Tuesday, July 01, 2008


I don't know of a good argument for failing to innovate. I suppose there may be one - perhaps a firm has a monopoly on a specific niche and therefore believes that no innovation is necessary. If your firm exists in a competitive space, competes for customers and market share, then innovation is a given. Otherwise your competitors or some new entrant will create a new product, service or business model that is so compelling that you'll be forced to respond, or leave the market.

So, if innovation is important, then we ought to examine what's necessary for good innovation practice. Today I'd like to focus on what I call stimulation - getting people out from behind their desks and interacting with customers, competitive products and services and the wants and needs of the market. Too often, many firms employ armchair quarterbacks - that is, people who want to be innovative but try to do it from their office or cube. These people are understimulated - they don't have a lot of contact with customers or prospects and don't have a good understanding of the market. That's not to say that they can't created a lot of ideas. The ideas these folks generate usually don't solve an important problem or identify a viable new market.

What you'll find is that most good innovators, and innovation firms, have connections to a large array of individuals and other firms, in their own industries and many other industries. Successful innovators are out in the mix, interacting with existing customers and business partners. They are sifting through societal and demographic trends and meeting their potential customers face to face in conferences and focus groups. They are seeing "how it's done" in other geographies or other countries. Here's an example. I was recently asked to speak to an innovation team at a large bank in the US. I asked them how many of them had been in the branch of a competitive bank recently. None had. I asked which firm they considered the most innovative in the banking space. Every answer was about other banks located in the US. I think probably HSBC has been one of the most innovative, yet few bankers in the US have exposure to HSBC. Next, we discussed other firms that might disrupt specific features of the banking industry (funds transfers, high interest rates) that are provided by non-banks such as Paypal and Schwab. Were any of the people in the room actively talking to Paypal or Schwab, to their customers? No.

So in an organization that considers itself fairly innovative, no one was out talking to customers, prospects and potential business partners. Everyone was innovating within their four walls, guessing at what the market wanted or needed, with blinders on about what is actually happening in the market. While a firm can be successful innovating from the "inside out", over time the best innovation happens from the "outside in". Your innovation teams need to get out from behind their desks and get out into the "real world" to understand what people want and need.
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posted by Jeffrey Phillips at 5:39 AM


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