Friday, May 28, 2010

Vision and Passion: All you really need for innovation success

As a consultant who works in the innovation space, I've seen lots of innovation initiatives.  Some were successful in spite of themselves, and some were failures even when all the "right" people were involved.  Some rely overmuch on technology, and some succeed using paper and pencil.  Some have plenty of training and process, some purely adhoc.  But the common denominators of all successful innovation projects are two factors:  vision and passion.  Let's explore each of them briefly.

When I say vision, I am using the word to represent several characteristics or components.  To me, vision is understanding the need to create something new, and understanding the emerging opportunities and/or challenges that a team should address.  Vision is also about being able to communicate those facts to others and get them to see the same opportunities as you do.  Often we see innovation projects that have been started because "someone" - usually a senior executive - believes innovation is important.  But no one stopped to consider what the strategy or vision for the innovation effort should be.  Inevitably this means the innovation team spins their wheels, or defines a vision for themselves.  Without a vision to strive towards, the team can't make headway.  A good vision should stretch the organization and take them out of their comfort zone, since you really can't innovate while resting comfortably in your little cocoon.  Frankly, it doesn't really matter "who" has the vision as long as someone is willing to stick their neck out and declare the vision.  In many cases the vision is stated by someone who isn't the initiator of the project, and doesn't have the "right" authority.

When we talk about passion, we are taking about people who are sold-out to solving a problem or creating a new thing.  Their commitment is almost contagious, and seems a bit unsettling to the people who aren't on the team.  After all, if you are going to innovate, you better be a true believer.  Everything in an organization is established to maintain the status quo, and you'll be doing everything you can to upset the status quo.  If you aren't passionate about the idea, you'll fail every time.  It's for this reason that we try to reject anyone who has been "assigned" to an innovation project.  We want volunteers - even if they aren't the "right" people, if they believe in the opportunity and are fully engaged in finding a new or better way, or new or better product or service.  People who are "assigned" to innovation rarely have the passion necessary to fight the battles that are required when implementing radical change.

If you have the vision necessary to be successful, or are willing to define it for your team, and you have a couple of people who are passionate about the idea or solution, you have all the key ingredients to be successful once at innovation.  At OVO we believe that you can create a systemic innovation capability by adding in a consistent, repeatable innovation process and framework, so the people who are passionate don't have to invent an innovation method and process every time.  However, you can have all the innovation tools and techniques on the planet, you can quiz your customers and use "open innovation", you can implement all the idea management software in the world, but if you don't have good vision and high passion for the problem or solution, it will all go for naught.

When "vision" - strategy, strategic intent, scope definition, problem identification, clear communication -  and "passion" - fully sold out people willing to implement change and explore new ideas - meet, they form an irresistible force.  Then the question will be whether or not your culture is an immovable object.
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posted by Jeffrey Phillips at 5:31 AM 2 comments

Wednesday, May 26, 2010

Patents Generated is a poor measure of innovation success

I see that Forbes has ranked Raleigh one of the most innovative cities in the US.  This was based on a couple of factors:

  • Number of technology and science jobs
  • Number of "creative" jobs
  • Number of patents per capita
  • Amount of venture capital invested per capita
I'll not spend my time debating these criteria, although I could easily argue that several of them are not measures of innovation but are outputs and outcomes of successful historical innovation.  In other words, some of these measures are really "rear view mirror" metrics.  They tell us about what happened in the past, but not what's likely to happen in the future.  To a certain extent we are benefiting from the decisions in the 60s and 70s to create Research Triangle Park and the recruitment of IBM and other research oriented firms.

After all, if we were to travel back in time in the heyday of Bausch&Lomb, Corning and Eastman Kodak, I'd be willing to bet that Rochester, New York, to use one example, would have ranked highly using these criteria.  I don't notice Rochester on these lists anymore.

But I digress.  My real beef with these statistics has to do with patents.  Every firm and university sets as one of its innovation goals the number of patents filed each year.  While patents are an interesting measure of ideas that have been documented and protected, and new intellectual property created, they aren't a good measure of innovation for a company, or more importantly a city or geography, for several reasons.  First let's establish a definition for innovation:  people or companies putting new ideas into action that has value for customers.

First, many patents are filed and awarded and absolutely nothing is done with that intellectual property.  This means that a smart bunch of people worked for a significant period of time to define and protect some insight, process or method that their own organization won't commercialize and won't license to someone else, usually because there's not enough commercial appeal.  In this case, while we are "racking up" the patents, we are actually encouraging economic behavior that detracts from adding real value to the corporation.  We'd be better off in the Keynesian model of paying people to dig and fill holes.  At least more people would be employed.  These patents don't add much value to the company or to customers, so it's hard to argue they are driving innovation.

Second, many patents are filed to defend turf or to stake out turf before a competitor can claim it. Thus many patents are defensive in nature, meant to ward off competition and protect a company's investments and assets.  This stifles competition and isn't good for the consumer.  It delays new product or service introductions or inhibits the introduction all together.  These patents aren't adding new value to customers or consumers, and similar to the patents described above can't really be considered innovative.

Third, it's misleading in the extreme to state that Raleigh has a lot of patents generated per capita, since we have three research universities within a twenty mile radius and one of the largest patent generation machines in the world, alternatively known as IBM.  I wonder what our ranking would look like if we subtracted just IBM's contribution to patents from our numbers.  While IBM's presence in Raleigh is a real blessing for jobs and for spin-offs, most if not all of the patents created there don't further Raleigh's innovation capabilities, and don't have direct impact on the local economy.

Fourth, let's consider the research universities where publish or perish is becoming patent or perish.  There is a tremendous amount of great research underway in our local research universities, much of it achieving patents.  Once again, however, those patents aren't getting translated as quickly and as efficiently as possible into new products or services, due to a host of technology transfer issues, revenue recognition issues and so forth.  While NC State, Duke and UNC pile up new patents, these universities and their associated new IP aren't having nearly the effect on Raleigh that Stanford has on Silicon Valley or MIT has on Boston.

If patents received is a poor measure for innovation success, what is a better measure?  How about patents converted into new products or services within X years of the issue of the patent?  Then we eliminate all the patents that weren't going to be commercialized, and all of those defensive patents at the start.  Next we'd also measure how adept the organizations and communities are at translating new IP to new viable products and services, which is really what innovation is all about.  Ask yourself, would you rather have one really compelling idea that you launched in the market that may be difficult to defend, or several patents that you have no intention of commercializing?  As Theodore Roosevelt said, credit belongs to the man who is actually in the arena...
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posted by Jeffrey Phillips at 1:32 PM 5 comments

Don't bring a knife to a gun fight

I've struggled to write this post, because the concepts I want to write about are very important and often not considered in an innovation effort.  I don't want to obfuscate the concepts but also am cautious about overly simplifying as well.  I've used an old, probably hackneyed expression as the title, but what it is meant to convey is the concept of arriving at a future state with the wrong idea, even though that idea seemed promising at the time.

We all (mostly) agree that innovation is creating new ideas and putting them into some action that's valuable for customers or clients.  Whether the innovation is a new product, or a new business model, or new experience, is less important than the fact that the concept meets and fills an important, relevant need that some customer or client experiences. 

The problem is that most of us consider these problems in current day frameworks.  As innovators following a methodology, we do the qualitative research, using ethnography or voice of the customer or needs based innovation to understand the needs of the prospective client base.  Many firms at this point then make a fatal mistake - they project those needs into an uncertain and highly variable future.  We'd all prefer that the future look very much like the present. Ideally it will look very similar to today, only slightly more interesting and we'll all be slightly slimmer.  If you've followed the news in the recent several years, you'd recognize that disruptions and significant changes in our expectations happen all the time.  As one Wall Street reporter once said, the most commonly used word in analyst descriptions of Wall Street results is "surprise".

So, clearly we can't create ideas today that will solve the problem that we notice today.  It will take time to develop an idea, test it and prepare the concept for launch.  So we should develop an idea with some understanding of what the alternative futures may look like.  Will the future two to three years from now look very much like the conditions today?  There are people in Greece, and in Iceland, and in Louisiana that hope very much that the conditions in the near future look very different.  Just a few weeks ago no one predicted the largest oil catastrophe in US history would occur, and now consider all the resources that are being applied to solve that problem.  What if your big idea one year ago was to build a new fishing fleet in Louisiana?  Would you have considered the possibility that while that may have been a good idea, there were possible scenarios that would cause you to consider other alternatives?

My point here is that we don't innovate in a vacuum and time and conditions don't stop to allow our perfectly conceived ideas to become true based on conditions we assumed.  Our ideas meet the market that exists when we launch the idea and must be relevant to those consumers and their needs.  Innovating to address an existing need is clearly relevant - but will that need be as important, and as relevant in two years when you can actually release the new product?  Have you considered the possible futures and how those future market conditions will effect the uptake and relevance of your new innovation?  Given the pace of change, especially in the world financial markets and economies, and the volatility in the market today, any innovator that isn't spending time thinking about the future market and future conditions for their new products and services is likely to create interesting ideas that fail to satisfy the needs that they had forecast, because market conditions changed.

While it is important to understand customer needs, "jobs to be done" and find "Blue Oceans" it is also important to understand the various future scenarios under which those needs are still relevant, and those scenarios where those needs are no longer important.  Only when you marry the needs you discover with the possible future scenarios will you be able to make your best innovation investments.
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posted by Jeffrey Phillips at 7:09 AM 2 comments

Monday, May 24, 2010

Innovation Paradox: Liberated by Constraints

I've been captivated by Roger von Oech's post about innovation and its relationship to paradox.  It seems that almost any factor of innovation can be considered a paradox.  Last time I wrote about the paradox of slowing down to speed up.  This time I'd like to consider being liberated by constraints.

Generally speaking, most teams believe that constraints limit their thinking, and their ability to be creative.  What's interesting is that most people who "do" creativity for a living crave constraints.  Without constraints, every task starts from a blank sheet of paper, a very long and broad sheet of paper, with no clear starting point.  David Ogilvy is quoted as having thanked his clients for a "tight brief" - not underwear, but a clearly defined and tightly controlled set of criteria to achieve.

Innovation teams often believe that working without constraints is the best way to get started, but what they inevitably face is a selection problem.  Which problem or challenge to solve?  Which opportunity to address?  These question keep the team circling, until finally the team establishes its own criteria or an executive does that for them.  Then, with an opportunity or problem identified they begin to generate ideas.  What happens next mirrors what happened earlier - without constraints and guidelines, the team has a difficult time deciding which ideas are the "best", since there are no clear criteria. 

You'll see this happen most often in corporations that lack clearly defined and communicated strategic goals.  When a company tries to be "all things to all people" the people who suffer the most are the innovation teams that need a clear lodestar or well-defined criteria.  Often management teams think they are "empowering" an innovation team by giving them a blank slate.  Usually that is simply a recipe for frustration. 

What happens in with a tight brief, or a well communicated set of criteria, is that the team is then liberated to innovation within those criteria, or to achieve something incredibly new and different within that criteria.  Since we all need a villain to slay or some fixed point to pivot from, having some fixed criteria or goals mean that we can then assume those goals are fixed and find all manner of outrageous ways to satisfy those criteria or goals.  That's when the really interesting ideas start flowing.  Good ideas then lead to a decision making process based on the established criteria or constraints.  This is a two-fer.  You get better idea generation, better engagement and a team that can more easily choose the best ideas, since the constraints were clearly identified.

If you want a team to really excel at idea generation, set a big problem or goal for them, define the strategic opportunities and establish some key constraints.  Then, allow them all the degrees of freedom possible outside of the constraints, and wait for the great ideas to come.
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posted by Jeffrey Phillips at 2:40 PM 4 comments

Friday, May 21, 2010

Innovation Paradox: Slowing down to Speed up

I was watching my Twitter stream recently and saw that Roger von Oech had noted that a lot of creativity and innovation is based on paradoxes.  You can see his original post here, and also note especially the comments to his post where people added other "paradoxes".  I thought this take was interesting, especially in light of the IBM Institute for Business Value Survey that has just been published.  You know it has to be interesting when the title is Capitalizing on Complexity.

In that survey the IBM authors note that the pace of change is increasing ever more rapidly, and the complexity most businesses face is also growing.  The authors suggest that good leaders should embrace the pace of change and the growing complexity by considering three factors in their business:  creative leadership, customer intimacy and operational excellence (my words, not necessarily theirs).  In their discussion about creativity, they basically make the argument that the current thinking and strategy that exists simply can't confront the pace of change and the growing complexity.  The CEOs surveyed suggested that creativity as a leadership skill was going to be required in new leaders. 

As I argued on Wednesday, that puts many organizations behind the proverbial "eight ball" because most executive education is based on conformance, managing within strict guidelines, adherence to rules and playing it relatively safe.  Most organizations discourage divergent thinking or place it in carefully defined silos.  Additionally, few organizations attract and retain truly creative people - most traditional organizations prefer to hire "creative types" from marcom firms, ad agencies or design firms - then send those individuals back to their firms once they've injected the minimally acceptable amount of creativity into an organization.  CEOs are suggesting, conversely, that larger firms, facing complexity and rapid change, need to add creativity to their management skills and distribute creative thinkers throughout their organizations.  These recommendations are probably correct, yet could create whiplash in firms that have just awarded themselves the Gold medal in the Six Sigma non-variability Olympics. 

But, it's probably time to link the two disparate threads of this post together.  We've already identified the dramatic change associated with introducing creativity as a management skill, and the concept of paradoxes for creativity.  What do they have to do with each other?  I think that the best thing most firms can do from a creativity and innovation perspective is to slow down in order to speed up.  There are several factors within this statement to unpack.

First, in most organizations everyone is far too busy.  There are too many meetings and too many decisions and too little time to think and reflect.  We've begun to value people by how "busy" they are and thinking that time is valuable.  Time is not valuable.  Knowledge and insight is valuable.  We need to encourage our most important managers to slow down, think about their products, customers and markets in context, and use some unstructured time to think about new products and services, rather than allow them the rather pathetic excuse that they are simply too busy to think about the future.

Second, it is natural to try to do things more quickly in the face of ever increasing change, but then we join a treadmill directed by some other power - not driven by our pace.  As we try to increase a lethargic organization to match the pace of the market, especially dynamic global markets, we'll quickly recognize that bureaucratic organizations were built with the intention of slowing things down, rather than speeding them up.  Let's use that to our advantage.  Rather than react to the market, let's forecast what we believe the market will do, using trend spotting and scenario planning, and put the power of the organization to work defining the future.  Then we can set the pace of change and work on developing the future products and services at our pace, and using our strengths, rather than trying to maintain the rat race established by someone else.

Third, we need to consider what is "fixed" and what is "fluid".  Traditionally we've assumed that business models are fixed - they exist for a period of time, and then they perish.  The buggy whip manufacturers spring to mind.  What is assumed to change if the business model is fixed is the product or service - we are constantly changing existing products or introducing new ones within a fairly consistent business model.  What if, as the IBM survey suggests, we assume a business model is flexible and should change over time?  What if the business models are adaptable, and products and services are adaptable as well?  What remains "fixed" is the customer value proposition and the firm's strategic intent, while everything else is subject to change.  Suddenly change and the pace of change isn't measured in product lifecycles, which are growing ever shorter, but in business model epochs or eras.  What isn't going to change drastically over any period of time is the customer's need for excellent services and experiences.  If we can "fix" those, then let's construct business models and products that evolve on our timescales, changing as necessary.

Given the fight or flight instinct, it is natural in humans to react to changes in our environment we think are threats or things we can't control.  Perhaps if we change the "paradigm" to assume we can assert a paradigm in which we decide to embrace the threats of speed and complexity rather than fight them, and do so by slowing down, looking further into the future and creating change at a pace acceptable to customers and to ourselves.  After all, customers are just as bewildered and threatened by the complexity and pace of change as we are in business.  Customers don't want change for change sake, they actually want their problems to be solved in ways that are easy to understand and adopt. 

Some firms that grasp that they control more of their future than they think they do, and who are willing to slow down to embrace complexity and change, will be the winners.
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posted by Jeffrey Phillips at 6:54 AM 10 comments

Wednesday, May 19, 2010

Innovation Leadership Characteristic: Creativity

I found it interesting yesterday to see that IBM's Institute for Business Value, a think tank and research organization, has surveyed CEOs of major corporations to try to understand the key characteristics that leaders will need in the near future.  I guess I should be more specific - I didn't think it was interesting that they asked 1500 CEOs about the important attributes and skills necessary for future leaders to possess.  I found it interesting that the number one skill they recommended was "creativity".

This is interesting on so many levels.  Mention creativity in most corporate environments and eyes roll so dramatically you'll be concerned that someone could actually lose one.  An eye that is.  Creativity isn't just scoffed at in most organizations - it isn't even considered a topic of polite conversation.  There are few if any classes on creativity, and very few people outside of perhaps the marketing organization get hired for their creative skills.  Most organizations "rent" creative people from their marcom or ad agency, then sigh a big sigh of relief when those "creative types" in black turtlenecks go back to their colorful offices.

In fact we've spent the last decade or so hunting down and eliminating the creative types - those that "question authority" or visualize whirled peas in larger organizations.  We've glommed onto the Six Sigma mantra, focused on continually improving in a Newtonian fashion to eliminate variances and errors.  God help you if you suggested a creative new idea or change.  No, we've been rewarding people for constantly sticking to the knitting, only in a more efficient way. 

But what's happened is that the future isn't like the past.  As Twain remarked, history doesn't repeat but it does rhyme.  Today is somewhat similar to yesterday, except that the pace of change and complexity are more intense, and will be ever so.  We can't constantly improve the existing processes and methods in the face of changing environments - we have to dream up new methods, new solutions.  And that dreaming up starts with creativity.  Roger Martin, the Dean of the Rotman school, wrote a book entitled the Opposable Mind, which boiled down for the sake of a blog post suggested that good leaders can hold two opposable concepts in their heads and reject an "either/or" decision making process.  Thinking outside the constraints and extending the context of the problem - that's creativity, because that thinking rejects the limited options and finds new solutions.

Interesting to think that a new breed of executives and managers will need to be more creative, and that CEOs already believe that.  There are only a couple of problems:
  1. The word isn't filtering down in their organizational bureaucracies.  Creativity is at best frowned on, so where will they find these creative leaders in their organizations?
  2. There's not a lot of approved training for creativity and little room to exercise creativity in an organization.  How does anyone develop these skills in a larger organization?
  3. The graduate programs many executives attend - MBAs and other executive programs - don't place much emphasis on creativity.  How does this thinking get grounded in a new generation of leaders?
You new generation of leaders, it's time to apply all the creativity you have, and find resources and outlets to learn more creativity, because the markets and challenges you'll face will require far more creative thinking than ever before.
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posted by Jeffrey Phillips at 5:32 AM 7 comments

Tuesday, May 18, 2010

The Fastest Follower is the innovation winner

In our innovation circles, we like to celebrate the pioneers. They are the folks that establish the trail and go where no one has gone before.  We highlight their advancements and hold up their accomplishments.  But what often goes unsaid or unnoticed is that many pioneers die right on the cusp of success.  Who are the ultimate winners?  The Fastest Followers (tm). 

Does this mean we as innovators should abandon the concept of "Blue Oceans" and wait for others to move?  Absolutely not - but it should inform our strategies.  Let's think about one exemplar of innovation - Google, and one pioneer that made the search space possible - Yahoo.  I can remember when Yahoo was the big news.  Yahoo was going to take over the internet and Google was an interesting sideshow.  What Yahoo did was establish that there were OPPORTUNITIES in the web space for search engines and portals.  What Yahoo also did was to carve out a business model based on a model of growing and capturing more and more content - even creating its own content.  The argument at Yahoo was that content was a winner.  But what wasn't clear was the business model.

Google quickly followed and staked out a search engine strategy based on advertising, not content. Since Yahoo went first and established the search engine market viability, Google didn't have to argue about whether or not the "Blue Ocean" existed.  It had been established.  Now the question was:  what was the right operating model and scale?  Google might not have become the innovative giant and money making machine without the pioneer, Yahoo, which has struggled to find its way ever since. 

Note that there were others who followed the pioneer - Ask, Bing, etc, but in any markets or opportunities it is typically the competent Fastest Follower who wins. 

What does it take to be the Fastest Follower?  A lot of the skill resides in what unsurprisingly looks like innovation.  First, you have to spot trends, understand them and react to them.  Sergey and the boys could have looked at Yahoo and said, well, they've locked up the market.  Or they could have said, there's no market there at all.  But what they did was watch the trend line of the growth in the web and recognized an opportunity, and moved quickly to exploit that opportunity.

Second, have a different idea.  They weren't the first, so they didn't have to explain the market or establish its viability.  Instead, they had to have a more compelling idea than the pioneer.  Often the pioneer is so exhausted from establishing that a market exists and has been so close to the market for so long that they don't understand the signals from the market they helped create and validate. 

Third, experiment and learn faster than the other guys.  Ask and a number of other search engines existed and were launched a roughly the same time.  Any one, or any several of them could have grown quickly like Google and could have contended with Google.  There's no law that says we should have only one significant search engine.  After all Google is a distant second in China.  Google experimented to understand the best search engine technology, the best way to monetize the solution, and the best ways to extend the "find and share" model.  At one point they were creating new "beta" products at such a clip that people would line up to tryout new Google products that weren't commercial and might never be.  Yahoo and others took a more traditional enterprise model development strategy and missed a lot of the excitement of the creation.

We all talk about the strategic goals of new entrant, fast follower and late follower, as if any "Fast follower" is equivalent.  They aren't.  While we innovation purists want all of our customers to crack open the new Blue Oceans and enter new disruptive markets and create products that meet unarticulated needs, many times the most successful innovators are those who have clearly attuned antennae for market trends and signals, who understand the markets a pioneer opens are more rich and robust than the pioneer does, and who can rapidly create and test business models and co-create with the customers in that market. 

Eventually, most businesses would like to be fast followers, but in reality most want to enter safe, proven markets and battle over the table scraps of the pioneers and the Fastest Follower.  In most cases history will show that the Fastest Follower - GM vs Ford, or Apple in just about any of its products, or MySpace versus Facebook - always wins, and they always have the characteristics of the "Fastest Follower" - better trend spotting and market signal reception, better ideas based on customer needs, and better prototyping and customer interaction.  These are the hallmarks of good innovators.  Clearly it's the case that all Fastest Followers are innovators, but there are many innovators who prefer to be pioneers.
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posted by Jeffrey Phillips at 8:36 AM 31 comments

Monday, May 17, 2010

Ideas are a commodity

I've been noodling for a few days about the right way to frame this post.  Lately I've heard several prospects and clients say they want to get all of "their" ideas captured.  This seems to suggest that their is a limited pool of ideas that an organization "possesses" and they are simply waiting to be tapped.  Perhaps this is true from an intellectual property perspective, but I think on a grander scale ideas are probably more like natural resources that are freely available and widely available to those who can spot them.  What if we thought of ideas in the same way we did as oil or drinkable water or valuable minerals?  Then, there are three factors that really matter.

The first factor is discovery.  If ideas are really like natural resources, then one of the most important factors is to simply discover the ideas and stake your claim.  Note that a big "pool" of ideas or opportunity is probably like a vein of gold or a large pool of oil - there may be other people prospecting in the same area, and finding the same opportunities.  Too often we believe we have a "monopoly" on an idea, not realizing that problems are evident and many people are searching for viable solutions.  The ideas are out there, in your organization, in your customer base.  Whether you prefer a tightly controlled internal idea generation process or throw open your idea generation to all your customers and prospects, the ideas are out there.  Just don't think there aren't other prospectors watching the same turf.

The second factor that matters is refining the raw material.  In fact, this is probably the most important factor.  Many countries have abundant raw materials like oil or gold, but don't have the means to convert the raw materials into usable products.  The list of countries that have oil but import gasoline - a refined byproduct of oil, includes many Middle Eastern countries.  The point is that simply having an abundance of the raw material doesn't necessarily add value.  The value for commodities like oil or gold, or ideas, is added as the ideas are refined, and shaped, and made into useful, valuable products.  In the innovation world, being creative but lacking the means to refine ideas is like being an oil exporter but a gasoline importer.  You have all the raw material but none of the means that make the ideas truly valuable.

As any large commodities trader can tell you, the last factor is in the marketing.  What's the difference between Exxon gasoline or BP gasoline or other brands of gasoline?  You certainly can't tell where the oil that makes up the gasoline came from, and the firms that did the refining have many of the same processes, so what drives you to choose one brand of gasoline over another?  Marketing and availability.  Likewise, an innovation process needs to frame ideas and position them in such a way that they are the solution to an important internal or external problem, at the right place at the right time.  Eventually, no one cares about the origination of the idea, or how it was refined, as long as it meets the right needs at the right time for the right consumer.

If you've read this far along, then the conclusions seem to be:

  1. An abundance of ideas is less important than a refinement process
  2. Ideas are everywhere, and abundant.  Processes are much less proficient
  3. Many people are prospecting the same needs and opportunities as you are
  4. Since many people are prospecting and ideas are abundant, the winners will be the people who can refine and market ideas effectively
  5. At the end of the day, no one really cares where your idea came from, or how it was refined, as long as it meets a need that an important set of customers have.  The backstory is always interesting and can become part of the mythos of the product, but is far less important than solving the right problem or challenge at the right time.
I'll stipulate that if all these points are true, then ideas are commodities, and what drives innovation value is an excellent refinement process that matches great ideas to important market needs, and brings them to market as the needs become apparent.
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posted by Jeffrey Phillips at 6:50 AM 3 comments

Wednesday, May 12, 2010

Take nothing for granted

I was thinking recently about what a great service NetFlix is.  No longer do I have to schlep down to the corner Big Box movie rental place and be completely disappointed by their selection.  Now I have a full range of choices that are quickly and easily delivered to my doorstep, with the added benefit of no late fees.  In fact I thought NetFlix had the perfect business model until I read the news recently about the terrible condition of the US Postal Service.  What has been a critical piece of NetFlix's business model could be unraveling.  If the US Postal Service has to curtail delivery on certain days or to certain locations, or has to increase the cost of delivery, NetFlix's delivery model seems to be a bit more suspect.  But who would have ever thought that the mail system could be in doubt?

Most interesting disruptions happen when a firm or industry has one or more "blind spots" or reliance on systems, methods, processes that almost seem to be a given.  I can't tell you the number of times we've been told that "federal regulations" prohibit certain types of insurance or health care delivery, as if "federal regulations" don't change on a regular basis, and aren't subject to lobbying.  I'm not going to argue in this post that NetFlix has taken the regular, low cost delivery of the post office for granted, but imagine the impact to their business model if the postal service reduces delivery or increases prices.  Suddenly the NetFlix model for home delivery is less sustainable, and the on demand portion of their business is much more attractive.  Problem is that while everyone has a mailbox, the number of people with reliable high speed internet connections is a lot lower.

External actors in any market have two choices when entering - accept the status quo and adopt the accepted norms and processes of the existing players, or attack and disrupt something that the existing players have agreed is "bedrock" or foundational.  Disruptive innovators are constantly seeking to overturn or subvert these blind spots because they are intricately intertwined with the incumbent's business model.  What your strategy and business model takes for granted - what you expect won't or can't change - is the exact target for those seeking to disrupt your business.  And while any established rule, process or service may seem intractable and impervious to change, everything changes, and we can easily establish that in an environment like ours the pace of change is ever increasing, and established norms are now looked at with suspicion rather than with trust.  Look no further than the banking industry if you want to see how quickly trust can be eroded.

Too often incumbents build their strategies and models based on what they are willing to assert won't, or can't change, while the innovative disrupters are seeking to subvert those exact components of the model.  Because if the factors that the strategy is based on are disrupted or proven wrong, the innovator has advantages in terms of trust and nimbleness that the incumbent doesn't have.  Just as NetFlix disrupted BlockBuster by attacking the "just down the street on every corner" retail model, the Postal Service may inadvertently subvert part of NetFlix's model by increasing the cost of mail service or decreasing delivery dates and locations.   Did NetFlix examine the possibility that the Postal Service would be unreliable?

These factors should lead any right thinking business to two conclusions:  first, given the rapid change in the environment, trend spotting and scenario planning should be a given.  Change is happening too fast to simply wait and react, and seismic change can happen more frequently than we'd like to admit.  Using these tools helps the firm understand what changes may happen and begin to deal with them proactively.  Second, question every assumption, every factor that defines or shapes your business model and strategy.  Any factor that your business "counts on" and assumes will be reliable and unchangeable is a blind spot in your strategy and the one place good innovators will attack first.
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posted by Jeffrey Phillips at 5:46 AM 4 comments

Tuesday, May 11, 2010

State of Creativity: Innovation at Work

As a person who has lived in Texas and has extensive Texan ties, it can be hard to acknowledge the fact that other southwestern states have stolen a march on my "second" home state.  But Texans, as well as North Carolinians, and others should sit up and pay attention to the work underway at Creative Oklahoma.

In the last few years we've seen states and localities begin to understand that creativity and innovation isn't something that merely happens, but can be nurtured and encouraged.  Additionally, creativity and innovation aren't actions that take place only within businesses or schools, but in communities that are engaged. Private industry has a role to play, certainly, but so do secondary educational systems, universities and colleges, the arts, and in many cases state and local governments.  Why do some locations attract the "creative class" that Richard Florida described, and some locations can't seem to retain their best and brightest?  This isn't a challenge that any one organization can solve, but requires a committed effort by a wide range of parties and interests.  Creative Oklahoma demonstrates that story.

According to people I talked with at Creative Oklahoma, the original driver for creativity was in the public schools.  After adopting new teaching concepts and initiatives, the K-12 programs brought new creative thinking into the programs.  Universities in Oklahoma liked what they saw and began to adopt their curriculums as well.  Soon, the government was taking notice and placing a heightened emphasis on creativity and innovation, and a non-profit was formed to encourage and nurture creativity and innovation and create a community that included education, government, business and the arts.  Oklahoma also applied and was accepted to the Districts of Creativity, a partnership of geographies, localities and cities around the world that have made creativity a commitment.  This fall, Oklahoma will host a conference that brings together a number of participants from these Districts.

As you may imagine, the development of creativity and innovation communities is not a simple or organic process.  It takes time, commitment and a lot of desire and vision.  We've seen what Oklahoma can accomplish, and other states like Rhode Island with the Business Innovation Factory are leading the way. 
Some locations - Austin, for example or Silicon Valley, may attract the creative class because they have high technology firms, a good economy, great weather, a livable climate, excellent universities and so forth.  These locations will continue to attract great talent - but that does not preclude any geography, any city, any state from making the investments and creating the communities to encourage and nurture innovation and creativity.  In this case, we believe you can "build it, and they will come" or they will remain.  Just as we don't want to outsource all of our knowledge and skills overseas, we don't want to create innovative cities interspersed with innovation deserts in between.  Every city or state that wants to compete in the 21st century and beyond needs to understand what it takes to attract and retain innovative and creative talent - in all walks of like.  These communities need to include educational systems, universities and colleges, the arts, local non-profits, government and business, organized and committed to the development of a creative, innovation community. 

Oklahoma has demonstrated it can happen, and other states should look to it, and to Rhode Island as examples of what can be done by a small set of very committed individuals.  We can't wait for Shanghai or Bangalore or London to become the centers of innovation and creativity - we need to demonstrate our commitment to innovation and attract the creative class to our shores.
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posted by Jeffrey Phillips at 7:23 AM 12 comments

Friday, May 07, 2010

Innovation Failure Points: Evaluation, Selection and Prototyping

Over the last week I've written several posts about the "failure points" of innovation, using the premise that failure is more instructive than than success, and that there are consistent points of failure in the innovation cycle.  These so called "weak links" are steps in the innovation process where innovation can frequently fail.  In previous posts we've identified getting started, linking innovation to strategy, inside out innovation and idea generation as transitions or phases where innovation can fail.

Today I'm focusing on another failure point in the innovation cycle - evaluating, selecting and prototyping ideas.  You'd think that by this phase in the innovation cycle the momentum for good ideas would be irresistible.  You'd be surprised how frequently innovation breaks down at this phase.  There are a number of reasons for the failure.

First, it's amazing to me how many firms generate ideas but have no means or methods for evaluating ideas.  Nothing is more frustrating that facing down a large number of ideas generated in a brainstorming session with no clear evaluation criteria.  In any innovation project, care must be taken to determine how ideas that are generated will be evaluated, otherwise it appears to the team that ideas were selected based on the preference of the sponsor.  Or worse, since there is no clear evaluation criteria, it's difficult if not impossible to select the "best" ideas at all.  This happens far more frequently than you might think.

An innovation program is meant to generate new ideas to solve an existing problem or address a new opportunity.  If there is a failure to link innovation to strategy, or if the problem or challenge is not adequately scoped, or if the "right" people aren't brought on board, it can be difficult or politically dangerous to evaluate and select ideas that challenge existing orthodoxies or introduce concepts in conflict with existing management priorities.  So, the only ideas that can be selected in the absence of a communicated evaluation criteria are very incremental ideas.

A second reason for failure at this phase in the innovation process is the difficulty in arranging appropriate tests for ideas before they are fully fleshed out.  Companies with strong innovative capabilities understand that prototyping and piloting ideas leads to new learning and insights.  They are willing to "fail" a little to gain a lot.  Many firms, however, consider the prototype sacrosanct and work for months to get the prototype "just right" seeking acceptance rather than feedback.  That's a fatal mistake.  Prototyping and piloting should be focused on getting insight, feedback and corrections, so that the ultimate product is not just innovative but meets customer needs.  Too often prototyping and piloting is used as a test launch, and any feedback other than positive acceptance is understood as failure.We advocate prototyping like Chicago-style voting -early and often.

At this step in the innovation cycle, good ideas can be held up or shot down for the lack of a documented evaluation criteria or a misguided prototyping approach.  Innovators are often very frustrated at this point in the cycle because they have good ideas in hand, but can't move them quickly enough or efficiently enough to launch, lacking a documented process and criteria and a receptive prototyping approach.
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posted by Jeffrey Phillips at 6:00 AM 3 comments

Thursday, May 06, 2010

Innovation Failure Points: Idea Generation

As strange as it may seem, one of the most innocuous and simple activities within an innovation process is also one of the most common failure points.  Idea generation, a task that any child can do effectively, is a daunting task for many firms, and a common innovation failure point, for a number of reasons.  This post is part of a continuing series of posts on innovation failure points across the innovation process.  Previously we've examined a "weak link" at the start, when linking to strategy, and when gathering insights from customers and prospects.  Today, we look at the strangest failure point of all - the one task everyone should do well.

The first reason is cynicism.  Too many people approach an idea generation session with a tremendous amount of cynicism.  Most of them don't expect the meeting to be conducted well, don't expect their ideas to be heard or valued, and don't expect anything to happen to the ideas once the session is over.  In many ways, idea generation often fails before it starts.  It's hard enough to encourage people to lower their defenses and actively engage, especially when the cynicism about idea generation is so high.  Most organizations fail to get the best ideas out of their people, and are usually happy to walk away from idea generation sessions with very obvious incremental ideas.  Most idea generation sessions are failures hailed as triumphs.

The second reason most idea generation sessions are failures is due to poor facilitation and planning.  Many idea generation sessions are run by the individual who needs the ideas, and who has pre-conceived notions or bias.  Many of these individuals aren't even aware that they steer the conversation and reject ideas out of hand during the event.  Often there's little planning, poor problem definition and scope development.  The facilitation of the event matters as well.  A good idea generation session involves everyone who is invited, breaks the participation barriers and encourages wild, even crazy ideas, to allow those ideas that are just beyond the mainstream to emerge.  Poor planning and facilitation dampen the engagement and involvement, and once again lead to a small number of ideas that are relatively obvious.

The third reason most idea generation sessions are failures is due to a lack of follow up.  Even in situation where the planning and preparation work is done well, and the cynical participants are pleasantly surprised by the engagement of the team and the positive facilitation, it is exceptionally easy to fail if the individual or team responsible for actually evaluating the ideas fails to do so, or simply becomes a "black box".  If the ideas aren't followed up, and if the results of the session aren't publicized, then all the good work up front goes for naught.

The final reason most idea generation sessions are failures is that we overly emphasize one tool - brainstorming.  Like the old adage says, when you have a hammer every problem looks like a nail.  If there are fifty ways to leave your lover, there must be nearly as many methods and techniques to generate ideas.  Brainstorming is a valuable tool, massively misused and overused.  Consider learning and implementing some new techniques, like brainwriting which will involve those more reticent to provide ideas in public, or SCAMPER to provide a set of tools, or use analogies from other industries.  These are just a few tools that can help generate ideas.  Remember the tools can be situational and more or less valuable depending on the participants and the kinds of ideas to be generated.

No doubt you are thinking that idea generation is a serious failure point.  You'd be right.  A task that is conducted everyday, in many organizations, that is considered such a useful tool, is so often abused and misused that it creates a tremendous amount of distrust and cynicism, which then creates a vicious cycle.  Each new idea generation session that's run poorly, or planned poorly, or doesn't result in actions on the ideas simply ramps up more cynicism.  What should be a fun, engaging and valuable experience becomes drudgery that people choose to avoid if possible, and usually results in very incremental ideas.
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posted by Jeffrey Phillips at 6:55 AM 7 comments

Wednesday, May 05, 2010

Book Review: Seizing the White Space

I was happy to accept the invitation to participate in a book blog tour, especially when the invitation came from my friend Renee Callahan at Innosight.  Renee asked me to review the new book from the Innosight team, Seizing the White Space, by Mark Johnson.

I've written frequently, and recently, about the importance of innovation and strategy.  While we at OVO stipulate that innovation isn't a strategy, it is an enabler to strategic goals.  Thus, good strategic thinking is a predicate to successful innovation.  Even more so, good strategic thinking is critical to set the stage for working in the "white space" - those gaps or green fields that your business does not address today.  Mark Johnson's new book deals with two fairly interesting, intertwined and complex issues - white space innovation, especially business model innovation.

Johnson's topic is important because it starts to move our discussions away from the "mundane" innovation (if there is such a thing) of new products and services.  Any firm today that isn't focused on product and service innovation has one foot in the grave already, and the need for product and service innovation is well understood.  Johnson is going after bigger, more elusive game - can an organization effectively innovate its business model to renew itself and its offerings?

Given the importance of a business model to how a company thinks about its value proposition, how it is organized, how it serves customers and how it makes money, changing a business model is a daunting proposition.  Fortunately, Johnson simplifies the task by first identifying the four key factors for business model success.  According to Johnson, a business model is made up of these components:

  • Customer Value Proposition - this is the offering that helps customers do the jobs that they are trying to do
  • Profit Formula - defines the way the company will capture value for itself
  • Key Resources
  • Key Processes
Johnson states that "successful businesses devise a relatively stable system in which these elements interact in consistent and complementary ways.  A change to any one of the four affects all the others and the system as a whole."  This statement identifies the reason why business models are so robust, and so difficult to change.

Once he has defined the business model and its components, Johnson takes us on a geography lesson.  We go looking for the mythical "white space", that Shangri-La that all consultants and executives seek, but rarely find.  Johnson identifies three locations to seek white space:  within an existing market space, examining opportunities that have been ignored or overlooked in existing markets, opportunities beyond the existing markets, either as entirely new untapped markets (think geographies, countries or continents) and the white space "between" two markets or industries.  Once he has established that "white space" exists and that a business model can be manipulated, he turns his attention to the really important stuff in the book - how to innovate a business model.

For those of you Christensen fans in the audience, it will come as no surprise that he frames this challenge with a "jobs to be done" approach.  This is the same framing technique that Christensen and many of his followers use to think about new opportunities or new needs that customers have.  Once a new job to be done is identified, Johnson recommends rethinking the Customer Value Proposition.  As the customer value proposition is understood and addressed, the firm can then determine how to review the profit formula, and this then leads to changes in key processes and resources.  In other words - start with the strategy, define how you'll make money and restructure the organization.  Simple to say, but relatively hard to do.

I'm impressed with most of the book and the thinking behind it.  Johnson has approached the challenge methodically and has given us a model for business structure and business models which seems to be internally consistent.  He's also identified where the white space exists and given us a recommendation on how to change the model.  Where the book falls down slightly is in the evidence of success of the approach Johnson recommends.  I'd like to see more case studies of businesses actually working through this change.

One example he provides is the comparison between Southwest Airlines and the short-lived airline Song, which was an attempt by Delta to create a low cost competitors to Southwest.  Delta focused on making an inexpensive, fun airline targeted at "discount divas", women who wanted low costs but some perks.  Johnson points out that Delta adopted some of the Southwest model, but not all of it, and eventually Song could not compete, attempting to be both a low cost and a high touch airline.  I'm not convinced this is a good comparison, or that Delta really was able to engage itself to create an airline that would compete with or perhaps cannibalize its own business, so this doesn't appear to be the best example for me.

What Johnson does well is establish that innovation is closely linked with strategy, but really is an enabler to business strategy.  While writing about business model innovation, he has really written a book about strategy and the key components of a business model that must be considered and refreshed constantly.  The geographic "white spaces" aren't unknown - in fact Blue Ocean Strategy has mapped these previously.  His key insights are more about thinking about the interplay between the components of the business model and how innovation will impact those components.

This book is probably more attuned to the executives who want to innovate or change their organizational structure, rather than the folks who've been called on to build new innovation capabilities.  That said it is a great addition to the literature around innovation and builds nicely on work by Christensen and others in the space.
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posted by Jeffrey Phillips at 5:55 AM 11 comments

Tuesday, May 04, 2010

Innovation Failure Points: Inside-out innovation

In a continuing series of posts I am examining a number of consistent innovation failure points, under the thinking that learning from failure is much more instructive than learning from success, since often success is situational, while repeated failures can be instructive.  In the first two posts, we reviewed failing by starting poorly, and failing by neglecting to closely link innovation to strategy.  What I'm interested in is identifying the "weak links" in the innovation process and examining why innovation fails most consistently at these particular points.

Today we'll consider the weak link of what I like to call "inside out" innovation.  This is the presumption that we know what our customers need, and that happens to look a lot like our existing products or services.  Too many firms "innovate" with very little information or insight about the market, their customers, or customers' need or wants.  Rather than go out and understand what customers need and expect, they rely on anecdotal evidence and market research, and simply extend existing products and services.  This is a failure point of the first order, consistent with running blindly down a path that ends in a cliff.

Too often innovators assume they can ascertain the needs of the market without interacting with customers.    What's really striking is to ask product and service development teams how frequently they meet with customers to LISTEN to their challenges and needs, instead of simply presenting a new product. In the innovation teams where customer insights are used, the team relies on third party research and customer feedback, rather than detailed Voice of the Customer or Ethnography work to uncover unmet or unarticulated needs.   Or the team fails to use Needs-based tools like the ones Christensen documented and Strategyn popularized like “jobs to be done” methodologies.  Too often innovation teams start generating ideas without understanding the needs and opportunities in the marketplace.  Sooner or later an executive is going to want to know what problem is being solved, who has that problem, and whether or not they are willing to adopt your suggested innovation.  You’d better have the answers or your innovation won’t move forward.

For some reason we've lost, or perhaps never really had, the ability to interact with customers and prospects in a visceral and empathetic way.  Even when our product and services teams are informed that customers are angry, frustrated and unhappy with the products and services, we continue to use the same tools and techniques to derive and design new products, assuming the fault lies with the prospects and customers rather than with the fact that we haven't understood the needs.

What’s the learning?  Innovation is about creating something dramatically better or completely new.  If you aren’t interacting with customers to understand unarticulated needs or “jobs to be done” then your shiny new product may be interesting, but not valuable to your intended audience.  Don’t rely on your own intuition, and don’t rely on third party research.  Go find out for yourself, interact with customers in unscripted ways.  You may not like what you hear, but you'll learn far more.  Leave the pre-conceived notions at home and deploy qualitative tools like Voice of the Customer or Ethnography.  Watch your customer interact with their challenge or problem.  The most common response to this kind of research is astonishment in the executive suite.
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posted by Jeffrey Phillips at 5:42 AM 3 comments

Monday, May 03, 2010

Innovation Failure Points: Disconnected from Strategy

As I noted in my previous post, I think it can be more instructive to learn from failure than from success.  Too often a success is situational, and the conditions for that success aren't necessarily repeatable.  But we can also see many consistent failures, which I know can be addressed.  Today we'll look at the second weak link in an innovation chain, the confusion around innovation and strategy.

All too often, executives are interested in innovation but have strong reservations because innovation is likely to explore areas where the business does not have specific strengths or will make recommendations that cannibalize existing products or services.  None of this activity is necessarily wrong, just creates some uncomfortable discussions when it comes time to invest.  This, compounded with the fact that often corporate goals, strategies and strategic intent are murky at best or simply poorly communicated, means that innovation can seem to be poorly aligned with strategic goals.  This means that the innovation teams, while pursuing ideas they find valuable and interesting, aren't supporting key strategic goals, and seem to be off on a wild goose chase.  Nothing will gain management attention more quickly than a team spending a lot of resources on sensitive investigations that don't align to strategic goals.

Why is the linkage between strategy and innovation a "failure" point in the innovation process?  Because too often innovation programs and initiatives are kicked off without a clear purpose or goal in mind.  Executives have seen the impact on the share prices of competitors who are more "innovative" and have decided to become more innovative as well.  As I've written previously, this is problematic since most executives didn't climb to the top of their organizations through successful innovation.  They don't have extensive innovation experience and aren't familiar with the tools and techniques.  When these executives talk to the teams about innovation, they are earnest in their desire for innovation, but a bit naive about the request and what it entails.

There are two critical factors to consider when linking innovation and strategy.  First, innovation is not a strategy.  It is a tool or enabler for other corporate strategies like organic growth, differentiation, excellent customer experience and so forth.  Anyone who merely says "We need to be more innovative" without linking that goal to specific outcomes misses the point.  Second, innovation teams need clear communications and clear directions about the corporate goals and strategies.  It's surprising how often we're called on to build an innovation program and end up spending time trying to clarify specific strategic goals and strategies that we can accelerate or support.  Innovation in the absence of clear strategy is like picking needles from a stack of needles.  Without specific guidance on what strategic outcomes are important, any idea seems reasonable.

If innovation isn't aligned to corporate strategy, and if strategic goals and outcomes aren't clearly defined, the innovation program is like a brushfire.  It will burn hot and quickly, then flame out for lack of fuel and direction.  The team will find itself spinning its wheels, because in the absence of clear goals and outcomes, the team cannot make headway.  As the team flails, it will send back requests for clarification on its purpose, its goals and it measurements.  This will lead to a frustrated executive team doubling down on the need for innovation, often without clarifying the goals or purposes.  In this scenario the team is fairly quickly exhausted by the effort and either decides to define its own goals, or simply scatters back to more productive work.

A successful innovation effort requires that innovation is understood as an enabler or tool to accelerate the desired strategic outcomes, and those outcomes or goals must be communicated clearly and concisely.  If either of these factors is missing, and usually both are, innovation is exceptionally difficult to achieve.  This is the second "failure point" for innovation processes.

How do you address this in advance?  Educate your executive team on what innovation can do, and its proper role in strategic goals and outcomes.  Build a communication plan that helps the executive team communicate its strategies and the role innovation plays.  Ensure the innovation teams understand the expected outcomes and create projects or initiatives that support corporate strategic goals.
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posted by Jeffrey Phillips at 5:41 AM 18 comments