This morning Talis hosted a visit from Small Heath School, which is, in the words of their website, an “inner ring, split site, co-educational 11-18 comprehensive school” in Birmingham. The five students who visited are all approaching the end of their first year of A level Business Studies and were accompanied by two teachers, one of whom, Jacqui Williams, is a friend of mine. They were all here to find out more about innovative marketing practice in a commercial company. The idea originated in a conversation between myself and Jacqui a few weeks ago in which I was telling her about the tools we now have at our disposal to manage our marketing communications.

We knew we’d only have a couple of hours or so, due to the teachers’ competing priorities, so once we’d looked at the curriculum, which Jacqui had sent us, we decided to concentrate on the Promotion element of the Marketing Mix. Apart from an opening session, then, in which Richard Wallis gave an overview of the past, present and future direction of the company, this was the focus of the event. Dave Robinson, our Senior Creative (and former student of Small Heath School), took us all through the re-design that is underway of the Talis corporate website. We exposed the students to some fairly high level explanations of the emerging technologies at this point, which was unquestionably challenging, but the students understood that we are fundamentally trying to make information more accessible and targeted to different communities.

We then moved onto slightly more comfortable terrain for the students. I took one of our market segments, the UK academic library sector, taking them through the range of communications that we produce and disseminate across this sector. Just as the previous presentations had been, this turned out to be fairly interactive, and I was able to speak about the challenges that universities face in meeting student expectations (particularly in terms of technology) in terms of the students’ own future university experiences.

My colleague Mark Travis then followed this up with a more product-based approach, explaining how and why we would create a marketing campaign around a new product, using Talis Engage as a case study. You could see that students found this interesting and could relate it back to the theory in their course, which the visit was hopefully bringing to life. It was then left to Grant White to explore with the students, somewhat bravely with a live demonstration, how tools such as salesforce.com, VerticalResponse and Google Analytics can help us to track how our communications are being received and ingested. This helps us, as Grant explained, to refine future communications as it’s so much easier now to identify those areas that our audiences find the most engaging.

Finally, Richard Wallis concluded the presentations by talking about his role as a Technology Evangelist, and in the process, explaining the positioning of Marketing as preparing the groundwork for sales activities in myriad ways, thus helping the students to see all the presentations in a broader commercial context.

One of the most interesting things for the Talis staff present was the discovery that not all the students knew what blogs were, or Twitter for that matter. Facebook seemed to be their world, and we soon learnt to relate discussions around Web 2.0 tools back to Facebook.

Apart from this revelation, why did I organise this event, and why did my colleagues get involved so willingly?

Well first off, it was noticeable that the two teachers were note-taking furiously throughout the presentations, thus validating one of the main reasons for the visit – to take A level students and teachers through important marketing activities which don’t seem to be covered by today’s text books, as well as consolidating learning by demonstrating marketing communications in applied scenarios.

However of equal importance, in my opinion, is the broader responsibility that innovative businesses such as Talis must bear in the current downturn. It’s becoming very clear that the UK economy needs to shift from traditional manufacturing to more innovative industries, especially with the near-collapse of the financial sector. It makes sense, then, for companies such as Talis to be sharing innovation, to nurture aspiration among young people and spread expertise.

Today’s visit is part of Talis’ continuing mission of shared innovation; it’s very encouraging that it has been so well received.

Justin Leavesley

Meaningful differentiation is a real problem for business. If you do the same thing as everyone else, chances are competition will mean that you do not earn unusual profits. If you play the game of linear economics then the theory says you shouldn’t earn much above the marginal cost of the goods produced, and as an entrepreneur that sucks. As the world becomes more modular and connected, it is becoming easier and faster to imitate what works making it much harder for business to maintain differentiation. Even with companies like Google, there are always more smart and innovative people not on your payroll than on it.

But when business is driven to improve, it faces a defining dilemma. Will it make a small and obvious incremental improvement that it knows people want; or will it make a more radical departure, innovating where there is not yet known demand. Incremental and radical innovation are both expensive, however, so only a modest number of innovations can usually be supported. Innovation is therefore limited not only by available financial capital but—more importantly—by available human capital: the skills, talents and passions of employees. But by its nature, radical innovation also has a very high failure rate. The high cost and high failure rate make radical innovation very hard for most business. It follows then that we see most businesses organised to invest far more in incremental innovation than true, radical innovation. With incremental or radical innovation, success is about choosing the right small number of the highest value innovations.

Nothing new here so far. Lets call this kind of business model: the value creation model. The central idea of the value creating business is that a business organises the resources at its disposal to create a valuable product or service that solves problems that customers care about. The cost of innovation is centralised and often it will try and capture the majority of the value in the value chain.

Now imagine a new type of company, which thinks about things a bit differently, enters a market populated by value creating businesses. This new type of company has found a way to remove the need to foresee which innovations will work. Instead of making the right bet on a small number of innovations, the company runs literally thousands of innovative experiments and the market selects those that are fittest to grow and become successful, the others remain small or simply vanish. Through diversity, the winners emerge over time: chosen by the market not a product manager.  This amazing trick is possible because the company has found a way to decentralise the financial and human costs of innovation so it does not bear the cost of failed innovation, but amazingly, does share in the success of the winning innovations.

This new type of company understands that the innovation it undertakes is to provide an infrastructure to enable the innovation of others. It may not have even created the vast majority of the value of customers experience at all. This company understands its job is to enable an ecosystem whose job is to lower the cost of innovating and to share the benefits of useful innovation with each participant. These economics are non-linear, driven by feedback loops generating direct and indirect network effects. The company enables the ecosystem, but it is the ecosystem that generates the durable value.

Now the value creation companies face something quite different: not a competitor business with the same constraints as themselves; but a seething, decentralised ecosystem where innovation can come from anywhere. The new company has inverted the innovation problem. Through building an infrastructure to decentralise the costs and benefits of innovation, the company has not bound the available financial or human capital within the its walls. Instead it can draw any motivated innovators into the ecosystem without having to hire or fund them. This is a massively scalable model in which a relatively small company can enable huge value creation.

Some call the infrastructure that supports these ecosystems a platform. Some platforms are proprietary like Microsoft Windows or MySpace; others are open platforms like Wikipedia or the web itself. In most cases though, the value of the ecosystem vastly outweighs the value of the actual platform technology. The platform is the enabler rather than the value. For example, if you had a copy of the ebay source code, all you would have is an auction site with no sellers or buyers. As with the web itself, both the platform and the ecosystem need not be owned by a commercial company nor indeed anyone.

As everything becomes more and more connected, the level of complexity and pace of change in many markets is going to continue to increase. The linear thinking of producer versus consumer is being daily challenged ever more deeply. It leads to a centralised business model which cannot scale to match the complexity created by this increasingly connected society. If we apply Moore’s Law, for example, to mobile technology; we see that the mobile devices connecting us together will be 1000 times more powerful in only 15 years. The number of industries or spheres of endeavour where shared innovation can be applied grows as the cost of connecting everything declines. It is time to consider shared innovation.