Thursday, July 28, 2016

What Dollar Shave Club's success says about innovation

I read today a rather rambling and confusing piece in the New York Times about Dollar Shave Club.  The article, entitled $1 Billion for Dollar Shave Club: Why every company should worry, can't seem to hit its stride or find a point it wants to make.  At first I thought the piece was going to congratulate a disrupter, Dollar Shave Club, who, despite the odds, grew a startup business to the point where Unilever acquired it for $1 billion dollars.  Dollar Shave Club did this in the face of overwhelming odds, taking on a deep pocketed corporate behemoth (and noted innovator) in Gillette and P&G.  I was sure this was going to be a story about the new innovations unfolding in customer experience and business model.

Instead the author seems concerned that new innovators are capitalizing on technologies and (horrors) merging those capabilities and technologies into new offerings and solutions.  While acknowledging the idea of creative destruction, doesn't he recognize that these mergers and new products were bound to happen?  Were the past solutions somehow better?  The market and the demand generated by Dollar Shave Club indicate that better solutions and offerings were possible.  He notes how Uber succeeded based on smart phone technology, the internet and location tracking.  All of these technologies were available to the existing corporations and to any potential startup, and most have been evident for over a decade.  The winners were companies that managed to merge the technologies and capabilities in a way that addressed unmet customer needs.  This is classic innovation.  The fact that larger companies refused to see the opportunity, or worse, saw the opportunity and recoiled from the risks, is beside the point.  Good ideas will be implemented by someone, either an existing competitor or a new entrant.  The market is mostly agnostic to the individual or company that provides the prevailing service.

Or, look at this another way.  Perhaps Unilever saw the opportunity but let Dollar Shave Club become it's prototype, knowing that if DSC succeeded, Unilever could simply acquire the company, letting venture capitalists bear the investment risks.  Acquiring a rapidly growing company is smart business as well - who doesn't benefit in this scenario?

Perhaps my favorite paragraph is just at the beginning of the article, where the author writes:
The deal anecdotally shows that no company is safe from the creative destruction brought by technological change. The very nature of a company is fundamentally changing, becoming smaller and leaner with far fewer employees.

Is this actually news to anyone?  The more we automate, the more we streamline and the more we outsource key functions, the smaller corporations can become.  And, hopefully, the more flexible, more nimble, more responsive and more innovative they can become, because that's what's required to survive.  Rather than simply looking at the downside of the changing economic models, let's consider the upside as well.  Yes, automation, innovation, globalization will change the large, somewhat paternalistic corporate model.  Here's where the article makes a new point:  the problem is inequality.
The wealth will be spread among a few. Dollar Shave Club has over three million subscribers but only about 190 employees. Its razors were made in South Korea by Dorco. Distribution was initially handled in-house but eventually was contracted to a third-party company in Kentucky. What remained was a terrific design, marketing and customer service shop; and a business that was easily expandable to meet demand and that had a good niche with men who do not like to shop. These super-successful companies with few employees should worry an America struggling with inequality.

Ok, so the founders and employees and venture capitalists who took a big risk will get a nice reward.  Good on them!  The author doesn't note that for every startup that succeeds like DSC, probably 10 to 15 fail completely, leaving the founders worse off than before, never mind the other issues with inequality generally.  What's the solution?  None is provided in the article, but what we should be doing is trying to create far more innovators and entrepreneurs, removing and reducing barriers to creating businesses, finding new ways to get more venture capital into the hands of people who want to create companies and jobs.

But here, in fact, is my favorite sentence in the whole article:  But the internet, mass transportation and globalization destroy everything.  Really?  The internet, which allows us to interact with anyone on virtually any device anywhere, which enabled political revolutions and offered us such incredible solutions as Amazon and Facebook (I kid) destroys everything?  Or does it enable new products and services?  And what's mass transportation got to do with shaving?  Does the author dislike receiving his books, clothes and increasingly meals via UPS or FedEx?  And, of course, the final whipping boy, globalization.  What's the answer - to refuse to trade with other countries?  David Ricardo did the original work on comparative advantage over 200 years ago.  Work and jobs will flow where the costs are lower.  Globalization allows people around the world to compete, and it raises standards of living globally.  But we are told that the internet, mass transportation and globalization destroy everything.

We can rail at the coming of the night or we can harness the best of the change that's coming.  Rather than fight the innovators, let's enable them.  Rather than accuse the internet and globalization, let's embrace them, because we can make it so everyone benefits.  Creative destruction is real, but it is not a zero sum game. As has been true in the past, large corporations that cannot compete or reinvent themselves will be shunted aside for those that can.  Where is the anguish for Sears Roebuck, or Tower Records?  Does the author find that the innovations that replaced them are wrong or full of inequity?  Is Amazon terrible because it replaced Borders?  Who makes the call as to what is right or wrong?  Ultimately the consumer does.

What to do?  Create far more opportunities for innovation.  Expect disruption - as more people get access to more technology and more connectivity, more new ideas will be created.  Large corporations don't have a right to exist, they have a right to compete.  But the best ideas, from any origin, will usually win.  Inequality results from too little opportunity, not from too few ideas.  Through trade and globalization, the world is getting smaller, but we have access to many more consumers and markets.  There is significant opportunity out there for any innovator. 
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posted by Jeffrey Phillips at 5:29 AM 0 comments

Tuesday, July 26, 2016

What Kipling has to say about innovation culture

There's a poem I love, that we post-modern types aren't supposed to love, because it was written by a colonialist Victorian, which by itself is almost enough to discredit any literature.  I'm talking today about the poem "If" by Rudyard Kipling.  If is a poem about keeping your wits about you when others are losing theirs, and keeping your course and beliefs when others doubt you.

I think If should be mounted on the cubicle wall or meeting space or prototyping lab of every person who claims to be an innovator.  There are a couple of passages that especially ring true for me.  The first one is:

If you can dream—and not make dreams your master;
  If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
  And treat those two impostors just the same;
 Innovators must be able to dream - to think about new products and services, to imagine new business models.  Simultaneously they must make those dreams realities - come back to earth and figure out how to recognize those dreams as new solutions.  And in doing so, innovators will meet with both Triumph and Disaster, Disaster more frequently in fact.  As long as you keep the disasters or failures small and cheap, then you are experimenting as you should.  A final note on this passage:  many, many companies have succeeded once and had a Triumph.  That alone does not make them an innovator.  It means they were lucky, or in the right time at the right place.  Too often this Triumph, as Kipling calls it, leads to complacency and arrogance.

Later in the same poem Kipling writes:
If you can make one heap of all your winnings
  And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
  And never breathe a word about your loss;

Kipling understood that we need to achieve a balance, sometimes taking big risks and accepting the outcomes.  Innovators understand this, but corporations don't.  Corporations have tried to mitigate, manage, re-mediate and eliminate risk, and in doing so have created cultures and employees which recoil from risk and uncertainty. Kipling was looking for people who could accept and even embrace risk, understanding the possibilities, both the rewards and the potential loss, and reasonably unaffected in either outcome.  Over the years we've built organizations that are predictable and dependable, but in doing so we've lost the ability to dream and take risks, or even understand how to embrace risk.  In this loss, we've lost a lot of what should be an innate ability to innovate.

Of course Kipling was putting into words the concept of the English "stiff upper lip" where one was expected to "never complain and never explain".  But there's a lot in If that relates to the requirements and demands of a people and culture that hope to innovate.  Innovators have to ignore the conventional and shrug when others question ideas or motives.  Kipling addresses this social ostracism that many innovators can feel:

If you can trust yourself when all men doubt you,
  But make allowance for their doubting too;
If you can wait and not be tired by waiting,
  Or being lied about, don’t deal in lies,

In a society that was as cohesive and orderly as the Victorian age was, it must have been quite a thing to read If in its day and recognize that a person with strong ideas could stand apart from the collective crowd.  Today, in some respects it is easier to do that.  We are encouraged to "go our own way", to put a ding in the universe.  Yet even today the Steve Jobs of the world are rare, because there is still a great deal of conformity and group behavior in our society and in our corporate cultures.

Until and unless we as individuals follow the precepts of the ideas behind If, and our corporate cultures lose resistance to new or different ideas, it will be difficult to conduct really interesting innovation.  As with much in life, innovation starts from a desire, which is lived out personally and then professionally.  If these ideas are supported and nurtured individually and collectively, we'll have more innovation.  As they are constrained by any one of us, or all of us collectively, we'll never innovate and the innovations that do happen will always be considered disruptions of the existing order.  Why do you think really interesting or radical innovation is called disruption any way?


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posted by Jeffrey Phillips at 6:11 AM 0 comments

Friday, July 22, 2016

Like nothing you've done recently

Sometimes, when you are in the middle of an opportunity or problem, you are left dumbfounded by how hard it seems to get a new perspective, or how difficult it is for others to understand the scope and complexity of the problem.  This struck me the other day about innovation.  Even after over twelve years of innovation consulting, I'm still constantly learning.  It struck me how difficult innovation is for large, especially successful, corporations.  They struggle to understand innovation, to comprehend it, to do it successfully.  In many cases that's because innovation is like nothing they've ever done or seen before.  And, until you are ready to see something new, and not just see it but embrace it, then your old way of seeing and thinking and operating is going to prevail.

Part of this monologue that will follow was initiated by discussions with clients, and I'll get to those points in a second.  But part of it is sparked by the current Republican political convention.  I wish I had a dollar for every time someone said that this convention is different or unusual, or that they've never seen anything like it.  For good or bad, Trump and his surrogates aren't just breaking the mold, they've completely ignored it, sometimes to their benefit, sometimes to their detriment.  The media, comfortable and familiar with the old mold, struggles to understand.  I'm not here to praise Trump, and much of what he and his team are doing doesn't make sense to me.  But this is like something we've never seen before, and it's causing a lot of confusion, consternation and over analyzing.

Corporations and their innovation teams face the same problems, but with a more positive spin attached.  While one can question the wisdom and purpose of the Trump ticket, innovation by all rights is beneficial, drives revenue.  Corporations should want to do innovation, and as much and as fast as possible.  But they struggle, because innovation (especially disruptive innovation) is unlike anything they've seen recently.  Note that I said recently - every firm was once an innovation, and perhaps even disruptive.  It's just that as they age they lose the willingness to disrupt and become more interested in defending existing share.  How is innovation unlike anything they've done recently?

Acquiring Help

Start with simply finding partners to help them succeed with innovation.  So many of our "sales" discussions devolve into educational discussions, where we as innovation "experts" try to help our clients define their purpose and scope, and then try to align our expertise and capabilities to that scope.  Most corporate buyers are familiar with setting a very familiar scope and getting a very specific, often quantifiable deliverable.  Neither of those happen all that frequently with innovation, meaning even the acquisition process is unlike anything the company has done before.

Defining Trends and Customer Needs

Most corporations have some sense of what's likely to happen in the next quarter or two, but don't really investigate major trends and the impacts they are likely to have on customers, prospects and the industry at large.  So they are constantly surprised by "sudden" shifts that have been happening for months or sometimes years.  They simply haven't done the job of watching, understanding and predicting trends, and understanding the implications.  In the same vein, many will argue that they understand customer needs very well.  I'll argue that they understand customer needs about that company's products very well, but can rarely define the next iteration or define the adjacent market opportunities with any degree of certainty, and simply cannot describe the important unmet needs customers have.  Most haven't done it before, and don't have the tools to do it well.

Generating really interesting or disruptive ideas

Anyone, from the lowest paid employee to the CEO, can generate ideas about existing products that make them slightly better.  Few people can dream up ideas about new products or services that aren't in the existing product suite, or that address adjacent markets or unmet needs.  It's simply something the vast majority of the team doesn't do on a regular basis, and probably think they aren't supposed to do even if they have the skills.  Efficiency and effectiveness suggest that sticking to the existing knitting is far more important.

The acceptable source of ideas

In many organizations, there are only a certain number of acceptable sources or fonts of ideas.  Perhaps its a layer barrier - people below a certain level aren't expected to generate good ideas, and so any ideas they generate are ignored.  Or perhaps its only people from the R&D team, while operations is expected to focus only on incremental improvements.  Many people simply haven't been called on to generate new ideas, especially outside their work scope.

Evaluating and Funding

The governance and budgeting process is really a good place to look at issues that will arise in the never done that before.  Governance and budgeting is highly tuned to review and approve budgets, products and projects that are modeled on past successes.  When you introduce a new approach based on new tools and no prior success or funding, the processes respond with:  we've never done that before.  And while they are correct, this isn't an acceptable answer.

On and On

I could go on and on about how innovation is like nothing your firm has done before, or recently.  That's why it is so valuable and such a leap of faith, and why it is so difficult to do.  You have a couple of choices here:

  1. Fit innovation into a scope that reflects what you do regularly and are comfortable with, which means only incremental ideas will be produced.
  2. Surrender and outsource all your innovation to a whiz-bang innovation firm, which is likely to mean you'll get more interesting ideas you simply shoot down later in the process
  3. Learn how to do stuff that makes your existing process and people uncomfortable while you start training them and defining new processes and rewards that encourage innovation, and make innovation something you do frequently, and recently.

Encountering important things that you've never done before can be quite daunting, because it's a high wire act with a lot of potential for failure.  Too often existing cultures will simply try to make things they haven't done look like things they have done, and will be dissatisfied with the results.  You've got to build teams and cultures that are willing to not only do, but embrace activities, markets and ideas that they haven't done before.  Or they'll be left with declining market shares and profits, secure in the knowledge that they've done it all before.
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posted by Jeffrey Phillips at 5:35 AM 0 comments

Monday, July 18, 2016

When no one wants to innovate

Over the last few weeks we've taken calls from several potential clients, all of whom seem to have an unusual problem.  An executive or even the CEO has asked their teams for innovative new ideas and solutions, offered support and promised rewards, but after several weeks of communicating this new approach, no new ideas are forthcoming.  After puzzling over the issue for a week or two, we get a call.

The conversations go something like this:  "We've told our folks we need more innovation.  We've promised to reward them for their ideas.  We communicated this through email or other means.  Yet here we are, four or five weeks into an innovation program, and we aren't getting any ideas.  What's going on?"  And we talk to them about past innovation efforts, to discover that this often isn't the first time that executives have asked for ideas.  In doing the autopsy of past innovation efforts it's often clear that while executives asked for ideas, they didn't really value them or consider them, didn't fund the work or implement ideas.  So, when people refuse to play the same game again - even though the management has changed - people are perplexed.  Why won't people innovate when we tell them we need it?  There are at least eight items to investigate to understand what's going on:

1.  Has this request been made before, and what happened when people presented ideas?  Companies are like elephants:  they are large, resist change and have long memories.  If someone has asked for ideas before but didn't follow through, the amount of investment and communication the next time is much higher.  How often has this request and then ignore cycle played out?  How jaded and jilted are the people you are asking to submit ideas?

2.  Ideas about what, exactly?  When you ask for innovative ideas, are you helping to define the scope and potential outcome?  People have ideas but want to solve problems that matter to them or their business.  If you ask for ideas, ask for them in specific areas of the business, either to drive new revenue or dramatically cut costs.  People are already implementing dozens of small, incremental ideas every day.  In these cases, it's typically true that they will rally around more disruptive idea generation, since they do incremental a lot.  But you've got to define that for them.

3.  When should they focus on this?  People are busy - at work, and away from work.  When will they find the time to innovate?  Will you relieve them from some of the pressures of their day jobs?  There's often not a lot of slack time in their personal lives, so if you simply layer on another "important" task on top of what they are already doing at work and in their personal lives, only what gets measured and evaluated will get done.

4.  The follow on to item 3 then is:  What are you evaluating, measuring and rewarding?  Most people move up the ladder and get rewarded based on a set criteria in the evaluation process.  If they take time away from their regular jobs to work on innovation, what happens to their evaluation if their regular job isn't completed effectively?  Putting out a reward for innovation isn't compelling because it's a one time thing.  Their evaluations will cover a full year and will have lasting impact on their progression, roles and future compensation.  No one is going to risk the longer term evaluations for a risky, potential one time gain.

5.  Who can they work with?  If innovation is important, and often demands a cross-functional team of people who know what they are doing, how does Tom innovate when he needs Sally and Jim's insights and coaching, when Sally and Jim aren't interested in working on new stuff?  Clearly, to really accelerate innovation, Tom needs Sally and Jim to be about as committed and available as he is, otherwise Tom is the Lone Ranger of Innovation, and his ideas aren't going anywhere fast.  You can't simply inspire the individuals, you have to equip and prepare the teams and experts who will be necessary to support innovation.

6.  What methods or processes should they follow?  How will they prove their idea to management?  People are good at day to day work because they follow existing processes and know what their managers and executives expect when they propose new projects or products.  But all that work happens within expected and defined confines.  Once you do innovation, especially disruptive or new innovation, you work outside the confines, typically using unusual or new tools and creating new solutions.  How do the innovators become adept at the new tools?  What methods do they use to present ideas to management?  How do they validate and justify new ideas so that executives support them and agree?

7.  Innovation isn't free.  The innovators can work all day at no cost (except their compensation) to create and draft ideas.  But at some point they are going to need to prototype their ideas, perhaps acquiring new technologies or working with experts to ensure their ideas make sense.  Then they are going to need to test their ideas with customers to get feedback (hopefully after they worked with customers to understand needs).  All of these actions require money - in order to identify needs, built solutions and validate with potential buyers.  What funds are you making available?

8.  What happens if we try and fail?  What if the ideas aren't interesting?  Was the effort put into innovation for naught, or worse a distraction from my regular job?  What if the ideas are good but don't align to what the business wants or management expects?  While people want to innovate, they will shy away from attempting new or risky actions that aren't clearly supported.

Now, if you've considered all of these topics and have fully addressed each one, and no one on your team innovates, you've got the right to go hire some new staff.  But in our experience, most managers and executives who ask their teams to innovate fail to consider the motivations, past experiences and lack of knowledge and tools. These gaps lead to little enthusiasm for innovation and at best a small trickle of incremental ideas.  People want to innovate but they instinctively understand the challenges and the costs. Being rational actors, they weight the costs and the potential benefits, and when the scale suggests that innovation is risky, they avoid doing even what they really want to do.  It's up to managers and executives to balance the risk/reward scale.

This is especially true if the innovation ask seems like a "one off" or a flavor of the month.  While many executives and managers understand that innovation is important, it often seems like a flash in the pan request that will soon be forgotten because it is so different from what people are asked to do every day.

If it seems that no one wants to innovate, it's quite likely that there are simply no incentives, no methodologies or tools, not cohesive groups and no shared definitions.  If this sounds like a job for leaders to tackle - you are correct.  Innovation can only happen where good leadership is actively engaged, defining the scope, providing the tools and means and supporting the experiments. 


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posted by Jeffrey Phillips at 6:43 AM 0 comments

Friday, July 08, 2016

Retaining the innovative spark

Phil McKinney wrote a nice post yesterday about the failures of Kodak and Nokia.  I did some consulting work (systems, not innovation) years ago as Kodak was beginning its long slide toward obsolescence, and it was evident to everyone there that film was king.  Even as the first digital cameras were coming out, Kodak was far more focused on film. They were in a desperate fight with Fuji to retain market share in film, as the digital camera sales were ramping up.  McKinney's piece made me think about the typical "arc" of a company's existence.  Without a continuing focus on innovation, the arc follows a relatively straightforward and predictable path:  create an idea, create products, create profits, get complacent, fight for survival.  This conjecture is backed by evidence - a recent data point indicates that the lifespan of S&P 500 companies is rapidly shrinking.  In 1920 the average life expectancy of a firm on the S&P 500 was 67 years.  Today it is 15 years.  Competition is accelerating, of course, and so is innovation.  The firms falling off the S&P 500 aren't innovating, so they are complacent and then focusing on survival.

Let's think about this proposed "arc" and why consistent, continual innovation is so important.

Ideas

When founders start a company, they do so based on an idea, or set of ideas.  They think they can realize their ideas as products or services, and hopefully scale up the ideas to a real business.  They are willing to do almost anything in order to succeed, and often change direction as their experimentation and new products succeed or fail.  The company is fluid, shifts direction and begins to gain traction.  Shape, structure, customers, are all secondary to the idea and its success.

Products

As the company grows and develops products, part of its flexibility is lost, because it must sustain the products and protect market share.  For many firms this is the start of inertia and inflexibility.  Even as new products are introduced, there is still great uncertainty about profitability.  The first product is the realization of the idea, but not yet the perfection of the company. There remains some flexibility and the ability to reinvent.

Profits

Once products are profitable, there's much more comfort in sustaining existing products and services rather than creating risky new ones.  The more products that create revenue and profits, the less attractive new ideas and concepts can be.  McKinney's Kodak story illustrates this. It's common for the management team to turn over during this transition - idealistic people who created killer products leave and people who can manage existing products and squeeze revenue and profits from current operations take over.  Profits become more important than growth or innovation.  This is where inertia, defensive thinking and rigidity often settle in.

Complacency

Kodak and Nokia are excellent examples of complacency.  Safe in their market leadership, both dominated their markets - film and cell phones - until new competitors with different technologies or platforms emerged.  McKinney notes that Kodak had many of the original patents on digital photography.  He doesn't note that Nokia created a touchscreen handset several years before the iPhone.  Both had the opportunity to continue to dominate their respective markets, but it required too much of a divergence from safe, predictable revenue streams.  Complacency took precedence over innovation and change.

Fight for survival

At the point where complacency sets in, every firm has the opportunity to take two paths.  The first requires sustaining existing products while simultaneously investing a lot in reinvention, new ideas, new technologies and new capabilities.  It's at this point that as Andy Grove used to say "only the paranoid survive", because only paranoid companies are reworking their revenue streams when they are highly profitable.  Many former innovators are now in a battle for their existence.  They don't recognize that smaller, more nimble firms that have higher tolerances for risk are slowly eroding their markets and customers.  Meanwhile management teams are far more comfortable cutting costs and extending the life of existing products, rather than recreating or reinventing.  That's because they are managers and caretakers rather than innovators. Entering this death spiral, as Kodak, Nokia and other venerated brands have done, it's exceptionally difficult to leave.  Even a vaunted leader like Marissa Mayer, moving to Yahoo from Google, has struggled to reinvent Yahoo once it entered the fighting for survival mode.

The lesson

The key lesson here is that the past is not a good model for the future, especially as we see the pace of change accelerating.  In the past, companies could scale up and produce products and services with long life cycles, reinventing those products after years of reaping returns.  The build up was slow and methodical, and there was plenty of time to reap profits and protect market share.  That era is over, done and in the grave.  It won't be coming back.  Just look at music distribution.  Records and CDs - distribution on physical media - lasted for over 100 years.  Yet once music was digitized, Apple disrupted the music distribution business with iTunes, which seemed poised to dominate the music distribution business for years.  iTunes was released in 2001.  Revenue peaked in 2012 and in 2016 there are articles written that suggest that Apple will shutter iTunes in the not too distant future because of Pandora and Spotify.  Did iTunes create blinders that made Apple miss the potential of streaming music, or did the business model simply change faster than Apple was able to change?

Fortunately for Apple it won't have to fight for survival yet because it still has profitable products like the iPhone and iPad, but we can assume these will come under increasing attack as well.  iTunes is simply a canary in a coal mine, a early harbinger of the need for reinvention.

What's your canary?  Are you paying attention to the amount of change going on around you?  Can you sustain a profitable business and conduct the amount of innovation necessary in order to succeed in reinventing yourself?  If not you'll soon find your company in a battle for survival.
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posted by Jeffrey Phillips at 7:53 AM 0 comments

Wednesday, July 06, 2016

The Declaration of Innovation

In the spirit of July 4th, and more importantly focused on the real need for innovation and the significant resistance to innovation in larger companies, it occurs to me that innovators need to create their own Declaration of Innovation.  In 1776 a group of small colonies banded together to throw off what they saw as burdensome government in which they had little to no say.  They felt taxed with representation, they were forced to quarter the soldiers they saw as occupiers.  They resisted a large but distant governance and were surrounded by Royal sympathizers.  Often, in the Revolutionary War, neighbor fought neighbor, some spurred on by the desire to change the status quo, some driven to retain it.  Sounds a bit familiar to innovators I'm sure.

You, too, need a declaration.  You need to establish the rationale for innovation, identify the consequences of inaction, and publish the document to your entire organization.  Luther didn't stop at 95 Theses. He posted them where everyone would see them, on the church doors.  The Founding Fathers ensured that everyone would see the Declaration of Independence by sending copies to every colony.  This is both a communication device and a "burn the boats" concept - leaving no opportunity to backtrack.

Let's break down the Declaration of Independence and see how we can create a Declaration of Innovation, to help create distinctions between those who would create something new and valuable, and those who cling to the status quo.

Jefferson, Franklin and Adams wrote the Declaration of Independence in four parts.

The announcement

"When in the course of human events it becomes necessary for one people to dissolve political bonds...".  In this paragraph the authors are setting out their purpose and telling everyone what they are up to and why it matters.  In the first sentence they announce they are splitting from England and go on to let the reader know their rationale.

What should innovators do?  State the obvious:  CEOs, Executives and middle managers recognize that the business as usual status quo will not allow our companies to prosper and grow.  We innovators declare our intent to innovate, more consistently and substantially.  We believe this is vital, and we want you to understand our thinking and rationale. Innovation is the key to growth, differentiation, revitalization and new profits.

Basic Principles

Jefferson built on ideas and principles established by Burke, Locke and others when he said that "all men are created equal, that they are endowed by their creator with certain unalienable rights, that among these life, liberty and the pursuit of happiness".  He goes on to write that "That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it".  Here Jefferson is laying out basic beliefs or principles that all men should aspire to, and notes that when a government or any entity developed by man blocks an individual from gaining the liberties to which he is promised, the people have the right to alter or abolish that government.

Innovators have the same rights and responsibilities.  As innovators we have the responsibility to help accelerate growth, differentiation and profits in our organizations.  Allowing the status quo, inertia or a focus on the past to limit innovation activities is dangerous.  While it is much more difficult to alter or abolish a conservative leadership or culture than to overthrow a distant government, much as Jefferson writes here it is our responsibility to try to change it, or to better yet leave altogether.  We have responsibilities to ourselves, our colleagues, our shareholders and others to drive more innovation, to forestall obsolescence, to compete effectively.  Those who would hold you back should be convinced of your dedication and of your purpose.

The proof points

Jefferson notes how patient the colonies had been under increasing duress from the English government.  He makes a list of the items that the English government (especially focused at the king, since Jefferson and other leaders were hoping to appeal to Parliament and the English people against the King) has pursued which they believe intolerable.
  • He has refused his assent to laws, the most wholesome and necessary for the public good. 
  • He has forbidden his governors to pass laws of immediate and pressing importance, unless suspended in their operation till his assent should be obtained; and when so suspended, he has utterly neglected to attend to them. 
  • He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.
And so on.  These are the examples Jefferson uses to demonstrate how unreasonable the King has been to his subjects, the patient, loyal colonists.

Likewise, we innovators need to be able to document our proof points.  In doing so we are recognizing the past success of our organizations but also noting the slowing growth, the focus on cost cutting, the lack of interesting new products and services.  All of these are evidence of a lack of innovation. Further, if we can point out how other competitors are succeeding at introducing new ideas, how new entrants are whittling away customers and market share, we further our case.

The Punch Line

At the end, Jefferson gets around to talking about (in very explicit terms) what the colonists intend to do.  He says "therefore", meaning, based on all these reasons, "publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved".  At the time they were writing this, they conducted an act of treason, which was punishable by death.  In other words, they set out a very specific goal after numerating their proofs, and were prepared to carry out their intended path.

Just as it's difficult to change or modify a corporate strategy or culture without an awful lot of acceptance and buy-in from the top, it will take a lot of courage to declare that you'll pursue innovation within your corporation regardless of where the consequences lie.  Most innovators simply resort to the silent exit, leaving the corporations where they feel stymied, or worse they simply hold on, hoping someone will recognize the need for innovation.  The founding fathers signed a treasonous document, which could have cost them their lives if the Revolution failed.  They believed in what they were doing that much.  Do the innovators around you believe in innovation that much?  If not, you'll never declare your innovation independence, and never change the culture or strategy of a business.

This comparison may seem a bit farfetched - overthrowing a distant government versus trying to engage a business in more innovation - but the analogies and investments and costs are very similar.  Both the Revolution and any innovation are attempts to create better outcomes, and face long history of established hierarchy and culture.  Change is always resisted until it springs forth in often unimagined ways.  To succeed, a lot of leading lights must get fully behind either idea, and leave themselves little room to wiggle out of their commitments.  And, like many great movements (Protestant Reformation, Magna Carta, Das Kapital, the American Revolution) the ideas need to be well communicated, in public, in a very compelling way.  The colonists would not have succeeded if they wrote the Declaration and kept it secret.  It's publication forced colonists to choose sides and commit more than they would have otherwise.  The same is true with innovation.  A public commitment of investment, resources and people is required, or all innovation will fritter away.
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posted by Jeffrey Phillips at 8:32 AM 0 comments

Tuesday, June 28, 2016

Brexit as an innovation opportunity

I rise neither to praise the British exit from the EU or to condemn it.  There are plenty of people on both sides of the issue who will praise or condemn exceedingly well.  The British people have either fallen for a terrible lie or rid themselves of a burdensome bureaucracy.  This will either be excellent for the UK or terrible.  Right now the markets are asunder, because they hate uncertainty.  Once the rules and process are understood and the actual outcomes are clearer, things will revert to a more normal condition.  Which is what we as innovators should attempt to avoid.

In the US, many politicians are enamored of the saying that "you should never let a crisis go to waste".  They say that because most people don't especially like change, but a crisis may demand change.  And when the crisis demands change, politicians and their constituents should get all the change they possibly can, before the crisis ends or is simply part of the social fabric, and people no longer clamor for change.  No matter how much people may dislike the status quo, they often fear change even more, which is why real disruptive and discontinuous innovation is so rare.  It's much easier to rail about the things we don't have, the freedoms we lack, and so on, than it is to encourage people to adopt new ways of thinking and behavior.  Until a major crisis sets in and all the existing rules seem to be broken.

Innovators understand this implicitly.  The amount of energy required to convince people to try out new products or ideas, and further the amount required to get them to switch allegiance from one product to another is rather daunting.  Geoffrey Moore didn't call it "the chasm" for nothing.  Early adopters are easy to win, but represent less than 10% of the population.  The early majority, on the other side of the chasm, requires a lot more than a shiny new idea in order to switch.  So we either expend an awful lot of energy convincing the early majority to switch or we move the chasm and force the early majority to make decisions.  Which, perhaps unintentionally, is exactly what Brexit has done - moved the chasm and made the old rules and ways of governing untenable.

While the politicians and the established governing classes run around debating the future of the EU and what this means to the economic systems of the world, some really smart innovators should be waking up to the fact that now is an excellent time to innovate the way we govern.  The UK, by the way, is used to this disruption.  From the Magna Carta to the imposition of a Parliament to restrictions about the King's prerogative, the English have remade their governing bodies many times, often in the face of adversity or conflict.  In fact it should come as little surprise that Brexit happened, because it's kind of in the nature of the English to reject a distant, demanding governing body.  What we should be thinking about now is less how to put the broken eggs back together again, and more about how to use this instance to innovate the structure of government and how we intend to provide good governance to the people in the UK, in the EU, and more broadly what this event means in a global context.

There are a number of players involved, each of whom have opportunities to innovate.  Most clearly is the UK itself.  Where does it see itself on the global stage?  What role does it want to take?  How do the people want to be governed?  One could easily imagine that the people in the UK regain a lot of sovereignty that was delegated to the EU, and by gaining that further reject any involvement from the existing monarchy.  Or, we could see a continuing devolution, where more and more power is moved from London to the regions and to Scotland, Wales and Northern Ireland.  As Labor is in shambles, the Conservatives are without a leader and the UK and EU are without a plan, real innovation could happen in how the UK governs itself.  This is the time for divergent thinking, testing different ideas and innovating the governance.

While the UK is doing those things (which as I noted come more naturally to the English) the EU should be doing the same things.  As Einstein noted, doing the same things over and over again and expecting different results is the definition of insanity.  The EU was originally built to build closer ties between countries like Germany and France, specifically to curtail warfare and build a common market.  Much of that has been achieved.  Now the question is:  will Europe become a SuperState, much like the US, where the countries take on subordinate roles to the EU governance, or will they continue to enjoy free trade but regain some individual sovereignty?  Why should Spain and Italy belong to the same union, with the same rules, as the Netherlands and Germany?  Perhaps we'll see regional behemoths emerge, which same common culture - one could even imagine a Mediterranean country formed from Spain, Southern France and Southern Italy, while Northern Italy, Austria and Germany link up due to shared goals.  The EU need to consider its value proposition and innovate its governance models - now is the time to do it.  The real question is:  where are the people with creative, innovative ideas about what governance should do and what its structure and benefits are?

More broadly, all governments should look at the Brexit and begin to think about what it entails.  As people gain access to more information and more connectivity, they are able to compare their lives with the lives of others in other countries.  It's no wonder that people in Syria pick up and move to Europe, because the Europeans have lost interest in trying to help solve problems in the Middle East, and the Syrians and others understand the standard of living in Europe is much higher than at home.  This could suggest that increasingly arbitrary lines on a map drawn after the First War War (thanks Sykes and Picot) mean little to people who seek out a better life.  These places have rarely been governed well, and increasingly aren't governed at all.  People don't want to belong to these countries, but instead belong to tribes, clans or religions.  The "state" such as it is, matters when it can provide services and benefits that are more attractive than those provided by clans or religions.

In fairness there are some experiments underway, including the concept of universal basic income in some pockets in Europe, which is simply the state providing the funds it would have spent directing people to specific activities, instead simply providing the money and getting out of the way.  Both a bit autocratic and libertarian at the same time.  Following this train of experiments we can imagine countries that provide nothing to their citizens other than safety and a sound currency (what China is trying to do) or countries that basically offer a guaranteed floor of food, clothing and shelter (universal basic income) with little to no promise of advancement.   These offerings seem to lead only to an increase in inequality, but time will tell.

In the US, instead of innovators and experimenters, we've managed to reduce the race to a person who seeks to maintain the status quo in the face of significant change (Clinton) and a person with no fixed outlook or policy (Trump). The first will resist the change and innovation that is clearly necessary, and the latter will chase any emerging issue, regardless of its value to the populace.  At a time when we could dramatically rework and rethink our own governance and our relationships abroad, we have the two worst political candidates to take advantage of the emerging uncertainty and innovation opportunities.  This is a crisis that may go entirely to waste, when just a few innovators could make all the difference in how we govern each country, and increasingly how we stake out relationships across the world.
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posted by Jeffrey Phillips at 6:15 AM 0 comments