important “system” is missing from the current CITE plan: People. Most systems would work perfectly if it weren’t for the pesky users. Realistically, CITE needs to crawl before it can walk, and the build-out of the environment before they add people is a logical first step. Throughout time, they can add people to CITE or connect with other real cities to take proven technologies to the people.

Even without these additional aspects that may eventually lend a more complete experience, CITE is a goal that should be applauded for taking a vision and finding an economic plan that will make it a reality. CITE is expected to reach $1 billion in investment over 10 years, however Pegasus Global does not intend on receiving $1 billion in private investment. It will raise 400 million and the rest will be part of infrastructure that companies using CITE will add to the project over time. The Pegasus team plans to fund the project with 100% private investments, and has an operational budget projection that shows realistic revenue growth and return on investment. The investors will be betting research is in demand and that as the world connects, that need will increase.

Innovation is all about the disruption. It is refreshing to see these leaders disrupting such a major part of the innovation process itself. The question is how companies, like those that you work for or own, will decide to prepare for the connected world. Will you focus on simply developing a few features in your products to try disrupting only your competitors? Or will you see the connected world as a paradigm shift that is fast approaching, one that requires you to disrupt your corporate strategies and prepare for connected innovation?


A Prescription for Innovation
There is no one prescription for how to enable innovation at your firm. However there are building blocks that seem to be relevant time and again. A repeatable framework that has proven successful in jump-starting programs include:

Example Innovation Jump Start Program Building Blocks

  1. Innovation Strategy – Innovation must be integrated into the corporate strategy.
  2. Innovation Team Planning & Formulation – Define the organization structure fitting your strategy.
  3. Innovation Process – The process itself isn’t the key, it is how you support and apply it.
  4. Sandbox Environments – Build environments (or participate in ones like CITE) that represent the world in which you wish to innovate. These environments must include physical and digital components and should be scalable to be able to test many ideas and how they interact with today’s and tomorrow’s environments.
  5. Ideation Mechanisms & Ecosystem – This is where a lot of the “magic” happens. Deciding what combination of the following the firm will have is critical in setting the “style” of innovation that will be supported: R&D/Labs; Employee Ideation; Application of Vendor/Third-Party Solution; Partner Co-Development; Consortiums Creation; Corporate Venture; Joint Ventures; M&A.
  6. Idea & PoC Management – Testing technology is getting easier and cheaper, but predicting how the technology will produce value with users and ultimately for shareholders takes a lot of practice.
  7. Innovation Transformation Program – When it comes down to it, successful innovation programs take the right culture. Assume at least 20% of the overall budget for a formal cultural-change program.

(© 2012 CGS Advisors LLC)

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