Thursday, September 15, 2011

The knowing-doing gap in innovation

A recent survey of midwestern manufacturers reinforces a fairly serious issue where innovation is concerned.  In the survey, the vast majority of executives recognize that innovation must start with the executive team.  That's a good thing.  There are some issues of concern in the survey as well - the fact that only about a quarter of the firms survey set aside funds for innovation, and the fact that the same percentage have a defined innovation process.  But another survey from the National Science Foundation shoots a bullet right through the heart.  According to that survey, only 20% of manufacturing firms reported creating a new innovation in the years 2006 to 2008, and, even worse, only 8% of services firms reported creating an innovation.

Clearly, everyone "knows" that innovation is important, and one could argue even vital, to the success of our businesses and economy.  But just as clearly, few firms are implementing the mechanisms for innovation success (see the Plante Moran survey) if only a quarter of the firms report that they set aside funds for innovation or that they have a defined innovation process.  What's perhaps even worse is that since there are few "standards" or agreed innovation methods or principles, what these firms are reporting as innovation processes or budgets could be optimistic or just plain wrong. 

What accounts for the knowing - doing gap in innovation?  This is the pink elephant, the emperor with no clothes in the innovation room.  We all know that a few firms claim the vast majority of innovation success, while most firms attempt innovation occasionally only to abandon it when needs or interests change.  If we are honest with ourselves, we can admit that "everyone" believes that innovation is important, but that few firms do it well, and most do it poorly, if at all.  I doubt there's another business function with such a large knowing - doing gap.  Is this simply the nature of innovation, or is there something more at work?

I'm going out on a limb here, but that's my normal perch.  I'm going to offer up that innovation is actually fairly simple in practice, but rarely defined, reinforced and sustained.  If we boil it all down, innovation is about three or four key capabilities or activities:
  • Spotting opportunities and trends in the marketplace before others do
  • Understanding customer needs before they are aware of them
  • Generating interesting ideas that set the company apart from its competition
  • Successfully commercializing and launching the new product or service
Yes, there is more to innovation than these four points, but you get the drift.  Whether your firm uses "open innovation" to get the ideas from external parties, or practices business model innovation to transform not just products but your business model, you still ultimately end up with the same basic activities.  So if the basic activities aren't that hard, what's creating the knowing - doing gap?  Three things.

First, it is easier, less risky and less uncertain to cut costs than to create something new and drive increased revenue.  Cutting costs is a certainty.  If I cut three people, the costs drop out of the bottom line.  Those costs are predictable and have immediate impact.  If I create a new product, the costs impact now and the benefits don't accrue for quarters or years, and even then aren't guaranteed.  In a short term focused world, skipping innovation for the sake of cost cutting is like skipping your green vegetables.  Dinner tastes a lot better tonight, but the body might not be as healthy in the long run.

Second, while innovation isn't "rocket science" it does require some new skills, process definition, new relationships and funding.  This at a time when core staff are working like mad to keep their products above water.  Most firms can't afford to take on new ideas.  They can barely handle the maintenance and sustenance of the products and services they've got.  No slack in the system, no extra bandwidth and increasing demands mean that all focus is given to existing products at the expense of innovation.

Third, we've lost a bit of the cowboy culture in our executives.  Jobs and a few others are willing to create some new stuff and see what happens.  I think those leaders are smart enough to know that what looks risky to a lot of us is actually a lot more predictable than we believe.  In most businesses, once a firm grows to a certain size it loses all, or most, of its entrepreneurial spirit.  Instead of sticking it to the man, these firms prefer to lock in certain advantages and lock out disrupters or new entrants.  And they slowly sink into the comfortable position of a large player, rather than a disrupter.  That's why firms like Apple and Virgin, and people like Jobs and Branson are so interesting.  They are large, but retain a bit of the cowboy.  Most of our firms could use a bit more cowboy and a bit less of the accountant and lawyer.  If the executives don't want to stick their necks out for new stuff, why would the middle managers and staff do so?

It's not as though innovation is a mystery.  There are hundreds of books, and more on the way (hint) that describe how to do innovation in large firms, design firms, military operations, services firms, health care, academic settings and so forth.  OVO and plenty of other firms offer innovation training.  There are plenty of models and success stories to follow.  The knowing - doing gap is a gap of choice, then, rather than a gap defined by a lack of knowledge or information.

The real question, then, is whether innovation can be accomplished by firms that are hesitant, cautious and resource constrained, or whether they'll simply need to outsource innovation for any measure of success.  I find this dichotomy a bit strange.  We know that any firm, pushed to its limits, can do amazing things.  Innovation is often amazing, but is based on basic principles that any firm can do well.  The question is - what will it take to push many of these organizations to the point where innovation becomes a capability that they adopt whole-heartedly internally, and will there be enough time for innovation to pull them out of the hole they created for themselves?  The knowing - doing gap is self-inflicted, and while it causes only moderate pain at first will ultimately hollow out an organization.
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posted by Jeffrey Phillips at 6:19 AM


Blogger Brendan Dunphy said...

Nice article! As a consultant of innovation and change I concur that there is a knowing-doing gap re innovation, but would contend it exists throughout most areas of a firm e.g. strategy. I think a part of the problem is the complexity of modern business and the uncertainty and dynamism of marketplaces. Making things happen across large, complex organisations is tougher than ever before and we make it more difficult by reducing relationships to the virtual and measuring the cost of everything and knowing the value of nothing. If we pay too much attention to ‘what is’ rather than ‘what could be’ then this is what we get and yes, cowboys (even in Europe, as Branson attests!) are a part of the answer. Thanks.

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