Following the response to my post earlier this week on systemic innovation, here are NESTA’s top tips for effective systems innovators.
1. Even a great product is no guarantee of success Superstar designers might garner the acclaim for iconic products, but much of the value they create lies in the systems that support and enable them. Products are often just the front door to these systems. New systems – from electricity to the Internet – create platforms that make us all more efficient and productive. Having a great product is no guarantee of success, unless you can assemble around it the complementary services, software, support, infrastructure and channels that allow consumers to use it easily and effectively.
2. Different systems need different approaches A tightly–coupled, complicated system that requires heavy investment requires a different approach from one that is loosely structured, complex and light on infrastructure. Sometimes the best approach is to outmanoeuvre a heavy system with a more agile, collaborative networked system: witness the rise of mobile banking systems in places such as Kenya and Pakistan where traditional banking infrastructures reach a minority of the population. Systems dominated by a few players, cannot change unless these dominant players are prepared to budge or can be levered out of the way. Their position is likely to rest on their economic power – they control how money flows through the system and knowledge, which determines what standards are accepted. More distributed, emergent and unscripted systems need leading as if they were a community.
3. Systems innovation turns on alliances Your capacity to innovate will depend on who is part of your alliance. Creating new products relies on creative teams. Changing entire systems, however, requires alliances of partners who will be co–innovators working alongside you and distributors who will take the product to market. Successful systems innovators create constellations of other actors aligned around them.
4. No value will be created unless it is shared Alliances only create value if they share it. Value will not grow if it is all captured by just one partner. It has to circulate. That requires a social contract to determine how value should be shared out among the alliance members. These social contracts for innovation require economic agreements – who gets what share of the revenue – but also technical standards and design rules to enable the different partners’ contributions to be brought together. Some alliances depend on explicit and open collaborative governance. There are already many different versions of these social contracts for innovation, from open source and Wikipedia, which is like a digital commons, to Apple’s approach to its app developers which is much more like a landlord with tenants. Orchestrating these social contracts – what Finnish innovation strategist Ilka Tuomi calls the “politics of innovative ecologies” – is the critical role of systems innovators.
5. System innovation needs behaviour change Leading mass behaviour change is like creating a social movement, in which people learn from and lead one another. The most powerful brands – like Apple – create a gravitational pull, drawing partners and consumers into their orbit. Innovation and economic strength is a function of the total capability of the movement, not just the team that creates the main product. Some of the most interesting new spaces for innovation – organic food, alternative energy – are being opened up by social movements. New kinds of consumer behaviour can be the starting point for systemic innovation.
6. Systems innovation requires a mix of leadership styles As system innovation involves so many components, it also requires many different leadership styles. Creative teams – like film crews – need producers and directors to bring them together in an intensively collaborative activity. Acting as a disruptive entrepreneur requires a leader who can be more like a pirate leading a crew, launching raiding parties on the status quo from the margins. Building alliances and movements, however, requires a leader who is more like a community organiser or the political leader of a coalition. In relatively closed, stable systems, in which tasks are repetitive and there are a few dominant players, leadership might be exercised through hierarchy, rules and contracts: relatively hard and fixed forms of power. In more open, emergent systems, with many players operating in more fluid environments, and where the task is to create solutions rather than repeat tasks, then successful leadership will be more like leading a community of volunteers, who cannot be instructed. Leadership is likely to be far more interactive and distributed rather than concentrated and instructional.
7. Move at the right time Systems go through different phases. In some phases they are more open to fundamental change; in others they are open to incremental adjustment. Often the maximum point of leverage is when a system is in transition. Thomas Homer–Dixon, the Canadian complexity theorist, argues systems go through periods of emergence and growth, which then lead to breakdown, reorganisation and renewal. It is the transition between these phases, when a system is moving from one state to another that offers the greatest leverage. This is when timing becomes vital to innovation. There are times when even systems that are deeply resistant to change can be reconfigured.
8. Intervene at the right point Knowing where to intervene in a system is as important as when. Donella Meadows, one of the founders of system theory, identified different levels of leverage in systems. The parameters of a system, which set its limits, can be changed. A minimum wage is a parameter. So is an inflation target, an immigration cap or a capital to assets ratio for a bank. The trouble with parameters as Meadows put it is : “People care deeply about parameters and fight fierce battles over them. But they rarely change behaviour. If the system is chronically stagnant, parameter changes rarely kick–start it. If it is wildly variable they don’t usually stabilise it. If it is growing out of control, they don’t brake it.” Many systems work well within the parameters set for them and yet still need change. Buffers and stocks, are part of these critical parameters and they can be increased to slow down the rate of change in a system, or reduced to increase the speed with which it reacts. The physical features of a system, like a distribution network, can be changed but this is often takes time and can also leave behaviour unchanged. Newly–designed schools will not change how children learn unless teachers approach their job in a different way. Infrastructures take a long time to change: London still relies on Victorian sewers. The information flows of a system can be redesigned to enable information to flow to where it is most needed, to improve the working of feedback loops – both positive and negative – so a system can readjust, as a thermostat adjusts a central heating systems. Simple changes to how information on energy usage is displayed, for instance, can have an impact on household behaviour, although information alone is rarely enough. The rules and goals governing a system – who is allowed to do what and why – can have a huge impact on behaviour. Containerisation had a huge impact only when the technology was accompanied by changes in rules: new working practices in docks; deregulation of trucking and shipping in the US. The framework and purpose governing a system provides the greatest leverage. Whole systems can be transformed by changes in ideas that reorder how people behave. Shifting from industrial systems, that transform physical resources into products and produce waste in the process, to closed–loop systems that endlessly recycle and reuse resources, is an example of such a change in framework and purpose.
9. Blank sheets are very rare New systems often fail when they demand everything should be changed all at the same time. Almost without exception successful new systems cleverly incorporate elements of old systems to make them easier to use, more familiar and to minimise learning. The growth of railway systems is a prime example. Modern railway systems started life in England in the 18th century, transporting coal from collieries to canals and ports. When George Stephenson was appointed in 1825 as the engineer for the first public railway in England, between Stockton and Darlington, the forerunner of all forms of mass rail systems, he used horse–drawn trucks from nearby Hetton colliery to bring the earth to build the embankments. The gauge for these trucks was 4’ 8”. The steam locomotives that Stephenson planned to employ could have easily carried wider, heavier loads than horses, yet Stephenson adopted the 4’ 8” gauge for his ‘permanent way.’ The changes Stephenson was proposing were already revolutionary: a steam–powered railway for public use was an untested new technology, with an untested business model. Widening the gauge was the least of their concerns. Stephenson was revolutionary where it mattered – showing how a public railway with a steam train could work – while being conservative where it did not matter – the gauge for the rails. Clever systems innovators know when to clothe the new in the old, to incorporate older elements into new systems to make them less threatening.
10. Learn to leapfrog In much of the world, huge opportunities for systems innovators are being opened up by mobile digital technologies. From banking to health services innovators are developing alternative models for serving people by doing without traditional, heavy, complicated, infrastructures of hospitals and banks. These light, mobile systems leapfrog the old systems, rather than trying to reform them. The systems of the future will be created by leapfroggers.