» Cogitatum

Peter J. M. Simons

How Artificial Intelligence can boost Corporate Innovation

Recently the 10 year old daughter of my friend Ed  asked him if Artificial Intelligence means we can stop thinking. Read more about that at CNBC.  We both were perplexed and were not able to give an answer to this curious question. This extremely smart question cannot be simply answered with a yes or no.  It triggered my own thinking and curiosity, after we had just mentioned the word Innovation. How will Artificial Intelligence contribute to Innovation in a Corporate Environment?

This little girl is right and wrong.  Given her age, she thinks in a binary fashion: yes or no,  good or bad,  like or hate.  This is normal, my 10 year old son does the same.  This way of looking at things is very much ingrained in western culture.  Good or bad. It is a simple concept. Religions use it all the time.  And in Hollywood, they make movies with good guys versus bad guys.  And good always wins after 90 – 110 minutes.   Good or bad, there is no in-between.

Well there is, the real world is analog, not binary, and we need to think.  Thinking is tough, and something many people really do not like to do, because thinking sometimes leads to conclusions they don’t like. Good or bad is easier. Well, for those who don't like to think, there is now a solution.

Computers have taken over a large part of our workload and have been becoming more and more intelligent. They can do even more of our work as they get more intelligent, so therefore we call it Artificial Intelligence. And that is not good or bad thinking anymore.  It does not mean that we have to give over the entire thinking process to Artificially Intelligent machines.  There is still soooo much thinking to do.  We hardly have time to think. Do you? Can you afford to sit one day a week and really think? We had a long discussion on that, at the University of Chicago when I studied there. We concluded that spending 10% of our time thinking would be ideal:  half a day per week. In reality, that is impossible.  Now if we can outsource a part of that thinking to a machine, wouldn’t that be great?

What parts of thinking should be outsourced?

Specialists hardly innovate.  Innovation comes from holistic approaches.  In a corporate environment, it means looking beyond the silos.  We are living in a time where corporations are silos, and they are linked at the C level.  Even there, the CEO may be biased to promote one silo more than another: the silo she came from.  There are CEOs that come from finance, from sales, from engineering, and they tend to be biased towards their silo.

Innovation has two main angles:

Beginning in the 20th century, really new things came into society: radio, TV, aircrafts, cars, phones.   I call them new, yes they had some relation with things from the past (cars were coaches without horses etc.), but new solutions came to life. This created verticals of industry that hardly collaborated.  They really had nothing in common.

Later that century, we started to innovate by combining things.  We had telco, we had computers, and we had data transmission. We combined that and created the smartphone.   Just close your eyes and do an exercise, find 5 of these combinations.  These combinations are mathematically easy to make, with N products, technologies or existing solutions, you can make N(N-1)/2 combinations, it grows with the square of N. Remember Metcalfe's Law?  So just run systematically through your corporation, define the combinations and decide per which combinations make sense.  Many will not make sense.

This combining of ideas and the subsequent collaborations, means crossing the borders between silos. And these borders are real medieval walls, not easy to break down.

artificial-intelligence

Back to Artificial Intelligence.  Instead of the CEO thinking at the top of all these silos, Artificial Intelligence could help us to think better at lower levels.   It can help to break these barriers between the silos.   These barriers exist and are tough to break  (“Stupid sales people”, “Bean counters”, “Oh my god, engineers” are well know expressions I have heard many times).  It means humans in a corporate environment are not too keen on communicating between these silos, to think and collaborate cross-silo, but an Artificial Intelligence machine can do this without bias.  Every silo feeds its knowledge into the system and Artificial Intelligence does the rest.  Yes I admit, very oversimplified, but this is the source of innovation in my view.

Conclusion:  Artificial Intelligence can help CEOs to get things done by delegating more of their C level thinking to the lower echelons. And it is about time we listen more to our children.  They really are smarter than we think.

Working with my BlackBerry Passport

blackberry_passport_working A question I receive frequently: You have an iPhone?

Nope!

No??? But you always have the latest gadgets?

Yes and no. Only if they make sense, common sense. And we all know common sense is the least common of all senses. Especially in the world of mobile devices I would say. In addition an iPhone is not a latest gadget. It is an innovation from 2007 or so. Every year they add a higher number to its name and make its size bigger until it starts bending or exploding.

As said I do not have an iPhone or tablet: they both cost me precious time, they are perhaps "cool" to have but real time-wasters. In business I have to stand out as a leader. I would destroy my image with popular not well thought through products begging for an outlet to charge outdated technology. Why I do not use Android? Not secure. I am not wasting time on writing about Android.

So what device do I use? It is called a BlackBerry Passport and I use it for working. I use it for getting things done.

Here are some ways I use it. Well yes if you use an iOS or and Android device you probably can do some of these things too. Will take longer I am afraid. So don't even waste your time trying.

1) Working on a physical keyboard. This physical keyboard let's me write long text. If you only Whatsapp "hi where are you" and typos are your brand anyway a touch screen keyboard is fine for you. But come on admit, it is horrible. It was cool. I can use down time like flights or train trips to the write serious documents or mails without typos. Or edit them. On average one hour per day I work writing on my BlackBerry Passport. Not only the keyboard is a big plus: its gestures on the tactile keyboard make me work fast. No need any more to pull out a PC and no worry about battery life. It has never died. The charger goes into checked luggage.

2) During the writing process I need to investigate on the web or need files on my PC or on my Passport. I can browse my PC, BlackBerry Passport and web without closing the writing application I am using that moment. I easily leave all applications running and select on the home screen what to bring forward to the wide screen. No it does not slow down. It responds very fast. I can evenquicklyrespond to any incoming message or alert, no need to close the app.

3) Responding to incoming messages. Regardless email, Twitter, Linked, SMS, you name it, the Hub nicely lists all on one wide screen in order of arrival. Using several email accounts and LinkedIn the Hub gives me the opportunity to work through the list in FIFO, or I can filter quickly one account only. No need to search mail by mail.

blackberry_passport_theblackbgadget_2

4) I meet a lot of new people. In the Internet and media industry ........

Please read further on theBlackBgadget.

theblackbgadget_logo

Relations

“Client Is King”. An expression believed to be true by so many. Well I am afraid it cannot be true. It is simply not possible to satisfy all the demanding needs of a client. Especially clients with an attitude of a Tiran. Clients can destroy your company. Wouldn’t it be better to say “The Relation With A Client Is King”? That means a situation where both client and supplier get better. Otherwise the relation has no long term future. Relation is the key word. It is the relation between the client and supplier that is king. Not the client, nor the supplier. Our society is built out of people organized in companies, associations, foundations, you name it.  Between people there are relations or not. Good relations or bad relations. Since the birth of social media we have been talking more and more about relations  than ever before. Networking is another of these buzzword. It means adding relations or connections as they are commonly called in social media.

Networks can be composed of humans and their relations. We can also look at networks from a more generic viewpoint. Then we talk about nodes and links.

Are the links or the nodes the most important? Net

Network configurations.

Well there are simply more and more links once you have 4 or more nodes. A fully interlinked network, also called a fully meshed network, with N nodes has N(N-1)/2 links. Hence 3 nodes have three links to interconnect them fully. Add one more node and you have already 6 links interconnecting all nodes. That grows faster than the number of nodes. It grows at the speed of N square. This is called Metcalfe’s law.

In the telecommunication industry the links are what makes the communications go tele, distant. If we would look at a balance sheet of a classic phone company we see that around 50% to 60% of the asset value is in the links.  For nodes you would find only 25% to 35% asset value.

In a marriage the link defines the marriage, not the nodes.

I can make a long list of examples of the importance of the link between the nodes.

How do you manage a link? And who manages it? The answer is that the two nodes at the end, or the two people that maintain the relation manage the link. They have to look at the quality of the relation by using the CCC method:

- What do we have in Common? - What do we have Complementary? - Where are the Conflicts?

Pyramid Link quality pyramid.

Answer these three questions. The answers will generate a list of topics and count this topic list. Plot it into a pyramid. A good pyramid has a stable balanced base, a good balance between Common and Complimentary. In addition it has not too many topics in the top (Conflict).

What do we see in the business world? In corporate training? The people get trained in hard skills. “Node Skills". What makes a company fly high? Managing the nodes and the links, the relations. Therefore “Link Skills” are extremely important. This includes a good communication over the link between the nodes. The company PERFORMANT that I have founded with several others ensures in its training program that the communication over the link is optimized. "Link Skills" like team work are given high priority. For example, it is important that we communicate well to avoid assumptions and that perceptions and reality are clearly kept separate and well understood.

About to hire someone? Make sure the person understands how to manage the links.

More: Read Michael Simmons "The surprising Science behind how super connectors scale their networks"

Burn your competitors

Obviously products have life cycles. Most companies provide products and have to launch frequently new products because simply said; their existing products are reaching the end of their life cycle. The solution then is a product upgrade with a new version number. The car industry is a good example. Peugeot N0M. Always with a 0 (zero) in the middle. Apple releases its iOS 5,6,7 etc. What is really disrupting? How can you do a disruption in a way that your company takes advantage and wipe out the competition? Well, let us look at nature where trees compete for space and water. What does a pine tree do? How does it compete? Pine trees are pyrophyte it means they tolerate fire and use fire to gain terrain. Have you ever noticed what happens in a wild fire of pine trees? Their pine apples fly around burning and their structure is such that they burn really well. The seeds survive the heat. Pine trees love to burn, they are full of resin. Once they burn, they burn all the trees and everything around them. Once the blaze is over we see the surviving seeds developing into new pine trees and many times the pine tree itself that caught fire starts growing again. After ten to twenty years the area is green again but with pine trees, no other trees can be found.

pine fire1

Back to business, no do not burn down your company. Insurance companies have smart investigators. Look at your products and at the sector you are in. What can you do that kills an entire sector including your products in it? Make sure you have a new plan ready that seeds new business. Like the pine apples.

Some examples:

In the 90s Nokia started to add a camera to its cell phones. It attacked both the competition and the camera sector. The last sector still is suffering (Kodak, Polaroid). Now the entire camera sector is suffering from smart phones. Nokia killed the simple GSM phone market in which it was doing very well.

Another example is Coca Cola. The company from Atlanta launched new products in the soda market and eliminated the Classic drink. However here we see that clients requested the classical product to be brought back into the supermarkets.

What to consider before you set your own pine tree on fire? • Have you talked to potential clients? Investigated the market? How will they react when you burn the existing product? • Do you really have the competences and skills in house to rise as a phoenix? Do you know how to make that new product? • What is competition doing now? Ask your clients, they know more than you think.

Applying the pyrophyte strategy is risky. Like most risky undertakings they can be very rewarding. At least the press will follow your actions.

Increase your sales

The most important number there is in a company is the revenue number. Call it sales. The 12 points below will trigger a change in the way you think about selling. Usage increase Find out with what your product is consumed. The best example is toothpaste. If you are in the toothpaste business, make sure that the toothbrush manufacturers make longer toothbrushes. We all have the tendency to cover the full toothbrush with toothpaste. Ask your dentist, she will tell you that half that amount will do the job too.

Partner Have your product already packed with a good selling product. You could make packages of tooth brush and tooth paste together. If you buy a new phone, some apps are preinstalled already: I found Evernote and Box on my new Blackberry Z10. I probably would never have downloaded these apps.

Raise the price Sounds counterintuitive not? Ask yourself how much is your product of the total price of your client’s end product. If it is less than one percent, raise the price. As an example if you make injectors for diesel engines for ships, find out what the cost price is to manufacturer that engine. Will my price increase affect the client’s gross margin or the end price? Now how to raise the price in front of your client? Come with an improved version at a slightly higher rate and announce that the current product will be discontinued.

Sell modules, the Lego model Young or new tech entrepreneurs tend to build a product with all the features in it. That is their passion. They then discover that it is difficult to sell. Make a minimal viable product at a competitive price and up sell the features later. Once a client has chosen your solution and they are happy, up selling becomes easy. In extreme cases, you give away the product and make the money on the up selling. This is done with consumables that are being up sold in the medtech equipment sector. Give away the machine and sell consumables at a high gross margin.

Variable recurrent The classic model well known is: Book, bill and ship, get paid. What about a usage fee? A monthly fee? Offer something variable that makes your invoices a variable cost for your client. You do not buy Rolls Royce jet engines. You pay Rolls Royce for the minutes these engines run. An aircraft that is not used for a week is not generating revenues, nor is there any cost for the engines. Compare it with a pay per click.

The Decoy Effect Change the perception of value, offer three products: Product A, with 5 features: 50 Euros, Product B, with 7 features: 60 Euros, Product C, with 9 features: 95 Euros. Make sure you have enough Product B in stock. By adding a far more expensive product with a marginal increase in features the product just below is perceived as a good offer. Remember that changes in perception drive us.

Discount is not lowering price Supermarkets use this. Discount, give 40% off. Now if you would lower the price by 40% the effect is less. I once analyzed at Chicago Booth two years of supermarket sales data of hygienic paper products and the highest jump in sales was always when a discount was given. Discounts are perceived as time limited, lowering prices is seen as desperately trying to sell.

Different brands Make sure your product is well positioned. Here is the idea: you cannot be a solution to everybody. In sales you cannot have the best price for everybody. Once the price is set, there are always customers that would have paid more. Launch a high end brand, sometimes a better looking packaging is enough already.

Placement For retail it is important to have the expensive products close to the short walkers, the fast clients, i.e. walking in and quickly walking to check out. I recently walked into a garden center to buy pot earth and I was shocked by the price of bags of eearth that were very close to checkout. I spent some time investigating and a 60% cheaper product was stored outside. For your e-commerce you can "bury" the cheaper products or services deeper im your web.

Find other applications Very obvious but often overlooked. Let me give a simple example. If you make refrigerator trucks to transport fish, you might want to consider the meat sector too. Have a good thought about what you do. Then ask where can you sell your product or solution too with or without adapting your product?

Sell first, then build product Not that obvious. My experience in telecoms is that our software product was build after it was sold to an operator under the condition that they would help to design it. The result was that other telecom operators immediately recognized the product as the solution to their daily problems. The competition had developped their product in house and failed to meet the real operational needs. Result was an incredible increase in sales. Check what David Burkus writes about in Harvard Business Review. Try to come to a similar arrangement with one of your clients.

Up sell via post sales services If you provide a customer service, train the phone operators to ask the right questions. If a customer service operator has solved a problem for a client a so called "sweet moment" exists. That is exactly the moment you can try to see if there is a possibility to sell an additional product or service. Insurance companies are good at that, once they solve a problema, like when you had a car accident, they will ask if you have more cars in your family. If the answer is yes, this leadis immediately forwarded to the sales department.

Try to see what you can apply to your business to increase your sales.

The challenge of the 21st century

In one way or another it seems we are in a world that has changed so much that we ended up in an economic turmoil causing job destruction. Has something changed and we have not adapted to it? If yes what is it? Let us go back a bit into history and I am going to narrow my focus onto Europe only. After the 2nd world war and its consequent destruction there was demand for whatever you name it. End 40s and beginning 50s entrepreneurs started companies to cope with this demand. The founders where the fathers and mothers of the so called baby boomers. Many of these companies did very well and growth started because of the high and growing demand. In order to keep up with demand, production methodologies became more sophisticated in the 50s and 60s. In the 60s and 70s the baby boom generation started to enter the company of their parents and learned together with them how to handle demand and how to supply.

The following 80s and 90s were the years of increasing the quality. Do you remember TQT? Total quality management? ISO? Quality had to improve because the demand site of the equation had reached higher levels of buying power and had become more sophisticated. Competition started to be important. A competition in product features and in quality.

How was their marketing and sales? Let me say very traditional, with sales agents, sales reps knocking on doors. Advertising talked about the features of the product. Demand was still growing but not that steep anymore. Supply also was growing and perhaps faster than demand. In the 80s and 90s the baby boomers were now trained and running these companies. Most companies would supply on a regional or national scale. Some exported already.

Around the change of century we see the start of globalization, we see the birth of the web and we suddenly find ourselves with some sectors in overcapacity in supply. All problems that management was and perhaps still is not used too. Remember they had learned how to run a company in the 60s,70s and 80s. Also politicians, trained in these years now started to wonder how to create growth and jobs and in most cases failed and still fail to keep their promises. General comment is that it is not fair that Asia is cheaper. They cause the problem, it is not our fault mentality.

In Cohen & Simons we use the following graph to explain this situation:

curves

Therefore we have ended up with companies still very product oriented, trying to sell with sales reps with many contacts, knocking doors and making the best product that everybody will love and buy. The CEO of a 20M UK company once asked me “why is it that with our superior quality there is not a queue waiting to buy our products?” Today companies have to compete on their marketing and sales skills, something current management is not used to. Remember they learned their job in the 50s, 60s and 70s. Interesting is that if you look at startups, many of them still invest the majority of their cash in adding features. And sales? We will go viral or people will love this product and become excited and buy it.

Time to shift gears and redesign the business. Unfortunately a vast majority of companies still uses and wants to use the business models they grew up with. Product features, hiring technical skills instead of attitude, paying sales commissions only and management by control and command are not the way to go anymore. Yes it is difficult to get out of the comfort zone.

Perception

Changes in our lives are important and cannot be avoided. We normally do not like them, they trigger us to take action. There are many simple examples how we react to changes. If temperature starts raising we notice that. If light levels or sound levels suddenly change we react. If something in our view suddenly moves we look at it before we know. The reason is that when we lived in trees we needed those triggers in order to survive. Changes affect us in the following way: If something changes for the better we are happy. If it changes for the worst we dislike. Once better or worse we do not pay attention to it anymore. We get used to it. Hence only the CHANGES give a stimulus to our mood, to our lives. Please understand the importance of changes to the way you are, the way you think and the way to take decisions, both personal and professional.

PERCEPTION

Whatever we do in live is mainly driven by perceptions. Marketers now that very well. We hardly take the time to verify and we believe what we perceive. The media use that continuously. We assume a lot and that is actually dangerous:

News shows one side of the story: the accident with the aircraft. People get afraid of flying (at least in my circles) The media will NOT TELL US how many aircrafts landed safely. They will not tell us about all the peaceful muslims on earth after a car bomb kills an American soldier in Afghanistan etc. It is worth the effort to THINK at least a few minutes when your start digesting information.

CHANGES IN PERCEPTIONS

We are triggered by changes. You cannot always manage changes yourself. Or can you? Yes you can because a large part of those changes are changes in PERCEPTIONS. We are triggered how we feel about something by CHANGES IN PERCEPTIONS:

For those who love mathematics:

U = d(Perception)/dt ,

where U is the quality of the feeling that was triggered. It can be positive or negative.

Once you understand that, YOU yourself can change your perceptions and consequently what to do with it:

- look at the flip side of a story, what was NOT TOLD???

- if you have a bad moment start to think that tomorrow probably will be better and if tomorrow arrives ENJOY that improvement.

- in conflicts with other people try to understand that a large part of the conflict is probably based on perceptions. Find out what really goes on instead of assuming.

-ask yourself constantly, am I ASSUMING that or do I know the facts? You will be surprised of the outcome if you are honest to yourself.

- in communicating with others try to find out how they perceive your message and if it changes their old perception, great sales tool.

Five ways of improving your quality of life, personally and professionally. It improves your decision-making.

Think about it and you will find that there are many more ways of changing your perception and how it influences your decision making.