Change Management Problem Introducing User Toolkits for Innovation
from PDMA Blog by Michael Osofsky
Von Hippel and Thomke proposed “user toolkits for innovation” to address the age-old problem of communication breakdowns between engineering teams and product users that result in users not getting what they want. User toolkits are a way for engineering teams to expose enough control over their product for users to be able to customize or configure the product to address their specific need. Examples include a food flavorings company that provides buyers with a toolkit to create their own flavorings, a product category where it is difficult to create products because it is hard for buyers to describe in English the type of flavoring they want. User toolkits are an approach to innovation because they put the solution-building task into the hands of the person who has the problem. Toolkits are another way of applying the maxim that necessity is the mother of invention.
“The Internet makes SME lives more difficult,” said Cranfield’s Prof Burke, who with Dr Hussels, conducted the research. “Only 16 percent of UK SMEs feel the Internet has increased operational efficiency, which is a fairly startling discovery.” Indeed, 46 percent feel the Internet has raised the complexity of running their business, with over 62 percent saying the Internet has increased competition from foreign markets - although this has another side, 56 percent of respondents said that the Internet had enabled them to sell their products abroad.
One in three SMEs strongly feel the Internet has made it harder to protect confidential company data, while 48 percent believed the Internet caused employees to waste time, thanks to distractions like social networking, personal web surfing etc.
The financial storm that blew up in America’s subprime mortgage market last year has become a hurricane. The ill wind from reckless property lending blasted first the market in asset-backed securities, then banks’ balance sheets and, most recently, stock markets. Across the globe, more than $5 trillion has disappeared from the value of public companies in the first three weeks of January. Many markets are 20% or more below their highs, the informal definition of a bear market. On January 21st share prices plunged from Brazil to Britain in the worst day of trading since September 11th 2001.
Although America’s exchanges were closed that day, its policymakers’ response was more than commensurate. Before Wall Street opened on January 22nd the Federal Reserve announced an unscheduled rate cut of three-quarters of a percentage point, to 3.5%, its fastest easing in a quarter of a century. A day later the New York insurance regulator and leading banks began work on a multi-billion-dollar plan to rescue the country’s teetering bond insurers. As the markets pitch and yaw the pressing question is whether central bankers and regulators have acted with swift prudence, or ill-judged panic.
There is no doubt that this is a frightening moment. But the narrow economic rationale for the Fed’s emergency rate-cut this week was thin. America’s weak economy means monetary policy can, and should, be loosened considerably. But the central bankers’ next scheduled meeting begins on January 29th. Since lower interest rates take several months to work through the economy, accelerating rate cuts by a few days will not much affect the outcome. Yes, share prices had been falling sharply across the globe, but the slide was orderly and the system had not seized up. The Fed seems to have been spooked, and wanted to stop the markets’ fall.
That is a dangerous path for a central bank to tread. Its success will now be identified with short-term movements on Wall Street. Indeed, as the stock market shrugged off the latest rate cut, the Fed’s authority already looked diminished. As if to prove the point, shares soared only when the insurance regulator appeared. Ben Bernanke, Fed chairman and guardian of America’s economy, moved Wall Street less than Eric Dinallo, whom nobody had heard of, saying he would rescue some insurers nobody understood.
Rather than chasing the market’s tail, the Fed ought to be asking what the markets’ fall really signals. The answer is: unsurprising judgments that should not have led it to panic.
The Bernanke put-upon
For much of last year, stock markets ignored the bad news from the credit markets, thanks to three assumptions. First, that policymakers, led by the Fed, would avert recession in the United States. Second, that even if America stumbled, the rest of the world economy was “decoupled” and would carry on growing healthily. And third, that the credit mess would be confined to areas related to subprime mortgages.
These assumptions were always over-optimistic. America’s economy has stalled as the building bust deepens and consumers cope with the triple whammy of falling house prices, tighter credit and dearer oil. The labour market is weakening at a pace that has in the past heralded recession. The rest of the world, meanwhile, is slowing. Europe’s outlook has darkened. Its banks are embroiled in the credit crisis; and one of them, Société Générale, has lost €4.9 billion ($7.1 billion) in a fraud. Japan is weak; even turbo-charged China may cool.
And the credit crisis has continued to spread. Corporate lending and parts of consumer credit, such as credit cards and car loans, are wobbly. The looming downgrades — and possible bankruptcies — of the “monoline” insurers of some $2.4 trillion of bonds boded worse until Mr Dinallo moved. They would have hurt states and municipalities that are their biggest customers; and banks that had bought insurance in credit-derivative trades would also have been hit. A further round of losses at the banks could have been catastrophic. With the system at risk, no wonder stock markets swooned.
Heavy weather
None of this is exactly cheerful, but it is not disastrous, either. Particular problems, like the monoline insurers, should be dealt with by particular remedies, not the warm bath of monetary policy. It is early days, but one choice for Mr Dinallo would be to corral their worst risks in a “bad bank”, leaving the rest intact—and more tightly regulated.
As to decoupling, although the rest of the world remains somewhat vulnerable to America’s troubles, most rich economies are in a slightly better shape than the United States, and most emerging ones are better able to withstand an American downturn than they were. Many have plenty of reserves and flexible exchange rates, making a rerun of the 1997-98 crises unlikely. Many are growing nicely on the back of rising domestic demand and regional trade links. And many have strong budget positions, leaving room for fiscal loosening to offset weakening exports.
American policymakers also have tools to cushion — if not forestall — the downturn. Lower interest rates may not stop house prices falling, nor will they prevent banks from tightening their lending standards. But monetary policy can still stimulate the economy, as lower rates boost banks’ profitability, bring down firms’ borrowing costs and improve indebted consumers’ cash flow. Equally, fiscal policy will be a prop. Of course, President Bush promised too much when he suggested that a stimulus package would keep the economy “healthy”. But Congress is rushing the $150 billion package through, and, even if it takes a while to reach firms and consumers, it will give the economy a boost.
Taken together, the signs from the world economy are troubling. The credit binge will not unwind quickly or gently. Asset prices will fall. But central bankers and regulators have the tools to stop a downturn from becoming a slump, so long as they use them sensibly. Reacting to market panic with panicky rate cuts is likely to make things worse rather than better. The Fed should always be the calm centre of a financial storm.
The financial storm that blew up in America’s subprime mortgage market last year has become a hurricane. The ill wind from reckless property lending blasted first the market in asset-backed securities, then banks’ balance sheets and, most recently, stock markets. Across the globe, more than $5 trillion has disappeared from the value of public companies in the first three weeks of January. Many markets are 20% or more below their highs, the informal definition of a bear market. On January 21st share prices plunged from Brazil to Britain in the worst day of trading since September 11th 2001.
