Thursday, March 31, 2011

The evolution of the innovation funnel

Today I want to examine a tool that has become a well-worn crutch for many firms, the innovation "funnel".  I'm going to argue that we need to rethink the funnel in fundamental new ways if we are to achieve our innovation goals.

First, let's get into the mood by recognizing what many people think about an innovation funnel, using a cartoon from Tom Fishburne.

Many times a funnel is simply a place to collect ideas, ignore them or hope they'll go away.

Remember that we innovators borrowed the idea of a funnel from the sales guys.  The analogies are fairly close however - you need many prospects to qualify to close a deal, and many ideas to evaluate to create a new product or service.  The first iterations of innovation funnels were simply that - a way to collect internally generated ideas and manage them through the innovation process to create new products.

Henry Chesbrough changed the concept of a funnel by making it permeable and porous.  With Open Innovation he argued that ideas could and should come from internal individuals and teams AND external customers and partners.  Further, ideas might enter the funnel from the outside and ideas may exit to third parties as well.  Here's a graphic that depicts the innovation funnel in an open innovation setting:






However, the funnel still seems too focused on ideas.  Our suggested revision to the funnel is outlined below.  This next iteration of the funnel incorporates opportunities, ideas, technologies and even products, considering "spin in" and "spin out".  Ultimately the funnel is a bridge between unmet customer needs and the solutions we offer.  The funnel should consider far more than just ideas.  After all, in an open innovation model, we can accept and exchange ideas, technologies or even products that may address a customer need or emerging opportunity.  Limiting the funnel to ideas reduces its capability and power and creates a very limited metaphor for innovation teams.



You can see a PowerPoint that provides more detail about our thinking at Slideshare.
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posted by Jeffrey Phillips at 5:21 AM 5 comments

Wednesday, March 30, 2011

Why innovators are never the most popular kid in class

As a people, we tend to group ourselves into tribes or communities that accept our foibles and issues and often reflect them.  Perhaps no place is more representative of this fact than high school.  Some of my favorite movies are about high school:  Sixteen Candles, Fast Times at Ridgemont High, The Breakfast Club and so on.  The reason:  everything falls into simple, neat categories (jocks, stoners, beauty queens, nerds, etc) and the real action takes place when someone tries to stray outside the natural groupings (a jock becomes a stoner, for instance) or when two groups intersect (a beauty queen dates a nerd, for example).

In business, there are tribes or communities as well.  You have finance types, marketing types and sales types, for example.  These tribes are social among themselves, share the same language and experiences, and look at the other tribes or communities with suspicion or disdain.  We have the Six Sigma types, the manufacturing types, the legal team and so on.  And for the most part, we work in small, homogeneous teams with little intermixing.

In business, the executives are the jocks, the finance team are the beauty queens, the marketers and pr team are the stoners and the manufacturing team are the nerds.  Note that so far I haven't placed the innovators.

That's because an innovator, like a prophet, is never accepted, even in his own community.  Innovators are trying to change the status quo, and don't accept or don't play along with the established norms or expected behavior.  So "innovators" who should be jocks are often at the periphery of that community, and innovators who are beauty queens are at the periphery of that community.  Unfortunately, innovators often don't flock well together either.  While they share common tools, methods and perspectives, they often have very different timeframes and expectations for success.  So it's rare to find a healthy innovation community, because some of the natural tensions exist (I'm a finance guy, what am I doing here?) as well as outcome tensions exist (you want to disrupt my line of business?) so innovators don't make the best community members.

That's not to say they shouldn't try.  Innovators should form tribes or communities within organizations and should reinforce each other, it is often simply hard to do that.  An innovator from finance and an innovator from marketing and an innovator from manufacturing are already outsiders in their own rights, since they've been attempting to upset the established order.  They don't share similar backgrounds or education, or roles or priorities, so bonding except over the fact that no one else gets what they are trying to do is tough.

Being an internal innovator in a firm that doesn't value or appreciate innovators can be a lonely life.  The jocks shun you, the beauty queens ignore you, the stoners don't understand you and the nerds think you're crazy.  No wonder innovation is so difficult and so rare, and requires a person with commitment and vision.  It takes a lot of guts to demand disruptive change from a comfortable corporate culture, to look beyond the 3 month timeframe that most of your compatriots are fixated on.  You, the innovator, are a disrupter, a berserker, a righteous distraction, often right and rarely supported.  You'll never be on the homecoming court.

But every once in a while, everyone in class will be glad you were there with the bright idea that saved the day.
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posted by Jeffrey Phillips at 5:40 AM 2 comments

Monday, March 28, 2011

Thinking the unthinkable - an innovation necessity

"Solitary, poor, brutish, nasty and short" is how Thomas Hobbs, a political thinker from the 1600s described the "life of man".  Hobbs, along with John Locke and a number of other social and political theorists, developed ideas around the social contract which influenced many thinkers and lead to changes in government in the United States (our revolution from England) and in other countries.

Hobbs was describing the fate of people when everyone seeks to gain at the expense of everyone else.  Only legitimate governance could improve the fates of men.  His thinking and the thinking of others led to the Enlightenment and influenced Jefferson, Franklin and others as well.  So why the history lesson?

I too have a theory:  the more "nasty, brutish and short" the timeframe for innovation, the more likely the firm will be to seek disruptive innovation.  Here's what I mean by that.

Too often firms will "innovate" - that is, seek to stretch their thinking or boundaries slightly, when another firm introduces a new product or service.  However, since the pain or shift isn't so great, the effort given to the innovation is rather slight and the results are often at best incremental.  Firms don't typically extend themselves into radical or disruptive innovation until they've exercised every other option.  Then, when all "reasonable" responses are exhausted, they exercise the unreasonable or unthinkable options.

Innovators, in large firms and in small firms, seem to work best when all the extraneous and reasonable options have been stripped away, when they work under tight timeframes to achieve the impossible or unexpected.  In other words, innovators will work best and seem to achieve the best outcomes, when their environment is nasty, their work is brutish, and their time is short.  Innovating from a position of comfort and security, tinkering around the edges, will only result in incremental innovation. 

What's interesting is how much time is lost, how many opportunities squandered, getting to that result.  Many firms have started and shut down new product development or innovation activities that tinkered with the margins, at first unwilling to consider the unreasonable or unthinkable alternatives.  Over time they realize that the small shifts aren't valuable and fall further and further behind.  What might have been possible if they skipped immediately to the unreasonable and unthinkable options from the start?  Certainly the approach would have been a shock to the system, but perhaps that's exactly what was needed.

By nasty, brutish and short I don't mean we should lock innovators in a dungeon and feed them bread and water.  But what I do mean is that often the only way to think differently is to strip away all the comfortable attributes we cling to and think cannot change, and start from that vantage point.  Placing greater importance, a sense of urgency and a short timeframe only heightens the pace of thinking and change.  Otherwise change moves at the pace the organization will bear, slowly if at all.
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posted by Jeffrey Phillips at 6:03 AM 6 comments

Wednesday, March 23, 2011

Bleach innovation and "red" oceans

I read with some amusement today the good article by Michael Schrage entitled Lafley's Ambiguous Gift of Innovation Failure.  If you haven't read it yet, please do so then return here.  I'll wait.

Interesting, don't you think?  P&G wanted to enter the bleach market, spent months if not years preparing a product, a branding campaign and a test market, and Clorox stole a march on P&G and disrupted their test market, sending P&G a "signal" to stay out of bleach.  Much of the Twitter traffic about this story concerns whether or not what Clorox did was "ethical".  I'll leave that for you to decide, because there are far more important issues embedded in this story.

One of the first issues that simply screams to be acknowledged is the fact that P&G waded into a completely "red" ocean.  I was a bit tongue in cheek earlier when I described P&G spending months developing a new bleach product.  Bleach is a commodity, available at any grocery store in a store brand for pennies on the gallon.  P&G didn't spend a lot of money on new product development, they simply decided they could muscle in on either Clorox's share of the market or the off-brand share of the market because of their branding capability.  Here, P&G is arguing that it will take pennies from others because of its marketing might, not because it is introducing anything new to the market.  This is a classic example of what Kim and Mabourge called a red ocean in their book Blue Ocean Strategy.  Did no one at P&G read that book, and understand the consequences?

Another issue:  Did P&G think Clorox would stand idly by while one of the largest marketing behemoths in the world pushed into its bread and butter product?  After all, if your brand name becomes synonymous with your product (Clorox for bleach, Kleenex for tissues) then you will defend your home turf mightily.  Why all this talk about "ethical" behavior?  P&G attacked another firm in a red ocean at the heart of its product line.  The gloves will definitely come off, baby.

Third, what is Lafley thinking, labeling this as "innovation"?  There's no innovation in P&G developing a new brand name and delivering bleach to grocery store shelves!  That may be a "new" product for P&G, but in the hierarchy of 1) new to the world 2) new to the market or 3) new to us, it barely meets the third criteria for P&G, and certainly doesn't achieve the other goals for consumers.  Was there a secret unmet need for bleach in the consumer space?  If so, P&G's actions don't demonstrate that.  They folded their tents and left as soon as it was clear that Clorox intended to defend the space. 

Finally, what does this episode tell us about P&G and it's commitment to new products and services?  No new introduction will receive immediate acclamation and consumer acquisition.  Most beachheads are defended and new products - even new to the world products that meet previously unmet needs - will face some resistance, even if just from consumer inertia.  P&G took one look at the competition from Clorox and decided to fight another battle.  Shouldn't that decision have been taken far before the development of the product?  Perhaps an established market seemed more reasonable and easier to develop than creating a completely new product in a new market space.  I have to believe that P&G drew other lessons from this exercise, including the risks of attacking a red ocean with a "me too" product and the need for establishing whether or not their product created any resonant new benefits for the consumers, hopefully before creating the brand name and defining the launch, which is where all the real costs of this development were for P&G.

No, this isn't a lesson about competition, it's a lesson about the difference between placing a "me too" product in a highly competitive space and assuming some of that market share belongs to P&G because of its marketing might, rather than its ability to create a valuable new product.  Every product introduction will face some resistance, but what I hope P&G learned has more to do with what it claims to be good at - discovering and filling unmet needs - rather than pushing into highly competitive markets and calling it innovation.
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posted by Jeffrey Phillips at 5:36 AM 5 comments

Tuesday, March 22, 2011

Book Review: The Steve Jobs Way

OK, I'll admit it.  I am a sucker for anyone who can decipher or decode Steve Jobs.  After all, the guy is a repeat Icarus.  He has flown too close to the sun not once, not twice, but at least three times and every time has come out better than before.  The effect he's had on Apple upon his return has been nothing short of a resurrection followed by a seating at the right hand of the Father.

Jobs is an interesting, mercurial creature, and I often wonder if he is simply one of a kind, a kind of idiot savant who understands how to tap into our wants and needs, and who has an almost messianic vision that we need to follow.  Sometimes I suspect that books about him are probably best read to illuminate how different we are from Steve rather than how we can become more like Steve.

I've read several books about Jobs, but in many regards The Steve Jobs Way is probably the best.  The subtitle for the book is iLeadership for a New Generation, which is a bit unfortunate, for reasons I've just presented above (I'm not sure we can easily emulate Jobs) and for the hackneyed use of the "i".  But Jay Elliott, who was present at the beginning, knows Jobs probably as well as anyone, and gives insights that few can do from the outside looking in.  And if the first few pages where Elliott describes how he first got the job with Jobs doesn't hook you, then really nothing will.

Here's the plain, unvarnished truth about what Elliot has to say:  Steve Jobs is unlike just about everyone you'll ever meet.  After founding Apple and wowing a bunch of venture capitalists and business people, Jobs had visions of a different kind of computer and become a disruption in his own company, and was eventually thrust out (first Icarus moment).  Using the funds he received from his stock sale, he purchased Pixar and developed the NexT computer.  For a man who is supposedly a marketing genius, he misunderstood Pixar and targeted a tiny university market with a computer that was far too capable and expensive.  Fortunately, due to his inability to recognize his failures, he stuck around and funded both long enough for the world to catch up to his technologies.  Both Pixar and NexT reached Icarus points of their own, and Jobs had the ability to reach deep into his own pockets to keep them float.

Jobs returned to Apple as an "advisor" to Gil Amelio and supplanted Amelio very shortly afterward.  Amelio must have been the only person on the planet who didn't foresee this outcome.  Jobs, having learned his lessons from his first stint at Apple and his near failures and spectacular successes with Pixar, determined to trust his vision and turn Apple into a customer experience company that happens to make electronics.  And that's where we are today.

The Steve Jobs Way is mostly a biography about Jobs, which I've encapsulated above.  Along the way Elliot points out the successes (in great detail) and the failures (in not so much detail).  Elliot points out the things we should learn from Jobs, like his passion, his vision, his obsession with detail, his ability to create and share a vision and so forth.  Frankly, most of us regular humans would find it hard to mimic Jobs in even one of these attributes, much less pretend to match Jobs in all of these attributes.  Layer on top Jobs' first win at Apple which gave him deep pockets and staying power, and very few people can touch his success.

What strikes me most about the short biography is how much I think Jobs learned from his own near failures that he now applies at Apple, including shortening the product offerings, focusing on customer experience and creating a mystique around the Apple brand and Apple products.  Jobs knows, and I think increasingly Apple knows, that the expectations are now so high for Apple that one stumble could seriously damage the firm, so every new product must meet Jobs' vision and expectations, which will hopefully outstrip the expectations and needs of the customer base.  Frankly, Jobs is in a competitive race by himself.  Every other computer and electronics manufacturer has ceded the high ground to Jobs and Apple and are merely hoping they make mistakes.

While it probably won't be a surprise when I tell you this, perhaps the greatest impact Jobs has with Apple is that he is the de facto product manager for the iPad, and the iPod and the iPhone.  I can think of no other significant consumer electronics manufacturer where the CEO is so involved in the design and development of the core products.  It is his vision and involvement and his passion for the product and the product features and attributes that differentiates Apple.  

Some books are proscriptive, they tell you what to learn and what to do based on examples.  Some books are descriptive, they tell you a story or describe an event.  This is a book that seems to suggest it is a proscriptive book, but ultimately it is a descriptive book.  However, it is a great read and perhaps one of the best I've seen about Jobs and what makes him tick.  I'm just not sure whether to wish for more Jobs or to acknowledge that only one can exist at a time.
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posted by Jeffrey Phillips at 5:47 AM 3 comments

Monday, March 21, 2011

Innovation becomes the safe strategy

I was thinking recently that one of the biggest barriers to innovation is the fear of change.  Most businesses are very comfortable operating in markets and interacting with customers that they understand.  Changing the parameters of the market, the customers or prospects you work with or the products that you offer risks disrupting the relationships that exist.  In this line of thinking, therefore, the least amount of change applied creates the greatest amount of certainty.

I wonder if there is a greater fallacy enacted on corporate management and individual stockholders anywhere else in the business world than this one - that it is safer and more responsible to operate a business as if the markets, regulations, competition and environment is not changing, and therefore investments in new ideas, or exploration of new markets is not as important as maintaining the "core" business.

Today, March 2011, it seems that everything is changing.  We worry about our environment with the advent of climate change.  We worry about Europe and its increasing debt levels in countries like Spain and Portugal, nevermind Greece and Ireland.  We worry about the changing relationship between the US and China, as China seems poised to become the largest economy in the world, which will allow it to direct more of the market than it has previously.  We ignore at our own peril a rising debt level in this country that must be repaid to foreign interests.  Yet in the midst of this many executives will argue that it is innovation that is the risky investment, instead trusting in a stay-the-course management style.

I suppose "stay the course" is reasonable in an environment where little changes, and customers don't have other options.  In that kind of market you can generate profits by sustaining existing products and services and constantly cutting costs.  But in a market where regulations change, competitors change and customer tastes change, stay the course seems to me to be the most risky option.  A business must be at least as nimble as its customers and competitors in an era of change.  Locking into a stay the course mentality and refusing to innovate when your environment is rapidly changing seems to be the risky strategy.

As usual, we've reached a point of diminishing returns.  A cutting costs, ever more efficient and effective business strategy works well when markets are protected, regulations don't change and customers have little freedom or choice.  In a market where all of these factors are no longer true, businesses that are nimble, agile and pursue innovation will have the upper hand.  Innovation, once the poster child for risky strategic thinking, will rapidly become the safe strategic choice.

If innovation is the safe strategy, then everything about your operating model needs to change.  We need to shift the dynamics of the firm from safe, "reasonable" slow change to identification of new opportunities and new customers.  We need to shift rewards from cost cutting to introduction of new products and services.  We need to change what we measure and reward.  Or, failing these actions, you can lock down your existing way of doing business and ride out the storm, since certainly all of these market, regulatory and competitive changes will pass, and the pendulum will swing back into static equilibrium.

If you buy that last argument, contact me re:  Brooklyn Bridge for sale...
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posted by Jeffrey Phillips at 5:40 AM 5 comments

Wednesday, March 16, 2011

Innovation wants and needs

I learned about wants and needs in probably one of the best ways possible:  through the rapid growth and fiery crash of a startup.  There's no better way to learn to ascertain what people WANT new products and services to do, and what they NEED to live their lives with less pain, less stress and less aggravation.  I ran marketing for a firm that segmented and analyzed the behaviors of customers.  We had very good algorithms that helped us group people into very small segments based on the way they "behaved" - how they actually used the product or service.  From that we extrapolated new offerings, new products and new services these small, tightly clustered segments would want and need.  We thought we could offer new products based on what we understood people wanted and how those wants and needs were expressed.  Boy, is there a difference between a want and a need.

That's where I learned the difference between a WANT and a NEED.  I was reminded of this concept when reading Tim Kastelle's blog about Flying Cars.  Paul Krugman and Charlie Stross (one of my new favorite Sci-Fi authors) were talking about the lack of flying cars.  Tim wonders if the lack of flying cars demonstrates the difficulty of disruptive innovation and the tendency for innovators to extrapolate current ideas into the future, rather than dream up completely new ideas.  For example, why would we need flying cars if we could simply teleport everywhere?  Rather than extrapolate existing technologies into the future, we innovators should drop back and solve for the bigger problem.

Another fact that goes unstated:  we've had flying cars since at least the 1950s.  It's not as though we don't have the TECHNOLOGY to create a car that can fly and then drive safely on the ground.  A quick Google search produced this humdinger:  http://articles.nydailynews.com/2010-06-29/news/27068585_1_faa-approval-terrafugia-transition-converts.  No, the real challenge in this case isn't technological, it's structural.  We simply don't all have runways out in front of our houses, and our neighborhoods are cluttered with a lot of low hanging trees, wires and other impediments to easy flight.  Additionally, flying cars are inefficient and inexpensive.  Krugman can have his flying car anytime he wants.  It's just that most of us won't make that decision now, and probably won't until the design of cities and suburbs is radically altered.

Further, though, is the deeper consideration of wants and needs.  While I may desperately "want" a flying car, deep down I know I don't really "need" a flying car.  I can get back and forth to work and to most of my activities fairly efficiently without a flying car.  That's the difference between an interesting idea and a disruptive innovation - wants and needs.  We all have wants, some of which we may choose to fulfill.  However, we all have needs that demand immediate attention.  Good innovators understand the difference between wants and needs, and solve for the needs.  Inventors, like the individual who created the latest in a long line of flying cars, are solving for the wants of a few very rich and eccentric individuals. 

We innovators are often guilty of glibly tossing around words like "wants" and "needs".  We need to understand the difference, and this is clearly a difference with a distinction.  Wants are interesting and may lead an innovator to potential value, but are often not deeply rooted or key to a person's life.  Additionally, wants often don't scale, that is, they aren't shared by a significant number of other people.  Needs, on the other hand, are more immediate, more closely felt and more likely to be shared.  Innovators must do a better job distinguishing between wants and needs.
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posted by Jeffrey Phillips at 6:09 AM 4 comments

Monday, March 14, 2011

Innovation and the Peter Principle

By this point in your career, regardless of your length of time in your career, you've met someone who demonstrates the description of the Peter Principle.  According to the authors of the book, the Peter Principle espouses that "In a hierarchy every employee tends to rise to his level of incompetence".  Of course any sweeping statement like this one must be taken with a grain of salt, but I was thinking about how so many axioms about management are often somewhat true but never completely true.  For example, the concept of pigeon management, which has been described as when a managers "swoops down, craps all over everything and then flies away".  In every such saying, there are people who support and sustain the stereotype, just as there are people who negate the stereotype.  But I wanted to focus on the Peter Principle because I think it is critical from an innovation point of view.

What's interesting or nefarious about the Peter Principle when it comes to innovation?  In my mind the seeming inevitability of managers and executives as they climb the ladder to hold on to innovation as a competence or skill.  In this I'm not attempting to denigrate anyone, and yes, I recognize the few exceptions that prove the rule.  Let's examine why an innovation Peter Principle may be a natural phenomenon and what we can do to prevent it.

We all, for the most part, start out as wide eyed kindergartners full of verve and creativity, and over time the scholastic system teaches us to succeed by giving the right answers and coloring within the lines.  Just wait, we tell ourselves, until I get that first job.  Then I'll make my mark.  Many people who enter the workforce have dreams of creating an interesting new product or service.  I suspect many of the best ideas in companies come from employees who have been with the firm less than ten years, because over time many of us find our will being shaped and formed by corporate culture.  It's inevitable, then, as we climb the corporate ladder and risks gets magnified that we'll embrace less risk, less change and less uncertainty.  We may "encourage" that behavior in others but executives and managers for the most part refrain from innovation, as it is too disruptive to the short term goals of the company.  Further, as we get further and further from our innovation days, our knowledge, tools and interactions with customers gets fuzzier and fuzzier.  While we all argue that innovation "must be supported from the top" many executives haven't innovated in years and may be unfamiliar with the needs and challenges of the market.  Years of incremental change have left them unaware of the needs and challenges in the market.

So, at a time when innovation is paramount, many executives may be at their "Peter Principle" summit, unwilling to risk change and uncertainty, removed from the needs and expectations of customers and too focused on the short term goals to see the longer term picture.  Have they "risen to the level of their incompetence" or merely allowed their skills, perspectives and knowledge to atrophy?  Certainly it is the latter, but often hard to distinguish from a distance.

Other than Steve Jobs and a few easily identifiable other innovation executives, it is hard to identify people in senior roles who are active innovation leaders.  This isn't so much a case of people with poor skills rising to the top as it is a sloughing off of the distractions that don't seem to add a lot of value at the top.  Executives are too busy, too occupied, too far removed from customers and consumers and too preoccupied with what Wall Street thinks.  However, that's natural since that's what we've reinforced in compensation and rewards.  Many of those individuals, with the right incentives, can become innovation leaders, given time and encouragement.  We innovators all talk about the need for "buy-in" and "support" for innovation from the top, even if the executives are too busy to get involved themselves.  Perhaps what we should talk about is the need for active leadership and participation in innovation from executives, rather than excuse them from the hard work as long as they are cheerleading from the sidelines.



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posted by Jeffrey Phillips at 5:55 AM 2 comments

Friday, March 11, 2011

No Vision = No Innovation

My son shocked my wife last night by announcing that he didn't think the space program had anything to offer mankind.  He had been assigned a paper in his middle school English class in which he needed to make a provocative point and sustain his argument with facts.  He decided to examine space flight and whether or not NASA would contribute valuable insights and technologies to mankind.  This from a kid who takes his telescope out on clear nights to look at the Moon, and Mars and Venus, and who saw the four visible moons of Jupiter recently.  In case you are wondering, he is 12.

I was convinced by his argument.  The problem that NASA faces isn't that there are interesting things to learn and discover, it's that NASA doesn't have a clear objective or vision for what it is supposed to do.  And I think that lack of vision is an incredible corollary for many businesses, who desperately want more innovation but just can't seem to do innovation well.

When I was my son's age, back in the dark ages, John F. Kennedy had created what seemed an almost impossible vision:  within the decade, place a man on the moon and return him safely to Earth.  It was a bold, audacious goal, and we were in a race with the Russians to get there first.  By placing such a bold, clear vision for NASA, and by extension for all of us, he created inevitable momentum for NASA.  Of course the government had far deeper pockets then than it does now.  The question today isn't whether NASA COULD be viable.  Of course it can.  The question is:  what is our goal and vision for the space program?  We've become far too willing to take on "small bore" efforts that have small bore returns.  Rather than return to the edge of space, we need to think about the problems of space travel in completely different ways.  One question NASA should be asking is:  how do we transform space travel so the immense distances in space shrink to fit our short human lives? 

NASA lacks a vision and mission, and therefore can't justify large investments.  With small goals and small investments, we become familiar with the small achievements.  Are you aware that the last shuttle flights are going up in the next few months, and then the Shuttle program is done, forever?  Are you aware that means that the US doesn't have its own lift capacity, even into Earth orbit, much less going to the moon?  What happened to the program that put a man on the moon and returned him safely to Earth 40 years ago?

The same thing is happening to your business.  When your business was started, someone had a "moon shot" vision or idea.  They wanted to radically shift a market or solve a very important customer problem.  Over time as the business grew, visions and strategies got muddled as the firm had more priorities and unclear goals.  Most firms today have great difficulty describing what their goals and strategies are, and that filters down to innovation.  No vision, no strategy, no innovation.  Increasingly a business becomes comfortable with small bore ideas that provide only modest incremental improvement.  Eventually the market becomes bored with the offerings or some new upstart creates a new "moon shot" that dramatically disrupts the market and forces everyone to shift.

Who knows where the next space "moon shot" will occur, if at all?  The challenges and distances involved in space dwarf human comprehension now.  The only viable way to travel in space is to radically increase the speed we travel, or radically decrease the distances between planets and stars.  However, here on Earth most businesses don't face the extreme distances and challenges that space flight does, yet have settled for little vision, little strategy and small bore ideas.  Where's the clear vision that drives your internal innovators to greater success?  If you don't have that vision, what disrupter does?

This is an open plea to every CEO out there.  We all look at NASA now and ask, what happened?  How did this great space exploration organization lose its way?  What can we do to restore its vision and expand its mission?  Soon, the same may be asked about your company.  What ever happened to Company X?  How did it become so complacent?  Can we save it or is it doomed to the dustbin of history?  Every firm had a clear, compelling vision once, and every firm can have a clear compelling vision again.  What is your vision, your goal, your strategy for your business?  The lack of those features means your teams simply can't innovate successfully, and that means eventual stagnation and irrelevance.
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posted by Jeffrey Phillips at 5:10 AM 7 comments

Wednesday, March 09, 2011

Treating Innovation as an experiment

Most businesses recognize that they "need" to do innovation, just like I recognize that I "need" more exercise.  Unfortunately, while for me more exercise simply means setting aside the time to do it and having the discipline to actually go out and jog, or swim, or bike, innovation takes more than time and discipline.  It takes resources, and few firms today have any spare resources lying around.  Which means that innovation is often taken on board very carefully, in a very controlled experiment, with limited time and limited resources.

Far too often large businesses treat innovation as a risky experiment, a concoction held at arm's length.  These firms fail to create a hypothesis, fail to invest fully in the experiment and are often quick to reject or ignore the results.  This is a Potemkin Village of innovation, which appears robust and interesting from a distance but what on closer examination is full of holes.  Why is innovation treated as a dangerous, risky experiment?

As noted above, innovation is new, risky, uncertain and requires time, resources and discipline.  Unfortunately none of the last are in big supply.  So, to minimize the impact and requirement for time and resources, the exercise is often limited to some small team focused on some unimportant issue.  Since there's not a lot of risk involved, the ideas are small and the investment is small.  Everything becomes smaller and smaller until there's no longer an experiment.  What's left is just an exercise to validate the existing thinking. 

Don't get me wrong - I don't think any firm can simply "jump" into full-fledged innovation without learning the ropes and gaining skills, but many innovation efforts are so carefully crafted and so limited that they produce nothing of value, or they are so isolated and target such unimportant or uninteresting issues that the results aren't replicable or valuable.  Once these innovation experiments are finished, everyone nods and agrees that a) the firm isn't really innovative and the results prove the original thinking or b) innovation doesn't really add any value.  In many cases the experiment proves the unspoken hypothesis.

We need to either conduct a real innovation experiment, fully cognizant of the investments and risks, with a clearly stated, important hypothesis, and let the work run its course, or we need to stop pretending to test the waters with phony innovation experiments.  Today we've trained our teams to believe they should know the answer to every question and every initiative before they begin, which eliminates the possibility of discovery and reduces what people are willing to work on, since they may not know the likely answers.  At one time experiments were meant to help prove hypotheses or introduce new learning, now we expect them merely to validate our existing beliefs.

As I noted in a Twitter post which led to this blog post, we should stop experimenting with innovation and start innovating with experiments.
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posted by Jeffrey Phillips at 7:12 AM 2 comments

Monday, March 07, 2011

Criteria for your idea

I'm always a bit skeptical when I read about any definitive list, whether it's six things to improve my complexion or seven myths of innovation.  So I enter with some trepidation a list for your perusal, a checklist of sorts to help you ascertain whether or not your idea can become a a successful innovation.

Note that the list below isn't necessarily exclusive, and if you have factors or considerations you'd like to add I'd be glad to hear them (please enter them in the comments below, and please, no offers of Nigeria bank transfers or knock-off Nikes).  Also note that even if your idea meets or exceeds your wildest expectations when you compare it to this list, you've accomplished about 1% of the work.  After all, Edison said "Genius is 1% inspiration and 99% perspiration".  So start what is often the more difficult part of innovation, the execution.

Here's my checklist to determine if your idea has merit:

  1. Does it solve a problem that is relevant and important to a customer?
  2. Does it cut costs, remove a significant barrier or create a significantly different capability?
  3. Will the idea be easy to adopt for the target customer, with low switching costs?
  4. Is the offer and benefit easy to understand, and easy to communicate?
  5. Is your idea protectable or defensible?  Is there any intellectual property?
  6. Do you have concepts beyond product innovation?  Can you extend your idea to service innovation, business model innovation or customer experience?
  7. Can you offer your idea at a price point where you make money?
  8. Can you scale your concept quickly?

For any idea, in any industry or market, if an idea can pass all of these questions, it has a strong chance of success, but only if you can take the next steps to develop the idea, test it in the marketplace and then launch it.

What about you, dear readers?  What other criteria would you add that isn't on my list?
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posted by Jeffrey Phillips at 5:39 AM 16 comments

Friday, March 04, 2011

Stop disrupting and solve the disruptions

It struck me recently that a lot of firms treat their customers as nameless, faceless objects all of whom share the same needs and have the same reactions to products.  Of course marketing has taught us over the years to segment our markets and attack the needs of the customers within specific segments.  If the segmentation is done well, segments should be relatively distinct from one another, with homogeneous needs within the segment and heterogeneous needs across segments.  This neglects one really interesting aspect of life that innovation often solves:  innovation around "moments" or "movements".  We as innovators spend far too much time trying to disrupt markets when we should find solutions for the frequently occuring disruptions that happen in a customer's life.

We assume that everyone in a segment has relatively the same expectations and needs, so therefore a product or service that addresses some needs or expectations that the people in the segment have will be rapidly adopted.  What we miss is that many of the people in any segment are not actually static:  they are moving into and out of various life events and life stages even while in the segment, and it is at these critical inflection points that innovation may provide the most value and be the most easily adopted.

Consider that many people don't adopt new products or services because to do so means to change their behavior.  Consumers who are in their "happy place" in their lives, content with their surroundings will resist change.  A product or service must have significantly more value over existing services or products in order to encourage them to change.  However, we humans go through a number of intentional and unintentional "life events" in our lives where change is thrust upon us, and these moments of change are often excellent opportunities for innovation, since the customer is experiencing change and uncertainty, and any product or service that eases the change or shortens the time to reach the new status quo is valuable.

Here's just one example:  Think about the different financial decisions and transactions an individual undertakes in just a few years.  Graduating from college most will start or increase their banking services.  They now must pay their own bills and perhaps plan for retirement even at an early age.  Often, not long after college an individual gets married and combines resources and learns to plan and budget in the company of another person.  Typically, not long after that a child comes along and forces the couple to budget for the expenses of raising a child.  In many cases, in less than a decade, this individual moves through three significant life changing events, each of which are significant opportunities for product and service innovation by financial institutions.  Yet few if any offer any real training, education, budgeting or planning tools to help smooth the way through what are significant disruptions in an individual's financial life.

What's interesting is how many of these life events or disruptions there are in an individual's life, and how little innovation is available to ease the transition between them.  Getting or losing a job, getting married or getting divorced, a death in the family, moving to a new location, having a child, sending that child to college, becoming an empty nester, retirement, and many more "life events" are significant disruptions and open up the individual to change.  In these instances the individual is open to new ideas because their existing world is changing, and any idea, product or service that simplifies the change or reduces its impact is valuable.  These, clearly, are major life events, but there are a host of other, smaller events that leave us needing more information, better insight or a bridge between an old existence that was safe and comfortable and a new existence that is yet uncertain.  Innovators need to focus on these shifts, disruptions and life events as opportunities for new products and services, because the customer is in a period of disruption and needs to be "re-anchored" in a safe, productive place once the change is complete.

Stop trying to force change and disruption on the client with new products and services they find difficult to adopt in their "steady state" life and instead find opportunities to smooth the inevitable disruptions we all face in significant life events or other imposed or inevitable disruptions in life.
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posted by Jeffrey Phillips at 6:15 AM 6 comments

Tuesday, March 01, 2011

The relationship between innovation and process

There are perhaps few more misunderstood concepts than the idea of support and enabling innovation efforts with a defined innovation process.  Let me start by saying that our business exists to help create sustained innovation in larger businesses, which we believe can only happen through the definition of an innovation process.  So I admit to "process" bias, but at the same time we've seen many firms benefit from defining an innovation process, and many firms fail without one.  Let's dig a little deeper, shall we?

First, let's consider typical innovation in many firms.  If innovation is a one-time, discrete event that won't be repeated, there's probably not much need for a defined process, since the work is ad-hoc and can't be well defined, and won't be done again, at least in the short run.  In this situation, an innovation process is overkill.  We'd argue that many of these efforts won't be successful, since innovation requires skills and disciplines, and risk tolerances that can't be deployed in emergencies or "one time" events.

Now, let's think about innovation as a repeatable capability, a business discipline.  If an organization believes that innovation can drive value over time, it would make sense that the organization create structures that allow the effort to be repeated.  The firm could define how the work to generate and evaluate ideas should be accomplished - the "work flow" and could begin to define the roles that support that "work flow".  If this is beginning to sound a lot like a "process", then you are correct.  In a large firm, any work that must be done well is done aligned to a defined process. 

A process allows the firm to define upstream and downstream activities, to direct and simplify workflow, assign tasks and responsibilities to people who have been trained in their roles.  A process also ensures work is done the same way, within reason, every time it is conducted and that the process and the people involved enjoy the benefits of a learning curve, gaining insights and skills over time.  Think about every other important activity in your business.  It follows a well defined and well-regulated process, whether that process is a formal, documented ISO certified process or an informal process sustained by the corporate culture.  If innovation is important, why wouldn't it have a defined methodology and process?

Many will argue that "processes" can strangle innovation, and to a certain extent I'll agree.  In some firms a "process" is built to demonstrate that the firm is engaged in innovation, but the process is meant to slow walk the ideas so the appearance of innovation is projected but nothing is actually delivered.  Yes, there are cynical people in some businesses who are interested in the appearance of innovation.  In other organizations people lose sight of what is the tool and what is the outcome - the process becomes paramount and ideas stagnate.  In other organizations the process for innovation is the same process as is used for other activities, and new ideas don't fit well within the process and are rejected.  An annual planning process is a great example.  Most initiatives that request funds are highly scripted and based on examples from previous requests, while innovative ideas often don't have the same rigor or documentation, and are rejected.  That's not a failure of the process, it's a failure to use the right process or place the ideas into a process meant to encourage ideas.

Yes, I can use process to stymie ideas but most larger firms simply cannot innovate repeatedly without defining a workflow, responsibilities and methods for ideas to transverse the path from idea to commercial product.  Let's distinguish between effective processes that accelerate innovation and those failed processes that either weren't meant to accelerate innovation or weren't the right processes for innovative ideas to begin with.  Keep the outcome in mind and find the right tools that create the most beneficial outcomes.
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posted by Jeffrey Phillips at 8:13 AM 2 comments