Man of String

An Innovation Paradox: When More of the Same Makes a Big Difference

This article was originally published in Fast Co. Design on August 4th, 2011

At a time when we are constantly being told to value the new and the different, it may come as a surprise to learn that the standard, the shared and the common can be strong drivers of transformation. In fact, many of the innovations that have changed the world, including railroads, modern manufacturing and interchangeable parts, money, agriculture, containerized shipping, numbers, the internet, even language, only succeed because of standardization.

Organizations that are looking to transform their operations, their customer experience or even their industries can benefit from incorporating as many types of standard, shared and common features into their efforts as possible. These include:

Standard Processes

In 2009, Baptist Health System (BHS) in San Antonio, Texas, became part of an initiative designed by The Centers for Medicare and Medicaid (CMS) to reduce costs and increase quality in acute care. A physician-led Clinical Improvement Council for Orthopedic Care at BHS transformed its approach to hip and knee replacement procedures. Where previously each one of the system’s 40 orthopedic surgeons had their own particular way of doing things, the Council developed a single model of care for all five of the hospitals in the system. New standards included everything from pre-operative tests, radiology, operating room instrumentation, supplies and other equipment, to post surgery medication, food and nutrition, physical therapy and physician consults.

Within a few months the results were dramatic; BHS cut its readmission rate in half, and infection rates dropped significantly, providing patients with a measurably improved customer experience. The physicians were able to complete their surgical workload in notably less time than it had previously taken them. Nurses, technicians and other medical staff reported higher job satisfaction because they no longer had to worry about managing 40 different models of care. The procedures cost less, saving the taxpayers hundreds of dollars per procedure. In short, common procedures, as well as a shared goal between physicians and hospital administrators, have demonstrated the potential to drive transformation in the US health care system.

Common Goals

Apple may seem like a strange company to include in a discussion of standards. It is, after all, the company that exhorted us to “Think Different.” But during his tenure as CEO, Steve Jobs instilled a culture inside Apple that had nothing to do with the free spirited and rebellious self-actualization that its TV and billboard ads proposed. Instead, Jobs set high expectations and goals for himself and the entire organization and swiftly got rid of people who couldn’t or wouldn’t play along. And for their part, his employees are known not for their diversity of perspectives but rather for their uniform adherence to and advocacy of the Apple approach to product design and development. They all value deep collaboration (multi-disciplinary teams that have the same goals and work together on different parts of the same problem at the same time) and take individual responsibility for the success of the organization, not the other way round.

From this surprising conformity, Apple achieves an extraordinary level of innovation and productivity that has transformed not one but several different industries, including computers, music, phone and home electronics. Its recent results have been a series of highly innovative consumer products and services that have catapulted the company into the upper echelons of profitability, growth and consumer loyalty. In the last decade, Apple’s stock price has risen from around $10 in 1998 to $350 in 2011, its revenues from around $5.5 billion to $87.5 billion, and the company is currently growing at about 60%.

Common Platforms:

By 1970, Black & Decker’s consumer power tool portfolio was a hotchpotch of 122 different models, which between them had 30 different motors, 60 different motor housings and 104 different armatures. Each of these variants required separate tooling. There were few shared components or processes, leading to high costs in inventory ordering, storage and management as well as in tool production and manufacturing. These costs were passed on in part to the customer. In 1971, driven by a triple threat of offshore manufacturers, inflation and rising costs, and anticipated regulation requiring double insulation to protect consumers against electric shock, the Black & Decker management team and board decided that it needed to rethink its entire approach to the design and development of its power tool portfolio.

A concerted effort by the business over the next three years saw a massive reduction in variants, leading to just one motor, a huge reduction in space, facilities, resources and time needed to manage parts and equipment, faster production cycles and retooling times. Motor production labor costs were cut by 85%, armature costs by 80%, failure rates fell from 6-10% to 1%. New products were introduced to the market in weeks rather than months and prices to the consumer were slashed by as much as 30% while maintaining 50% margins. In what amounted to nothing less than a complete transformation of their operations, Black & Decker became so dominant in sales, price, variety and quality that it forced many of its domestic competitors--including Sunbeam, Porter Cable, Rockwell and even General Electric, among others--out of the consumer power tools market.

Shared Values

Every potential new employee at the online retailer Zappos.com is screened not just for capabilities and experience but also for likely culture fit. As a new hire, they receive five weeks of training, are immersed in the company’s culture and taught the company’s ten core values. Commitment to these values is so important to the company that it offers new recruits $4,000 to leave if they don’t share them. The results are clear. Voluntary staff turnover, in a customer service/call center industry plagued by attrition rates as high as 50% nationally, is estimated by some accounts to be as low as 10% at Zappos.

Meanwhile, the customer service ethos–“Deliver WOW Through Service”--is famously anything but common or standard. Unlike the vast majority of call centers, phone calls are not scripted and they are not timed. In fact, there is some pride in the fact that the record for the longest call (as at July 2011) is 8 hours and 3 minutes. The shared commitment to a common set of values provides a platform from which a highly differentiated service is delivered, transforming what would typically be the most mundane of transactions into a delightful one, and one that itself drives loyalty and rapid growth.

Standard Interfaces

Until the development of standard parts in the early 19^th century, rifles were built individually by hand. Expensive and time consuming to build and to repair, they were also totally incompatible with one another, rendering them useless if they malfunctioned in the field. Interchangeable parts, a powerful form of standardization, changed all that and ushered in the era of mass production,

Nearly 200 years later, a standard interface has further transformed the rifle, allowing a standard weapon to take on multiple functions. The Picatinny (Pic) Rail provides soldiers with a means to attach and detach weapon accessories like optics, lasers, bipods, and other hardware to the M-16A1 assault rifle. Since its introduction in 1995, it has helped to more than double the longevity and functionality of millions of the Armed Forces standard issue weapons. The common interface provided by the rail has reduced the costs and simplified the logistics of equipping and supporting 1.5 million soldiers and 1.5 million reservists, and increased the rate of innovation and growth in the small arms and accessory industries. For example, Aimpoint Inc., a manufacturer and supplier of high performance optics to the US Army and Air Force, has seen a fifteen-fold increase in revenues since 1997, since the rail makes it possible for more soldiers to be deployed with, use and service advanced optics and other accessories in the field. Most importantly, the rail has increased the functionality and efficacy of active-duty front line soldiers, providing them with a tool that can meet a variety of both specialized and general needs.

Standards are Critical Tools of Innovation

Most organizations get it wrong when it comes to thinking about standards and innovation. They think that standards are a necessary evil, important but dull, their significance limited to cost reduction and quality improvement. At the same time they equate being innovative with being different. This is provably wrong on both counts. Focusing on the similar, the shared and the common will provide a stronger platform for scalable transformation then trying to be different ever will.

Milk and Water

As a child, growing up in a small town in south east England, the milkman was one of the most visible supporting players in our community’s life. Once or twice a week he’d show up early in the morning and you could often hear him before you saw him, driving up the road in his electric milkfloat stacked full of crates, as the glass milk bottles jiggled against each other with each slight bump in the road. The bottles were all identical, imperial pint-sized, and unlabelled. The only thing telling them apart was the colour of the foil cap which identified each bottle’s milk fat content.

Our family always ordered silver cap, which was full milk and had an inch or so of cream at the top. Rich, but not as rich as the gold cap milk which was almost sinfully decadent. From time to time, if we didn’t bring the milk in early enough the local birds would perforate the foil cap with their beaks and get at the cream. This irritated my father no end as he liked to invoke the paternal privilege of getting the first pour for his morning coffee.

It turns out that birds are lactose intolerant and that milk will give them diarrhea, but the cream has no lactose in it and so is a tasty energy-rich treat for them, as it was for my father. Even so only two species of birds, the blue tit and the robin, learned to drink the cream at the top of each pint. It seems that the birds first learned this many years ago when milk was delivered without the foil bottle cap. That protective innovation was introduced after World War I but in less than thirty years the trick of perforating the cap had spread across the entire blue tit population. Blue tits flock together for several months and the young birds evidently learn from their elders. Male robins, however, are fiercely territorial and will shoo away others if they get too close. So even though some individual robins did learn the cap perforation trick it never got passed on from bird to bird.

For several decades the milkman was such a prominent feature of communities across the country that a whole genre of jokes grew up around him. More recently he and his electric milk float have gradually, though not totally, faded from view. But I am still struck by the very idea that milk can be delivered to our homes in standard sized bottles, and how that differs so dramatically from water delivery. When I want water I simply turn on a tap and out it pours in an undifferentiated, unmeasured flow. I can leave the tap on for as long as I like. I can water the plants, run a bath, wash the dishes, fill a kettle, and I can use a different amount every time without having to order it in advance.

As I think about this difference some more, it seems to me that nowadays mostly everything that we need to be delivered is done so like milk, in standard sized containers. This is obviously true of products like cereal or baked beans but also true of paper documents via FedEx envelopes, cars via sea containers, and digital content like emails, movies, songs and websites via the packet-switching network known as the internet.

In comparison, our experience of water delivery is actually rather rare and getting rarer. Apart from water itself, the only things that get delivered to us as a flow are electricity, radio and TV. Of these, radio and TV are being increasingly delivered digitally, over the internet, and are therefore now more like milk than water. Meanwhile, the traditional electrical grid concept of central power generation and always-on, use it or lose it electricity is being reinvented from all sides. The days of cheap and effective rechargeable batteries for home and car, linked to small scale power generation facilities like solar panels, potentially and intriguingly providing us with a hybrid water-milk delivery model that may even feed energy back to the grid, are hopefully not too far off. And that leaves us with water, which we inherit rather than make. We know how fortunate and few we are who have this precious flow at our disposal.

So when it comes to stuff that we want distributed, we seem to be leaving the world of water and embracing the world of milk. Technology transforms our experience of flow into episodes and transactions, bottles and crates, boxes and containers, envelopes and packets.

I’ve recently started to have milk delivered to our home again, after a break of at least three decades. It was a decision based on choice – it’s really good milk – rather than on necessity. The delivery mechanism remains more or less untouched, but many of the details of the experience have changed. We no longer pay the milkman directly but order and pay online. The milk bottles here in Chicago are US half gallon rather than imperial pint, and the bottle tops are no longer aluminum but plastic. And we never actually see or hear our milkman in person, though he does send his customers a holiday letter every year along with a photo of his family. No one tells milkman jokes anymore.

gardens as technology

This being Father's Day and my children being on a mini-vacation at their Grandparents' cabin, I got to choose today's activities for myself and Mrs King.  And on something of a whim I suggested that we go visit the Chicago Botanic Garden.  Wikipedia describes it a 385-acre "living plant museum" and while I agree with the living plant bit it didn't feel much like a museum to me. I was, however, delighted by my choice.  The Garden was really quite breathtaking in the scope of its undertaking as well as in its beauty.  The entire 385 acres has been meticulously designed and crafted and continues to be lovingly maintained and improved by a professional staff that is supported by over 1,000 volunteers.

To go to the Garden is to experience a surprisingly strong and coherent design aesthetic, where order and symmetry reign over chaos.  Or, you might say, over nature.  I guess that's the point of a garden, a forced separation of nature from itself, a place where nature is at the same time honoured and rejected.  I hadn't thought about it in these terms before today, but a garden fits perfectly with Brian Arthur's definition of a technology.  A garden "captures" the phenomenon of plant life.  Of course a field also captures plant life, but does so to fulfill a need we have, the need to eat.  I had thought that we were going to see the plants.  But it turns out that we weren't really.  We were there to satisfy another need we have, the need to believe that we're different and better and more powerful than them (however misguided that belief might be).  And the garden, in a way that does turn out to be similar to a museum after all, is the technology we use to do that.

Is it a home? is it a phone? No, it’s the Dodge Grand Caravan

Having recently written about Tesla Motors and some of the ways in which cars are becoming more like computers, I was amused to see the current ad campaign for the Dodge Grand Caravan.  It uses two taglines; “more multimedia than your home”, and “a smart phone that seats seven”.

The minivan:home equivalence is hardly new but I am interested that the unit of equivalence (the way in which the comparison is made possible) is digital technology rather than furniture and function.  The minivan used to be like the home because of its ability to mimic different home-based activities that have been traditionally supported by distinct room types (eating in the dining room, watching TV in the sitting room, sleeping in the bedroom).  But this ad seems to suggest that this is becoming old hat.  Consuming media and food can be done together, and nowadays most often is, so why bother having a separate dining room?  Might chairs make more effective sleeping platforms than beds? Might the home become more like a minivan rather than vice-versa?

The minivan:smart phone equivalence is newer and its easy to imagine an agency creative getting all excited by the insight that the minivan is the ultimate in mobile technology (geddit???!!).  Actually I thought it was rather clever too.  We’ve obviously had multimedia in the car for ages now, but something more interesting is lurking behind the obvious.  If the car is becoming increasingly more digital and therefore increasingly more like other things that are also becoming more digital (like the phone, the home, the computer, etc.), then it also becomes increasingly more programmable.  What might it mean to have downloadable car apps?  I don't mean apps as part of a multi-media in-car infotainment platform, as envisaged for example by VW’s newly launched “App My Ride” open innovation challenge.  I mean, what if you could download apps for the car itself?  What if you could program the car? Car:Robot equivalence here we come.

Tesla Motors and equivalence

Last week I took part in a scenario planning workshop for one of our clients on the subject of the future of transportation.  I was talking about equivalence with one of our invited experts, Lee Schipper, and he said that he thought cars are becoming more like computers.  Not literally perhaps, but what he had in mind primarily was the new generation of electric car entrepreneurs like Tesla Motors.

Elon Musk, Tesla’s CEO, co-founder and investor, is not a typical automotive guy.  He is a serial entrepreneur best known so far for co-founding PayPal, although in the future he will most likely be better known for his accomplishments at Tesla, SpaceX and SolarCity.   Nor is Tesla a typically car company, describing itself first and foremost as a technology company that “has brought the best of the automotive and technology worlds together”. And as a technology company it anticipates performance improvements and accompanying cost reductions as a normal part of its business model.

The product itself is also a different kind of a beast.  The heart of an electric vehicle (EV) is not the engine but rather the battery, in Tesla’s case the same type of lithium-ion battery that powers your laptop.  As battery technology evolves, the heart of your car will become a modular “off-the-shelf” component that can be swapped in and out as necessary.

The number of parts in an EV that require specialist knowledge to maintain is considerably smaller than in a traditional internal combustion engine (ICE), and those parts are increasingly digitized, (including digital, rather than analog, motor control, as described in a Tesla blog post “from waves to bits”) meaning that the good folk at Tesla can act more like a Geeksquad, connecting locally or remotely to customers’ cars and troubleshooting them in the same way they would your computer or home network. 

In some respects, then, the car really is becoming more like the computer; increasingly digital, increasingly connected, and increasingly modularized.  In an earlier post I proposed three laws of equivalence, and I would suggest that Tesla specifically, and EVs in general, may be indicators of the third law at play in the automotive world:

“Any product or service that cannot be made equivalent will most likely be made redundant by another that is, through the forces of scientific and technologic advance and/or modularization”.

The ICE will eventually be made redundant by the battery, and as it does, the businesses and industries that were founded on their unique ability to produce, support and/or distribute it (e.g. gas stations, auto repair shops etc.) will see the value of that ability begin to disappear.  Smart businesses will get ahead of this shift while others will go under, tied to conditions that no longer apply and to solutions that no longer matter.

Why is digital technology still so disruptive?

Why do some companies and even whole industries fail so miserably to recognize the opportunities and threats of digital technology?  Why, for instance, didn’t Borders or Tower Records create Amazon.com?  Why didn’t the UK’s Exchange & Mart, a print-based marketplace for people to sell their used stuff to each other since 1868, create eBay instead of being buried by it?  Why did Smith Corona give up on its fledgling PC unit after only a year and dissolve into nothingness less than 5 years later? Why is Blockbuster losing out to Netflix and Redbox? And why are the textbook publishers still in the infancy of digital content development?

This is not a new question of course.  According to one school of thought, the answer is inertia; it’s just really difficult to stop doing the things that have made you successful in the past.  According to another, it’s management incompetence that’s to blame.  And I understand both points of view but have a sense that something else is playing a part, something that, for now at least, I’m calling equivalence.

When senior decision makers within the corporate world think about digital technology, they’re mostly frustrated by the cost of IT in their organization, or by the loss of their children to the world of texting, social networks and first person shooters, or by their own inability to get their laptop to find a connection.  What they’re assuredly not thinking about is two of the most fundamental aspects of computation and communication; the digitization of the analog stream and the quantization of the digital stream.  And why should they?  Well, I think there are two reasons why:

Firstly, Digitization gives us equivalence in production and consumption.  Digitization makes every single piece and type of content equivalent to every other piece and type.  All content in a digital world is a combination of 1s and 0s.  A printed book that used to look and feel very different to a song, or a movie, or an X-ray, or a financial transaction, is now, in its digital form, essentially identical to them.  They are equivalent.  And the same goes for meta-content, or content about content.  Even those pieces of the world, like cars or chairs or computers themselves, that remain obstinately analog and resist digitization can still be described digitally and therefore manipulated and traded the same as any natively digital entity.

Digitization, therefore, means that any piece of content can, in most regards at least, be produced and/or consumed by the exact same types of device, including PCs, smart phones, tablets, game consoles etc., running the same or similar applications.  And when the means of production for different types of content become the same it means that anyone who produces one can produce the other.  Book publishing, for instance, is no longer confined to book publishers.

Secondly, quantization gives us equivalence in distribution. Quantization is a process of chunking up content into discrete, standard units and is responsible for the effective and low cost worldwide distribution of both digital content (via packets on the internet) and physical content ( e.g. via envelopes on mail networks and containers on shipping networks).  Quantization of the digital enables all these different yet equivalent pieces of content to be advertised, distributed, bought and sold over the exact same distribution infrastructure, namely the internet.  This means that any business that exists as a middleperson between producer and consumer, including retailers, dealerships, distributors, sales representatives, agents and so on, is increasingly interchangeable with any other.

So, digitization creates equivalences across the entire transactional domain of production, exchange and consumption.  But it is important to note that digitization is only the most recent form of equivalence.  Many of the world’s greatest innovations have been the introduction and development of systems of equivalence, including spoken language, writing, numbers, money, and quantized networks including mail, package and container systems.  And we still have many to come, including the digitization (or equivalent!) of taste, smell and touch experiences, as well as of our genetic code and of molecules, and the quantization of energy.

I propose then three laws of equivalence:

First, any product or service that can be digitized, or made equivalent to another product or service, will be.  And if not by you, then by someone else;

Second, any product or service that can be quantized for effective distribution will be.  And if not by you, then by someone else;

Third, any product or service that cannot be made equivalent will most likely be made redundant by another that is, through the forces of scientific and technologic advance and/or modularization.

And if not by you…