Andrew Hargadon

The iEconomy

The NYT article on Apple and employment, How U.S. Lost Out on iPhone Work , offers valuable insights into the future of manufacturing. But there is a way out.

What our leaders tell us about our selves

Steve Jobs died. The outpouring of sorrow and admiration is nothing short of stunning, and more than most heads of state would engender. Jobs deserves credit for so much that Apple (and Pixar) have wrought, and a tribute to his purely technological contributions would be plenty.  But there is something intensely personal—something that speaks to us more than the phones, or laptops, or iPads—that in passing shakes us to the core and asks what we want of our leaders and of ourselves.

Entrepreneurs and Society: Kauffman Foundation's "3 Things" video

The Kauffman Foundation just posted a nice sketchbook talk by CEO Carl Schramm (embedded below), summarizing the good and vital research the company has supported that looks at the role of entrepreneurs in society.  These numbers should guide both policy and personal decisions.  

Misguided Policy: Following venture capital into clean technology

The Solyndra debacle raises significant questions about how to best pursue a clean tech revolution. As I argued before, most of these questions will go ignored in the scramble for political advantage but several others are raising the same questions (E.G., Real Solyndra Scandal).  A good post by Bruce Krasting actually brings testimony from an engineer with Solyndra that makes the company look very much like any other venture-capital backed business—consuming cash as fast as possible to grow as quickly as possible to meet a rapidly closing window of opportunity. 

In particular, the Department of Energy’s recent loan guarantee program, through which Solyndra received its loan guarantees. has backstopped roughly $2 billion to venture-capital backed clean tech startups with the honorable motive of fostering a clean tech revolution. In a search for means to foster a clean tech revolution, the Obama Administration made venture capital a cornerstone of its energy policy. Yet, despite venture capital’s leading role in clean technology this past decade, we don’t really know when it works well and, as importantly, when it doesn’t. 

Last spring, my colleague Martin Kenney and I completed a research paper that looked at the boundary conditions underlying venture capital’s success and its appropriateness in pursuing a clean tech revolution: "Misguided Policy: Following Venture Capital into Clean Technology."  The paper looked directly at the funding of Solyndra, Tesla, and other new ventures. It is forthcoming in California Management Review but, given the circumstance, wanted to introduce it here.

Download Hargadon Kenney 2011 CMR Misguided Policy Following Venture Capital 110726

Steve Jobs and Thomas Edison

Last week, Bob Sutton asked me to add my two bits to the dog-pile surrounding the “Steve-Jobs-is-the-modern-Thomas-Edison” analogy. I initially balked. There were plenty of folks who’d already made this connection. Then I balked because Bob’s own brilliant post on Apple took the discussion in a much more productive direction.  Over the weekend, however, I bit. Not because of how the analogy fit, but because of how it didn’t.

Finding new problems

What if innovation was not about solving problems?  This thought nags me whenever I'm forced to read about the grave responsibility of "innovation" to solve such persistent problems as climate change, healthcare, poverty, and education.  Or listening to how innovation might solve all of Acme, Incorporated's problems but especially that gaping hole in Q3 revenues for 2012, their obsolete technology platform, or declining share values.

More news on VC investments in Greentech

Some recent (bad) news from VC investments in greentech raise more questions about whether this is the best model for pursuing innovation.  Despite its glory days in the halls of the Obama administration in general and the DOE in particular, venture capital is not the cure for all ills.  In particular, the factors that make venture capital successful are not always those that make new ventures successful. Understanding the difference is critical for national policy makers, venture capitalists, and scientist-entrepreneurs alike.

In Facebook, who's got your back?

Networks play two very different roles in innovation. Broad-ranging social networks are great for moving knowledge about ideas, technologies, and people from where they're known to where they're not. And those with broad-ranging networks tend to be in a better position to see these ideas. But ideas are not so valuable in the innovation process, as I and others have argued.

This past week's New Yorker features a terrific article by Malcolm Gladwell, "Small Change: Why the revolution will not be tweeted," that illustrates this difference—between social networking as our kids know it and social networking as our parents' generation did.

While we were waiting for the google of electric cars...

While the DOE was out investing in startups like electric car manufacturers Tesla ($465M) and Fisker ($528M)—or rather guaranteeing loans, the equivalent of investing minus the equity—the regular old car companies were not sitting on their hands. In fact, while Tesla has ramped up production of its $109,000 Roadster to roughly 100 units per month, Nissan has announced its new $25,000 electric car, which will go on sale in the U.S. in December.

According to the AP (Nissan), 

The Leaf, a four-door hatchback, will have a base price of $32,780, but it's eligible for a $7,500 federal tax credit for electric vehicles. That will make it cheaper to buy than electric vehicles coming from rivals and may force competitors to cut prices. But the Leaf's limited range of just 100 miles per charge for its lithium-ion battery could be a dealbreaker for some motorists.

Customers can start reserving a Leaf in the U.S. on April 20 and Nissan is aiming for 25,000 orders by December. It hopes to build and sell 50,000 of the cars around the world during the first model year. Production is starting at an existing factory in Oppama, Japan, south of Tokyo, and will expand to Nissan's factory in Smyrna, Tenn., in 2012.

It begs the question—do we really need a silicon valley startup to produce electric cars? In many ways, Microsoft, Apple, and Google were revolutionary.  These companies were uniquely configured to design, build, and sell products and services in ways that were fundamentally different from then current market leaders.  And so they led revolutions in the personal computer, software, and internet markets.  

Is a wholly new business model required for leading a revolution in electric cars?  Yes, the drive train is different, but does building electric cars, marketing electric cars, selling electric cars, and servicing electric cars require fundamentally new organizational structures, skill sets, or business models.  

If Nissan can introduce an all-electric car with the capability of producing 50,000/year (or 4,116/month), where is Tesla's advantage?  As Tesla attempts to introduce a $50,000 sedan, where will Nissan be—let alone Honda, Toyota, and who knows how many other car companies who already have the supply chains, production lines, and distribution and sales to move their own models.    

The clean tech revolution will not be fought and won where the incumbents's business models can remain intact.  If we're waiting for the google of electric cars, it's going to be a while.

The future of organizations

A friend recently asked me where I thought the future of organizations was heading.  It was one of those deceptively simple questions on which few professors can resist taking the bait.  And, like any good speculative sociologist, I think not in outcomes but in the opposing forces shaping those outcomes (letting me make forecasts without making predictions). My quick response hinged on how technology and organizations interact over time, and so was worth exploring further. 

Two of the major technological forces shaping the future of organizations today are (1) the centralization of information (enabling the flow of decision-making, coordination, and control to the core) and (2) the decentralization of capability (enabling more potent actions at the periphery)

Organizations are increasingly able to channel information to the very top levels. Those movie scenes in which White House politicians watch, in real time, the actions of soldiers in the field are not unrealistic.  Through the miracle of enterprise software, top executives at retail chains, for example, can watch and respond to the daily revenue numbers of individual stores; sales executives can track daily progress of their salesforce.  Large organizations like Walmart can now respond with a speed and flexibility unheard of for their size, or for any size 10 years ago. 

At the same time, individuals and small teams at the periphery of these organizations can now take actions that control the fates of those organizations. Two traders, Michael Swenson and Josh Birnbaum, were able to save Goldman Sachs from the subprime meltdown (Goldman's traders, not bosses, deserve credit). And Andrew Hall, a trader at Citigroup whose small group (Philbro Corp.) was able to make big bets on energy prices and, by being right, generate 10% of the net income of Citigroup for 2007 ("Trader hits jackpot in oil"). Citigroup's response reflect the dilemma posed by these opposing forces:

"Questions about the future of Phibro could add to the problems facing Citigroup and its new CEO, Vikram Pandit. A sprawling company with 300,000 employees, Citigroup is trying to nurture entrepreneurial talents like Mr. Hall, while curbing risk-taking elsewhere. The bank can ill afford to lose top performers after a tough 2007, in which it wrote off billions of dollars in failed mortgage bets." [by rogue traders, no doubt -ed]

And this is not always a good thing. Individuals and small groups at the periphery are also becoming capable of toppling those same firms. The Cavelese disaster, in which a single pilot flew recklessly low, severing a gondola cable and killing 20 civilians, triggered an international incident.  These actions, while tragic, seem to pale in comparison to business, where we've seen "rogue" (but nevertheless junior) traders like Nick Leeson and Jerome Kerviel take down  longstanding and well-respected financial institutions (Barings and Societe General).  Increasingly, we're seeing these demonstrations of the power and capability that has been created at the periphery of organizations today.ves viable.

The Red Queen within

Between these opposing forces of centralization and decentralization we have, in essence, a red queen effect.  The Red Queen is named after a character in Alice in Wonderland.  As Lewis Carrol wrote.

"It takes all the running you can do, to keep in the same place."

The Red Queen describes positive feedback loops in competitive systems--where each side advances (sometimes very rapidly) in response to each other's advances. Or, as the poet Robinson Jeffers wrote:

"What but the wolf's tooth whittled so fine
The fleet limbs of the antelope?
What but fear winged the birds, and hunger
Jewelled with such eyes the great goshawk's head?"
                (Robinson Jeffers in "The Bloody Sire", 1941)

The flow of information and decision-making to the core and of capability to the periphery in many ways reflects a Red Queen effect--a set of interdependent evolutionary forces that, by interacting with each other, creating rapid change in organizations.

The more capability flows to the periphery, the more effort will go into providing the core with control over those frighteningly large peripheral capabilities. Conversely, the more coordination and control at the core, the more the organization creates capability  on the periphery. Control without the capacity for action is wasted, and action, by definition, lives on the periphery.

This Red Queen effect has forced large organizations to simultaneously centralize decision-making and decentralize raw power. And so with all the running they must do, they are in the same place--no less secure for all of their centralized control and distributed capabilities.

And so it seems that one of the most important lessons we can be teaching our next generation of leaders is to understand and manage what will become an increasingly unstable aspect of organizational life.  The illusion of control over resources that can, on any given day, bring  the entire organization to its knees.