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Overflying Madrid City with Flightgear Flight Simulator. Photo Credit: Public Domain

Innovation is one these words that in a certain period of time all people have in mind. In the previous decade there was not a company without the word innovation in its values. Every company wanted to provide new products as a way to increase the sales. A company without an innovation department was a company considered a failure. This decade, however, has been defined by a different word: global crisis. Crises imply a need to reduce risks and innovation is an activity inherently risky. This fact has produced a change of paradigm. Many authors have alerted about the complexity increase produced by innovation, and the typical rationalization of resources required in a crisis has produced a reduction of the innovation budgets in many companies.

Thinking in the complexity changes driven by innovation is a good practice; however, thinking in some kind of evilness around it is a great error. Innovation can be a strategic tool as good as in the 90’s to change a company, and crises usually demand changes in any organization.

What is required now is not a new vision about innovation but modern methods to manage it. In this decade we have seen that innovation does not produce a better positioning of the company automatically. We can only assure that it will provide a change, it is positive or negative it must be considered from many viewpoints.

We usually think that the change produced by any innovation will be positive because we are thinking in technological terms. If innovation produces a technological advance, it will be a competitive advantage. Although this is true, many other things must be taken into account.

If we have an electronic device fed by a battery with a certain voltage and current supply and we change the battery with another one with same voltage and more current supply capability, we will have an advantage but the device will be working like in the former case. It will continue providing the same current at a higher cost, because the current depends on the voltage of the battery and the electric load at the device.

In the same way, innovation only will be used if the market is prepared to take advantage of it. Innovation management is a managing function that tries to adjust the offer to the demand for both the offer and the demand side. Innovation management is searching for new technology offers and trying to create new demand for any new technology. Our decade should have been the decade of innovation management because crises must not be faced through the elimination of activities but through better management. In some cases, better management will imply the elimination of activities and in other ones will not.

The new paradigm of innovation will require new ways to analyze the effect of innovation on the robustness of the business, and more control about how innovations fit markets. The recent crisis has shown that the role of the innovation managers must be nearer the strategic directorate and the CEO than before.

Innovation management never has been a matter of technological development only but a matter of thinking about what we must develop, how we must develop it, where and for whom.

Additionally we must think now that there is another aspect that should be considered: how innovation is affecting the structure of our business changing the relationships among suppliers and clients, because a change in the value chain of the business is changing the global risk of the company.

If we look at the current innovation trends we can see that most of them proceed from technologies that arose in the previous decades but could not be used in the markets due to a lack of demand and development capability. These are two examples:

  • Internet of the things: Internet protocols TCP/IP were developed at the 70’s, however, it was necessary to have larger communications networks and smart devices in order to think about a real development of it.
  • Virtual Reality: Computer Vision was born in the 60’s, however, it has been necessary to improve the microprocessors to get real time.
  • Deep learning, big data and Artificial Intelligence: AI exists in computer science from the 50’s. Neural networks are from that decade, however, for its development large computers and a large source of accessible data has been required.

The offer side limits have been overcome, but, now it is the turn of working on the demand side. Is the world really prepared for IoT and VR? Probably, it is, but this development will need a great effort to become true. The case of Big Data and AI probably has a larger demand yet.

Those innovations can change not only a few businesses but even the entire world, in the same way as internet did it. Those kinds of changes will impulse changes in all businesses that will have to be properly analyzed and managed.

 

Portrait of Napoleon Bonaparte with Imperial Outfit

Portrait of Napoleon Bonaparte with Imperial Outfit. Public Domain

A name is only a word that designates an object or individual. What makes our organization different is not the name but the identity. Identity is not defined by the name but it is defined by values. The values define how our organization behaves.

Europe can be seen as a name or it can be seen as the identity of a group of people. A national identity is void if it has not got a set of values different to its surroundings.

Europe is the result of the evolution of the ashes of the Roman Empire and the evolution of Christianism. Are the values of the French different to the values of the Italian or the Spanish? There are differences of language, but there are not many differences of values.

European Union, as an organization, is a recent invention however a united Europe is an historical concept that has never been abandoned from the Roman Empire and it has been tried several times along history from the greatest countries of the continent. The Spanish Ruler Carlos I was crowned Emperor of the Holy Roman Empire with the name Carlos V. Napoleon Bonaparte tried to conquest all Europe, and the expansionist zeal of Germany in the XIX and XX centuries is well known. The current European Union is a way to join the countries of Europe based in democracy. It supposes a different try of joining the European identity to a political organization.

In the last years, we are seeing how people defending the national identities are increasing their influence in the European politics. However, the odd issue behind this fact is that national identities are growing on the discourse of the defense of the traditional values that are common in every European national state. Those discourses should be promoting the union instead.

Looking at this fact we could understand that people perceive that European Union is destroying the European values instead of protecting them, and then, to recover the initial spirit of the current Europe should be a priority of the European politicians trying to preserve the union.

An organization is not built around money but around values. A classic strategic planning is done through three important matters: mission, vision and values. Money is secondary. When the money becomes the primary thing, you can assure that there is a great problem inside the political organization. The Spanish philosopher Ortega y Gasset though that rich people have not got power because they are rich. The truth is the contrary thing: Powerful people have money because they are powerful.

Money is a secondary matter in an organization because it provides a power limited to a single use, however, knowledge provides an unlimited power in time. Money always moves from people without power to people with power in a natural way. That is the reason why liberal democracies were established in order to put a limit to the power of rulers, avoiding that money could move indiscriminately from people (without political power) to rulers (with political power).

In Europe most people do not know strategic planning. The European national states exist before the definition of the concept of strategic planning. They were never built on a formal document. Unlike other countries like USA, modern constitutions of the European countries are subsequent to the existence of the political organization. And any attempt of union was defined in the head of a certain ruler instead of on a paper. For instance, Napoleon, considered a great strategist, had a clear vision about a union of Europe under the French domain. His problem was that many other people did not share his vision. Organizations fail when many people at the organization do not share the vision of the rulers. In a group, success or fail is a matter of common strategy, instead of a matter of money as some people without business knowledge think.

In a business organization, the strategy is defined by the directorate in the same way as the first politicians of USA defined its constitution; however, this is not valid for the European states. People have got and know a shared set of values and a way of working, a new set of values cannot be imposed without a great conflict between rulers and people. Europe cannot be built from the vision of a single ruler or country unless he can be smarter than Napoleon Bonaparte and he can have a better army than him. European rulers should think about if their abilities are better or worse than Napoleon’s ones before trying to define any vision of a united Europe against the classic values of the European. And farther values, strategy requires that the strategic actions are related to the actual capabilities of the organization and managing staff.

Unlike national states, European Union has been defined with a strategy, with a mission, a vision and a set of values. And only those countries that share them can be a part of it. Europe must go back to its values. It must to put values over money, and finally, as usual, money (and votes) will flow towards the people with actual power to preserve them.

Planboard Planning. Photo Credit: Wikimedia Commons

Planboard Planning. Photo Credit: Wikimedia Commons

Some years ago I defined an innovation project as the proper basement to support ideas and to manage the development of innovation and its internal and external dissemination in order to get the essential characteristic of any innovation system that it is to make easy what is difficult. In more modern words, a project is an organized way to reduce the complexity of any activity.

I advanced that the project is the main way to control the risk of the activity. In other words, we can say now that reducing complexity we are limiting the risk of the activity. Going farther, I mentioned that innovation project is a special kind of investment project where there is more than a bounded risk, there is an inherent uncertainty. This inherent uncertainty must be balanced through a more rigorous definition of tasks. In other words we need to reduce the internal uncertainty of the defined activity to balance the total addition of internal and external uncertainty, because we can do nothing on the external one.

Complexity management is not new, however, in the recent years, new methodologies and approaches have appeared in order to make this activity more effective from the use of science.

Complexity management as science let us to understand better how we can improve in our investment decisions but this is not anything against the reduction of complexity organizing activities through projects.

Any activity to improve the future must be planned in a project or a set of them because the future is uncertain and our modern societies are driven through very complex activities. Project management continues being the best way to reduce complexity. We only need to add complexity management techniques to the definition of projects in order to make our work simpler instead of more complex.

A project is only a planned route to turn an idea into something real. Projects make our life simpler and they let that we can live far from uncertainty and risk. We cannot imagine an engineer working without an engineering project, a business man working without a business project, or a political party working without a social project. If there is no project, there is no work, and then there is no value for the society where they live.

Once we have understood this, we will be able to analyze which project is better to comply with its aim, or in other words, which project is less complex and which project produces a less complex result. This can be done through complexity measurement techniques.

The complexity of the project will define its capability to reach the result. The more complex the project is, the more difficult its management is and the more difficult to reach the aim is. On the other hand, different projects can drive to different results producing different amount of complexity and uncertainty.

John Maynard Keynes. Photo Credit: Public Domain

John Maynard Keynes. Photo Credit: Public Domain

Keynes is used many times to justify the growth of the volume of activity of states in economy; however, it is not based in his thinking. He wrote in “The End of laissez-faire” the following thinking:

“The most important Agenda of the State relate not to those activities which private individuals are already fulfilling, but to those functions which fall outside the sphere of the individual, to those decisions which are made by no one if the State does not make them. The important thing for government is not to do things which individuals are doing already, ad to do them a little better or a little worse; but to do those things which at present are not done at all”.

For Keynes the activity of states would be defined by technical reasons instead political ones:

“We must aim at separating those services which are technically social from those which are technically individual”.

Many current economists defend the increase of the intervention of states in economy as a way to preserve the economic growth; however, they usually forget these important Keynesian sentences.

Keynes would not accept states looking for activities in the private field in order to be replicated by public institutions, however, the opposite thing could be reasonable. He would not consider this one as a way to improve the efficiency of economy. His critique to capitalism is not related to technical questions, but moral ones if it produces an increase of poverty:

“For my part I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable”.

A private economic activity that does not increase substantially the differences between people in an unfair way would not be objectionable from any viewpoint, both economic and political.

Related to risk management, Keynes understands economic risk as one of the main economic troubles of our societies:

“Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance”.

As other classical economist, Keynes makes a distinction between risk and uncertainty. You must remember that risk is something that can have an assigned probability, and uncertainty is related to events where we cannot assign a probability. It is very illustrative that he put ignorance at the same level of risk and uncertainty. Ignorance of people is a huge source of complexity in a society, and it lets that a few people can perceive a great amount of money taking it from many other people.

Although he has not a theory of complexity management, he can see the problem of complexity produced by nationalization of industries. Related to complexity, he understands nationalization as something driving to a very complex society to be managed:

“We must probably prefer semi-autonomous corporations to organs of the central government for which ministers of State are directly responsible”.

Keynes is aware that ignorance in the political field drives to odds arguments to justify certain policies in every political party:

“Confusion of thought and feeling leads to confusion of speech. Many people, who are really objecting to capitalism as a way of life, argue as though they were objecting to it on the ground of its inefficiency in attaining its own objects. Contrariwise, devotees of capitalism are often unduly conservative, and reject reforms in its technique, which might really strengthen and preserve it, for fear that they may prove to be the first steps away from capitalism itself”.

For Keynes, capitalism cannot be critiqued from an economic viewpoint, however, he think that political aims can drive the economic policies. This thinking was shared by more liberal economists like John Stuart Mill. For both of them, moral reasons can be over technical ones, but this is the role of politics instead of economics.

Mixing both fields only produces confusion and complexity. Moral aims, if there exist, must be justified from moral reasons instead of trying to do it from economic ones.

Atlantis Spacecraft. Photo credit: NASA

Atlantis Spacecraft. Photo credit: NASA

In every modern organization the deployment of any strategy is driven by policies. Policies establish a general guidance of action to develop any important activity in an organization. They start from the organizational values and the desired objectives that the action must reach. They establish a framework to define the proper working procedures. While procedures provide a defined path of action, policies put limits to the final path only.

Policies in a business organization are not based in ideologies as social policies. They are usually based in paradigms. Paradigm is a theory or a set of theories that have a basement or model that is accepted and not questioned and it provides a framework to develop activities following reason. A change of the paradigm is produced when science demolishes the model and then it is substituted by a different one. In the same way as ideologies are a matter of faith, paradigms have need of faith in the authority of someone that proposed the model; however, it is easier to change paradigms than ideologies. Ideologies are usually based in a vision of a better future organization and paradigms are based in a perception of how the current organization actually works. Our perception of the present can be changed through additional data while our desires about the future cannot be changed so easily.

As business organizations has mostly economic objectives instead of social ones, business organizations tend to be driven as a technocracy where paradigms are supported by the authority of the senior directorate. On the other hand, social policies totally based on paradigms instead of ideologies would drive to a perfect social technocracy.

Innovation policies are a special kind of business policies because the innovation activity is searching for a better future for the organization. The vision of a different future can drive the innovation activity instead of the perception of the way followed by the organization that can be optimized by the development of new products and processes.

In a healthy organization these two different concepts are present, and it is very important to preserve a line marking the border between envisioning the future and paradigm although sometimes this line can be very thin.

The difference implies that we can try to change the market with technological innovations or we can try to develop technological innovation to satisfy market needs. The former option would be based on our vision of the future market and the latter one would be based on our perception of what market really needs although sometimes it does not know it.

For instance, about thinking that every family should have a PC computer at home: Was it a vision or a change of paradigm?

In any case, related to innovation policies this is not important. Innovation policies are related to how innovation activity is organized inside the business instead of the innovation itself. An example of innovation policy would be to define what kind of ideas about new products can be chosen and this is usually done following a paradigm. Senior directorate usually has a theory about what kind of ideas finally works, what kind of ideas produces a higher benefit and what is ratio of risk that can be accepted for the activity, that let them to decide a certain portfolio of products. Innovation consultants have several models of it, and the most common is usually known as the current paradigm about innovation.

In large organizations, innovation policies usually are paradigm-based while innovation itself can be vision-based.