Making Innovation Flourish

Internet radio: how regulation could impact online innovation

Today internet radio stations in the US are observing a day of silence to protest the Copyright Royalty Board (CRB)'s decision to hike royalty fees for internet radio stations - a hike of 3-12 times the fees currently being paid by stations. Small stations have complained that the fees would be more than their annual revenue, and many pundits argue that this could effectively 'kill' streaming internet radio in America. Even non-profit radio, such as NPR (National Public Radio) would be severely hit by the hike.

Roughly 1 in 5 Americans listened to internet radio regularly in 2006, so the potential impact shouldn't be underestimated. For reference, on this side of the pond, the picture is much the same: BBC's internet radio doubled its listenership in 5 months, and a year ago reported over 32million hours of net radio consumption (I'm sure it's doubled again by now).

To me, the tragic irony in this story is the fact that the proposed royalty fee model could never have existed without the online medium itself. The fees are per song, per listener - something which could never be accurately measured in the old broadcast model, but suddenly is possible for online stations due to the trackable nature of streaming media. Net radio campaigners say this is an unfair model, as it penalises online radio unjustly compared to satellite or standard broadcast radio fees.

Internet radio is the epitome of The Long Tail at work: thousands of small, non-commercial niche stations sprang up as an alternative to mainstream commercial stations littered with ads, churning out the same playlist over and over. A thriving new business model emerged based on broadband penetration, streaming media technology and consumer demand; a perfect example of innovation at work.

Looking at the bigger picture, this is a case in point of how something like regulation could seriously impact the growth of an innovative business model. What nascent markets like these need is not overbearing regulation, but forward-thinking. Of course I'm not saying they shouldn't pay (fair) fees, but this was a missed opportunity for the CRB to demonstrate leadership in the way intellectual property should be managed in the digital age. Instead, they opted for an approach that exploits the nature of the new medium to line the pockets of the record companies: none of the proposed fees would go to the recording artists.

Innovation policy needs to be more like innovation

The innovation that matters most differs between sectors. Obvious really, but it’s easier to recognise than it is to design policy for.

NESTA’s new research report, Hidden Innovation, examines six sectors that, at least according to traditional measures like R&D, have low rates of innovation. But sectors such as oil production and construction do innovate, just in different ways. In oil production, innovation is the development and application of technologies in the field. In construction, it’s more about the adoption of new working methods and materials. Neither form of innovation is based primarily on university or corporate lab research which is then applied and commercialised – the so-called linear model of innovation.

The new policy agenda for innovation – developing approaches that stimulate and support the different forms of innovation that matter in different sectors – will need a new approach to policy development. In effect, in the past we have relied on a linear model for policy development: do some research (privately); analyse the results; develop and launch a pilot programme; evaluate the impact before deciding whether to roll-out as a full ‘product’.

Much innovation in industry no longer works in this way. It’s collaborative, interactive, incremental, experimental, open. Not words usually associated with policy development, let alone politics.

At the event to launch the NESTA research, Alistair Darling, Secretary of State for Trade and Industry (and possibly the next Chancellor of the Exchequer) announced the intention to form ‘sector innovation groups’ with industry partners (and NESTA) to discuss and develop new policies to support innovation in service sectors of the economy. [You can watch his speech here] Does this approach – potentially innovative in itself - represent the future of policy development for innovation?

How do we build policy to support user-led innovation?

Last week, NESTA hosted Eric von Hippel, Karim Lakhani and a number of their associates for a series of events exploring user-led innovation. Two major points stayed with me:

Firstly, building specific policies to support user-led innovation is challenging.  That, however, is not the same as making sure that other policies do not harm it.  If Eric’s work is correct (and its methodology is excellent) then users are the real source of much innovation.  We must therefore be careful not to enact new IP laws or give free rein to new technologies (like DRM) that might restrict this freedom to innovate.

The challenging nature of building policies to support user-led innovation does not, however, let policymakers off the hook. There are several quick wins that could be achieved simply by making sure that user-led innovation is taken into account in existing initiatives.  If users are so innovative, why should they not feature prominently in Foresight-type programmes, Innovation Platforms and Knowledge Transfer Networks?

Secondly, Eric is often mischaracterised as being ‘anti-IP’ – placed alongside the West coast crusaders and their acolytes in campaigning for the overturning of the international IP system.  This isn’t the case.  Eric argues that user-led innovation needs IP but it needs more intelligent IP that allows more sharing of information and different types of rights. Broadly-speaking, however, any new extensions of existing rights would hurt user-innovators.  But Eric doesn’t make this case like a deranged zealot.  He simply points out that if users are often innovators, it’s good for all of us if the state doesn’t prevent them from doing more of this in the future.

Launching the NESTA Connect blog

We have spun out our NESTA Connect team into their own blog.  All of Roland Harwood's posts have been transferred here.

Net taxation could kill collaborative innovation

Soon the US government will decide whether the ban on taxation of internet access should continue or not. If the ban is lifted, Americans could be taxed per access or amount of bandwidth used instead of the current blanket per month fee for broadband. Not only is this a backward step for consumers (remember dial-up?), this clearly has societal implications, allowing only the moneyed classes to readily access high-bandwidth content such as video, or to stay online for long periods in Second Life or MMORPGs. But there's so much more at stake than missing out on YouTube or online games. The entire economy of the internet would change. Would you do your banking, grocery shopping or check-in for flights online if you had to pay extra to do so?

The rise of cheap broadband also opened the door to exponential growth in online social networks and collaborative tools such as Basecamp and Central Desktop, not to mention online meeting tools and VOIP. There are millions of people online every day, collaborating on projects and ideas, sharing knowledge in ways that weren't possible before, and just plain getting things done. People from oppostie sides of the world can collaborate in real time without ever leaving their chairs. Taxation such as that being debated could kill these kinds of online collaboration. Without cheap & easy access would projects such as the IBM InnovationJam thrive - or even exist?

If the US were to lift the ban, other countries could be inspired to follow suit - I only hope that those of us who live our lives online can make sure this doesn't happen. It also highlights the fact that many of the factors in creating a climate where innovation can thrive reach way beyond 'innovation policy' or personal  entrepreneurship.

Ideo, Interdisciplinarity and Enterprise

Please Note : NESTA Connect's Blog posts have now moved

Thinking About Design

Please note: This post has moved

This week, we are fortunate to have a series of events at NESTA with three leading thinkers/speakers from the world of innovation.

Firstly on Tuesday evening, we are hosting Designerly Thinking with Bill Moggridge, founder of IDEO, one of the most successful design firms in the world and one of the first to integrate the design of software and hardware into the practice of industrial design. Then on Thursday, at the launch of NESTA Connect, we have Professor Eric von Hippel, Professor of Management of Innovation and Entrepreneurship at MIT and best known for his work developing the concept of user innovation (see his excellent book ‘Democratizing Innovation’). Finally, on Friday Karim Lakhani from the Harvard Business School, will be hosting a policy breakfast on the emergence of open source software communities and their unique innovation strategies.

In different ways, each of these events for me signals the growing awareness of the importance of design, or user-led thinking, in the development of better products, services or processes. By design, I don't mean funky kettles or stylish cars, though obviously these would be nice to have. Rather, I mean innovating from the user’s perspective to make products, services or processes easier to use through making them more intuitive. This sounds so blatantly obvious, it is easy to dismiss and yet we come across bad design in our lives so often we barely notice it. This weekend I was struck by the appalling (lack of) design of a local pedestrian crossing that makes crossing the road very difficult and very dangerous - I'd love the person who designed the crossing to actually try and use it and I can feel a letter to the council brewing. On the other hand I am an avid user of Streetcar, the pay-as-you-go car, which is very convenient and easy to use, and makes car ownership unnecessary in dense urban environments such as London. I believe the Streetcar service was developed by one of the emerging breed of service-design companies live|work.

This week sees the launch NESTA Connect which aims to build the UKs capacity for innovation through collaboration. Our focus is upon stimulating new, unexpected or extreme collaborations between different research disciplines, difference types of organisations and disparate communities. It is no accident that two out of the first three NESTA Connect projects have design at their core. I’ll post again soon with more information about these projects very soon. In the meantime, I'd be interested to hear of more unusual examples of good or bad design in action.