Could Textiles lead the way?

Did you know that in the 1700s it was against the law in England to export looms or weaving equipment? The British government understood that the English controlled weaving and fabric production, and they wanted a monopoly. Over time, of course, the technology moved to the Northeast of the United States, where it was tightly controlled, until wages forced a move to the Southern United States. When I was growing up, every respectable small Southern town had a textile plant. Dalton, Georgia is the carpet capital of the world due to the number of firms that manufacture carpet there.

So in a sense the shifting of manufacturing jobs has been a steady progression since the dawn of the industrial age. Manufacturers have shifted production to sites where the costs are lower in a very rational way. Today, most of those small Southern towns are seeing the same mills that provided great jobs closing up and moving, first to Mexico, then to China and Vietnam.

But many Southern towns and cities have a huge vested interest in textiles. Perhaps we cannot be the manufacturing capital of textiles anymore, but we can be the innovation and design capital of textiles. Some of the most interesting and complex and differentiated textiles are being developed and produced in universities in the Southeast United States, where there's been a recognition that to remain competitive, they need to innovate the fabrics and the manufacturing processes.

My uncle, who has worked in textiles for many years, now finds he is in demand to train others on new techniques that his firm has developed for coatings and waterproofing fabrics. As our textile engineers and universities combine to create innovations around textiles, they demonstrate our using our knowledge, our insights and our willingness to innovate will keep us at the forefront of innovation in a space where the US can no longer compete, at least on a manufacturing basis. Maybe soon we'll see lots of small textile firms generating new fabrics and new production concepts which will be manufactured here and overseas, much like we see small biotech firms attempting to create a new drug.

Biggest roadblock to corporate innovation

I've been talking a lot recently to people in mid-sized and larger organizations who want to improve their idea management and innovation capabilities. It's fairly clear that we don't have to educate people as to the "why" of innovation - I think most people get that and are beyond it.

Even the "what" and the "where" are reasonably well understood about innovation. It seems to me the biggest challenge is the "how".

How do I get people interested? How do I get them to share ideas? If ideas are shared, how do I get them to collaborate?

We've grown our cultures to assume that if it needs to be done, I'll do it myself. Basically, in many firms, we encourage competition and knowledge/information hoarding. Which means in many firms we have lots of small teams and individuals with great ideas, busily working on those ideas in isolation. There's really no incentive to share information, ideas or processes.

The "how" of innovation comes back to three components that I constantly reinforce. Those are:

- Culture
- Process
- Collaborative systems

Which is the most important? Culture. If people aren't motivated to share information or ideas, or feel they should only work on "their" ideas, then we give up a tremendous amount of insight and brainpower, locally optimized but globally sub-optimized.

Process is also important. What other business function lacks a defined process? Not sales. Not finance. Not purchasing. Not manufacturing. And other than sales, all these other processes and functions are about cost cutting and efficiency, not about growth. A process means more people share more common language, culture and methodologies, so they can work together more effectively.

Collaborative systems also play an important part. If each small team has its own Access database or spreadsheet of ideas, I'm left with a virtual archipelgao of information sites with no integration and lots of duplication. There's no visibility or accountability. Bringing ideas to a common integrated database means others can see and interact with the idea. It also surfaces a lot of the ideas and helps determine the "best" ideas.

Many of the problems firms face in innovation is not the desire, or the intent to innovate. The problem is encouraging people to share ideas and participate in the process. This is a cultural, compensation and motivational problem that can't be fixed by processes or software.

You want people to work together and improve innovation? Do you compensate them to do that? Are they motivated and incented to do that? Does senior management encourage that behavior?

Using what you know

I met with a firm today to discuss a partnership between our firms. The firm I met with works a lot in new product design and industrial design. We started talking about how innovation is working even in places that might seem less than innovative - for example, propane distribution or furniture.

Since we both live and work in North Carolina, we cannot help but notice the impact of furniture manufacturing jobs fleeing to China, Vietnam and other low wage countries. We talked quite a bit about what the people in Hickory, High Point, Lexington and other long time furniture towns are losing, in terms of jobs and in some cases, hope.

But what strikes me is that while the folks in these towns and others like them in Virginia, and Michigan, and other long time furniture manufacturing towns is that they have so much knowledge about furniture - its design, its manufacturability, the quality and style of furniture, that these locations should reposition themselves as the front end design and innovation centers for furniture. True, this repositioning will not replace all the manufacturing jobs that are lost, and some people will need to be retrained, but there's got to be an enormous amount of institutional knowledge about furniture in these cities that is begging to be tapped.

It seems to me that these locations can strike out as innovation centers for the furniture industry, dreaming up new materials, new fabrics, new uses for furniture. They can work with leading designers to design new furniture and keep one step ahead of their foreign competitors. After all, furniture manufacturers in the US have been at the manufacturing a lot longer, have strong ties to distributors and retailers, and are much closer to the end customer than their competitors. The institutional knowledge needs to be tapped. There's even a significant amount of knowledge in these locales about furniture supply chains and distribution challenges.

Who's gathering the information on furniture trends? What is just over the horizon in terms of new demands and new furniture requirements? I doubt our foreign competitors have nearly as much information or access to data and good decision making as the folks in High Point or Grand Rapids. Sure there's a huge transition to make, but the loss of the manufacturing jobs is not going to slow very much. We've got to capture and use the knowledge we have to differentiate and add more value in the market.

Let's take advantage of the knowledge, the history and the insights we have in this industry and create a whole new capability to continue to lead the markets. And once we've done it for furniture, we can do it for any other product that is becoming "commoditized".

Innovation Landrush

There's a time in every market, a phase of development, when the market is recognized as real, and everyone rushes in to place their flag and claim their territory. The analogy, of course, is the Oklahoma land rush, when settlers lined up and raced to their favorite locations in Oklahoma to stake their claim.

Where innovation is concerned, I think the land rush is on. Many firms with many different approaches are moving into this critical management need, to define the space and carve out differentiated positions. The truth is, no one firm "owns" much real estate in innovation yet.

There is no Miller-Heiman of sales process for innovation, one of the few definitive selling methodologies. There is no Sarbanes-Oxley, defining legislation which is forcing CFOs of public companies to scramble. There is no SAP or other large, predominant software provider to crowd out the other players.

Nope, mostly right now there are a number of firms carving out distinct capabilities and messages having to do with the entire pantheon of needs where innovation is concerned. Some firms focus on training. Some firms focus on changing the cultural landscape to make innovation more acceptable. Some firms attempt to define business processes and methodologies. One of these firms will become the gold standard for innovation processes, just like Six Sigma became a gold standard for those concerned about quality.

Let's face it, we are early in the process of sorting out winners and losers in carving up the innovation space. I think we can say clearly that US businesses need help with training, change management, processes and software to improve innovation, but there are no "standards" yet. And in some circumstances, there may not be an evolved standard, since product innovation is somewhat different from service innovation, or incremental innovation is fairly different from disruptive innovation.

This period in the evolution of the innovation space is natural and normal. Life rushes in and creates a lot of different alternatives, and gradually the winners will emerge. It's an exciting time to be working in innovation.

The Innovation Perspective

I was thinking recently about innovation, and especially the ideas put forth in the book Blue Ocean Strategy. If I understand the premise correctly, the idea put forth in Blue Ocean Strategy is to change the perspective or the way you view the market, and establish or frame new markets where the competition is small or non-existent, rather than chip away at market share in heavily competitive markets. I hope to read the book soon, but hopefully I've captured some of the overall meaning of the book.

If that generalization is true, then it strikes me that this form of innovation is very similar to an old joke that sales people use. Two shoe sales men are assigned a new territory - an island in the Pacific which is long known to be inhabited but never visited by shoe salesmen. The first arrives and recognizes that no one on the island wears shoes. He writes back to headquarters to ask to be brought back. His rationale? No one wears shoes on the island. A second sales person is sent to the island. He writes back to headquarters thanking them for the great opportunity. Turns out, no one on the island wears shoes, and his only competition just left.

The point of the joke is that your perspective matters. The second sales person sees opportunity in the fact that no one wears shoes, and sees big sales for himself, while the first salesperson was discouraged by this fact. One sees potential customers, the other sees no customers at all.

A good example that is often used, and I think used in Blue Ocean, is Southwest Airlines. Now, I have a bit of an inside view of Southwest as my lovely spouse worked there once. I think Southwest was started by people who simply wanted to improve the ability to get around in Texas - really not much more than that. If you have ever been in Texas you'll know there are three major cities (Dallas, Houston and San Antonio) and it is very time consuming to move between them. Texas is after all a large state. There were no inexpensive means to move between these cities, and a lot of business is conducted between these cities.

Herb Kelleher and others wanted to break the monopoly and poor schedules of the existing airlines, so they built their own. I don't think the original intent was to provide basic, low cost airfare for the common man, but to make business travel cheaper and easier within Texas.

What happened over time, though, is that Southwest recognized a huge opportunity to shift the frame of "air travel". For a long time, air travel was expensive and considered to be a luxury. Well, in the Southwest, where you can drive 10 hours and still be in the same state (believe me I've done it), long distance travel isn't a luxury but a necessity. Southwest eventually identified a core group of prospective customers who would normally drive or take the bus, and decided to bring those people to air flight. These were underserved customers that the major airlines did not think were potential customers. Eventually, Southwest became for all intents a bus that flies, offering good schedules, short hops, low fares and pleasant but minimal service. I'm not sure that was the intent from the start, but Southwest eventually created its own "Blue Ocean".

Now, this is all a matter of perspective. Southwest did not fundamentally change air travel. Pilots still sit in the planes, and baggage handlers still load and unload planes. Southwest's planes still fly between cities. What they did change was the fare structure, to make it more affordable to fly in a region where long distance travel was just accepted as a fact of life. Southwest never could have been formed in the Northeast of the United States, since you can drive or in some cases take a convenient train between most major cities.

In this instance, and in many others, innovation is a matter of perspective. What customers aren't served, and how can we serve them? What markets aren't open and how can we open them? Who needs to travel long distances and how can we change their travel paradigm?

Innovation does not have to be about new products and services. Southwest is doing what Braniff and Continental and American and TWA and so on have done for years. They simply defined a market and built a company to serve that market.

Innovation is the new Strategy

Time was, oh, only a decade ago, when corporate titans and mid-sized firms had a wealth of options at their disposal. Seems like only yesterday we were knocking around the different options of right-sizing, outsourcing, improving quality and many other key corporate initiatives. Boy how things have changed.

I think, to borrow an idea from Michael Treacy, that a firm has three options to survive. First, become the low price leader and remain the low price leader. Drive all costs out of the product or process. Second, become the customer intimacy leader. Know the customer and fill his or her every need. Finally, become a firm that creates new things, new ideas, new products and services people just have to have. There are some other competitive slots in this pantheon, but those are reserved for special niches, like products or services that cater to people who don't care how much something costs.

Ok, so let's break it down. Statistics show that the top three competitors in any industry usually control well over 50% of the market share. One firm will position itself as the cost leader. One firm will position itself as the firm that "knows" the customer. One firm will be able to position itself as an innovator in products or services. The rest of the firms fight to be the follower in one of these segments or to control a small niche.

Innovation will play a role in all three of these competitive positionings. The firm that is the cost leader will have to innovate its products, its services, its processes and systems to constantly reduce its costs. It may well invent new ways to do business to reduce costs. The firm that owns the customer intimacy position must constantly innovate its business processes and how it interacts with the customer. Finally, the firm that is positioned as the product or service innovator must constantly bring forth new products and services that people want.

Ultimately, regardless of the positioning and strategy your firm takes, you'll be competing on innovation. Whether its finding new ways to cut costs, or finding new ways to get closer to your customer, all of these strategies rely on constantly developing and implementing new ideas for products, services and business models.

Growth and Innovation Conference Day Two

Just back from the Growth and Innovation Conference hosted by the Conference Board. On the whole a very good conference. There were some great speakers and the attendees were clearly very focused and very serious about innovation.

Today (Thursday) there were several very interesting talks that I had the opportunity to attend. Here's a recap of several of those talks:

Chris Steel, a senior partner at PA Consulting, headlined and talked about the way PA innovates. PA is a consulting firm, but it "spawns" new companies through its intellectual property. PA has a very firm process and discipline to its approach, which Chris outlined. PA, as a consulting firm, has spawned several hardware firms and software firms. They entice and incent their teams to create new companies around intellectual property, and provide venture money to get these firms started. It sounds like PA does a good job of developing and launching these new firms.

Next, Madan Birla spoke about his book, FedEx Delivers. He spoke about the growth of FedEx and how its focus on innovation has propelled it to its dominant position. Madan has characterized the five attributes about FedEx that made it successful - mostly around the FedEx team members. He felt the people in FedEx were helped tremendously by a culture that incorporates innovation into the very fabric of the business. I've misplaced my notes so now I'll have to read the book, but if his book is as good as his presentation, it will be well worth it. Madan focuses a lot on the culture of FedEx and how that impacts its innovation capabilities.

Next, Navi Radjou, VP at Forrester Research led a discussion topic on the Impact of India and China on Global Innovation. From the speakers, it's clear that India, China and other countries are really focusing on innovation. For a relatively small show, less than 200 attendees, there were a lot of attendees from India, China, and western European countries. Innovation is clearly a focus for firms in every geography.

These were the events I was able to attend today. I'd encourage you to check out the next Innovation Conference from the Conference Board. I was very impressed by the attendees and the speakers and look forward to their next event.

My takeaways after the conference: Innovation is clearly an important topic in many firms. However, there's not a clear consensus on how to approach innovation. Should it be considered as something that R&D does and needs to do better? Should it be a corporate wide initiative? How do we measure and manage innovation? Should innovation address products, business models or other functions? Right now, many firms are grappling with these types of questions.

Just like with Six Sigma, Sarbox or other recent corporate initiatives, these attendees and their firms need some more definition about innovation and what it means to them, and a road map to use to implement plans to become more innovative.

Growth and Innovation Conference Day One

I'm attending the Growth and Innovation Conference in NYC February 1 and 2. I thought I'd summarized some of the topics and interesting ideas coming out of the conference. So far, the first day has been great.

The keynote speaker, Lorraine Segil, identified several barriers to collaboration across product development lifecycles which impede innovation:

- lack of transparency
- cultural misalignment
- fear of failure
- lack of senior management commitment

The second panel, including senior executives from Pitney Bowes, Motorola and CA, talked about customer driven innovation. Their conclusions:

- Voice of the customer is good, but not enough. Pitney Bowes uses customer-centric innovation, understanding the customer's problem, then applying their own technologies or determining what new capabilities are necessary.

- Partner with the best, innovate the rest. Motorola partners with Oakley for sunglasses with mobile technology, and other leaders in their field to extend mobile data.

- No more field of dreams, or 1000 points of light - innovation must be focused on customer needs

It's clear from the discussions and questions that there needs to be a method to define what we mean by innovation when people talk about it - disruptive innovation or incremental innovation; big company innovation or small company innovation; product innovation or service innovation; etc

Many speakers are talking more and more about idea "incubation" - the idea that an idea must be captured, and developed before it is examined.

The lunch speaker, a gentleman who had run two startups and worked in very innovative firms (LoudCloud and Opsware) said there are two emotions in innovation - euphoria and terror.

Something I thought was very interesting - J&J is starting an innovation team outside of the business units and tasking it with encouraging disruptive innovation and ignoring existing business models within J&J.

What really surprises me is how little discussion there is around service model, business process or other innovation beyond product innovation. Given that less than 20% of our economy is product based, and 80% is service based, there is still not much discussion on service model innovation.