Occupying the Management of Innovation

Occupying the Management of Innovation: A talk with Sami Makelainen Innovation Manager at Telstra and External Expert at the European Commission.

Capital I Interview Series – Number 8 

Sami Makelainen occupies a position which is finely balanced between Australia and Europe.  Manifesting what some might say was a true Finnish trait, Sami is a straight talker who doesn’t let a false sense of political correctness stop him from calling things as he sees them – be it broadband connectivity, vested interests in the coal industry, innovation (or the lack thereof) in telecoms, seed funding for innovation and the current economic crisis.  We talked about all that and much more for the Innovation Interview Series.

How do you define innovation Sami; and do you see a difference between  small ‘i’ and Capital ‘I’ Innovation?

There’s always a problem in speaking about innovation because everybody has their own definition.  Having said that, there are certainly two vastly different styles of innovations, or new things out there.  Things that are more important, more fundamental and more disruptive would tend to fall into Innovation. But in terms of volume, the vast majority of stuff that’s going around is going to be incremental innovation.  What I would consider true Innovations are few and far between.

Can you give me some examples of what you think are Capital I Innovations?

One of the most recent Innovations is the Gemasolar CSP plant (Concentrated Solar Power plant) in Spain that’s producing electricity 24/7.  It’s a baseload solar power plant, the first commercial of it’s kind. I’m not sure how much of the energy debate you’ve been following, but one of the primary objections people have to solar power is that it can’t do baseload production – because the Sun only shines eight hours a day. Well, [Gemasolar] is beginning to show that’s not quite true.

The Gemsolar Power Plant

When I moved to Australia I was surprised more wasn’t being done to take advantage of the Sun. 

Inevitability [they] will, but it’s going to take a long time, particularly because we have a hell of a lot of coal in Australia.  It’s cheap and there are big vested interests for it going as long as possible.  [There are] people who don’t really care about emissions, or believe in Global Warming. They just want to maintain business as usual.

How do you think the carbon tax will affect that?

It’s probably going to start at too low a level to have any meaningful impact in the first few years and it’s probably going to have too many concession to various stake-holders.  It’s going to be baby steps in the first, let’s say, five to ten years unless there’s some massive global shift.  But, with the speed things have been progressing in the past twenty years in terms of the climate debate, I’m not expecting that to change any time soon.

Do you think your perspective on the subject is tempered by the fact that you’re European, as there seems to be quite a different perspective to these issues in Europe in comparison to that in Australia?

Probably. All of our opinions are colored by our background, whether we acknowledge that or not.

How long have you been in Australia?

Coming up to  two years now. Ironically we’ve got tired of the cold Finnish winters and arrived in the coldest and wettest winter that Australia had in forty years.

Seeking sunny days

Can you tell me something about your role as Innovation Manager at (Australian Telecoms firm) Telstra?

One of the key responsibilities I have is managing the funnel of ideas.  We have a relatively open innovation process, so it’s fairly quick to deal with ideas.   They enter from a number of sources, whether it’s our staff within the Chief Technology Office or wider Telstra [organization], from start-ups, universities, research entities, external individuals, or our vendor partners.  Ideas come from different sources into our innovation process and then it’s a matter of managing, weeding, refining and deciding what to go forward with and how to go forward with them.

My background is from the Nokia Siemens Network where I was with the Application Innovation unit. If you go even further back then my background is in systems research, program management, systems architecture, solution architecture and a whole lot of other roles in the telecommunications, banking, electronic banking and online services space.

It’s amazing to me how many people in the innovation community seem to have a background in telecommunications.

That’s even more ironic because telecommunications is an industry that’s far from innovative.

How would you compare the culture of innovation between Finland’s Nokia and Australia’s Telstra? 

There are similarities in that both are relatively big organizations and big organizations come with both opportunities and challenges.  There are big opportunities in terms of having the resources to do something if we decide to.  But then of course it comes back to the risk-averse nature of stake holders. Trying to push something truly disruptive and truly innovative… I wouldn’t say it’s impossible, but it just takes a lot of effort.  Having said that, if you have a truly disruptive idea, while working within your start-up might be easy, it’s not going to be easy bringing it to market.

It’s never a clear-cut path.  And, depending on what level of innovation you’re talking about, the bigger and the more Innovative they are the more you can, and should, expect people to hate them. Howard Aiken, the US computer scientist who died [almost forty] years ago, very accurately said,

“Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.”

In terms of similarities in innovation between Nokia Siemens and Telstra I think one of the common features is that most of the innovations we’re doing [at Telstra], and were doing at Nokia Siemens, are customer-centric.  It’s not just about business to business and it’s not just about how to make our bottom line better, but how to make our bottom line better in a way that helps the customer.

Even at Nokia Siemens, which was more a business to business company selling to operators, the applications and services that we came up with there were mostly originating from end-user research.  There is a genuine attempt at figuring out what people actually want rather than just pushing new stuff out for the sake of new stuff.

Does that entail asking what people want rather than telling them what they need?

Yes, but it’s not just about asking what they want; it’s about observation of future behavior.  Asking people what they want is one of the traditional market research methods and it sucks!  If you ask anybody how would they like this and that to work, you’re not going be able to get a good answer out of them.

If you had asked two years ago (before the Apple iPad was out), “How would you like your next portable electronic device to look?” – nobody would have answered – Well, I want an iPad, or a tablet, or anything like that, because the previous incarnations of those were unusable and terrible.  Nobody felt at the time that they could actually be such a big hit.

With a view to ‘observations of future behaviour,’ how do you see Telstra making use of the opportunity that the NBN (broadband) is going to provide for engendering innovation?

The NBN is obviously going to change a lot, but it’s mostly going to change things on the wholesale and fixed business side.  One of the thing that the NBN will bring, that is going to be hugely beneficial to all companies, is the fast connectivity to a majority of Australian households. Right now, as we all know, Australia isn’t exactly a leading broadband country.

That’s certainly true.

When I came here two years ago, I almost had a heart attack when I looked at the speeds and the prices when subscribing to a broadband connection.  I was like… “What!? They are capped by gigabyte?? I’m not gonna take that!”  But I don’t necessarily think that the NBN is going to get rid of the caps or the limits altogether. The economics just don’t work.

Having said that, if the NBN achieves it’s goal – and that’s if because I don’t think everybody will have understood how much it’s actually going to end up costing the consumer – there’s going to be big broadband connectivity to all Australian households (practically all of them anyway).  That’s obviously going to offer huge opportunities in terms of changing how people live their lives and how they work.  So, there’s more or less unlimited opportunities there.

One of the biggest opportunities, which I am personally interested in, is allowing people to work from home in a more efficient manner.  Right now if you live outside the core metropolitan areas, the connection that you get at home isn’t sufficient for many corporate uses.  Allowing people more flexibility over where to work from and even when to work is going to be critical as we deal with energy, congestion and population growth [issues].

If we agree that Innovation is critical, looking back, what is the most important Innovation that has launched in your life time?

That’s a bloody good question. I would have to say the mobile phone.  This is a biased answer of course, since I have been in the mobile business for fifteen years, but if you think about the device that’s truly changed the way people communicate and live their lives, there are few rivals to the mobile phone.

Pretty much everybody in the world has one…. almost everybody. There are still a billion people or so at the very, very low end of the economic scale in developing countries [who don’t], but you still have hundreds of millions of subscribers in the poorest countries of the world.

There was an interesting Vodafone study done some years ago showing that mobile phones in significant quantities materially impacts a countries’ GDP.  While I’m not a big proponent of measuring progress in terms of GDP in poor nations it does make a big difference.  I mean, if the farmers are able to check market prices it can increase their income substantially and help improve their lives a lot.

And it helps remove the power of the middle-man to set unfair prices. 

The socioeconomic benefits are best in the developing countries, but it’s changed the world in developed countries also.

If you think about it, you always have your mobile phone with you.  You know, if you loose your wallet…  The average time it takes to report a stolen credit card or a stolen wallet can be twelve hours or so, the average time it takes to report a stolen mobile phone is twenty eight minutes.  And, you know, more than half the people who use a mobile phone sleep with the mobile within arms reach.  You don’t do that with your TV, DVD player, or microwave oven.  The mobile is integrated into peoples’ lives in a way unlike any other device.

Along with being Telstra’s Innovation Manager, you are also an external expert at the European Commission. What does that entail?

The European Commission has this thing called the Seventh Framework Programme (FP7) which is a multi billion dollar euro initiative that hands out research funds to research organizations, universities and even companies.  Companies and universities propose projects and ideas to the European Commission and then the Commission puts together a panel of subject matter experts to decide who gets the money. I’m there doing that work.

So in a sense it is a way for government to support innovation.

Yes.  Most of the time the companies that are applying for this funding are big entities that in turn fund things on a national level things. So, for example, one of the biggest entities in Finland getting funding from the European Commission is the Finnish Funding Agency for Technology and Innovation, which then supports smaller companies in Finland.

That feeds into one of my other questions: Does location matter?

Yes, I’m not sure it matters in terms of coming up with the ideas, because most of the time ideation is easy, but it does matter in terms of executing those ideas.  There are definitely hot beds of innovation and lively little innovation groups and clusters of companies scattered around the planet, but in terms of executing on innovative ideas the best place arguably is still Silicon Valley, not Europe, especially in the ICT space.

Location does matter – particularly for execution of the innovation, but also in terms of access to financing.  For instance, seed financing is really difficult in Australia, comparatively speaking. There’s obviously a lot of competition for Venture Capital in the Bay Area, but there is a hell of a lot more money to go around, too.

Speaking of money to go around, what are your thoughts on the current economic crisis and what part, if any, Innovation can play in solving it?

I recently finished reading Mats Larsson’s book “The Limits of Business Development and Economic Growth” – which is a great book in its own right, that I can warmly recommend – but the most interesting point to me was that there are now three or more distinct lines of credible analysis, all of which come to a similar conclusion.  Whether you look at it from the limited-resources perspective, from the purely economic debt-laden economies perspective or from analyzing some simple, fundamental limits of business development as in this book, all signs point convincingly to the economic growth of the world coming to an end, and doing so soon.  Looking at all the evidence, the scenario of ‘business as usual’ that is still the official truth driven by most governments and media is the least probable development for the 21st century.  For a world running and highly dependent upon the current financial system, which is only stable when growing, all this presents huge challenges on a scale that the world has never faced before.

The “Limits of Business Development” was written in 2004, before the most recent rounds of global financial crisis; yet recent years just serve to highlight the importance of its message – on the financial front, aside from the economic chaos and ruin, we are now seeing societal movements such as the Occupy Wall Street-movement as just one early signal of changing times.  While the protesters do not, for the most part, have a single message or a concrete, actionable goal aside, perhaps, from calling for tax increases, the reactions of the rest of the economy have been more telling – the mainstream media doing their best to ignore the entire groundswell movement, and the governments cracking down on peaceful protesters.  The Occupy-protests constitute a signal that governments will ignore to their detriment; even though highly visible now, they’re still an early-warning sign – an early warning sign that, if not acknowledged and dealt with, can morph into something much more serious.

Many of the macro trends over the past decades – urbanization, globalization, supply chain and other process optimizations, reliance on electricity and fossil fuels for our basic needs, etc – have had the unintended consequence of dramatically reducing the resilience of the society.  It’s time we reversed this trend and focus heavily on increasing the resilience of our communities; resilience that would’ve already come in handy in many cases.  All of these will desperately be needed as the world moves towards a new era, called by some the age of Scarcity Industrialism. There is tremendous scope for innovation here – from recycling to efficiency gains to renewable and distributed energy production, to better farming practices, to upgrading critical pieces of the infrastructure in fundamentally new ways, to actually changing the way the society works.

As in most innovations, coming up with good ideas is the easy part of the equation.  There are no shortage of those.  For example on the financial crisis side, we already have good evidence that rolling out complementary local currency systems, ones not based on the model of fractional reserve banking, help lower unemployment while increasing the resilience of the society.  There are already hundreds of LETS (Local Exchange Trading System) schemes in operation globally, but what we need is a systematic effort of encouraging LETS schemes and participation in them globally.  This is not innovation as in “new ideas” – it’s innovation, as in changing the way the world works, for the better. That, in my opinion, is a far more important aspect of innovation than any (necessarily arbitrary) concept of novelty.

(Kim and Sami Skype’d between from their homes in Sydney and Melbourne.)

One response to “Occupying the Management of Innovation

  1. Though provoking entry. You can definitely feel where you are coming from on the idea.

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