Driving Eureka!. Doug Hall

more information, they could compare the value they received for their money. Those merchants who didn’t offer a meaningful point of difference (i.e., value for the money) soon lost sales and died.

      Because the change in exchanging information came faster than most companies were ready for, the impact on the economy was deflation, as companies had to cut prices to win back sales. In total, there was a 30% decrease in the consumer price index during this time period.

      The internet has created a 1,000X greater disruption than the introduction of railroads and national advertising. Everyone can know everything about a product. Differences that are marketing “smoke and mirrors” are quickly exposed. Having lots of money to spend on marketing is no longer a cure for mediocre nonprofit services or commercial offerings.

      TODAY’S Growth in Our Ability to Exchange Information Is Exponential

      The internet really is the biggest innovation in history. It’s more important than the computer, even more important than the transistor. The internet came and everything became for everyone. We were set free.

      —Steve Wozniak, cofounder

      of Apple Computer Company

      Today, around 40% of the world’s population has an internet connection. In 1995, it was less than 1%. Today, there are 250 million registered domain names. The impact of the internet is greater than simply the ability to text or look up information. It’s igniting new infrastructures and systems.

      As an example, having something shipped to my rural farmhouse on the north shore of Prince Edward Island, Canada, historically took up to two weeks. Today, I can have almost anything I want shipped to me by Amazon Prime with free delivery in two days. For the first time, there are even UPS brown trucks and FedEx trucks traveling the island.

      I think Prince Edward Island will find, in time, that the exchange of information and infrastructure systems like shipping will have a greater impact on the economy of the island than the 12.9-kilometer bridge to the mainland that opened in 1997. The impact will be positive when they learn that, like the bridge, change goes both ways. The new marketplace makes it possible to live in a paradise like Prince Edward Island and do business across planet Earth.

      David Carr wrote in The New York Times, “Change comes very slowly, but then happens all at once. The future, as it always does, sets its own schedule.”

       HINT: If Your Goal Is to Make Money, Innovation Is the Only Choice

      Recently, a CEO I know told me: “We’re conservative. We’re slow to change.” Or as another CEO told me: “Doug, I don’t get it. I don’t know how to innovate, my team doesn’t know how to innovate, and, frankly, my customers have never asked us to innovate. Why the focus on innovation?”

      If a purpose of your company is to make money, or if a desire of your nonprofit is to survive and sustain, then innovation is your only choice.

      Researchers at Georgia Tech have compared companies’ self-reported strategies for success versus the profit margin they realize. As the chart that follows shows, the conclusion is simple—if you want to make more money, innovation is the only strategy. Companies pursuing innovation as their core business strategy realize 50 to 100% higher profit margins than those that pursue “low cost, high quality, fast delivery, or voice of the customer (doing whatever the customer says).”

      Basic economic theory predicts these research results. When you offer something that is meaningful and that no one else offers, you have a monopoly, resulting in higher profitability.

      It’s the Best Time to Be in Business!

      The interconnected marketplace is creating exciting opportunities for increasing innovation speed. Just as it’s empowering customers, it’s empowering companies. Proactive leaders can discover and develop breakthrough technologies with faster speed and less risk if they upgrade their management and innovation systems to leverage the opportunities present in the new marketplace.

      Evidence of the rising ability to innovate is the number of patent filings in the USA. The USA is a great barometer, as the market is big and many of the world’s patent offices use the US filings as benchmarks.

      Historically, patent filings have grown at a slow and stable rate. However, as the chart that follows shows, as the number of internet users around the world has grown, so, too, has the number of patent filings. The internet has enabled inventors and entrepreneurs to make technical connections, conduct patent searches, and find opportunities faster than ever before. It has made it the best of times to be an inventor.

      Interestingly, two out of three patents filed in the USA are granted to someone either born outside the USA or to a company from outside the USA. To borrow a line from Bruce Springsteen, “Born in the USA, owned in the USA” is not the way with technology anymore. The internet is making it easy for everyone everywhere to innovate. In fact, somewhere in South Korea, Northern Ireland, or South Africa, there is someone with an idea, some education, and a ton of motivation to disrupt your company, industry, and career.

      The Classic Management System Can’t Keep Up with the New Rate of Change

      When the pace of change was slower, it was possible to treat strategy, innovation, and the way we work together as independent functions, just as Henry Ford segmented work on the production line. However, as the world moves faster, we don’t have the time for the inevitable meetings, communications, miscommunications, and rework that are created by the classic command-and-control management system.

      The challenge today’s leaders face is that, as the life cycle has accelerated, their method of management has not adapted to the new pace of change. The classic method of managing innovation as a department, or as something led by specialists, is just not fast enough anymore.

      What’s needed is a culture in which innovation is the mission of everyone, everywhere, every day—a culture in which innovation is enabled through scalable education systems and tools. The result is an amplification of the effectiveness of employees just as a tractor amplifies the amount of land a farmer can work versus with a horse and plow.

      To restart success for organizations that are the victims of change: Cost cutting won’t solve the problem. Working harder won’t solve the problem. Beating the workers won’t solve the problem.

      The ONLY sustainable solution to the accelerated pace of change is to create a culture of innovation.

      The Five False Innovation Cures

      Growing an innovation culture is hard. It’s really hard. The existing infrastructure has evolved over time to be 100% focused on decreasing risk. And, as the marketplace changes faster, the culture responds by amplifying its avoidance of risk.

      Worse yet, we are organized in companies the same way we were in universities—in departmental silos. Each worker reports to a head of a silo—be it manufacturing, marketing, product development, finance, legal, market research, or sales. The corporate system rewards loyalty to the silo more than to the organization. It is the silo that gives us a pay raise. It is the silo that prevents us from being laid off or downsized.

      It is very easy for every silo to do a perfect job, but collectively we are not effective. Dr. Deming spoke about how everyone applying their best efforts, working with diligence, can still result in the company going out of business. The reason is that the success of an organization lies in the interactions between the people, processes, and departments.

      Getting the system to work is so difficult that most leaders are not willing to take on the challenge. As the CEO of a Fortune 50 company told me: