The following article was part of a presentation made to the California Farm Bureau Federation in December of 2011.

The looming shortage of freshwater is not unique to farmers here – it’s rapidly going global. Many farmers will choose to see the problems ahead with water as a crisis, but it could, instead, become a significant opportunity if they play it properly. Let’s start with the fundamentals of the emerging crisis.

There’s no shortage of water on Earth: three-quarters of the Earth’s surface is covered with it. However only 2½% of Earth’s water is fresh water, and most of that is not where it’s needed, or available when it’s needed. In fact, of that 2½%, more than 2% is frozen, mostly locked up in the Arctic regions (for the moment). That leaves less than ½ of 1% of usable freshwater, the vast majority of it is contained in aquifers. Unfortunately, many aquifers are largely non-renewable resources, being, in effect, fossil water laid down over periods of hundreds, thousands, or millions of years, but which we are depleting in periods of decades. When they run dry, problems will multiply very quickly.

Now, given where we are right now, there are seven major factors contributing to coming water shortages, and they will have differing levels of effects on farmers:

• Population growth here at home will produce modest, but steadily increasing pressure on supplies. Meanwhile, population growth elsewhere, especially in places like India and other developing countries, will be a major source of freshwater difficulties. By the third quarter of this century, it’s estimated that there will be another 3 billion human beings, all of whom will need water. Yet, short of technological breakthroughs (which will come, but not cheaply, and not soon), there are no major new sources of water available.

• Increases in the standard of living will be largely neutral here (unfortunately), but another major cause of stress on water sources in the developing world.

• Agricultural intensification (especially using irrigation in dry areas) will moderately increase water shortages here, but again will be a big cause of water shortages elsewhere as almost 70% of the world’s water is used in agriculture.

• Urbanization will be one of the major causes of shortages of water everywhere as rapidly growing cities ratchet up the demand for an increasing share of static or dwindling water supplies.

• Pollution will be pretty well neutral here, which means it’s not going to get much worse even if it doesn’t get much better as we’ve already done most of our polluting. The same isn’t true in the developing world, where farmers are looking to increase yields by using more fertilizers, and the run-off will contaminate water sources and aquifers.

• Depletion of aquifers (fossil water), which can destroy an aquifer, or at least reduce its long-term capacity, will be a major issue here and everywhere else, particularly as much of the damage to aquifers comes as the levels get low. Worse, predictable as aquifer depletion may be, virtually no government, agency, or voting public ever thinks that the aquifer they’ve exploited for years will ever run dry – until it does. They are then caught by surprise, and completely unprepared. This is one of the most surprising things about the coming water shortages – there should be no surprise at all, but there inevitably is.

• Climate change (which changes where and when water is available) will also be a major issue. While people can argue over whether humanity’s at fault for climate change or not, there’s very little real argument left about whether climate is changing, and farmers are among the first to notice and feel the changes. Moreover, the changes that do occur are more likely to be negative than positive.
For these, and other reasons, the shortage of water is going to force itself on global consciousness. You’ve all probably heard water referred to as “the new oil”, but I say that vastly underestimates the problem. There are substitutes for oil, but there is no substitute for water. Water shortages are going to be felt to varying degrees, but at a rapidly increasing rate all over the world, and are going to affect what farmers can grow, where industries can flourish, and how fast economies can expand.

Likewise, you’ve all heard about carbon neutrality, now you’re going to start hearing about water neutrality. For example, Coke & Pepsi were required by the Indian government to put 1 liter of water back for every liter they withdrew from community sources. If you think about what they sell, you realize how difficult this was for them to accomplish this – but they did. So water neutrality and steadily improving water management is something you should be thinking about, even if you’re already ahead of everyone else on this issue, as water continues to grow scarcer.

Meanwhile, political conflicts are going to continue to grow between user groups (e.g., farmers vs. cities), states (Texas vs. New Mexico, for example) and national governments (especially the U.S. vs. Canada and Mexico). Perhaps the two coming conflicts that will get most attention here are the conflicts between cities and farmers, which are going to get steadily worse, and the conflict between water-rich Canada and water-seeking America.

Yet, while farmers here think they know about water scarcity, I think we’re just scratching the surface on this problem, and they would be well advised to look at ways of increasing their water productivity. As water scarcity becomes a worldwide issue, more and more attention will be focused on it, and its perceived value will continue to rise. This will cause more people, groups, and political bodies to try to grab more control over it. It will also attract attention from financial players, like sovereign funds and pension funds, who will start buying water sources to control and toll, which will further escalate the conflicts.

But there’s an upside, too: Those farmers that improve their water management practices can benefit from the water problems of other parts of the world through increased demand for the agricultural products they produce.

One of the big changes to come is that countries, like India, that were self-sufficient or even net exporters of food are becoming net importers simply because they don’t have enough water to grow what they need. This kind of importing of “virtual water” through crops will increase the opportunities for farmers who are proactive in learning how to manage water supplies even more carefully than they do now. I’m not suggesting this will be simple, but there are more water-efficient technologies out there that can help, like those from Israel, and forward-looking farmers should be actively seeking out new techniques, new technologies, and new, possibly GM crops that allow them to grow more with less water.

In summary, water shortages are inevitable, they are going to become increasingly high profile, and they offer real opportunities to those who can be proactive in managing supplies. You know that there will be problems with water, you know that agriculture is a big user of water, and you know that those who are prepared for a problem while their competitors are still struggling to catch up can prosper from difficulties.

So take the plunge – exploit the future of water.

© Copyright, IF Research, February 2012.

The year ahead is going to be a tumultuous one, challenging in political, economic, and financial terms. Despite this, there are opportunities for those prepared to take advantage of them, because uncertain times mean that market share is up for grabs. And no, it’s not a coincidence that there are 12 trends for 2012. I discarded a bunch more, but it’s such a catchy title I couldn’t resist.

I’m going to approach these 12 trends with three objectives: What is important? Why is it important? And what does it mean to you?

And I’m going to start with the bad news, and end with the silver linings.

1)    Declining American influence – America’s absolute and relative influence in geopolitics, economics, finance, and the military is declining for a host of reasons: the rise of competing powers like China, India, Brazil, and others; the very expensive military adventures in Iraq and Afghanistan, which have sapped America’s willingness to engage in aggressive political and/or military action; the Arab Spring, which eliminated Middle Eastern strongmen like Mubarak who followed America’s political lead, and the continued stalemate over the fate of the Palestinians, means that America’s influence over this critical and unstable region is at or near an all-time low; the Great Recession, which has sapped America’s economic and financial clout; and the dysfunctional stand-off between Republicans and Democrats that has frequently led to policy paralysis.

The implications of this are a less stable, more dangerous world. America may have gone back and forth on whether it wanted to be the world’s policeman, even though it truly was the global cop, and it’s inability to fill that role now means that the world is a more dangerous place.

This sets the stage for sticky situations to emerge, such as the twin nuclear threats from a suddenly even less-stable North Korea, and the only slightly more stable and geopolitically ambitious theocracy in Iran. It also leaves more elbow room for the ever-ambitious China to expand its power and influence, notably in south Asia and the South China Sea. It also leaves critical global issues, like what to do about climate change, without essential leadership.

The implications of this is a world where there are more likely to be more, and more serious, geopolitical, financial, and economic crises, and greater uncertainty in virtually every aspect of life. Others may not always have agreed with American policies, but they will miss America’s steadying influence as it ebbs from their lives.

2)    Ho-hum! Just another financial crisis (European edition) – The daily drumbeat of scary headlines dealing with the financial crises in Europe have gradually deadened everyone’s awareness for how dangerous the situation truly is. In particular, Angela Merkel is juggling hand-grenades, and hoping that she won’t drop any, and that none of them will go off unexpectedly. Germany is the only European country with the potential to stop the rolling crises that are affecting Europe, and then only if Merkel acts in a timely basis. To do this, she must let Greece go bankrupt instead of propping it up, shore up the banks, notably German banks, that have bought far too many dodgy EU bonds in the past, allow the European Central Bank (ECB) to become a lender of last resort, with the ability to stop a run on European bonds, and halt the bond market attacks on other European countries, starting with Portugal and Ireland, but extending to the much bigger countries like Spain, Italy, and even France. But Germany doesn’t want to do these things, and German voters are adamant that they won’t subsidize what they see as the lazy, profligate lifestyles of southern Europeans. But if Germany doesn’t act, and in a timely fashion, it may lose the ability to act at all, and come under attack from the bond markets as well. Indeed, German bonds are no longer being bought with as much enthusiasm as they were even two months ago. If Germany doesn’t act soon, it may lose the ability to do so at all.

Remember what happened in the American financial markets in 2008? If Germany doesn’t act in time, we could see the same kind of thing happen in 2012, this time starting with a run on European government bonds. From there a run could spread to those banks – American as well as European – that hold too many of these bonds. And once such a run started, the most dangerous question of all would emerge: “Who’s next?” Investors, frightened by the panic, would look to sell any and every questionable credit, and their attention might turn to the various U.S. state and local governments, like Illinois, California, and Harrisburg, Pennsylvania, among many others, that are struggling with their finances.

The U.S. Federal Reserve has become the de facto lender of last resort to the entire developed world, and would undoubtedly step in and support the banks and markets with everything they had. But this time, remembering the callous, greedy ingratitude of last rescue of the banking industry, American voters and the American Congress would likely tell the banks to drop dead. It was a hard enough last time to get Congress to bail out the banks; this time I suspect it would be impossible, even though failing banks would take the global economy down with them. Moreover, the Fed doesn’t have anywhere near as many bullets today as they did in 2008, and Fed Chairman Bernanke already has some Republicans, notably Ron Paul, baying for his blood over the quantitative easing from the last crisis.

The danger here is frighteningly real, and even greater than the risks we faced in the panic of 2008. Yet, the steady drip of crisis headlines and last-minute rescues has left many people convinced that nothing will happen. If it does, it will catch people flat-footed, not because they didn’t know there was a crisis, but because they have been hearing about it for over two years now, and have tuned it out. We could muddle through, and probably will – but the risks are far higher than most people realize. It will be important to have thought out a Plan B to deal with the unthinkable, if it happens, one that prepares you and your finances for a bigger repeat of the 2008 panic. Again, it probably won’t happen – but it’s better to have a plan and not need it, than need a plan and not have it.

3)    Yes, China’s influence will continue to rise, but…  Napoleon famously said, “China is a sleeping giant. Let it sleep.” Well, China’s very much awake now, and throwing her weight around – although cautiously. If I were (God forbid) Emperor of China, I would require my minions to tread cautiously, to smile a lot at our trading partners and neighbors, and to make our gains slowly, one salami slice at a time, never appearing too greedy or overreaching. I would practice soft diplomacy, offering aid and comfort where I could do so cheaply, loudly proclaiming our respect for other countries’ internal policies, taking leadership positions in things, like climate change, where I knew I was going to have to make changes anyway, and generally trying to look like a good global citizen. I would act, in short, as if time were on my side, and I was going to be the next Big Thing.

And generally speaking, that is precisely what China is doing – except that every once in a while the mask slips, and the avarice and aggression shows, as with the boundary disputes with other countries, especially as related to the South “China” Sea, which China (the nation) seems to be trying to interpret literally as being a Chinese lake.

But China has an Achilles’ heel – several of them, in fact – and does not have (much) time on its side. Its biggest weakness is that it is aging faster than any other significant country on Earth. Because of its One Child policy, China’s population is expected to peak, and begin declining, sometime around 2020 – within the next 10 years. And its labor force is already in decline, even as the demands for higher wages push its cost structures higher.

Meanwhile, although there is a great deal of pride in China’s new affluence among the Chinese, that affluence is not evenly spread, and there is unrest among those who remain poor. Add to this the widespread corruption of Chinese officials at all levels, which often provokes revolts, like the one in Wukan, which leads to simmering dissatisfaction among many Chinese.

This will further be exacerbated by the fact that China’s factories are automating almost as quickly as those of the developed world, which threatens to slow the rate of job creation, productivity, and affluence markedly over the next 10 years. Yet, China dare not automate; to do so would mean a loss of competitiveness, which would produce even worse results as industries would move elsewhere.
So, with that in mind, what would I, as self-appointed Emperor of China, do? Worry about a future I couldn’t control, and for which I could not see a clear path forward. The next 10 years will mark the beginning of the end of China’s ascension, and if I were Emperor, I’d think about retiring to some warm, cushy haven before the revolution came. Chinese Spring, anyone?

The implications are for China to step up its attempts to increase power and influence, and throw its weight around even more actively before that power starts to wane, but as quietly as possible. Look for China to try to make this the China Decade, especially in finance, trade, and geopolitics, as it attempts to pull in as much as it can while it can.

4)    American Spring? Meanwhile, closer to home, while those on the political right like to dismiss the Occupy movement (e.g., Occupy Wall Street), the fact that the movement happened at all is the most significant part of it. Indeed, Time magazine made protestors its “Person of the Year”, and that’s not restricted to just the Arab countries. The Occupy movement and protests against cut-backs in many developed countries had many of the earmarks of the Arab Spring: protestors saying that their governments serve an elite clique and not the people; lots of people, especially young men, who cannot find work despite months or years of trying; and a belief that the political system is neither representative nor responsive. Just because winter has fallen, and the Occupy settlements have been disbanded does not mean that the dissatisfaction has gone away. And with increasingly dysfunctional government in America, the potential is there for a much stronger protest movement against the System, however that is defined. American Spring, perhaps? It sounds unlikely, but not as unlikely now as it did before, and it won’t be restricted to America for discontent will grow in all developed countries.

This is especially true as the boomers move towards retirement, only to find that their either don’t have the resources to retire and that no one is going to donate them, or that the civil servant pensions that they were promised are unaffordable.

The protest movements have only just begun, and they are going to be acrimonious, disruptive, and at times hijack the political process.

5)    Mixed signals for both weaker – and stronger – economic growth.  Europe and its prospects are dragging the global economy down. The uncertainty in Europe, combined with the painful budget cuts in Greece, Ireland, Portugal, Italy, Spain, and the United Kingdom, mean that Europe is now in recession and a drag on the global economy.

Meanwhile, China, which had been concerned about inflation, and hence was hiking interest rates in a bid to slow it, has now reversed itself, which I can only interpret as concern that growth will slow more than they want. That’s a potential positive, as it will add stimulus to the global economy.

Canada, which has to date seemed to skate above most of the problems of the rest of the developed world, now seems to be experiencing slower growth, with an unexpected jump in the unemployment rate, while its housing market is looking pricey, frothy, dangerous, and much like America’s prior to the collapse in 2008, especially in condo development in its major cities like Toronto, Vancouver, and Calgary. Moreover, its consumer debt levels are exceeding the levels of American consumers in 2007, and no less a figure than Mark Carney, the highly respected Governor of the Bank of Canada, has warned consumers and banks alike to cut back on consumer borrowing. Canada could be arriving late for the financial meltdown of 2008 – but if its consumers don’t mend their ways, they will get there.

And yet, America, which until 2008 was seen as the world’s engine of growth, seems to be picking up for no specific reason. Actually, this was almost inevitable because of the natural dynamism and entrepreneurship of the American economy. What has prevented America from rebounding earlier, or more strongly, has been the housing market, which is still in horrendous shape – but slowly improving.

So how will this balance out through 2012? Assuming that Europe doesn’t crash and burn, and drag everyone else down with it, and that Iran doesn’t precipitate a significant war in the Middle East, then America will continue to recover, its jobless rate will continue to decline (slowly), the world will lick its (economic) wounds, and things will slowly get better.

Accordingly, while I continue to counsel my clients to have a Plan B in their back pocket if things do go bad, my primary advice is the prepare now for better times ahead. There are problems – big problems – ahead, and the American election in 2012 is not going to help, but for 2012 we are likely to see an improving environment, and opportunities re-emerging for those with the courage to grasp them, as I outline in Trend #7 below.

6)    Climate change accelerates – and the consequences will multiply. The most significant and portentous climate news of 2011 was the discovery of methane gas bubbling up in the Arctic Ocean off the north coasts of both Siberia and Alaska. Methane is a far more potent greenhouse gas than carbon dioxide, and the melting of the Arctic ice cap, combined with the rise in the temperature of the Arctic Ocean, has started to release methane from the ocean floor. As well, as temperatures rise in the northern polar regions of Siberia, Alaska, and Canada, the permafrost melts, releasing even more methane into the atmosphere. The amounts of methane that could be released by both sea floor methyl hydrates and permafrost are staggeringly huge, and could dramatically accelerate the rate of climate change. If this trend continues, not only will the debate over climate change be over, but humanity will be forced to race to keep up with the potential changes.

As it happens, the vast majority of climate scientists – something approaching 95% – now agree that climate change is happening, and that humanity is at the very least a significant contributor to it. Since I speak to lots of different kinds of audiences, I can tell you that most groups now accept that climate change is happening, even those that have been among the most vocal doubters. The doubts they now raise are more along the lines of whether humanity is to blame. But from my point of view, it no longer matters: if your house is on fire, you don’t throw gasoline on the fire, regardless of how it started. That’s roughly the position we’re in now.

In 2012, we will get more information about the release of methane, and can only pray for good news. Meanwhile, brace yourself for more strange, and increasingly extreme weather. And because climate is a chaotic system (where chaos theory is a branch of mathematics), it is literally unpredictable. This means we can’t tell whether we will get floods or drought, hurricanes or tornados, or something else unforeseen. But it won’t be business as usual, either.

7)    Innovation as Steve Jobs’ legacy.  Jobs didn’t invent innovation, but he sure popularized it! Innovation has become a corporate religion in recent years, and with good reason: innovation can allow you to disrupt the marketplace, scoop up market share, increase profits, and win friends and influence people, just as Jobs and Apple have done. Yet, innovation is hard, especially because there’s a natural resistance to change and to the real risk-taking that innovation requires.

But if there is a theme for the corporate world in 2012, it is that now is the time to get serious about innovation. As an innovation specialist who runs seminars and workshops for corporate clients, I’m seeing this on a daily basis in genetic and medical research, agriculture, the automotive industry, the insurance industry and finance generally, plus just about every other sector of the economy. And technology itself embodies innovation. Indeed, the idea of a technological company not working hard at innovation seems like recipe for extinction. The world is changing rapidly, and there are lots of new opportunities – and disasters – out there. It’s raining soup, but if you just stand there, looking up in surprise, you’ll drown!

8)    Who dares, wins. Such is the motto of Britain’s fabled SAS – one of the world’s premier commando groups. But their motto applies equally to unsettled times. During such times, it’s easy and very, very tempting to hunker down, conserving cash, and wait for lazy, easy times to return. But study after study shows that companies that continue to market aggressively, and pursue research into new ideas, new products, and better results for their customers make far more inroads with modest expenditures during bad times than spending far more during good times, when everyone else is competing hard. Moreover, loyalty is won when times are bad, both among consumers, and among employees. And best of all, you can often accomplish a great deal with careful planning and foresight rather than lavish expenditures. This is where strategic planning comes to the fore. The time to be thoughtfully aggressive is when your competitors are playing turtle.

9)    The Red Invaders. The emergence of a Chinese middle class not only means upward pressure on food and fuel prices, it also means a vast invasion of Chinese tourists bearing money. For those countries and regions able to attract such tourists, it means a new source of revenue, and a big shot in the arm. And, as with all ethnic groups, it also means serving them the way they want to be served in terms of language, food, and customs. To the winner go the mega-spoils.

10) Haggling returns to North American retailing. Smart retailers are recognizing that it’s no longer enough to post a sign saying “10% off” to attract consumers, but that consumers are more demanding now, and are moving away from the traditional “no haggle” approach to buying. Moreover, haggling offers two additional benefits to consumers: it’s become somewhat of a game where they can enjoy the thrill of the hunt; and it offers bragging rights when talking with their friends. As a result, haggling has been emerging in two different ways, one passive, and the other active.

The passive form of haggling is to wait for sales. You can witness this almost anywhere when consumers see an item they like in a store, and ask if it’s on sale. When they’re told that it’s not, they turn up their noses, and say they’ll wait until it is. This might be described as “temporal haggling”, where the consumer is saying, “I’ll wait until you lower the price before I buy it. And if you don’t lower it enough, I won’t buy it.” Smart stores are responding in creative ways. Some salespeople say, “No, that’s not on sale, but it will be starting next week,” which amounts to a counter-offer. A smart consumer will reply by saying, “Can you put it aside for me until then?”, implicitly offering to buy it if they do. Some salespeople say no, others say “Sure.” The net result is that store and consumer have haggled over the price to agree on a sale/purchase. Yet the smart retailer actually has an advantage in this exchange: they get to name the sale price in temporal haggling.

By comparison, in active, more traditional haggling the consumer takes the initiative, saying something like “What’s your best price on this widget?” If the salesperson replies with the sticker price, the haggle is over and the consumer leaves. If the salesperson names a price, the consumer responds dismissively, and says, “I wouldn’t pay a nickel over $X for that”, and the salesperson can choose to respond or not. This is, as I say, traditional marketplace haggling.

If a retailer wants to capitalize on the re-emergence of haggling into the North American marketplace, they need to anticipate it, and come up with a range of responses. One might be to say, “We can’t discount this item today, but it is going on sale next week. Would you like to put a deposit on it to hold it until then?” The retailer regains the initiative this way, and moves towards a close. Or better still, the retailer should look for a way to add value rather than cut price by making a counter-offer like, “No, I’m sorry, we can’t discount that item. But we can offer you a 50% discount on a matching accessory if you buy it.”

Regardless of approach, though, retailers should be prepared to return to marketplace haggling, and have a range of responses ready to deal with it. Consumers, as always, should decide what they want, and what their bottom line is in getting it.

11) Health care magic blossoms. Putting aside the issue of cost, which concerns everyone, the ability of health care to solve problems is beginning to move at computer speeds, in part because IT is increasingly being used by doctors, nurses, hospitals – and patients – to manage health care, and in part because research is increasingly being done using smart, powerful computer tools to perform research and execute treatments. Among the changes in the immediate future of health care are:

• The rapidly rising ability to repair failing hearts and minds (or at least brains) and other organs with stem cells. Stem cell treatments are starting to move out of the laboratory and into the operating room, and 2012 will see hundreds of people receiving this kind of therapy.
• Similarly, 3D printers, which have been in development for roughly 20 years, are now good enough that they are starting to be used to create replacement organs from a patient’s own tissue. This will gradually move into mainstream medicine, with replacement hearts, livers, and kidneys being at the top of the list.
• Quadriplegics will increasingly be able to interact with the world through prosthetics controlled by thought alone, either through electrodes that interpret brain wave patterns, or implanted chips which interpret specific thought-impulses.
• Retinal implants are starting to emerge that can help blind people discern light, shapes, and some objects. The implication is that we may be able to help aging boomers improve their failing eyesight as they age – one of the biggest complaints of old age!
• Health care is increasingly falling into the hands of the patient – literally. Smartphones, which are fundamentally wearable computers with all the capabilities of what used to be called “supercomputers”, can now work with Bluetooth-enabled sensors to monitor various aspects of health, from the vigor of your workout, to the health of your heart, to the level of your blood sugar. This will lead to a revolution in health management, with consumers sometimes way out in front of practitioner.
• Likewise, as patients become more and more comfortable with researching medical conditions and treatments online; they are demanding an increasing role in their own diagnosis and treatment; becoming active, important advocates for fund-raising and acceptance of treatments; and blunt critics of health care practitioners through social media and word of mouth. Smart practitioners are accepting this trend and rolling with it. Old school practitioners are resisting, but may wind up steamrolled by it.
• Crowdsourcing of tough diagnoses, and novel solutions to the medical and financial problems of health care promise to open yet another front in the health care revolution. This follows on with the success of crowdsourcing in helping leading-edge research scientists in astronomy (galaxyzoo.org) and protein research (Foldit game softwear).
• Sequencing your genome gets cheap. Sequencing the first genome cost billions of dollars and took decades to perform (culminating in the Human Genome Project). Today it costs about $1,000 (although analysis costs significantly more). Within 10 years, it will cost $100, and analysis will cost about $500 more, and will provide you a complete run-down of where your vulnerabilities lie, and what you can do to forestall future health problems. For 2012, we will see incremental advances towards that goal, with major diseases identified, and a short list of things you do – and don’t – want to do or eat prescribed. This is the true beginning of personalized medicine, and it will revolutionize health care.

12) Technology accelerates in 2012. It’s hard to know what to leave out: electronic mind-reading? Glasses that emit sounds and smells to allow you to enhance social media? The proliferating tablets and smartphones with ever-more wondrous abilities? Here’s a partial list of things I think demonstrate trends that will become increasingly important:

• 3D printers – As well as making replacement organs, 3D printers are coming into the price range of consumers, and may mean that you can buy your own desktop factory. Need a replacement screw for a door? Make it yourself. Need to duplicate a key? Ditto. See a nifty device on TV? Download the plans and make it yourself. Of course, who knows what the ink cartridges will cost.
• Near-eye monitors – These look like glasses, but are computer monitors. They’re the lineal descendents of jet fighter heads-up displays, and will revolutionize the way we use computers, particularly smartphones, but have been hampered by high costs. Prices are starting to approach luxury consumer levels, so applications will start to appear in things like immersive gaming, personal entertainment theaters, medical imaging, and augmented reality.
• Augmented reality through your smartphone – Augmented reality is overlaying information on top of the view from your Mark 1 eyeball, much as Google Street View overlays the names of shops on a photo. You’ll be able to hold up your smartphone’s camera and have your phone overlay directions, stores, infrastructure views, or whatever else might be useful to you. This gets better when you can view the results in your near-eye monitors.
• Cloud computing explodes – Owning a computer is so 2010. Cloud computing is rapidly placing the resources of today’s supercomputers in your hands for pennies a minute. One researcher used one of the commercial clouds to try to break his password to a social media website by brute force, just to see if he could do it. Using the cloud and standard code-breaking techniques he did it in minutes, and it cost him 39¢. As the tools to harness this power get more powerful and easier to use, the potential of the cloud will be adapted by more and more users.
• Siri & copycats + babbling to your smartphone – Siri is an application of the iPhone 4S that allows you to speak to your iPhone and get it to do things for you. This might be setting a count-down timer, converting milliliters to fluid ounces, finding an address and directions from your present location, or looking up a phone number (all of which I’ve done). Apple is offering this technology as a beta version now, but every Siri request goes through Apple’s servers. This means the potential exists to assess what people want to do, and come up with solutions, improving the results really quickly, making personal avatars (also called PDAs, butlers, or assistants) much more valuable in short order. And that means everyone will rush into the field. This will lead to lots of really bad copycat applications, but ultimately a revolution in how we use technology.
• Biometric passwords – Our world is becoming so full of passwords that need to be foolproof (meaning our tendency to forget them) that biometric passwords are almost inevitable, and they are beginning to appear. They will be expensive at first, but gradually retina, fingerprint, voiceprint, and other means of making sure you are you will become cheap and commonplace, and then you will become your own password, no memory required.
• Robots – Everyday robots are here, but they are clunky, expensive, or just plain cute. That’s changing very quickly, and 2012 will see more and more of them appearing in more and more places. Typically these will be commercial settings, but health care is one place where robots make sense and will be used. Rosie the Robot won’t be washing your dishes this year, but she’s coming – if you’re willing to pony up the equivalent of the price of a luxury car.

The Occupy movement is most significant not for what the protestors say, but rather that the movement is happening at all. It demonstrates significant unrest, and the greatest dissatisfaction with the capitalist system that we’ve witnessed since the fall of the Soviet Union. But where is it headed? That’s a much more worrisome question.

The fuel that powered the Vietnam war protests was the draft. There were many other issues – objections to the military-industrial complex, objections to American foreign policy, objections to the money misspent on the war, dislike and disagreement with McNamara and Johnson, even objections to war per se – but without the draft, the protests could not have been as sustained or as widespread as they were.

In the same way, the fuel that powers the Occupy movement is jobs – or rather, lack of jobs. In America, and most other developed countries, the official unemployment rate is high, but the true unemployment rate is obscenely so. In the U.S., for instance, the official rate is 9%. But if you include those who have stopped looking for work, and therefore are no longer counted in the official unemployment statistics, then add those who are underemployed, the true rate approaches 20%. And if you look at the rate for young men, particularly among minorities, it approaches 40%. There is immense frustration with the lack of opportunity, and the smug, self-righteous people who look at the protestors and sneer, “Get a job!” only reveal the vast depths of their ignorance.

It’s true there are many issues embraced by the Occupiers, but without the lack of jobs, the movement would never have developed into much of anything. Americans are not generally a jealous people. If people were prospering, the middle class was expanding, and young people were able to find jobs and start their careers, they wouldn’t really have cared what percentage of total wealth is held by the top 1% of income earners. What rankles is that the rich continue to get richer through a perceived manipulation of “the system”, while the vast majority of other people suffer economically. It leads to the belief that the game is fixed in favor of those who can afford to buy the politicians. Whether this is right or not may not matter – it’s the perception that’s important here. And that perception may be explosive.

But where is this movement going? What’s next?

The Future of Work

If the future holds more jobs, and greater prosperity for most workers, then the Occupy movement will collapse from lack of fuel, and be remembered as a strange fad that came and went, like pet rocks or hula hoops. That’s not the case, because the future of work is much bleaker than people, even most top economists realize.

There are two forces that are squeezing workers in all developed countries: foreign competition, and domestic automation. One is going to get much worse, and the other is going to get slightly better.

The one that will get slightly better, at least in manufacturing, is foreign competition. There have been headlines for decades about the offshoring of jobs. There was even a management cliché for it in the 1990s: “Emigrate, automate, or evaporate,” which meant move your factories offshore in order to take advantage of dramatically lower wages in developing countries; decrease the labor content of your products in order to reduce the advantage of cheap labor in developing countries, or go out of business. (As an aside, there’s actually a fourth option: innovate, but that’s another story.)

This happened because of the emergence of the global economy. A global marketplace implies a global labor pool. If workers in developing countries can do similar work, but at much lower wages, then the work will naturally gravitate to them, and away from workers in developed countries. This has been going on since the 1970s, and is a familiar tale. It makes headlines, and becomes the subject of learned papers by economists, and protests by industries and unions that want protection. And the offshoring of jobs will continue until there is a rough parity between those producing things offshore, using cheaper labor, and the cost of producing things at home, using more expensive labor.

One way this could happen is through wages falling in developed countries, and rising in developing countries. But wages tend to be sticky; not many people are willing to take a cut in pay. As a result, what has tended to happen instead is that workers here are let go, and their jobs disappear, even as the wages in places like China and India are, indeed, rising.

The mild good news here is that much of this adjustment has already happened. Indeed, there are a few reports of manufacturers moving production back to America as the cost of labor in China, for instance, has risen, and as governments, particularly in the southern American states, have reduced legal protections for workers, effectively lowering their cost. (Whether you view this as a good thing or not is a separate issue. Indeed, it’s a difficult issue: do we want good worker protection, but no jobs, or bad worker protection and some jobs?)

The other way for workers in developed countries to compete is through higher productivity, and many companies have survived and kept their production in America that way. Yet, even when they succeed, the number of jobs required goes down. Businesses survive, but only by shedding jobs, leaving a trail of unemployment in the wake.

This is the past and present. The future will be different.

Increased productivity comes most notably through increased automation, and we’ve all experienced that, as when we go to the gas pump, swipe our credit card, and pump our own gas, all without an attendant. But automation is about to become supercharged.

The rate of change in computing speed and cost-effectiveness is not only accelerating, but the rate of acceleration is increasing. Some technology forecasters believe that computers will increase in power by 1,000 times over the next 10 years. With this growth in computing power available at steadily cheaper prices, automation is going to accelerate dramatically, eating its way up the workplace food chain. Only this time, it’s not going to be primarily blue-collar jobs that disappear – that’s pretty well already happened – but white-collar jobs that are hard hit. Indeed, anyone who uses a contemporary computer can experience this for themselves.

With the Macintosh laptop that I’m using to write this blog, I could (if I had the talent) write a new piece of music, score it, perform it with dozens of (computerized) instruments, record it and release it for sale. I could take videos with my iPhone, download them to my laptop, edit them, add titles and special effects, add in the music that I had created, and then publish the end result on YouTube. In effect, with these two tools, a laptop computer and a smartphone, I can replace composers, performers, and an entire movie making team – and that’s using today’s technology. Very shortly, I could make an entire movie, using technology to create photo-realistic virtual actors and background scenes, dub the voices myself, then change the sound of my voice using technology, and produce an entire movie without anyone else. True, it would be a terrible movie as I know nothing about directing, editing, or acting, and not much about composing or playing musical instruments – but that’s not the point. The point is that the tools we use are becoming so powerful that high-end jobs that used to require skilled people can now be done by ordinary folk.

Likewise, computers will move into medicine, performing research using Genetic Programming, and assisting doctors to do complex diagnoses using smart computers like IBM’s Watson; performing clerical work in almost every conceivable industry, and displacing millions of white collars workers along the way; drive cars, trucks, and trains unassisted; and almost any other kind of routine work. Indeed, computer intelligences and everyday robots will move towards replacing workers in any and every kind of repetitive work, leaving only creative, innovative, entrepreneurial work – and leaving millions, or even tens of millions of people unemployed.

What Happens When Too Many People Are Unemployed?

If you look at the Arab Spring from earlier this year, it wasn’t so much a yearning for the freedom to read newspapers not approved by dictators, or the desire to vote that was the driving force that caused people to revolt, but unemployment, especially among young men – leading the inability to create a life, to feed your children, or even to be able to afford to get married and start a family – that drove the revolutions, and inspired young men to face bullets and tanks. If you look at the protests in Europe, it’s not just the anger that a lazy, luxurious way of life is being taken away from Greek citizens, but a very real fear that they won’t be able to live that drives citizens to the barricades.

Unemployment, the specter of want, and the inability to make a decent living, to have a decent life, is historically a very potent, very scary force in geopolitics, and it’s with us now. The Occupy movement is not just about fairness, but driven by the fear and anger that there is no opportunity unless you are one of the privileged class that has a job. As the number of jobs lost to automation rises, so too will the number of people who will respond to the goad of fear and anger about their future.

Worse, it’s not just about finding a job – it’s also about keeping one. Jobs appear and disappear faster than at any time in history, and someone who is a valued employee and a rising star one day can be redundant and valueless the next. A person in that position can try to retrain and find new work, but they find themselves among the multitudes of people desperately seeking work. Without the in-demand skill that got them a job in the first place, they are reduced to the same pavement-pounding, resuming-producing, faith-sapping odyssey that afflicts so many out of work people today.

I’ve seen this coming for some time. In 1993, I wrote a book called Facing the Future. In that book I wrote the following passage:

It’s an overall decline in the need for work that concerns me, brought about by the increasing capabilities and sophistication of computers.

I seem to be very much in the minority on this view, and I may be dead wrong. The conventional view is that as jobs disappear from manufacturing and clerical work, for instance, the steadily rising productivity of workers using increasingly sophisticated automation will create a new prosperity that will increase demand and create new jobs. This is certainly reasonable, because it is precisely what has happened throughout history. But where, I wonder, will the new jobs appear? The conventional view is that new services will spring up, and that higher living standards will allow people to spend money on things they could never afford before, and that much of this will be for personal and personalized services.

I can see logic in this. New services do appear. There were no aerobic instructors, for example, in my grandfather’s day. But how much personal service can we use? Moreover, generally speaking, service jobs pay less than manufacturing jobs. As for being able to buy things that we couldn’t afford before, since manufacturing will increasingly be automated the higher demand for manufactured goods won’t necessarily generate more jobs.

This is not a problem that will burst on the scene in the next five to ten years. Humans are still capable of offering a flexibility, initiative, and creativity that machines cannot duplicate. But at some point, whether it’s twenty years away or one hundred, I’m afraid that the time will come when there will be very few jobs that computers can’t do better, faster, cheaper, and more reliably than humans. As that day approaches, we will be confronted with several problems.

In the first place, we will need a new economic system. Much as it grieves me to say so, free market capitalism may be dying, for it only pays those who are part of the production process. If virtually no one is part of this process, all the fruits of production will belong to those who own the machines – a recipe for the peon-and-aristocracy patterns of Third World economies. But where will the machine-owners find their customers? People can’t be consumers unless they have money to spend. …[1]

In the intervening 18 years, I’ve seen nothing to change my mind. We are, indeed, heading towards a world of aristocrats and peons. Indeed, that is precisely what the Occupy forces are demonstrating against, only they use a slightly different terminology: the 1% and the 99%. Same thing.

So where is this leading us? If I’m right, then even if the economy and employment picks up, and mollifies the Occupy protestors and their spiritual kin, the concerns will return again and again as the long-term rates of unemployment, especially among the young, continue to rise. And that way lies revolution.

What Should We Do About This?

If we lived in Naples in 79 A.D., and saw steam pouring out of the top of Mount Vesuvius, we would try to warn the residents to flee. We are in an analogous situation. This volcano won’t erupt in the next month or next year – but as things are trending, we need to take action, and soon, or we risk precisely the kind of revolution we witnessed in the Arab Spring earlier this year.

It’s no good trying to stem the tide of automation. That smacks of the 19^th century luddites smashing mechanized looms that they felt were stealing their jobs. Moreover, it would be like trying to hold back the tide, and about as successful. It is possible that politicians, under voter pressure, will seek to ban automation and the productivity increases that automation produces in order to preserve jobs. (This is also called “featherbedding”.) All that means is that countries that do not ban automation will see their relative productivity increase, their cost structure decrease, so that the jobs will migrate from here to there rather than being lost to automation.

Instead, politicians, economists, and anyone else interested in our future prosperity and stability should be taking a serious look at how to create new, better jobs that people can do best. These will largely be entrepreneurial, I suspect, and will all be creative, and focus on innovation. This also implies a complete revamp of our education system, away from rote learning and memorization, and towards creativity and individually customized education, to enable each person to emphasize the things they are best at.

None of this will happen quickly or easily. It requires a very different view of “job creation” and a very different understanding of the future of work. The “magic of the markets” won’t solve this problem. Capitalism, left to itself, will emphasize greater productivity through automation, leading to greater profits for the owners of the machines – until profits collapse because there aren’t enough consumers to by the goods and services industry produces. Capitalism will lead to a dead end.

This is not the conventional view, and many will decry my message as “socialist”, although I’ve said nothing at all about redistributing wealth. Some will pillory me for being alarmist, but without attempting to refute my reasoning. And some will just hide their heads in the sand and say “it can’t happen here.”

To this last group, I would suggest that they tell that to Moammar Gadhafi and Hosni Mubarak. They were sure it couldn’t happen there, either.

There are innovations in the field of innovation itself, as well as older principles of innovation that have been around so long that many people either aren’t aware of them, or ignore them despite their value. I thought it was about time to explore both trends.

The particularly interesting thing about innovation is that its entire purpose is to carve out a future in the shape you want. It is a true tool for inventing the future. In this blog, I’m going to talk about what you should be trying to achieve with your innovation, the manner in which you should be focusing your innovation, rather than how to go about it. I’ve talked about how elsewhere (like here), so with that in mind, let me outline the 9 trends in innovation that I see emerging – or re-emerging – today.

1) Exclusivity is overrated; fanaticism is more valuable

There’s a natural tendency in sales to discount prices in order to boost volume. Unfortunately, this is a bad trade-off. Suppose you have a 25% pre-tax profit margin on your widgets, and offer a 10% discount to boost sales. That 10% comes right out of your profits, cutting your pre-tax profits by 40%, from 25¢ on the dollar to 15¢. Moreover, in today’s environment, offering people a 10% discount is virtually an insult, and may actually reduce sales rather than increase them.

One strategic way that companies attempt to counter the discounting impulse is to create a premium brand, and one of the ways of creating a premium brand is to foster a sense of exclusivity about your products or services. Their reasoning is that people are less likely to expect discounts on something that only certain people are eligible to own. Of course, if you look at the ads for luxury goods, most notably luxury cars, you can see that this doesn’t always work – and may not even work any better than for a mass-market brand.

A better way to avoid discounting is to seek to create a fanatical customer base that is devoted to belonging to, or being a member of the experience you create. A classic example of this is the Disney Company, and the clearest example I know of is found with the Disney Cruise Line (“DCL”). People rarely think of Disney offerings as being “exclusive,” yet, on one of the Disney ships, the cost of a one-bedroom suite with concierge service can be 50-100% higher than a comparable suite on a competitor’s boat. If you read some of the online forums for DCL, you will see repeated queries from confused consumers wondering why DCL suites are so overpriced. The simple answer is that whereas other cruise lines have fans who buy suites, Disney has fanatics that would rather pay more for the Disney experience than less for anything else. As a result, the suites sell-out almost as quickly as they go on sale, with the result that Disney can charge big premiums for them.

Of course, creating fanatics is not easy. It takes years of work, meticulous attention to detail, and outstanding customer service. In an environment where management wants instant results, where the bottom line seems to scream for cutting corners, and where customer service is known simply as “overhead”, none of these are popular choices. But look at those companies that have fanatics instead of fans, look at their profit margins, and then ask yourself whether it’s worth it or not. Nobody said innovation was easy, but if you’re serious about it, ask yourself what you would have to do to convert customers into fanatics. (I’ll come back to Disney because they do so many things so well, as you would expect from a company where innovation has always been part of the corporate culture.)

2) Create ecosystems, not products

If you look at the best technology names in the world today, they don’t create individual products, they create systems that interact and support each other. The Macintosh computer was a marginal success with less than 5% of market share when Apple introduced the iPod in October of 2001. But under the revitalizing and visionary influence of Steve Jobs, who had returned to the company he co-founded, the iPod was not just another “me too” MP-3 music player (and remember that Apple wasn’t the first to introduce such players). It was merely the front end of a music-and-information system that included iTunes in cyberspace, arrangements with most of the major music companies that made it easy, legal, and relatively inexpensive to download music, plus provided a means for entrepreneurs to plug in and use the iPod for their own ends. Podcasting became a way for people to become their own broadcasters, and create an audience for themselves without having to work through a media company. And along the way, the revamped iMac became the world’s first computer that sold essentially as an accessory to an MP-3 player, the iPod.

When Apple introduced the iPad, they also introduced an App Store, which resulted in thousands of entrepreneurs creating applications and selling them to iPad owners. This storm of creativity was supported by Apple, and Apple was able to sell and profit from things they hadn’t created. But they benefited even more than mere profits because competing touchpads had to cahse after not only the Apple interface, but also all of the apps available for the iPad.

facebook is perhaps the best example of creating an ecosystem, only here they’ve created the ground, and allowed others to plug into it and grow their own businesses, from games, to advertising, to organizing groups for disparate reasons, and much more. It has become the de facto means for communicating for many people, especially the young and the technologically adept, to the point where many people no longer use email or IM outside of the facebook ecosystem. And facebook gets paid through advertising for providing this fertile ecosystem, and benefits from the entrepreneurial instincts and efforts of those who create more networks, games, recipe groups, political groups, and more. They have become an engine that entrepreneurs can plug into.

Likewise, Google has created an ecosystem that includes free tools, free email, free news, free tracking systems, free data storage, and more. And it all integrates, and funnels down into their revenue generation. People like free things, they like useful, powerful free things even more, and they’re willing to put up with the attendant ads that make it possible.

3) “It’s not the customer’s job to know what they want”

This comment, apparently, is something that Steve Jobs has said repeatedly within Apple. If you are innovating, then you are, by definition, doing something new. And if you’re doing something new, then your customers won’t know if they like it until they’ve actually tried it. Hence, it’s your job to figure out what your customers are likely to want before they know themselves. Let me give you an example of why this is so.

When the very first cellular licenses were being offered, I was working with a group that bid (unsuccessfully) for one of the licenses. My job was to write the science fiction section of the application; you know, the part that said people would be able to send fax messages from their cars, and walk down the street talking on the phone. Since, at that time, most portable phones had their guts in the trunk of a car and were highly unreliable, this was all very wild and wooly, and people wondered what kind of funny-smelling cigarettes I had been smoking.

Meanwhile, our financial backers were nervous about whether there was actually a market for this very expensive technology, so we commissioned a consumer survey to find out how many people were likely to want a cellular telephone. The survey results came back, and everyone was pleased and relieved that there was, indeed, a big enough base on which to build a business: the survey indicated that fully 7-8% of working adults would consider acquiring a cellular telephone. Of course, now this seems foolish as our survey results were short by more than a factor of 10. But it was difficult for people to know if they wanted a pocket telephone, something they had never experienced.

To truly innovate, you have to imagine not only what might be, but also how your clients or customers might like something they’ve never experienced before. Fortunately, there are some guidelines to help, one of which is next.

4) Seek beauty and perfection in what you offer

I did some work for Lexus US, and the CEO, Mark Templin, told me a story to make a point about their cars. He said that one of his neighbors came over and knocked on his door to tell him that she was going to buy an SUV, but not from Lexus. He blinked, and said, “OK, I appreciate you telling me. May I ask why?” It was because, she said, that too many people owned Lexus RX’s, and she wanted something that stood out. He thanked her, they finished the conversation, and she went home.

A couple of weeks later, he saw her again, and she was driving a Lexus RX, just as she had said she wouldn’t, so he went over to her house and knocked on her door, asking her what happened. “You know,” she said, embarrassed, “I tried all of the others, then tried the RX, and yours was just so much better that I couldn’t imagine owning anything else.”

Seeking perfection sounds like a hippy-dippy, naïve, lamb-choppy thing to say, so let me approach it in another way. If you asked your mother to use your product, would she find it easy to do so? Would she enjoy it? Do people connect with what you offer in an emotional way that makes them feel good about themselves as well as with what you’ve sold them? Are they proud of owning or using what you offer?

It’s easy to make something “good enough”, and good enough often sells. But if you are truly trying to innovate, good enough is never enough. Magnificent is what you’re after. Or, again quoting Steve Jobs, you want to create something “insanely great.”

Indeed, the insanely great 1984 Macintosh created such a powerful impression that it is still benefiting Apple today. Apple’s head of design is an Englishman named Jonathon Ive. In a September 5^th, 2011 article in the Los Angeles Times, reporter Jessica Guynn related the story of Ive’s first encounter with the Macintosh computer:

“He says the company’s revolutionary nature was clear to him from the moment he first touched a Macintosh computer. At the time he was nearing the end of his four-year industrial design studies in England. Not one to read an instruction manual, he was frustrated with personal computers and feared he was ‘technically inept.’ Then he turned on a Mac and said he felt an instant connection to the computer and to the people who designed it.

‘I could just use the product straightaway. It was a really profound moment. I don’t think I ever had actually quite the same sense of ‘wow’ with a product before,’ Ive said.”

If Ive had not felt such a strong and immediate connection with the original Macintosh, he would almost certainly not have joined the company. And if he had not, himself, sought to create perfect, intuitive products while he was working within Apple, he would not have come to Jobs’ attention when Jobs was seeking a new head of design. But because both things happened, Ive wound up as Apple’s Head of Design, and become an internationally renowned designer. His goal is always to “make something that looks like it wasn’t really designed at all because it’s inevitable.”

Seeking perfection supports the goal of creating fanatics, as described in #1 above, but while related, it’s separate. Indeed, if you don’t have beautiful, magnificent, insanely great products, you’re not going to be able to develop fanatics. The two complement each other.

5) Create experiences, not products or services

Companies often become so focused on what they’re doing that they lose the customer’s perspective, thinking only of what they’re trying to do, how they need to market, distribute, sell and deliver their offering. But if you think about it, the customer doesn’t care about any of that. The customer only thinks about what they experience, and what they would like to experience (if, indeed, they know).

There’s an old marketing cliché that “Nobody wants a quarter-inch drill; what they want are quarter-inch holes.” That’s still true, but what has also happened is that consumers are looking past or through the product or service, and considering their experience with the results. Or at least, that’s what they want to do. This is particularly evident among car companies.

For 31 years, BMW used the marketing slogan “The Ultimate Driving Machine.” Then, in 2006, they changed it to “The Ultimate Driving Experience.” This would be consistent with the quarter-inch hole dictum: do people want a driving machine, or a driving experience? Clearly, BMW decided that, at least for now, they want a driving experience.

Lexus is perhaps an even more powerful illustration of the importance of experience instead of product. In a 2009 interview with David Brimson, the head of Lexus UK, publication The Executive Issue commented on Lexus’ rise among luxury cars in Europe that:

Customers had to fall in love with the complete experience, the product and the customer handling, this made the Lexus brand famous, then customers were more loyal and told their friends about Lexus.

“A car is new and exciting for a while, but after the ‘honeymoon’ people get used to it,” Mr. Brimson explained. “After one or two service cycles the car is just a tool. But if customers have a real relationship with the retailer, that helps to bond them to the brand.”

Brimson went on to describe why focusing on the experience is actually quite difficult:

…automotive retail has remained largely [unchanged]. By looking through [the customers’] eyes we learned more. We saw that we were forcing them to perform the way WE wanted.

E-mail is a great example. Many of our premium customers live on their Blackberries, an increasing percentage want to use e-mail or use mobile internet, just as they would normally in their jobs. But very few retailers have processes to respond to e-mail in anything like an acceptable time, so customers really have to use the phone.

So forget the quarter-inch drill; go for the experience. And the experience starts and ends when the customer thinks it does, not when you think it does. Sticking with cars for the moment, the customer experience begins when she first thinks, “I wonder what it would be like if I bought a new car? What’s out there?”, not when they walk through the door of a dealership. This means that the experience includes how easy it is for them to get information about the cars you sell, if they can find the information that they actually want (even if they don’t know what they want), if that information is satisfying to them and encourages them to continue moving forward, and so on.

And the ideal is that the experience persists even beyond the customer’s life span, that they have talked glowingly about you and what you do so that their kids or their friends want the experience as well. You are aiming not just womb-to-tomb, but beyond as well. Their experience becomes a permanent relationship (which is fanaticism) – and that leads me to the next trend.

6) Eat your own lunch – and everyone else’s

The world changes. This is such an obvious statement that people never really think about what it means. It implies that your market changes as well. And that means your offerings have to change. Yet, many companies resist the idea of introducing significant changes to what they do for fear it will eat into their existing sales and hurt their revenues. The reply is obvious, and again, it’s so obvious that people never actually think about it: whether you introduce changes that eat into your existing sales or not, someone else will. So the question then becomes: do you want to cannibalize your sales, or let one of your competitors do it? This is an old, established principle in innovation, but one that is so well known that people take it for granted – and don’t, as a result, make use of it. And with the speed with which things are changing now, this old principle takes on a new urgency.

Worse, you also need to take risks when you introduce new things, precisely because the world is changing so fast. If you make timid changes, you risk being left behind.

I have to come back to Apple again, because Apple does this better than anyone else. Apple popularized the use of the mouse-and-desktop metaphor. (They didn’t invent it – that was done by Xerox at their PARC research group, but they were too timid to exploit it.) And Apple were the ones to first push customers to move beyond it. People still use mice with their computers – but Apple found them too limiting for their iPods and iPads, so did away with them, substituting touch and tap technology instead. They were the first to do away with floppy disks, and, more recently, with any kind of external drive, including CD and DVD drives in their MacBook Air.

Yet, what Apple and Jobs did was far more profound than just leapfrogging their own creations. They went outside of the computer industry and ate other industries’ lunches as well. In the words of a New York Times article (David Carr, “Steve Jobs Reigned in a Kingdom of Altered Landscapes”, August 27^th, 2011, NYT website), “[Jobs] didn’t set out to destroy existing business models, he just noticed their lack of relevance and came up with new ones that kept consumers happy and Apple fat. Along the way, he changed the vocabulary of media: Songs became files, subscriptions became apps, and media became just one more way to make that thing in your hands appear all the more magical.”

So, when you set out to innovate, make no small plans, and don’t even think about protecting your own business and your existing sales. Think beyond the boundaries of what you sell your clients, and think instead what you could do for them with what you have.

7) Speed kills – your competitors

Carrying on the discussion of how Apple has grown seemingly effortlessly over the past 10 years, they have forced the pace of change to the point where competitors are struggling to catch up to their last innovation while they’re already working on its successor.

I remember when Apple introduced the iPhone in January of 2007. There was a lot of criticism of what it couldn’t do, and of its shortcomings. I thought such criticisms, while perhaps warranted, were short-sighted because I knew that Apple’s pattern was to introduce a product, and then immediately and rapidly work to improve it. Sure enough, most of the shortcomings of the original iPhone were corrected (or at least improved) in subsequent releases, first of the software operating system, and then of the device itself.

There’s even a management cliché about this process: “Ready! Fire! Aim!” Introduce your revolutionary device, even if it’s not quite ready for primetime. Meanwhile, work like fury to smooth out the shortcomings, and listen carefully to the bitching and complaining about it so you can make the improvements that will make a difference to people who are using it. Use the market as the beta tester, because waiting too long saps your speed and allows competitors to catch up.

Of course, speed can kill you, too, if you don’t listen, or don’t want to listen, to criticism of your offering, or are unwilling to change it. If you bet the farm on a new offering, and then refuse to tinker with it, you will create enormous momentum – towards the scrap heap. So, you need to keep ahead of your competitors, and force them to make bad choices and introduce poor imitations of what you’ve done – but you also need to treat your own offering as a poor imitation of what it is going to become when you improve it.

8) Make lots of small mistakes

This seems to contradict trend #6, but it doesn’t. In a handbook I created for my consulting clients, titled “Innovation and Leadership: Techniques to Lead Creativity”, I talk about why companies proclaim their dedication to innovation when they secretly loathe and despise it because of the risks it forces them to take, and the fear of failure that comes with such risks. I then suggest that the way to overcome that fear is to institute a process of continuous improvement (from the Japanese process of kaizen), introducing a steady flow of minor changes that, collectively, add up to massive improvements over time. There are two aspects of this that complement, rather than contradict, my “speed kills” trend.

First, when you create a culture of continuous, all day, everyday improvement, and everyone is always looking to do things better today than they did the day before, the cumulative changes add up very quickly, supporting the Need for Speed. Creating that culture is not easy, but in today’s market, I believe it is essential.

And second, when you use creativity-enhancing techniques in the quest for a steady flow of small improvements, you will occasionally stumble across a really big idea as well. Of course, most people either back away from a big idea because it’s so scary, or fail to recognize it at all because it seems so different, so out of context, so “outside the box.”

What’s more, pursuing incremental improvements on an on-going basis does not preclude making a concerted effort to find the Next Big Thing, either, although that is harder.

I worked with one client, taking them and their people through an “Inventing the Future” process. At the end of that process, two things happened. First, the workshop participants came up with what I thought was a brilliant new approach to their market that was a relatively simple (although not easy) extension of their existing customer service process. It would have created substantial market differentiation, setting them apart from everyone else in their very busy market. Yet, their reaction was definitely ho-hum. They didn’t see it as being that important. This is, in my mind, a classic example of failing to recognize. They were looking for something dramatic and flashy. This was – but they didn’t see it that way, and so chose not to pursue it.

Meanwhile, as a result of preparing and running the visioning sessions for them, I had an idea that went ’way outside the box, bringing technology into their business in a dramatically new and different way. However, they hadn’t hired me for my ideas, but for my ability to stimulate their thinking and facilitate their brainstorming process. Indeed, this was explicitly spelled out in the terms of engagement. Accordingly, I approached the management privately, told them I had an idea that might be of value to them, but warned them it was a radical departure from their current way of doing business. They didn’t want to hear about it. They didn’t ask any questions. They basically just brushed it off without knowing anything about it.

9) Use technology to make magic

When people marvel to me about all the changes technology has introduced over the past 10 years, my reply is always, “You ain’t see nothin’ yet!” Technology is advancing so quickly that it’s almost inconceivable what we will experience over the next 10 years.

Yet, technology is doing things that even 20 years ago people would have dismissed as improbable, impossible, or thought was just plain magic. So exploit that magic. You may be in an established, mature industry that uses very little technology. But look for ways of improving your customer experience of your offerings by using technology to make it magical. Again, Disney is great at this.

I was on one of their new cruise ships in January of 2011, and while there were lots of interesting, well-executed things on this ship, one thing caught my imagination and stuck in my mind as really neat: they had magic pictures on the walls (or bulkheads, if you insist). When you were walking through some of the public areas, there were all kinds of pictures, illustrations, photographs, and decorations from their movies and creations. A few of them, though, were magic: while they looked like pictures, for example of a pirate ship, when you walked up to them, a motion sensor turned it from a static picture to a cannon battle between the pirate ship, and a port city fort, complete with sounds.

There was no compulsion to do this. Disney’s earlier ships had static decorative pictures and such on the walls. But this was an opportunity to use technology to make something ordinary into something magical. And since Disney sells the experience of magic (even though they don’t actually have magic), it was a natural progression for them.

You don’t have to be Disney to do this. You could run a lunch counter, and offer your regulars the opportunity to order their lunches by email. Once you had that established, you could email photos of what they normally ordered, along with suggestions for sides that might complement such dishes, and an offer for a (first time) discount if they were ordered together. Once you got your regulars used to that, you could match similar taste combinations from the things that other customers who liked what this customer liked, and make suggestions of things they haven’t tried, along with a (first time) discount to encourage them to experiment. In short, you could use technology to look for ways to make their experience (Trend #5) easier, better, and more memorable. In fact, I’m sure there are lunch counters that are doing just this, even though I don’t know about them.

“Any sufficiently advanced technology is indistinguishable from magic,” said author Arthur C. Clarke. Technology is making magic on a daily basis – so find a way to bottle this lightning, and turn it to your advantage.

There are many other developments in innovation beyond what I’ve said here. I started work on this blog by listing ideas, and then wound up discarding a bunch of them in order to focus on the ones I thought were most relevant right now. If you are truly interested in innovating, then it must become a way of life, not just something you think about when reading an online article.

And if I can help, contact me.

The following article was first published in Teach magazine.

A recent government publication highlighted all the marvelous things that individual teachers and school boards were doing with technology in my region. It was both uplifting, and disquieting. It was uplifting because I could see that there were entrepreneurial, creative people working in education to drag the education system into the 21st century. It was disquieting because these innovations were disjointed, unrelated to each other, and were not doing much to change the average outcomes for the vast majority of students. Indeed, the process of highlighting the projects merely underscored what could be done – but what, largely, wasn’t being done.

There has, recently, been a steadily rising chorus of voices, especially outside of the pedagogical community, commenting on how much better we could be doing with today’s education. These range from Sir Ken Robinson, a U.K. consultant, author, and iconoclast, to Why Don’t Students Like School?, a book psychologist Daniel T. Willingham, to a series in The Toronto Star by science journalist Alanna Mitchell that surveys what’s happening in education around the world. My favourite quote from The Star series is from the first article. In it, French neuroscientist Bruno della Chiesa was cited as having asked the French education minister about an international movement to link research into how the brain functions (and therefore, how people, especially children, learn best) with the field of education. The minister’s reply? “The brain? What does the brain have to do with education?”

Our education system, as I’ve said before, is based on the 19th century mass production model. This was natural. Universal education came about because the Industrial Revolution was creating factories that needed workers who were literate. Therefore, business pushed governments into creating and funding universal education to produce such workers, and it was done pretty much in the style of the factories that future workers were being trained to fill: You take 25 students (more or less) and put them in the 1st grade workstation and process them through the 1st grade curriculum. Then you move them through the 2nd grade workstation, process them through the 2nd grade curriculum, and so on. Moreover, you have them sit still and listen for six hours a day, five days a week, 180 days a year. The process is, itself, completely contrary to the natural inclination of children, with the result that we bore them to tears before they get much past grade 2 or 3.

This is changing, but very slowly, and changing primarily in superficial ways. Moreover, we are not, as a rule, using the things we know now about how the mind works, how different people learn with different strategies, how different people need different emotional and psychological needs to support optimal learning, and much more. We are, fundamentally, following an outdated model of the most effective ways to teach children.

Yet, our understanding of humans is growing with remarkable speed. We can look at brains as they function, tell whether someone is engaged or bored, identify strategies that are likely to produce superior results, and even begin to understand the relationships between genetics and environment that shape personalities, intellects, and brain function. But what we know now will pale in comparison to what we know by the time today’s grade 1 students finish their formal schooling. Moreover, not using this research would make about as much sense as medical researchers unlocking the secrets of, say, cancer, but society refusing to make use of such findings. Clearly, we want to take advantage the things we learn about how the human brain functions – and how learners can be helped to learn better, and develop better intellectual gifts.

So my question is: What needs to happen for us to adopt superior methods of education students? And who can help us as we seek to take advantage of our rapidly gathering understanding of brains, and how they learn? The answer, if you think about it, is that there are lots of things that can be done, and lots of people to do them. Let’s start at the top.

• Teachers – Teachers are the front line in education. You are the ones that have to make fine theories work in real world classrooms. Therefore, you must lead this revolution, much as doctors would have to lead a revolution in cancer treatment, not researchers. But to do this well, you need to know about the work that’s being done. Accordingly, we need two things. First, you must seek out such knowledge, particularly case studies of real students in real classrooms, and push to have it presented at conferences and PD days. And second, we, as a society, must make sure you have both the time and the resources to study new developments before asking you to implement it.

• Principals and administrators – You need to be the fomenters of change, pushing ministries and school boards to source and present such information, and making sure teachers have straightforward, effective access to it. You are the facilitators of this process, and, with the teachers, must become the champions of the things that can realistically work in the classroom. This is a tough balancing act between fine theory and real practice, but there’s no one in a better position to do it than you.

• School boards and ministries of education – It’s your job to sift through the research, find the approaches that look most promising, and make it available to schools. This means appointing people to seek out the wide varieties of research that are emerging, consult with researchers to find out which ones have been tried in real world environments, and which show the most promise. Perhaps most important, it’s vitally important that approaches be realistic, and have been tried in ordinary schools, not showcase schools with massive resources. And even new approaches that have worked elsewhere need to be introduced slowly, on a small scale, and proven before they are rolled out, willy-nilly.

• Teachers’ Colleges – The world is changing, and your job is to prepare those who want to be teachers with the latest research, an understanding of what works best in pedagogy, and how to apply it in a real world classroom. What’s even more important, you are going to have to keep changing your curriculum as new research appears. Many teachers’ colleges are doing this now, but it’s crucial that they stay abreast of what’s happening.

• Secretaries and Ministers of Education – Your job is two-fold. First, you need to take the political flak that always accompanies change, to defuse it, and to harness it into constructive dialog so that schools don’t become war zones between opposing views on high-minded pedagogical theories. And second, you need to push the system to change. Every social system resists change; stasis is easier, and people – all people – are inherently lazy. Therefore, for the good of your jurisdiction, and to secure its future, you have to make sure that change happens. Push your bureaucracy. Support their initiatives. And make everyone in the system accountable for converting new ideas into practical classroom realities. Oh, and one more thing; don’t interfere when people are doing their jobs right, no matter how politically attractive it may be to do so.

• Parents – You are not the experts on this, but you represent the users of the education system. It’s up to you to push for better education for your kids, and to work with teachers to make it happen. This means being supportive when new things are tried, but also unwilling to accept 19th century answers in a 21st century world. And here’s a clue: if you’re kids are bored, and hate school, then there’s something radically wrong with their school. Find out what the alternatives are, and start a conversation about how schools can improve.

• Voters – Change takes time, but has to start somewhere. Don’t just block change with knee-jerk reactions of “Schools were tougher in my day.” In our day, we didn’t understand 10% of how the brain works, or how students learn, that we do now. You’re paying a hefty tax bill to educate students. Make sure the education system is giving you value for money.

Our education system needs to be changed, but cautiously, and in the right directions. This is going to take sustained, careful effort, and what some might think is hopeless cooperation between the different participants in the education system. I believe we have no choice; the old models won’t work with today’s hipper, sharper, Internet-saavy kids. If we don’t change the system, today’s students will increasingly tune out the system as irrelevant, and we will lose an enormous opportunity that will benefit all of us.

© Copyright, IF Research, September 2010.

The relationship between leadership and innovation is pretty clear: if an organization’s leaders do not support innovation, in action as well as in words, it’s a pretty safe bet that innovation can’t happen. The most that will happen is that employees will do their best to look good without actually taking any risks and doing good. In such an organization, innovation will not happen, and the organization will fall behind its more innovative competitors, even as management puzzles over why it can’t seem to catch up.

However, the manner in which innovation can improve the leadership of an organization is not as apparent. It’s something I only discovered by working with clients who wanted to promote innovation in their organization.

Two primary kinds of innovation

From my perspective as a futurist, there are two primary kinds of techniques for exercising innovation: top-down, and bottom-up. Top-down means looking at the big picture, and breaking it into pieces in order to uncover opportunities that might not have occurred to you otherwise. Hence, scenario planning, where you look out to a time horizon several years away and consider a number of “what-if” possible futures that your organization might experience, and then come up with contingency plans to deal with each one, is a top-down technique. So, for example, I worked with a logistics company that dealt with the financial industry. We prepared a number of possible scenarios for the future of their clients, and then identified what services their clients would need over the next 5-7 years. Once we had identified these services, the logistics firm was able to think through what they could do to support their clients in the defined circumstances, and therefore what services they should be prepared to develop over the same time horizon.

A bottom-up innovation technique is one where you start at ground level, in the nitty-gritty of an operation, and use one of several different kinds of brainstorming techniques to come up with new ways of doing things. Hence, many of Edward de Bono’s brainstorming techniques are bottom-up approaches. I’ve developed one called the Opportunity Matrix, where I break an organization’s operations down into tiny pieces, and then pose focused questions about how those tiny parts of their operations might be improved. By forcing an organization down to the micro level, it forces people to come up with fresh thoughts instead of recycling ideas from elsewhere. Because you are dealing at such a minute level, you can’t fall back on clichés or old ideas. They don’t fit. The result is that you come up with hundreds of new ideas for tiny improvements, and then sift through them to find the ones that seem to hold the most promise, that play to your strengths, or that you just like the best, and develop those.

Where leadership comes into this is slightly harder to see; you have to approach it obliquely.

How to create excitement

A top-down approach, such as scenario planning, can both give your organization direction and a sense of purpose, and help you inspire your people. A believable Big Picture can be heady stuff, especially if you develop it with a plan to bring it to fruition, as you can do by developing a Desired Future scenario. It can create excitement, which energizes people and leads to fresh enthusiasm and further fresh thinking. In fact, I have a very simple formula for this: Dreams + Belief = Excitement. If you can help your people paint an enticing view of the future, one that they sincerely want to see happen, and make it seem possible, then people get excited about it. In contrast, if you paint a not-very-interesting picture of tomorrow, then even if people believe it will happen, there’s no excitement. And if you paint a fantastic image of a really terrific future world, but nobody believes that it will happen, they may mouth the corporate slogans, but you won’t have won their hearts and minds; there will be no enthusiasm.

So, painting an highly desirable picture of the future, that your people fervently desire, and showing them how it can be achieved inspires them, excites them, energizes them, and underscores your leadership abilities.

How to motivate people

Meanwhile, giving your people authority to come up with new ideas, and then seeing the best of those ideas implemented, as happens with successful bottom-up techniques, helps keep excitement alive when the novelty of a Grand Idea has worn off, because (a) they can see that your operations are steadily improving, and (b) they see that they are both being listened to, and that they are making a difference. Both of these buttress people’s belief in the organizations they work for. Everyone wants to work for a winner, and winners get better all the time, learning from the past, and preparing for the future. And going home with the feeling that you’ve accomplished something, and made a difference in the world, according to management studies going back decades, is one of the strongest of motivations for virtually everyone.  And creating an environment where people feel they’re working for a winner, that they are being listened to, and where they can make a difference, dramatically enhances the attraction of working for your organization – and by inference, enhances your leadership abilities.

Nor are these things just good PR. By creating a future that people can believe in and get excited about, an environment where they feel they can contribute, and the belief that they are working for a winning team, you are creating real improvements in your organization. And these things will help no matter how successful you are; top quartile, or bottom-feeder. Leadership, true leadership, comes from leading people towards success in a way that makes them believe they contributed to it.

And that’s the link between leadership and innovation. Ironically, it’s very simple – which is not to say it’s easy. But then, if it was easy, everyone would be #1, wouldn’t they?

Innovation is motherhood in the corporate world. You have a problem? Innovate! Falling sales? You need innovation! Losing market share? Innovation will fix that.  Are your people less than dedicated to good old Corporate You? Don’t hesitate ­– Innovate!

There is, in fact, a minor industry in innovation these days. It’s become a black box, a blank space on the map marked “Here there be simple answers to all your problems.” But while it is true that innovation is necessary, desirable, and can solve problems, there are two major problems with innovation itself: first, that it’s not a magic spell that will make your problems go “POOF!”; and second, most organizations really, really don’t want to innovate, no matter what they say to the contrary. In fact, many of the most vocal proponents of innovation are, I suspect, the biggest fakers. Let’s look at these issues, starting with the magic box idea.

The I Ching, or Book of Changes, is an ancient Chinese book of divination, which is kind of like a computational fortune teller. It is also the repository of a great deal of folk wisdom, and one of my favorite hexagrams (or fortune cookie sayings, if you prefer) is that “Even the greatest hunter finds no game in an empty field.” I take this to mean that if a problem has no possible solutions, you can’t solve it no matter how creative you are. And, of course, this immediately invites the comment that if a problem hasn’t been solved, it’s only because no one has been creative enough. Logically, this is a tautology, like saying you can make water run up hill through prayer. How hard do you have to pray? Why, hard enough to make water run uphill, of course.

Moreover, true innovation is hard work, and much of it involves real thinking. That doesn’t sound like a bad thing, and isn’t, but someone once said that most people will go to any lengths necessary to avoid having to truly think. Innovation takes serious skull sweat, and most people are out of practice in thinking new thoughts. What’s more, our society and culture have spent decades teaching us that only artists can be creative. Indeed, creativity is often thought of as a “soft” skill, suitable only for soft pursuits rather than hard-headed business. When you’re taught for decades that you’re not supposed to be creative, you tend to think that you’re unable to be creative. It’s not true, but it means having to fight against the culture you were raised in.

Next, there’s the frankly bigger issue of aversion to true innovation. Companies (and not-for-profits, too) pledge allegiance to innovation because they know it’s a good thing, and they’re supposed to. But innovation requires you to do two things that most organizations don’t want to do: do things they’re not good at, and be willing to fail. If you’re only willing to do things you’re already good at, then the chances are you’re just rehashing something you’ve done before, which is, by definition, not innovation. And organizations most especially don’t like the idea of failure. Failure is the ultimate sin in the corporate world. It goes you fired, demoted, passed over, or passed up. Yet the possibility of failure is the price you pay for doing something new. If there’s no risk of failure, then you’re only re-playing your greatest hits, and you won’t have any new ones.

Naturally you don’t want to fail, and you should do everything, within reason, to avoid failure. And your first attempts at something new should be small and containable, so that if they don’t work, you haven’t lost too much. And, most important of all, you need to work hard to learn from your failures, and take them as opportunities to improve your skills and extend your abilities. And you need to look for ways of turning your small failures into bigger successes, not by doubling down, but by taking what you’ve learned and leveraging it into something better.

Innovation truly is important. It’s not a panacea, able to cure all ills, but it is a critical tool in any organization’s arsenal. And the techniques of innovation can be incredibly helpful, providing structured ways of looking at the world from a different perspective, inspiring new thoughts and new ideas, and providing ways of developing those thoughts and ideas into practical, working realities. But no one should approach innovation under the delusion that it is quick and easy, and that all you have to do is rush into the marketplace with the latest book on innovation open to page 37. It doesn’t work that way, and folks who do this are just fooling themselves, and wasting time and resources doing so.

 © Copyright, Richard Worzel, May 2009.