Beyond Innovation

By Simon Jones, Director, Human-Computer Studies Laboratory, University of Amsterdam





Introduction

In a few short years innovation has moved from being the domain of wild-haired creatives into an effective business process that acts as one of the levers for extracting value [1]. At this point it is timely to pause and consider ‘what’s next?’ After all, the global environment continues to get more complex, competition gets tougher and the demands of customers increasingly sophisticated. How can countries, regions, cities, private and public sector organizations respond to this challenge? How can they succeed in a marketplace where innovation is an established technique, widely deployed? How do we reach way beyond what is possible and proceed as though it could be? In short: in order to maintain competitive advantage, what comes after innovation?

This article looks at the next wave of change for organizational and individual creativity. It argues that to thrive in the non-linear, quixotic, accelerating world we live in the creative response has to evolve beyond systematic processes of innovation and become spontaneous, volatile, impulsive and serendipitous. In short, we need to be instinctive.

It seems paradoxical, perhaps even reckless to suggest the next competitive edge will arise from preferring instinctive action to formal process. However, there are a number of existing cases where doing precisely that has been the best route to higher performance.

Innovation Today

Innovation is the act of connecting human creativity into a supply chain. Sometimes it is connected into an existing supply chain and sometimes it creates an entirely new supply chain. Many organizations have recognized the central role of innovation as a means of extracting maximum value from assets old and new. Indeed, many companies, cities and regions will claim to have a culture of innovation and methods plus tools and techniques for innovating. As such innovation is becoming a systematic process for creating, managing and deploying human creativity [2]. Contemporary European economies see innovation as a main component of maintaining economic success and ensuring future prosperity for their people. However, the globalised nature of business means that the emerging economies of Asia and beyond are similarly adopting and adapting innovation practices as they too seek to climb the added-value ladder. If the developed economies of Europe are to maintain their competitive advantage just having an innovation system will not be enough, they will have to accept that their competitors can deploy innovation strategies at least as effectively, just for example, as they do today with quality systems. To flourish in the future Europe needs to master the skill sets that lie beyond innovation.

Three Cases of Instinct.

Flying

Manned flight has been possible for just over 100 years. In that time, engineers and scientists focused on aerodynamics to develop smooth, stable flying platforms. The creation of such aeroplanes has had a transformative effect on our lives, of that there’s no doubt. Aeronautical engineering developed rich and sophisticated theories and models about the behaviour of airplanes. A key element of any aeroplane is its control. The ability to fly straight and steady under differing conditions makes for a plane easy to manage and generally safe and sound. However, where aeroplanes need to out-perform each other, such characteristics are disadvantageous. In the extreme case of military fighter aircraft, airframes which are inherently aerodynamically unstable are not only desirable but offer the best opportunity for surviving a dog fight [3]. In pursuit of this goal, aircraft designers have rejected much of traditional airframe design and wilfully create planes which left unmanaged will hurl themselves into pieces. However by harnessing these designs to appropriate sensor, actuator and control systems, successful flight is possible by continually adjusting the system to correct the instability when needed but permits such instability when the resulting changes deliver enhanced manoeuvrability.

Avant-Jazz

In the mid 1950s, Ornette Coleman produced his albums ‘Something Else’ and ‘Tomorrow is the Question’. These are generally considered to be among the first Avant Jazz (also known as Avant-Garde Jazz or Free Jazz). Ornette and others like him found accepted Jazz styles to constrain not to liberate him. Avant Jazz uses many Jazz idioms, but the role and rules of composition are considerably weakened. Avant Jazz emphasizes the role of improvisation and has few or no pre-composed elements [4]. In the last 50 years this approach has evolved considerably and more structured and compositionally influenced forms have also emerged [5]. Nonetheless the underlying recognition is that above and beyond a certain point structure and process inhibits and it is only by wilfully freeing oneself of these things is further progress possible.

The Game of Life

The Game of Life [6] is a well known computer simulation where a large square of cells, can be either black or white. Cells have a rule to decide whether they change colour and this is usually decided on the basis of the colours of the neighbours. The simplest version checks what colour the majority of the neighbours have and changes the cell colour accordingly. It’s a lot of fun to observe and can create a series of remarkably attractive pictures and animations. However it also has many important practical applications. The Game of Life is one representative of a class of systems known as cellular automaton (CA) they turn out to be powerful tools for the analysis of complex systems including encryption and many natural systems. However they operate in a very precise way. All cells have the same rules to obey and all cells update themselves at the same time. As a result of these restrictions many important problems, especially those that model living cells or the phenomena of complex groups are not easily addressed by CA’s. Moreover, the constraints on their behaviour are intrinsically unrepresentative of real cellular systems. Researchers have considered eliminating or modifying these constraints and proposed asynchronous cellular automaton (also referred to as stochastic or probabilistic cellular automaton) [7]. These devices still change state as a basis of neighbour information but do so at a time of their own choosing and with a certain probability of a change occurring. Such systems are far harder to analyse and control. Sometimes they fail to do anything useful and rapidly get stuck in a single state or oscillate aimlessly around a few patterns. However it has also been discovered that with suitable rules and suitable starting conditions asynchronous cellular automaton can not only solve problems faster and quicker that regular CA’s but also solve complex problems that regular CA’s simply can’t.


Post-innovation

If we look at the three diverse examples above, there are a number of common factors which point us in the direction of the post-innovation landscape.

• They have moved from an environment of a small number of cohesive macro-rules to one with many overlapping and conflicting micro-rules




• The participants have a very high level of skill and experience in the domain




• The overall control system intervenes very frequently but each change is relatively small
  

From Macro-rules to Micro-rules

This seems to be one of the characteristics of the post-innovation landscape. Unstable aircraft are more manoeuvrable than stable ones. The well established equations and design principles of aerodynamics have been wilfully ignored to create a structure where instability of the airframe is maximised. The elements of the airframe fight against each other and together do not form a system optimized for airborne transport. In Avant-Jazz the well established compositional techniques, timing, tonal forms, melody and rhythm have been disregarded. The sound produced however is not random, each of the notes, phrases and forms have specific musical intent, it is the rules that produce songs and melodies that have been discarded. In cellular automata systems with a single or a few update rules, they are now superceded by devices where each cell has its own rule and conformance to those rules varies according to time, context or chance.

To use a language metaphor, in all these 3 cases, the established ‘grammar’ of the system has been replaced by something else but the individual sounds, formants or syllables are redeployed not abolished.

High-Level of Skill

One of the advantages of innovation practices is that it deskills the process to make it accessible to many people. However in these examples of a post-innovation landscape, such practices are currently only possible by those with extremely high levels of skills and techniques. Unstable airframes require pilots with the highest levels of training and expertise. Avant-Jazz is a form simply impossible to play by any but the most gifted musicians. The design and operation of asynchronous cellular automata even now defeats leading mathematicians and computer scientists. Success in the post-innovation landscape is likely therefore to depend on access to individuals who have been trained to the very highest levels and have significant expertise in particular domains. Such individuals have to have mastery of their specialist topic before they can effectively go beyond innovation to create new economic, social and technical landscapes.

Frequent Adaptation

Traditional management or control strategies usually operate on a macro-scale. A goal is set, it is monitored at a relatively small number of intervals (e.g. mid-life project reviews) and outcomes generally assessed towards the latter of half of a project. In the post-innovation landscape this is likely to be quite different. The ‘occasional touch on the control stick’ strategy taught to pilots is highly unsuited to modern fighter aircraft. They require frequent adjustments to stay in the air. Indeed, the degree of instability is such that computer support is generally necessary for most of these aeroplanes to be flyable. In Avant-Jazz rehearsal and scores are generally neglected. Instead a premium is placed on improvisation during which players play instinctively based on their own phrasing and the music that other players around them are currently producing. At its best it results in music with a passion and nuance unmatched by other forms. Cellular automata update their own behaviour frequently, in the asynchronous case the rules of updating are modified at least as often as the cells, resulting in a complexity of behaviour unmatched by traditional forms.

The Post-innovation Perspective

The post-innovation landscape will require different approaches from organisations, different forms of interaction and different skill sets. Of course the longstanding needs of entities will remain: they have to have a purpose, operate within an eco-system or supply chain and have ready access to financial, social, physical and information infrastructure. Current innovation programs are still necessary in the same way the need for quality systems is also not bypassed. However, the post-innovation landscape impacts leadership, organisational development, regional and city innovation policies and the educational sector. The following sections outline where and how these changes will be felt and how best to adapt.

Expertise

Organisations will need significant numbers of people who are given a great deal of autonomy and these people will be entrusted with the future of the organisation. Their own individual track records will be of the highest calibre but their challenge is to deconstruct skill sets and knowledge and create a new vocabulary and grammar for themselves and their organisations. They may not know precisely where they are going, but their instinct and flexibility serves them well.

These individuals will have to spend much more time learning, experimenting and exploring than is done today. Perfecting their operational skills and exploring new concepts is vital to keeping good instincts and the ability to create new vista’s

Their skill set and approach makes them much more similar to elite sportsmen or artists. In common with such types, they will have a relatively short period in their lives where such instinctive abilities can be effectively deployed. Thereafter roles for them in developing new experts or other roles need to be sought.

The Post-Innovation Organisation

The operational mode of organisations will need to change. There will still be the need for long-term strategy but this will necessarily be broad brush and greater emphasis given to the culture, beliefs and value of the organisation as the guiding lights.

The organisation must possess superlative change management capability such that large numbers of small changes can be effortlessly and fluently executed; a challenge for even the most able COO’s. The organisation must have the capability to assemble and reassemble itself frequently and rapidly to ensure effectiveness as a new cultural and operational landscape is pioneered.


Regional and City Innovation Policies

Given the increasing importance of attracting star players to a region or city, the emphasis on a creative eco-system where supporting mechanisms such as venture capital, world-class universities and a pleasant living and working environment will increase in importance. Furthermore, such individuals are in demand and need to be attracted and incentivised to stay. Traditional inward investment and regional development strategies have focused on companies. Given the increasing role of instinctive leadership, this approach is likely to be insufficient and emphasis on locating and attracting key individuals either at or before their peak performance will increase in importance.

Educational System

Such a landscape is likely to require significant numbers of talented individuals who like premier league footballers or international artists, are highly in demand for the relatively brief period they perform to the highest standards. This rapid turnover of instinctive experts means that the educational system needs to reform itself to nurture and enhance creative talent of the highest order. Europe’s elite institutions will need to expand to significantly enhance the number of people with skills of the highest level. This represents a new challenge to the massification trend of contemporary higher education and research that some will find difficult to attain.

Ultimately the requirement of the education system will be to hugely increase the number of individuals who have sufficient mastery of a domain to create a grammar and vocabulary that moves beyond it and put that into practice. This is truly uncharted territory for advanced education.

Summary

Innovation is not the end of individual, organisational or regional creativity. Human ingenuity remains central to competitive ability. The systematic approach takes us so far, but examples for science, technology and the arts show the fullest competitive advantages come from highly skilled individuals, encouraged to reconstruct their domains instinctively and possessing the courage and fortitude to master a world of permanent instability and ruthless competition.


References

[1] ‘Taking Action: Making Innovation Pay’, Harvard Business Review, James P. Andrew, Harold L. Sirkin, John Butman, Jan 9, 2007.
[2] ‘From Ideas to Income’, CEO Today Sovereign Publications. Simon Jones, September 2007, accessible via http://www.simon-jones.com/ideastoincome
[3] ‘F16 Fighter’, Global Security Inc, http://www.globalsecurity.org/F16Fighter
[4] ‘Jazz’, Encyclopedia Brittanica Online, http://www.britannica.com/jazz
[5] Avant-Garde Jazz, Wikipedia, http://en.wikipedia.org/wiki/Avant-garde_jazz
[6] ‘The Game of Life’ Scientific American 223 120-123, Martin Gardner, October 1970.
[7] ‘Notes on finite asynchronous automata’, W. Zielonka, Informatique Théorique et Applications. v21. 99-135.

Author

Simon Jones is Full Professor at the University of Amsterdam and former CEO of MIT’s Media Lab Europe. He is Founder of Ictinos Innovation which advises governments, regions, cities and corporations in innovation policy and invests in and advises start ups in the ICT and New Media area. He is based in London and Amsterdam.

What future coal?

By Michael Akerib, Rusconsult

In the wake of today’s energy crisis, the number of solutions to reduce our dependence on oil and gas appear limited: alternative sources such as ethanol, wind or solar power; nuclear power or coal.

Coal appears to be a candidate of choice in view of its low price and its relative abundance in some of the OECD countries, but also in China, a country whose hunger for energy is growing exponentially.

In fact, the Middle East is the only zone where the sub-soil is wealthy in hydrocarbons but poor in coal.

At today’s prices, oil is seven times more expensive than coal on a thermal unit basis and this price difference explains the increase in global coal consumption of 35% over the last five years to account at present for 40% of electricity production.

Two-thirds of the world’s reserves are found in four countries: the USA, which holds 27% of the world’s reserves, Russia 17%, China 13% and India 10%. These countries, together, also represent two-thirds of global production.

The amount of reserves has, however, been put into question. The same tonnages have now been posted for several years, even in countries, such as China, Vietnam or the US, which have a high extraction rate.

The Energy Commission of the European Commission has strongly reduced the amount of reserves, from an initial figure expected to cover 277 years of usage, to 155 years. BP has an even more pessimistic outlook, with a forecast limiting the reserves to 144 years.

Germany and Poland have, of their own accord, and without providing any explanation, also drastically reviewed downward their reserves – Germany by 90% and Poland by 50%.

To confuse the issue even more, Australia and India revalued their own reserves….

Production in the countries of the European Union declined considerably. However, there are plans in France to rehabilitate certain mines and even to open new sites that were considered unprofitable until now. Such a move would enable Europe to be less dependent on Russian gas.

Only 20% of world production is exported, the market being essentially domestic. This, however, is set to change as previous self-sufficient countries are now becoming net importers.

Seventy per cent of the coal extracted is supplied to electricity producers, and 40% of the global electricity production is based on coal-burning technologies. Coal thus covers a quarter of the world’s energy needs.

Germany plans to close its mines by 2018 and would replace their production by the import of 50 million tons from Russia. Should such a contract be concluded, Russia would need to double its production. RWE, a major German utility, is planning to build three new coal-fired plants.

In Poland, 80% of the electricity produced is in coal-fired stations.

Italy is modifying some of its electricity plants that presently burn oil so as to function with coal.

In Britain, one third of the production of electricity is coal-based.

Russia is also increasingly looking at coal as an alternative to gas due both to poor planning, a shortage of production and an absence of investments in the required infrastructure. Russia’s coal production is presently 300 million tons and is forecast to reach 400 million tons by 2010. A five-year plan ending in 2011 should add 41 000 megawatts of new capacity at a cost of $ 130 billion.

Coal production decreased due to the restructuring of the industry, and Russia is the country with the highest dependency on oil and gas for electricity production. The present coal to gas ratio for electricity production is 26:71, and the objective is to change it to 31:65.

The mines in Eastern Siberia and the Pacific are economically viable, with an extraction cost of Rubles 35 to 100 per ton, or approximately, $ 1.5 to 3. The coal is particularly low in sulfur and it would be an attractive product to export, if it were not due to the distance between the mines and the ports, and the lack of a developed domestic transport infrastructure.

It is possible that Gazprom will acquire the coal monopoly, as well as its present near-monopoly on gas, the only obstacle being the Russian anti-trust agency.

India’s electricity production is very much coal dependent, as 80% of its electricity is generated by coal-fired plants. Tata Coal was awarded, in April 2008, a major credit line by the World Bank’s subsidiary International Finance Corporation, to build, in the state of Gujarat, their ‘Ultra-Mega’ plant which will burn coal to produce 4 billion watts per year as well as 23 million tons of CO2.

Coal production is the monopoly of Coal India which is unable to satisfy the rapidly increasing demand in spite of deposits of 100 billion tons. Thus, India’s coal imports should continue to rise and could even be higher than the country’s production of 400 million tons.

To maintain a steady flow of imported coal, however, major investments will be required in port and rail infrastructure.

An alternative to imports would be to abolish Coal India’s monopoly and allow private entrepreneurs to invest in coal production. There is little hope that this development will take place as the trade unions have indicated they would resist such a move.

China is a major user of coal since coal-fired plants are responsible – just like in Poland – for 80% of the country’s electricity production. On this basis, China uses annually 2% of its reserves and is now a net coal importer due, mostly, to the distance between the coal mine and the largest consumers of electricity, and hence of the power plants. The coal imports could reach 50 million tons per year. This would allow the country to treble its electricity production. It is believed that one new coal-fired plant is inaugurated every week. Precise figures are not available as a large number of these plants are operated illegally.

China Coal did a successful IPO on the Hong Kong stock market in 2006, and raised 1.7 billion dollars, thus enabling it to increase its production through the opening of new mines.

Another Chinese company, Shenha Energy, a producer of both coal and electricity, has a stock market value of $ 63 billion, which ranks it as the world’s most highly capitalized coal producer.

The renewed attraction of Chinese coal mining firms on the stock market is due to the partial liberalization of sales prices, with a maximum increase of 10% per year.

Electricity demand in China is driven not only by increased industrial output, but also by the increase in living standards and therefore an increased use of air conditioning systems.

In the US, 50% of the electricity production is coal-based and the country is a significant coal importer and the best quality deposits have been exhausted or nearly-exhausted.

There are plans to build up to 150 new plants, particularly to meet the growing energy requirements of the West Coast.

However, bankers and pension funds are extremely reluctant to fund these projects as they expect the Federal Government to pass very strict regulations in the near future.

The coal-miners lobby has been very active in clamoring for billions of dollars to allow electricity production from a mix of coal-based liquid products. A process of converting coal into gas, underground, could enable the country to reduce its oil imports by up to 30%.

Discussions are also under way with the US Air Force for a 25 year contract to supply a carbon-derived fuel, to partly replace the present consumption of 10 billion liters of jet fuel.

Producing fuel from coal, however, requires enormous quantities of water. Also, mining activity alters the scenery in a major way.

The total number of projects of coal-fired plants in the world add up to approximately 1 000 over the next five years. This would represent an increase in coal consumption of 3%per year until 2015 and of 2% per year from 2016 to 2030.

Coal generates 37% of the world’s CO2 emissions, but remains below the level of the emissions due to oil which represent 42%. It is, however, a worse emitter of carbon dioxide per ton. It also releases sulfur and some highly toxic pollutants not contained in oil, such as mercury.

The 600 tons of mercury released on an annual basis by China blow over Korea and Japan, the Russian Pacific and eventually reach California.

The damage caused by pollution has been estimated by the World Bank to cost China 10% of its GDP.

These problems have led to several projects to ‘clean’ coal.

The European Union’s CASTO (Capture to storage) program aims at reducing the cost of capturing CO2 by one third, as the present level of 60 Euros is considered uneconomical.

The storage would be done under the ocean floor, for instance in empty oil and gas wells. Initial experiments on land in the US and offshore in the North Sea have yielded positive results. There is nevertheless a risk difficult to asses in case of a major earthquake.

China produced 1.5 billion cubic meters of methane from its coal deposits. This figure represents 3% of its natural gas consumption. The 2010 target is to reach 10 billion cubic meters, representing 10% of the total consumption.

A gaseification process was developed in the US, based on the earlier Fischer-Tropsch process, to transform the hydrocarbons contained in coal into a hydrogen-rich mixture called ‘syngas’. This product burns as cleanly as natural gas and can also be converted into gasoline or diesel.

China invested $ 4.5 billion, two-thirds of which were raised on the stock market, to build two 2250 ton reactors to transform coal from the neighboring mines into gas. The process makes economic sense with a barrel of oil above $ 50.

The added value to US coal mines of such a process would be huge and Peabody Coal, the world’s largest producer with a turnover of $ 5.3 billion dollars, has calculated that it would reach $ 3 600 billion for this firm alone.

American Electric Power is working on a process called Integrated Gasification Combined-Cycle which would enable not only a gasification, but also the use of the gas to action a turbine. The CO2 could be collected relatively cheaply and buried or used to produce methanol.

The cost of building such a factory would only exceed by 15 – 20% the cost of a classic coal-fired plant.

In conclusion one can say that coal has a bright future, particularly if clean technologies could be developed to reduce the heavy pollution it causes and the anti-nuclear lobby is successful in blocking the building of new nuclear power plants.

It is therefore urgent to reassess reserves to limit the risk of building plants that would not be ensured of a continuous supply of raw materials.