Monday, August 30, 2010

Innovation on "sale"

One of the interesting challenges about innovation is its connection to cost and to value.  All innovation efforts promise value tomorrow, in the form of great new products and services, at the cost of investment today.  Since the return isn't usually a certainty, the executives who sponsor innovation seek uncertain but larger returns in the future based on specific investments today.  The uncertainty around innovation causes many opportunities to be missed.  Wouldn't it be great if ideas were "on sale" or even free?  Then, there would be less resistance to innovation, right?

Not in a million years.  The "cost" of innovation has very little to do with the development of ideas.  As a person who is actively involved in a number of innovation projects, I can tell you that there are always more ideas than can possibly be considered, and often many of them represent good opportunities.  The generation of ideas is not time consuming and isn't expensive.  In fact, I've argued before, ideas are a commodity and are often simply adaptations of concepts from history or from other industries.  In fact, ideas are on sale all the time in an organization that encourages innovation - ideas for the most part are free and readily available.

The challenge isn't in the cost of generating ideas, it's in two factors - overcoming resistance to new ideas and in the difficulty of developing a new idea into a new product or service.  These are the two interesting issues to address, and can tell us a lot about an organization and its priorities.  Let's look at both in turn.

A good friend (Hey Todder!) and innovator has a statement on his wall to the effect that if you have a good ideas you shouldn't worry that other people will steal it.  If it's a really novel idea, you'll typically need to cram it down their throat to get them to accept it.  That's because while we pine away for really interesting new products and services (bring me the next iPod of our business!) we are awfully wedded to the existing products and services in our business.  After all, the processes and teams are optimized to build and provide those existing products and services, and they make some nominal return.  Changing that status quo seems dangerous and difficult, and we usually only make the change when actual threats or disruptions appear.  If you want less expensive innovation, find ways to reduce the cost of resistance to new ideas, either by invalidating a way of doing business internally or simply creating a skunkworks that is entirely removed from the business.  These costs are primarily psychic costs, but often are the most expensive costs and the biggest barriers.

The second issue is an even bigger conundrum.  In what should be a "best practice" - product development and management - many firms simply don't have the capability or bandwidth to create new products and services.  Although by definition they must have created products and services previously - otherwise they wouldn't have any offerings - they seem incapable of creating a new product or service.  It's as if hundreds of years of product development philosophy and training doesn't exist.  The fallacy here is that long product life cycles mean that we can build new products only very occasionally.  Perhaps a new Moore's law is in order.  With a humble heart we'll call it the Phillips' law of diminishing lifecycles.  With global competition, we'll argue that average product lifecycles are halving every four years.  What may have been a seven to ten year lifecycle in 2000 is now at best a two to three year lifecycle.  As lifecycles decrease, the ability to gin up new products consistently and capably is not just a competitive differentiator, it's the difference between success and failure.

If you want less expensive innovation, reduce the psychic costs of change by creating space and the expectation of new ideas and new products, and reduce the actual cost of product development by implementing new product development techniques and hiring the right people.  The bottleneck from an innovation perspective is not in the generation of ideas, but in the development of ideas.  We can "mark down" the costs of innovation by decreasing the costs of idea development.

PS:  I left this post and felt I had to return to it to add this postscript.  Think about this in a completely different way.  Suppose someone came to you and offered you, at no price, several really great ideas for new products or services.  The ideas have been developed based on customer insights and generated by a top notch team.  All that is needed is for your team to adopt them, test them and implement them.  The great ideas in a sense are "free".  Could your team accept the ideas and bring them to market quickly?  If not, what are the barriers that get in the way?  Are those barriers tangible barriers like a lack of people or resources, or are those barriers cultural or psychological barriers like resistance to change or fear of new ideas?  Regardless of the barrier, you'd better find a way to eliminate the barrier and improve your ability to convert new ideas to new products.
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posted by Jeffrey Phillips at 7:31 AM


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