Under the Microscope

Are you familiar with the Hawthorne effect? That's the added productivity you receive when people are aware that you are watching them closely. The Hawthorne effect has proven to be instrumental in some areas of productivity, but constant oversight of an innovation program is probably the most disruptive and difficult things to overcome.

Think about this for a minute and you'll quickly agree. Your team has been asked to create something new, something really radical and different. Of course it will be different than what the firm does or produces currently, and will take resources away from doing the daily work, which produces revenue. You'll need to question a lot the firm already does, and identify needs or markets the firm has missed or ignored. All the while, of course, reporting back to a team that on one hand would like some really interesting new ideas, and on the other hand doesn't want to rock the boat too much.

So, the classic debate in many of these meetings becomes, one one hand, are we being disruptive enough? And, on the other hand, are we being too disruptive? The team is very conscious of the steering team and the people who will review and evaluate the work, and anticipates the kind of reception their work and ideas will receive. If Boss "A" is likely to reject anything new, then the team is likely to be more conservative and frustrate the members who want more innovative ideas. If Boss "B" is likely to request dramatic innovation, this energizes the deep thinkers but worries the more conservative members of the team.

There's a real catch 22 going on in most innovation teams, a huge cognitive dissonance. They are asked, at least for a while, to step away from everything they know to be true about the firm and think up new ideas, all the while knowing that the product of their efforts will be judged by their existing management team and its expectations. What can you do about this?

When you set up an innovation team, define very carefully the expectations that the entire management team has. This eliminates the concerns that some executives will look favorably on the work while others will be angry or upset about certain outcomes. If you can't achieve that level of psychic harmony, place all the work under one manager who has the charter to do what's necessary to innovate. Then, the turf wars may be fought, but they'll be fought and argued away from the team. Next, if your executive team wants disruptive ideas, say so and reward those ideas, and as much as possible stock the team with people who are willing and able to generate those kinds of ideas. Next, tell the team that every idea will receive due consideration based on how it helps achieve the innovation goals that were set forth, whether the idea is "disruptive" or incremental. What? You didn't set clear innovation goals? Well, that's always a problem. It's actually easier for the teams to work when a clear goal (gain 5 points of market share) is introduced. Those goals for the effort frame up the kinds of ideas, products and services that are necessary, and remove a bit of the politics. It's much easier to argue for a radical innovation when that's the only way to achieve the stated goal.

Look, innovation is tough in any circumstance, and every clear thinking member wants to achieve the expectations of his or her management team. Typically, innovation teams are made up of people assigned to a cross functional team and responsible to an innovation leader or manager. This means that the individuals on the team have at least two loyalties - to their "home" manager and to the innovation manager. But since the innovation manager is probably temporary, there needs to be very compelling reasons to do things that might get the participants in trouble with their "home" or permanent managers or executives. We create enough uncertainty around innovation without causing all of these political games. Let's give the teams the space they need to work, so they don't constantly feel like they are under a microscope.

While it seems a minor point, I know from experience that a tremendous amount of effort is expended trying to satisfy these mutually exclusive issues. Rather than spend all their time focused on new ideas, many team members are constantly trying to determine how the idea will be received, or what challenges or issues they'll confront if they support an idea. Whose ox will be gored? If you want a successful, engaged innovation team, give them clear guidelines and goals, and eliminate as much of the politics as possible.

The Innovation "Quick Fix"

Recently we received a call from a potential client. The individuals I spoke with noted a number of significant issues preventing them from innovation effectively. As I recall there were several significant issues: an "engineering" oriented culture, several large customers who demanded exceptionally high quality, few competitors and a complete lack of risk taking in the organization. The good news is that the management team has recognized that what worked in the past will not work in the future. The team has to become more market oriented, and the organization has to learn to identify and satisfy more customers. New competitors are entering the market, so the firm, once very comfortable and slow moving, has to learn to move more quickly, identify customer needs and innovate to create new products and services.

So far, so good. A firm that has recognized the importance of innovation, and how far the firm is from being a "good" innovator. The bad news is that the firm is seeking the proverbial "quick fix".

Rather than change the factors that influence whether or not a firm can innovate successfully, like the expectations people carry around with them, or how people are evaluated and compensated, or identifying some key new market opportunities and seeking out the best ideas, the firm asked for training. The executive team wanted to train five or six people in innovation methods over a couple of days. This training, it seemed, was budgeted and available to be spent, so that training would inform all the work that would be done to make the firm more innovative until the next budgets kicked in in January 2010.

Now, leave aside for a second the challenges that any firm faces when innovating and place yourself in the shoes of the folks who will be trained. What, exactly, are they going to do for the next four months? How can they succeed when everything in the culture is diametrically opposed to what they might learn? How can they enact any changes with no budgets, no clear goals and little management commitment? Why exercise this training budget simply because it exists to be spent?

Don't get me wrong, I am fully on board with training to improve innovation skills. We offer a program of innovation training, and that's why we had been called in. However, I can see a difficult proposition when I see one, and we suggested that this approach didn't make sense.

Leaving aside the matter of training, innovation requires bold leadership. Is it wise to take a number of people steeped in a culture that the firm admits will struggle to innovate and train them for a couple of days in innovation techniques but then not exercise any of the training? Can we even find a person who could define and manage an innovation program within the ranks of the people inside the organization? If we could find a person to lead an innovation effort, would he or she get any management help or funding? Probably not this year.

Everyone wants innovation, and everyone wants it to be easy, and fast, and painless. Yet they freely admit that their organization will struggle to innovate and that there are many competing interests and goals. Good innovators understand that innovation is driven by the culture of the organization, the expectation of the people and the leaders and that it is interesting, but hard work to do it well. There are no quick fixes for innovation, and if there's a significant amount of "low hanging" fruit in your organization, then your managers aren't doing their jobs.

There's no better time than the present to understand this and decide to take on the change necessary to become better at innovation. Every firm is rethinking its strategy and its capabilities in this downturn. Any reasonable firm knows that changes are in store for almost every firm in every industry. If change is necessary, and innovation requires change, let's do it now, and bite the bullet when we have to change anyway. There are no quick fixes or cheap solutions, but there are examples throughout every industry of firms that are innovating and reaping the benefits.

What can we do with Tags?

A good friend, Stewart McKie, has introduced me to "tagging" and I'm interested in exploring this further. You can see some of what Stewart is working on at www.vizitag.com, and I'm embedding a tag I created for my book Make us more Innovative inline above. If you have the appropriate readers it will take you to a website that features my book.

What I'm interested in are your thoughts - what can we do to innovate using these kinds of tags? For example, I could see placing a tag on a business card or marketing collateral, so a user could quickly link to content online. Or, I could see placing a tag on printed materials (newspapers, magazines) so you can learn more or go to specific purchase sites to buy what you've seen.

With an appropriately managed "back end" people with chronic illnesses could wear tags or even have tattos that would be readable by any cell phone so that individuals could offer assistance.

The real benefit of these tags seems to be linking detailed information using mobile devices very quickly and easily. It's effective especially since I don't have to recall a specific company name or web address. Just point and shoot.

What ideas do you have about using tags in an innovation context? What existing products or services could we disrupt using this technology?

Event or Condition Based innovation

I see in the blogs and tweets and other data streams a lot of discussion about whether or not a firm should increase or decrease innovation spending during an economic downturn. This seems reasonable on the surface, but if you think carefully about the question at hand it seems more like asking whether water and air are more important to humans on Mondays or Fridays.

Let's define a set of stipulations. First, innovation is important for new products and services. Second, new products and services attract new customers and retain existing customers, and the absence of new products and services often results in the loss of customers and revenue. Third, the driving factor for most firms is an increasing share price, which is typically driven by increasing revenue streams.

You can choose to accept that simple sequence of stipulations or not - your choice. I suppose you could argue that during an economic downturn, revenue is going to fall since customers will buy less. But then the argument should be that when customers spend, they want the absolute best for their money. Given a tradeoff between a new, innovative product or service and a tired, traditional product or service when spending is limited - most people still want the product that delivers more "bang" for the buck. Or I suppose you could argue that people will just stop spending all together so there's no need for new products and services. I've been to the malls and shopping centers, and there are clearly fewer shoppers - but last I looked the GDP is still at 95% or so of what it was a few years ago, so there's a lot of spending still going on. Or perhaps you could argue that you'll simply "wait it out" and start innovating again when the economy improves. As we've discussed before, the time it takes most firms to gin up an innovation program will mean that you'll be at best late to anything you do, and at worst an also-ran.

If innovation is important, should we treat it like tap water, than can be turned on and off when circumstances, economic dips and swings and other events force us to re-evaluate our business? Does your firm stop purchasing raw materials, or stop paying employees in a downturn? These are "lifeblood" issues, right? Well, if you stop innovating in a downturn, what does it say about the importance of innovation to your business? Not a "lifeblood" activity?

If innovation is predicated on the economic cycle, then when is the appropriate time for innovation? Clearly many people believe we shouldn't innovate when the markets and economy are 'down', and one could argue that innovation isn't all that critical when the markets and economies are "up" because there's a lot of product out there for money to chase. We certainly will run into obstacles spending money on innovation when the market is deteriorating, as people will want to "reach the bottom" before investing. So that leaves us timing the market on the way up, and possibly innovating while the market is hot. In other words, many people believe in innovating much like momentum investors.

There are a couple of problems with that. First is calling the market. Is your team smart enough to call the market bottom and top correctly? Second is cultural and inertia. If you stop, then try to start again, the corporate inertia will drag you down. The third is speed. Even if you can get started, can you get up to speed quickly enough? The fourth is a pipeline problem. Most firms take several months to generate and shape a good idea, and anywhere from 4 to 18 months to develop, commercialize and launch. That means if your pipeline is bare, you may be in the next downturn by the time your ideas get through the pipeline. Finally, the start and stop model sends a signal to your people that your team isn't seriously committed, so they'll be very hesitant to commit to an innovation program the next time around.

Until innovation becomes a core capability that is active through thick and thin, it isn't a capability at all.

Today's disruptions are tomorrow's incrementals

We hear a lot about disruptive innovation. Every firm we talk to has some interest in disruptive innovation - either to prevent some other firm from disrupting their market, or to disrupt another market.

Disruption has been held up as the nirvana for ultimate innovators - kind of the Olympics of innovation sport, and rightly so. Any real disruption in a product, or service, market or industry can radically remake opportunities and reshuffle the competitive deck. However, a really disruptive idea or opportunity faces two significant challenges.

First, by its very nature, a disruption is dangerous. Dynamite, used in the right hands, can be a powerful tool, but in the wrong hands can be dangerous or even deadly. That's why it is regulated. A disruptive idea can be advantageous if applied correctly, but can backfire or cannibalize your existing market. For these reasons, disruptions are usually managed very carefully. Which leads us to the second challenge:

Time. Any disruptive activity or idea will take time to vet, build and deploy. The more disruptive the idea, in general the longer to deploy, since your organization doesn't have the people or processes to build or deploy a truly disruptive idea. So, incremental ideas can be deployed relatively quickly with less risk, while disruptive ideas will almost always take much longer to deploy.

So that leaves us with this conundrum: what seems like a really disruptive idea RIGHT NOW may seem very incremental when it is finally launched as a new product or service, given the fact that many times the product or service development lifecycle can be rather long. If you could commercialize that really disruptive idea today, it would be disruptive. If it takes nine to eighteen months to commercialize, by then other products or services may be addressing the opportunity or need you spotted.

The implication? If you want to launch disruptive innovations, learn to do it quickly, outside the normal development life cycle, or make sure the ideas are exceptionally disruptive, since the time lag from concept to product or service may be long enough that others address the opportunity before you do.

What we know too well

In countless innovation projects, we've queried the management team about the state of research. What we're interested in is what the firm "knows" about its customers, its market and its opportunities. Typically we are quickly reassured that the firm has a significant amount of research, and it will be made available. What we usually find is that most research is focused on very specific product or service markets or niches, and on very short term opportunities. Most firms lack overall strategic insight, and most are heavily, if not exclusively weighted to quantitative research.

Now, there's nothing wrong with quantitative research, especially from a customer satisfaction perspective. After all, most firms want to be able to quantify their results and measure how well a particular service offering meets the needs of customers and satisfies their expectations. The problem in most firms is that "research" becomes obsessed with quantifying results of existing products and services. Ask any research team how happy the left-handed, red-haired baseball fans in the southeast like their existing product line, and you'll get an answer to three significant digits. Ask most research teams what these folks want next, or would consider a compelling innovation, and there's rarely a good answer or insight.

That's because most quantitative research (and, therein, most research conducted in major corporations) is focused on the existing products and services, and existing customers or strong prospects. This means we are experts at knowing what our existing customers are happy with or how satisfied they are with what we already offer. As noted above, from a customer satisfaction standpoint, that's great. From an innovation point of view, it's really not relevant.

Granted, it's hard to ask questions about what new products and services people want - most people can't tell you that on the fly. Often a new product or service must be experienced before customers can tell whether or not it will be valuable. But some insight about unmet needs or undiscovered opportunities should be conducted. Far too often we are asked to create new products and services that will "disrupt" a market, but with little direction and no sense of what customers want or need. Where most corporate research is focused, we know all too well what we know (quantitative, satisfaction oriented data) and far too little about what is important from an innovation perspective (qualitative, aspirational, unmet needs).

Further, we are quick to apply quantitative methods, which are internal strengths, to new ideas. Can we justify the new ideas using existing survey and research tools? Well, we definitely have the methodologies, but we may be asking the right questions in the wrong ways. As noted above, most people can't dream up new products and services on the fly, and even when presented with a new concept many people may find it hard to understand, or reject it simply because it represents change. It is dangerous to test new ideas using many quantitative tools, simply due to the fact that a new idea, regardless of its worth, is often rejected. After all, as Henry Ford said, if I'd asked my customers what they wanted, they'd have said a 'faster horse'.

So, there are two traps when thinking about innovation and the role that research can play. First, we have a preponderance of narrowly focused research in most firms that tells us how satisfied existing customers are with existing products, but little to tell us what new products these customers want, or what would attract new customers. Second, our reliance on this existing strength often leads us to validate new ideas using tools and methods that we understand, but might not be the right "validation" methods for new ideas.

What we know too well is not enough when it comes to innovation, and what we know too well may actually trip us up when it comes to validating new ideas. New thinking is important when it comes to generating new ideas, and when it comes to validating them as well.

The burning platform for innovation

Given all the bad news in the economy and the natural inclination to pull in the forces and cut costs, most businesses are having a difficult time doing anything from an innovation perspective right now. There are simply too many other factors in the marketplace that are commanding attention - the financial industry crisis, the possibility of changes in healthcare, the economic slowdown, cap and trade legislation, and the fact that things generally slow down in the summer anyway. All of these factors and more combine to put innovation on the back burner even at the most innovative of companies.

So, if your team wants to get something started, and you are fighting all of these factors in order to get time and attention, what can you do to get started? Create a burning platform for results.

This concept is really stolen from sales. A good salesperson knows that even if a prospect has money, and the solution is a good one for the buyer and the solution meets the needs of the buyer, the buyer often won't purchase unless there is another factor that makes the purchase URGENT. After all, people don't jump off of perfectly good platforms until they absolutely have to. That's why a burning platform is so important.

How do you create a burning platform from an innovation perspective? I'm glad you asked. There are a couple of approaches you can take. Note that none of these will necessarily create a innovation program or capability, but they will allow you to get something started, and perhaps that will light the flame for innovation in your business.

Create an innovation contest
Within your organization, identify one or two important opportunities or challenges and ask people to submit ideas to solve these challenges or opportunities. In this environment, certain challenges may be more acceptable than others. Those focused on cutting costs, or doing more with less. Be sure to appoint one or several winners and provide an award. With this approach, you've introduced the concept of a "campaign" and demonstrated the value of gathering ideas from the workforce. You can also extend this opportunity to customers as well.

Conduct a scenario planning workshop
Yes, I know, everybody is very busy, but even the most busy individuals need to get a grip on what the market looks like one, two or three years out. A short, focused workshop that looks at trends and competitors in the marketplace, and possible changes may identify new opportunities. Given the tremendous amount of change that may occur (health care, cap and trade, financial re-regulation) it makes sense to try to create alternative scenarios and get ahead of the change, rather than simply waiting for it to happen and then react to it. By then it will be too late.

Put a stake in the ground
This one is a little easier if you are the CEO or head up a line of business, but sometimes a deadline is worth more than anything else. Simply demanding an innovative new product or service nine months from today will force people to think differently and get started right now. While there are significant pressures on most businesses, there are also a significant amount of under-utilized and unemployed talent in the marketplace which can be directed to work on your new ideas.

Run a brainstorming session
This slowdown won't last forever, and as the economy turns more positive there will be people who want new products and services. Running a brainstorm or idea generation process now, in anticipation of the economy getting stronger, will provide you with the new product and service ideas that you can release then. Generating ideas and slowly developing them over time is much more effective in the long run than trying to do something quickly (see above), but either of these approaches can work, depending on the organization and the situation.

Identify important emerging needs
As the economy changes, and as legislation changes, there will be opportunities for new products and services. By the end of 2009 it is likely we'll see changes in how health care is delivered, financial re-regulation and an upswing in the economy. What opportunities do these factors create, and what existing products and services do they destroy? Knowing that, or at least having these insights will position you to take advantage as the opportunities unfold. Who is tracking trends in your organization?

These are a few ideas for getting a small innovation activity off the ground in this economy. At the worst, you could apply innovation skills and tools to cost cutting or operational excellence. But in that regard, rather than trying to save a few dollars or few minutes in a transaction or process, seek to find ways to eliminate the transaction or the process all together.

Innovation, more than any other function, needs a burning platform to kickstart it in most organizations. How can you create a burning platform in this economy?