Presentation isc mshow

Editor's Notes

• #3: Good evening … I really appreciate your invitation and hospitality I’d like to share some of what I’ve figured out about innovation and entrepreneurship over the decades ... including my 14 years as the director of the Raikes School of Computer Science and Management at UNL This presentation highlights some of the ideas that I’ve had published over the last year I hope that you’ll find several of these ideas useful in your own endeavors … or at least find some entertainment value
• #4: So you may not have heard of the Raikes School, but you probably know our building at the center of city campus at UNL From the beginning, we had an inter-disciplinary mission to educate students in both computer science and business in the same classrooms But starting in 2010 we added the transcendent mission to develop innovators … as well as develop outstanding multi-disciplinary computer science and business graduates So as always, the word innovation sounded good in a mission statement … but if you use that word in an educational context, you have to figure out which skills will be developed and which topics are to be included in the curriculum So after a long career in technology … computer hardware and software … I had to figure out what innovation really meant
• #5: We all know that we’re living in a golden age of innovation and entrepreneurship … its been called the second machine age … This age is characterized by technologies supporting networks, digital technologies, and smart software
• #6: But now let’s take a look back at the first machine age for some insights that might be useful today The first machine age began in the second half of the 1800s and was driven by the electro mechanical technologies of the industrial revolution At that time 43% of the US labor force was engaged in agriculture according the census of about 1880
• #7: A generation or so into the first machine age … Forbes magazine was first published in 1917 and also published the first of its famous lists … Here’s the top 20 of the 100 most valuable US companies …value here being defined by balance sheet assets As you see … these firms mostly offered products arising from harvesting, mining, and drilling … only a few might be called technology product companies
• #8: Then a generation after the end of that first machine age … in 1987 … Forbes retired its Top 100 US company list and devoted most of that issue to an analysis of the unsettling changes in both industry and society over those 70 years The cover story says that an economy and a society can’t be stationary under a capitalist system …. That’s a major take away from the first machine age
• #9: Here’s the top 20 comparison…. 70 years apart but 70 years that included much of the first machine age In 1987 you see fewer materials and agriculture companies …. And the emergence of computing, pharma, retail, consumer products, automotive … the only agriculture centric business is Phillip Morris
• #10: So how many companies remained in the Top 100 throughout those 70 years? 18
• #11: Here are the 18 Only 11 companies of the original top 100 grew faster than the Dow industrial average over 70 years… Now over the 30 years since that 1987 list … how many of those survived? Kodak, GM, PG&E bankrupted and re-emerged GE and Citibank needed government guarantees in 2008 Westinghouse was bought by Toshiba, Amoco by BP, Texaco by Chevron … and Mobil merged with Exxon in 1999 DuPont and Dow are merging US Steel and Sears aren't top 100 companies anymore …. But some have remained strong like Chevron and Exxon … AT&T, Proctor and Gamble, and Ford
• #12: Here’s the lead article It says that the companies that disappeared had become complacent and were unwilling to change Maybe ... but actually its difficult for a large company to execute an innovation strategy regardless of the preferences of the executives Of course there are viable strategies other than product innovation … Well up until a few decades ago …. a lot of tangible assets and a large customer base created a barrier to competitors … but now those competiive advantages can be restrictive in an industry thats getting disruptive
• #13: Kodak’s case seems pretty dramatic …from #2 in growth over 70 years to bankruptcy in 2012 Remember the story … Kodak invents the digital camera in 1975 It weighed 8 lbs … image resolution was 1% of 1 mega pixel … the digital photos still needed to be printed to be viewed and shared You hear two different restrosptives ... Kodak may have made a rational decision to not invest much …. but you also hear that Kodak executives were indeed unwilling to change But they had a second chance, Kodak produced the first consumer digital camera ... for Apple in the mid 90s ... a camera with one-third mega pixel images .... 30 times as a great ... but Kodak still didn’t introduce its own digital camera And now of course everyone has 8 or maybe a 12 mega pixel camera in their pocket … so Kodak may still not have succeeded at least at the low end ... on the other hand .... a deal with Apple for cameras in iphones might have been interesting Regardless, Instagram is a much larger business than the new Kodak Kodak … and many others … didn't anticipate the technological progress of the second machine age … digitization of technology, networks, and smart software
• #14: I mentioned Ford as having done pretty well over a hundred years … but new technoloogiues aimed at the automotive industry are emerging rapidly ... Here are a few of my favorites Electric cars that are cool, autonomous self driving cars, ride sharing, a co-created on-line car, 3D printed car (carbon fiber reinforced plastic) , and an Apple concept car How is Ford going to continue to compete ?
• #15: Maybe pretty well!
• #16: So innovation seems pretty important … even if its hard … But as this wall street journal article says … many firms claim to be innovative … when they’re not …. So its not clear what the word innovation means now due to overuse …or maybe the meaning has never been clear One of the many examples in the article was Pringles claiming that its pizza flavored chips are an innovation
• #17: In fact if you search around the web, you find lots of articles suggesting that innovation is overused to the point of confusion
• #18: A similar lack of clarity surrounds the word entrepreneur So … is the entrepreneur associated with a new company, a small company, a startup, an innovative company, or self employment,? Are the Google execs entrepreneurs ? If I buy a health club franchise … am I an entrepreneur ? If both answers are yes …. then what is the skill set to be learned ?
• #19: So the WSJ said that the term had begun to lose its meaning in 2012 But here’s a similar thoughts from …. From 1971 And another quote … from 1961 So maybe the word innovation has never had a very clear meaning …. So I set about discovering the origin and development of these words
• #20: When you search out examples of early entrepreneurs … before the word was used in France … You’ll find Marco Polo who was an adventurer merchant in the late 1200’s … He was backed by VCs …. Venetian capitalists … Polo got 25 percent of the profits and borrowed capital at 22 ½ percent. And two hundred years later … Christopher Columbus was doing mercantilist business with the Spanish monarchy …. he got 10% of the profits plus got to be governor of the new lands Polo and Columbus both had great visions in pursuit of adventure and profits but also faced great uncertainties
• #21: The word entrepreneur was being used in France by the 1600’s … and was included in this dictionary in 1723 … it was simply someone who undertakes a project ….
• #22: The first modern era book focused on economics was circulated as a manuscript in 1730
• #23: Noting that this is the late agrarian age … in the original English translation … Cantillon writes that … there are 4 types of economic agents … two are independent … the Princes and the landowners … and two are dependent …. Hired people with a fixed wage and entrepreneurs … in the original french .... with unfixed wages and yes …. entrepreneur was usually translated to English as undertaker until the early 20th century … when the French word was borrowed The key characteristic of the entrepreneur relative to the other three … was “living at uncertainty”
• #24: Of course on the topic of economics … we need to check with Adam Smith …
• #25: In Smith’s books and lectures … he referred to three categories of business people The adventurer in the spirit of Polo and Columbus Projectors who took a lot of risk relative to the expected return  He used the word … undertaker … for business people that undertook prudent levels of risk relative to expected return And never used the word entrepreneur
• #26: So now let’s jump over the word innovation …. Which entered European languages in the 1600s or before … It meant something new as it does today, but more as the opposite of tradition … which was bad … since an innovator opposed the tradition of the monarchy, the church, or society … of course the connotation of opposing tradition remains today Note that innovation was the change made by something new …. not the new thing itself …. And was often used in an ill sense since the innovator disturbed settled opinions and practices
• #27: But during the 1800’s …. following the French, American, and Industrial revolutions … attitudes towards progress began to change … Here’s a graph of income per capita in western Europe …. with it taking off following the industrial revolution and into the first machine age
• #28: And here that same progress is indicated by a social development index and by population … so we have economic, social, and demographic indicators showing a time of great and positive change During this time innovation came to be associated with this progress … and became the positive term that it is today
• #29: We’ve all heard of economics referred to as the dismal science … here’s the face of that science … Thomas Malthus …
• #30: Here’s the Malthusian model …. economic output and particularly agricultural …. produced from land and labor … the means of production …. could grow arithmetically but the population would grow geometrically and that a critical point would be reached … at which time .... population growth would stall … but this model likely did fit the economic data prior to 1800 … Malthus just had the bad luck to publish at an inflection point
• #31: Here’s another way to illustrate that idea There is an initial increase in output and consumption as more labor and capital with specialization are applied to production, but eventually rates slow and reach an equilibrium
• #32: Jean Baptiste Say was a famous French economist who really defined the modern concept of entrepreneur and co-founded the first university level business school His description was someone who launches and manages and enterprise … but also includes natural agents ... science ... and knowledge as economic factors of production
• #33: The English economist John Stuart Mill added to the concept when he said that diminishing returns could be suspended via mankind's command of natural agents … science
• #34: So by the late 1800’s innovation came to have the connotation of progress … and as having utility The French sociologist Gabriel Tarde first captured the ideas with the insight that social development was about innovation… which was driven by invention and its adoption across society through a process of imitation
• #35: Now we meet the hero of our story Austrian born, Harvard economics professor, Joseph Schumpeter … who wrote in the early 20th century
• #36: In his 1911 book … published when he was 28 years old … he said that innovation was the stimulus to economic development And that innovation was the commercial application of something new …
• #37: Innovation was different from invention … Inventions were economically irrelevant unless carried in to practice
• #38: An innovation is a new combination of productive factors And appear discontinuously … so Schumpeter doesnt include a concept of incremental innovation
• #39: Innovations don’t have to be end products … as was the case with Sears with its mail order business model that began in 1880s
• #40: He observed that innovations generally come from new firms
• #41: And who drives innovation? Schumpeter says it’s the entrepreneur … he never used the word innovator
• #42: He described the entrepreneur as a leader … someone who has the vision and ability to challenge the established way of doing things … similar to the innovator who disturbed settled practices And interestingly says that leadership is only relevant when new possibilities present themselves …
• #43: That 1987 Forbes issue had a summary article …. By Bill Baldwin who we still see on the business channels ... Appyling Schumpeter’s concept of capitalism as creative destruction which is a process driven by innovation
• #44: Now I’ll pick back up on the sociological thread of innovation … We’ve all heard the marketing terms early adopters and S-curves … they were introduced by sociologist Everett Rogers in the early 1960s He defined innovation as something perceived as new by a potential adopter and defined the innovator as someone who adopted something new … even before the early adopter
• #45: And now back to the economic growth thread of innovation By the mid 20th century … it was clear that equilibrium economics didn’t explain the economic growth data of the first machine age .... Robert Solow of MIT developed an economic model that showed how technical change boosted the production function
• #46: Here’s an illustration of the model … the red line … showing that technology makes labor and capital increasingly productive … it won Solow a Nobel prize
• #47: And in 1990 economist Paul Romer introduced an economic growth model wherein knowledge and information was embodied in both technology and in human capital … So this is the economic growth model of the information economy … So innovation became a positive concept when it became associated with societal and economic development during the first machine age
• #48: So we’d better define technology … of course it broader than just what engineers and computer scientists do …. It’s a means to fulfill a human purpose and can come from any discipline …
• #49: So now I’ll wrap up the concept of entrepreneur By the way never did find the origin of entrepreneurship – a French word with an English suffix. But a wild guess would be Schumpeter's German unter-nemer-geist – entrepreneurial spirit – got translated as entrepreneurship Silicon Valley startup guru, Steve Blank distinguished between startups and small businesses The startup mission is to search for a viable business model motivated by a new idea in a world of significant uncertainty … and characterized by an unknown product and an unknown market … A business on the other hand … executes a business plan … based on a validated business model
• #50: MIT entrepreneurship professor Bill Aulet distinguishes entrepreneurial business as either small or medium enterprise or as innovation driven enterprise So the key distinction is whether an enterprise is innovative or small, not its age The innovation driven enterprise … either a startup or a business … faces greater uncertainty and competes with an innovation strategy The innovation strategy derives competitive advantage from its technology and its human capital … which must be continually developed to distinguish it from capital and labor available in the markets … and easily deployed by competitors
• #51: Now in wrapping up innovation …. Here’s a diagram from the design thinking world … It shows that innovations and innovative designs emerge at the intersection of business, technology, and human values … so innovation is inherently interdisciplinary
• #52: This version of the diagram suggests a useful definition for innovation …. technological change …. a change in the fulfilling of a human need … that is feasible, viable, desirable, and useable This captures all of our concepts of innovation as invention or something new that requires commercialization and adoption
• #53: Then we have some optional descriptors for innovation, like novel if the innovation resulted from great creativity or … disruptive innovation … if there is a major shift in an underlying technology… as was the case with the digital camera
• #54: This interdisciplinary space includes wicked problems … as opposed to tame problems The characteristics include a high level of uncertainty, changing and conflicting requirements, and a coupling of problem formulation and solution Solving wicked problems may be the defining characteristic for the innovator or the for entrepreneur leading an innovation driven enterprise
• #55: So I’ve been in a lot of meetings on innovation … on and off campus … where discussions frequently get stalled on the definition of innovation … which can be different between the disciplines But what seems to be common ... is the skill set of the innovator and the innovation driven entrepreneur As well as the methods and processes that support innovation and the innovation driven enterprise
• #56: So in concluding, Claude Shannon … who created information theory … which is fundamental to this second machine age .... famously said information is the resolution of uncertainty … a thought that I’ve found to be intriging and motivating ... so hopefully I’ve resolved a little uncertainty around innovation and entrepreneurship Thank you