Monday, November 15, 2010

Innovation: Doing the impossible with no resources

During this most recent downturn, but similarly to other downturns, at least while I've been in the workforce, is the concept of "doing more with less" - that is, wringing more output or benefits out of the same, or often even less, inputs and resources.  This idea hasn't become a slogan, but a working reality for many businesses.

That's the nature of the beast - it's far easier to cut resources and costs to sustain a certain level of performance than it is to "invest" in new people or new products in the hope of increased revenues, especially as the economy has people pulling in their spending.  For good or for ill, the new management mantra is "do more with less".

In light of that admonition we need to understand how to get innovation done.  US businesses can't continue to cut, and cut, and cut, people, ideas and capabilities without doing long term damage to competitiveness and innovation.  The economy will bottom out, will turn around and the firms that are investing - to whatever degree possible - in innovation will be the ones best positioned to take advantage of the upturn in the economy.  As I've written before, there is no "good time" for innovation.  When times are bad it's easy to argue that the additional investment isn't worth the cost.  When times are good innovation risks distracting the team from its core purpose or takes dollars and resources away from the money making products and services.  Frankly, it's easy to make the argument that innovation costs too much or distracts too much in almost any market condition.  Yet firms that fail to innovate will fail to survive.

So the question becomes, in an era of "more from less" when it is easy to dismiss innovation investments, how can innovation get done, since the alternative to no innovation is obsolescence.  This gets us to the title of the post:  in this economy, regular operations is doing more with less.  Innovation takes that a step further to doing the impossible with nothing.

So then the question becomes - can we "do" innovation with little cost that has a big impact?  Let's assume for a minute that you can create really viable, really interesting ideas that will have a significant impact on your business.  Now, what's the investment necessary to 1) identify the idea 2) manage it effectively and 3) bring it to market.

Let's deal with a few "truths" rather than myths.  First, innovation does not have to cost a lot of money.  For a recent client we led an innovation program, which included third party research and ethnography and had two full time and one part time innovation consultant on the team, combined with seven client team members.  We generated hundreds of ideas that were managed, evaluated and prototyped.  We arrived at ten practical, game changing ideas and implemented three of them.  The total outlay for the client in "hard dollars" - that is, not counting their resources costs, was about $350,000.  If any one of the three ideas selected and implemented does anything close to our expectations, the return will be over $50 million in new revenue.  So innovation can be done rather inexpensively.

Second truth:  Your team can do a lot of the work, if you'll allow them to.  Rather than "outsource" innovation, train your teams and engage your own people rather than teams of consultants and third parties.  Or, use open innovation and work with your clients, partners and others to generate ideas.  It does not need to cost a lot to generate a lot of good ideas, and your teams or your clients and partners can do this work with you and for you.

Third truth:  Your teams should "own" this work.  If you consistently outsource all of your innovation work, it costs more and has less chance of being implemented and accepted.  If you can engage your internal teams and give them the freedom and tools necessary, innovation costs less and is more likely to be implemented and accepted.  You get two wins:  exciting ideas at less cost, and a more engaged workforce.

Fourth truth:  You have to assign the "right" people and give them the best tools and training.  When I say the "right" people I don't mean the most experienced people or the people at the right level of the hierarchy.  I mean the people willing to make change who have great ideas.  Typically they aren't the most senior people.  The most senior people often have the most to protect, and aren't willing to change.  If you can find and assign the right people, then give them the right tools and training.  Don't ask them to do this work without some investment in the right innovation skills.

Fifth truth (and the one that is self-serving):  Find a trustworthy innovation partner who will guide your team and train your team rather than asking them to "go it alone".  An analogy is in order:  when the west was settled, wagon trains left regularly from St. Louis.  While there were clear "wagon trails" and some maps, every team took a guide, who recommended where they should stop, what daily progress they should make, where the "rough patches" were and so forth.  I suppose many people wondered if they needed a guide when they could follow the wagon tracks, and abandoned materials along the way.  Similarly, I'm sure many organizations will argue that they can read a few books and attempt this without a guide.  Many firms I've talked to that tried this approach ended up in logical but predictable dead ends.  I'll argue that it makes sense to acquire a guide, as long as you also intend to learn from him or her along the way.

The question eventually becomes - can we afford to eliminate our investments in innovation and simply rely on cost cutting?  I think most firms will answer in the negative.  If that's the case, what's the best investment we can make for minimal cost that can achieve great innovation outcomes?  From our experience, if you are willing to invest the time of between five and seven people for six to eight months, and hire a guide, your firm can create really valuable innovation without a lot of cash outlay.

Clearly, we believe that every firm should have an innovation budget, just as many have an "R&D" budget.  But in the absence of that, every firm should be investing in innovation.  You can effectively manage your innovation investment and get great returns, but you can't get a return if you don't invest at all.
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posted by Jeffrey Phillips at 6:07 AM


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