How innovation becomes infectious

If you are like me, a person who is interested in innovation, you've probably experienced the following scenario.  A meeting is called, where an executive announces that he or she wants more innovation.  Other heads nod sagely, having seen this play before.  The executive directs attention to the innovation facilitator, advocate or consultant in the room.  At that moment, time freezes, as the shields go up and everyone searches your face to determine what wild party trick you have up your sleeve.  It's clear from that moment on that it's "us" versus "them", and while great outcomes are expected, they'll happen on another person's watch.

Having lived my life as an innovation consultant, I'm familiar with the unintentional cold shoulder, the lack of belief and the patient settling in, waiting for the party trick to emerge.  That's my business, so I've learned to lower expectations about immediate outcomes and hopefully build consensus for change.  But what about an internal innovation advocate?  Must they constantly be the virus that seeks to infect corporate cells that simply don't have receptors?  How does an organization become truly "infected" with innovation when most of them have anti-bodies actively pursuing and eliminating any wayward innovation viruses?

Since we are talking about infections, let's start at the cell level.  At the cell level, receptors are located on cells and receive instructions for the cell to do something.  There are two types of chemicals that work with receptors, interestingly called agonists and antagonists.  An agonist is a drug or chemical that binds with a receptor to help it do its work and engage the cell.  An antagonist is a drug or chemical that blocks or binds the action of another chemical or drug, blocking the receptor.

In most organizations, the receptors are attuned to short term gains, maintaining business as usual and slowly, steadily growing the company.  Antibodies or "antagonists" act against ideas or actors that suggest concepts that would conflict with these receptors.  Innovation is often a foreign element that seeks to enter the corporate cell, but finds few receptors and most of those are blocked by antagonists who seek to maintain the existing order, protect business as usual.  Innovation is viewed by the corporate body as an invading virus, bent on destruction rather than as a positive force with beneficial outcomes.

To overcome these corporate barriers we need to do three things:  reduce antagonists, create more receptors and make innovation less of a foreign substance and more familiar to the cellular structure.  To accomplish these goals, corporate bodies need to do the following:

• Reduce antagonists.  In the cellular world, antagonists block messages or disable receptors so cells can't or don't do what they should.  In the corporate world, antagonists are represented by corporate culture, which dissuades people from taking actions, compensation, which encourages consistency over change, history and perspectives, fear of risk and uncertainty.  Until these antagonists are removed through changes in corporate culture, communication, compensation and reward structures, innovation will always be viewed as an invading virus rather than a beneficial cell.
• Increase receptors.  The more receptors available for a specific signal, the more likely the signal is to be recognized and enacted.  If only a few receptors exist and antagonists are plentiful, the messages don't get through.  In a corporate world, we need more people in management roles who are willing to try out innovation initiatives and programs.  These can be existing people, newly motivated and directed to be more open to innovation, or new people hired for their perspectives and attitudes toward innovation.  Good ideas that aren't received and aren't supported aren't useful.
• Make innovation familiar. Going beyond the cellular level into the DNA level, our DNA for years has baffled scientists, who at one time claimed that over 95% of DNA was "junk".  Now, scientists are realizing that our DNA have incorporated many different types of information, which allowed us to evolve.  These "junk" DNA may not control our destiny but help us adapt.  In a corporate setting, we need to add innovation into corporate "DNA" to make it more familiar to business as usual and to help the organization adapt.  As long as innovation is seen as an external intruder or virus, we will resist it and create antibodies to suppress it.  Once it becomes part of the DNA we'll develop receptors and agonists for it.

So the next time I'm in a meeting and getting the feeling I'm the virus and the executives around the table are antagonists (in the receptor sense) I'll try to introduce some agonists or seek to introduce more receptors in the room, with the ultimate goal of introducing innovation into the DNA, so innovation is seen in a positive light as opposed to being viewed as a virus.

As innovators, we need to find ways to make innovation infectious.  That means innovation needs to seem more valuable, more effective and less risky than the existing state of affairs.  It also means reducing the antibodies and inoculations against innovation in the team you are trying to convince.  Learning from nature is important here as well.  Some of the most infectious diseases are spread by 1) fun activities (sex) or 2) by many carriers or 3) being easy to transmit (through the air).  New ideas and the methods and tools to realize them, to become infectious, must be fun to do, or at least more fun and interesting than existing work, supported by many people, who can transmit the ideas easily.  The ideas need a short incubation period, to take root and grow quickly.  The ideas need to be resistant to inoculations, like "we're not innovative" or "that's too risky". 

In short, we innovators could learn a lot from infectious diseases.

More efficiency or more innovation?

Every once in a while someone can illuminate a point so well that you simply have to stop and pay homage.  Paul Sloane crystalized a key point about innovation recently when he tweeted: 

Businesses are good at getting better but poor at getting different.

The reason this crystalized one of the key innovation issues is that it reminded me of my early economics classes.  I suspect you remember those somewhat simplistic "guns vs butter" tradeoffs.  Should a country produce more guns, or more butter?  Who benefits from the selections?  What happens if more butter is produced?  Are fewer guns necessarily produced if more resources are shifted into butter production?

If this rings a bell from somewhere back in freshman economics, but at the same time seems too simplistic when viewed in light of the modern economic enterprise, then consider this simple question: 

What is the appropriate balance between efficiency and innovation in a business?

Eliminating all other factors, how much of your time, your efforts and your resources should be invested in driving ever more efficiency in your organization?  How much of your time, effort and resources should be invested in innovation?  It's not until we think of these as investments and force specific tradeoffs that the conundrum becomes clear.  Just like guns and butter, we probably need a reasonable investment in both efficiency and innovation to thrive over time.

A national economy will demand guns for defense and butter for nourishment - those demands will shift and evolve depending on the threats the economy identifies externally and the needs of the population internally.  Businesses, with timelines and incentives that are somewhat different, focus on short term financial results, which tends to shift the balance between innovation and efficiency toward efficiency.  Most initiatives that focus on improving efficiency have an immediate, and positive financial impact.  Thus efficiency is rewarded, and initiatives that are rewarded are repeated.  Innovation often has a negative short term impact - costs without an immediate benefit - so innovation is far less likely to produce a short term financial benefit, and therefore much more difficult to do.  Slowly, over time, the scales shift from a balance between efficiency and innovation to ever more efficiency and increasingly less innovation.  Eventually efficiency is well understood and easily accomplished, but it has ever decreasing marginal returns.  Innovation, on the other hand, becomes more difficult the less it is practiced, and is viewed as risky, uncertain and become even less likely to be taken up.

Clearly, every business needs both - a focus on efficiency and a focus on innovation.  My new book Relentless Innovation provides examples that demonstrate why a balance between innovation and efficiency is so important, and extracts lessons from firms that manage to do both well simultaneously - P&G, Apple, 3M, Google and Gore.  These firms have capabilities and investments that other firms would do well to emulate, because an ever increasing diet of efficiency will create a firm that is exceptionally efficient, but indistinguishable from its competitors.

The economics example of tradeoffs between guns and butter is meant to help students think about investments and tradeoffs.  Both guns and butter are necessary for every economy, but in different degrees.  Likewise, innovation and efficiency are necessary in every company.  Establishing "how much" investment in efficiency and innovation is necessary, and then carrying out that strategy, is very important.  Firms that can achieve an appropriate balance will thrive, while firms too focused on efficiency will become one trick ponies.

Who would have thought that the guns vs butter tradeoffs could illuminate an important business challenge?

8 - the perfect innovation number

Every sport has a specific team size.  Basketball allows five players on the court at one time.  Baseball allows nine on the diamond.  American football and international football both allow eleven on a side.  It's a mystery how these numbers were arrived at, but they've become codified in the sports we play. 

Other initiatives and efforts have a "right" number.  Three wise men.  Three musketeers. Four horsemen of the apocalypse (just saying).  However, the old adage is that "too many cooks spoil the broth", and like many old adages it carries a ring of truth.  There's an appropriate team size or number for almost any effort, and we at OVO have decided that the magic number is eight.  As in, eight people.

In my experience innovation suffers from the Goldilocks phenomenon, not necessarily too hot or too cold, but either too few participants or too many.  In the first case, innovation seems challenging and requires a lot of work with little possibility of payoff, so only the hard core dedicated types show up.  In the latter case innovation seems like the approved strategic flavor of the month, so lots of people show up but don't, you know, expect to have to do anything. 

When you have a team that's too small, there are too many perspectives missing and too much work for the team to do effectively.  A small team rarely spans all of the business lines, business functions and insights necessary, so the team is constantly calling on other people and eventually makes itself a nuisance.  Conversely, when the team is too large it is unmanageable and easily distracted.  People who probably shouldn't be there, or people who are there to make sure they don't receive assignments simply get in the way of people who are actually trying to get things done.

But on the whole, smaller teams are more powerful than larger teams, for this reason:  only smaller teams can grapple with disruptive ideas.  Getting people to think disruptively means getting them to think outside their comfort zone and outside the products, services and strategies of the business.  If even one person can't or won't free themselves from those confines, then the team will be dragged back down by the doubter.  The larger the team, the more likely it is that you'll have a doubter.  And the power of one person who can't or refuses to get on board with a new perspective or scope is enough to drag down the rest of the team.

So, in most regards, five people is at the lower end of a viable innovation team, simply due to the workloads and the range of experience and perspectives.  Ten is probably at the upper end, due to the cost of the commitments and the increasing likelihood of people who simply won't get on board.  Eight is a nice, round number somewhere in-between, and the number we've found to be about the best for innovation.  Oh, you might say, that seems on the high side.  You're right, and we err on the high side in this case because many innovation teams consist of people who have other, important jobs, so they can't attend every meeting.  Working on a quorum philosophy we always keep working and expect absent members to catch up.  This philosophy works if you have 8 members and 2 can't come, but becomes difficult when you have five members and 2 can't come.

There is another aspect of the Goldilocks phenomenon mentioned above.  Team members can be too hot (too excited about their own ideas) or too cold (assigned to the team but with little desire to be on the team).  Smaller teams can be formed around volunteers - people who WANT to be there, while larger teams are formed from people who were TOLD to be there or people who want to be sure they are represented but don't actually plan to do any work.  Like Goldilocks and her choices, you don't want too hot or too cold, too large or too small, you want the team and the people to be "just right" for the effort.  That magic number for innovation is eight.

Innovator as Storyteller

I've been catching up on some reading, and thinking about my own experiences working with customers who are trying to become more innovative.  A pattern is beginning to emerge that has been sitting there in front of me for years, but is only now becoming clear. Perhaps, like viewing a pointillist painting, one needs the proper distance or perspective for all of the dots to come into focus as a picture.  My realization this week has less to do with viewing a picture, and more to do with other forms of communication and thinking that block innovation.

I read today a paper by Malcolm Gladwell, published in May 2011, which tells some interesting stories about innovation.  Gladwell's point is that all innovation is basically evolution of an original concept.  For example, Apple didn't create the idea of the mouse, it borrowed it from Xerox PARC, who borrowed it from a researcher at Stanford Research Institute, who probably borrowed it from someone else.  Gladwell writes about this continuous evolution as a model for innovation, stripping away the things that aren't necessary and introducing simplicity to reach a larger audience.  But what's also interesting about the story is the number of times the innovators he interviews were told "no" about their innovations.  So here's the critical question:  do we innovators lack the ability to communicate to others the value and importance of our ideas?  Do the "business as usual" folks who predominate most businesses fail to hear and understand our messages?  Are innovators from Venus and business people from Mars?  Do we speak different languages or simply not value the stories we are told?

Reading this article and thinking about what I learned writing Relentless Innovation, I've come to realize that perhaps the most important capability of good innovators is their ability to communicate.  What I mean about the ability to communicate is that the excellent innovator communicates the value proposition of his or her idea in the correct manner, using the correct channel, and touching on the correct needs and values of his or her audiences.  Note that I used the plural - audiences.  Because an innovation within a corporate structure has many audiences and has to run many  traps not simply to succeed, but to remain true to the initial vision.

The first audience is the executive or sponsor who has a problem that needs solving, or needs an interesting and valuable new product or service.  These sponsors must exist to fly cover for the innovator, so the innovator must be able to demonstrate that his or her idea helps an executive achieve an important business goal or corporate strategy.   Key message:  why this idea links to important goals or strategies.

The second audience is the people who have to move the idea from concept to product or service.  Usually an idea is different from and in opposition to much of the existing internal investment and process.  That means the innovator must be able to demonstrate to people who are used to doing work in often diametrically opposed processes that the idea is valuable enough to short circuit or change the existing ways of deciding and working.  Key message:  why this idea requires a different development process than existing "business as usual".

The third audience is the financial team, who will want to understand the ROI of the innovation as quickly as possible.  The innovator must assuage the financial team's worries about the "R" - return, revenues and profits, because the "I" - investment, costs, and so forth are easy to calculate.  This means the innovator must be able to tell a story about his or her idea that is also a financial story.  Key message:  why this idea, or any idea, must be judged differently from existing concepts, while recognizing the importance of return.

The fourth audience is the development team.  Every new idea generated and transitioned to a product or service development team faces an uphill climb, as these teams are already overwhelmed with existing priorities.  What is so important about the new idea that should land it on the top, overriding existing priorities?  The innovator has to be able to tell a story that sells the importance and value of the idea, and why it should take precedence over the existing priorities.  Key message:  why this idea is so important it should take precedence over other priorities.

The fifth audience is the customer base.  Why should they adopt a new product or service that often demands that they change buying habits or behaviors?  What is so valuable about the product or service that will encourage them to switch?  Key message:  This product or service solves an important need that you have, in such a way that you may be willing to change your buying habits or behavior in order to receive the benefits.

Note that at each interaction with an audience, the messages about the idea, or product or service, can be modified, watered down, manipulated and changed.  In fact this is often what happens, and why a good idea at the outset becomes a mediocre idea in implementation - the concept, messages and stories about the idea change subtly in every interaction and telling, reshaping and refocusing the idea.  This is perhaps why Steve Jobs was such a consummate innovator - he was able to define a message about an idea and carry that message forward through all of the audiences in a relatively consistent fashion.

Many innovators and people in the innovation community will argue that storytelling is a vital aspect of innovation, and I think they are correct.  But while storytelling is important, it's telling a consistent story, and the right story, and a compelling story, over and over again that drives an idea from an interesting concept to a market winner.  Innovators need not only have great ideas, they need to be able to tell good, consistent stories about their ideas, or partner with people (again, Jobs and Wozniak as examples) who can craft and communicate the story.  Ultimately Jobs' genius wasn't in design, or technology, or integration, or user experience.  Jobs' genius was in the storytelling - what he told his team, and what he told his consumers.

Innovation and Efficiency: Opposing Forces

I'm big on irony, so it's always exasperating yet amusing when my clients realize that attributes or characteristics they've thought of as strengths are revealed as barriers or weaknesses.  As organizations grow and mature, they stop trying to evaluate their business models and the factors that sustain those models, and begin to take factors within the business model for granted - or argue in their defense.  While older, mainline firms are comforting themselves by talking about how unassailable their business models are, innovators and new entrants are working to make those factors unnecessary or obsolete.  So Blockbuster has all the valuable real estate for movie rental stores locked down.  Yep, that's a barrier to other firms who plan a real-estate based strategy, but perhaps not so important to an innovator who seeks to innovate through completely different channels, rendering an advantage in real estate obsolete. 

So it will come as no surprise to you that I come today both to praise Lean and Six Sigma, along with a number of other management methods, tools and mantras, as well as to bury them.  Nietzsche is supposed to have said that whatever doesn't kill you makes you stronger.  Perhaps the corollary is true as well - whatever makes you stronger makes you blind to your potential weaknesses and faults.  Like Blockbuster, which was fighting the real estate battle while NetFlix was shifting the competitive landscape to mail and then direct downloads, many firms in the US are still fighting the efficiency and cost cutting battle, while the battlefield is shifting imperceptibly toward innovation.  The tools and techniques used to further hone existing business models to ever higher effectiveness and productivity are exceptionally valuable in the short run, and are building ever increasing barriers to innovation.  In many firms innovation and efficiency aren't simply at odds, they are at war.  And efficiency is winning.

Efficiency is winning because, to continue the warfare analogy, all the troops have been trained in the cost cutting and efficiency models and methods.  We have ninjas stalking through the business reinforcing Six Sigma and Lean concepts. The coin of the realm is paid out to reward efficiency gains far more frequently than innovation outcomes.  Business models, processes and methods are much more attuned to efficiency. As these concepts are reinforced, they remind the rest of the troops to place emphasis on reducing risk, reducing variability, reducing costs.  When an officer (read executive) argues for a new battle plan, based on innovation, the majority of the organization looks on in horror.  No one is familiar with those tools and methods.  They introduce risk and uncertainty, with a very indefinite outcome.  And innovation doesn't reinforce the strengths of the existing business model and strategies - in fact it may weaken or destroy the very fortress the firm has worked so hard to build.  While I've written this in rather florid language, make no mistake, there's a battle underway in every firm between efficiency and innovation, and efficiency is poised to win in most organizations. 

It doesn't have to be this way.  Many of the Relentless Innovators I write about in Relentless Innovation are both innovative (recognized by consumers, customers and their industry competitors as leaders in developing valuable new products and services) and are also efficient (they use their inputs and their resources at least as effectively as their direct competitors).  So some firms seem to have bridged the gap, and are using both strategic capabilities in harmony, rather than seeing them in conflict.

To compete in the future, deep capabilities in both strategies will be vital.  A firm must be efficient to compete, and must be innovative to remain top of mind with customers.  Rather than allowing innovation to be constantly overwhelmed by the far more experienced and superior forces of efficiency, it may be time to call a truce between what are often unfortunately opposing forces:  innovation and efficiency. 

Relentless Innovation Introduction

I have written a new book entitled Relentless Innovation, of which I am, I think, suitably proud.  I hope many of you will rush out and get the book as a present for that special middle manager or senior executive in your life.  Because innovation is no longer a nice to have.  To compete in the emerging economy, you must become a Relentless Innovator.  Why?

There are several reasons that are examined in the book, but the simple answer is that there are three compounding factors, all interrelated:

1. Increased global competition and easy access to markets.  Any firm, anywhere in the world can compete with you, due to rising technological competence, trading networks and lower trade barriers.  You don't need to worry just about your local competitors, but also regional, national and global competitors.  As global trade barriers fall and economies become more integrated, competition will only increase.
2. The costs and barriers to enter virtually any market are falling, thanks in part to the Internet, which becomes a global sales channel, and the fact that we are acquiring more content, information and services rather than physical goods.  More money is available in developing countries to start new businesses, so watch for more new entrants attacking existing wealthy markets.
3. These two factors mean that the pace of change is increasing dramatically, customer demands and expectations for new products and services is exceptionally high and product life cycles are shrinking.  If your innovation and new product development capacities are more lethargic or simply less capable than those of your competitors, you won't simply fall behind, your firm will simply lose relevance.

These factors point to the fact that innovation isn't a nice to have or an occasional initiative in reaction to a new threat in the marketplace.  No, innovation must become a consistent capability and core discipline in order to compete in an exceptionally fast moving and competitive marketplace.  There are companies, such as Google and P&G and 3M and Apple that understand this.  I call these firms the Relentless Innovators.  Your firm must learn what they know and adopt the methods, attitudes and perspectives of these Relentless Innovators if it hopes to stay relevant.  Your firm must become a Relentless Innovator.

There are two key factors that stymie innovation.  You know these factors and trust them.  These two factors create value for your business today.  They are called "business as usual" and "middle management".  Business as usual and middle management are the engines of productivity and short term financial profit.  They make sure business operates effectively and efficiently, with little variability and minimum risk or variance.  They enforce the rules and maintain order.  They are responsible for achieving your quarterly numbers and they are responsible for choking all the innovation out of your organization.  In subsequent posts I'll address why both are so important to efficiency and short term financial goals, and why their existing focus is so destructive to innovation.

In support of the ideas in the book I have developed a separate book website, and I have also begun to detail the key ideas in the book in a series of short PowerPoints which are shared on Slideshare.  I would encourage you to post your comments about the ideas I'm presenting and the recommendations I make at the book website or here on the blog posts about Relentless Innovation.  There is also a Facebook page about Relentless Innovation, and if the discussion warrants we can create a discussion group.

Whether you buy the book or not (I hope you will!) I encourage you to ask key questions about how your firm operates, and how it SHOULD operate.  Is there a powerful "business as usual" mentality?  Does that business as usual mentality stifle innovation?  Is innovation important to not just the success but the very survival of your business?  Who besides middle management supports and enables business as usual?  How do you begin to shift business as usual and incorporate innovation?  Can you create an "innovation business as usual?"  These questions are answered in the book, and I hope to have an online dialog/discussion with anyone who is interested in discussing the importance of consistent, sustained innovation.

Of course we'll be happy to help you think about the factors that must change in order to become a Relentless Innovator.  Changes to important attributes like the formal and informal rules that govern "business as usual" won't come easy, and helping middle managers rethink and rework their training, their focus and their compensation in order to achieve more innovation is time consuming but paramount.  There is no "right time" for innovation, and the work isn't simple, but may propel your firm into a completely different competitive capability that sustains it far after many firms that can't innovate fall away.

Bridging the gap between ideas and products

It's time to assess where things stand from an innovation perspective.  Clearly it won't be news to alert you to the fact that the vast majority of CEOs report that innovation is very important for the success of their businesses.  Increasing competition, from a wide range of countries and geographies, increasing customer expectations, rapidly shifting business models, new entrants and a host of other governmental, financial and demographic shifts mean that innovation is no longer a "nice to have" but a must-have for ongoing success.  Firms that have spent the last two decades right-sizing, outsourcing, cutting costs, getting "lean", implementing Six Sigma and a host of other management tools are rapidly realizing that you simply can't cut your way to growth and differentiation.

The economic conditions in the global market suggest that smart firms will hunker down, save their ammunition in order to fight another day once consumer demand returns.  This approach seems reasonable from behind the confines of the ivory towers built in many large, complacent organizations.  Meanwhile,  emerging new entrants are developing interesting, valuable products and services and learning to compete in this environment while established players simply hunker down.  Right now, as the first "green shoots" of economic growth are becoming visible, is the time to develop the skills and capabilities to improve innovation processes and disciplines within your firm and build innovation networks to spot and adopt great ideas that exist outside your firm.  The real question becomes - what are the critical skills necessary to thrive in an environment where innovation becomes a critical success factor.

In many organizations, good ideas are a dime a dozen.  In fact one could argue that there are too many ideas about too many different priorities.  Executives must do a better job of defining important corporate goals that innovation should support.  Once fewer but better ideas are generated, the real work begins:  spotting ideas that have the best chance to become disruptive products and services and moving those ideas through the decision points and approvals to become a new product or service.  This is the key innovation problem that all firms face.  There is a yawning gap between idea generation and product commercialization.

This problem can be addressed in one of two methods.  First, we can train innovation experts who understand innovation challenges and goals, and are very experienced in every phase of an innovation effort.  These individuals will work above the existing business as usual processes and will have the opportunity to supersede existing products, services and processes.  The challenge with this approach is that very few people possess the knowledge, skills, breath of insight, thick skin and simple desire to help ideas accelerate through the barriers that they must clear to become new products or services.  In this model, the necessary skills to succeed include excellent vision, the ability to spot promising ideas, the strength to champion an idea over a long period of time against significant odds and the ability to attract funding to the ideas they favor.  Few people possess all of these skills and can survive and thrive in existing corporate environments.

The other model is to develop an innovation process which defines how ideas should be recognized, developed, evaluated and converted into products and services.  These roles are filled by many people throughout the organization rather than one "champion" trying to do all of the work.  This innovation process ensures that more people are involved which brings more skills and insights into the process.  The process should be funded on an annual basis, so searching for funds should be less of an issue than in the "champion" model.  Since the process is dominant, rather than the ideas or champions, there's less chance of exhaustion or frustration of any one individual.  In this model it is important that a broad range of people gain skills in each of the critical steps and phases of the innovation process.  In this regard many people can fill the roles necessary to improve ideas and move them through the innovation process.



So, if you choose to follow the "champion" model, you should be recruiting a few people with a very broad range of skills who can spot great ideas, develop the funding and approval models and move them rapidly to new products.  You'll need to constantly recruit these people, as they will burn out rather rapidly and will be hard to find and hard to replace.  Most of the innovation effort will be centered on these individuals.  They will be unlike your typical recruits.

If you choose to create a systematic model for innovation, then the skills you need have far more to do with defining and improving innovation processes.  There may be a bias to simply apply your deep lean and Six Sigma skills to innovation efforts.  They can help with defining a process and improving the process, but the vision and perspective for innovation is far different.  Ensure you set big goals, including differentiation and organic growth as the targets for your innovation process, otherwise a bias toward process perfection may lead to incremental ideas.

The first model is about finding a few PEOPLE in whom your innovation potential rests.  The second model is about defining an innovation PROCESS, which is less reliant on any small group of people.  In the end it really doesn't matter which model you choose.  The real choice is in whether or not to consider innovation as a key capability or discipline.  That choice, and the investments to bring the choice to reality, are what will matter. 

What the crowd knows

In one of my favorite movies, The Blues Brothers, the guys get themselves into a jam. They are supposed to play at Bob's Country Bunker, and don't really know what kind of music the audience enjoys.  When they ask the waitress she responds, "Both kinds.  Country and Western".  Like the folks at Bob's Country Bunker I happen to enjoy both kinds of innovation, internal "closed" innovation and external "open" innovation.  In fact I wrote a chapter in this book about the different kinds of open innovation.  Both have their uses and both have their limitations.  Understanding when and where to apply the different kinds of innovation will help you find the most relevant and valuable ideas.  Using these innovation types in the wrong way will frustrate your teams and reinforce the image that innovation isn't effective.

I wanted to write today about crowdsourcing, or the instance of open innovation where we ask our clients, customers, partners and channels to submit ideas.  Open innovation is gaining a tremendous amount of awareness. I think this is due to programs like Dell's IdeaStorm and P&G's Connect+Develop program, as well as work by Nine Sigma and Innocentive.  But recognize that each of these "open innovation" programs represents a different approach and method of open innovation.  Only the IdeaStorm model really represents true "crowdsourcing", while Connect+Develop is an open innovation approach based on proprietary networks and trusted partners, and Nine Sigma and Innocentive are a mix of RFPs and contests.

So, if the idea that crowds can help generate ideas, the next question we should ask ourselves is:  what does a crowd know?  What does a crowd of people, who represent our customers, partners, competitors and channels know about new products or services that is relevant, timely and valuable for us?  And, if they have good insights, why would they give them to us with no compensation? 

Crowds, especially large, energized and homogeneous crowds, know a lot about a product or service. They know what they like about the product. They know what they dislike about the product.  They know what substitutes or alternatives exist and the strengths and shortcomings of the substitutes and alternatives.  But, as has been demonstrated time and again, crowds, and individuals have a hard time conceptualizing something completely new and different.  To quote Henry Ford once again, "If I'd asked my customers what they wanted they would have said a better horse".  No one asked for a car, because it wasn't within their worldview or perspective.  Crowds, especially large crowds, revert to the mean, and in this case they revert to the mean of their collective understanding.  What this means in general terms is that crowds are good if you are trying to understand short term needs, short term frustrations and incremental solutions.  On the other hand, crowds and crowdsourcing aren't valuable if you are seeking radical or disruptive ideas, for several reasons:

1. They can't imagine a major change or the absence of the product or service
2. They have a vested interest in the existing product. They prefer slight improvements to radical change
3. They forecast the future to look a lot like the present and can't image a reason for significant change
4. They don't believe that companies will invest to create something radically new and different

I don't mean to belittle crowdsourcing, and I know a number of firms that have used the tool reasonably well. After all, it is only a tool, and only one method or approach in a range of tools and methods lumped under the open innovation umbrella.  Appropriately used, it can have good value, especially for identifying acceptable incremental innovations or understanding the challenges and frustrations caused by an existing product.

If you are looking for ideas outside of an incremental solution, or hoping that you'll get a lot of ideas that are interesting and radical simply because you are asking more people the question, you'll be disappointed in crowdsourcing unless you invite a lot of people who aren't your customers or don't think they need your product.  But then your team will have to deal with the kind of feedback that may be a bit more difficult to hear. 

If crowdsourcing is an important tool for innovation, then we need to use it effectively and appropriately.  Our first question should be: what is it that the crowd knows that I don't, and how can I use that effectively?  What kinds of ideas and innovations can they imagine, and what kinds of ideas do I want or need?  If you are seeking radical or game changing ideas, or ideas with deep intellectual property, then this particular open innovation tool may not be right for you.

Give the people what they want

One of the reasons that innovation seems to miss its promise so often is that great many products and services are presented with great fanfare and expectations about how those products and services will delight customers.  Far too often, those expectations are wrong.  That's not to say the product or service is inadequate, or that the need doesn't exist.  There's simply more to the story that innovators often overlook.

There are 50 ways to leave your lover, and perhaps almost as many ways to identify a need in the marketplace.  Here are five of the most common ways to identify and define a need for a new product or service:

1. Have the R&D guys create the next iteration of your existing technology platform.  If they liked the last one, they'll love the new one.  I call this "inside-out" innovation.
2. Ask customers what they want or need.  You'll get reasonable responses from people who genuinely want to help you.  These answers, for the most part, will indicate incremental products and services at best.  As Henry Ford said, if I'd asked my customers what they wanted, they would have said a faster horse.
3. Conduct market research with your existing customers.  This is the natural starting point for most companies, since they've grown to trust statistically significant market research data.  The problem with this approach is that it is exceptionally good at telling you what existing customers think about existing products, and practically useless otherwise.
4. Conduct a trend spotting workshop and synthesize the trends into scenarios.  While this approach won't result in specific product needs, it will identify emerging markets, emerging segments and emerging threats to your business.  The problem with this approach is that trends are usually assessed over a long period of time, and most of us want to create the next big thing tomorrow.  The future is too far away to be of any use today.
5. Use tools like the Strategy Canvas from Blue Ocean Strategy.  This is a useful and powerful tool that practically no one understands, because it forces a user to think about their existing industry and competitive position in entirely new ways.  If you can get a team to do this, you can spot many opportunities.  Otherwise, you'll simply reconfirm the existing competitive strategy.

The problem with these, and with many other innovation approaches, is that we are too focused on the parameters and attributes and specifications of the outcome, rather than the shape, size and emotion of the needs and gaps.  Spotting needs is an empathetic exercise, one that is qualitative and not quantitative.  We need to understand the depth of the need, the reason for the work-around, the failures and frustrations the gaps create.  Instead, we are trained to be excited about the specific parameters (feeds and speeds) of the shiny new object that we can create.

Giving people what they want means solving a gap, a barrier, a challenge or a need that they may not be able to articulate, and that they may not think can be solved.  The famous example is the microwave oven.  No one ever demanded a microwave oven, but they certainly would have enjoyed and appreciated the value of faster food preparation.  Far too often we innovators are too focused on the here and now, on the practical, on what can be accurately measured and statistically proven, rather than simply understanding a customer's frustration, the overlooked market segment.  We trust our own instincts about what customers want and need rather than interact with them in ways that illuminate the opportunities for us.

Perhaps the only person who seemed to do this well was Steve Jobs.  He had some kind of a mystical mind connection to the population, but ultimately his solutions were common - better design, better usability, better coordination and compatibility.  While the rest of the tech world focused on feeds and speeds, Apple focused on accessibility, and that made all the difference.

If you want to innovate, create truly new and valuable products and services, you will have to leave your office.  You will have to go out and mingle with the populace, the great unwashed, and learn not just what they think they want, but what the biggest barriers, challenges, problems and gaps to achieving whatever it is they want to achieve that you can solve.  For Apple, it started by helping people manage their music more effectively.  You need observational skills, empathy and interpretive skills that often aren't valued in the traditional business setting.  The more disruption you seek, the further from your comfort zone you'll need to travel.  The more disruption you seek, the more you'll need to talk to people who aren't your customer today and who have little stake in the existing systems and infrastructure. 

The reason so many "innovations" seem so hum-drum or fail to miss the mark is that they are only logical extensions to existing solutions that seem obvious by the time they reach the market, or completely miss the important, relevant needs that people actually need to solve.  Ideas are a dime a dozen, but ideas that are focused on the right insights, the right needs and opportunities, are immediately important and relevant.  Good work up front to spot needs and trends will simplify idea generation and make it more effective.  Poor or non-existing understanding of needs, barriers and challenges means idea generation will fail to achieve its goals regardless of the facilitator, regardless of the participants, regardless of the tools.

Good innovation is doing your homework, which is really doing your fieldwork.  Sure, give the people what they want, but more importantly, help them achieve the outcomes they desire.