Cost, Credibility, and Open Innovation

Innovation seems to be a mantra for a business survival, paving the path for prosperous future. In business, it's not just about technology nor something merely new. It's about positive change leading to increased productivity and business value.

Some put it that innovation sources out from creativity and, in proceeding with the implementation, involves some risks. As risk taking is in this equation, an undertaking that could put a business into liability, those launching a (radical) innovative change shall first earn credibility. As such, it would get management trust and proper funding to put it in place.

In this regard, it's interesting to read one CIO - those position responsible for IT for the business - shared his thoughts in a magazine (forgot the name and publication) about the role. First, it should become a Cheap Information Officer to build the credibility before functioning fully as a really Chief Information Officer as it's supposed to be. Once it gets all in order and serve the business purpose, you could then tranform into Chief Innovation Officer.

I have been, to some extent, seeing this in some organizations. It gone well for some. On another case at worst, it should have catiously been managed: some :innovation" initiatives went thru unchallenged, with fancy technology introduced, the chnages that sometimes be well understood to relate to building a landmark for the chief. A personal image building that incurred some hidden costs to the business.

The lanscape of innovation is now changing. And it changes very fast. Previously (and it is still now for some), innovation is a managed proprietary initiative (R & D, or even sacred activities for some) conducted largely inside the organization. Nowdays, it gets connect beyond corporate walls: the new face of innovation involving people outside from suppliers, customers, independent inventors, and university labs.

Internet technology, Web 2.0, and the need for best utlizing all creative talents available, more flexible work environemnt gave birth to Open Innovation unimagnibale before: collaborate inside-out and co-create product and services borderless and in real time. There would always be a lot more smarter people in the world outside the wall of corporate offices.

The game has been playing a lot more now. Wikipedia, the online encyclopedia, is a living and continually expanding global reference work. Wikinomics, abook written by Don Tapscott and Anthony D. Williams, becomes a new phenomena on how mass collaboration changes everything. A success story of Canada-based Goldcorp Inc., in finding more gold deposits after collaborating with outside experts by openning up their proprietary geological data for sharing. In March 2000, the "Goldcorp Challenge" was launched with a total of US$ 575,000 in prize money available to participants with the best methods and estimates.

Check out at Innocentive, Inc., where the world innovates: an Open Innovation community to earn money while solving some of the toughest problems facing the world today. Online marketplace with challenges to solve in a wide variety of disciplines, from Business and Entrepreneurship to Engineering and Life Sciences: awards from $5,000 to $1,000,000. Challenges are posted by corporations, government agencies, and nonprofit organizations. Many others are available to tap and utilize.

Henry William Chesbrough in Open Innovation: The New Imperative for Creating and Profiting from Technology, addresses that companies can no longer afford to rely entirely on their own ideas to advance their business, nor can they restrict their innovations to a single path to market.

What is CIO now ? Get the business to collaborate and craft a way to innovate by best utilizing outside experts.

Performance Indicators - Missing the Key

As the saying goes, "what gets measured, gets done", we have instutionalized a number of measuremens and mechanism to keep track on stuffs with the business operations. Good, but beware that we might loose sight of the real purpose.

In a breakfast with a colleague manager of mine a few days ago, he was appreciative about how much lot of data that we have been collecting in day-to-day operations. People do follow procedures to get the data and information expected from them. Yet, he complained, how little analysis that our guys are doing with those data. If they managed to spend some time doing some analysis, there could be a lot of improvements with many activities be done differently with more effictive and efficient.

As we measure things, we would like to track those contributing to the "success factors". Stemming out from organizations' Vision-Mission, Stretegic Goals, and Objectives comes CSF - critical success factor. It then is further quantified into KPI - Key Performance Indicators, supposed to be the selected few that we shall focus on for a prticular business domain to breed expected success. In practice, I often found that it's too many details to measure and review in a given time that business leader could be distracted, lacking the information focus. The key is lost deep in the the ocean of oprational information metrics.

One of our guys was struggling to collect data and figure out KPI for the IT shop that he should submit to a regulatory body. It consists of 10 category of the so-called KPI with each containing 3-4 items to measure. Overall, it deals with 30 to 40 metrics that we called key performance indicators! And there are more than 10 completely-different companies (and at corporation level, be comptetitot to each other), oil and gas, that the IT shop shall submit this KPI to the IT dept of a regulatory execution body that monitor oil and gas companies. While the idea is 'noble' to have a meaningful collection of metrics to compare and benchmark, the number of KPI is too much to a non operating body to challenge the information for any strategic decision making.

To stay on top, to possibly make any necessary strategic direction, I suppose that 3 (three) top categories are enough to start with: Cost Performance, Value Creation and Realization, and Synergy and Collaboration. With 2-3 items for each category, the energy can be directed to the focus of guiding the proper IT investment and leveraging it across for the benfeit of all. As such, it would not interfere with details of business operation of each competing company. Still, the regulatory body, repressenting the host government as the major stake holders, could still stay on control.

Unfortunately (fortunately ?), I was somehow get involved in the process - although a bit late coming into the game. It was too late to re-direct the whole things. or probably, it's just better the stay the course. Just make sure that we do not just collect all data possible without a clear path forward to act on them. The end in mind shall be then - "compare and decide", not just "review and store".

A similar reminder from an articel in HBR (Harvard Business Review), Stop Making Plans, Start Making Decisions. Debate and Decide, instead of just Review and Approve. And remembering Pareto, get focus to the vital few, as not to miss the key in trivial many.

Global Reach and Cost Disparity

As always, Fortune Global 500 portrays an amazing notion on how big corporations getting bigger, with the biggest ones generating revenues much, much more than state budget or spending of almost all developing countries.

The top lists this year have an interesting outcome. The top 10 largest companies, in revenue, are those old names, with Walmart sitting on the top with US$ 378,799 millions.

1. Wal-Mart Stores (~$ 379B) ....... 6. Chevron (~$ 211B)
2. Exxon Mobil (~$ 373B) ............ 7. ING Group (~$ 201B)
3. Royal Dutch Shell (~$ 356B)....... 8. Total (~$ 187B)
4. BP (~$ 291B) ....................... 9. General Motors (~$ 182B)
5. Toyota Motor (~$ 230B).......... 10. ConocoPhillips (~$ 179B)

By profits, Exxon grabs the top list with US$ 40.61 billion or nearly $ 78,000 per minute! Stacked on the US$ 18 billion club are Chevron (no. 6, $ 18.7B), Petronas (no. 7, $ 18.1B), Total (no. 8, $ 18B). Thease are all oil companies, benefititng from high oil prices. Amazingly, Petronas is the no. 95 by revenue, yet its profit is at par with two of the super major oil companies, Chevron (no. 7) and Total (no. 9). With revenue about one third of these two big guys, Petronas posted profit against revenue (27%) about three times of Total and Chevron. How can it be ?

Fortune 500 described that Chevron "faces several challenges from falling oil production to difficulties in finding new resources". Beyond this, I presume that for Petronas being operated out of Malaysia contribute to lowering the cost of doing business -- although not quite sure enough about the significance.

It's about globalization, and those big corporations of "multi-nationals". Automation technology, creative efficiency, and professional disciplines have been contributing to a big leap in productivity in light of growing business operations globally. It's been the "priviledge" of much developed economy to have those productivity enabling characteristics. With the advance of Internet digital technology, growing competency of people in less developed countries, and easier flow of people around the globe, the opportunity is now widely open to developing countries. As company operations are becoming global, the needs for more standard products and services are more apparent to breed overall efficiency. Several global companies are still relying on products and services that are "manufactured" by and in developed countiries with more "advance" technology, yet with labor-related cost relatively much higher. The aim is to get an overall good cost-performance: higher labor cost is offset by higher productivity. This product-service package is then deployed to all their business units across the globe.

The above is no longer true for mass products. As economic disparity still in a wide gap, re-locating manufacturing plants to low-cost countries have been quite successful to lower down cost of business. Products made in China has been flooding the world. Services and eventually products made with more advanced technology, and specialized services would be on the next pendulum shift. Offshoring jobs to India have become a business phenomena. Among other things, I suppose that Petronas is taking benefits by having Malaysia as a base of operations as compared to Total (France) and Chevron (USA).

The challenge for global companies is to agressively move around their "factories" around the globe to benefit from low-cost economy whrever appropriate. Management overhead would be higher as it would face a complexity of managing research centers, pool of expertise, products design and the like across various locations in the world with different timezone and cultural barrier. Once it could be properly managed, the overall cost of products or business would be more efficient, lower that at the end would book more dollars to the bottom line.

Although there might be some concerns of "national interest" (employment in the base countries / HQ), the global reach would benefit the world as whole providing a net positive opportunity to all. It is going toward a new equilibrium of the world while shrinking the economic disparity. It shall be done on mutual benefits, business-like undertaking, not on the basis of (pure) charity. It is, I would suppose, within the spirit of capitalism. Or as Bill Gates once stated, a creative capitalism.

Blowing in the Wind of Change

For the past 4 years, the wind of change has been blowing straight into my face. Different roles of job with some exercises of branch-outs, having to deal with a turbulent time. Getting used to a challenging moment of raising a baby kid turning to be a hyper-active toddler. Accepted a new job in a new company, only to find out that several months afterward a major merger was undergoing, jumping again into a different environment. Moved out to stay in an apartment-hotel, living on "high ground", less than a sixth of the size of my previous house.

I am pretty much OK with all those changes and, supposedly, still in a good shape. The people around me might not be feeling the same. This notion came into my mind, right after I delivered my presentation to a senior leadership team in one of our few business operating group. I am managing a project that would deliver a new business computing environment that would significantly change the way people work with business information. While in general they were aware of the upcoming inevitable future and the top leader was supportive at the end, I could sense great concerns from the audience and some blank faces. Yet, a voice of embrace was also present in conjunction with a faintest remain of old school of thought. A mixed of various degrees of angles in dealing with a technolgical wave of change.

Having been going thru a number of same presentations to various different groups, I was already on a high gear. On the latest session, I should have been back to a drawing board as it deals with field operations wit concerned focus on safety, operation excellence, and prodcution. Adressing a change management is becoming critical as it challenges the very basic of human nature: stability. It is natural that we would then be encountering some resistances.

When stuffs around us are in a state of flux, our established routines are disrupted. Consequently, we have to think of navigating our ways moving forward. And thinking is hard work, let alone going into an extra mile of efforts. However, when everything is in order, when going from any point A to any point B is straightforward, we would just need, as my old boss would love to say, a robot instead of creative human being, not to mention about highly paid managers.

Learning from past failures, corporations have been taking a serious stance on addressing change management in implementing any new major inititives brought in to an established business operation. It shall go two folds. People in charge of introducing new things that would shake out the business, have to be equipped with and wisely manage change management processes. It's not just a game of technical prowesness. Mastering techniques, financial matters, and "hard" stuffs are necessary but far from enough. Facts are that pace of adoption for people around us is and will always be not the same. If it's not managed correctly, it could screw up even great things, products, or innovation we are about to put in place.

On the other hand, leaders are expected to quickly and flexibly adapt and adopt - embrace change as a business fact of life. Sadly to say that we are witnessing many expensive managers not being able to cope with it. Even worse is to actively resist change. Last week, I had a chat with a Project Manager experiencing the case of resistance before. He noted that how much more productive we would be if those energy of resistant behavior be transformed and directed into efforts for adopting the change. Surfing the wave of changes, we shall be expecting some bumps along the road. A period of valley of despair would surface that needs to be dealt with and managed before reaching up to the summit.

"Be a good salesman", advised a colleague manager of mine in well knowing the business-technology innovation that we are about to bring. As the saying goes, the only people who like change are busy cashiers and wet babies!

Down to Gorky Park, sing Scorpions, listening to the wind of change. Blows straight into the face of time. The world is closing in. But there would be no magic of the moment. We strive to make it leap forward to share our dreams of tomorrow.

Escape the Past, Invent the Future

In a Q&A session after our GM presentation on re-organization, vision and mission, upcoming projects, and global undertaking, one of our guys posed a question about job security. I had no idea what prompted him to ask this question as he is one of our high performers. Perhaps, he was voicing concerns that some others might have.

The classic response was that we are working in a big enough company, on the top lists of Fortune 500, operating globally with diverse energy production and opportunities. Region-wise, two third of the energy demand would be coming from Pacific rim, with industrializing China hunger for more and more energy. On personal space, I was adding to remind our guys to keep on maintaining professionalism and preparing for the future in light of the next generation of skills (probably some of our guys were not quite comfortable with this notion). Referring to the best-seller Competing for the Future (Gary Hamel and C.K. Prahalad), we shall be ready to escape the past, do something to invent the future. An old book, yet still inspiring, that I bought a few years ago in Houston. Hamel and Prahalad indicated that inability to escape the past and inability to invent the future are great company diseases that make them failed.

As for our professional life, it is human that we all are proud of our great achievements in the past, and frequently that we are content with current performance that breed success. The one, among other things, that we might get trapped with this is that "success confirm strategy" mindset. We keep on doing things in the same way with the same thinking as it's already "proven" before that it makes us "success". We might "win" in the past because of abundant resources and it gets into subconsciious mind that "resources subsitute for creativity". The landscape of the future would require us to creatively adjust from time to time our approach to success. It might not be an immediate future, yet we need to get prepared. The "blue ocean" of the future is opportunities for those ready with new skill sets to tap in and reap the benefit. We have been seeing, for instance, that "customer subscription-based fee" is replaced with "ads revenue stream" in the business model such as Google, Yahoo and the like.

First thing first would be a question as to how that we have strong enough radar screen as to capture the fish of the future. How do we get in touch with the future. More importantly, do we have the courage to cross borders and go beyond -- out of current comfort zones. Let alone, if the risks are clear and the rewards (whatever huge it might be) are still a possibility. As Robert Kiyosaki (in Rich Dad Poor Dad, or other books I did not recall), we are always waiting for a green light. The light will never turn green, we have to make it green!

Get our mind to smartly read any leading indicator while wisely enough to deal with lagging indicators. Success of the past is a sweet memory, but it would not necesary be a ticket for a future success. In an interview wih Newsweek published this week, Dalai Lama said that "we don't talk about the past. We are looking to the future" when asked about his relationship with Beijing, recalling about meeting with Chinese leaders in the past for being reminded that Tibet has been part of China for centuries and being requested to state for no separation guarantee.

Do something. For the better future.

Managing Less is Managing Better

A very long while ago, I told an executive "leader" that he should stay away from interfering into granularity of work details of his people, and have a helicopter view instead. The response was "I am an engineer. If I drive a car, I have to know how the engine work". I was trying to remind him that he is a vice president. A US$ billion company. He then said that he would stay away once he knows all the details and feels comfortable enough.

It turned out that enough was never enough, or at least took a very long time to get to a small portion of enough. It's at the expense of (some) other people, feeling unease at work, worrying (or fearing) that the way people do the jobs might not be the way the boss like. Nevertheless to say, he got what he wanted, jobs were executed completely. Some good highly talented people were detaching themselves, some were seeking opportunity outside the company. Lately, I indirectly had a converstaion with one of them. He smilingly mentioned that if he were a VP, he would have him (the boss) as the manager, not the other way around. "Now, he is getting better, though", he added.

I have no idea to connect 'an engineer' and 'a helicopter view'. Perhaps, I shall be wise enough to understand about being (or talking to) a 'leader' and a 'manager' as some people try to differentiate. Or there are people thinking that the world is revolving around him or her, the center of universe! It might be an interesting topics of organizational behavior or leadership psychology study. But I would like to refer to Jack Welch, the former chairman and CEO of General Electric. Many called him as one of the greatest CEO of the era. In 29 Leadership Secrets from Jack Welch (Robert Slater, 2003), abridged from Get Better or Get Beaten, Jack Welch mentioned:

As we became leaner, we found ourselves communicating better, with fewer interpreters and fewer filters. We found that with fewer layers we had wider spans of management. We weren't managing better. We were managing less, and that was better.

Interesting enough that he wanted his managers to manage less. He wanted them to do less monitoring and less supervising and to give their employees more lattitude. Conversely, he wanted far more decision making at the lower levels of the company. It shall be understood carefully as not to suggest that managers are out of controls on what's happening. Sometimes it sounds counterintuitive as managers are supposed to and want to manage. As we see it within the context, it's more appropriately sugesting about managers staying away from thsoe granuarity of details of their people. Stop looking over their shoulders. Stop bogging them down in bureaucracy. Let them perform.

Behind it lies a key idea: we have hired the best people and trained them so that we need to treat them with respect. Build their confidence - in us, in the company, and in themselves. And then get the hell out of their way. For Welch, "managing less" at GE meant that his leaders had more time to think big thoughts and be more creative.

I would say that it's very inspiring. We can just simply say, Empowerment.

Bill Gates on Creative Capitalism

Davos, Switzerland. This winter sports area is famous as the host to the annual meetings of the World Economic Forum, an annual meeting of global political and business elites. The closest that I could physically get to this destination of the rich was last year when 'Eurailing' aboard Glacier Express from St. Moritz to Zermat. The scenary view was spectacular along the Alps of beautiful and snowy Switzerland. We, Ratih and my 5-year old Rafi that kept on moving around, were the only one, I suppose, that looked far, far less wealthy among those passengers in the first class car serving a good lunch meal aboard this slowest fast train in the world.

That's it. The gap between the rich and the poor. Craving for $1 a day, unable figuring out how much zeros are there in $1 million a day in local Indonesia or Peru currency. At WEF 2008 in Davos last month, Bill Gates, Chairman of Microsoft Corporation, was talking about Creative Capitalism, an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities.

The great advances in the world have often aggravated the inequities in the world. The least needy see the most improvement, and the most needy get the least -- in particular the billion people who live on less than a dollar a day. There are roughly a billion people in the world who don't get enough food, who don't have clean drinking water, who don't have electricity, the things that we take for granted. Diseases like malaria that kill over a million people a year get far less attention than drugs to help with baldness.

We need a system that would have a twin mission: making profits and also improving lives of those who don't fully benefit from today's market forces.

A very noble intent. Although qualifying Capitalism with 'creative' or any other words would not create a new school of thoughts as to establish a new set of economic system. Some critics even say that Bill Gates miss the point on 'creative capitalism'. It's something like branding corporate social responsibily with a new word, as similar to 'caring capitalism'. They said that corporations already provide money to communities and charitable causes, and the world does not get any far better.

I would say that the critics miss the points as well in focusing more on charity aspects. Business could not grow bigger and bigger beyond the limit that can be financially afforded by purchasing power of the community. You can not sell more and more cars in a town that the people can only buy a bike. Anyway, we would not be getting trapped into pros and cons arguments. We would embrace and support the ideas of making the world a better place to live for everyone. And if it comes from a Diva of Software Industry like Bill Gates, it would become more real and make things happen.

"It's Bill", commented Erik Renaud, GM Enterprise & Partner Group, Microsoft Asia Pacific, in our lunch at Pacific Place, Jakarta today. "He likes big things. He still wants to change the world".

Well, we shall be wellcoming Bill Gates in May 2008 here in Jakarta. Probably, someone could manage to steal his time to introduce the concept of "zakat" and "ekonomi syariah", a completely different thinking that might inspire him to do more..... as John Lennon with Imagine, inspired after he spent some time inside India.