Monday, December 20, 2010

Four Innovation Predictions for 2011

For those of you who receive our newsletter, these predictions are the same ones we made in our December 2010 edition.  For those who don't know about the newsletter or our yearly predictions about innovation, please read ahead.

Keeping with the publishing traditions that demand that most articles in December relate to a "top ten" list from the year just past or predictions about the near future, each year we boldly stake out several predictions about the future of innovation.  Each year we also recap the predictions we got right, and wrong, from the previous year.  For 2011, we're making the following predictions about innovation:
  1. Ideas come from everywhere - "open" innovation is ubiquitous
  2. Experience is more important than product - the outcomes change from new products to new experiences
  3. Timeframes shorten - while organizations are getting better at generating ideas, the timeframe from idea to commercialization hasn't changed.
  4. Creativity re-enters the workforce.
Let's look at each of these in turn and describe why we think they'll occur and why they matter.

Ideas from Everywhere

In case you haven't been following along, this trend is already underway and will reach its zenith in 2011.  Open innovation - receiving ideas and developing ideas with partners and customers - is already a powerful force in the innovation space, and will become even more so.  Whether "open" innovation means receiving ideas from customers, co-creating, crowdsourcing, technology transfer or any of the many definitions or labels we apply, firms are interested in gaining more ideas from more people.  There are benefits and risks associated with this.  The benefits are that the firm has a much broader portfolio of ideas and sources.  No longer is the firm limited to ideas that can be generated internally.  The risks are that the firm fails to deliver new products based on these new ideas.  There is an inherent contract with your customers and partners - ask us for ideas, fine, but be sure to deliver something new.

One reason that Open Innovation will reach its zenith this year is that many firms will recognize that Open Innovation, for the most part, is about generating ideas.  If the evaluation, selection and product development capabilities aren't improved, receiving more ideas that you can't convert into new products and services isn't important.  In 2011, we'll see even more emphasis on open innovation, and we'll also see a growing recognition that while open innovation is important, it doesn't solve many internal barriers to innovation (see "Tick-Tock" below)

Experience over Product

Traditionally, innovation has been focused on new products.  We typically measure innovation by the investment in R&D or patents generated.  The examples we use are things like the iPod - physical, tangible products.  But innovation can result in a broad range of outcomes - products, services, channels, business models and experiences.  Our prediction is that in 2011, experiences become more important than products.  Here's why:  first, people will continue to purchase cautiously.  They need to know their money is spent wisely.  Therefore, fewer products will be purchased and they'll have more meaning.  The experience around the product purchased will matter more than it did previously.  Second, experience is more difficult to copy or duplicate than product.  There are thousands of MP-3 players, but only one iPod.  That's not because of the technology, but because the experience is truly different.  Third, people will shift from a consumption economy to one where they demand more "meaning" from the products they buy and the firms they buy from.  Look no further than Subaru's campaign to contribute to causes.  In 2011 and beyond, firms that understand that experience is important and start innovating around experiences will be more successful.

Tick-Tock

Many firms have done a good job of improving their ability to generate and manage ideas.  However, they remain stuck with the existing product development processes, which actively hinder commercialization of ideas.  The time from idea to commercial launch is actually increasing in many firms, and there are fewer resources to do the work and many competing priorities.  As competition increases and product life cycles shorten, firms have to do a better job of getting their best ideas to market quickly.

In 2011, many firms will seek ideas to shorten the product or service development lifecycle, to get their best ideas to market faster.  This will mean improving internal processes and capabilities, or partnering with third parties to bring the new products to market, while internal teams manage legacy products.  There is an analogy for this in IT - typically new software is designed and implemented by third party consultants, while the IT team manages legacy applications.  We'd prefer to see both capabilities housed internally, but the coming years may be very good for consulting firms that can speed the commercialization process.

Creativity Revived

As firms and organizations realize they must compete not simply on cutting costs but also on their new ideas, creativity will find a new, welcome role in larger organizations.  I've just heard about new training proposed in a state government to teach government managers and executives to think more creatively.  Can't wait to see that training curriculum, but it's a symptom of a much larger need.  Over the past decade, most businesses have cut and downsized to the point of optimum efficiency and focused "like a laser" on become effective.  Now the need to generate new ideas is paramount, but those people and skills are gone. 

Firms in 2011 will need help creating new ideas, and will do that by training their staff and hiring consultants to help them add more creativity and new ideas.

That's what we believe will happen in 2011.  Please contact us to let us know what you think we got right - and what we missed.

Here's to an innovative 2011.
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posted by Jeffrey Phillips at 8:27 AM

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