Noise Between Stations

Category: Design

Apple’s R&D investment – too low or too high?
“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
— Steve Jobs, Fortune, Nov. 9, 1998

This Street.com story on Apple’s under-investment in R&D has been making the rounds with the exclamation that more money does not equal more innovation. As a principle, I agree with that, and in fact it’s one of MIG’s axioms that “innovation is not expensive”. But by this we mean you can’t simply throw money at the problem, you have to tap into the capabilities of people. That said, money — especially to a hardware company with proprietary software — doesn’t hurt, and it’s worth looking more deeply into Apple’s situation to understand what’s going on.
1. The Street article compares the most recent R&D spending as a percentage of sales (“While sales have grown at a compounded annual rate of 27% over the last four years, R&D spending has grown at an average rate of just 5.6% per year over that period.“). This masks the exponential increase in recent sales (65% net sales in Q4 2005). Since innovation is a function of how people work, scaling R&D simply to match sales could be futile and possibly harmful as an organizational development change. Just because accounting usually measures R&D as a percentage of sales doesn’t mean it should be managed that way.
2. In absolute terms, Apple’s R&D investment is up $59 million in Q4 2005 over Q4 2004. For all we know this might be a good, sustainable R&D investment rate for them.
3. The IDC analyst quoted in The Street article of course doesn’t know the reasons for the drop in R&D investment (nor do I). The article does mention an equally plausible theory is that Apple is learning how to be more innovative with less money, e.g. through management innovation that ultimately leads to other kinds of innovation. And isn’t doing more (sales) with less (R&D investment) a good thing?
4. The comparison to other companies in Apple’s industry is a good idea, but the comparison is restricted to R&D as a percentage of sales. It ignores the effectiveness of that R&D investment vs. other factors and the directionality of the R&D-to-sales relationship. Just consider where, with regard to new markets, Apple is heading and where Sony is heading.
5. Where the article really misses the point, IMHO, is by saying, “But even with all of Apple’s market and business prowess, the company is still, fundamentally, a technology company.” It may not be in the IT analysts’ interest to say so, but the nature of R&D investment is changing (at least in Apple’s industry) from solving tough technical problems to solving tough design problems.
6. Finally, it’s ironic that analysts who have historically criticized Apple’s returns now criticize their frugality! I tend to think the traditional IT analysts will always find a way to not love warm, fuzzy Apple.
When everyone realizes Apple faces more design than technology issues, analysts will start to ask how much companies are spending on R&D of people rather than R&D of technology.
3/17/2006
Balance control with collaboration – First Draft
To solve tough problems, we need the active participation of a diverse group of people. Instead of control residing only with managers, each person on a team should have the authority and responsibility to contribute fully. Rather than command them from above, the team leader should facilitate the teamâ€™s efforts.

Since the industrial revolution weâ€™ve needed a lot of science to deal with the changing nature of work. Science in the form of organizational theory helped us structure giant corporations. And the scientific method made time-motion studies possible which vastly increased manufacturing speed. Frederick Winslow Taylor wrote a book in 1911 about the latter field, appropriately titled, The Principles of Scientific Management.

These days our work increasingly consists of complex problems that cannot be divided into simple, repeatable tasks. Take, for example, the Global Earth Observation System of Systems in which 60 countries have agreed to participate in a 10-year effort to collect and share thousands of measurements of the Earth. This data has a wide variety of applications, from monitoring pollution to predicting the weather. But this requires hundreds of scientists with different agendas to agree on thousands of decisions. As one of the project leaders says, â€œâ€˜We have been able to make computers work together. The challenge of the 21st century is to get people to work togetherâ€¦â€™ noting that the problem will be overcoming bureaucracy, politics, and turf.â€

Science alone wouldnâ€™t have a chance to make this project work.

The work practices we used throughout the 20th Century are still important and useful. But for complex, 21st Century work theyâ€™re not sufficient. Because the problems are bigger, they require more people with more skills to solve them. These complex problems require the combined effort of people with complimentary experience, knowledge, and ways of thinking.

Working involving new combinations of people requires effective collaboration.

Collaboration requires each person on a team to have the opportunity to drive the processes and outcomes.

In other words, success with complex problems depends on sharing control with others. Joe Kraus, the founder of Excite and JotSpot has said, â€œVery early on, the founders of startups make an important choice. Do they want success or control? â€¦I’ve picked success. And success implies giving up control â€“ hiring people who are much better than you, or being willing to be the janitor if that’s what’s required.â€

Of course, groups that have no leadership at all can easily slide into a death spiral of debate and fail to accomplish anything. Success today requires balancing control in the form of management with collaboration in the form of facilitation.
Try it now
On an interdisciplinary team, assign a team lead that is a contributing member of the team, but also has responsibility for two critical functions:
1. Facilitate the process â€“ This is an art in itself, but it includes eliciting each team memberâ€™s best work, resolving conflicts, and finding alternative paths when the team gets stuck.
2. Make executive decisions â€“ There will be times when team members will have opposing opinions and canâ€™t resolve them. The team lead synthesizes everyoneâ€™s viewpoints, weighs the project priorities, and makes the tough decision, but only when absolutely necessary.
3/13/2006
Numbers can be prototypes
Something I knew on a surface level but didn’t internalize until taking a Financial Modeling class was that numbers can be prototypes.

When financial people build models in a spreadsheet, they’re building prototypes. Just as a designer might sketch on paper or carve a piece of foam, financial modelers will quickly sketch in a spreadsheet (or on the back of a napkin).

What’s odd here is that designers usually think of numbers as representing exact quantities. When a designer writes 100,000 he means 100,000, whereas a financial modeler may mean 100,000 +/-20,000, or she may mean on the order of magnitude of 10⁵ and not 10⁶.

The opposite gap in understanding is true as well. Designers are often hesitant to show clients an early design in the fear the client will misunderstand which aspects are high fidelity and which are low fidelity.

An aptitude for building and understanding different kinds of models seems to be an important skill for integrated thinkers. The question for me is, how can we develop this aptitude, and how to teach it to others? My approaches so far include:
1. Gradually move from similar skills you do well to new skills: for example, when learning financial modeling you might start by sketching a graph of the variables, or writing out the financial scenario in prose format, and then turning that into a spreadsheet.
2. Play simulation games: which model many different kinds of variables and interactions in a dynamic, interactive way, allowing you to iterate and learn. Making our own simulations will become an important teaching skill.
3. Work with someone who already does both well: these are rare, but they do exist.
3/9/2006
Burning questions
I had an interesting discussion today with a graduate student who is honing in on a thesis question in the intersection of design, innovation, and business. Along the way I remembered I had composed a list of questions that came up during a project last year. These are not necessarily great thesis questions, but they’re certainly things I’d like to know more about, and worth releasing just in case someone is inspired to work on them…
- How can we introduce the uncertainty of wicked problems into organizations accustomed to certainty gained through analysis and hierarchical decision making?
- How does top-down strategic innovation mesh with bottom-up product innovation?
- How can teams seamlessly fuse analysis and creativity?
- Which combinations of skill sets help individuals be innovative?
- How can design theory be applied to business planning and strategy?
- In each of our industries, which skills and techniques are proving successful?
- In each of our situations, which language helps us communicate with colleagues most effectively?
- How does culture determine what kinds of products and services are possible, and vice versa?
- Are there attitudes in our fields that hinder innovation?
- How do organizations accustomed to making decisions based on hierarchy or quantitative analysis alone become more customer-centered and make use of qualitative analysis?
- Can we teach process in a heuristic, modular way that makes it easier for people to use a toolbox of processes as easily as they use a toolbox of techniques?
3/8/2006
Shiny, happy, innovative people

…the business world is full of highly touted prescriptions for being more innovative… in my experience, few solutions actually address what I believe to be a fundamental enabler of innovative behavior in organizations… The key to unleashing innovative behavior is asking the question “how can I help each person in my organization achieve a state of happiness on a daily basis?” In other words, help happiness bloom, and innovative behavior will follow.

Happiness and the Art of Innovation

I’d say more is required — innovation is more than just working well, it’s taking risks to try the untried, which takes moxie — but the essence of this message is spot on: happiness is a prerequisite for good work, and managers are responsible for creating an environment where that’s possible (you can test this by asking, “What if you knew everything there was to know about innovation, but you worked for Dilbert’s boss?“). The Knowing-Doing Gap argues this at length, refuting the idea that mean-spirited management makes better workers.

3/6/2006
Agile publishing

37 Signals’ new book Getting Real is out, and looks like a great read about applying agile techniques and spirit to web app development. It’s agile both in the content and in having small chapters, something we’ve seen in books like Godin’s Purple Cow and what I’m working on by re-interpreting agile principles for general managers in Evolve.

Who has time to read long books?

3/2/2006
WOW — I DeSIGN

Dr. Charles Burnette’s IDeSiGN — Seven Ways of Design Thinking is the best thing I’ve seen in a while, a curriculum for teaching children how to pursue their goals using different ways of thinking.

This is designing. It is a process of creative and critical thinking that allows information and ideas to be organized, decisions to be made, situations to be improved, and knowledge to be gained. Purposeful thought and action is the basis for all human achievement and is found in all subject disciplines. Its objective is to change information,understandings or circumstances, to preferred or improved states or to create something entirely new. Because there are many possible outcomes from design thinking it is not easily automated like purposeful thought that has become habitual or has a predetermined result, such as solving a puzzle that has only one solution. Design thinking is a more powerful, comprehensive and creative form of purposeful thinking that can be applied to interpret or resolve complex, confusing, or unanticipated situations whenever and however they occur.

2/28/2006
Use simple tools

The tools we use to create and communicate should be so easy to use we rarely ever think about them. With simple tools we naturally focus on what the tool allows us to do.

The famous typography designer Matthew Carter has said that when you read you should not see the letters on the page, you should see through the type to the message. If printed type was the tool weâ€™ve used to communicate for thousands of years, today we do our jobs using mobile electronics, software user interfaces, rapid prototyping devices, and so on.

And yet, as I write this in 2006, I still canâ€™t use my computer to make an appointment with someone working for a different company and know that the meeting will appear on both our calendars. I may spend time trying, but I know this everyday task is still completed more easily (and with more accuracy) if I simply call the other person and schedule the appointment over the phone.

If your calendar software makes it difficult to schedule a meeting, use something simpler. If it isnâ€™t obvious how to use the functions of your mobile device, get something easier. These tools should be just as transparent as the type youâ€™re looking at now. Communicating and executing our ideas is too important to let technology get in the way.

Robust tools are seductive, but their complexity quickly results in diminishing returns. Adopt tools with as many features as you need, and no more. Usually a few essential features will enable you to do many things well.

Try it now
As you go through your days, write down a list of every tool you use to create and communicate. Mark those that are cumbersome, and find an easier replacement for each cumbersome tool. Do the same with your team.

2/24/2006
Thought for Friday: Relax

Two researchers at Pace University here in New York compared results from dozens of studies of thousands of employees in 21 occupations to find which exhibit more stressors. Did fire fighters and police officers come out on top? No. Financial and business people did. We worry more about poor job fit, management problems, and work/home tradeoffs. Whereas police expect and even crave thrills.

With that in mind, here’s a couple thoughts going into your weekend:

“The trouble with the rat race is that even if you win, you’re still a rat.” — Lily Tomlin

â€œListen: We are here on Earth to fart around. Donâ€™t let anybody tell you any different.â€ — Kurt Vonnegut

2/24/2006
Frontiers in lower customer service costs

As Vonage prepares for their IPO, are they enacting measures to improve their cost structure?

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2/24/2006
Architecture and employees

I wonder if this flashy, animated building facade — very not-financial services — changes employees’ perception of Lehman Brothers?

Could it backfire and make employees more cynical?

2/23/2006
Gain, v3.0

The new & improved Gain — the AIGA journal of business and design — has just re-launched. Congrats to Karen, Jeff, Liz, and the gang.

2/23/2006
Your future is older, browner, and more feminine

The always entertaining Andrew Zolli has a new article in the current Fast Company mag, expanding on the themes he’s been talking about in person. Essentially he demonstrates the importance of looking through the demographics lens when thinking about the future…

The hourglass society will bring an avalanche of new social challenges, cultural norms, and business opportunities. With a huge increase in the number of older consumers, entirely new entertainment, culture, and news markets will open up–film, television, books, and Internet sites pitched more to the Matlock set than to the Eminem crowd. Also, older people tend to vote more frequently, and they will wield significant political clout: We could see a multidecade “boomerocracy” or, as one gen-Xer put it archly over cocktails, “TRBN: terminal rule by boomer narcissists.”

I’ve found his presentations quite useful in the past, and I’m looking forward to his participation in the Design 2.0 panel. If you were thinking of going, I hear a few seats are available.

2/21/2006
Balancing Act: Westin
John Holusha of the New York Times profiles Westin’s decision to move to an all non-smoking format in their hotels. I think this rocks on several levels:
1. It’s progressive, recognizing only 6% of customers request smoking rooms (only half of which actually smoke in the rooms), and this segment isn’t key to their success. Also see Nikon’s move to all-digital cameras.
2. It’s good for customers, in that Westin’s in-house smoking cessation program will help the 90% of smoking customers that say they want to stop.
3. It’s good for business, creating more flexible room inventory and avoiding the damage caused by smoke and cigarette burns.
It’s a brave thing to aspire to higher goals for your revenue, brand, environment, and customer satisfaction, then design a solution that addresses all of them.
2/19/2006
Tom and Jerry and management

My colleague Jim, from a recent interview:

I was born in Hollywood and raised in Los Angeles. My father, mother and grandparents all worked in the film industry. My parents actually met when they were both working on Tom and Jerry cartoons. The culture of filmmaking has influenced my approach to design and business. Hollywood offers interesting models for collaboration, ad hoc organization and merging creative and business requirements. Similar practices have migrated to Silicon Valley, and working with clients here was one of the things that sparked my interest in management issues â€” how we work and the ways in which our working methods influence the products we make.

2/17/2006