Thursday, March 26, 2009

Innovation in a time of plenty

I was listening to a local radio show just recently and the host had as his guest a gentleman who was running a small gourmet food and beverages store. The proprietor was a person who had built and run a small grocery chain, but who had tired of the breadth of depth of a grocery store and who was now focused solely on wine, tea and coffee. To hear him talk about his experiences and the commitment his brokers and buyers have about the coffee, tea and wine they select and choose to sell was to listen to an almost religious experience. He talked about the authenticity of his teas and coffees, and the care that went into getting to know the wine makers whose wine he sold. It struck me then that this is the next iteration of innovation. Innovation around experience, product relevance and authenticity.

I was struck, thinking about the discussion at a later date, about how far we've come, at least in the US, from where even our grandparents were in relation to food. My grandmother lived through the Great Depression, and scratched out barely enough food to eat to live. Food choices or considerations about authenticity or how the food was grown was beyond anything they cared about. That was only 80 years ago.

The next evolution, once there was enough food to eat, was in augmenting and improving food. We added supplements and "fortified" the food to make it taste better or provide more nutrients. Then, once we had extended the existing food, we sought out new food types. Suddenly Thai food, Sushi and other foods that had been extravagances became mainstream. Then we innovated with existing foods, creating new "fusions" of food - mixing different cuisines. Now that we've run that gamut, and we have in most cases enough food to worry about obesity rather than scarcity, and enough selection that a trip down a grocery store can literally flummox most shoppers, we are now innovating and differentiating around authenticity, the "roots" and history of the product and the intent of the product.

Using food innovations as a metaphor for innovation more generally, we can easily see that the next wave of innovation is not product innovation, or service innovation, or even business model innovation, although business model innovation still has a lot of legs. No, the next iteration of innovation is in customer experience and authenticity. People want their products and services to have "meaning" and to understand the origin, history, purpose and intent of the product or service. They want to buy from firms that have a purpose, not nameless, faceless organizations. They want innovation that ties them back to genuine issues and creates meaning in the acquisition, use and ownership of the product or service. As conspicuous consumption falls, meaningful, purposeful acquistion will arise. We may have less things, but those things will need to have purpose and meaning - will need to provide a worthwhile experience for the consumer. It's not enough to have the lowest priced product, or the highest priced brand for that matter. Your product must have an authentic story, and create an experience that ties the customer to something that's meaningful. See the next wave of innovation about to unfold - the innovation of authenticity, purpose and meaning.
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posted by Jeffrey Phillips at 5:07 AM 2 comments

Monday, March 23, 2009

The idea spectrum

One of the most difficult and troubling aspects of innovation is the lack of clear, concise definitions. One man's "incremental" innovation is another's disruption. One team's ideation is another's brainstorming. Given that there are many tools and methods, and no overriding agreed standard, it can be confusing when talking to clients, prospects or even team members about innovation.

Take, for example, the word "idea". Generally speaking, everyone understands that an idea is something that is not fully formed, and represents something new. However, an idea can represent a very simple change to an existing product or service (the "next turn of the screw" so to speak) or could represent some radically different, disruptive concept. An idea can also represent a range of opportunities or spaces instead of discrete, tactical products or services. So, when someone suggests that it is time to generate some ideas, a little definition is in order. What kinds of ideas (incremental or disruptive, or both) over what time frame, with what outcome or intent?

There are four time horizons worth discussing. The first is the easiest - what does our next iteration of an existing product or service look like? Usually this means a timeline of no more than 18 months. The second time horizon is the horizon for creating a completely new product. This means at least 2 years and possibly as many as four or five. The third time horizon is the one in which we contemplate entering a new market or line of business. That's a three to six year time horizon at a minimum. Finally, there's the long term scenario planning or future assessment time horizon, which looks at seven to ten years at a minimum. I can generate ideas that are valid in any of these time horizons. What I need to know is: which time horizon is valid for this particular exercise?

Next, let's talk about the outcome of the idea. Most people think about ideas becoming new physical products. However, there are more opportunities, and more powerful opportunities, in innovation around services, business models, channels and customer experiences. So, it is important early in the discussion of "ideas" to include or exclude what our expectations about the outcome of the ideas. If ideas about new business models are acceptable, then say so - but also understand the impact that has on the time horizon.

Additionally, it is important to describe what impact the ideas should have or what the sponsors of the ideation expect. If the ideas should be incremental in nature, with less risk and greater opportunity for implementation, then say so. If the sponsors are open to more disruptive and risky ideas, then say that. One of the biggest failings of innovation programs is a mismatch between what the sponsor of a brainstorm wants and what is produced. Either the sponsor wants disruptive ideas and gets safe incremental ideas or vice versa. That is the manifestation of poor definition and communication.

Look, doing innovation is difficult enough as it is in this climate or any business climate. Innovation requires risk, uncertainty, failure and a departure from the status quo. If we expect people to get engaged and to deliver useful ideas, then we need to be very clear about what we want - the kinds of ideas. Using specific language and describing the outcomes or types of ideas you expect, you'll be more likely to receive ideas you can use.
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posted by Jeffrey Phillips at 1:59 PM 18 comments

Tuesday, March 17, 2009

Axes of Innovation

No, not axes to chop things down, although in this market it seems like many innovation programs are getting chopped. Axes as in more than one axis, like in geometry. I want to talk today about how we get our innovation axes exactly backwards in most cases.

Think of innovation as bounded by two axes - one axis being the amount of freedom we allow people to have when they generate ideas, and the other being the amount of freedom we provide when considering, managing and commercializing ideas. Although I'll be happy to argue that this is actually a multi-dimensional problem, we'll use this simple x-y thinking for now to illustrate a problem with innovation.

In most firms, there is an unspoken barrier to the kinds and types of ideas that people can generate. Most ideas that are generated are very safe, incremental ideas that don't threaten the status quo, don't disrupt and don't risk very much. Whether this is an imposed barrier or a perceived barrier remains to be seen. So, on the "Y" axis in most firms today there is relatively little freedom for exploration. On the "X" access - how we manage, evaluate and commercialize ideas, there is a great degree of freedom, since few firms have a defined process for innovation and moving ideas into a new product or service development stream. This may seem appropriate, but is in fact a difficulty since every idea and its consideration becomes one of a kind.

In a perfect world, these axes would be bounded very differently. For example, in a very innovative company, the "Y" axis would be unbound. Create any idea of any type that you care to. We, in fact, demand your best, your most disruptive ideas. Anyone generating "safe" incremental ideas will be barely accepted. On the other hand, the "X" axis, which represents how ideas are evaluated and commercialized, would be bound. There would be a defined process for capturing, managing and evaluating ideas, rather than an undefined mess or a free-for-all.

So, in the vast majority of firms, we have exactly the worst configuration of these two axes - bounded ideation and unbounded (really undefined) processes. What would it take to shift to an unbounded ideation and a bounded (defined) process? Investment in the process, consistency and commitment to follow the process and a dramatic reduction in perceived risk of generating disruptive ideas.
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posted by Jeffrey Phillips at 5:41 AM 7 comments

Wednesday, March 11, 2009

Innovation, invention and entrepreneurs

When out working with our clients, we are constantly asked to define the differences between innovation, invention and entrepreneurs. I'll give you the answer we've developed over time, and I hope you'll respond with your own in the comments.

Innovation, to our way of thinking, is about creating ideas and putting them into valuable action. Innovation isn't just creating new ideas. It is also about commercializing those ideas in a way that generates new products or services or business models that others find valuable. In this definition then, invention is a subset of innovation. Inventors create something new, and sometimes find ways to commercialize their inventions, which then makes them innovators as well.

Entrepreneurs are innovators, usually identifying an opportunity and developing a new product or service to bring to market to fill a gap they've identified or to meet an unrecognized need. The difference between entrepreneurs and innovators in larger organizations is that entrepreneurs have one big idea, and they put their entire investment behind that one idea. There are no other options, and failure means shutting down the business.

For innovators in larger organizations, innovation is eventually about making the best choices, given a range of ideas and investment opportunities. Even in very large organizations, there is little stomach for new ideas and risk, and often a wide range of ideas for new products and services. Innovators in larger organizations need to be able to select the ideas that have the greatest promise and commercialize those ideas, so the innovation process within larger organizations relies as much on a strong vetting and evaluation process as anything else. Innovation in many larger firms is a resource allocation issue - which ideas to fund, while in very small firms innovation is a "bet the ranch" issue - all eggs in that basket.

What's interesting to me, and will need to be the subject of another post, is the fact that within larger firms we have a "portfolio" of products and services - new products, old products, products for this niche or that niche. We understand product roadmaps and the tradeoffs necessary when developing new products. However, we rarely if ever understand our portfolio or pipeline of ideas and how they would "map" to a portfolio, even though as we've noted previously innovation is primarily a selection issue. But we'll leave a portfolio discussion for another post.

If innovation is primarily a resource allocation and selection process in a larger firm, then what's your evaluation and selection process? Does one exist, or do you still use the "squeaky wheel" approach? The absence of a defined selection and allocation process speaks volumes as well, does it not?
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posted by Jeffrey Phillips at 5:28 AM 13 comments

Monday, March 02, 2009

Teach a man to innovate, he'll create value for a lifetime

Sorry, really couldn't help it - I have that "teach a man to fish" thing running in my head. Recently I held a long conversation with a team of innovators within a university who were kicking off a project to make the MBA program more innovative. It was an interesting discussion, because like many others they had plunged headlong into the work, without defining the outcome and goals, or defining how they wanted to work. There's a really interesting subtle challenge to innovation that I tried to clarify with them, and will try to clarify for you.

Few people ever learn "how" to innovate, we are just expected to innovate based on the knowledge and skills we already possess. Teaching a person to innovate often seems difficult or disingenuous. However, until we provide the insights, methods and skills, what we are basically asking people to do is use the same old skills they've had to solve new and different problems. Hopefully that will raise your eyebrows and make you go "hmmm".

Another challenge that always crops up in an innovation program (and did with the MBA program innovation challenge) was that there were few definitions of what "innovation" meant or what the goals and outcomes were meant to be. There was a concern about "constraining" innovation if we set clear objectives or goals. This, in my opinion, is one of those issues that "everybody" knows and is 100% wrong. For true innovation success, you need to - you must - constrain innovation by providing clear goals and expectations of success and scope. Otherwise it is almost impossible to innovate successfully. Here's why.

If you ask someone to solve a problem using tools and methods they understand and are comfortable with, they may not need a lot of problem definition. They can solve a general problem using tools they understand. However, to create something entirely new, risky and disruptive using tools they aren't comfortable with given unclear goals and expectations, you can see why this is very likely to fail. Innovation is usually about creating something new or different (risky and uncertain) using tools and methods that most people have little training on or understanding. So, we've asked people to do new stuff with tools they are at best unfamiliar with. Should we also ask them to create these ideas in the absence of good scope or defined outcomes? If we don't provide clear goals and strategic objectives, we can assume that the team will define those for itself, and they'll fall back on what seems safe and reasonable. So what we'll get if we are lucky is relatively obvious answers and we'll then assume that innovation is ineffective or the tools and methods don't work. WRONG! What failed is the lack of clear objectives and the knowledge of the tools and methods.

Rather than worry about constraining innovation, teach people the tools and methods and define for them the goals and objectives of the exercise. Then they'll be able to generate really interesting and relevant ideas. To get new kinds of thinking to solve new and interesting problems, we need to leverage new tools and methods to think differently. Since the scope of possibilities is so broad, we need to provide scope to constrain that thinking, so the teams can focus their work and become effective.
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posted by Jeffrey Phillips at 6:57 AM 11 comments