Risk and innovation – complex and important connections

Recently, I’ve been focusing on a set of increasingly important, powerful, complex and intriguing connections between risk and innovation.

Part of my work has involved articles for Risk and Insurance Magazine, and an initial result of that work is a set of pieces that have appeared in the April 15 issue of the magazine.

This editorial package looks at major changes that are taking place in leading academic programs that focus on Risk Management.

My articles for the April 15 issue now are available online on the Risk and Insurance website.

You can find them at:

Risk Education In-Depth Series (Part 1): Reprogramming an Enterprise

State School Reinvents Risk Management Program

ERM Program at Risk School Takes Flight

Under-the-Radar Changes in Curricula

Impact Extends Beyond the Classroom … to the Library

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Press Coverage of the GPS Initiative

We’ve gotten quite a bit of press pickup for the latest installment in the on-going project about GPS trends on which I am working with Owen Shapiro of the Leo J. Shapiro & Associates research firm.

In particular, our GPS Edges Out Internet for Cellphones item that presented new findings from a follow-up survey about GPS was picked up and covered by dozens of publications and news organizations.

We released the information in a brief item on the PRNewswire, and here is a page with links to coverage that was listed in Google News.

Interestingly, there also were a number of significant outlets that picked up the GPS item, but that did not come up in the Google News search service listings. These include:

and others.

In addition, you can find more info about the GPS initiative in my earlier posting at

GPS Transformation – “High-Tech Rosetta Stone” re-shapes topography

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Cities 2.0 – A New Generation Re-Invents America’s Urban Centers

My latest piece is the first in a planned series of articles in which I will explore the “Cities 2.0″ transformations that are re-shaping the fabric and topography of America’s urban centers.

This initial article, which was published in the Chicago Sun Times, focuses on the impact of today’s “Generation 2.0″ cohort of 25-to-34-year-olds and particularly points to

  • Ways in which today’s “re-invented” Gen 2.0 demographic definitely is not your father’s 25-to-34-year-olds.
  • How a convergence of powerful forces has spurred Gen 2.0 to concentrate in central cities at unprecedented levels, and
  • The impact that this generation is having on Chicago and other U.S. cities.

In fact, these changes in our urban centers connect very directly and in important ways to the changes in the U.S. economy that are placing a higher priority on innovation…and to recurring themes addressed by this blog.

Here’s a link to a JPG version of CHICAGO 2.0: A new generation reinvents Chicago as it appeared in the Sun Times on page 2 of the Sunday Op-Ed section a couple of days ago (Nov. 11). I’m including the JPG because the editor of the section, Tom McNamee, created terrific graphics to go with the piece and gave it a generous amount of real estate — full size, the package of article and graphics was just over 11″x17.”

For at least the next few days, you also can find an online version of the piece (with the complete text, but without the accompanying charts and great graphics) at
CHICAGO 2.0: A new generation reinvents Chicago

In addition, here are links to two of my previous pieces that address related issues and that provide somewhat different perspectives on these topics.

  • “A Few Minutes With…Richard Florida,” a Q&A interview about the “Creative Class” that I did with economist Richard Florida that appeared last year in REALTOR Magazine, the monthly magazine of the National Association Realtors.
  • My “Gold-Collar Workers” Op-Ed piece that I wrote about “human capital trends” for Crain’s Chicago Business almost 20 years ago (June 1989). To be sure, there are parts of the piece that I would change if I were writing it today, but I am willing to argue that its notions about “gold-collar workers” and the “NBA-ization” of the economy still have significant relevance to today’s challenges and opportunities.
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GPS Transformation – “High-Tech Rosetta Stone” re-shapes topography

Owen Shapiro and I just wrote an article and an Early Signals Briefing about the striking developments connected to the new generation of GPS tools and services that are exploding into the consumer marketplace.

Here are a few of the topline findings (which are based on data from phone interviews conducted by Owen’s research firm in early October 2007 of a national sample of 450 Americans):

  • Web-based mapping services have achieved striking penetration into the everyday lives of Americans and have eclipsed traditional paper maps as mainstream sources of information about the world. A strong majority (60%) report that they had used a geographic website (e.g., MapQuest, Google Maps) – in the weeks preceding the interview, twice the percentage that report using traditional on-paper maps..
  • New GPS-enabled personal navigation devices (PNDs) are leapfrogging past early-adopter growth and are surging almost directly into widespread, mainstream usage. Nearly everyone surveyed (94%) said that they have heard of GPS; almost one-third (32%) reported having used a GPS-enabled unit, including one in six (17%) who reported such use in the past month.
  • Look for pitched battles among incumbent (and newcomer) brands as they race for dominance in this burgeoning market as the GPS-enabled PND and consumer mapping marketplace roaring into a period of explosive growth.
  • GPS consumer-market turmoil is likely to gain energy as it continues to tap the “high-tech Rosetta Stone” qualities of GPS-enabled services, and the tumult could have significant spill-over effects on more technical, geographic information system (GIS) applications.

Here are a thumbnails of charts that illustrate a few of our findings (click on the thumbnail to see the full-sized graphic):

There’s lots more discussion and material in our article and in our “Early Signals Briefing on GIS/GPS.”

Here’s a link to the article, which was published on the Directions Magazine website on November 2.

Consumer Awareness Driving GPS-enabled Device Adoption

The Directions Magazine article was based on our “Early Signals Briefing on GIS/GPS,” which has numerous charts and more extended discussion that was not included in the Directions Magazine article.

You can get a copy of a PDF version of the Early Signals Briefing by sending an e-mail to gps@ljs.com.

Finally, I’m also putting together a more extensive “Emerging Trends Report on GIS/GPS” that will significantly expand on the “Early Signals Briefing.”

You can get a copy of the Emerging Trends Report when it is completed by sending an e-mail to that same address – gps@ljs.com.

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If you outsource your out-of-the-box thinking…

…are you in danger that your thinking will get boxed in?

Or, to put it a bit differently, consider the old saying:

  • “A man who chops his own wood is warmed twice.”

In part, these issues come to mind because of the recent attention that has been showered on the justifiably-heralded new Boeing 787 Dreamliner, which embraced a paradigm-busting approach that included the outsourcing of many aspects of the design and R&D of the new plane.

More specifically, Boeing officials estimate that the new process cut “one-third to one-half of the time out, and perhaps 50 percent out of development cost versus historical methods.” A key part of their strategy involved having Boeing subcontractors around the world take responsibility for the development and design of many components that, in the past, would have been handled by Boeing internally.

And, more generally, there has been a flurry of recent reports that underscore that Boeing is not alone in outsourcing and offshoring its R&D. For example,

  • Global executives surveyed by the Economist Intelligence Unit (EIU) predicted that their firms would markedly increase the proportion of R&D that will be carried out by external partners and overseas. Already, 65% of the 300 surveyed reported that their organizations already were performing at least some of their R&D offshore…and 84% were expecting that they would be by 2010, according to findings which are presented in the EIU’s “Sharing the Idea – The Emergence of Global Innovation Networks” report.
  • A report on “Next Generation Offshoring -The Globalization of Innovation” from the Fuqua School of Business at Duke and the Booz Allen Hamilton consulting firm found that, from 2005 to 2006, offshoring of product-development projects increased by close to 50 percent from an already significant base, and, over the next eighteen to thirty-six months, growth in offshoring of product-development projects is forecast to increase by 65 percent for R&D and by more than 80 percent for engineering services and product-design projects.
  • The “Outsourcing of R&D Becomes More Strategic” cover story in the June issue of R&D Magazine presented data from its own readership surveys that further documented the continuing growth in the outsourcing of R&D, as well as providing an excellent discussion of findings of the Booz-Fuqua and EIU reports.

In combination, these reports provide valuable insights into the compelling factors that are driving the growth in the outsourcing and offshoring of R&D…and they give us glimpses into the new management challenges that these trends are triggering.

And, some of the most important of these new challenges stem from the distinctively innovative nature of R&D that makes the management of the outsourcing of R&D much more complex and challenging than the management of the outsourcing of more prosaic functions like payroll, or finance, or accounting, or procurement.

There is an unpredictability that is inherent to R&D, and there also are subtle, not-always-explicit benefits that accrue from R&D that often are hard to quantify…and that can be hard to “manage.”

Which brings to mind a comment made many years ago by the members of the team that were managing the renowned Fermilab research laboratory just outside of Chicago.

In the course of a long and fascinating conversation about reasons behind Fermilab’s success as a research center, they told me how its founder and its first director, Robert R. Wilson, also had played a central role in the design of the facility…and that he particularly had made sure that a number of features were built into the building that would facilitate serendipitous interaction among the large team of researchers who would be using the facility.

For example, Wilson insisted on an “open design” for the first floor of the building that made it possible for a person waiting at the main elevators to be able to see anyone else on the first floor…and vice versa.

The idea was that this improved visibility would boost the opportunities for the sharing and cross-fertilization of ideas among the scientists.

And it is precisely these types of small, subtle aspects of the R&D process that seem likely to play key roles in helping an organization to be “warmed twice” from its investments in innovation efforts.

Already, you can see an array of sophisticated online tools and strategies that address the “subtle” R&D challenges that have begun to emerge…and it seems likely that an organization’s ability to “manage” these challenges effectively will be a critical factor for producing the unexpected sparks that often ignite the “hot” new ideas and products needed to succeed in today’s hyper-competitive business arena.

For those who are interested, here is a link to an excellent article in CIO Insight, Boeing: New Jet, New Way of Doing Business by Edward Cone, which provides a detailed, in-depth discussion of Boeing’s new approach to R&D, with a special emphasis on the underlying computer systems that played a crucial role.

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Innovation is busting out all over Chicago this autumn

Looks like a bumper crop of innovation-related events will be arriving in Chicago this autumn…and this flurry of activity clearly underscores the high priority and rising interest in innovation-supporting initiatives that have been announced in recent months.

Here is a quick list of a few of high-profile events that are scheduled for just one week in October:

R&D 100 Awards – October 18 black-tie event at Navy Pier

Chicago Innovation Awards – October 22 event at Goodman Theater

2nd Annual Chicagoland Innovation Summit – October 25 at Navy Pier.

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Why P&G blabs about R&D labs

Procter & Gamble’s stunning R&D about-face has to be among the most compelling indications of the immensity of the re-invention-of-innovation that is under way.

The marketing powerhouse’s R&D moves are shaking up the consumer packaged-goods sector…and they give us unique insights into what lies ahead for many other organizations in other industries that are trying to ramp up their creativity in order to compete in today’s business arena.

Recent signs of the radical R&D changes at P&G’s can be found in this article in the June 23 issue of Information Week: At Procter & Gamble, The Good And Bad Of Web 2.0 Tools

The piece talks about successes and frustrations that P&G has encountered as it has, among other things, provided blogging software to employees (who have created hundreds of blogs) and to the P&G public relations department, which is using blogs to discuss company issues externally.

On the face of it, those of you who are not long-time P&G-watchers might not appreciate the significance of what’s reported in this article.

After all, it’s not news that a major corporation is trying to make effective business use of the powerful set of new Web 2.0 tools that now are available.

No, that’s not The Big News.

What is stunning is that we’re talking about an emphasis on idea-sharing and information-openness at P&G – yes P&G!

And it is especially astonishing for those reporters and editors (including yours truly) who in the 1980s and 1990s tried to include input from P&G in our coverage. Just about every business journalist of a certain age can to tell you about running into P&G’s legendary “No Comment” Iron Curtain regarding virtually any question that was posed to the consumer packaged-goods behemoth.

P&G’s attitude was that – given its position as the widely-recognized paradigm of 20th-Century marketing excellence – it had nothing to gain from passing along anything beyond the minimum of information about what it was doing, planning, or thinking.

But now, the legendarily tight-lipped — make that totally-zip-lipped — leviathan has been blabbing far and wide.

In fact, it has even been talking a lot about, of all things, what is going on in its Holy of Holies — The vaunted P&G R&D labs!!

What gives?

As P&G senior executives Larry Huston and Nabil Sakkab explained in a summary of their fascinating Harvard Business Review article P&G’s New Innovation Model from last year:

“Connect and develop will become the dominant innovation model in the twenty-first century…For most companies, the alternative invent-it-ourselves model is a sure path to diminishing returns.”

And how will connect-and-develop be achieved? According to the P&G execs:

“We needed to move the company’s attitude from resistance to innovations ‘not invented here’ to enthusiasm for those ‘proudly found elsewhere.’ And we needed to change how we defined, and perceived, our R&D organization—from 7,500 people inside to 7,500 plus 1.5 million outside, with a permeable boundary between them.”

Which brings us to the on-going PR blitz: A big part of creating that permeable boundary involves putting a lot of effort into publicizing P&G’s new strategic emphasis on open innovation and collaboration.

There’s going to be a lot more to this story, but, for the moment, it might be summarized in this way:

It appears that the “Re-Inventing Innovation Revolution” is being televised…or, at the least, highly publicized.

And, in case you might find them useful, here’s a set of additional links to relevant materials:

Posted in McKinsey, P&G, strategies | Comments Off

Schumpeter on Steroids – Industrial-Strength Creative Destruction

A buddy of mine likes to say: “Always keep an eye out for what you’re not seeing.”

Or, when he is the mood to be more concrete, he will tell you: “You’re much more likely to get hit by the truck that you’re not watching.”

That “advice” comes to mind as I’ve enjoyed the recent uptick in attention given to economist Joseph Schumpeter. This discussion has been triggered by the new biography, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, by Pulitzer-winning historian Thomas K. McCraw.

At the bottom of this entry, I’ve included a selection of links to particularly noteworthy items that discuss the book and that provide valuable and interesting insights into Schumpeter and his signature notion of how “the perennial gale of creative destruction” plays a central role in capitalism.

However, in the spirit of my friend’s advice, I’ll indulge the impulse to focus on what isn’t there.

And you don’t have to look very hard to discover an important issue that, despite all this recent focus on Schumpeter, is not getting the attention that it merits, namely:

The way that quantitative changes in the amount and the rate of Schumpeterian transformation are triggering important qualitative changes in the nature of Schumpeter’s creative destruction.

In fact, a tsunami of “Industrial-Strength Creative Destruction” is flooding across virtually every part of the world…and our encounter with “Schumpeter on Steroids” is cramming unprecedented change and transformation into every nook and cranny of the planet.

If you look back to the first half of the 20th century, you can see that the industrialization and mass-production of manufactured goods began to radically change not only the quantity of those goods, but also the nature of the goods that were produced and the roles that those products played in our lives.

In an analogous sense, the new “mass-production of creative destruction” has important implications for the role and nature of Schumpeterian change…and for the role and nature of innovation in today’s world.

I’ve touched upon these issues in several “Articles from the Archives” that already have made it onto this site (for example, In Praise of Bad Ideas and Nobel Laureate on R&D Changes), and I expect to be exploring other implications – specific and general – in future postings.

So, stay tuned for more…much more.

In the meantime, here are few links to a selection of notable recent items about Schumpeter and the new biography by McGraw.

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Audio – USG Executive VP discusses innovation initiatives

Fareed Khan, the Executive Vice President of Sales and Marketing at Chicago-based USG Corporation recently discussed the strategies that the venerable building-supply company (formerly US Gypsum) is using to address the high priority that the organization puts on innovation.

In the the Q&A session that followed the presentation that he delivered at the Business Marketing Association luncheon on May 17, Kahn responded to the question:

What are you doing now that you were not doing 5 years ago…and what do you expect that will you be doing in 3 years that your are not doing now…to try to build USG’s innovative capacity?

This audio excerpt (click here to listen or download) with his answer is a bit grainy, but USG’s innovation strategies are razor-sharp…and they have helped the company earn recognition as a winner of Chicago Innovation Awards in two of the five years that the awards have been in existence.

If you have trouble hearing the audio, here are a few key points from Kahn’s response.

There are three buckets that we have created, with some focus and some organizational resources around them.

  • There is a big area around process innovation…there is a group focused around really thinking about breakthrough ideas that change the way our (manufacturing) processes …
  • A second area is traditional R&D…we have a research center in Libertyville…where people are thinking about chemistry and the next generation of products
  • The third area is business innovation…we have created a little incubator…it has an internal board and seed money…and we take idea for businesses and we take them through different stages.

If you’d like a more complete transcript of his reply to the question, just send an e-mail to contact@re-inventing-innovation.com.

And you can find more information about Kahn’s presentation in a report by Michele Beaulieux about the May MarketingMasters Luncheon on the Chicago BMA site.

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Workshop on Leadership and Innovation

Professor Brian Uzzi of Northwestern University’s Kellogg School of Management will lead a network & learn event for executives titled:

Make Your New Ideas Infectious: Leadership, Influence and Social Epidemics

The event — which is co-hosted by Human Capital Institute, University of Chicago Graduate School of Business, and Kellogg — will begin at 730AM on July 25 at the NU’s Allen Center in Evanston and topics are expected to include:

  • Proven strategies and tactics for transforming your leadership style.
  • Tools you can immediately take back to the office to effectively promote your ideas.
  • Steps for building better executive networks and managing complex systems of social ties within firms such as knowledge management systems, intellectual communities of practice, and email networks.
  • The dynamics of innovation, diffusion, and change in market-based social networks such as blogs, patents, citations systems, and MySpace.com.

More information is available at:

Make Your New Ideas Infectious: Leadership, Influence and Social Epidemics.

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