Innovation Roles

So let's say you've decided to introduce more innovation into your organization. In some cases, this will occur naturally, as innovative people will create ideas. In some cases, the culture or organization may discourage change and new ideas, so you may need to sponsor and encourage innovation for it to succeed.

In either case, you'll need to think about the roles and capabilities necessary for innovation to succeed. Note I did not say begin - but to succeed over the long run. I started to title this post the tinker, tailor, candlestick maker, because it may seem that you'll need all those skills available when you are done.

First, let's start with the obvious skills, capabilities and roles:

• Someone or some teams to identify opportunities, trends, unmet needs
  
• Someone to generate ideas specific to those opportunities trends and needs
• Someone to capture those ideas
• Someone to evaluate those ideas
• Some team to sign off on the ideas and agree to fund them

Most organizations will assume you can stop there. I'll add a few more roles and capabilities that you'll agree are necessary - the only consideration is timing.

In my pantheon, I'll want to add to the above:

• Someone from corporate communications - since what we'll do effects the organization and the folks need to know what's happening and whether or not it has management buy-in
• Someone from Human Resources - to ensure people are prepared, trained and compensated in a manner that supports innovation
• Someone from Legal or Intellectual Property - to review the ideas and identify knowledge or information that can or should be protected
• Someone from IT or who is comfortable managing information - as the number of people involved increases or the number of ideas increase, you'll need a set of databases to capture and manage the information
• Someone with process definition and management skills - to help define and refine the innovation processes
• An interested, involved senior executive - this is what provides the motivation and the ability to take these risks

You don't need all of these skills at once, but they can trip you up if you don't put the capabilities in place well before you need them. In a large firm, good communication is essential, and without a corporate communications person on board, your initiative may struggle. You don't need systems and databases immediately, but in many cases after three or four ideation sessions or requests for ideas, you'll have more data than you can manage in a spreadsheet.

The trick isn't knowing what skills and capabilities you need - any good innovation consulting firm can identify thoses - it's knowing when and how to bring those skills to bear that matters most.

Innovation Networks

The commonly-held belief that innovation comes from a small team sequestered in a lab, is probably one of the most dangerous concepts in innovation, for several reasons. First, a small team can easily become focused on one or two specific problems, and with little guidance or feedback, select the wrong problems. Second, these individuals may not have much access to customers or to trends in the marketplace, and may ignore or not realize the importance of readily available information. Third, a small team may grow to rely solely on each other, rather than creating networks and connections across a wide variety of partners and customers.

Today, I want to focus on this last issue - the idea of creating an innovation network. If Proctor and Gamble, one of the leading consumer products firms, believes its scientists and research labs are insufficient to generate enough ideas to keep its products current, how can any firm believe that its internal knowledge and resources alone will generate enough ideas to even become slightly more innovative? Compounding this fact is the reality that thousands of organizations are generating lots of information, market research and other data that identify opportunities waiting to be exploited. How many of you reading this have an active relationship with at least one research university, funding new research and reviewing new discoveries?

The challenge any firm faces is how many other partners should be in its network and what its expectations are of the network. The first is difficult to answer - depends on the complexity of the problem and the potential solution. The second is easy to answer - an innovation network should provide your firm with a significant number of new concepts, new ideas and new technologies, but not a new product or service. The goal of your organization should be to constantly review what's happening in the network and draw conclusions or create new product and service ideas from these new inputs. Don't get me wrong, it's entirely possible that a university, a research partner, an industry consortia may have something you can simply pluck and deploy as a new product or service, but I think the greater value add is in the aggregation of thinking and ideas across these inputs that will change the way your team perceives opportunity and the sources for inspiration.

Conferences, trade shows, industry groups, peer networking groups and other organizations offer many opportunities to gain a new perspective on the innovation space and may help your team connect two dots that seemed unconnectable before. The investment in building an innovation capability is as important on the outside - in building and sustaining a network - as it is on the inside.

Taking the deep dive

Working with a number of firms in the innovation space, I see a lot of excitement about innovation and the possibilities innovation holds for more revenue, more profits and more differentiation. Often, it seems like the innovation teams are kids in a candy store, looking through the plate glass at all the possibilities, trying to figure out how to spend their money.

However, it often proves difficult to part with that money. For a number of reasons, many of them discussed here previously, it can be very hard to get started and take that first step. What's interesting to me is that so many firms want to "get it right" the first time. We've placed such an emphasis on perfection that we've forgotten how to fail. Once all the planning and contingencies are worked out and a new, "safe" innovation initiative is begun, we could have tried and failed several times, learning along the way. Sometime we literally need to jump in and test the water.

Right now a lot of firms are doing what I call snorkeling. They've entered the water and are making some progress, swimming right near the surface. Anyone who has snorkeled can tell you that the view is pretty good, and reasonably safe, since many people don't leave the surface. But for real innovation success, just like real diving success, you need to go deeper. Taking a deeper dive, making a more significant commitment, is what is required to get the real benefits. Moving from the snorkeling at the surface to the scuba gear gets you closer to the real action below the surface. Yes, it requires more risk taking and more experience, and some training, but the investment is worth it.

I'll use this snorkel versus scuba analogy for innovation commitment because I think it's a valid one. Cruising along on the surface doesn't require a big commitment, but you'll never recognize the real benefits and rewards until you make the decision to take the deeper dive and swim right down to the point of the opportunity. Scuba diving requires a lot more training and experience than snorkeling, but the difference is profound. Also, most scuba divers started out as snorkelers, and graduated to scuba because they realized they wanted to get closer to the things below the surface, and stay there for longer periods of time. Likewise, most firms can't dive in immediately, and need some quick wins to demonstrate the innovation capability. That's OK, but once that's been proven to gain real innovation return the firm needs to dive deeper.

Give the people what they want!

It's time to be contrary. For those of you (thanks mom and dad) who read regularly, you won't be surprised that I may on occasion become a bit contrary. Well, where's the fun if we all just agree about everything?

Today, the subject of my contrariness is about innovation and customers. There's a concept that seems logical but doesn't offer much hope for true innovation - that is, asking people what they want. While this approach seems logical, there are a number of problems associated with it:

1. Most people don't know what they want
2. Of those that do, they don't represent a significant population and/or aren't market makers
3. You aren't the only one with the bright idea of asking people what they want, your competitors are doing that too
4. Real innovation is usually about solving an unmet or unserved need. Wants are aspirational, needs are practical.
5. Most people are not willing to think disruptively, so many ideas that result from customers are likely to be incremental at best
   

So, while asking people what they want seems reasonable, it isn't a very useful way to create interesting, unique innovations. How can you use your customers and prospects to generate innovations?

There are a number of approaches, but the ones we like best are:

1. Rapid Prototyping
2. Identification of unmet needs
3. Lead Users

In the first case, customers can respond to physical representations or mockups and tell you want they don't like or how they'd change it much more accurately than they can describe useful products or services in the abstract. Rapid prototyping is not used very effectively in most organizations. The Blue Ocean folks have some great tools to consider unmet, undermet and overmet needs, which can open up whole new markets and disrupt existing ones. When Southwest disrupted the market, most existing fliers demanded frequent flier miles and were not likely to switch, so they identified a market that didn't demand frequent flier miles. Imagine asking customers if they wanted an airline without frequent flier miles!

Lead users is a concept that Eric von Hippl describes in his book. This is the case of identifying what people are already doing with a product or service in a way that was not intended. The classic example is the mountain bike. When mountain bikes didn't exist, lead users created them with bits and pieces of motorcycles, regular bikes and bike parts. Specialized, one of the leading mountain bike manufacturers, sold bike parts in those days. They recognized that something was going on and watched the folks who were building their own bikes, and entered with a "packaged" mountain bike. Lead users are already doing what others are likely to do in the future - you don't have to ask them, you just have to observe them.

A logical approach then would be to identify lead users, identify the undermet or unmet needs they are satisfying and quickly prototype a solution to present to your customers for confirmation.

Innovation Maturity

Innovation, like many other corporate capabilities, evolves over time and as the people involved gain understanding and knowledge. Think about some of your existing corporate processes and capabilities. They've been honed and refined over years (in some cases decades) of experience. You expect those capabilities to work at peak performance, since they are hard wired into the corporate culture and into the expectations of all the employees. Would you expect a brand new capability or process to work perfectly the first time out? How long does it take for a new process or capability to become ingrained?

Innovation in most firms is really just getting started. To that end, it's a lot like a small child, succeeding ocassionally, stumbling occasionally, learning by doing. As the capabilities become well understood, the innovation processes and teams gain more confidence and the ability to repeat the processes and demonstrate more consistent outcomes. Right now, in many firms, innovation is in the awkward teenage years, wanting more autonomy and to stretch responsibilities. However, the parents aren't quite ready to hand over the keys. The senior executives want to see more consistency and more results.

To become more proficient at innovation requires some significant changes in attitude and perspective, however. Firms that are proficient at innovation are open to change and to risk, and have an expectation that innovation should happen and will happen. These individuals seek change and new solutions. A firm that is more focused on process excellence and cost cutting seeks ways to avoid change and risk, so you can begin to see the dynamic of a teenager and the parent. The teen (innovation team) wants more autonomy and wants to take more risks, sure the future is bright. The parent (executives) want the teen to grow, but don't want to assume any costs or risks. The child risks being suffocated for its own good.

However, the senior executives of most firms then demand results - where are the new ideas? What return have they generated? Small ideas that expose the firm to small risks and long decision timeframes return small benefits. There's some schizophrenia in the executive teams to keep the innovation team under restriction but expect great results from a process that has not fully matured.

We as innovators need to recognize the steps to "maturity" and the fact we can't change a firm overnight. It takes careful growth and demonstration of some return and benefit to change the attitudes, and in many cases the innovation processes and methods can't become mature overnight. Likewise, the senior executive teams need to give innovators room to experiment, grow and mature, in order to become a more consistent capability. This maturity takes time, patience and consistent investment, but will pay off in the long run.

If 3M and Proctor&Gamble are "mature" from an innovation perspective, where does your firm's innovation capability lie on a maturity spectrum? What will it take for your initiative to become more mature?

Business Model Innovation

I was reading recently about a new electric car company in Scandinavia which is planning to release a new car shortly. There were two telling points in the story:

1. The technology used by the company was owned by Ford at one point but discarded when SUVs were making so much profit
2. The real innovation is the plan to disrupt not only the internal combustion engine but also the automotive business model.

The first point goes to the fact that no matter how well you are doing, only one or two significant changes in your operating environment can dramatically change your market. In fact we use this concept to help our clients think about ways to disrupt the market. What would happen if oil moved from $10/barrel to $80/barrel? Answer - demand for more fuel efficient vehicles. Ford acted as though oil prices would always remain low, even as China and India were growing their economies at unimagined rates. Face it, we'll compete with these growing economies for oil and even if new oil is discovered we've probably seen the last of oil below $50 a barrel. Why didn't Ford place more emphasis on investments in concepts that were going to help them when the price of oil inevitably rose? Once it appeared that the automotive industry could reduce or ignore the zero emissions standards in California, Ford sold the division.

The second point I think is even more interesting. According to the article, the firm in question plans to disrupt the business model - taking on a Dell approach and acquiring the materials as you order the car, rather than building a significant dealer lot inventory of finished automobiles. They will become a just-in-time assembler. While this poses some challenges and may initially limit where the automobiles can be sold, most of the market for autos in the US is on the East Coast, large cities in the Mid-West and the West coast. Demand for an electronic vehicle will be highest initially in "green" locations where people may be willing to trade off some comforts, and in places with short commutes and high population.

There are two business model stories embedded in this: first, don't assume that your existing business model is infinitely sustainable and ignore the opportunities to disrupt the market. Ford, and all of the Big Three, are guilty of that. Second, a small player without the infrastructure and investments that the Big Three have can disrupt the sales and distribution portion of the model, just as Dell did with PCs. What firm is eying your value chain and seeking to disrupt your business model?

Lake Wobegon Innovation

The latest BCG survey on innovation across major industries and geographies has just been published, and it reads like a Dr. Jekyll and Mr. Hyde novel. On one hand, the senior executives surveyed felt that speed to market, innovation capability within their firms and the ability to focus on innovation were sorely lacking. However, 57% of the respondents said their firm was above average or excellent at fostering a culture of innovation, and almost 75% of respondents considered their company above average or excellent at service or product innovation.

This is Lake Wobegon thinking, where everyone is above average. This also reflects a divergence between what senior managers and executives BELIEVE about their business, and what middle level managers, directors and other professional staff KNOW about their business.

CEOs are paid to be cheerleaders for their organizations, to be optimistic about the capabilities of the firm and moving ever onwards in a strategic direction. CFOs and COOs, on the other hand, have more operational oversight and understand the practical, day to day issues many firms face. The authors of the study note towards the end that leadership and culture will make or break a firm where innovation is concerned, and they are correct. It seems odd that so many executives felt that a risk-adverse culture made it difficult for firms to innovate, yet so many executives felt their firms were above average.

There are three key barriers or hurdles identified in the survey, and they are consistent with what we find in our clients as well:

1. Risk averse culture
2. Long product/service development times
3. Inconsistent management commitment

What's odd about these barriers is that virtually every firm we've talked to, and most that participated in the surveys as well, recognize that these are the key barriers, yet there seems to be a lack of discipline and dedication to changing these barriers. In firms where innovation has really taken off, the first and third barriers (culture and management commitment) get changed quickly, because senior managers and executives can influence these rapidly through their actions, words and emphasis. Long product/service development times are a vestige of the fear of failure, recognition of the existing product and service portfolio, and the difficulty of making tradeoffs amidst scarce resources. These development times can be reduced, but that's a longer term effort.

Recognize, however, that the culture and management commitment are the most important, and the most difficult to change over the longer term. A half-hearted effort to change the culture will bring some initial innovation success, but after a period of time, as the management team drifts away to other topics and strategies, the culture will return to its comfort zone and resist innovation. The only effective long term strategy for innovation is consistent management focus, emphasis and involvement in innovation over a long period of time.

Many of the survey respondents in the senior ranks want to believe their firms are better than the others they compete with, but I doubt that's the case. There are simply too few real standouts where innovation is concerned, and too many firms in head to head "red ocean" competition that aren't really innovating at all. This realization won't sink home until the senior executives get down in the trenches and understand what the barriers are to real systemic innovation and decide to do more than simply issue innovation oriented edicts.

Empathy, Utility, Profits

I had the chance to sit in on a talk given by Jeneanne Rae, and, as always, greatly enjoyed her talk. One of the key messages of her talk was about empathy for the customer, which is a topic we've been working on as well. This is an important subject for innovators, because customer empathy can create entirely new opportunities.

What Jeneanne calls empathy we call "meaning" or experience. It does not mean feeling sorry for the customer, rather it means creating products and services that have an even higher value proposition based on the values of the product, the company or the brand. We live in an era of unbelievable overabundance. Very few of us have "needs", and really very few of us have "wants". What many consumers increasingly seek is a product or service that has more than just utility - it has experience or meaning along with it.

Examples abound. One I like is the Body Shop, which practices environmentalism and tries to prevent cruelty to animals. By using their health and beauty aids, a person also aligns themselves to the values of the company. Body Shop understood that doing "good" within their business would help them identify loyal customers. Increasingly, you can buy any lotion - so why not buy one with some important value beyond the mere utility of the product?

This is what many innovators miss. They identify the "need" and create a product or service to fill the need - and neglect the meaning or experience. After all, there are thousands of MP-3 players, but only one iPod. That's the genius behind Apple - they've created an entirely new cool tribe to belong to. In some ways I think Starbucks is the same. I am not a coffee drinker so watching people order and consume Starbucks coffee is interesting. There is an entire language and culture building around Starbucks - which they are reinforcing with music and other cultural accoutrements.

Rather than focus solely on the utility of a new idea, start thinking about the value, meaning or experience that is encapsulated with the product or service. What does your brand say or mean? What additional value or experience does your client receive by using your new idea or service over another one? Daniel Pink, in his book A Whole New Mind, got this one exactly right - in an age of overabundance, people start looking to satisfy more than just the utility requirement.

So, what's this got to do with profits? Well, there are two schools of thought, but companies that create a meaningful experience can charge more, and generate more profits, than those that view their products and services as utilities. Need proof? Look closely at the costs of food in Whole Foods versus another grocery store. Sure, some of the products at Whole Foods are organic or differentiated, but not all of them are. And even if they are all differentiated, is the utility of the food that different? No. There's a reason we jokingly refer to Whole Foods as Whole Paycheck, and why it's the most profitable grocery chain - they have higher margins for their food, because they create an experience.

The challenge with this proposition is that many innovators are very convinced of the value of their new ideas, but often don't consider the larger question of meaning or experience. Anyone can eventually copy an idea, but it is much more difficult to copy the meaning or experience as well. Truly differentiated ideas - disruptive ideas - will combine utility and experience.