A conversation with Haydn Shaughnessy, Chief Content and Design Officer, Flow Academy
This is part of my series on thought leaders in the innovation space. Check out the other articles here.
Haydn Shaughnessy started his career as a broadcast journalist in London. With expertise from his research in public broadcasting at the University of Manchester, he went on to become the Programme Manager for RACE, Europe’s R&D program in advanced communications. While the US was taking the lead in developing software and Japan dominated the hardware arena, Europe was investing heavily in mobile broadband. Through his work with RACE, Haydn got his first taste of innovation and its effect on the global economy.
Success is accidental
Hard work, commitment, and determination are all factors in success. But Haydn believes there’s one aspect that we often underplay: chance. Many innovation programs are focused on process or the mechanics of achieving a successful outcome. Process does play a part, but even the best processes can’t guarantee success.
“I think that many of the explanations of innovation, many of the structures that underlie innovation programs are not capturing chance. They’re assuming that you can be programmatically innovative, and I don’t think that’s true.”
Introducing more chance into innovation is achieved by placing more emphasis on valuable conversations. “Steve Jobs said that his single most important job inside Apple was to have the right conversations. Ultimately you don’t get anywhere unless you have the right conversations. And the right conversations never happen in meetings.” Creating venues where these conversations can emerge increases the opportunity for innovative discoveries.
Organizations looking for the time and space to encourage conversations need look no further than the time currently being dedicated to meetings. “We know that at least 65% of all meetings are wasted. And we know that as people go up in the organization they attend more meetings.” Haydn points out that in most organizations the time and space for conversations already exists, it’s just that we fill it with the wrong things. The idea speaks to a larger cultural bias about social interaction in the workplace. “Convincing people that social interaction of good people will lead to better decisions and better innovation is not a message that’s currently being listened to very much.”
The Steve Jobs example speaks to the role of management in innovation and how overmanagement can impact outcomes. One way that overmanagement can show up is through measurement. When I asked how innovation should be measured, Haydn advised against it. He shared the example of Google Glass — a product he says “has been measured to death.” Despite all of the measurement, Google Glass failed to take off for a number of reasons. The primary reason was that, aside from developers and a small number of early adopters, the market didn’t want the product. The idea was solid, but the application failed. “What you need to do is see what people will commit to, what a big enough group of people will buy.”
Overmanagement can also impact innovation outcomes when organizations become technologically dependent on it. “It used to be much more common to be constantly curious about what’s actually changing in society.” Now the focus is reversed with organizations using emerging technologies to guide their innovation efforts. Instead, Haydn argues that organizations should be asking questions about what’s changing in the marketplace or people’s attitudes and what customers really want.
3 Levels of Innovation
Haydn thinks of innovation in three levels.
At the global level innovation is geopolitical, geoeconomic. “If you look at why Japan became a strong economy in the 1970s, it was because America decided to export key technologies to Japanese companies to have them built. Why did Japan become so good at innovation around microelectronics? It’s basically because America wanted that to happen. There’s a lot of geopolitical, geoeconomic things that happen to allow innovation or create the right conditions for expanding markets.”
At the enterprise level, innovation happens in response to geoeconomic change or to make that change happen. “Over the past decade platforms and ecosystems are altering the way we create wealth. You could say in the 1980s that supply chains did the same.”
At the individual level, there are innovators themselves who consider the way we work and how innovation is achieved. Haydn sees the current innovation landscape as rich and abundant and changing at all three levels. “We’re in the process of creating a whole new economy, and it will be dominated by China.”
China’s approach to innovation
So what makes China so good at innovation? “If you look at what the Chinese are doing and the resources they’re able to commit to things like supercomputing, quantum computing, etc. They can make more commitment to advancing innovation in those areas.”
In contrast, Haydn sees innovation spending in the U.S. Defense Department as increasingly wasteful. “It’s actually spent on wars more than it should be and less on innovation than it was. I think America struggles with innovation in ways that China doesn’t because China stays controlled, is five or six times as big, and has the resources to pour into these things.”
The most telling difference between China and the US is in the behavior and interactions between individuals, customers, and firms. “Chinese firms just happen to be better at responding to what customers actually want and what they want right now. I think what a lot of American people would like to have happen is that we function more through the mobile device and that we function in a more seamless way.”
“Chinese firms just happen to be better at responding to what customers actually want and what they want right now.”
To illustrate the highly connected, seamless experience of a Chinese citizen, consider the following scenario: In China, people can book flights through an app called Fliggy. They can get insurance on their mobile device through Zhong An. Assuming said traveler has never been abroad before, they might receive a new suitcase offer through Alibaba. All of this can be paid for with Alipay, the mobile payment platform established by Alibaba. What all of these interconnected customer experiences have in common is that the companies are all owned by the same people. “So ultimately what you have going in China is a modern version of a cartel. It allows very rapid innovation. You wouldn’t be able to do that in the United States because you’d be caught up in antitrust legislation very quickly.”
In the future, this scenario has a bigger impact as China’s market grows. “What China has is a captive market of six billion people, not 1.4 billion. I think it’s going to capture most of the Southeast Asia market. It will be a dominant force in the Indian and African markets and the Middle East, too. I think it will lock American companies out of large parts of those markets.”
Outdated management structures
In order for the new economy to be more America-friendly, Haydn urges innovation leaders to think about the essence of American entrepreneurship, consider how to get back to it, and what can be done to elevate it. “Because the solution is an entrepreneurial solution rather than a government solution.”
Organizations that want to take action to remain competitive in the new economy can start by reconsidering how their companies are structured. Haydn shared Haier’s acquisition of GE to illustrate the point. “When Haier bought GE Appliances, they sacked 12,000 managers straight away. They divided the company into hundreds more companies in months — it didn’t take years. In American and European companies, we have management structures that are very, very wasteful and we’re not honest about it. If you were running an American or European company over the last 20 years you would have outsourced a lot of your labor. You’d be looking to AI and robotics to replace more labor and so on. But nobody’s really looked at what the management structures are like and how management structures waste a huge amount of resources.
“What the economy needs is those 12,000 managers to go out and create new businesses.”
Haydn stressed that the 12,000 managers Haier let go could be 12,000 new businesses. He urges organizations to take a proactive view and realize that heavy management structures are outdated. “What the economy needs is those 12,000 managers to go out and create new businesses.”
Organizational decision making
In addition to management structure, the process of decision making is another area for organizations to re-evaluate. “Any conversation that you have with people in organizations about why innovation is not working or why innovation is not being exploited properly will come back to people in senior positions not letting something happen.”
AI is one technology that is both a victim of this reality and a possible solution. Haydn has observed that teams often get direction like, “We need an AI program. Get working on it.” But in reality, “There aren’t enough AI specialists around to service the needs of all these large companies. That’s a fact.So basically most of them have gone out and bought people that are not skilled in AI. They’re going to end up coming up with programs that don’t function properly and they’ll take years to get the right kind of data and models. Those decisions are being made by senior people.”
The larger issue, according to Haydn, is the rush to consensus among management. “Senior people get dragged into consensus too easily. They get dragged into the vendor pitches too easily. They disagree with each other in ways that are not transparent so that bad decisions get made.” Haydyn posits that introducing AI into decision making can provide a check against a rush to consensus. “There is a different way to do it if you’re arguing with an intelligent machine.”
Innovation doesn’t have to be expensive
Haydn rejects the notion that innovation has to be a big investment. “Look at cloud services. Why do we have a generation of SAS platforms? Because there are cloud services. And what are those SAS platforms? Three or four guys that just need spending money basically. So it’s kind of erroneous to think that larger companies need to invest a lot in innovation.” He goes on to say, “Large companies want innovation to be expensive. They’ve managed to increase the cost on innovation over time, and they’ve run big R&D centers in order to do that.”
“Large companies want innovation to be expensive. They’ve managed to increase the cost on innovation over time.”
Haydn views the shift in consumers wanting to buy experiences as evidence that innovation doesn’t have to be expensive. “Look at the Airbnb program, Airbnb Experiences. What does it cost? It costs a bit of Cloud capacity, that’s all really. I mean you could argue, and I know Airbnb does argue, they went to a lot of trouble to involve a lot of people in the ideation of that program, and I think they did some really good pilot testing of the program. But in the end, it’s not expensive to create something where people effectively pay to meet other people and then have a great experience.”
Anything that delays getting a product to market contributes to the cost of innovation. “If you look at the way Chinese companies put stuff into the market, they’re not doing long iteration cycles to see if they’ve got a product or not. Zhong An, a Chinese online insurance company, launched 300 products over the first three years of its life. That’s two products a week.”
Chinese companies are particularly good at customer involvement during product development. “It’s not difficult for them to get 20,000 customers involved. If we got a couple dozen people involved in something giving us feedback, we’d be grateful for it. But they can get 20,000 people.”
Taking care of the little guy
And that customer involvement does not go unrewarded. For example, with Alipay, the small change in those customer accounts are invested into a mutual fund. “It’s not just ‘Okay, can we get 20,000 people to get involved in something here.’ It’s that the platform will give you something back — something tangible and real. I’ve had money in Skype for the past 10 years. One way or another Skype has had at least seven to 10 dollars of my money in its account. And it keeps taking it every time my Skype account runs out. It’s not giving me anything back, not even a discount.”
Price and margin in the west
Beyond heavy management structures and wasteful meetings, the western “sense of entitlement around price and margin” contributes to higher costs in US innovation. “If you create something in, say, the western insurance market, you’re going to be locked in at something like $50. Is it possible to make that product for $1.50 and get it out there? Because if you do, people will buy it.”
Haydn encourages organizations in the west to consider if it’s their product that isn’t gaining traction or if it’s their price. Some aspects to consider in achieving a lower cost include: accepting a lower profit margin, employing fewer managers, decreasing the time to fulfill customer orders. “Taking all that away, can I do this for $1?”
“The most remarkable change in the American economy in the past 15 years, I would argue, are micropayments.”
“The most remarkable change in the American economy in the past 15 years, I would argue, are micropayments. The fact that you can advertise on Google for 20 cents, the fact that you can buy books on Amazon for 99 cents, the fact that you can buy music on Apple for 99 cents, the fact that you’ve got apps for free — that’s the most dynamic part of the American economy. The reason for it is because it costs less.”
Decentralized Autonomous Organizations
In the face of the new economy, Haydn is most intrigued by the notion of decentralized autonomous organizations (DAOs). A DAO is an organization represented by rules encoded as a computer program that is transparent, controlled by shareholders and not influenced by a central government. The DAO concept of collaborative decision making, first introduced in peer-to-peer communities, is one-way Western economies can survive the shifting landscape.
“I don’t know that western economies dominated by large organizations will survive. Will it be necessarily the case that Google will continue to be the company it is? I suspect that the reason that they traded Alphabet is that they know that it’s a very limited lifespan left in dominating the data market.”
Haydn believes we are currently moving in the direction of smaller, interdependent companies running the economy. In contrast to Google, he sees Amazon’s model as one that embraces the future. “Amazon facilitates all kinds of other people’s businesses.” The distributed approach, according to Haydn, is the best guard against the scalability problem.
“Alipay wants two billion customers by 2025. Google is not ever going to have two billion customers. It’s just not going to happen. So somewhere along the line, we’re going to have to start thinking about the distributed model, the peer to peer model as a better way to keep our place in the global economy.”