Innovation in Baltimore
February 23, 2009
Tomorrow February 24, 2009 marks the inaugural meeting of the Baltimore Angels investment group at the Emerging Technology Center (in which I am participating). The Baltimore Angels puts angel investors in touch with entrepreneurs via bimonthly meetings and other events. It is exciting to see the energy around this new group that is hoping to provide alot of advice and some cash to local entrepreneurs as they strive to bring new and innovative products and services to market. This group is the brain child of Dave Troy and several other early pioneers who are all interested in stoking the fires of innovation in the Baltimore area. The other interesting element of the Baltimore Angels movement is that it started and grew via Twitter (@baltimoreangels). In fact the website (baltimoreangels.org) simply takes you the Twitter page.
Over 50 executive summaries were submitted to the Baltimore Angels for the first meeting where 3 companies were selected to present. I reviewed many of the executive summaries myself, and there were several very interesting ideas in the mix. And there were more than a few that don’t really have a chance. I think the biggest challenge I see is that there are alot of smart people trying to create “lifestyle” businesses. These are businesses that are interesting, fulfilling, and potentially very profitable, that will provide the founding entrepreneurs with a very good living and a great lifestyle. The challenge is devising an investment model that makes sense for the lifestyle business. Both entreprenuerus and investors need to profit from a lifestyle business, or the movement won’t continue to grow in my view. There is also alot of opportunity to help entreprenurs think about their markets in greater detail: going beyond – there a 14,000 customers in this market and we expect to get 5% of them in the next 3 years. After all intelligence and passion are essential, but every business still needs to solve a pervasive and urgent market problem in order to succeed.
But Baltimore is off to a great start in 2009. This is an important movement that will pay deep dividends in the future if it grows and prospers. Find a way to get involved and track the progress at twitter.com/baltimoreangels.
The Innovators Prescription for IT – Part 2
February 17, 2009
Part 2 of my post on the new book by Clayton Christensen called: The Innovators Prescription . Part 1 can be found here: (The Innovators Prescription for IT).
A key theme of the book is that the general hospital is not a viable business model because it is focused on trying to do everything for everybody. As a result, general hospitals really are trying to simultaneously support three different business models: solution shops (which diagnose problems and recommend solutions), value-adding process businesses (which fix or repair definitively daignosed problems e.g. a knee replacement), and facilitated networks (membership based networks that deal effectively with chronic disease maintenance). And the resulting overhead structures, high costs, and inefficiencies are the source of the health care problems in this country. The answer is that focused specialists need to disrupt the general hospitals, and this trend is already beginning in health care.
If you are in the IT services or software industries, does this ring a bell? The lack of focus in IT has been a pet peeve of mine for a long time and I have seen it bring down several fine organizations. In effect many IT and software companies act like a general hospital in the health care industry: they try to do everything for everybody.
A couple of recent blog post talks about this growing and pervasive problem (Rocket Watcher), and the recent product management survey conducted by Pragmatic Marketing really drives home the lack of focus and the problems it causes.
In essence many IT and software companies are acting like general hospitals: they try to do anything for everybody. And as such they are trying to manage multiple business models just like the general hospitals: solution shops (which diagnose problems and recommend solutions), value-adding process businesses (which implement the systems and technology that address business needs), and facilitated networks (ongoing management and support). The result is the same high overhead and increased costs that the market is no longer willing to pay for.
In health care we are starting to see disruptive business models displace the general hospitals. Specialist hospitals are starting to pop up everywhere. Neighborhood clincs are dealing with the simple illnesses that we used to go the physicians office for. And online networks are helping people manage their chronic diseases far better than their primary care physician can (due primarily to the fee-for-service profit formula in use today). To survive, general hospitals are going to have to be dissected into the three businss models.
In IT we are starting to see the same thing. Fueled by simple new tools and technologies (Wordpress, Facebook, Twitter, Google Docs, etc.), disruptive innovators are starting to steal market share from the industry leaders. Specialists and focused competitors are the wave of the future, just like in health care. If you are still caught in the general hospital business modl, you had better act fast. Once disruption hits it stride, creative destruction will quickly push aside those organizations that are unable to adapt.
If you are in the IT or software industries, pick up Christensen’s book and kill two birds with one stone. Become an informed citizen as the health care debate picks up in this country, and develop some keen insights on how to move your IT or software business forward in the new era of disruption.
The Innovators Prescription for IT
February 16, 2009
Over the weekend I finished reading The Innovators Prescription written by Clayton Christensen, a professor at Harvard Business School, along with Jason Hwang M.D. and the late Jerome Grossman M.D. Christensen intoduced the concept of disruptive innovation back in 1997 in The Innovators Dilemma.
As I read this book, which is about applying the principles of disruptive innovation to health care, it struck me that the IT industry is dealing with many of the same types of issues.
Here is a succinct summary of disruptive innovation and the book: Disruption is about the need to transform expensive, complicated products and services into ones that are higher in quality, lower in cost, and more conveniently accessible to larger numbers of people. And disruptive technologies and business models have been the mechanisms that brought affordability, consistent quality, and convenient accessibility to most facets of our society and to most industries (including technology).
Every disruption is comprised of three components: a technology that transforms the fundamental technical problem in an industry from a complicated one into a simple one; a business model that can take that simplified solution to the market at low cost; and a supporting cast of suppliers and distributors whose business models are consistent with one another, which is called a value network.
So the premise of the book is that disruption is the best way to make health care more affordable and accessible to everyone. The authors urge America’s political leaders to foster disruption as the vehicle to solve our health care problems and to avoid further government control (Amen!). And the central discussion is about disrupting the business models that currently drive the health care industry and that are the source of its inefficiencies and high costs.
If you are at all concerned about the state of the health care system in the US, and are feareful of what might happen as the politicians in Washington DC begin to address this problem later this year, read this book and pass it along to everyone you know. It is that important.
Due to the growing length of this post, I will get to the to the connection to the IT industry in my next post.
ASAE Technology Conference — Part 3
February 3, 2009
One of the more positive things I took away from the ASAE Tech Conference was that many associations are starting to embrace disruptive technologies.
Disruptive technologies deliver relatively simple, convenient, and low cost innovations to a set of customers who are ignored by industry leaders. Tools like Wordpress, YouTube, Facebook are all examples of disruptive technologies. Many Associations are experimenting with these technologies and that is a good thing. Combining the jobs to be done process I described in my last Post with experimentation with disruptive technologies is a powerful way to deliver products and services that resonate with members and other constituencies.
The challenge is matching the availability and use of disruptive technologies with the typical way that Associations budget for and manage technology initiatives. The nature of Associations often dictactes that major technology initiatives get the approval of not only senior leadership but also the Board of Directors (BOD). The result is that most Associations are forced to follow a very deliberate strategy, where they define requirements and goals, define a set of steps to reach that goal, and then methodically act on each step. It is the only way for the leadership team to answer the Board’s questions around how much, when, and why.
This approach is evident in the dozens of RFPs I have seen over the last 4 years for CMS, AMS, and Website implementations that are all virtually identical. They consist of a large wish list of features or requirements, demand a fixed price and schedule, and want to know the total cost of ownership. And the result of this approach is that 4 years later, Associations are still saying that most of their energy is taken up fixing and replacing systems.
It seems that a different approach modeled after the Google approach that Chris Sacca spoke about on Day 2 of the ASAE conference might be worth considering:
- stay focused on the user and their unmet needs (jobs to be done)
- experiment and iterate with simple, low cost technologies.
By following an emergent strategy that is based on gathering feedback from the marketplace and retaining flexibility, Associations can experiment with new technology and change their strategies on the fly to adapt to new information that emerges from members. So when a member survey says “you need to have a blog”, you can quickly go out and set-up a Wordpress blog for under a couple of hundred dollars, for example, and test whether the members will really value the blog before developing a major initiative around blogging (or video, or Twitter …).
Maybe the time has come for Associations to create small R&D organizations that are charged with innovation: understanding the jobs that members need to get done, and following an emergent strategy that incorporates learning and rapid adjustment to create products and services that resonate.
It seems to me that this is the best way for Associations to break out of the technology inertia that keeps them focused internally on their existing systems and to get back to delivering killer applications that make it easier for members to do something they were already trying to accomplish.
And then maybe next year ASAE can host the first Innovation Conference for Associations too.
What do you think?
ASAE Technology Conference – Part 2
February 2, 2009
As I mentioned in my previous post, Associations have a real opportunity to move beyond fixing and replacing their existing systems as the focus of their technology initiatives if they embrace a couple of key concepts that were highlighted by Chris Sacca in his General Session talk. These concepts are: stay laser focused on the user and embrace disruptive technologies.
Sacca talked alot about Google’s passion for solving user problems and creating compelling user experiences. In my view, this is the essence of innovation, which is fundamentally about identifying important problems to be solved. And innovation is the pathway for Associations to get beyond the technology inertia that is still focused on the AMS/CMS/Website triumvirate.
Most Associations conduct at least an annual member survey to try and understand member needs. Unfortunately, asking members what they want and need can be dangerous because the type of information members typically provide include things like solutions, benefits, needs, and specifications — none of which will help you to devise breakthrough products and services or make the innovation process more predictable (http://twurl.cc/esw).
So the first step on the innovation pathway is to change the unit of analysis from member needs and to instead focus on the jobs that members need to get done (http://twurl.cc/esy).
The philosophy is simple: members have jobs that arise regularly and need to get done. So they seek out products, services, and indeed, organizations to help them get the job done. These jobs can be functional, personal, and social. So when joininig or participating in an Association a member may want to have access to specific information or services (functional), but she may also want to enhance her career (personal) and feel more connected to her peers (social).
By deeply understanding jobs to be done, associations will really understand their members and be in a better position to leverage technology in creating products and services that resonate with them.
So the next step is to understand the power of disruptive technology, which will be the subject of my next post.