Can big firms be innovative? Peter, Nick and Fraser are joined by a special guest Roland Hardwood.

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Hello and welcome to the Cognitive Engineering Podcast produced by me, Fraser McGruer, for Aleph Insights. In this series of podcasts, we take a look at interesting topics and discuss what we think they tell us about analysis and decision making. I'm here with Nick Hare and Peter Coghill of Aleph Insights. And also, we've got a special guest with us this week, which is Roland Harwood. And this week, we're discussing whether big firms really can be innovative. Okay, so first of all, Roland, tell us about something about yourself, your background and what you do.

Okay, I'm Roland Harwood. I'm co-founder of 100% Open, which is an open innovation agency. And I've been doing that for the last eight and a half years. Just recently left working on a new venture, which I'll tell you about next time. But I'm a physicist by background, I've worked in innovation my entire career. And also, musician, piano player, failed astronaut, lots of eclectic side projects as well, which we may not have time to talk about today. And sorry, you said an open innovation center, did you say? Open innovation agency. Agency, what's that? So that is a small company based in London, 15 people. And we work with some very big companies, which we're going to talk about today. Big multinational companies, governments, charities to access the best ideas, talent, technology anywhere in the world through a range of competitions, communities, programs.

Okay. Okay, so let's kick things off. So what we're going to be talking about, as I said, is can big firms really be innovative? 100% open, it sounds like one of the things that one of the key things or maybe the key thing that you've been doing would be talking about innovation. So let's go straight to that question. Can big firms really be innovative? Give us your thoughts on that.

Okay, so this kind of binary question drives me slightly crazy. I think the answer, of course, is both yes and no. So on the no side, sorry, on the yes side, let's start with that. So companies like Apple, or Lego, or Ford back in the day, or there's lots of kind of not for profit, large organizations as well, have been, you know, complete pioneers in their sector and have done great things and have been innovative. The reason I would say no is because none of those examples and no other examples do that at all on their own. They're part of a much bigger ecosystem of customers, suppliers, regulators, academia that they're part of, often that gets neglected and forgotten about. But that's what I'm interested in how big firms or any firm or any organization can develop new ideas, but as part of a much wider system or network or ecosystem.

So in your experience, what are the sorts of things that prevent innovation happening, specifically in big organizations?

Politics, bureaucracy, inertia, groupthink, not invented here syndrome, lots and lots of syndromes and behaviors, I think generally, because, you know, a large organization is a has a culture and in its own right, just like a country or a city. And people want to kind of conform or feel they have to conform because of hierarchy and performance appraisals and whatever other mechanisms are available. It is sometimes often dangerous to be risky entrepreneurial to have disruptive ideas that may be counterintuitive to the current status quo of the business. So there are many, many explicit and often hidden incentives or to discourage people from actually being innovative. In fact, I've had two meetings in the last two days where people have told me who both work for large companies that I won't name that they they've been having lots of new ideas for new ventures, but they're not going to give those to their employer because they're too good to kind of give to their employer. And I think that's a sad state of affairs that smart people aren't who are employed and presumably well paid to, you know, work for that company, don't share their best ideas with their employer because they feel that's that's not you know, they don't feel personally motivated to do that. I'm only sharing that that's in the last couple of days. I've had that same conversation with two people and I know two people doesn't make a trend but but but it's in my mind as we speak today. Okay, I want to bring

in Peter or Nick, either come and weigh in with your own thoughts or because we've got a resident. Yeah, questions. Yeah. Yeah. I mean, we've covered some of the things that you mentioned a few of the sort of syndromes that the symptoms if you like, I guess what it'd be an interesting question, looking at the causes, what what factors about organisations, large or small, tend to be correlated with or, in your view, could actually cause those

firms to be more or less innovative. So factors that enable larger firms to be more innovative, I would say, are an acceptance and tolerance of risk. And you know, with that comes potential failure, that that's not only tolerated, but sort of encouraged, a willingness to embrace a diversity of perspectives, both internally and externally, and kind of sit with the uncertainty and the discomfort that sometimes comes with that, rather than just doing what the boss says, or the CEO says, factors that maybe, you know, discourage innovation now, basically the opposites of those. So, you know, ones where there's often too tightly a controlled decision making structure, which discourages people to challenge the status quo, and pose new ideas. And, you know, maybe a business model that incentivises them to take that forward.

I mean, you meant because you mentioned Apple. But I mean, my impression from people who worked in Apple, is that Steve Jobs when he obviously, obviously, before he died, was quite controlling and less controlling after he died. So I've heard. But yeah, apparently, he was quite controlled. So is that is that true? Is that an unfair caricature of the cult? Is that not represent is that not representative of the Apple culture? Or? I think that is true. I think Apple

is. And you could argue that Steve Jobs in his deified dead state has somehow greater sway than

he even did before, but become more powerful than you could possibly imagine.

Something like that, like Elvis is selling more records now. Yeah, after his death than he did. And when he was alive. So it's very hard to compare yourself with Apple. Are they the biggest company in the world now? I'm not sure whether, whether they've recently been overtaken. But anyway, they are the exception that probably proves the rule, you know, almost all other companies aren't like Apple, but even Apple. They do, as I believe, I don't know Steve Jobs, and I haven't worked directly with Apple, but I believe they set up sort of competing teams to tackle the same problem. And basically, the best solution wins out. So that's sort of encouraging a diversity of routes forward. They also just quickly last time I checked, and I'm sure this data is out of date. They have four times as many people developing apps for the iPhone than they have employees within the company. So they have this very rich, even though they are very controlling and closed, in some ways, they do have this very rich ecosystem of creative people around their

organization that is incredibly valuable. And I mean, my experience from working with you guys is that, you know, whatever the question is, the answer will often look like a curated network. So rather than a free for all, you know, a key enabler of innovation is being able to get your hands on the ideas from the right people. And so it sounds like, you know, actually, that's that fits quite nicely with what you're saying that actually, it's the network, as much as it's the sort of culture of the organization itself. It's how it can be. Yeah, so before you pick that up,

Peter? Yeah, I think the controlling nature of Steve Jobs and the management of Apple might have actually had a positive effect on the problem solving innovation side of things. This is something I've had a direct kind of experience of. So they, Steve Jobs was kind of visionary, and he was very good at spotting new ideas for new products and things. And I think he set very difficult challenges to the engineers underneath him to say, right, we're going to make this thing called an iPod with a big screen on it, and it's going to have loads of storage, and it's going to be really nicely built and designed. Go and build that. That's kind of, it was sort of broke the mold of consumer electronics at the time. So it was a really difficult challenge, which under the right conditions, can really promote sort of the engineer to get into problem solving mode and be really innovative. I had experience of this when I was a junior electronic engineer in a company. And we did small form factor computers that went into cars and helicopters and things. And the design was not led by the engineers. The design was led really by the marketing kind of department, making big promises to customers that, oh, next year or two years from now, we'll have this thing with twice as much memory. And that set us a big challenge of making that happen.

So let's sort of turn that into a question then, Roland. So is there a track record? Is there any data to show where innovation most successfully comes from within an organization?

Well, I would immediately say it doesn't come from within an organization. It almost always comes from without or outside of an organization. But that might be, you know, inspiration that you draw from seeing a movie to a great idea brought to you by a customer or supplier. It can, of course, emerge internally as well. But just the sheer law of large numbers, it's more likely to come from outside. I am very conscious to your earlier point, Nick, having co-founded and run a company called 100% Open, which is all about accessing outside ideas that for a man with a hammer, every problem is a nail. And therefore, it's not necessarily true that the answer to every challenge is a curated community. But that's certainly potentially a big part of it. And that's a big part of what we were doing at 100% Open. I also think Steve Jobs is a consummate storyteller. And so I liked your example, Peter, of setting those really interesting questions or hard challenges, and then trying to figure out how the hell are we going to kind of respond to those. So that's a kind of big part of

that. Yeah, I got so I mean, I think some of the things I already is clear, you know, just talking through some of the some of the sort of unpicking some of these issues about what we think of different firms and how innovative they are, and so on. It's obvious that actually, what we mean by innovation is quite a complex concept. And, and I just want to I mean, in your what, how is innovation, I suppose, expressed, you know, in terms of the bottom line, ultimately, you know, we think being innovative is good, certainly in some sectors, I imagine more so than others. How does it appear? How would you measure it? How do you know that a firm is innovative? What would you look for?

So I think, ultimately, for a commercial organization, it's just about revenue generated from new products or services, you know, over a period of time within, you know, 12 months, three years, five years, whatever it might be, and the corresponding share price, etc. If it's a publicly listed company, I think, more often than not, the measures are more kind of activity measures, you know, do people want to kind of go and work for this company? If so, you know, why, you know, Apple and Lego are the two that I mentioned at the top, they're certainly have attract very good people, which is one of the reasons why they're so different to almost every other organization in the world where they have to kind of fight for talent in a way that, you know, an Apple or Lego doesn't have to because their brand is, you know, really fantastic. They have brilliant marketing

and storytelling at the heart of their business. So are Google just cheating then? I mean, have they basically stumbled upon an incredibly successful business model by chance because they were the lucky one out of thousands of people who tried alternatives, and now they just buy innovative people and companies? Or is there something unique about the sort of approach? I suppose what I'm thinking, I've got at the back of my mind, the idea of sort of, there are a lot of imitators of Google's management corporate style. And I just wondered if, in fact, it's that's like a sort of cargo cult approach. Well, Google have beanbags and table tennis tables. So we're going to have that, and that'll make us innovative. You know, how closely are those things related? Is it just that actually what Google is really doing is just buying innovation? Or is there something about Google's management structure, which makes them, which encourages innovation? I think most companies

when they get big, most of the time, all they are doing is buying innovation. They're buying people or they're buying companies or they're buying technology that they then integrate and scale. And the same is true of a Google as anybody else. I think there's a huge amount, two things which are often overlooked. And I think this applies to Google. One is timing. So, you know, phenomenally smart guys who created a better search algorithm than existed, you know, by an order of magnitude at the time. But had they waited three months, six months, you know, the world could have been very different. And the whole beanbags and the corporate culture is a legacy from that. But I don't think that's really got anything to do with it. The other thing which definitely relates to Silicon Valley companies, the ilk that we're talking about is public subsidy, defense spending. A lot of this stuff is very unglamorous, but a lot of these companies have been built on patents and technology that has often been developed deep in DARPA or defense kind of laboratories, which is, I know, a world that you two know quite a lot about as well.

So is it fair to say, well, I just want, I mean, if you want to be, it's like if you want to be, if you want to be innovative, first become successful, and then it's easy to be innovative. Or, you know, is it actually, I mean, does it benefit small companies to try and imitate that approach? You know, can small, we're asking about whether big companies can be innovative. I think we've sort of concluded that obviously they can, but they won't necessarily be. They have to try. What about the small companies? Are they a small company? Is it a myth that small companies are more innovative or? I mean, just, I mean, sorry, I'm not, I'm not the innovation expert. But I can think of, can you be success? Is it success comes first, then you innovate. But I can think of a company, Groupon, who straight from the get go, they weren't a company, and they just started out as a daily deal company. And that in itself was an innovation, and be able to harness a large number of people. And that and they just went straight from there. So I would say that the

innovation came first. Anyway, Roland. I think what I was gonna say partly to pick up on both Nick, and Fraser, your question, I think large and small companies, whether it's Groupon or somebody else, but they both have a different role to play in the innovation process. So if innovation is about coming up with some kind of new way of doing stuff, and then making that successful, often, small companies, smaller organizations are good at coming up with new ways of doing things. And then larger organizations are good at making those successful and kind of scaling those. It doesn't always have to involve large and small organization collaboration, but it often does. And so I think they just play different roles in the innovation process, which is why the opening question, can large firms be innovative? I think, yeah, the answer is yes, but it's part of a kind

of wider, wider ecosystem. Just touching back on measures and things. So you talked about lots of measures about companies doing new things. So like measuring them in terms of revenue by new services or products, etc. But to my mind, there's like another kind of innovation, which is doing the same thing, but in a new way. So take a boring company that provides water or something. That's all they do. And that's all they can do and all they should be doing, really. But they might improve their internal processes. Deliver it by drone. That's how I want to get my water in future. Yes, they might do things differently and be more efficient results. So am I right in thinking that companies often are biased in their view of what innovation should be? And some companies see themselves as not needing to innovate because they're just doing a thing. And they think innovation is all about doing new things. And they think, oh, well, maybe we don't need that.

We don't need innovation. Yeah, so this is one of my kind of bugbears is that there's so much obsession with these kind of drones or blockchain or whatever the kind of the hype, you know, technology or meme of choice might be. And the vast majority of the time, it's, you know, just tightening the washer on the pipe, so it doesn't leak as much is, you know, will have a greater impact on your business, you know, in the short to medium term. But you can't just keep on tightening the washers, you do need to keep an eye on the drones and the blockchains in case it

disrupts your business in the future. Yeah, because this is something I've felt directly in the civil service, for example, they, you know, they're very well defined, well, very delineated things that teams and departments should be doing in the civil service. And I was always trying to make things different, make things, you know, make the average hour of a person in the civil service better. Or, you know, most ideas fell on deaf ears. And that's one of the major reasons why I left ultimately, because there just wasn't any appetite for rocking the boat in any way, because they kind of thought they had it nailed, and everything was working. And they were doing what they was asked for them. No, no desire to actually sort of improve efficiency where you could squeeze a few more percent out of kind of the productivity of it. I don't think that's unique to the civil service. I

think I see that in every organisation, large or small, especially large organisations. I think if you sat with your former colleagues, honestly, they wouldn't necessarily, I'm sure they wouldn't claim that this is the most optimum efficient kind of model. But they just had no incentive to really do anything about it. And that's the problem. You said something earlier, Nick, which I wrote down, I think before we started recording, the best time to start doing anything is now. And the problem with a lot of innovation is it sort of outsources responsibility for doing stuff to some shiny new future utopia that we're going to build. And it actually delays action. And which is unhelpful.

Yeah, one thing we haven't, because we haven't discussed, we haven't mentioned any economic theory yet, which is kind of weird. But there is, the theory doesn't get you anywhere, I'd say. In fact, if anything, it sort of backs up what Roland said, and what the, you know, the few bits of research and innovation is a hard thing to research, because it is quite hard to measure, it's hard to gather the sort of enough details on a company to measure the factors of a company, which might be influencing it. But the theory says, essentially, that, you know, large firms stand the most to benefit, and of course, have more resources. But of course, their innovation, their attempts to innovate are going to be less efficient because of, you know, institutional size and friction. And in fact, that's, if you look at what the people in the business press say, that's more or less the same, you know, to get the best out of innovation, you need the resources of a large company, and the agility of a small company. That's sort of, that's what people generally seem to think. But I got another more general point really to do with, it is to do with sort of economics or kind of organizational design, which is this issue of, you know, the fact that actually specialization is often, you have to trade that off against adaptiveness. You know, in general, look at animals, you know, animals, which are very specialized and highly successful are more vulnerable to extinction, for example, you know, it is a trade off. And so there's going to be some elements which the environment you're in, how changeable is that environment? And, you know, it doesn't make sense to really specialize. Well, if you have a very, a product, which is entirely stable, maybe water is a good example. You know, perhaps innovation is completely unnecessary. I mean, I just wondered, Roland, do you ever, are there people who come and talk to you who, you know, where you think, well, actually, you're, you don't really need to innovate, you're, you're doing fine? Or is can everyone do with a dose of the innovation salts?

It's very hard when you run an innovation company to turn people away saying you're doing fine. But no, normally, when we're having conversations with people, they're almost in the opposite situation, as it's almost, it's often too almost too late, you know, to do something about it. I think there's always room for improvement. You know, I'm whether even if you're doing incredibly well, but there's definitely a time and a place for innovation as well. And sometimes you should just focus on the day to day. This is one of the challenges of running an innovation agency is it tends to be delivered in doses or commissioned in doses, which isn't always necessarily the smartest attitude to innovation as well.

One thing you said there was it's often or sometimes too late for them to innovate. Does that mean the institution it's too late or the marketplace has moved on? Or can you what do

you mean by that? Well, yeah, both both of those things, I think the number of times I've sort of engaged with a company who, you know, three years ago had a great idea, and then they've seen somebody else come and sort of do something very similar and win in that market, when they could have done it, you know, in that time, that just happens again and again and again. So it's that inertia. And, you know, often the processes which are governing, managing risk and managing, you know, responsible use of budgets, etc, actually stop you taking a risk, trying something different,

and maybe winning in the market. And I saw some articles also suggest that companies often seek to implement an innovation strategy, when their share point their share price or something drops, and they they're starting to lose their place in the market. And they, they think that innovation must be the way out, because they're trying to throw out all the old ways of doing things and do something new, they fixate that it's the old ways of the wrong ways, we need to do something new.

And we're close to wrapping up. But I've got a question, which is, it's for both groups here. So for Nick and Peter, as one group, and for yourself, Roland, can we confer? Do you want a single answer from us as a group of two? I do. We're all individuals here. Especially him. How innovative is, I mean, we tend not actually to talk about our own companies here. But how innovative is Aleph Insights? Can you talk to me about the beginning of Aleph? And where you are now? And how innovative you believe you are? And I'm going to ask the same question to Roland, with 100% open. How innovative do you feel that organization was and is? The Aleph boys, you go first. Well, we've got to say it's extremely innovative. Yeah, I mean, I think I think I'd say what we are is really highly agile. And that's because we're small. And it's very easy for us to adapt. Which is surprising, because looking at you both, you don't look particularly agile. Up here, up here, mate. Okay. It's like a bloody, you know, cheetah running across the Serengeti. But I think, you know, being small, you have a very limited opportunity to set the market, to influence the market. So most of the work we do is very much pulled by the customer. And, you know, we have limited opportunity to sort of ultimately shape their requirement, you know, and especially that that's true of the work that we do for government. You know, the requirement comes out pretty fully formed, and we and we need to address that requirement, where I think we are in a way that we approach those things. So it's not so much the product, but it's the it's the approach to that product, which I would say, because of the sort of methods and tools that we've developed and honed, means that the end, the thing that we end up delivering is, you know, usually, given that it's going to be informing a decision is going to be resting on a much securer foundation than, you know, those other rubbishy analytics companies out there. So Peter, one thing Nick mentioned there was it's not so much the end product, it's more the approach. Maybe you can talk to that a little bit?

Well, yes, yeah. Well, actually, I was gonna say, at a high level of abstraction, we're actually not that innovative. Our approach is really, we've just got good people who are engaged and want to do this, want to build this thing together. So in that respect, you know, it's no different to any other company, we've just got well-motivated, good people. Yeah, but our approach, yes, at a sort of working level, we want to, we see value and customers realise value in having an analytical robustness to any product once they have it. So as long as we can get that idea in their head, somebody wants a cost-benefit study on something, it's very easy just to knock one of those up and just wet finger, pull some figures out of the air about why something might be good or bad. But designing a robust approach to answering that question is of huge value. And that's the kind of innovative thing we do is we want to put robust analytical practice in everything we do.

Yeah, okay. Yeah, it feels slightly unusual territory in this because we don't usually talk about ourselves. Well, that's because I think it's a bit naff to talk about your own company on your own podcast, because then it looks a bit too much like marketing. Yeah, exactly. It does feel like that, but it's okay. We'll let ourselves off on this occasion,

I think. We've given ourselves a really good excuse. Yeah. Roland? Yeah, I think Aleph Insights are very innovative. I've enjoyed working with you guys in the past. You know, you're not so bad yourself. Oh, thanks very much. But I think there's nothing like trying to sell a proposition to a customer and then they say no, and then you tweak it, you know, and then the next day they say yes. So you're constantly responding to kind of customer demand. That means you can be quite possibly too agile and responsive, but it does force you as a small, small company to be very highly creative and sort of tailor what you do. So I think small companies inherently are more innovative. And that is definitely true of 100% Open. In the early days of 100% Open, I think we were relatively pioneering. Open innovation was a relatively new thing. We were one of the first players in the market. And I think we created quite a different proposition to other people that are out there. It has become more competitive. There are more people out there doing similar things. I think it remains innovative in some of the things it does a bit like you were saying with Aleph, Peter. Some of the things that 100% Open do are still, I think, very innovative. And then there are other things which are probably very similar, or me too, to others as well. But it's the combination. I think the one thing that 100% Open remains to this day is incredibly collaborative in everything it does. So every project involves a hybrid of multiple partners, internal and external, and tries to collaborate rather than compete, including with our sort of what others may see as our direct competitors. And that is quite unusual in a sort of capitalist society and something I remain proud of.

Well, we've worked with a range of different consultants and by far and away, the most fun. And, you know, the... You were about to say him. Yeah, 100% Open, yeah. Are you a consultant? I was, sort of. Well, you know, so compared to other consultancies, which are there to provide some sort of corporate improvement, a lot of them are, you know, very interchangeable. And, you know, they're sort of young, bright chaps in suits saying things with two by two matrices. 100% Open, it's a whole different experience. We have three by three matrices at 100% Open. Three by three by seven by 16. Okay. So this is in danger of just turning into a big back-slapping fest. It is a bit, yeah. But look, just to round things off, I don't know... So I want to ask a question. Your favourite innovation, right, in history, this could be from... And you're not allowed to say the internet. And you're not allowed to say anything to do with Star Wars either. So it could be in history, sorry, in technology. It could be in the realms of fiction. It could be biological. In which case, I guess we're talking about evolution. I've got one. Okay, go for it, Roland.

Yeah. And I guess, you know, the mark of that is that you look at it and you go, why the hell did no one try that before? Exactly.

I suppose he kind of asked himself, he said, like, this is a better way of doing this. This is, but is it not, is it allowed? Is there anything stopping me from doing this? And there wasn't. So the idea is just get over the bar any way you want unassisted. And that's kind of like the rule, isn't it?

If I start playing basketball now and throw underarm, I could be in the NBA by this time. I think there are possibly other factors that may keep you coming to play.

If we start our own team, we can clean up in the NBA. Yeah, yeah, yeah. Peter? I think, okay, it's a bit abstract, but the written word, so written language, not just language, but the written language, kind of like key point in human history that has enabled so much more to happen, so much more learning and so much more technology, without having, we had language a long time before we wrote it down. And that got us so far. But it's only when we started writing ideas down, did we explode in terms of the amount of things we could do. You start to build on stuff.

I'm fine. I've enjoyed it. Your Canon example just reminds me of my favourite answer to a similar question that I used to ask in workshops about an innovation that has had a sort of a 10 times increase in performance, speed, cost or something similar to your Canon example. And one guy, an academic at the University of Durham, I seem to recall, said his favourite innovation was screw top wine because it allowed him to open his bottle of wine 10 times faster than wine with a cork. So that's my final comment. Make of that what you will.

I like it. I like it. Okay, we're going to stop there. Thank you as always for listening to the Cognitive Engineering Podcast. I'm Fraser McGruer. We've been here with Nick Hare and Peter Coghill of Aleph Insights and with our special guest, Ronan Harwood. Thank you very much for being with us. Until next time, goodbye.