Wednesday, May 27, 2009

Pulp Innovation Chapter Nineteen

I was 40 minutes into a 60 minute presentation, and getting the high sign from young Mr. Executive at the back of the room. He was looking for a quick wrap up, but I felt I had the buy-in of the group to pace myself and cover the remaining material effectively. I shot him a frozen rope and he sat down, looking unhappy and glancing around for support from the executives at the conference table.

"As my time is almost up" I said "I'd like to recommend a few actions and some things to think about as you begin to structure your innovation program."

Everyone shifted in their seats. They'd endured the 40 minutes of lecturing about innovation, and were ready for the punch lines. Finally, they were thinking, here comes the actual stuff we need to do.

"First, build an innovation team that can assist the business with consistent innovation methods, idea generation and trend spotting. The team doesn't need to be large - three to five people is fine - but does need to be full time. This team will form the core of your innovation program and act as the keepers of the culture, who can help others in your organization create innovation projects and programs."

At this Thompson interrupted.

"Do you mean one centralized team or do you mean one team per line of business?"

"We think that one central team that is not beholden to a specific line of business is more valuable, since it can offer solutions to any line of business and is freed up from the quarterly demands within a line of business. The central team is really an organization to ensure consistent methods and processes are used, and to offer support to innovation teams in the lines of business."

"Thanks" he said. I think I had just helped him win a point over several of the individuals who were responsible for lines of business within Accipiter, but I didn't care. Innovation should happen in those lines of business but if each group creates its own methods and tools, anarchy will break out.

"Next" I said "you will have to have the right expectations about resources and time frames. Part-time innovators rarely succeed. They will be pulled back into their "day jobs" very quickly. If you are going to build a successful innovation capability, the central team and the individuals who work on innovation throughout the organization need to be committed to that work. Additionally, your team will need to understand the lead times from idea generation to new product or service launch. How long is your average product development cycle here at Accipiter?"

Phillips, who'd been silent throughout the discussion, weighed in. "Anywhere from nine to eighteen months, depending on the product." Other heads nodded in agreement.

"OK" I said. "That is from the time someone agrees to fund a new idea and convert that idea into a product or service?"

More nods all around.

"What's the 'typical' time from idea capture through to the decision to enter product development?"

Silence. I like asking that question because no one really knows. Even in a firm with a well defined innovation program, it can vary from a few weeks to five or six months. No one volunteered an answer.

"Let's assume its three to six months" I said, just to get a number out there. "If those numbers are reasonable, that means that once your teams commit to an innovation project, it's unrealistic to think that you'll have a new product or service in less than a year in the best of situations. As a management team, you have to set the right expectations for an innovation program."

More shifting in seats. Talking about more than a year was anathema to many of the people at the table, who were driven by Wall Street and the 90 day reporting structure.

"Also, you will need to consider how you fund innovation. Many firms try to fund innovation projects through their annual planning process. How successful do you think that is?"

One guy near the front rolled his eyes and shook his head. No volunteers on that one.

"We call an annual planning process an idea killing opportunity, mostly because there are many competing interests for very limited dollars, and most proposals are much more complete than idea proposals typically are at that stage. Think about this for a minute - does your customer or competitor care when you 'fund' projects, or whether or not there are funds available in this calendar year? No, of course not. They release new products according to their marketing plans and timeframes. I've worked with several firms that insisted on integrating innovation with their annual plans, which meant that great new ideas generated in the fourth quarter waited for funding in the summer as part of the following year's annual plan. Does that make sense to you? If not, we advocate an R&D fund for innovation, to move ideas that happen out of sequence with traditional funding models."

At this point the CFO spoke up. "What is the size of the budget you've seen in other organizations for an R&D innovation fund? she asked.

"As you would guess, it varies widely, but we've seen anything from several hundred thousand dollars to several million dollars available, distributed by the head of the innovation team or an innovation council."

She nodded and I continued.

"The last, and most important aspect for success in an innovation project is your behavior. If your team is invested in innovation, all of you will be advocating innovation, talking about innovation with your team, and willing to suffer a few setbacks as well as innovation successes. It's an old, hackneyed phrase, but you've got to walk the talk. You can't be successful asking people to innovate and then pull the rug out from under them at the first failure. There's too much risk and uncertainty involved. If you aren't sure you have the commitment as a management team to innovation, you'll be better off not starting a program that you won't fully back or support."

I wrapped up my presentation with a short conclusion and asked for questions.

One gentleman, near the back, asked "What can we expect as a return for an investment in innovation?" I think he was looking for an ROI or ROE kind of answer. Instead, I gave him this.

"The return will depend on your investment and expectations. You should also think about what kind of return you expect. We've had firms that launched innovation programs because they would create more organizational excitement and engagement, and they measured those programs as successes before the implementation of ideas. You may also want to measure the program based on what it does for your marketing and positioning. If you are actively engaged in innovation, it may impact your differentiation and the awareness of Accipiter in the press. Both of these are less quantifiable results, but valuable nonetheless. If you are asking about specific returns, like an ROI or ROE metric, I can't answer that because I don't know today the kinds of ideas you'll pursue, but I can promise you that it will most likely take at least a year to see any financial results whatsoever."

Probably not the answer he expected, but the one I felt was appropriate.

Young Mr. Executive was flapping his arms in a manner that led me to believe he was learning to fly or extinguishing flames near his seat. He was eager to wrap up and move the meeting on to the next agenda topic, which I believe was cocktails on the veranda of the Excelsior. I asked if there were any more questions. Seeing none, I wrapped up my presentation and packed up my gear.

Briggs approached me as I was finishing my packing.

"Thanks" he said "I think we all learned a lot today. I was especially appreciative of the comments you made about compensation and culture."

"Just part of our standard pitch."

"We have a small token of appreciation for your time. It's a check for $2500. I know it probably doesn't cover your actual costs, but the management team felt it was appropriate."

"Thanks" I said, surprised at the generosity. "I'll look forward to the opportunity to work with you and your team if Accipiter decides to move forward."

"That will be the big question"

I stopped to say thanks to Bill Thompson, who was surrounded by a covey of executives eager to bask in the sunlight of his position and power.

"Mr. Thompson, thanks for having me in today to speak with the management team. If there are any further questions, please feel free to forward them to me."

"Thanks, Sam. We all appreciated your presentation and will be getting in touch shortly to discuss the next steps."

I nodded and left, walking down the long halls to the lobby. The bar, with its dark booths and smooth whiskey beckoned, but I felt it was probably best to clear out of the Excelsior completely, rather than seem to lurk at the edges of the Accipiter meeting. Now the waiting game would begin.
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posted by Jeffrey Phillips at 4:48 AM


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