Craig Venter, who led the charge to decypher human DNA, is now on the green hunt. According to Treehugger he’s looking for a double-wammy: take CO2 in the atmosphere and convert it into fuel (rather than fuel creating CO2 as is mostly the case today).

As we’ve described before, Venter’s overarching goal is to produce microorganisms that are able to “convert things like sugar or sunlight or carbon dioxide into fuels that people are very familiar with, like diesel fuel and gasoline,” as he himself put it. These would constitute not only the fabled second- and third-generation biofuels we keep hearing about (like cellulosic ethanol and other plant biomass-derived fuels) but even so-called “fourth-generation” biofuels — those produced directly from CO2.

Venter hopes his bugs will supplant the need for carbon capture and sequestration (CCS) technologies by making CO2 a commodity, instead of a byproduct to be disposed of. According to Venter, large, bacteria-processing fermenters, similar to those used to make beer and wine, would replace traditional refineries. He expects the first generation of his engineered bacteria to be commercially available within the next year or two years. He made it a point to stress that he and his colleagues were thinking “in terms of years, not decades.”

There are some obvious concerns about releasing such organisms into the wild, nevertheless it’s this kind of thinking we’ll need to help move us away from the global warming brink. 

What seems to be a pretty thorough study on how incremental and breakthrough innovations have impact on company value and sustained competitiveness has appeared in the Journal of Marketing. Rather than simply looking at top-line contributions they look at three key factors:

1. Effect of breakthrough and incremental innovations on a firms’ normal profits
2. Effect on “economic rents” (profits beyond what’s required to compensate for risk and time value of money)
3. Effect on firm risk

They come to several conclusions that provide quantification of the issue of balancing incremental and breakthrough innovations. First they find that

…few firms can persistently produce a substantial flow of either breakthrough or incremental innovations. For example, only one firm, Procter & Gamble, had an above-average output of breakthrough innovations each year during our sample period.

 They go on to say:

To CEOs and other corporate officers, we note that incremental innovation keeps firms in business, but breakthrough innovation is the key to achieving sustained long-term growth. Our model allows managers to quantify the average NPV of a breakthrough innovation. Specifically, the estimated coefficient…is .000847, which means that, on average, each breakthrough innovation is associated with a 0.847% increase in the market value of the firm’s equity. This increase accounts for all costs (including a normal equity charge) and thus represents pure economic profit. For the typical firm in our sample with an average market value of equity of $4.9 bioonion, [the profits] associated with a single breakthrough innovation is approximately $4.2 million.

Notably, organizational slack is a significant determinant of breakthrough but not of incremental innovation. A possible explanation is that incremental innovation is more likely to be incorporated into a firm’s baseline investment strategy and less likely to depend on uncertain slack resources. In contrast, breakthrough innovation may be viewed as a more opportunistic activity to be undertaken only when greater slack resources are available.

Another possible explanation: Most companies try to make the most of employees’ time, thus taking slack out of the system. What do they get them to focus on? Mostly next-gen or incremental products. So that squeezes the slack out of the system that appears to be a pre-requisite for breakthrough innovation. (Start-ups are 100% focused on breakthrough in most cases, so their slack is entirely taken up by that. Same thing goes for skunkworks.)

This is a dense article with a lot of math in it, and none of the conclusions are particularly surprising. But the detailed quantification provides a perspective on innovation, particularly the balance between incremental and breakthrough innovations, that is valuable. Sure enough, you can’t rely on incremental innovation to keep you competitive - periodic injections of breakthrough innovation are required for survival.

Download it here 

Jess McMullin has posted an interview he did with me a few weeks back, on his bplusd blog (a very good read all around). We touched on a lot of different topics in our 45 minute conversation, which he summarizes as:

• Chatting about the strategy practice at frog. Differences between traditional strategy offering from McKinsey or Bain. The advantages of integrating strategy with a more holistic practice including industrial and interaction designers, engineers, and others.
• Discussion of Org 2.0 companies and how they are better able to take on innovation and create compelling experience-based products, services, and systems. If you’re in an Org 1.0 company, start with a skunk works.
• Dealing with the innovation surplus. Companies that have embraced innovation now have no shortage of fantastic ideas. Now the challenge is prioritization and execution.
• Core insights. Like core competencies, core insights emerge from the unique combination of experience, skills, information, and activities of your organization. Core insights are hard to duplicate in the market, and offer significant competitive advantages.
• Some thoughts on influencing innovation - how can aspiring innovators escape the gravity well of the status quo? If you’re not in a company that embraces innovation, what can you do? Adam comes back to skunk works as one way to build momentum. Look for much more on this topic at bplusd in the coming weeks and months.

 It was a lot of fun to do, thanks to Jess for suggesting it and putting the effort into doing it. You can download the full mp3 from his site.

If you’re a parent, here’s a cool new product: Cucuyo. It’s portable baby changing station and diaper bag. It was designed by a couple of friends of mine, husband and wife team Ana Reza and Page Hadden (she formerly of frog design and Pottery Barn, he of Timbuk2 and Lowe Pro, so they know their stuff). It folds up sort of like a burrito, and unrolls into a pad for doing diaper changes, and has a pouch for storing new and old diapers. As they say, there’s no need to have a dedicated diaper bag, as this fulfills the role. Plus it comes in a bunch of cool colors and patterns.

I believe we are about to see the birth of a new business organization - one that is optimized for complex systems of problems and solutions, rather than based on silos focused on specific functions, and which treats user experience as a core organizational axis rather than a meddlesome add-on. Call it Org Chart 2.0.

Today’s companies are largely structured with Org Chart 1.0: silos of knowledge and product offerings (segmented by customer type, price point, technology, etc.). We have had this structure for decades, even centuries, and there are good reasons for it: it helps drive efficiency of development and decision-making, focus on customer segments and competitors, it makes the chain of command and (in theory) accountability clear, and so on.

Unfortunately this type of organizational structure is quite poor at dealing with complex systems and systemic-level problems. And this is becoming increasingly untenable for several reasons:

1. User experience design challenges the ability of organizations to cross silos: user experiences run rough-shod over org charts. Why? Because many elements go into making a user experience that from the user’s point of view should all be seamless and to an extent indistinguishable. Users don’t really care if the e-commerce portion of your website is created by a different group than the informational areas of the site, and from a brand point of view you should be ensuring that both areas of your site speak with the same brand voice. Now multiply that across your products (hardware, software), collateral, packaging and out-of-box experience, call-center, point-of-sale displays and materials, sales staff, and so on. That’s how user experience gets created.
2. Companies now need to deliver whole “solutions” rather than old-fashioned products. User experience design is just one example of this. More and more companies must pull together complex networks of partners, acquisitions and vendors in order to create and sell these solutions. No-one today is as vertically integrated as Henry Ford’s River Rouge manufacturing plant, where iron ore came in at one end and finished cars went out the other. Being nimble, global and adaptive in hyper-competitive and dynamic markets has forced dis-aggregation of capabilities and resources.
3. Customers are more complex than they used to be (or more likely it’s simply that our old models of market segments and personas did not allow for human nature and its self-contradictions). This makes understanding them and addressing them with offerings more nuanced and multi-faceted. A one-size-fits-all shrink-wrapped product on the shelf at Best Buy or Walmart is not going to cut it any more.

The strain is showing on the traditional silo’d organizational structure. I believe we will soon see the emergence of new companies formed in this environment and they will look quite different than what we have seen for the last decades. For these companies, thinking systemically and about user experience will be as natural as breathing. They will treat complex systems as inherent to their structure and creators of value, rather than as headaches to be avoided and territories to be fought over by silo’d clans.

What could a Business Organization 2.0 look like?

Instead of business units these companies will have “experience units”, which manage the end to end experience. Instead of focusing on products and technologies, they will be focused on the “invisible” system that connects the various products and customer touchpoints together. They will welcome outside vendors and partners as enablers rather than disdaining them as “not invented here”, and see themselves as being modular entities that can fluidly adapt to chaning market dynamics and customer needs. Customer input will be voraciously sought after and taken in, and customer participation in shaping the company and its offerings will be routine rather than the exception.

I’m sure there are many time-honored and well-established reasons why these things don’t make sense, and why Org Chart 1.0 is better. But the fact is that the world is changing and we need to think about new business organizational structures to adapt.

So what do you think? Are there any companies you see emerging that have these traits?