Incubation as a model for idea management

The more I talk to people in innovative firms, the more I become convinced that incubation is a great model for innovation and idea management.

Ideas start out in life as new, fragile things that need care and nurturing to succeed. As the ideas grow and mutate, they have to be carefully considered and evaluated. Eventually, these ideas must be exposed to the harsh light of reality, but not too soon, or the potential value may be missed.

I looked up the word incubate on www.dictionary.com. One of the definitions it provides is "To form or consider slowly and carefully, as if hatching". I think this is the right metaphor for idea management.

An idea often starts out as a very undefined concept, usually nothing more than a sentence or two in a brainstorm, or a response to a customer request. This early idea needs to be placed in a protective, nurturing environment where it can be further elaborated and defined. The idea needs the chance to grow and mutate within a framework where others can interact and share information. Move the idea too quickly through the incubation process and you'll discover down the road issues that were not considered, which can be fatal to the idea.

Once the idea is ready to meet the more stringent evaluation standards of the market, it can be "hatched" and presented as a fully developed thing. The idea is probably much more complete than it was when first developed, and has had the benefit of much consideration and forming, to improve its chances of success.

In most firms this type of language and approach will be seen as a little ridiculous, but this is an approach that works. Until we provide the appropriate incubators for ideas, and give them the care and feeding they deserve, why would anyone share their "precious" idea with anyone else?

Giving up the high ground

If you've been reading this blog, you'll know I am passionate about the importance of innovation. I don't want to sound alarmist, however. After all, if we don't do it, someone else will, so that work will get done. I guess the big question is - who will innovate if we don't?

The Economist, the only magazine you really need to read, has the answer in the latest edition. In the December 17th edition there is a special report on Japanese businesses entitled Competing through Innovation. The article suggests that the Japanese economy, after 10 years in the doldrums, is starting to wake up and shed the deflation and lack of confidence it has been under for quite some time. The Japanese recognize that they need to innovate to differentiate. The article goes on to state that the Japanese will improve it's innovation capability - primarily by improving the way it commercializes new technologies and funds entrepreneurial firms. OK, so the Japanese will innovate if we won't.

Oh, and the other article that might be of interest in the same edition of The Economist (December 17th) recognizes that India is placing large bets on moving beyond simple IT outsourcing to outsourcing business functions like accounting and even legal tasks. Microsoft has just opened several new R&D centers in India. So, if the innovations the Japanese come up with won't work for us, hopefully the ones from India will.

Of course, China and other major trading partners aren't sitting around watching all this happen without taking action themselves. The Chinese government is backing a program to launch 1000 Chinese businesses which create innovative products and services. Note that's not 1000 jobs but 1000 companies.

I've argued before that we in the States have outsourced and downsized to the point where our businesses are lean and mean. We understand how to cut costs, reduce cycle times and improve operating ratios. Now, these businesses need to grow. To grow they either have to go after new markets with existing products, or win new customers with old products, or create new products for existing customers and new customers. Innovation is key to all three of these market requirements.

Now, removing my tongue from my cheek - we've got to get busy. We need to keep the innovation high ground and keep innovating. Otherwise we've got few competitive options left.

Becoming a little innovative

You've heard it here before, but when car companies and drug manufacturers use the same marketing language, a new corporate initiative around innovation has been launched. The problem is, no one is really sure what "innovation" is or how to become more innovative. It seems to be well-understood that they need to be more innovative, but the steps to becoming more innovative and what that might mean as a result are not yet well understood.

This reminds me of the old saying - you can't be a little bit pregnant. You either are or you aren't. Seems the same to me with innovation. You either are innovative or you aren't. If you can't define it and can't communicate it to others, then you aren't.

What's happening right now is that many firms are recognizing the need to become more innovative. We've seen the recent studies from Arthur D Little and Booz Allen and others which suggest that innovation is the best source of new revenue growth and one of the last remaining differentiators. Senior executives are tasking their reports and teams with the requirement - "become more innovative". The question now is - what does that mean to your organization?

Should you focus on "incremental" innovation - just trying to make the products a little better all the time? Should you focus on disruptive innovation - trying to change the existing market entirely? Should you focus on new product innovation or service innovation or business model innovation? Where's the sweet spot for your company? Once you've got all this figured out, then the hard work begins. Unfortunately, most of the direction coming down so far from senior managers is very unspecific. Someone's going to have to decide what innovation means for your business and how it should be implemented. Someone's going to have to decide the purpose and investment that will be made in innovation.

So, once again the middle management will be left to determine what do make of a corporate directive. If this is the case, innovation will most likely be focused on incremental innovation around known problems in the product line or service area. Innovation will become a loose corporate mantra rather than a real focus.

What we need is some real direction from the top down. What changes are expected? How will we measure whether or not we are innovative? Just how innovative are we? Where's the innovation Jack Welch when you need him? If we aren't the first or second or third most innovative company in our industry, why should we compete?

Many people I speak with are getting the directive to become more innovative. Now, they just need more clarity on what that means.

The Innovation Gene

I was speaking with a person recently about innovation. She told me she didn't think anyone in her firm had the "innovation gene". It was all I could do to keep from falling on the floor.

I guess there are three ways to interpret what she was saying. One, the people within her firm don't have any ideas. They are all tapped out. Or two, what she is saying is that only "special" people who are creative or genetically disposed have great new ideas. Or three, perhaps its a cultural thing - no one is allowed to have good ideas.

I'm interested in the second assertion - that there is a "gene" or that only certain people are innovative or creative. What's up with that? Would you knowingly hire a person you thought would not be able to contribute new ideas - if not to the organization as a whole, at least within his or her working team? There is some mystic belief among many people, especially in larger organizations, that specialization has set in and only the white coated lab guys from R&D or the really sharply dressed folks with the little square glasses and european shoes from the marketing agency can create cool new ideas.

Let's put those ideas through the debunking engine. Who knows more about your product, your service, your business model than the people who live with it every day? Who understands the problems within the business model or product? Who has the best insight into how to change or completely eliminate your product? The people who work with and for you. The average guy down the hall in the fourth cube from the left. The guy in accounting whose white socks don't always match his dark suits. In other words, the people within the process or the people involved in all stages of the "value chain" of a product understand the opportunities and limitations, and are fully capable of contributing new ideas. There's no specific innovation gene. But there is an innovation "ear".

That is, what is your management willing to hear, and willing to do, with the ideas that are generated by the team. That's where the real genetic problem exists.

Innovation myths

Over the last six months we've been talking to a lot of people about innovation. We were interested in how it happens, how it is sponsored, how ideas become new products and services. What's really astonishing at some level is how cavalier people are about innovation, and to a certain extent the low level of expectation they have about innovation in general.

There are several pieces of received wisdom about innovation that explain this. I'll look at a few of those and try to de-bunk the commonly held view.

1. You can't "manage" innovation. Really? Tell that to the major consumer goods manufacturers who crank out hundreds of new products each year. Do you think that happens by accident? If they can do it, why can't every firm become more process oriented around innovation?

2. People won't use innovation processes or tools. This one takes me back to the early CRM days. Every skeptic I met told me that sales people would never put their data into a system. 10 years later, everyone uses CRM - Salesforce.com has been a huge success. People will use tools that make them more productive and more successful.

3. There's no defined process for innovation. It seems to me that in general people dream up new ideas, and then write them down. The person who came up with the idea, or someone else, decides whether or not to pursue the idea. The idea is evaluated and people make decisions about putting that idea into a new product development process. There are logical, repeatable steps for innovation, and these can be written down and codified.

4. Too much management of innovation will stifle creativity. Actually, quite the opposite. Even today, most managers tell me their problem is too many ideas and no consistent way to capture and evaluate the ideas they get. Creativity is interesting, but putting ideas into action is valuable.

There's a page full of objections and complaints about innovation and the challenges that a firm faces, but let's be honest - a lot of this received wisdom is simply fear of change. There's going to be some change involved in becoming more innovative, but let's not allow some unreasonable notions about how difficult it is put the brakes on what we do. If we fail at innovation, let's fail for a real reason rather than some simple objection such as these that can be easily unmasked.

Ideas into action

What's interesting to me about innovation is how many ways it is defined. The definition we use - People putting ideas into valuable action - seems right to me. We believe that merely generating ideas simply isn't enough. In fact, to be innovative, we've got to put those ideas into action as new products or services.

Simply creating ideas isn't enough. I guess the creativity side of innovation gets a lot of attention because it's the fun part. The creativity part is where you get to go to a brightly colored room with slinkys and play doh and get creative. You'll spend the day wearing many hats and generating crazy ideas. Who doesn't enjoy doing this stuff? It's like being a kid sometimes, and you can get paid to do it!

The rst of innovation, though, is much more like a traditional business process - or it ought to be. That's the part where you choose an idea or initiative to work on, evaluate the idea, consider how valuable it could be in the market and whether or not you can make it and sell it, or provide it to your market. Then you've got to build a prototype and then determine how to price the product and revise it so people will buy it. Eventually you'll release a new product into a new product development process or devise a new service offering and prepare to offer it to your customers.

Gosh - this part of innovation sound like, well, work. It actually sounds a lot like the stuff we do most days in our regular jobs. Market assessments and pricing models and building a new product. In fact, much of innovation is simply a continuation of your standard business processes - just with some new products and services in mind.

To me the hard part is the transition - moving from the playdoh and slinky to the established business processes. There's a very important discontinuity there - moving from a very free-form idea generation process into a very "mundane" idea management process, and I think that's where ideas get lost.

Bringing Innovation out of the lab

Many firms we speak with have innovation covered. "That's in research and development. They're responsible for innovation." I hear that quite frequently. If that's true, then quality belongs in the quality department and no one in your firm other than the sales team sells.

I think we are all beginning to figure out that innovation is a corporate wide initiative, and too important to be left to just R&D. Anyway, a focus on innovation as an R&D initiative assumes that all innovation is product focused. As we've discussed before, innovation can come from a change in a product, most definitely, but also from a change in a process, a service offering, a business model and many more less tangible and non-product origins. Does your R&D team focus on these types of innovations as well?

One of the first questions I ask anyone when we talk with them about innovation is "If an employee in your organization has an idea for a new product, a new service or some other innovative idea, where does he or she submit that idea?" Generally speaking, many firms don't encourage individual employees to dream up new ideas, and don't have anything more than a physical suggestion box. Where there's no emphasis on individual creativity and innovation, ideas are generated only by those whose "job" it is to create new ideas. Innovation, especially outside the scope of the R&D team, is probably stifled.

If we are in an age of knowledge workers, with more education than ever before and with increasingly greater knowledge of their jobs, their work and their products, why wouldn't we find ways to tap into that knowledge? We talk about people as our key asset, yet we treat them as if they have no independent knowledge or ideas.

Here's to bringing innovation out of the lab and into marketing, purchasing, sales and quality assurance - in other words, let's get everyone involved.

It's so esoteric

One of the main challenges I run into when talking to firms and individuals about innovation and idea management is the refrain "It's too esoteric". What I think they mean is that their expectation is that managing innovation is like nailing jello to the wall.

Hmmm. That seems to be a fairly reasonable argument at first blush. How can anyone manage an idea or a concept? These are usually nebulous things, hard to share and hard to pin down concretely. Is it possible to create a steady stream of ideas that are evaluated and eventually launched as new products or services? Won't that be exceptionally difficult?

I guess the answer is: yes, but. Of course that's an answer you'd be more likely to get from an economist or politician, but no one said this was going to be easy. Generating, capturing and evaluating ideas in the absence of a process and collaborative systems is a very difficult thing to do. It's even more difficult if the management team doesn't take it seriously.

But what if the management team does take it seriously? What if there are motivations to generate, capture and manage ideas, and convert them into valuable products and services? Seems to me that Intel, P&G, 3M and a lot of other firms are doing this on a fairly routine basis. 3M has a goal that 50% of its revenue will come from products developed within the last three years. P&G has a stated goal that 50% of it's revenue will come from ideas generated outside the company. Do you think these firms (and others) would establish public goals, especially ones tied to revenue and profit, if they thought this was difficult or impossible to do?

I think people fear idea management and innovation because there's a significant number of ideas that simply won't pan out, and they'll be labelled as a failure if their ideas don't work. Didn't Edison know 1800 ways not to build a lightbulb? That didn't stop him, however. And what's not so well known about Edison is that he had metrics and expectations for the number of inventions his team would create, and a timeframe. He expected to create one minor invention every three weeks, and one major invention every three months. He also determined to only work on ideas that he believed there was a strong market for, and those ideas could become valuable products.

If Edison, 3M and P&G think innovation can become a sustainable, repeatable process, and have demonstated they can do it, what's so esoteric about it? What's left is the will to change the culture of your firm, establish a process and get started.

Money Isn't Everything

In an article sure to warm the hearts of smaller firms, process oriented types and cultural consultants, the folks at Booz Allen Hamilton have just released a new survey on innovation entitled Money Isn't Everything. You can read it for yourself here.

What I like about this study is that it emphasizes that too often senior executives throw more money into R&D and innovation initiatives, expecting greater and greater results. The study indicates that in terms of innovation and results, throwing more money at these initiatives does not necessarily increase innovation, and certainly doesn't provide tangible results. Now, there are some conclusions: larger firms have an advantage over smaller firms in the amount they can invest, and there is definitely a lower limit to the amount your firm should spend on innovation. But what's interesting is that even within industries, there's a wide variance between the amount spent on innovation, and the results achieved.

Why? The authors indicate that what's most important in innovation is defining a consistent, sustainable process and encouraging collaboration. To quote them "Yet of all the core functions of most companies, innovation may be managed with the least consistency and discipline". Of course, throwing money at a poorly managed process will not result in the expected outcomes!

The authors evaluate R&D and innovation investments across a wide range of publicly traded companies and compare and contrast investments and results. Their conclusion:

"...suggests that focus primarily on increasing the cash input to an innovation "black box" - a process presumed to transform R&D spending into results without anyone fully understanding how - are more likely than not to fail to deliver the desired performance". Note the authors' use of the words "black box". That is short hand for a process that is not transparent and not well documented or understood.

Later, as the authors begin to dissect the problem, they state that research by a colleague demonstrates that "financial returns on innovation investment depend on the effectiveness of innovation processes: the way a company generates, selects, develops and commercializes ideas."

The good news for any firm in this research is at least three fold:

- Money by itself is not that important. The process is much more important.
- Scale and size, while they can impart some advantage to a larger firm, are not the key factors to improving innovation.
- The "best practices" required to improve these processes are readily available to any firm.

What the authors don't comment on, and I think would be equally interesting, would be the question - does a dramatic reduction in R&D investment create more interesting results - can you force people to think more creatively in the absence of large investments? It seems to me that if necessity is the mother of invention, that sometimes people may be more creative and innovative when they have far less money than they think they need to succeed. After all, this is basically the model for entrepreneurs. When too much money is available for innovation and investment, there are no hard choices.

For those of you who are advocates of improving the innovation process and increasing collaboration, you've got the evidence you need to get management's attention. What more could you want? You can argue that what your teams need to succeed is not necessarily more money, but improved processes, systems and collaboration.

Spare Time Innovation

There's simply no better way for a firm to become more "innovative" than to instill a sense of the importance of innovation, and follow up that emphasis with changes to the compensation and the culture of the organization.

It's said that Jack Welch has told many audiences - "Show me a salesman's time card and I'll tell you how he is compensated". What Welch means is that people put their time and effort into work that they believe will be valued by the organization and for which they'll be compensated. Sales people spend time with customers when they are compensated for those actions. Likewise, employees within an innovative firm are motivated to participate in innovation because they are 1) caught up in the culture, 2) don't want to be seen as a laggard 3) recognize it's important to the company but most importantly 4) know they can be compensated for great ideas.

Contrast this with many firms I speak with on a regular basis. Most individuals in firms I speak with tell me they are "too busy" to innovate consistently or effectively. They try to do some innovative stuff, but it has to happen around their "jobs". Obviously in these organizations innovation is not taken very seriously. It appears that innovation is some sort of "add on" and not part of a regular business process. Innovation is something you do on your "spare time".

Who's got spare time anymore? All I want for Christmas is one more hour a day to accomplish all the stuff I need to get done. If my firm tells me innovation is important, but that I should spend my spare time on it, nothing will get done around innovation, and it's clear that the senior management does not support innovation as a serious business focus.

How can you tell when they are serious? Not when they: have an executive speak about the importance of innovation, or when they release a press release, or even when they install a new computer system to support innovation. No, you'll know when they are serious when: innovation becomes part of your measurements and objectives, and when the compensation plan changes to reward you for spending time innovating, and when individuals and teams are recognized for innovation.

Spare time innovation is a waste of time and effort. To see if your firm really values innovation, check your paystub, your corporate handbook and your evaluation forms.

Tinker, Tailor, Soldier, Spy

Great minds think alike. By saying that, I can put myself in the same realm of thinkers as Tom Kelley at Ideo and Edward de Bono. In case you didn't know, Kelley has written a book entitled the 10 Faces of Innovation. At NetCentrics, we complete a white paper on innovation entitled "The people you need to innovate" about one month ago. Turns out both address a similar problem.

Innovation, just like any business process, requires more than one person and more than one type of skill to repeat successfully. I have not had the good fortune to read Kelley's book, but I have read excerpts in Fast Company. The identification of the "faces" in his book are similar to "roles" we've defined in our approach and white paper. In our white paper we identify roles such as a "Scout" a person who gains market insight and gathers information about new trends, a "Framer" who decides how a new idea should be evaluated , and a "Prototyper" who builds prototypes to help customers interact with a physical representation of their ideas. While Kelley's approach is more esoteric, our roles and definitions are more tactical. Both approaches make a lot of sense and begin to move the dialog about innovation from "Who's doing what" to "When can it be ready"?

The issue that Kelley's book and other approaches like his seem to miss, (I'm judging before reading) is that there must be an agreed "process" before these folks - Kelley's Faces, de Bono's Hats or our Roles - can work together efficiently. I have concerns about the people within the innovation framework taking on roles before the processes are defined and agreed upon. Also, should people be able to take on several roles? de Bono has six thinking hats - again the emphasis is on "thinking" not implementation or doing. Where's the definition of the process these people taking on these various roles are going to follow?

I am completely on board with an emphasis that the people involved are important - and that there should be a wide range of skills involved in innovation. What's as important, and not as well addressed, is that there should be a defined process for these people to use when they show up in their various roles, otherwise a lot of thinking will get accomplished, but not much action.

Slow slide into oblivion

I was speaking recently with a prospect who was interested in some applications we are building to support innovation initiatives. I asked him what piqued his interest in our applications, and in innovation generally. He said he felt that innovation was important - his mantra was "innovate or die".

I've heard these types of statements before - they set up such a simple, bipolar worldview. But in many regards I can support this statement in this context. The "die" part is probably overly dramatic, no firm is going to drop dead tomorrow because it does not innovate. However, if your idea of an enjoyable place to work is a place that is a constant follower, afraid to take risks and satisfied with the status quo, then get ready to wither away. I think the more appropriate slogan in this case is "It's better to burn out than fade away". Because that's what firms that fail to innovate will do - fade away.

There are so many competitive pressures on most firms that just keeping up the the latest fads, technologies and new products is daunting enough. Trying to constantly create new products and services is almost overwhelming. However, the market doesn't sit still, and firms that don't innovate will gradually fall further and further behind, becoming a pale shadow of their former selves. Innovation is a mandatory requirement to consistent differentiation and to stand out from the crowd.

Innovate or die? Possibly. But the death will be a long, boring slide into mediocrity and eventually into oblivion. Better to burn out than fade away.