The innovation bandwidth constraint

After discussions with a number of current customers and potential prospective clients, I've come to the conclusion that many businesses are at a critical inflection point in regards to the innovation they can conduct.  What's interesting is how closely the constraints align to larger economic issues.  I'm talking here about the necessary level of staffing in order to get things done.  What's I've referred to in the title as "bandwidth".

Today, after years of outsourcing, right sizing, continuous improvement and an unfortunate focus on efficiency most businesses run right on the bitter edge of staff availability and competency.  It's as if many businesses decided to identify the least possible amount of staff to accomplish the everyday work that must be done, and then reduce headcount by 10%, all the while whistling past the graveyard, knowing full well that there is no staff availability to do anything above and beyond the everyday work.  When my clients talk about a lack of time or a lack of available resources to do innovation work, I don't doubt them.  Many businesses seem to lack the people to get their regular work completed.

While OVO interacts with only a handful of companies at a time, I get the feeling that my observations are in line with what other colleagues are seeing - that the productivity curve has reached or perhaps exceeded it's optimal levels.  Businesses are asking fewer and fewer people to do more and more work, and increasingly it comes at the expense of doing anything new or different.  There simply isn't enough time or enough bandwidth in many corporations to take on new, innovative or different projects.  We ought to stop and consider the paradox presented by overworked, overwhelmed corporate executives in the face of unemployment and underemployment in the US.  Right now we have a dearth of innovation in many companies because the employed staff are far too busy on everyday work, while tens of thousands of people are unemployed or underemployed in this country at the same time profits are reaching new peaks.  It may be time to hire a few more people to conduct the "Everyday" work so that your best people can focus on innovation.

The lack of innovation from many corporations today is not because there are few opportunities in the marketplace or that companies or employees lack ideas.  Most organizations are awash in good ideas.  No, the barriers to more innovation come from several sources, almost all of them having their root cause in staffing and resource availability.  At a time when money is insanely cheap, people are viewed as expensive and hiring is difficult.  Ask any group of executives and they'll blame innovation strictures on available resources, conflicts and concerns about tradeoffs for existing projects.  They'll rarely point to poor ideas or a lack of opportunities.  It's a concern about hiring more people, having the flexibility to expand and/or contract headcount as opportunities present themselves, and having people with the right attitudes, experiences and perspectives who can create new value quickly.

The answer to this dilemma breaks down into one of two internal solutions:  either hire new people who are highly creative and can innovate rapidly, leaving your existing employees to continue to operate at high efficiency, or bring on new employees to take on the everyday work, freeing up your best employees to gain skills and create new products and services.  Of course you can pursue another path, outsourcing innovation to consultants who fill the gaps that your teams can't or won't fill, but you'll never convert your internal organization or its focus by leveraging too heavily an external partner.  Innovation isn't something you can start and stop at will, but must eventually become an internal capability.  Relying on outsourced models is more expensive, and in a period when money is cheap and people are expensive is a relatively intelligent solution, but the time will come when money is expensive, and your competitors will have modified their models to incorporate more innovation skill internally. Then where will your business be?

Note that I'm not even addressing the issue of whether or not the people outside your organization are naturally creative or innovative - in many organizations they simply need more people to get the work done that they are doing everyday.  Simply freeing up a few good people to think about the next new product or service would be a great start.  Giving them innovation skills or people with innovation experience would just be the icing on the cake. 

Wall Street and us investors have become too enamored with short term success and constantly rising stock prices, which are creating disincentives for real innovation and differentiation.  The pressure on costs inside many organizations means that they shed opportunities for future differentiation and growth, focusing only on the most predictable and least risky products and services.  This leaves only the truly entrepreneurial firms to innovate, which makes innovation seem even more uneven and risky.  The breaking point for corporate innovation today isn't ideas, it isn't funding, it isn't opportunities - it's personnel bandwidth.  That seems like something that should be easy to address, especially in a time when more and more people attend college, and thousands of experienced people are looking for work.  This isn't an issue of skills match, this is an issue of too much focus on the cost of hiring and maintaining headcount, and the impact that headcount has to short term results.

Innovation starts with a need

I'm in Chicago this week, interviewing customers of our client to understand their needs for products and services.  Nothing can open eyes and ears more easily than sitting mid level managers and executives in front of customers who are willing to express their frustrations, difficulties, gaps and workarounds to executives who believe their products are fairly robust.  I've never taken a client into an ethnographic encounter or a "voice of the customer" experience that didn't result in my client remarking on how much they learned.  Well, sure.  Get out of your office, out of the daily grind of meetings and actually interact with your customers, in an open and honest way.  You are bound to learn something!

But chastising my clients isn't my primary purpose today.  No, my primary purpose is to talk about the ignition switch for innovation.  Many people are confused as to what provides the initial "spark" for innovation, what creates energy and passion to conduct innovation work.  The answer is simple:  a need.  It can be a business need, to grow revenue or enter a new market segment or geographic space.  It can be a customer need, a gap in the marketplace that frustrates a customer.  But by and large, most good innovation is based on the identification, deep understanding and fulfillment of a need.  Whether it was Jobs recognizing the need to simplify and standardize music sharing, management and the device, or 3M recognizing its customers' needs and developing technologies that solve needs even before the customers recognized the gap, most good innovation starts with a need.

What is a need?

My daughters' birthday is coming up and no that's not a typo, I have twins.  When I asked one what she wanted for her birthday, she responded that she has everything she wants.  No, I replied, you may have everything you NEED, but no one can possibly have everything they WANT.  Wants are aspirational, need are much more tangible.  Too often we innovate to solve a "want" when what we should be identifying is what customers "need".

The folks who wrote Blue Ocean Strategy actually created a nice typology of needs.  It's interesting that while we use the word need it is, like a lot of other innovation language, very inexact.  In the Strategy Canvas the authors of BOS identified "undermet" and "overmet" needs.  These are needs that are partially but not perfectly filled by existing solutions (undermet) or needs that are met by products or services that exceed what the customer can consume or use (overmet).  Both are opportunities for innovators.  Even when a need seems to be met, there may be opportunities for new products and services that do a better job meeting the need exactly.

Then, of course there are "unmet" needs, in which a customer simply can't find a product or service that meets a defined need.  Care must be taken to understand this unmet need and how many people or businesses have the need.  One reason it may be unmet is that the need may only impact a small portion of a large market.  Or it may be exceptionally difficult to satisfy.  We as innovators should always be looking for important unmet needs that create conditions where the consumer is unsatisfied with his or her outcomes.

Finally, there's the holy grail of needs - the unarticulated need.  These are needs that consumers have that they may not even be aware of, or believe that no one can solve.  A good example is the Model T.  It's probably apocryphal, but Henry Ford is said to have stated that he didn't ask his customers what they needed because they couldn't image it.  "They would have asked for a faster horse" is the quote that is often attributed in this story.  If you can identify needs that people have that are important to solve and for which they don't believe a solution can exist or can't imagine a solution exists, you may be a big winner.  Of course the company that creates such a solution will find many competitors entering once the market has been developed, but personally I'd rather lead than follow.

How do you find needs?

Now that we've defined or at least identified a taxonomy of needs, the next question is:  how do I find them?  Let's consider two alternatives.  The first is that you carry on with your regular work, isolated in your corporate headquarters, reading second hand sales reports and purchased market research.  This approach to discovering needs is far too frequently the one that is used, since people don't have the time or energy, or experience, to sit in front of customers.  This approach to understanding customers is like digging for dinosaur bones in your backyard.  You may be digging, but the result will be less than satisfactory.

Now consider the other alternative - getting out of the office and meeting with customers, prospects, channel partners and so forth.  You will be amazed at what they tell you, both positive things about your company and negative things that cause them frustration, worry and anger.  There are literally dozens of ways to interact with customers, from web-based interactions you can conduct from the safety and security of your office, to purely ethnographic exploits which will place you in your consumers homes and offices. 

What will these consumers tell you?  Everything.  They'll share their joys and frustrations.  They'll tell you what they like and don't like about a product, a company or an industry.  They'll share intimate secrets.  They'll share their workarounds and shortcuts to getting done what they need to get done.  They'll expose how much they know, and in many cases how little they understand about your product and service.  You'll realize that marketing messages that you've reinforced for years, or product features that you've pounded on for months aren't registering.  You'll discover that people don't just have a wrong attitude about your company, but that they completely missed the important value propositions your product should create, at least in your mind.

And yes, I know you are uncomfortable and perhaps unfamiliar with interacting with clients or consumers in this way, but you need to do it.  Too often many corporations outsource all customer interaction, preferring to read market reports from analysts or market researchers.  What you get are facts that have been filtered, but what you miss are passion, anger, emotion, and other signals about the strength of the need.  Without that passion you have a PowerPoint presentation that looks a lot like every other recommendation.  You need that passion and emotion to carry your story, and you need to see that passion with your own eyes, not simply have it reported to you.

What do you do with needs?

Whether you frame this as "needs" or in the Christensen framework "jobs to be done" these insights become the basis for your innovation efforts.  Companies that understand important needs and respond to those needs effectively win customer loyalty, sell more products and become trusted because they listen to their customers.  These needs or jobs to be done are the things your customers are trying to overcome, hurdles to be removed, rough patches to be smoothed over.  Your job is to take those needs, understand them, rank them from the customer's perspective, and decide which you want to solve.  Then the innovation portion of the activity kicks in when you decide to solve them incrementally, with existing products and services, or to solve them by creating new and interesting solutions that customers don't anticipate.

There are basically three things you need to understand from this post.  First is that a good grasp of needs is what creates energy and enthusiasm for innovation, and helps ensure you are working on the right things.  Second is that you can't find important needs while sitting in your office.  You simply aren't that empathetic or smart.  You've got to get out and meet with customers.  Anyone who is in new product development or innovation who isn't regularly meeting with customers in different settings to discover needs should be fired.  Third, understanding needs is just the beginning.  That's when the real innovation work takes place.  You can't innovate successfully without the raw material of needs, but that raw material must be converted into valuable ideas, and then into new products and services that fulfill those needs.

Unrealistic Expectations and the failure of innovation

For several years, when OVO first entered the innovation consulting space, I was constantly amazed by the insincerity and misinformation that is constantly spread about innovation.  While it is easy to point to innovation success stories from a wide range of firms, many of the innovation stories one reads are from people who seek to cast doubt on innovation or to disparage innovation activities.  Right now, one lonely journalist has stirred up a debate about "disruptive" innovation, ignoring for a second that disruptive innovation is happening in many industries.  Much of the skeptical writing about innovation is akin to listening to a person flying on an airplane arguing about whether or not the science supports the ability to fly.

Innovation has happened, it is happening, and it will happen, as long as there are problems to solve or needs to be addressed and a market that is willing to reward the inventor or innovator for their troubles.  Almost all of the advancement in human history is due to innovation - in agriculture, in societies, in medicine, in technology and in education.  Rather than doubt the power of innovation, review human history and see the impact of innovation across centuries.  People in past decades or centuries would not believe the modern marvels we have, the life of leisure many people enjoy today, and almost all of that advancement is due to inventors and innovation.

Yet we encounter in this narrative a "forest and trees" issue.  The long term, significant impact of innovation can blur and become meaningless as we want more change and more innovation. Rather than identify long term patterns and successive progress we leap to individual stories of innovation failure and grasp only the individual data point.  We fall prey to immediately observable "failures" of innovation, rather than understanding the sweep of innovation over time.  Thus, our immediate personal experiences or stories that we read about innovation failure, or people who identify challenges with innovation overwhelm our ability to recognize all the value that innovation provides. 

Why does innovation "fail"?

Which should raise the question:  why does innovation fail?  If so much advancement over so many decades and centuries is based on successful innovation, why does innovation "fail", and when it does, why do we immediately assume that innovation is a fraud, or impractical, rather than recognizing the trial and error, start and restart, creative destruction nature of innovation?  I chalk a lot of it up to unrealistic expectations.

Innovation is a tool, nothing more.  As Archimedes said, give me a spot to stand on and I can move the world.  He was referring to the use of a lever, which can translate a small amount of effort into a significant force by relying on a simple principle of leverage.  While a man may not be able to lift a heavy weight directly, using a lever and fulcrum the same individual can lift the weight.  This demonstrates the power of a tool well used.  Innovation is a tool as well.  When used correctly, for the right tasks, and in the right hands, innovation is a force magnifier and leverages creativity and insight to create new solutions.  But the tool is only powerful when used in the appropriate settings, with the correct training and application, and with the right expectations.

Innovation fails out of context

Note the three criteria I posited:  settings, training and expectations.  I like to tell our clients that innovation is not "free magic".  If they have experienced difficulty creating interesting new products and services previously, merely muttering the word "innovation" isn't going to change the outcomes.  There are no magical results, no magic wands.  Innovation is a tool that can be applied thoughtfully, carefully and after deep understanding and practical knowledge.  Even then it cannot guarantee success.  Innovation cannot create magical outcomes, and the outcomes it does create come at the cost of reallocated priorities, unusual investments, skill development and time.

What many firms want when they "innovate" is a magical result.  They want to immediately overcome organizational resistance to change, ignore the machinations of their internal development processes and overlook doubts and risk to instantly create a new product or service, with little investment, learning or change.  These are unrealistic expectations, and what's more, every person involved understands how impossible and unrealistic these commitments are.  In previous posts I've referred to this style of innovation as the "Potemkin Village" approach to innovation.  This is innovation for appearance sake, in which innovation is a pantomime for an audience.  The Soviet people had a saying for this kind of pantomime - you pretend to pay us and we'll pretend to work.

Lacking time, lacking training, lacking innovation experience people will fall back on known and trusted models - which have been generating incremental changes for years.  Why are we surprised when the vast majority of innovation projects result in products and services that look like the existing products and services?  Without introducing anything new to the system, the system provides what it has always provided.

Unrealistic Expectations

A firm that has spent the last 20 years focusing on efficiency, cost-cutting and right sizing cannot simply "implement" innovation without cultural change, introducing risk and reward changes, training on new skills and capabilities, and introducing new tools and thinking.  Trying to force a highly efficient, risk adverse organization to create "disruptive" products without a change in attitude or the correct investments is foolhardy and points to unrealistic expectations.  Innovation can be a powerful force, but it requires change, time, skills development and a new way of thinking.  These changes don't happen overnight, but take years to adopt.

Further, while anyone, anywhere in a firm can create a good idea, it takes years to move through approval cycles, resourcing cycles, development cycles and commercialization.  Often when we are asked when innovation will begin to demonstrate value, I'll answer in two or three years.  When we are quizzed on this answer, I'll ask about product development and commercialization cycles.  If we had the perfect idea today, and placed it in the product or service development queue, when could we have the product ready for the market?  When could we launch it?  What are you willing to defund in order to move the idea ahead?  You see, it's not merely creating an idea.  Using a baseball analogy, that may be second base.  Getting to home requires getting the product built, deployed and into the market, generating revenue.  That process is often what hampers innovation, not the generation of ideas.  Magical thinking leads to the belief that once we have good ideas, the innovation work is done and we can reap the benefits.

Another unrealistic expectation is found in the depth and breadth of product thinking.  If for years your team has been providing incremental improvements to existing products, and has been taught that regulation, compliance, competition and other factors limit significant change, demanding "disruptive" innovation from the team without resetting their thinking is useless.  Just as an elephant learns that an ankle cuff means he is staked down and can't move, people and teams adopt a cramped, limited thinking model, and can't release themselves to think more broadly until it is demonstrated by a leadership team that they MUST do so.  Anything less than radical or disruptive is failure.  But the commitment levels, communication programs and cultural resets take time and focus from management teams that are completely focused on the next quarter.  It's far easier to demand disruptive innovation than it is to invest time and resources to change cultures, skill sets and tool sets to instill a new way of thinking and expanded scope.

Changing the Innovation dynamic

What we need to do to create more innovation is to train future managers and leaders about the investments necessary to achieve innovation capability and outcome.  Innovation is not free, it's not magical and it can't produce immediate results.  What it is is a powerful force that once effectively taught and unleashed can create significant positive change for a business.  Thinking of innovation as a capacity or capability rather than a discrete project can help as well.  Far too often innovation is seen as an isolated project to respond to a specific market threat or condition.  But all the same factors apply.  People need to reset their thinking, adopt new tools for innovation and move an idea rapidly through product development and commercialization.  If you are going to do all of this work once in order to be successful, why not institutionalize the effort and create a culture where innovation is a constant force, rather than an occasional nuisance?

Innovation: It's inconceivable

When I was in graduate school, a number of my friends became aficionados of the move The Princess Bride.  At first, for me, it seemed a lot like many other swashbuckling movies.  It has the requisite hero who has been cheated, a damsel in distress, some swordplay, and so on.  But what I missed initially are all the tongue in cheek gags, the funny lines.  One that has stayed with me for a long time is what Vizzini says quite often in the film.  Anytime a plan or a plot goes wrong, or something doesn't work out the way he planned, he exclaims:  It's inconceivable.  When Montoya, the wronged hero, meets Vizzini, and Vizzini's tricks don't stymie Montoya, he blurts out:  It's inconceivable!  To which Montoya replies:  I don't think that word means what you think it means.

Inconceivable, according to the dictionaries online, means unimaginable, unthinkable.  Yet in every instance what Vizzini claims is inconceivable is currently happening.  He's using a word either without the proper knowledge of the word, or perhaps simply underestimates his competitors.

The problem with language

This is a problem, and a possibility, with language.  When words have common, shared meanings, communication flows easily.  When I use words and use them with the same context and definition as the people who hear or read my words, good communication results.  On the other hand, if I choose my own definitions for words that appear common and have other accepted definitions, I may confuse my listeners or readers.  For example, if I decided that the word sword would now take on a new definition, say peace for example, I might confuse my listeners when talking about swords when I am advocating peace.  People can't choose their own definitions and people should agree on common language when trying to communicate important ideas.

Daniel Patrick Moynihan, a senator in the US, had a relevant saying:  everyone is entitled to their own opinions, but everyone is not entitled to his own facts.  Facts are common, shared and provable.  Opinions are often unique, formed from perspective or experience, and subject to judgment.  Likewise, language can be shared in common, or it can be personal or contained within small groups.  When it is shared, good communication flows and meanings can be understood.  When language is private or not shared, communication is difficult and intent may be misinterpreted.

The problem with innovation language

The problem with innovation language is that there is no standard.  Every team, every academic, every expert uses words like "innovation" in their own context, assuming that the readers and listeners share the same context.  What innovation means to one individual in a small company may be very different than the meaning in an academic or governmental setting.  Just trying to define the word "innovation" can be a challenge. 

Then, realize that innovation is full of nuance.  When we speak about innovation, are we talking about continuous improvement or "disruption".  Disruption by itself is poorly defined and recently called into question.  Or, instead of disruption, should we use "gamechanger" or "radical" as adjectives to describe innovation?  What's the difference between "gamechanger" innovation and disruptive innovation?

Or take another often abused and misused innovation phrase:  "open" innovation.  At OVO we like to say that open innovation is simply the exchange of ideas, intellectual property or technologies between two entities.  Yet many people have adopted "crowdsourcing" ideas and will tell you that their internal program to gather ideas from their employees is clearly open innovation, since it looks like crowdsourcing.  And who can argue, since I haven't yet stumbled over an approved innovation dictionary lately.

Why innovation language becomes a barrier

The problem with incoherent and imperfect innovation language is that innovation is difficult and risky enough, creating new products and services in business models attuned to consistency and repetition, without adding in a layer of imperfect communication to garble intent, plans or outcomes.  Yet in the absence of shared definitions, directions about innovation from executives are interpreted and implemented far differently than the executives expect.  Each listener applies their beliefs and expectations to a request for innovation.  At the end of the experiment, no one is happy, because the executive expects interesting, new and valuable ideas, and the employees created a look-alike product.  Both are working from their own definitions and expectations.  Both believe they communicated clearly.  Neither took the time to determine a common definition.  George Orwell, perhaps one of our best writers on the subject of language and its uses, put it this way:

But if thought corrupts language, language can also corrupt thought. A bad usage can spread by tradition and imitation even among people who should and do know better. The debased language that I have been discussing is in some ways very convenient. Phrases like a not unjustifiable assumption, leaves much to be desired, would serve no good purpose, a consideration which we should do well to bear in mind, are a continuous temptation, a packet of aspirins always at one's elbow.

Notice that language corrupts thought.  Poor language leads to poor thinking, and poor thinking leads to inadequate or disappointing outcomes.  Innovation is difficult, uncertain and risky when the strategy and communications are sound.  It is almost impossible when the words, meaning, definitions, language and intent are garbled, insincere or simply not aligned.  Innovation is inconceivable without good language, common definitions and share context.  What are you doing to create shared definitions and context in your organization?

Innovators overcome the can'ts

There's a vicious, pervasive mentality swirling in corporate America today, and it's limiting innovation, growth and corporate renewal.  Many of your fellow employees have been infected by a mental virus, and they aren't even aware that they have it.  It's not Ebola or the plague, although it can often be just as deadly for new ideas as these illnesses.  The virus has crept into the thinking and attitudes of many managers and employees, without a lot of fanfare.  In fact, when it was introduced it seemed natural and reasonable, but it has become a major limiting factor to growth, change and innovation.  That dreaded but little known illness is called the can'ts.

A reasonable perspective

The can'ts emerge when anyone suggests a new idea, a change to the existing order or entering a new market or segment.  The can'ts are always reasonable, always based on existing methods, decisions or models, always based on facts.  The can'ts are viral and powerful, and seem so reasonable upon first utterance that many people infected with the can'ts aren't even aware of the virility of the disease.  Many times the first exposure will look some thing like this:

"I have a great new idea to solve a customer problem in ..."

"Here's why we can't do that..."

And the reasons are perfectly reasonable.  Too expensive, too different from what we do today, too many competitors, too much regulation, too demanding on a workforce that is already stretched.

To those infected with the can'ts, this is logical, reasonable and quickly puts to bed an interesting annoyance that was distracting the team from its primary mission. 

Getting past the can'ts

But if we are to innovate, to bring valuable and relevant new products or services to market, we have to get past the can'ts.  I'm sure most innovations that make it to market are confronted with many can'ts, and it is only the willpower of the innovators or the guidance of a senior executive who removes the roadblocks that the can'ts erect.

To innovate effectively, we first have to realize that many people are infected with the can'ts.  In one recent innovation project I described a possible ideal result - a new product or service.  Then I asked the innovation team to write down all the reasons they thought we "can't" create that new product or service.  After about 20 minutes we had a list of over 30 reasons.  There was a collective gasp at how difficult the work appeared, based on all the hurdles.  Fortunately we had scheduled a very senior executive to come in and talk about the executive team and their willingness to overcome the can'ts.

Merely recognizing the can'ts and addressing them in advance can help, but that's not enough.  Doubt and prior experience always creep back in, so even if you can stymie the can'ts early on, you'll need to constantly fight the same battles throughout an innovation activity.  Because while the innovation team may be on board to resist the can'ts, often others that they need data, information or assistance from haven't been inoculated, and their doubts can infect the team again.

Diverge and Converge

Innovation offers us another tool to remove some of the can'ts - the intentional steps of divergence and convergence.  You see the can'ts want to limit our thinking, to quickly converge based on the scope that is dictated by what "can" be accomplished, rather than what needs to be accomplished.  This is why divergence and convergence are valuable tools, at every step of the innovation process.  Divergence doesn't eliminate the can'ts, but it does highlight many alternatives or options that are possible if the team can escape the limiting convergence of the can'ts.

How might we...

Other tools to help fight the can'ts are open ended, aspirational questions to the team when they are struggling with the can'ts.  A great one, often held up as a mantra for innovators is:  "How might we..."  Notice the "might".  I'm not asking yet for commitment, just options and alternatives.  As people become aware of more options and alternatives, they often are willing to acknowledge that other solutions exist and the can'ts aren't quite as powerful as they thought.

Can you change the can'ts

In another client we ran into a case of the can'ts that illustrated a blind spot in corporate thinking.  Working for an insurance firm, we generated some really compelling new ideas, only to be told that we "can't" implement them because some of them violate regulations and statues.  Well, we replied, don't you employ a team of lobbyists? And isn't it their job to help legislators and administrators find the best solutions?  Aren't the regulations and laws changeable?  Shouldn't they be changed if we can find better solutions?  Too often the can'ts appear real, immutable and permanent, when they are really based on common agreement and can be changed.

As a fish is unaware of the water it swims in, and we take the air for granted, too often we become immersed and immune from the limits in our thinking.  We become a people of "can't" rather than a people who wonder "How might we".  The can'ts are pernicious because they are so reasonable and pervasive.  What we innovators need to know is that we will always face the can'ts.  What we need to do is make people aware of their thinking, show how the can'ts limits innovation, offer alternatives and options for success, and identify blind spots and barriers that creep in.  We'll likely never eliminate the can'ts, but we can keep people aware and honest as they participate.