Monday, October 15, 2012

The end of "either or" innovation

When I describe the challenges of innovating in a "business as usual" environment, many of my clients and the people who attend my presentations ask:  what can we do?  There is an increasing recognition that firms must be more innovative, and a growing realization that all of the management philosophies of the last 30 years, including quality, Six Sigma, Lean, outsourcing and right-sizing have created operating models that are inflexible, risk averse and highly efficient.  Or, in other words, very resistant to innovation.

Changing the process or changing the ideas

Einstein said that the definition of insanity is doing the same things over and over again and expecting different results.  That's a fair analysis of many innovation efforts.  If you attempt to innovate in a business as usual environment, using processes, workflow and teams that are steeped in efficiency and small bore thinking, you are insane if you expect anything other than incremental ideas.  Far too often teams are confronted with this "either or" proposition:  either we change the ideas to fit the mental models and operating processes, or we change the mental models to accept the risky ideas we need.  Since innovation often appears as the flavor of the month, and doesn't appear to be a lasting focus, it is far easier to change the ideas to fit the business as usual model rather than change the operating models and processes that have been perfected over 30 years.

How can a firm create disruptive ideas?

Here's another "either or" proposition.  How can a firm develop disruptive ideas?  There are two paths: the firm can work to shift its models and processes to accomodate more innovation in its regular work, or it can isolate innovation in a "skunkworks".  The first activity - reworking the operating processes and mental models - is time consuming and is only practical if innovation becomes a consistent activity.  The skunkworks seems less confrontational, less risky, because it isolates disruptive ideas from the rest of the business.  This is also the challenge.  Even if a skunkworks or an isolated team creates a really radical idea, the business must still adopt the idea, produce it and commercialize it.  Often a disruptive new idea changes far more than the offering - it demands changes to channels, to marketing and to business models as well.  So even a good idea conceived in a skunkworks can easily find barriers to commercialization.

The end of either or thinking

We are rapidly approaching the point where either or thinking will have to end.  Management teams are gradually becoming aware of the unintentional barriers that efficiency, risk aversion and short term thinking have erected for innovation.  Indeed, management teams are recognizing the need for more continuous innovation activity and the handcuffs that have been placed on the organization through efficient processes and cramped visions.  The "have your cake and eat it too" approach of focusing on efficiency and attempting periodic innovation is rapidly coming to a close.  Soon we'll see the mantra of "both and" - we need efficiency, but not at the cost of effective, consistent innovation.  Today, management teams are making tradeoffs between efficiency and innovation - and innovation usually loses because it is risky and uncertain.  But firms that "stick to their knitting" and focus on efficiency are rapidly losing pace with new entrants, market shifts and competitive pressures.  Innovation as a core competency is the answer.  What are you willing to sacrifice in terms of efficiency is the question.

Incremental or Disruptive, Product or Service

The tradeoffs that face innovators are many.  Should we pursue incremental innovation or disruptive innovation?  What are the best outcomes - new products or new services?  Who in the business should innovate - R&D or marketing, business units or geographies?  Note that all of these assume tradeoffs and mutual exclusivity.  That thinking is out of date.  Your firm should pursue incremental AND disruptive innovation, simultaneously.  It should pursue new products, new services AND new business models as innovation outcomes.  Every team, every function should be involved in innovation activities.  This is the end of "either or" innovation.

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posted by Jeffrey Phillips at 6:11 AM


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