Improvised Innovation

I’ve just been reading a new book by William Duggan, a professor who teaches business strategy at Columbia Business School. The book, Strategic Intuition, argues that the best innovation comes through improvisation, not through advance planning. It’s called “opportunistic innovation”: instead of planning and setting advance goals, sit back and watch for opportunities. When you spot a chance for a big payoff for a low investment, then set your goals and go for it. Duggan provides a wealth of historical examples, showing that each breakthrough innovation resulted from this kind of improvisational responsiveness.

This is fascinating because it’s exactly the opposite of the conventional wisdom that you find in business advice books (or even college commencement speeches): set big goals, then do what it takes to reach them. Bill Gates’s Harvard commencement speech in 2007 told students to do exactly this.

One interesting implication of Duggan’s book is that although businesses innovate opportunistically, governments and international agencies always try the “set big goals first” strategy. Of course, the voters demand solutions to specific problems, and it’s the job of governments to respond. But then, they end up rigidly pursuing the fixed goals, and the bureaucracy prevents them from responding improvisationally to new opportunities.

It doesn’t have to be that way. Duggan tells the story of how Muhammed Yunus developed microcredit (small loans to individual businesses at low interest rates). He started out by trying to relieve poverty in Bangladesh by increasing crop yields. And while he was doing his part to contribute to the Green Revolution of the 1970s, he noticed that landless women were making hand crafted items, but making almost no money because to purchase the materials, they were forced to use local lenders who charged outrageous fees like ten percent each day.

We need a lot fewer big goals and grand plans, and more leaders who are capable of responding improvisationally.

A quotation I just found:

“The real accomplishment of modern science and technology comes in taking ordinary men, informing them narrowly and deeply and then, through appropriate organization, arranging to have their knowledge combined with that of other specialized but equally ordinary men. This dispenses with the need for genius.”

By John Kenneth Galbraith, Harvard economist and advisor to Presidents Kennedy and Johnson, in his 1967 book The New Industrial State (pp. 60-61).

The Creative Industries Around the World

This last week, I visited the World Intellectual Property Organization (WIPO), a United Nations agency based in Geneva. I was the lead-off speaker of a two-day conference called “Intellectual property and the creative industries.” By “creative industries” they mean money-making ventures based in the creative process: the primary topics of discussion were movies, music, and videogames. There were speakers on the program who represented each of those industries, and the ministers of culture from Lebanon, Jamaica, and Nigeria.

The creative industries make a big impact on the bottom line: in the average OECD country, between 5 and 6 percent of GDP comes from the creative industries. The United States is far ahead of the pack: over 11 percent of U.S. GDP comes from the creative industries. (And we’re just about the only country without a ministry of culture!)

Our stereotype of creative activity is the starving artist, painting in the basement; or the depressed poet, writing somewhere out in the woods. But the forms of creativity that make a big economic impact are complex, organized, and collaborative–think Hollywood movies or major new videogame releases: a single new movie or videogame involves hundreds of people and costs $20 million dollars plus. In spite of the high cost, these investments can pay off big: Halo 3, the new videogame for Microsoft’s XBox, made over $300 million in its first few weeks. The studio music recording industry is also complex and collaborative; it starts with a song, but then enters a multi-staged collaborative process (brilliantly demonstrated at this conference through a documentary video displayed by Ms. Laura Tesoriero, President, EPSA Music, Buenos Aires).

A few things were missing from the conference. Most of the speakers were advocates for rightsholders, and for mechanisms to protect against copying and piracy, such as Digital Rights Management (DRM). But there are strong voices out there arguing for “free culture” and “creative commons”; developing countries who argue that protected pharmaceuticals cost too much and that they are morally justified in producing copies, because they save lives; such voices were not present at this conference, and the result was that it felt like we were all preaching to the choir. When I presented my argument for mandatory licensing and for a cap on licensing fees (you can find it at the end of my book Group Genius), I felt like I was upsetting the consensus–even though I’m a big supporter of intellectual property rights.

A second thing missing was those industries based on patents rather than copyrights; most of the talks clearly assumed the copyright as the model for IP. But many people would argue that software, for example, is a creative industry, and patents are more relevant than copyrights in that industry.

And, finally, those traditionally high status creative activities like painting, poetry, and novel writing were not represented. It’s perhaps to be expected that national governments would focus on the highest-revenue industries. But publishing is not an insignificant business; many books generate millions, and a large number of successful movies are based in novels. And the art world is often the source for new trends in graphic design and packaging. While focusing on the big-money industries, we shouldn’t lose sight of the full range of creative activities–all of them are critical components of culture.