You do not normally expect ‘a well-behaved child who studied hard while growing up’ to break rules. But that is exactly what you would see in Niklas Zennström who, in the 1990s, helped build Europe’s leading low-cost phone company, Sweden-based Tele2, which managed to attract more than 30 million customers from established competitors in 24 countries across the continent.
Breaking rules
After a number of conventional business development roles, including launching and being responsible for the ISP Get2Net and as CEO of the everyday.com portal, Zennström got together with Danish business partner Janus Friis to launch Kazaa, a free peer-to-peer music download service that, in those pre-iTunes days, created quite a stir in the music business, narrates Peter Fisk in ‘ Creative Genius: An innovation guide for business leaders, border crossers and game changers ’ (www.wiley.com).
The duo’s most successful venture so far has been Skype, which used the technologies developed in Kazaa to offer free audio and video calls from one computer to another over the Internet. After eBay acquired Skype in 2005 for $2.6 billion, came Joost, an online distribution service that is now competing in a crowded download and streaming market, the book chronicles. “Zennström and Friis now run Atomico Ventures, a venture capital fund based in London, through which they have funded more than 15 new start-ups, including the music business Last.fm and Fon, which makes wireless routers.”
Ideas company
One other example of innovation discussed in the book is IBM, which ‘registers more patents than any other company on the planet – more than 3125 in 2009, which works out at 60 patents per week.’ IBM has come a long way since deciding to move away from consumer electronics, redefining itself as an ideas company with experts in every industry and perhaps the most diverse, and prolific, innovation business, the author notes.
“Recent breakthroughs include a self-assembly nanotechnology process in computer chip manufacturing that creates vacuums between wires, allowing signals to travel faster while consuming less energy. Add to this a tool to predict how an emerging infectious disease such as bird flu will mutate, helping drug-makers whip up an effective vaccine.”
Jam process
What Fisk finds to be impressive is IBM’s relentless search for new ideas through the ‘InnovationJam’ process that brings together the organisation’s creativity. With the CEO Sam Palmisano pledging to invest $100 million the most promising proposals, in 2003, more than 150,000 IBM people, and many more partners from over 100 countries, logged onto the two 72-hour sessions, one learns.
“The discussions were analysed by sophisticated text analysis software known as eClassifier to mine online comments for themes. The first session produced 37,000 ideas; the second, a few weeks later, focused in on improving the top 50 best ideas, and from this, ten new projects emerged to secure the jackpot funding.” The projects, as the author recounts, focused on challenges such as integrating an entire region’s transport system, and crating a one-avatar-fits-all platform for any 3-D virtual world in a way that could fuel real-world revenue.
While InnovationJam has demonstrated that you can gamble on several emerging businesses without the usual rigorous filters, letting each team set its intuitive direction, an interesting development is that it has inspired similar events in other companies, “often with the licensed processes and support of IBM, making ‘Big Blue’ a leader in facilitating collaborative innovation across businesses and their partner networks.”
Three questions
To web entrepreneurs, there are key lessons in a section about Reid Hoffman, ‘the most linked-in man in Silicon Valley.’ This graduate from Stanford initially wanted to become a professor, but he realised that academics typically write books which no more than 50 to 60 people read! He needed a way to have more impact on the world, and started with Inglenook, a Napa Valley winery, moved to Apple and then to Fujitsu before cofounding his first company, socialnet.com, traces Fisk.
“He also joined the start-up board of PayPal and eventually became EVP of PayPal in charge of business and corporate development. In 2007 he founded LinkedIn, the professional network, acting as CEO for the first four years before becoming Chairman and President of Products.”
The mantra of Hoffman is to build an audience with a great product, then figure out how to make it pay. As a serial investor, what he looks for in a new business are not ‘dazzling products or cash flow forecasts’ but answers to three questions, viz. how will you reach a massive audience, what is your unique value proposition, and will your business be capital efficient.
Location vs distribution
“Hoffman reflects that in real estate it’s all about ‘location, location, location’ and in consumer web-based business, it’s ‘distribution, distribution, distribution.’ He sees the biggest challenge as rising above the noise so that people can discover you, giving examples of YouTube’s use of MySpace and Facebook’s 80 per cent adoption across student campuses within 60 days.” Thus reads the explanation to the first question.
The second question is about innovation that stands out from the pack but not so forward-thinking as to alienate the user, and not just a repackaged or refocused version of what exists already, elaborates Fisk. What is, accordingly, not an innovation is ‘a dating site, but for senior citizens’ but “category-changing ideas like Digg, which lets users decide their headline, or Last.fm, which tracks music listening with an iTunes plug-in.”
Capital efficiency, in Hoffman’s view, is about what is achieved after the initial round of financing. “He looks for ‘intelligent scaling’ like TypePad, which grew to 10 million users without second-round funding. Ideas can look great at start-up, but, he argues, it’s more important to think how they will get future funding,” informs Fisk.
New workplace
Compared to the traditional business, the creative business looks and works differently, moving from hierarchy to meritocracy, from bureaucracy to autonomy, the author describes. Instead of anonymous they are familiar, not clean but messy, less about experts and more about thinkers, he adds.
Aptly cited in the book is Theresa Amabile of Harvard Business School for the list of five characteristics that support creativity in the workplace, as follows: encouragement (through open flows of information); freedom (autonomy in day-to-day tasks and a sense of personal ownership); resources (the expertise, tools and materials to explore new things); pressure, push and pull (in the form of both challenges and expectation); and impediments (the need to overcome barriers, typically organisational).
Two examples that Fisk mentions in this context are of Infosys campus in Mysore (dominated by a huge white dome: not the reception or executive suite, but four food courts surrounding a 96-bedroom employee hotel, along with a state-of-the-art gym, pool hall, and bowling alley), and Cisco in Shanghai (where the local managing director maintains ‘a huge map behind his desk with red dots reflecting each worker – not their task or performance, but where they live, so that he can schedule more shuttle buses and so make Cisco the nearest, easiest place to work.’)
Build organisational energy
Looking around, the author also notices endless experiments of corporate ‘theme parks’ – in the form of gaming rooms, nap stations, media lounges, good-old bean bags and bikes on the walls – and wonders whether it is sociability and wellbeing that really energise an organisation. Among the answers he explores is the five-step approach of Stanton Marris to help companies build organisational energy that drives engagement and performance.
Foremost in this approach is being open, which calls for sharing the big strategic challenges with everyone. Then comes opening up, seeking suggestions from all stakeholders. Thirdly, let go, giving local teams the freedom to contribute. The final two steps are to be supportive, showing continuous and consistent interest, and to maintain focus, monitoring progress and holding on to the big picture.
Since the best talent is infinitely transferable, organisations need to rethink many of the factors that created their old glue and start working in faster, knowledge-based, connected ways, advises Fisk.
Immersive read for anyone with ambitions in the current century.
Tailpiece
“The result of our ‘buy now, pay later’ offer in the new tech outlet was so positive…”
“That your sales boomed?”
“Yes, but receivables mounted so much that the latest policy for our staff is, ‘Work now, pay later’!”
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