Investing in Knowledge Based Capital Encourages Disruptive Innovation

When considering issues related to the development of innovation within any economy, it is worthwhile to discuss the elements that can create an environment, or innovation ecosystem (1), that nurtures disruptive innovation. As you may recall, disruptive innovation is the ability of seemingly new and “less desirable” alternatives to steal market share or ultimately drive out incumbents from any given market.

uae-knowledgeKnowledge Benchmarks and Innovation

The 2014 Abu Dhabi Innovation Index report makes apparent the elements that enable innovation within emerging economies – most especially Natural Resource Rich Economies such as those in the UAE that have a large share of the economic mainstay in natural resources with very little diversification into other industries.

It is well known that radical innovation is dependent on the presence of knowledge and skills. In the Abu Dhabi Innovation Index, key indices used as benchmarks were specific to knowledge, including knowledge access, anchoring, diffusion, creation, and explotation. A further analysis of these benchmarking metrics may be used to identify what this may mean in terms of disruptive innovation.

  • Knowledge Access: The ability of an economy to connect and link to local and international networks of knowledge and innovation.
  • Knowledge Anchoring: The modification of applied knowledge to suit the context of the local market or region. (Note that knowledge anchoring is slightly different from general education or schools and colleges that teach agile development or business model design.)
  • Knowledge Creation: The ability to generate and bring new knowledge to the world in the form of ideas, discoveries, designs and inventions.
  • Knowledge Diffusion: The collective capability of an economy to adopt, adapt and assimilate new innovations, practices and technologies.
  • Knowledge Exploitation: The ability to utilize new knowledge for social and commercial purposes in order to create value from it.

In an OECD executive report in 2013 titled “Supporting Investment in Knowledge Capital, Growth and Innovation,” the following statement was made in the executive summary, highlighting the importance of “knowledge capital” to innovation:

Today’s firms are looking beyond research and development (R&D) to drive innovation. They invest in a wider range of intangible assets, such as data, software, patents, designs, new organisational processes and firm-specific skills. Together these non-physical assets make up knowledge-based capital (KBC).

Knowledge-based Capital and Innovation

It has been rightly said that innovation leads to a knowledge-based economy (on a macro level). It can also be pointed out that an aggressive drive toward knowledge-based capital (KBC) is an important factor for developing innovation within an ecosystem. Thus, when businesses invest heavily in KBC, there will be a direct (or indirect) impact on the local innovation ecosystem. [Read more...]

The New Innovation Mandate: Borderless Innovation

open-doorI’ve spoken before about “borderless innovation,” the idea of looking beyond physical borders — the four walls that enclose your office, your department, your company or your country – and even social borders — the gap between public and private organizations, between big businesses and entrepreneurs. I wrote a blog post on this topic in 2010, and I’m pleased to report that many innovative organizations around the world are now demonstrating these concepts.

Although traditional innovation has relied heavily on internal problem solving and idea generation (often tasked to the R&D department with little cross-functional interaction), the new innovation paradigm is much more open, with organizations seeking input and cooperation from their entire ecosystem.

Bruce Mau, a leader in design thinking and innovation and co-founder of Massive Change Network, explains the benefits of borderless innovation as follows: “If you have to rely on one group of people to solve a problem that has been in some cases challenging us for decades and if you are trying solutions in sequence it takes forever; whereas, if you can activate the marketplace to take on that problem and solve it collectively there is so much more creative power in the collective than in the individual.”

In other words, organizations are learning that “two heads (or more) are better than one” when it comes to innovative problem solving and idea generation.

Examples of Borderless Innovation

The recently released “Abu Dhabi Innovation Index” found that, compared to a number of countries frequently cited as innovative, Abu Dhabi firms co-operate more frequently with other organizations during the process of innovation. According to the report, Abu Dhabi firms have sought to exchange knowledge with a number of external partners including suppliers, customers, universities, specialists, and even competitors. In addition, around 50% of Abu Dhabi firms report internal cooperation (between different business entities), which is also an important aspect of borderless innovation because it removes the silo mentality that hinders innovation.

ibtikari2A great example of this cooperation is the Ibtikari program, which was launched by Khalifa Fund for Enterprise Development. Ibtikari helps cultivate entrepreneurial culture among UAE Nationals and encourages innovation around a specific theme. It brings together entrepreneurs and innovators interested in a specific industry, plus those with business/marketing/operation backgrounds, to generate ideas and design innovative business models that could become startups funded by Khalifa Fund. In an article for Zawya, Abdullah Saeed Al Darmaki, CEO of Khalifa Fund, credited the program’s second round (Ibtikari 2.0) to the collaboration between Khalifa Fund, Abu Dhabi Tourism Authority and the ICT Fund. “The success of such initiatives comes as a result of the comprehension cooperation between different entities,” he said. [Full disclosure: Innovation 360 was retained by Khalifa Fund to assist with facilitation and marketing of Ibtikari 2.0.]

Other companies are adopting borderless innovation principles by combining R&D and external corporate investments with early stage accelerators and incubators. A number of global corporations have done this including McDonald’s, General Electric (GE), Citrix and Capital One, to name a few. Here at home, DP World launched a similar initiative, TURN8 seed accelerator, in 2013.

Borderless innovation is not only the domain of large companies – it is often exhibited in the openness of startups, especially those in the tech sector who routinely release “beta” versions of their app or website specifically to garner feedback from those outside the company. This feedback is then considered to make the product better before releasing to the general public.

Large organizations, especially in the Middle East, often shy away from this type of tactic. Yet being more open with their projects is exactly what they need to move beyond old ways of thinking and produce truly innovative offerings. (By the way, market research, while important, doesn’t count as borderless innovation.)

So what can your organization do to increase borderless innovation?

First, work toward a culture of innovation, which promotes trust and encourages risk-taking. This means investing in people, tolerating risk and failure, supporting inquiry and the scientific method, encouraging opposing points of view, banning politics and embracing the individual.

Second, take advantage of advances in technology, computing and communications. With the rise of social networks (both internal and external), companies can seek ideas and input from a wider array of stakeholders than ever before – customers, prospects, employees, suppliers, partners, etc. Not only will this give you a larger pool of ideas to draw from, it can also provide you with innovative solutions to problems that your own team has been stymied by.

Third, increase internal collaboration to 100%. I’ve been a proponent of “every man” innovation for a while now. That is the notion that innovation within an organization is every man’s (or woman’s) responsibility. Not just the R&D department. Not just the leadership. Everyone. (It’s one of the reasons I structured training offerings for everyone from the CEO to the front line employee.) I love this quote from James Patterson, a VP at Capital One Labs: “Innovation should come from all corners of your organization — make sure you are seeking out diverse perspectives and engaging the curious people in your organization who think about problems bigger than themselves.”

Fourth, establish partnerships with the private sector. The Abu Dhabi Innovation Index characterizes the benefits of such partnerships as follows:

As Abu Dhabi Government’s investment in innovation enabling activities increase, the risk for growing inefficiencies between capacity and performance will increase. Therefore, private sector partnership in innovation projects will be necessary to mitigate against such risks. Private sector involvement will help steer innovation investments towards market needs and make more efficient use of combined public-private resources.

These are just a few ways that your organization can adopt borderless innovation and enhance the caliber of your innovation efforts. What other ideas do you have?

How Peer to Peer Companies Change the Business Model Canvas

Collaborative consumption is an economic model based on sharing, swapping, trading or renting of products and services, enabling customers to have access to goods without ownership. Businesses that leverage this trend are now commonly known as peer to peer, or P2P, as they enable peers (or consumers) to buy and sell products and services from each other. The business brings the consumers together and facilitates the transaction for a fee. Examples of P2P businesses include eBay, Airbnb, Snapcar, Zilok and Zopa.

p2p-ebayP2P is not new, but more businesses are beginning to leverage this common human behavior due to the power of technologies that enhance these interactions. Since virtually all P2P transactions rely on the Internet, businesses have benefited from new web technologies – especially on the back-end – and from the increase in Internet bandwidth and availability. Smartphones and other mobile devices make P2P businesses more accessible. There has been also an increase in trust by consumers, who not long ago may have hesitated to make a purchase online from a reputable business, let alone from a complete stranger.

I would also argue that the dramatic rise of community-based networking (social networks) has contributed to the popularity of P2P businesses. Consider that 72% of all internet users are now active on social media, and that there are 684,478 pieces of content shared on Facebook, 3,600 new photos on Instagram, and 2,083 check-ins on Foursquare during every minute of every day.

There is obviously wide adoption of the “community” concept and it is growing. If people will share information, opinion, photos and so on in a social community, then they will be more open to the idea of services and products being distributed among networks of connected individuals.

The question I would like to pose, then, is: does the traditional business model canvas need to be revised to better reflect the building blocks of P2P businesses?

The usual business model emphasizes the nine building blocks (e.g., offering/value proposition, target customer, channels to customer, customer relationships, revenue streams, cost structure, key activities, key partners,  and core capabilities). [Read more...]

What Can Innovators Learn from Disruptive Streaming Video Providers?

The Internet has disrupted many industries over the past decade. The traditional television industry is now the latest victim of this disruption. Thanks to the wide availability of low-cost, high-bandwidth Internet access, on demand streaming video services have grown rapidly over the past few years. Such “real time entertainment,” as it is called, has taken a 62% market share in North America during the first half of 2013 according to a survey by Sandvine. Netflix has almost single handedly created a big disruption in this industry. It has a staggering 89% market share in video steaming services in the U.S., followed by HULU and Amazon Prime.

There are four main reasons that on demand services are growing and threatening to wipe out traditional TV.

Adaption to technology
The streaming services have very quickly adapted to new technologies. They started with online video streaming on computer desktops, but understood the rising demand of tablets and smartphones and started offering applications for Android and iOS. These new apps give users access to their favorite shows on the go from their phones and tablets. They now have the choice to watch on whatever device they want.

netflix and hulu plus streamers

Strategic partnerships
Netflix and Hulu have partnerships with leading movie and television producers, giving them access to many movies and TV shows, both new and old. The variety of entertainment available to viewers has attracted a huge number of customers (Netflix is said to have more than 40 million streaming subscribers globally). Netflix has also partnered with digital media streaming hardware and console companies to support their services, making it even easier for customers to access the entertainment they want, when they want it.

Cost structure
Murdoch-quoteBecause of the large user base and also low overhead – no physical stores and, in the case of Hulu and Amazon, no physical inventory – on demand streaming video services can afford to offer customers a good deal. They are typically freemium and subscription based. HULU offers some of its content for free with advertisements. If the viewer wants to watch ad-free programming, he has to subscribe for a monthly fee. The monthly subscription fee is very reasonable, especially compared to the cost of traditional cable television, or even the cost of traditional movie rentals.

Exclusive content
It’s easy and low cost for customers of on demand streaming video platforms to switch from one provider to another. Thus, there is a need for original content to keep customers interested. Netflix started producing its own TV shows – like the Emmy award winning “House of Cards” – which gives users privileged or exclusive access to shows that cannot be viewed on any other platform. Other services, like Amazon and Hulu, are following the same concept of producing exclusive shows, and have been in successful in getting viewers’ attention.

What can other businesses learn from on demand streaming video providers?

If you look back at the reasons above that on demand streaming video services have been so successful, you can derive several lessons that can help any organization be more innovative, even disruptive.

  1. Adapt to technology quickly, especially technology that your customers are using and that makes it easier for them to consume your product/service.
  2. Form relevant partnerships that help you deliver more to your customers – more variety, more cost savings, more quickly, whatever you can do better than the competition.
  3. If you can offer a comparable product/service for less than the competition by targeting a new market (young Internet-savvy movie fans, in this case) you will disrupt your industry.
  4. Invest in exclusive products/services/features to attract new customers and distinguish you from the new competitors who always follow in the footsteps of a true disruptor.

AmazonFireTVThe future of on demand streaming video services

The UAE has its own prominent streaming video service, Icflix, which was started a couple of years ago. The biggest differentiator is that it provides regional content to suit local audiences. As with other streaming services, membership is offered on a subscription model and rates are quite modest.

With the UAE having 77% internet penetration, I predict there will be plenty of regional players to tap in to this market. The future for these steaming services is bright and competition will be intense. It remains to be seen how the global service providers will expand to other markets and compete with local players.

Want to disrupt YOUR industry? Contact us.

New $100M Venture Fund Announced by Leading VC Firm Targeting Middle East, Asia and Silicon Valley

A new venture fund, the Fenox Global Fund IV, seeks to invest USD $100 million in seed, Series A and pre-IPO funding throughout the United States, Asia and the Middle East. The fund has been established by Fenox Venture Capital, a global investment firm headquartered in Silicon Valley, in partnership with Innovation 360, a leading innovation consultancy based in Dubai, UAE.

Fenox’s current investment portfolio includes, among many others, Dream Link Entertainment (DLE), the largest animation company of its kind in Japan that recently executed an IPO on the Tokyo Stock Exchange, and Lark, a wearable technology company whose products are now sold at Apple stores around the world. Fenox’s portfolio companies have been included in joint venture rounds with some of the top VCs in the world.

Now open to investors in the Middle East, the Fenox Global Fund IV will seek to invest in information technology startups – including Internet, computer hardware and software, and communications – as well as startups in the area of healthcare technology and clean tech.

The fund strategy is to invest in a mix of startups in need of seed and Series A funding in the Middle East, pre-IPO companies from Asia, and seed and Series A startups in the United States – particularly Silicon Valley.

“We are breaking new ground in the Middle East with the Fenox Global Fund IV,” said Brent Traidman, General Partner at Fenox. “I know of no other time that a Silicon Valley VC has used capital from Middle East investors to promote entrepreneurship in the local region.”

At the same time, Kamal Hassan, Fenox General Partner and president of Innovation 360, cautioned that the number of businesses seeking VC funding in the Middle East is small compared to regions where the startup culture is more mature. “Fenox sees the huge opportunity for growth in the MENA region, and so we are offering funding and expertise to a few best-in-class regional startups who we believe will provide significant long-term gain,” he said. “However, by also investing in more mature companies from Silicon Valley and Asia, the fund will diversify the investors’ portfolio and create a greater return for investors.”

Fenox has a track record of investing in global businesses from all around the world, having managed funds that focus on entrepreneurial development in South Korea, Singapore, Japan, Indonesia and China. Innovation 360 has been a visible and vocal supporter of the entrepreneurial ecosystem in the UAE. In addition to establishing i360accelerator for early stage startups, founder Kamal Hassan is a Managing Director for the TURN8 seed accelerator established by DP World, and has himself invested in 19 startups from the Middle East and elsewhere.

Ten percent of the fund (USD $10 million) has already been committed. Fenox Venture Capital is currently qualifying additional investors for the fund. If interested, contact KHassan@fenoxvc.com in Dubai, or BTraidman@fenoxvc.com in San Francisco.

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How Design Thinking Enables Creative Problem Solving

By Guest Blogger Christine Nasserghodsi

Design Thinking at The CribbPeople often think they fall into one of two categories — creative or not.  Although there is a general belief that creativity is a trait that some are simply born with, strategies to enhance creativity can, in fact, be taught. Design thinking is one such strategy, and has the added benefit of helping people develop creativity in a way that increases the impact and reach of ideas. Design thinking is a user-centered approach for problem finding and problem solving that is marked by building empathy, ideating solutions, and rapidly developing and testing prototypes.

So, how does design thinking spark creativity?

Imagine being told to sketch out an idea for a new wallet. You would probably think about your existing wallet, what works well, what doesn’t, and make a few changes. There’s a pretty good chance that those changes would be things you’ve already thought about. On the other hand, imagine being asked to design a wallet for another person…worse yet, someone who says he likes his wallet the way it is! After interviewing this person, perhaps even watching him for a day, you’ve learned that he works a full day and is developing a start-up. He gets frustrated when he’s late but often is. You’ve seen him fumble through different currencies and misplace his cellphone several times. You’ve also noticed that he keeps pictures of his children between business cards and lights up when talking about them. How might your design be different for him? The odds are you would come up with something that hadn’t occurred to you previously.

design-thinking-empathyDesign thinking begins with empathy – developing a deep understanding of a user.

After defining the user’s point of view or need, design thinkers work with a team to explore ways to help the user. Through the use of various constraints, design thinkers ideate broadly and group their ideas in different ways. They select an idea to test and develop a low-resolution prototype to capture their idea. After giving their user a chance to test their idea and capturing verbal and non-verbal feedback, design thinkers make changes to their prototype and continue with testing. Throughout the process, the user remains the focus.

[Read more...]