If I could change one thing

I love old John Wayne movies, and for that matter a lot of movies from the "golden age" of Hollywood, when it was easier to tell the good guys from the bad guys, and there was always at least one deathbed scene where the wounded cowboy/soldier/detective would ask for just a few more minutes. If only...

I think we all live and die a bit each day, and everyday that goes by that we don't make a simple small change or recommend a different approach means our initiative and creativity dies a little. Let me suggest just one thing you can do this week: create a list of things you wish you could change at work.

This exercise is not meant to be one of those "let's remake the company and make me CEO" type of daydreams, but an honest look at the things that your company does that you'd like to change, or a small improvement in a product or process that you'd like to recommend. If you do this you'll be surprised at the simple changes you can make that will have an impact on the way you work or the products and services you create. With the advent of the blog and/or wiki, virtually anyone can set up a simple list and allow others to add their ideas and/or fixes.

Simply making a list isn't enough, however. You've got to find methods to implement some of those changes or ideas, and demonstrate that the exercise isn't just about making lists, but about creating simple changes and implementing small new ideas in your business. Getting the first few done may be hard, but engaging your team or business in this way creates an expectation that everyone can contribute and should contribute to change the business process or create an incremental product or service.

If I could change one thing about our processs....

If I could change one thing about our product...

If I could change one thing about they way we treat our customers...

Be careful, once you start it is hard to return to complacency.

Innovation Cliff Notes

There's a press release from Sara Lee today that encapsulates all the expected challenges, issues and benefits of innovation. Clearly the Sara Lee people recognize that innovation is the key strategic initiative for the foreseeable future. You can read the press release here. In my mind, this press release and my comments below serve as the Executive Management Cliff Notes for Innovation. You can now skip the coursework.

There are a few things within the press release I want to point out specifically.

First, innovation is critical for long term success. Here's the first quote:

The move is also key to keeping Sara Lee competitive, analysts say, especially in the food industry, where companies are carving out high- and low-end niches, making it difficult for major foodmakers to thrive serving the same products to one mass, middle market.

"It really is what is going to make or break companies going forward. Line extensions, package modifications don't lead to much incremental value. Real breakthrough innovation is what is important," said Bob Goldin, vice president of Technomics Inc., a Chicago-based food research company.

Second, your competitors are doing something so you may already be late to the game. Sara Lee reacted because Wrigley, Kraft and others have opened innovation labs and have invested in innovation as a differentiator, while Sara Lee :

"has had a reputation among analysts of skimping on research spending. While other food companies were investing in R&D facilities during the 1980s and 1990s, Sara Lee allocated little to the development of new products, they said."

Third, hope is not a strategy. Innovation must be managed as a process for ongoing, sustainable new product introduction.

"Innovation is easier said than done. You have to put pretty significant resources behind it," Goldin said. "Companies that really manage their innovation business are going to be in a far better position."

Fourth, there are real, tangible, measurable benefits from being great at innovation. Sara Lee expects increased sales and higher stock prices based on successful innovation.

Sara Lee executives say their R&D push is crucial to its reinvention of the company as an American food company. Executives hope the changes will lead to innovations, boost sales and ultimately move Sara Lee's stock price

Finally, what's really important about innovation is the end to end process and getting new products out the door quickly.

"What we have now is a real opportunity to go from an idea into a concept pretty quickly"

So, this is basically a Cliff Note's version of the rationale for innovation and the important things to do now.

Exporting knowledge

I was reviewing the website of a firm in Europe that had requested information on some of our products. What jumped out at me was that over half of the management team had completed their undergraduate or graduate degrees in colleges and universities in the US, even though all of the people were native Europeans. In fact, paging through their employee ranks, at least 25% of the entire company had graduated from a university in the US.

I use this example to define and describe what I think is one of the greatest sources of advantage for us in the US - our higher education system. We have what is probably one of the best systems of higher education in the world, and we attract people from around the world to our excellent programs. Our universities and colleges are to be commended for the excellent job they do.

These higher education programs serve the US by attracting bright people who seek a great education. Some of those people eventually remain in the US, adding to a great talent pool. Likewise, some of them return to their native countries to put their new skills to use there. Both of these outcomes are positive from an innovation point of view. The students who remain add great energy and knowledge to our workforce, and fresh perspectives. The students who return home hopefully take a better understanding of the US market, culture and norms, so they are better prepared to create products and services that we in the US can acquire, and they are more familiar with our culture. In some circumstances, admittedly, this exchange has turned out for the worse. Some of the extremists who have attacked us have also at one time been students in the US. On the whole, however, we want to remain a free, open society that welcomes students from other countries, because the education is valuable for both parties.

Many students come because our unversities are very democratic - the students are judged by their competence and capabilities, while in their home countries other considerations may apply for their enrollment. Many come because the US is recognized as having excellent educational facilities and programs. I suspect many come because they see the innovativeness and entrepreneurial outlook of our people and expect to gain some of that through their education.

We need to continue to pursue a policy that welcomes students from any country. We gain if the students remain and become part of our workforce, and most often we gain if the students return home to create new businesses and new jobs. After 9/11 it became much more difficult for foreign students to come to the US, and we need to take a hard look at that issue. If we turn away too many students from other countries, we lose and they lose. Other countries will see the opportunity and begin to strengthen their university systems to fill the void. At this time, we need more interaction with other people and other cultures - socially, politically and otherwise - and the higher education system is a great place for us to introduce others to our country and culture.

Innovation Location

Innovation as a concept is easily accepted and quickly endorsed. Moving from a concept to an actual working process is slightly more difficult. I believe one of the reasons that innovation is simple to talk about but harder to put into practice has to do with location.

Management teams want innovation because innovation can bring differentiation in the market and organic growth, which are two strong drivers of profit and market attention. The challenge that innovation presents is: where should it be done, and who should be doing it? I think there are at least five different "locations" for innovation, and by identifying these locations we can begin to determine the tools and techniques necessary for each location to thrive, and who should be working on ideas in each location.

Now, these "locations" as you may have guessed by now are virtual, but very important. Just as a company has a formal org chart and the "real" organizational power chart, innovation can exist in a number of different virtual spaces. Let's look at a few of those now.

Within R&D and/or a product group. This is the natural, comfortable place for innovation to reside. In fact in most firms it already lives in this space, so the management talk about innovation is either reinforcing the existing innovation or threatening this team by expanding innovation outside of this "location". The processes for innovation - at least incremental product innovation - already exist.

There are challenges to defining innovation at just this level or location. Innovation should be about more than simply defining the next iteration of a product, and the R&D teams and product teams clearly don't hold the monopoly on insight into new services or business models, which should also be fair game for innovation. So, while this location is a good one, I doubt it is the only valid "location" for most firms.

Across product groups. What happens when you company needs to innovate across lines of business or product groups. Perhaps there's a large opportunity to innovate by combining several of your products or solutions into a new "whole product" for the customer. Where does that innovation reside? Now there are suddenly two or more cohabitating groups with different approaches and different compensation models trying to work together on innovations in a virtual space. This becomes a bit more tricky and may demonstrate a need for a center of excellence where the teams from different business units or product groups can work together more effectively - away from each others' teams and turf. Again, we still are really only focused here on product innovation, although crossing corporate functional boundaries may raise the awareness of service or process innovation.

White Space innovation. Who is responsible for innovating in the "white space" of your organization? Should each product group and/or R&D team work to create new products in the spaces where your products or offerings are missing today? Who sets the direction and strategic vision for the white space innovation? If created, who will own and manage the products or services for the white space? Location is not just an issue of strategic intent, it is also an issue of ownership. Ideas conceived for the "white space" that do not have ownership in a product group or line of business over time may be accurate but will fail, as corporate teams simply don't have the experience or bandwidth to identify, own and grow a product or service innovation.

Innovation between a business and a partner. Who is responsible for this "location" - a virtual space between your company and one or more business partners who have agreed to innovate around a new product or service? Who owns the responsibility for the investment, the business development, the legal headaches necessary to work with people who are partners or possible competition? This is a very important "location" as few firms have the footprint to cover a wide range of capabilities, technologies and markets, so partnering will often make sense and add a lot of value, if you can get the groundrules established. Ownership of the idea and the product or service long term is obviously a big issue. Who decides where the idea resides?

Innovation in the open. If you've followed the concepts of open innovation to their logical conclusion, you'll know that truly open innovation - user or customer generated ideas and content - are where innovation is heading. Who in your firm manages the interaction between your customers and your prospects and their ideas and content? I think we can predict fairly soon that there will be people in every business who are responsible for helping to shape and manage customer innovations. In our area, there are several small photolithography shops where anyone with an idea can create a small prototype of the product they've invented. If prototyping becomes mass market, anyone with an idea can present a reasonable facsimile to any firm. Will yours be ready to review the new products and services and content generated by "average" folks?

In each of these areas, the classic management issues are very different. Span of control, management communication and direction, ownership, control and strategic alignment change dramatically as we move from "location" to "location". As your firm considers its innovation strategy, tools, processes and methods, look first at the "locations" where innovation is important. The locations will dictate the changes necessary for innovation success.

Through the looking glass

Listening to NPR this morning there was an interesting discussion about the problem of dust on the moon. Now, dust on the moon is really only a problem if you plan to spend time on the moon, which it turns out NASA is planning to do. The problem with dust on the moon is that the dust is exceptionally fine, metallic and has jagged edges. So the stuff adheres to everything and is very bad for humans, especially the lungs.

What's all that got to do with innovation? It struck me that in any new endevour there are some things one can plan for, and some things that simply must be discovered and dealt with afterwards. I'm sure the astronauts and NASA knew that there was dust on the moon, but did not have a sense of how potentially damaging and pervasive it would be. So they now have to determine how to deal with the dust. One of the interesting learnings is that the dust melts easily and can be fashioned like glass - so maybe we can create glass bricks on the moon from the dust.

I think innovation is similar in many ways to the problems and opportunities presented by moon dust. What seems a small problem and somewhat innocuous at first can become a real show stopper, until new thinking and new perspectives are applied. Then, entirely new opportunities open up. Often, we get stymied at the thought that the problem is a real show stopper - after all, we don't want to send astronauts to the moon to load up their lungs on moon dust. The asbestos litigation industry is just waiting for that.

When firms begin an innovation process, there are often roadblocks that seem large but surmountable. Once a team begins innovating and attempts to overcome those obstacles, other, unforseen problems emerge - often ones based on turf, bureaucracy and strategy. These are potential innovation killers and, while hard to identify initially, should be expected. Only by thinking in new ways and offering new perspectives can your firm continue on its innovation path.

Moon dust is a potential threat in many ways to our astronauts, yet with great thinking and new technologies it may prove to be the building block of our Moon base. Problems and challenges with innovation will emerge, and with great thinking and new perspectives will only make your initiative stronger, unless you allow these problems to dissuade your teams and defeat your thinking.

Let's assess the situation

Since it's early in the calendar year and, in most cases the fiscal year, many firms are starting new initiatives and projects. I suspect that many of them are starting innovation initiatives. If so, let me provide one small piece of advice. Stop right now.

By that I don't mean stop innovating completely, or never begin an innovation initiative. What I do think is important though is to assess "where" you are in terms of innovation readiness. Take a short, quick assessment of your organization and its willingess and capability to innovate.

By now, if you are still reading, you've probably thought to yourself, or, if you are like me, yelled at the monitor something along these lines "What? Is he crazy? Any idiot can innovate." To which I'll reply "yes, any idiot can innovate. But with what results?" The challenge isn't whether your firm or the people within CAN innovate, the question is whether or not the firm, its culture and structure, its strategic goals and its investment strategy will sponsor and support innovation. If these, and other components, aren't in place and supportive, then all your innovation team is doing is getting set up for the fall.

What are the key factors to consider when assessing your firm's receptiveness and readiness for innovation? A complete answer would take several posts. For the short answer, think about whether or not innovation is aligned to strategic goals, whether or not the culture of the organization will support innovation, and how the innovation team will interact with the existing corporate structure. If you can identify some likely challenges in a simple thought experiment, you'll encounter those challenges and more to your innovation initiative as you proceed. Identifying the likely sources of conflict and addressing those before the initiative starts will be exceptionally helpful. After all, the folks who climb Everest plan their route and stage food, water and oxygen along the way. They don't climb the mountain and then radio in for supplies as they encounter the needs.

I know we are all in a hurry. I know innovation is exciting and can change the way you work and the revenues and profits you generate. But as with many new initiatives, you get one really great chance to get it right. Make the most of the first chance by assessing your readiness and identifying the likely challenges to your initiative.

An Innovation State of Mind

I receive the "Swamp Fox" newsletter and respect what John Warner is trying to accomplish in the Southeast. His goal is to create an innovation corridor from Research Triangle Park to Atlanta, encompassing a number of excellent public universities, national laboratories and Fortune 500 companies in a community of innovation.

His latest post on Swamp Fox, though, expressed in some terms the real problem associated with innovation, especially in larger firm. The statement "we're just not innovative" is fraught with problems. An outlook like this can only come from one of several attitudes:

• We were innovative once, but aren't any longer. Somewhere along the way we lost the innovation magic. We were innovative once - since we built the company up from nothing to something substantial, but now we just exist to keep the company running
• We'd like to be more innovative, but it's simply too much work and too much risk. We'd all prefer to create new and exciting products, but there's no reward in it and too much risk.
• Innovation sounds cool, but I've got all these other pressing jobs. In fact it turns out my biggest competitor is about to release a new product, so I've got to figure out how to make my products cost less
• There's too much bureaucracy to create something new here

What I can't understand and can't stomach is the absolute surrender implied in these statements. If you "just aren't innovative" then you are on the slow track to oblivion. Every company was innovative at least once sometime in their past, and innovation is not like quantum physics, which will take years to learn and master. Innovation capability is first and foremost a state of mind.

If you truly want your firm to become more innovative, make it a cultural standard. This has to come from the "top down" but can bubble up from a committed team. Shake off the lethargy and understand that every competitor on the planet is trying to figure out how to knock your firm out of contention, and eventually out of business. If you aren't innovating, then your firm is dying. Is that the statement you want your team to hear?

Any firm - let me repeat - any firm can be innovative. There is no special talent necessary, no advanced degrees. What is required is a will and a mindset that sponsors change and innovation across the board. Look at most "innovative" companies. Apple is not a well-oiled machine, but Jobs encourages and expects innovation. P&G is not a small shop in a garage but a mammoth organization, proving that large firms can innovate. The overriding force necessary for innovation is a state of mind and the willingness to innovate. The rest is great execution.

Innovation in 2007

From time to time we at OVO will create a white paper or forecast on some issues regarding innovation that we find to be interesting or don't believe are adequately covered by the media. We've just released a paper that looks back at 2006 and looks ahead to 2007 to investigate some of the factors of innovation that we think will become more important in 2007.

This white paper is available to our newsletter subscribers - you can register for the newsletter in the right hand margin of the blog page or by clicking here. The white paper is also available on our website on this page, titled 2007 Innovation Forecast.

If you have a chance to read it and care to send thoughts or comments, they are welcome. I look forward to a year in which we'll see a lot of emphasis placed on product innovation and new opportunities emerging in service innovation.

If you think innovation doesn't matter, just take a look at Bob Nardelli at Home Depot. Yes, the final straw for Nardelli was his compensation package, but what killed his support at Home Depot was the absolute lack of innovation at Home Depot. A number of articles written about Nardelli's recent demise pegged investor and shareholder dissatisfaction squarely on the fact that Nardelli failed to grow and differentiate Home Depot. See an article from Bruce Nussbaum at BusinessWeek on this topic here.

CEOs and senior management teams that can demonstrate organic growth through innovation are going to be rewarded handsomely by the stock market. In fact several innovation consultants have created an Innovators' Index, a sort of mutual fund made up of the leading "innovators" in a number of different industries.

What can the behavior tell us?

I was reading some news recently and a figure jumped out at me. The BBC published a story which suggested that many people in England who have garages don't park their cars in the garage. This caused, as you might expect, a significant uproar about the fact that people were lazy or using the garages for other purposes.

According to the story, over 53% of English households have access to a garage, but only 24% of those homes used them to park their cars. A group of MPs (members of Parliament) said they were "astonished" that these garages were not used to park cars. It seems like there will be some new laws about on-street parking and so forth in England. But it seems to me that these folks are missing the point. There's a significant trend occurring here that we as innovators should investigate. Either people are lazy, or cars are too wide, as the article suggests, or something else entirely is going on.

There are several reasons why people would choose to park on the street when they have a perfectly good garage:

1. They are storing a significant amount of stuff in their garage
2. They've converted the garage into a play area for their kids
3. They've started a business in the garage
4. They needed extra space and converted the garage to a completely new room

I guess there could be other reasons as well. Rather than focus on how unbelievable it is that people don't use garages to park cars, we should be considering the implications.

One could be that homes in England are too small and people are using garages for extra storage or for new rooms. This would suggest that people are accumulating more stuff and that we can expect to see rapid growth in self-storage in England the way we've experienced it in the States. Or that perhaps teardowns are more difficult in England which will lead more people to move further out into the suburbs where they can build homes to meet their current needs.

Another could be that families are having more children and they are not finding the recreation or education alternatives they expect and so are converting their garages to schools or play areas. I suspect if we were to look more closely we'd find some of those garages at use in exactly this manner. An entrepreneur or innovator might position themselves to provide products and services targeting small recreation areas or schools in these situations.

Another reason could be that people are starting the proverbial garage business. Your garage is cheap real estate to begin a new business. If this supposition is true, then it might be possible to see a boom in entrepreneurial businesses in England. An entrepreneur or innovator might position themselves right now to offer services to home-based businesses that are just starting out.

More than likely, all of these suggestions have some validity. As people who are trying to figure out the next new products and services to offer, we need to look at these trends with open minds and try to understand what's happening and what the longer term implications are to position ourselves to offer the products and services necessary as these trends continue.

Or we can just assume that people are lazy and cars are fat.