Tuesday, February 28, 2012

The Tyranny of Today blocks innovation

Last week I was talking with a client about the reasons why innovation seemed to be difficult in her business.  We talked about the usual suspects - commitment, funding, focus and so on - and then she said: of course, there's also the tyranny of today.  There are some moments in a person's life you have to look back and wonder if they were scripted.  She actually said the tyranny of today, and if it were possible I would have reached through the phone and given her a hug.

The tyranny of today?  What's not to like?  For innovators the tyranny of today is personified as Lex Luther, superman's alter ego.  The tyranny of today as a phrase does more, with less, to describe the barriers to innovation than almost any description I've heard.  And I should know, I wrote Relentless Innovation trying to define how to overcome the tyranny of today.

What's today got to do with it?

Today has become paramount in business thinking.  What can we solve today, what problems exist today, what are our revenues today?  This focus on today has led to ever shortening timeframes, smaller and smaller decisions, less and less risk and far less investigation into future needs and trends.  Today is paramount, and as I've argued before we prize fire-fighting far more than fire prevention or fire proofing.  Rather than investigate emerging threats and create new products and services, we heap praise on people who fight the fires today that should have been predicted and avoided months and years ago.  But the tyranny of today doesn't allow that to happen.

One big reason for the tyranny of today?  An "all hands on deck" mentality, which means that all available resources are focused on today's issues, today's needs, today's problems.  Ever more efficient operating models have pared organizations to the bone, meaning that anyone not working on today's issues seem superfluous.  Until the new products and services cupboard is bare because no one was working on new products and services.

We've created very powerful "business as usual" engines, and increasing, these engines no longer serve us, we serve them.  The BAU models dictate how we think, how we deploy resources and how we reward people.  The tyranny of today is based on our business as usual operating models and the perverted ways in which they drive our strategies, our thinking and the way we apply resources.

Is today important?

Sure.  Today is very important, but change is inevitable and the pace of change is increasing.  If there were no change then maintaining and improving the status quo would be paramount.  Since the forces of change are inexorable, any firm developing more skills at standing still, locked in they tyranny of today is simply marking time till its own obsolescence.  Since we KNOW that change is occurring, since we know that the pace of change is accelerating, since we know that the cost of entry for new competitors is decreasing and the number of competitors is increasing, deep down we know that while today is important, tomorrow is even more uncertain.  And perhaps that increasing uncertainty causes us to flinch away, ignoring what's behind the dark door for what's in the evident present.  But simply ignoring the future, honing the present business model and hoping that change will pass us by is not strategy, it's the absence of strategy, and abdication of decision making.

Focus on the Future

Rather than wait passively for the future to unfold, stymied by the tyranny of today and existing business as usual models, we need to create an equally important "focus on the future".  Balancing a tyranny of today, with its requisite efficiency and short term goals with a focus on the future, to understand and embrace new products, services and business models, restores a balance between reactive, short term efficiency and proactive, long term vision.  And that balance creates a more nimble, flexible company that can survive the tyranny of today and overcome the fears of the future.

Next time the tyranny of today forces your firm into decisions or actions that defer innovation and promote short term thinking, ask yourself and your team:  can we balance the tyranny of today with a focus on the future?
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posted by Jeffrey Phillips at 5:49 AM 0 comments

Monday, February 27, 2012

A new innovation paradigm

History, Mark Twain said, doesn't repeat itself but it does rhyme.  Spinoza wrote that those who ignore history are doomed to repeat it.  Where innovation is concerned, it seems we have to constantly rediscover what's worked in the past, and return to those models, rather than build on what worked and expand on it.

I'm writing this post today in response to True Innovation, the New York Times article about the innovation engine that was Bell Labs.  The author, Jon Gertner, expounds in the article and in his new book about the innovation that sprung forth from Bell Labs in its heyday.  And quite the innovator it was. Beyond the transistor, much of the basis for the internet and a range of other technologies, the first research into the "big bang" was conducted by Bell Lab employees.  As a powerful R&D engine, Bell Labs was in a league by itself.  But it wasn't in a model by itself.

The original innovation lab was also built in New Jersey, also built by a visionary innovator, but his name was Edison.  In Menlo Park, Edison constructed what was probably one of the first innovation labs, and the one that many R&D centric innovation programs are intentionally or unintentionally modeled on.  Edison's insights, which were novel at the time, were:
  1. House a number of technicians and engineers in one lab
  2. Purposefully explore a number of new technologies in different fields simultaneously
  3. Create plenty of opportunities for cross-pollination across different fields of research
  4. Create an intentional innovation engine, with quantifiable goals for the number of minor and major innovations produced each month
My colleague Dean Hering produced a short video about the first innovation lab, which identifies the muckers (people who worked on the different technologies) and also notes that Edison had a system to capture and process the inventions.  Note as well that after Edison failed to gain much interest in his first invention, an automatic voting system for Congress, that he vowed never to create an invention unless there was a demonstrated market for it.

The point of examining Edison's Menlo Park lab is to say that Bell Labs, while exceptionally innovative, was simply following in the footsteps of Edison's Menlo Park lab, and that other organizations, like Xerox PARC, have since walked in the same footsteps.  Attention should be paid to the antecedents of Bell Labs, and to other firms that have pursued the same concepts.

A new paradigm, building on the old

However, we must build on and expand the Bell Labs model for success in the future.  The markets have changed, customer demands and expectations have changed and therefore how an innovation engine must operate has changed.  Many of the factors that Gertner notes were successful for Bell Labs - interaction across disciplines, long, patient management cycles, as examples - are still relevant, but any innovation engine must embrace the modern realities of innovation as well.

Perhaps the most glaring difference between Bell Labs model and the existing demand for innovation is based on interaction.  The photo says it all - one long hallway filled with Bell engineers.  Today, innovation demand interaction with people inside, and outside, the organization.  Very few firms can afford to hire the number of R&D specialists necessary to drive enough innovation to counter everything that's going on in the rest of the world.  If P&G felt the need to pursue "open" innovation, then every firm must consider how it will participate in open innovation.  Our innovation teams must be open to interaction with external partners for idea exchange, to find and exchange research and new technologies, and open to the method and manner of new product commercialization.

Another significant difference is the range of innovation options available.  Bell Labs and other R&D centric organizations focus innovation on new technical products.  But innovation can be demonstrated through new customer experiences, new services, new business models and more.  The expectation of innovation is much broader, so the delivery of new products, services and business models must become far broader.  Innovation isn't just about new physical products or even new technologies.  Innovation is expected and demanded in all facets of life.  Old business models in industries like publishing are dying and new models must rise to take their place.

Yes, we need to look back at successful models such as Bell Labs, or perhaps even to the predecessor which was Edison's Menlo Park.  But we can't simply replicate these models.  We have to take what's best from these models and add to them the factors that will drive success in today's markets.  Speed, openness and the breadth of innovations delivered are just a few of the ways in which the Bell Labs and Menlo Park models need to change to adapt to needs in this century.

PS:  I have not read Gertner's Book The Idea Factory, so it is possible he explores what modern innovators must add to the innovation models of Menlo Park and Bell Labs.  This post was written in response to the NYT article included in the link above.
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posted by Jeffrey Phillips at 5:39 AM 0 comments

Thursday, February 23, 2012

How to reduce innovation risk

Every day when I come to work I scan my Twitter stream and get insights from hundreds of people who have excellent perspectives on innovation.  There are people who write about open innovation.  There are people who write about business model innovation.  There are people who write about new products, innovations in specific industries and topics like reverse innovation.  The diversity of insights and range of topics demonstrates how valuable innovation can be.  But while there is great diversity of opportunity, there also remains a great distribution of success and failure, which creates innovation risk.  And while there are many types of innovation, one common factor in all innovation efforts is risk.

As I've written in Relentless Innovation, innovation is fraught with risk.  There is risk that an innovator won't identify important needs.  Risks that innovation teams disrupt the regular operations of a business.  Risks that even a promising idea isn't accepted by the customers whose need it was meant to address.  Instead of the scarlet "A" from Hawthorne's novel, every innovator and every innovative idea wears the black "R" for risk.  And in the modern business model, risk is to be avoided at all costs.

Risk introduces uncertainty, costs, variability and unpredictability.  These factors run in opposition to business as usual - the work most firms have done to streamline operations, create predictable short term results, eliminate unnecessary costs and reduce or eliminate variability.  Innovation introduces the snake of risk back into the garden of efficient, effective business operations.  And yes, that snake whispers sweetly to some executives about the mythical risk/reward tradeoffs.

Clearly, if our highly efficient, productive business models are to become more innovative, they need to believe that innovation risk can be reduced or controlled.  Either that or the operating models must become far more comfortable with risk and its costs and variances.  I suspect the latter requires far more cultural change than many firms will sustain.  If the tradeoff is trying to reduce innovation risk or reduce the resistance of the culture to risk, I think the former is the place to start.

How does a firm reduce or eliminate innovation risk?  I think there are at least five actions that can dramatically reduce innovation risk.  Note that I didn't say eliminate risk.  I doubt that is possible, but I do believe innovation risk can be dramatically reduced through the following actions:

  • Align innovation to strategic goals.  Far too often, innovation activities jump the tracks, pursuing interesting ideas that aren't in line with corporate goals and strategies.  This is an especially damaging result:  good money and resources spent on poor outcomes.  A clear strategic goal and documented scope provides a framework for innovators, increasing their chance of success.
  • Executives clearly committed to innovation.  Rather than propound the need for innovation, executives need to provide the best resources, provide funding and stay engaged in early innovation efforts.  Otherwise innovation is viewed as the flavor of the month and slowly withers from a lack of engagement and a dearth of resources.
  • People who understand what to do.  Many innovation teams are simply going through the motions of innovation, pantomiming their way to an acceptable idea.  They aren't trained in innovation tools or techniques, and, more importantly, aren't open to really big ideas.  They haven't changed their perspectives, still encumbered by the risk profiles of the business.  Only when the best people are on innovation teams, have released their thinking anchors and have received training on the best innovation methods and tools can innovation succeed regularly.
  • Clear insights into customer wants and needs.  Far too often innovation teams review existing market research and suggest ideas that extend existing products and services.  It's rare that an innovation team meets a real customer, much less explores new unmet or unarticulated needs.  Identifying and validating new needs and creating ideas based on these needs will greatly reduce the risk of innovation.
  • Doing innovation at speed.  Most innovation teams struggle with the culture, which is resistant to innovation, focused on the status quo, stuck in meetings.  Most innovation teams lack sufficient resources and pull people on a part-time basis from their day jobs.  Most innovation teams have to invent their innovation processes, which delays the work and forces the people around them to question they ability to innovate.  The longer an innovation project drags on, the less likely it is to be successful.  And the longer a project drags on, the less valuable any needs or insights that were spotted become.  Innovators can reduce risk by creating educated teams following defined workflow and working quickly to ascertain needs, generate ideas and validate those ideas in the marketplace.  Instead of slow and steady, move fast and steady.
By the way, while we are on the subject, there are several ways of reducing risk that don't work well:
  • Reducing the scope of the idea.   Many, many ideas start life as interesting and disruptive concepts, and over time are reduced, shrunk and rounded off to become incremental at best.  Yes, this reduces the risk but also eliminates much of the differentiation and the reward
  • Fast follower.  Many organizations believe that they can wait for others to innovate, then quickly copy the product or service.  The fast follower model works if 1) your development teams are truly fast (which most aren't) and 2) you understand what the customer values in the product you are copying (many times firms don't understand the customer value proposition).  As product cycles shrink and customers become ever more discerning, fast followers are left with less and less margin.  Again, little risk but little reward.

There are many more ways to reduce innovation risk, but we don't have time or space for them in a blog post.  This should be the first order of business for any innovator - trying to define the types and nature of risk that innovation presents, and understanding how to eliminate or reduce risk.  It's strange actually - everything about business is a risk/reward tradeoff, yet in many organizations we've lost the ability to balance the two, and seek only opportunities with no risk and little reward.
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posted by Jeffrey Phillips at 5:49 AM 1 comments

Monday, February 20, 2012

Real innovators ship products customers can adopt

So here's a big conundrum in the world of new product development and innovation.  Why is it that after careful needs gathering, excellent idea generation and a streamlined but productive product development process that your new product is met with the customer equivalent of a shrugged shoulder?  Why is it that when you've done everything right - spotted trends, walked a mile in the customer's shoes, pursued a jobs to be done strategy, and so forth that too often new products don't seem to jump off the shelves?  I'll stipulate the reason is the difference between evaluating ideas from an internal perspective and assessing a product from a customer's perspective.  What we think is interesting and valuable does not matter.  What matters is if the customer is willing to take the risk to change.  And yes, every change from an existing product or service to a new product has embedded risks.

There are three risks in particular that we must address when introducing a new product or service into the marketplace.  Clearly the product or service must offer equivalent benefits at a lower price or new and improved capabilities at the same value proposition.  But if you've achieved these offerings then you have won a seat at the table.  You must then overcome the risks that customers perceive in any new product or service:
  • Will it be difficult to adopt?
  • Will it be compatible with my existing way of life?
  • Is it "complete"?
No matter how well the idea ranks in our evaluation frameworks, the customer is seeking products and services to make their lives easier, or better, or more informed.  If your idea achieves those goals, that's table stakes.  If your idea is difficult to adopt, requires significant change, forces the customer to acquire education or more knowledge in order to use the product effectively, then you've probably lost the game.

Inertia is probably one of the biggest barriers to new product or service adoption, and to overcome inertia the customer bases has to recognize that a new product or service offers very enhanced benefits, and doesn't create a lot of work for a customer in order to switch and adopt.  The more work the customer has to take on to adopt the new product or service, the better the benefits had better be.  This is why even great new solutions often aren't quickly adopted, the inertia level and adoption effort is simply too high, even for an idea that offers compelling new benefits.

Beyond forcing the customer to change in the adoption of a new product or service, there's another significant question - does the product or service "work" with the existing infrastructure of operating systems, conventions, protocols and other expected and long held agreements?  If a new product offers compelling functionality but does not work well within the rest of the customer's solution set or needs, it won't be adopted.  Far too often, innovators dream of "disruption" but don't understand the power of compatibility.  Every product or service is launched in a market where thousands of formal and informal agreements, standards, conventions and protocols exist.  No matter how compelling your product or service is, it had better be compatible with the existing infrastructure or offer so much value that it can rebuild the infrastructure from the ground up.

We innovators are often the "early adopters" and as such we expect others to be early adopters as well.  When Geoffrey Moore wrote about Crossing the Chasm, he wasn't talking only to large corporate entities but also to every innovator.  In the long run it does not matter how much the early adopters love your innovation, if the product or service can't cross over to the early majority.  And what the early majority wants is "completeness" or what Moore called the "Whole Product".  The difference between an early adopter and the early majority is that both are interested in new solutions, but early adopters are willing to try products that don't quite have a support strategy, or perhaps don't have all the documentation complete.  Early majority, on the other hand, wants new technologies but wants all of the "augmented" product in place - support, communities, online and offline resources, channels, training, accessories and so forth.  Without this "whole product" the early majority isn't going to bite, no matter how compelling the new product or technology appears to be.

We at OVO have a 7C framework that examines ideas from the customer's perspective.  Two of the "Cs" - compatibility and completeness, are described above.  This presentation describes the other Cs that customers use to determine if a new product or service is right for them.  When you evaluate your new products, make sure they meet your internal frameworks and thresholds, and also make sure the ideas will be valuable and important from a customer's perspective. If your ideas aren't receiving the accolades and rapid acquisition you'd hoped for, contact us.  We can help you shape your ideas based on internal evaluations, as well as customer needs and the 7C framework to achieve far more adoption, at a much faster rate.
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posted by Jeffrey Phillips at 1:00 PM 1 comments

Friday, February 17, 2012

Why do we want innovations yet fear innovation?

I was thinking about writing a blog post about corporate culture and its resistance to innovation.  I even had this snappy analogy ready about how corporate culture is like a wet blanket thrown on the fire of innovation.  Other ideas I wanted to explore included how corporations "but" ideas to death.  But it won't work, but we don't have the people, but it will distract from our existing products.  And so forth.

However, the more I thought about writing that post - and don't worry - few seconds were lost in that perusal - the more I was certain that everyone knows that culture and organizational perspectives are for the most part inimical to innovation. But what really stumped me, thinking just a bit more, is the dissonance between the reaction many people have about innovation in their organization, and their wondrous, blithe acceptance of innovation from other firms or individuals.  It's almost as if most of us have bifurcated minds - absolutely rejecting the possibility of innovation WITHIN our organizations while simultaneously DEMANDING innovation from other firms.

A case in point to illuminate the discussion.  Many of our clients, when confronted with new ideas that may actually benefit the firm by attracting new customers, worry about their ability to produce the idea, market the idea, fund the idea.  They worry about how management will perceive the idea, whether or not the organization will fund the idea.  They worry about disrupting existing products or cannibalizing their own markets.  Every possible exception is made to demonstrate why it will be so difficult to innovate.

Yet these same individuals whip out iPhones at the sound of the xylophone that is now the ubiquitous ring tone.  They jot notes on yellow sticky pads that have become a requirement of modern business work.  They search for specific terms in a web browser and search engine.  They wear the latest in water-proof, wind-proof, sweat-proof, dirt resistant shells.  They expect, no DEMAND, innovation in the products and services they buy, and are disappointed when the brands they know and trust fail to deliver ever more innovation.

What causes the dichotomy?  Why are so many people unable to imagine their own firms creating interesting, innovative new products and services?  Why are so many firms resistant to innovation, when there is clearly so much expectation and demand for new products and services?  Why do the same people who "yes, but" an idea to death in their own organization immediately rush out and acquire new products and services?  Clearly these innovations came from somewhere - an imaginary land of innovative firms where "everyone" is innovative.

These consumers - who are really all of us - want new products and are evidence of the opportunities that interesting new products and services create.  Yet somehow when we return to our desks, doubt and uncertainty creep in.  Only certain firms can innovate.  There's not really a market for this.  Stick to your knitting and let others develop the new markets.  We become economists, who thankfully only have two hands, who say "on the one hand, there might be a market for this idea, but on the other hand...". 

My only conclusion is that the threshold to many corporate office buildings must hold powerful magic that creates temporary amnesia and replaces demand with fear.  Every person who "yes buts" an idea in a conference room while texting on an iPhone or Android should take a long look in the mirror.  We have met the enemy of innovation and he is us.
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posted by Jeffrey Phillips at 6:37 AM 2 comments

Thursday, February 16, 2012

Only the Innovative and Efficient Survive

Andy Grove wrote about his experiences at Intel in a book entitled "Only the Paranoid survive".  Paranoia, at least as described by Grove, was the constant fear that someone would disrupt Intel's business, and his passionate pursuit of innovation to remain the top semiconductor manufacturer.  I was thinking about this today after reading Scott Anthony's post on HBR entitled Negotiating Innovation and Control.  Scott reviews three academic frameworks that examine the tradeoff between innovation and control.

Scott looks at Christensen's framework, which argues that a firm can't simultaneously house two competing philosophies.  Christensen believes that one will be dominant and the other must be spun off.  Further he looks at two other frameworks, one by Tushman and O'Reilly that examines "ambidextrous" organizations, carefully balancing both competencies, and finally a framework by Govindarajan and Trimble that argues for a discovery team and a performance engine - basically an efficient development capability loosely coupled with a disruptive, innovative front end.

In my book Relentless Innovation I argued (in line with Christensen) that "business as usual" operating models focused on efficiency and effectiveness are barriers to innovation.  I also think that Govindarajan's model of an innovative "front end" and a highly efficient performance engine that converts ideas into products and services effectively is a valuable idea.  But the real opportunity as innovation becomes a competitive advantage is the concept that all firms must become ambidextrous - as good at innovation as they are at control and efficiency.

I'm not the first to make this claim - Roger Martin suggested the framework in his book The Opposable Mind.  Basically he argues that corporations should be able to pursue "both/and" strategies using integrative thinking rather than more simplistic "either/or" strategies.  As managers and their roles (and more importantly education and tools) have evolved, we have the talent to build organizations that can be both innovative and efficient.

Scott has accurately identified three frameworks which represent current thinking about the structure of a business and how control, efficiency and innovation are manifested.  However, I think that as we look to the future successful firms will be those that achieve balance between innovation and efficiency as part of one operating model, one core capability, one organizational culture.  No firm can sacrifice efficiency and control.  That would lead to poor product quality and higher costs.  Conversely, no firm can sacrifice innovation.  That would lead to commoditization and obsolescence.  As we move into the future, both skills are necessary, within one corporate framework.  That's why I think every firm must move from a "business as usual" operating model to an "innovation business as usual" operating model, fully balancing innovation and efficiency.

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posted by Jeffrey Phillips at 6:07 AM 0 comments

Tuesday, February 14, 2012

What are the opportunity costs of not innovating?

A client asked me this question recently, and it has been much on my mind.  The question, when boiled down, was this - we know the costs of "business as usual" and we think we know what it will cost to innovate.  Often, the costs and uncertainties related to innovation block our innovation efforts.  But we have no way of measuring the cost of failing to innovate.  Is there a way to measure the opportunity costs of not innovating?

Wow.  If I had the answer to that one, I'd be residing on a tropical beach with a cold, fruity drink in hand (this being a recurring theme when/if I strike it rich).  But, since I don't have a crystal ball to predict the cost of foregone opportunities, we ought to ask ourselves if this is a reasonable request.  Could we compare the investment in idea generation and innovation versus the potential revenues we miss by not innovating?  Can we compare the value of the missed opportunities to the opportunities we chose to pursue?

I think the answer is a qualified "yes".  That is, we innovators should attempt to place a value on every innovation or every good idea, and suggest that the avoidance of innovation means that we miss out on new customers, new markets and most importantly, new revenues streams and new profits.  Those missed opportunities come at a cost - usually in disruption or product or service obsolescence.  This analysis requires a number of assumptions - that we can create a new product or service, that it has value or benefits to customers, and that we can assert some knowledge about the downstream revenues or profits that will be missed if we don't innovate.

Unfortunately, I can speak about this from personal experience.  We led a project with a large enterprise and presented several very valuable ideas, ideas that would disrupt the marketplace and that were relevant to consumers.  We knew the suggested products and services were attractive to consumers because we conducted rigorous testing in the marketplace.  Yet when we requested funding to accelerate the ideas to finished products, no funding was available.  The client wasn't comfortable with the risks involved and was too focused on short term concerns.   Over the next three years, competitors created products that were similar or virtually identical to the products we had suggested, and our client was forced to play "catch up" with the ideas that we had presented years before.  I know what the costs of playing catch up were, and I can also assume that the first mover commanded more margin and won more customers because they were first.  So, it is possible to get an accurate accounting of the missed opportunities, if only after the fact.

Managers are trained to ask "what's the cost" when considering a new innovation, but rarely if ever ask "what's the size of the opportunity we miss if we avoid innovating".  As a manager or executive, you must consider not only the short term costs of innovation, but also the longer term implications if you don't innovate.  What is the cost of not innovating?  What if another competitor releases a product or service before you do?  What are the costs of being forced to respond, rather than forcing other firms to respond to your great ideas?

Update (3/9/2012)

There is a nice HBR article by the man himself, Clayton Christensen, and Kaufman and Shih which address this issue nicely.  In the paper entitled Innovation Killers (from January 2008) they state that most executives consider the cost of innovation against a static, do nothing status quo, when they should really consider the costs of a decline in performance once the firm fails to innovate.  They use this graphic to make their point:
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posted by Jeffrey Phillips at 7:10 AM 3 comments

Wednesday, February 08, 2012

If we had a blank slate

As you may have noticed, Paul Hobcraft and I have been interacting on the subject of "frozen" middle managers and their impact on innovation. No, they aren't cold, they are frozen in their thinking and perspectives.  The pressures of efficiency and short term profitability have frozen their visions, actions and incentives.  As we all know, middle managers are the folks who get things done - using resources efficiently and acting as a bridge between executives (who create vision and direction) and staff (who implement the plans to achieve the goals).  If the middle is frozen, it becomes difficult for the rest of the organization to move, regardless of how much they want to move.

In some discussions online Paul received this bit of feedback about the "Frozen" middle managers:
The cavalry is not coming. It is the responsibility of every manager to be innovative and grow the business. Very difficult to do when everyone is working 12 hour days.
So what are you going to stop doing to make room to run your innovation experiments.
This represents what I call the zero sum thinking approach, and unfortunately also represents reality in many companies.  The argument here is that the middle managers have no time for innovation.  If innovation is (or must be) introduced, what is the executive team going to de-emphasize or remove from its expectations?

There's a question I often like to ask at this point in the conversation to reframe the debate.  That question is:
If you were starting fresh in this market today, what would your offerings look like?
Yes, the "blank slate" "start from scratch" approach.  What this approach allows us to do, if even just for a moment, is to shift perspectives.  There are usually three insights:
  1. What I'd stop doing - every business is supporting products or initiatives that don't have any real value, and the investments in those activities crowd out other useful activities.
  2. What I'd do more of - every business should rebalance its portfolio and chose where to place emphasis
  3. What I'd do that's new - and here's where we move from defense into offense.  Doing more of the same, only faster and with fewer resources, is competing in the "red ocean".  Could we step back and find new solutions, new offerings, new markets that allow us to open up a "blue ocean"?
This mental exercise is meant to explore what's really valuable and important.  Sure, everyone has more work than they can possibly complete, and the pressure is on to do more with less, and accomplish all the important goals.  The "blank slate" review, which every management team, every product team, every business line should do at least twice a year, is meant to compare what you are spending time and valuable resources on, and ask if these are the BEST uses of time, focus and resources.  If not, then let's free up time and availability for innovation.

What are we going to stop doing to make room for innovation?  The question almost answers itself if you take a blank slate approach.  What products, services and business models are outdated or require more in investment and time than they return?  What would you do if you could start from scratch?  Even if you can't start from scratch, realize that other entrants and disrupters are doing exactly that.  It's better to obsolete your own products and services intentionally than have others do it for you as a surprise.
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posted by Jeffrey Phillips at 8:06 AM 1 comments

Tuesday, February 07, 2012

Slow Motion Innovation Disaster

I was discussing the disaster that is Kodak with a friend today when he said something I found difficult to believe.  He suggested that Kodak never saw or understood the impact that digital photography would have on its business.  I think quite the opposite is true.  Kodak knew what digital represented, and was an early developer of much digital intellectual property.  Plenty of Kodak employees forecast what was likely to happen if Kodak didn't change its emphasis on film and shift to focus on digital.  Kodak's failure isn't one of a lack of vision or understanding.  It is a slow motion disaster based on barriers created by existing business models, management schemes, hierarchies, compensation, culture and a range of other factors.  The people, the culture, the organization models and expectations simply could not let go of the past, and no one was able to fully contemplate what the impact of digital would be to Kodak and to its business.

What's interesting is that there are two other significant industries that are in the midst of this slow motion disaster right now.  We have ring side seats to the events, and it will be interesting, and painful for us as consumers to see these slow motion disasters unfold.  But the impacts that will (and are) occurring in book publishing and in higher education are too instructive to miss.

Just like Kodak, I'm sure that book publishers have understood since the first e-reader or blog that the traditional publishing business models and timelines are dinosaurs.  The first chink in the armor was Amazon, which created new distribution channels and disrupted old ones.  The second chink was the increasing ease (and respectability) of self-publishing, with firms like Authorhouse and Lulu removing much of the cost and overhead of publishing a book.  The next chink was in the vast array of other publishing channels - blogs, Twitter, Kindle, e-books and so forth.  Now anyone can get "published" and the real challenge is drawing attention to the content.  When channels were limited and the number of books published was far smaller, publishing houses ruled by controlling content and channels.  That model is finished.  What remains to be seen is whether or not publishing houses can become channels and marketers, because as the amount of content increases, someone needs to separate the wheat from the chaff, and identify and promote the best material. Book publishing is a slow motion innovation disaster, but one that has been evolving for close to two decades. It's not a failure of vision or acknowledgement, it's that the models are so ingrained that they are difficult to change.  In the immortal words of the soldiers who burned My Lai "we had to destroy the village in order to save it".

Next, turn your attention with me to the college and university system, arguably unchanged since the 12th century.  When I speak on innovation at universities, I like to provoke conversation by asserting that we could parachute in a don from Oxford from the 12th century, and other than the dress styles, co-education and some technologies, everything would seem familiar to him.  But the business models of higher education are broken, and the products aren't much better.  Academics have a publish or perish mentality when the real value is in converting ideas into products more quickly.  Students aren't being prepared for real world expectations, as grade inflation increases and education demands decrease.  Costs are spiraling out of control.

As a father of twin daughters soon to go off to college, I'm amazed by the focus of most universities as they sell themselves to my daughters.  Study abroad, luxurious dorms and workout facilities, a range of food options unheard of in the real world, "low student faculty ratios", and so forth are promulgated.  Yet no one is measuring what the kids learn, how they advance and how the college prepares them for life afterwards.  Costs increase on unnecessary items, pricing many students out of college or forcing them to face debt loads that in my day only doctors or lawyers would contemplate.  Many recent graduates are frustrated because there aren't many jobs and many employers believe they must invest training dollars to bring new employees up to speed.  Larger firms are limiting their hiring yet few students understand the need to become entrepreneurs.  There's a mismatch between expectations and realities, and the collegiate business model is severely broken.  Yet instead of innovation, most colleges and universities are simply doing more of the same - adding more dorms, more Division 1 sports, more food options, instead of questioning the real value they need to deliver.

Colleges and universities understand that they need to change, but are locked into models based on historical precedence, existing cost structures, alumni expectations and competition with other schools and universities.  Just once I'd like to hear a college say "we're spartan, we focus on learning and knowledge, and all of our graduates are employed upon graduation".  Change is coming to higher learning.  A generation of students who can't afford to go to college, yet can't get jobs without the education will demand change or seek alternatives.  This is a vicious Catch-22 for a rising generation impatient with the status quo.

These factors aren't a surprise and aren't unknown to book publishers or institutes of higher education, just as the advance of digital photography wasn't a surprise to Kodak.  Heck, Kodak INVENTED much of the digital photography capability, but refused to let go of existing business models and understand the differences and impacts that digital would create.  We are all witnesses to what happened to Kodak, and we will watch with even more at stake as book publishers endure this shift and as higher education confronts the need for innovation.  The stakes in the last one, especially, are much higher for all of us.
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posted by Jeffrey Phillips at 7:41 AM 6 comments