Wednesday, August 30, 2006

Innovate Strong or What would Edison Do?

After much consideration, I think I've got the answer to what has seemed to be a big disconnect between what is said about innovation, and what is done in the name of innovation. It all came about because of a wristband.

My daughter is a huge fan of Lance Armstrong, and has had a LiveStrong bracelet for quite some time. The LiveStrong bracelets became such a huge fad that it seemed everyone I knew was wearing one at some point. And, since a lot of the money went to fight cancer, the more wristbands, the merrier. What do wristbands have to do with innovation? Quite a lot.

Nobody ordered everyone to go out and buy (and wear) a LiveStrong wristband. People bought them because they saw their friends wearing them, asked them about the wristband, heard the story and decided to get on board. In other words, the LiveStrong wristband was a word of mouth success which eventually became a media story. That's when the whole think probably jumped the shark. What's interesting about this is that much of the attention and awareness of the wristband and its meaning and value passed from person to person - people committed themselves to buy and to wear the wristband because they thought it stood for something - curing cancer, and even their small contribution put them in solidarity with others who wanted to fight cancer. It became a cause to join.

That's where there's an intersection between innovation and wristbands. Innovation, for the last few years, has been an interesting hobby horse for CEOs and senior executives to trot out to Wall Street and their investors. "Look at our focus on innovation" they'll say. Yet in the mid-management levels, little has changed. Little additional money or resource has been set aside in many of these firms. As we've discussed previously, innovation needs top level involvement and a groundswell from the troops to be successful. It's time for the WWED wristband. WHAT WOULD EDISON DO?

We need for people in the trenches to get onboard with innovation - most firms need to create a cause that their employees, business partners and vendors can join to improve the prospects of the firm and become more innovative. Yes, they'll still be underfunded and yes, there will be high expectations for innovation and yes, the innovation teams won't get all the resources they need - but as people begin to wear the wristbands, innovators in business units and functions across the organization will recognize each other and learn to work together across the business units and in spite of the inadequate resources and slothful culture.

Most businesses don't need to be told that they need to become more innovative - they know that. What they need is something - a mission, something to belong to, that people within the organization can join in and support, so innovation become a bonding opportunity and a method to bring everyone together on the same page. If Lance can do that for Cancer, what can we do for innovation?
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posted by Jeffrey Phillips at 3:07 PM 51 comments

Tuesday, August 29, 2006

Innovation Webinars

What I've learned over the last few years of focused effort on innovation is that sometimes things aren't as they seem. There is a great deal of noise around innovation, coming from senior executives and marketing. Everyone wants to be on the innovation train. We're offering some free web seminars to help. See the signup page or keep reading.

The TrendWatching report for August thinks maybe we're all a little jaded by all of this "innovation". Obviously innovation has a lot of value for many firms as they seek to increase organic growth, or just seek to find new ways to improve internal operations and processes.

What we find quite a bit is that there is a disconnect between the senior management team, who are standing on the sidelines loudly cheering for innovation, and the mid-level managers who are trying to convert the dictates of the senior management team into actual stuff people can do to create new value. That's why we've launched a new web seminar series on innovation.

Right now, many people are struggling with issues around innovation, especially:

- How to build a business case for innovation. After all, there still has to be a return.
- How to organize people and get started. Enough talk already - let's do something.
- What processes and tools are available. Let's not reinvent the wheel.

I'm sure there are other issues, but those topics are the ones we've chosen to offer as web seminars.

Our web seminar on Building a Business Case focuses on the differences between a "regular" business case and an innovation business case.

Our web seminar on Getting Started to Innovate looks at the challenges and tasks associated with starting an innovation initiative.

Our web seminar on Processes and Tools for innovation looks at some "off the shelf" processes and tools to help improve innovation.

All of these webinars are available at no charge and are offered at noon EST on the schedule noted on our registration page. These will last about 40 minutes and are meant to help senior managers and mid-level managers begin to define their innovation initiatives and start generating real value.
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posted by Jeffrey Phillips at 8:00 AM 35 comments

Monday, August 28, 2006

What happened to Dell?

I was thinking recently that innovation should be a continuous process, helping to evolve a firm over time. News about Dell struck me as a potential example of a firm that innovated spectacularly once, and rested on those laurels for quite some time.

Dell, which has been the darling of the financial world, has missed its earnings projections the last five quarters in a row. It has seen its profit margins shrink, it's position as the largest manufacturer of PCs lost to H-P, and most importantly, it is now seen as having poor customer service and not using the "latest" components from AMD and other suppliers. This is a dramatic turn of events from just a year or so ago, when every newspaper and magazine trumpted Dell as the dominant leader in the PC market.

Dell gained a huge advantage by disrupting the PC market, eliminating the "middle man" and selling good quality PCs direct to individuals. Over time, Dell opened a market to sell to corporations, and that's where one of their first issues was created. Having sold to individuals, they understood the consumer market, but I think even today they struggle to understand the corporate market and its infrastructure needs. Secondly, Dell pioneered the assemble to order model and pushed inventory back on its suppliers, so it received payment for the hardware before it paid for the parts. I suspect that Dell's pressure on its suppliers and its choice to remain very loyal to Intel has cost it as well, as suppliers will only extend so much effort to mollify a customer that constantly beats down on price.

But Dell's problems are significant in another way. Here's a firm that many, many people viewed as a real innovator that disrupted a market and took a leadership position. Dell's innovations were powerful and they did lead to the opportunity to change the PC market, basically forcing IBM out of the PC market and forcing the merger of Compaq and H-P. However, as the market consolidated and got smart to some of Dell's innovations, Dell has not modified its operations - it has failed to innovate new products or services. In fact Dell has become a "me too" operation. It has opened stores, created lower cost copies of MP-3 players and flat screen televisions. This is not the brash upstart that changed the market - this is a firm seeking to tweak the edges of the market and the operations a little bit.

So, can a large firm which owns a leadership position in a market return to its innovation roots? Is Dell willing to dramatically change itself and its market to regain a leadership position? Or are all firms doomed to become satisfied and protective of their market once a certain level of success is achieved? Michael Dell and his team dramatically changed the PC industry once. Can they do it again and revive Dell, or will we simply see them slug it out with H-P for market share points?
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posted by Jeffrey Phillips at 4:41 AM 34 comments

Wednesday, August 23, 2006

Innovation Pipeline

What do you think would happen to a sales executive in a large organization who was asked about his pipeline and could not produce one? As we all know, sales management is constantly hounding the sales team for up to date sales projections. A typical salesperson spends at least an hour a day updating his or her sales pipeline, noting the opportunities being pursued, the size and scope of the opportunity and the likelihood of winning the deal. Various levels of sales management receive these updates, apply "judgement" to the reporting and consolidate the report into a final pipeline.

A good sales manager knows what deals will happen next week, next month and next quarter. Every large organization has some form of sales reporting and pipeline management. Otherwise, they'd be driving blind, going into the future without a good sense of near term potential revenue.

Contrast that with the state of innovation today. There are teams and individuals working on new ideas which may become new products or services. Unlike the sales teams, these innovation teams do not have an integrated management structure, don't report to the same people and don't generally have any incentive to report their status or prospects. Additionally, they don't share a common methodology or philosophy, naming convention or set of reporting tools to collect and report their status. In fact, many of these teams seek to keep their work secret (skunkworks) to keep it from being influenced or killed by management or other teams.

So, in many "innovative" firms it is difficult if not impossible to get any sense of an innovation pipeline similar to a sales pipeline. Want to know what ideas people are currently working on that might become that new product in six months? Go ask each team, if they'll tell you. What's the potential return on the innovation investment for a particular idea? What measurement should the team use in order to report that? How likely is an idea to become a valuable new product or service? What are the odds of a successful launch and winning in the marketplace? Whose definitions should we use?

Too often, ideas are wrangled through disparate systems and processes by idea champions who quite literally pick up the flag and carry it through the muck and push and cajole and beg until their idea is considered and moved forward. If you are lucky enough to identify these people and have them report consistently to you, then you might be able to create a reasonable picture of your innovation pipeline. Otherwise, trying to find the ideas and teams and trying to apply judgement to the ideas to determine the value of your innovation pipeline and its potential timing is close to impossible.

Why should this be? If innovation - defined as bringing a new idea to market as a valuable product or service - is the driving force for new organic growth, and if innovation is a top three priority for most businesses, certainly we'd want to know where the investment is going and what the likely return is on that investment, and the relevant timeframes. If the sales teams can create a reasonable, quantifiable sales pipeline that is used by industry analysts and Wall Street experts to judge the financial well being of the company, certainly any firm that prides itself and differentiates itself on innovation should be able to create an innovation pipeline.

What's standing in the way? A lack of enterprise systems to capture the ideas, a lack of corporate standards to judge the ideas according to their viability and potential return, rosy scenarios about the length of time it will take for the idea to blossom and the real cost of bringing the new product or service to market. Sales guys figured out a long time ago how to quantify their opportunities, and sales management applies the relevant judgement on those reports to create a viable pipeline. Innovation managers need to create their own standards and begin reporting the likely return on innovation and the timeframes or they won't be taken seriously for very long.

Sales management benefits from the fact that all sales people belong to and report to the same business function, and are compensated not only for closing deals but for reporting their progress and pipeline. Obviously the sales team has an easier job capturing and managing the information, but that does not excuse the fact that the important innovative ideas that will drive future growth are not well managed or reported today.
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posted by Jeffrey Phillips at 2:16 PM 26 comments

Tuesday, August 22, 2006

Innovation Culture and Conflict

I've been thinking a lot lately about the organization and culture of many businesses, and the importance of a culture that supports and enables innovation. To create a simple example, let's group all firms into one of two types of cultures: sustaining and enabling. These are my definitions so let's get them out on the table.

A sustaining culture is one in which few new ideas are created, and the culture is all about sustaining existing products. My example in this regard is Texas Instruments. When I worked for Texas Instruments many years ago, the management team prided itself on driving down the cost of the products they created. Now, this is not to say that TI didn't create new products, just that the culture and the focus of the business was on driving out cost and scaling up production, rather than a significant focus on new product development. In fact TI spent money on new products, including a significant amount of money on microprocessors to compete with Intel and AMD. TI at that time just wasn't able to bring the innovation, creativity and culture to bear to win in markets where its sustaining culture wasn't helpful. TI became a more innovative firm when the Houston office, which was removed from headquarters, created a new product (the digital signal processor) and the management team that created the DSP took over. Even after that takeover, the predominant culture at TI is one of driving out cost and quickly reaching scale production, but TI has become more innovative.

By contrast, an enabling culture is one which identifies innovation as a critical function for differentiation and puts in place the systems, processes and culture to enable innovation on a consistent basis. Innovation and new product development are recognized as important to the organization and there is a corporate wide focus on these capabilities. To stay within the semiconductor industry, Intel was probably the most visible of the larger semiconductor firms as an enabler of technology. When your senior folks write books with titles like "Only the Paranoid Survive", there's a belief that the competitors are constantly gaining on you, and only through constant innovation and new product development can you differentiate. Other good examples of firms with enabling cultures are the pharmaceutical industry and the Consumer Packaged Goods industry.

However, over time it has proven difficult to maintain an enabling culture across the business. If we look closely at Intel, or pharmaceutical firms or CPG firms, what we'll see in most cases is a combination of the two cultures: an enabling culture in R&D and a sustaining culture in the rest of the business. After all, those firms still have to make next quarter's numbers. What falls apart somewhat in these firms is that "innovation" increasingly becomes "R&D", while the rest of the business focuses on its day to day operational issues. Clearly there are ideas and concepts to improve other parts of the business, but the sustaining culture creeps in.

What's interesting is how the cultures are bending back on themselves. Some new idea management systems in firms we've worked with are spawned by sustaining cultures trying to improve their efficiency through Lean or Six Sigma. By considering how they can become more efficient, these teams and processes are generating a lot of ideas which need to be considered and implemented, so a sustaining culture needs to become an enabling culture, at least for a while.

Where's your organization's culture on the sustaining - enabling spectrum? Outside of R&D, most firms are very focused on a sustaining culture, which is necessary but misses many opportunities. Also, as two cultures emerge in a business, there will be conflict at the intersections unless the "sustaining" folks and the "enabling" folks are working together cohesively.

Over the long term it may not be possible to maintain a truly enabling culture. As the firm grows, it may simply need to spawn small enabling organizations or teams and graft them to a sustaining manufacturing and fulfillment team. Size plays a critical role, as does the focus on the next quarter and the risk of failure. Quite possibly the hybrid culture is the best approach for a larger firm.
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posted by Jeffrey Phillips at 4:36 AM 28 comments

Thursday, August 10, 2006

Innovation - Make or Buy?

I think there's a growing consensus in many organizations that innovation is similar to other business initiatives. Innovation requires commitment, focus, a dedicated team, defined business processes and metrics. It's becoming clear that innovation initiatives also face the same make versus buy decisions that other initiatives face. There are a couple of reasons for that.

One, larger firms are stuggling to bring incremental products to market. The size of the firm and the complexity of moving a new idea through the many stages and gates means that it's not easy to bring a new product to market, especially one that is new to the business. Second, some firms are recognizing that they simply aren't very good at innovation. They have strong processes in place and deliver great service, but innovation and new product development is not their focus or core competency. In that case they'll simply buy new products, patents or capabilities from other firms. Third, smaller, more nimble firms are more comfortable with the risk associated with nurturing an idea. A small firm can (and does) put all of its eggs in one basket - that one idea, or product or service. This means that the idea has a greater chance of becoming a product, but the smaller firms lack the ability to scale up production and market broadly. Fourth, innovation may disrupt or cannabalize an existing product or market, so there will be political pressure to slow down a new product that will undercut an existing product. All in all, it's hard to believe large firms will be able to consistently deliver gamechanging and disruptive innovations.

So, if all this is reasonably true, there should be a big opportunity for true business development in the innovation community. Larger firms, which increasingly need more new products to sustain revenue, simply can't fill a pipeline internally. Several well-known CPG firms have all but admitted this - P&G as an example. These firms need new products and services that have been developed externally, and someone needs to seek out those products and services. There needs to be a clear set of guidelines as to what technologies are acceptable, what markets are targeted and what costs are reasonable. Someone in the larger firm needs to play the role of Scout, to constantly survey the potential partners and rank order them.

There's a hitch in this plan, however, called legal. In the firms that have attempted to acquire more new ideas, patents and products from external parties, the reasonable step is to ensure that the seller owns the IP and it does not infringe on someone else's IP. So there's a rather significant hurdle to the business development path - and probably an opportunity to play the middleman and remove or reduce the risk of acquiring ideas, patents and technologies.

Clearly, this is not yet a frictionless marketplace, but I think larger firms increasingly will admit to themselves and the market that they simply don't have the insight, bandwidth or corporate culture to sustain revenues through internal innovation. The opportunity exists for larger firms to become the manufacturing, marketing and scalability components and smaller firms the true innovation engines, which is valuable for both parties. There are clear business opportunities to help larger firms identify promising technologies and products, and to remove the risk of infringing on someone else's IP during the acquisition process.
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posted by Jeffrey Phillips at 9:10 AM 32 comments

Wednesday, August 09, 2006

Business Case for Innovation

There's a growing sense of urgency around innovation. According to the recent BCG Survey on innovation, over 70% of CEOs name innovation as one of their top three priorities, and say they'll spend more money on innovation this year over last year. However, almost 50% say they are dissatisfied with the return they've received from investing in innovation initiatives so far.

I think part of the problem around innovation and the "return" on innovation resides in the business case. Like most new initiatives, many firms just started an innovation "skunkworks" or team without defining a tangible result or finalizing a business plan. When the results don't quite achieve what people had hoped for - a new, disruptive technology for instance, then suddenly everyone is disappointed. Now the pendulum is swinging. Innovation is forced to justify its existence through a traditional business case development.

And boy are the innovation teams having a tough time in some places. You see, in most firms you can pull a plan off the shelf for most business initiatives. That's because in most cases there's rarely anything truly "new" in a business. More than likely its been done somewhere before, and we can call on people with experience and pull plans out and modify them. Well, that's often not the case with innovation. There are very few people in many businesses who can detail, step by step, cost by cost, what it will take to improve innovation. Add to the newness issue the real fact that innovation is messy and problematic and prone to failure, and you've just increased the difficulty in defining and building a business case for innovation.

In most firms, there is no clear definition of the business case for innovation. That's because there are a lot of options (incremental or disruptive, product focused or service focused, open innovation or internal innovation) without a clear strategy. It takes time and effort to break down the commandment - Be Innovative - to its component parts and make decisions about what that means and how to implement it on a operational and tactical level. It's also difficult to quantify the benefits of an initiative that acknowledges a significant failure rate. As your firm becomes more innovation focused, some ideas, some investments simply won't make the cut. How do you quantify success now?

This is one of those activities that on the surface seems simple. Who would be against innovation? Certainly becoming more innovative is a good thing. The difficulty lies in the defintions of innovation, the hoped for outcomes and quantifying the results in a way that demonstrates the team understands its objectives and can achieve buy in from the senior ranks.
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posted by Jeffrey Phillips at 4:49 AM 28 comments

Monday, August 07, 2006

What's wrong with idea generation

I wasn't sure whether to title this post as a question or a statement. There's clearly a lot of effort going into idea generation in many businesses, and it seems quite a lot of that work is wasted or not put to good use. I think there are several reasons why we fail fairly consistently at idea generation:

- Brainstorms are often run with poor framing or context
- Facilitation of a brainstorm requires different skills than managing other meetings
- Too few people are involved in ideation
- The teams don't believe the ideas will we acted on
- There's poor communication throughout


I had the opportunity recently to sit in on a new IBM initiative around brainstorming. Over a three day people people from all over the world sat in on a virtual ideation session over the web. I don't know what IBM will do with the ideas or how they'll be used, but it seemed to me a great use of technology but a poor focus on the outcome. IBM asked contributors to submit ideas in four rather large and vague topic areas. Viewing the ideas and the commentary around the ideas, many were interesting but vague or difficult to implement. "Cut greenhouse gas emissions" for example. That's a great idea. But, how exactly? Where? In automobiles or in lawnmowers? Too often our idea generation is simply too poorly focused and too vague to be put to good use. Ideation sessions should be free form and flowing, and should encourage wild ideas, but they should be shaped and focused around specific topics or outcomes. The question should have been asked: How can we cut greenhouse gasses by 30% in the next five years from lawn equipment? That would have generated some very specific ideas that could be put into effect quickly.

This points out a problem of facilitation. Most meetings are run by executives who have a couple of goals in mind: run to the agenda, get a few decisions made, end on time. Many people who facilitate ideation sessions and brainstorms do a poor job of managing brainstorms because they have little training in the differences between a traditional meeting and a brainstorm. In a brainstorm the facilitator needs to help people open up, explore ideas, and encourage discussion and idea generation, not follow a specific agenda. The more communication and discussion, the more idea generation, the better, as long as it is serving the ultimate goals. So, setting a good topic or goal and then facilitating to that expectation is important, and often lacking.

Next, most firms involve far too few people in ideation. We go back to the same people, the same teams over and over again, instead of inviting others who may have different ideas and perspectives. Does your team involve a wide range of ever-changing faces in its brainstorming and idea generation? Do you incorporate people from your business partners, your vendors and your customers? How many times do you hear "We've examined that idea before"? If you hear that a lot, you don't have a broad enough team.

Let's assume your team ran a successful brainstorm - the team was a cross-section from a number of different business functions that had a good, specific goal in mind when brainstorming and was led by a competent facilitator. A number of great ideas were generated. What's the next step? How do those ideas move from concepts on a sheet of paper into actual action? Is the completion of the brainstorm a simple checkbox on someone's to do list, or does this begin a new process of idea evaluation? Too often, nothing happens once the brainstorm is complete. People become jaded about the outcomes and don't want to waste valuable time attending brainstorms where the results aren't taken seriously. There must be a logical progression once the ideas have been generated as to what the important next steps are, and who will take them.

Finally, there's really very poor communication about the entire process. Think about the last brainstorm where you were a participant. More than likely you were invited to a brainstorm which had a fuzzy definition and unclear outcomes. You were led by a person who had a specific set of goals and shut down some lines of thought. At the end of the brainstorm, the ideas were collected and you never knew what happened or how they were evaluated. What's your likely response to the next brainstorm? Instead, the teams need to clearly define the goals, manage the brainstorm effectively, and let people know after the fact how ideas are considered and evaluated, what decisions were made and why, so they know their contributions were taken seriously.

It seems to me that far too often, many businesses consider the serious work of ideation and brainstorming as a mini-vacation from actual "work" and don't take seriously the process or the outcomes. Then they wonder why innovation is so "hard" and where the next great ideas are going to come from.
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posted by Jeffrey Phillips at 4:49 AM 41 comments