Tuesday, January 29, 2008

Innovation on the Org Chart

Who owns innovation? Where does it "sit" in regards to the organizational structure? This is probably one of the biggest challenges facing firms that are trying to become more innovative.

After all, many teams or business functions within a company can probably rightfully claim to "own" innovation. Any firm with a research and development team can expect that team to stake a claim to innovation. Product management or product development will often stake a claim as well. But what about non-product related innovation? Who is responsible for managing innovation of services, or marketing, or business models? Certainly this type of innovation doesn't "belong" in an R&D group or with product marketing.

This is where innovation and the org chart can get a bit hairy. What does your organization mean when it says "innovation"? Incremental changes to existing products? Disruptive market entry in an entirely new industry? Dramatic changes in its business models or services? Each of these definitions leads to a different consideration of the location of innovation within a business.

Ultimately, what we need to accept is that every part and function of the business should be responsible for innovating. If your product teams are innovating and creating new products, won't that have an effect on your sales and marketing teams and your service and support teams? Should customer services lag because all innovation happens only at the product level?

If you think this can be a conundrum, consider for a second firms that deliver a products or services that span several business units or functions - banking or insurance for example. While the consumer does not give a second thought to his or her banking services, each key service (mortgage, checking, savings, etc) is managed as a stovepipe business unit. So when one team innovates, but the others don't, it creates a difference in the way the services are delivered. Eventually all of these business functions need to learn to work together more effectively, and innovate for the needs of the customer rather than for their own discrete needs. Where does innovation sit in a firm that must combine its products and services to present a unified offering for a customer?

There's not one clear answer - we've seen a few models that demonstrate the experiments that firms will try out. The first is a highly centralized model, with one central team responsible for capturing and managing ideas, although those ideas will be generated and implemented in a product team or business unit. Then, there's the opposite approach - very distributed and hands off innovation happening in each business unit with little corporate or centralized direction. Finally, there's a hybrid, a central team that helps manage and provide consistent approaches to innovation happening throughout the business.

Most firms start with a highly distributed model, not on purpose but because the teams need to perform innovation and its easier to start within one group. Then, as management teams recognize the value of innovation and the distributed nature of innovation within their businesses, a central team is formed. Central teams are very valuable under these conditions:
  1. There are a large number of business units or product groups and there's a need for central oversight of innovation efforts
  2. The innovations are unusually disruptive or demand more investment and/or longer time frames that the business units or product groups can support
  3. The offering to the consumer or customer combines products and services from several business units or product/service groups and must be adequately rationalized and integrated
  4. Innovation is tied closely to the corporate strategy
There's not a wrong way to organize, but there are benefits to developing a central team to ensure consistent methodology, language and culture and the use of consistent tools and frameworks. Eventually, most ideas if adopted will be implemented in a specific business unit or product team, so the central team acts as a facilitator, coach and sponsor, usually without implementing the ideas.
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posted by Jeffrey Phillips at 5:36 AM 6 comments

Thursday, January 24, 2008

Innovation Motivation

In what may seem like yet another glaring inconsistency where innovation is concerned, probably one of the most significant barriers to innovation is personal motivation. Now, you may say - "Everybody wants to create new stuff - what's not to like?" While innovation sounds great as a slogan, when put into practice it can be very difficult to implement.

The challenge is that while management teams sponsor innovation and innovation initiatives, they often forget to change how people are evaluated or compensated. So, when the teams are called on to generate ideas or manage ideas, they are initially very excited. After all, who doesn't want to generate and manage new ideas? But then the reality sets in.

There's no incentive model, no section of their evaluation form, no compensation that aligns to the innovation work, yet the innovation work requires significant time away from regular tasks. So, the question becomes - where should I spend my time? I want to work on innovation, but my supervisor doesn't want me to spend my time outside of my regular duties. If I do get called into an innovation program, can I afford to spend time on that program and keep my regular duties up to date? What happens if I participate and fail? How will my work be compensated and evaluated.

Ultimately, people do what they are motivated and compensated to do. If we don't impact everyone's motivation, compensation and evaluation metrics to encourage participation in innovation, then we'll end up with a lot of folks who are excited about innovation possibilities but can't commit any time since they aren't compensated or rewarded on an innovation basis. This leads to frustration and a sense that the management team isn't serious about innovation.

If you don't change how people are compensated and evaluated, yet expect them to participate in innovation initiatives, you'll find a few people who are interested will show up, regardless of the cost to them, and the remainder are very half-hearted or simply cannot commit the time and resources necessary to make innovation work.
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posted by Jeffrey Phillips at 9:04 AM 6 comments

Wednesday, January 23, 2008

Innovation Goals

I read an article by the Heath brothers in the latest issue of Fast Company that really resonated with me. Their article was about setting resolutions, versus setting goals.

Many firms will get religion about innovation and will create some new initiatives or programs about innovation. They'll print up the appropriate placards and table tents and perhaps order those inspirational posters to hang on the walls. But when it comes down to brass tacks, many are unwilling or unable to define and communicate the goals of the initiative. This is similar to my yearly quest to lose weigh.

Each year, January 1st, I decide that I need to lose weight. So I'll create a resolution to decide to lose some weight. In the Fast Company article, the Heath brothers note that when Congress decides to change something, they write a law. When they are upset about something but can't agree or don't know what to do, they write a resolution, which is not binding.

Here's the problem. People in corporate america are really good at understanding the difference between platitudes and expected results. When another initiative comes down the pike, whether it's employee engagement or innovation or be nice to your neighbor day, they investigate to understand a couple of key points.

First, how broadly is this communicated? The more consistently and completely communicated the program is, the more likely the program is to be implemented and to have meaning.

Second, are there specific timeframes and goals for outcomes and actions. While I am all for being nice to my neighbors, it's probably likely that there are few specifically defined actions or outcomes. For innovation to succeed, we need not only the communications, but clearly defined outcomes and goals. The firms that demonstrate continuous success with innovation set very clear and consistently communicated goals - 20% of our revenue will come from products created in the last 3 years.

Third, are there resources committed to this initiative to help it succeed? Again, a platitude or an initiative without any funding or goals will be viewed very skeptically by the employee base, for good reason. This is a case of management jawboning - talking up a program without commitment or measurement. What investment is the organization willing to make in order to turn those innovation resolutions into real action that can be demonstrated and measured?

Is your management team writing a resolution about innovation, or does it have serious innovation goals that can be achieved, demonstrated and reported? Are they bound to the goal in a way that requires action, or will the innovation resolution fall by the wayside, like many new year's resolutions, at the first encounter with another strategy?
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posted by Jeffrey Phillips at 12:00 PM 4 comments

Thursday, January 17, 2008

Risk and Control

What would you say if I told you that there are people going to work every day missing great opportunities to create something new? Or how about an opportunity to do something cool where there's no risk and you have total control? Would you be interested in that?

Well, every time you are in a brainstorm you have an opportunity to do something neat - to help solve a problem or create something new. If the brainstorm is conducted appropriately, you should have NO RISK and TOTAL CONTROL as well. What more could you ask for?

A good ideation or brainstorming session is driven by setting great expectations, using a good facilitator, and getting the message through our thick skulls that we, the participants, are responsible for the results. Recently I sat in on a brainstorming session as an observer. One of the participants noted at the end of the event that while the brainstorming had been interesting, he didn't feel like any new ideas had surfaced. At that point I was very disappointed - mostly for him.

What he must not have realized is that one of the few places that you should be able to have no risk, and all control, is a brainstorm. After all, we want to encourage exceptionally broad thinking and foster wild ideas. Many of the ideas we generate won't progress, but may create new ideas or merge together to create something that has exceptional power. If you aren't willing to take the risk of creating or submitting a wild idea, and are unwilling to grab the control that is offered in a brainstorm, then don't be surprised if you are less than satisfied with the results.

Yes, I know that it is hard to accept that there's no risk. Everyone has some fear of looking foolish in any meeting. However, in a well-run brainstorm we need to learn to put aside what we KNOW and create what could be. This may require suspending belief in many things we hold dear, but until we take that control, we cannot push for the great ideas that exist just out of our reach.

An example: In his book Think Better, Tim Hurson relates a story of a team that was brainstorming new ways to package glassware. The packaging team had been using newspaper to package the glassware, and noticed breakages had increased. Upon observation they learned that the packers were reading the newspaper, which distracted them. The team decided to brainstorm new packaging options. One wild idea, thrown out in the heat of the moment, suggested poking the eyes out of the packers. Clearly not a suggestion that was going to happen. But it lead to the idea that perhaps the team could employ people whose eyesight was very limited or who were blind. Since these folks tend to have higher tactile sense, they actually reduced the breakages anyway. The idea was implemented and the costs fell. Here's a team that understood there was no RISK to creating wild ideas and took control of the brainstorm to create something really new.

When your team brainstorms, do they do so in an atmosphere of no risk? If there is a risk to participating, you've limited your team's ability to brainstorm. They will provide some safe ideas and call it a day. They will not take control of the session and provide all the ideas they are capable of, and will not take ownership of the results.
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posted by Jeffrey Phillips at 2:33 PM 4 comments

Tuesday, January 15, 2008

We've tried this before

When we work with clients we often hear several concerns about ideas that are generated. Most of them express concern about the fact that many ideas that are generated have been presented before and there was no tangible result. The unspoken complaint is that there's little use to generate ideas since it's not clear anything will happen.

There are many logical outcomes when ideas are generated, but two that are very common are that ideas are generated and they fail to achieve a viable outcome, so they are quickly discarded, or ideas are generated and no further action takes place, so idea generation is no leading to further action.

In the first case, the failure of an idea ("We tried this once and it didn't work") is really not a viable argument. We call this the Edison condition. Can you imagine what could have happened if Edison had decided after the first twenty or thirty attempts at creating an incandescent filament failed to quit trying? Clearly, the ideas that Edison and his team were generating weren't working. Edison is famous for finding 1800 ways not to create a lightbulb. Yet, he refused to give in to an idea that failed. Instead he continued to generate ideas. When an idea fails, all that the failure means is that the idea was "wrong" for the time, or opportunity, or conditions, or channel. It is possible the same idea can be applied successfully somewhere else. If your team adopts and accepts the thinking that failure indicates a dead end for ideas, then you'll create a culture that seeks reasons to shoot down an idea rather than one that looks for possibilities.

In the second case, ideas that are generated but never have any followup actions, this is a signal of process failure. If your team is generating ideas but there's no defined "next action", then you'll encounter a lot of frustration. Ideas that are generated but not followed up are quickly lost, and the teams that participated in the generation come to believe that idea generation is a waste of time, or a farce. This problem can be addressed by defining and creating an innovation process that defines how ideas should be acted on and how they should be evaluated.

If your team is generating ideas and it seems nothing is happening to them, diagnose the problem a little more deeply. Is the failure of an idea too easily accepted, or is there a lack of process to move an idea along on its path to becoming a new product or service?
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posted by Jeffrey Phillips at 8:31 PM 2 comments

Wednesday, January 09, 2008

Tearing Down and Building Up

You know that when one great thinker talks about a subject that you are interested in, you should pay attention. When two great thinkers from two very different schools of thought coincide, then you ought to drop everything and see what they've got to say.

Pablo Picasso is quoted as having said "Every act of creation is first of all an act of destruction". You may remember Picasso as the painter of the melted clocks and an exceptionally influential painter. Another of his quotes that I like a lot is "Bad artists copy. Great artists steal."

On the other hand, Joseph Schumpeter, a renown economist, popularized the concept of "creative destruction" noting that capitalism and innovation consistently overturned the status quo.

What can this tell us about innovation? Well, at least two things.

First, it aligns well to the castles and ships theory. A castle is built for defense, and while it is powerful, it can easily be surrounded and overthrown. When you build a product, a service or a business model, you can attempt to protect it, but the more money you spend building defenses the less you have to spend on creating new products and services. Ultimately playing defense in a creative economy is a losing proposition, due to creative destruction.

Ships, on the other hand, don't have a fixed position. They are meant for flexibility and speed, and are proactive in nature. Most firms want a "castle and ships" strategy - defend the key capabilities and build new ones to open new markets. It's just that with most firms, the castles get all of the money, and the ships become little more than rowboats.

Second, someone will be planning to attack your "castle". It may be an established competitor or the attack may come from someone you don't expect. Did you really expect Apple to be one of the largest music distributors? The point is, innovation is about tearing down and building up. Before someone else does, figure out how to attack or innovate your castles and do something.

There are very few truly new things in the world. Innovation often just makes things more simple, less costly or more interesting. After all, we could still all use feather dusters to clean our houses - but Swiffers are simpler, more easy to use and discard, less expensive and darn it, just more fun. If all innovation is creative destruction, what does that say for your products, your services and your business models? Do you have a plan to destroy your own castles? Someone else does. Are you building and deploying your ships?
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posted by Jeffrey Phillips at 6:57 AM 3 comments

Thursday, January 03, 2008

Bounded Innovation

I initially considered calling this post "bound and determined" but I could not arrive at a reasonable origin for the phrase, so we won't go there. What I am interested in is defining a platform for successful innovation and ideation.

Too often, teams and firms like the "boundless" approach to innovation - that is, we need some NEW IDEAS about something that will help us DO SOMETHING VALUABLE. Often, this is the direction that innovative teams and people receive. Now, there's a benefit to keeping innovation very open - it allows a significant degree of freedom when generating ideas. However, too much freedom means that the ideas can represent virtually anything the participants think is valuable and may not align to the needs or direction of the business.

What we like to see is the definition of a boundary or a given, and the ability to "pivot" from that position while retaining some consistent boundaries or constraints. For example, your team could say that you have the best cheese making capabilities known to man, and want to generate ideas about how you can use your cheese making capabilities to increase production, create new products, offer new services to existing or new clients and potentially disrupt an existing market or create an entirely new market. But all of that is bounded or constrained by the cheese making process and the amount of risk or newness that you plan to inject.

When establishing boundaries or approaches, there are several paths you can follow. The first, and probably most overused, is the inside out technology approach. You may be familiar with this one - it's also referred to as the "hammer looking for a nail" approach. In this approach, you ideate and innovate based on your interesting technology - who needs it and how can it best be delivered?

As we identified above, you can also do this based on a capability, a service or a business model, although the preponderance of the effort is unfortunately placed on technology (read product) innovation. Too little emphasis is placed on understanding how a strong knowledge base or capability can be leveraged to create new products or services or disrupt existing tangential markets.

Another path to follow is to identify unmet or undermet customer needs. If your team can identify markets, industries, verticals or customer segments that have unmet or undermet needs, then you can innovate based on those needs. The question then becomes - how can our firm, with our capabilities, technologies and processes - address those unmet or undermet needs in an innovative way? Don't forget that you can meet those needs with a partner as well.

Another path to take is to project the future and anticipate trends and future markets and future needs. This is probably the least utilized approach since it requires the most research and risk, yet provides probably the best chance for high rewards. If your firm can accurately project the future and begin developing innovative products and services people will want, then you can get quite a leap on the market. In this regard, your bounds are the future wants and needs of a target group of individuals. Then, your task is to determine how, or if, your firm can meet those future wants and needs.

A final path is the disruption of an existing market based on a better mousetrap. Based on the capabilities, technologies, methods and processes, you may discover that your firm has the ability to disrupt a market that it has never competed in before - not just enter the market but radically change how it works. For example, could Apple change how music is distributed? Could Salesforce change how software is purchased and licensed? Too often many firms fail to examine their core strengths and consider how those strengths could be consolidated and provided to a new market.

These paths or approaches I've suggested are just a few ways to "bound" the innovation and ideation and make it more productive. Many firms aren't willing to "bound" or constrain ideation because they are afraid the results will be too timid. However, without a set of bounds that tie closely to strategic direction and intent, most ideation and innovation will be incremental at best, and unfocused and unproductive at worst.
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posted by Jeffrey Phillips at 1:27 PM 4 comments