Innovating what we innovate

It finally came to me last week.  For over a decade I've been working with corporations, trying to help them accelerate their ability to generate new, interesting ideas to market as viable products and services.  In some instances we've been successful, and in other instances there were interesting failures.  I've recognized for a while that some major challenges exist.  I wrote Relentless Innovation as a way to frame some of the things I'd learned about the way culture resists change, and how a "business as usual" approach can stymie innovation.  But even with these obstacles it would seem we should have more innovation than we do.

What came to me finally is that we are trying to do new chemistry in old equipment, equipment that is tailored for a more conservative, slow paced way of working where there is less change and more certainty.  Our businesses are "built to last" and meant to gain scale quickly and then lock in customers and channels to drive more revenue and profits.  In a day and age (say 20-30 years ago) when markets were more stable and there was less innovation, building a company with this intent made sense.  Those days are over.

In fact we can look back 20 to 30 years ago at some key events and agreements that at the time seemed relatively benign, but in fact have accelerated competition and innovation.

The unintended consequences of free trade

Just under 30 years ago, President Bill Clinton signed the NAFTA agreement, which allowed for mostly free trade between Mexico, Canada and the US.  This was the start of many more free trade agreements, as other countries began to reduce trade barriers and increase global competition.  It should come as no surprise that the European Union is also almost 30 years old.  These agreements and others like them were good for consumers, because they lowered prices, but often bad for established businesses that were used to competing behind tariffs.  These agreements also increased the migration of lower skilled work to places where costs were lower.  This migration isn't new - any task with a high labor component has always migrated to lower labor cost areas.  The difference was that instead of moving from North to South, it moved from the US to Mexico, as an example.

Globalization and free trade increased competition dramatically and introduced a shift in valuable skills.  In the US, manual labor and low skills jobs began to disappear while IT and finance skills gained credibility.  This is also the beginning of the new imbalance we see today, why there is an increase in disparity in incomes between people who offer the market manual labor or few skills versus those who can move financial markets or program software.

The internet boom

The internet also begins to appear about 30 years ago, moving from an interesting collegiate experiment to a system that connects people across the globe.  Yahoo, and then Google began to organize the data on the web.  Google is 20 years old this year (2018), meaning it is leaving its awkward teenaged years and becoming an adult.

The advent and rapid advancement of the internet as a communication tool, then a content tool and now thanks to Amazon a sales and fulfillment tool has shifted how we consume content, how we acquire goods and services and has significantly changed entire industries.  Just ask Sears, the Amazon of the previous century.

The evolution of the internet now means that I can do business with just about anyone, anywhere in real time.  Existing companies now have far more competitors and the consumer has far more options.  Thousands of new companies can compete to provide goods and services, increasing the opportunity for innovation dramatically.

Apple and Amazon

The third leg of this stool, beyond globalization and the internet is the emergence of new and somewhat rapacious companies.  Amazon and Apple are the avatars.

Amazon was founded in 1994 as a book seller and has gained scale quickly by increasing its dominance over physical retail, while innovating its business models and entering entirely new markets (web services as an example).  Amazon demonstrated that people were willing to wait for the company to grow before becoming profitable, and cheered Bezos on to greater heights rather than demanding immediate profits.  Jobs returned to Apple in 1997 and created a company based on a few simple ideas - simplicity and integration.  Both of these companies explored new value propositions and new ways of working with customers.  Both are closing in on market dominance not seen since the guilded age.  Both give hints about new operating models and structures.

Stuck in the railroad age

Yet most corporations are stuck with a command and control organizational structure that dates to the age of railroads, which were the first large corporations.  It won't be a surprise to learn that the railroads adopted their operating models and organizational structures from the military, the other large and bureaucratic organization of its day.  These organizational structures worked well when change was slow and many organizations had monopoly or near monopoly power, and when few people were educated.  Today, most of these stipulations aren't true.  Change is constant and accelerating.  Few firms, other than Amazon and Google have anything close to monopoly control, and workers are far more educated and interesting in the meaning and mission of their work.

Corporations operate like glaciers, moving slowly and inexorably toward an almost predetermined goal, difficult to steer and with deep sources of internal, informal power that seem oblivious to the environmental changes all around.  Our business structures and models are for the most part still based on top down command and control, very regimented (a word straight from the military) and hierarchical, when we need to be more open to investigation, more flexible, more adaptable, more nimble.

Innovating org structures and business models

What we innovators should focus on are new organizational structures and new business models rather that products and services.  We can see evidence of some org structure and business model innovation in the "asset-light" companies like Airbnb and Uber, who have reworked their models to demonstrate that they don't need to own the assets to deliver a valuable product or service. 

But these are just the beginning.  As both Uber and Airbnb have demonstrated, once an organization reaches a certain size they take on trappings of bureaucracy and perhaps arrogance and lose sight of customers and their needs.  They become increasingly rule-bound and inflexible, losing some of their advantage and creativity.  If we can innovate new products and services with such alacrity, certainly we can innovate new organizational structures and business models that allow businesses to scale and remain nimble, become relatively large but still able to respond to emerging trends and needs.  This is the new "holy grail" of innovation - creating organizational structures and business models that are able to shift as customers shift, completely flexible and nimble while still scalable.

The quiet desperation of corporate innovators

Over the last year I've been conducting a one person listening tour, talking to a lot of my peers in consulting, as well as prospects, customers and friends who work in government and industry.  Of course many of these conversations revolve around innovation and new product or service development (or the lack thereof), and how people are engaged in their work and their roles.

One recurring development that has really troubled me over this period is the uniformity of feedback about innovation, about growth and about large companies' willingness to embrace the evolving future.  I've had the good fortune to talk to hundreds of people, in different industries, in different roles and across different geographies and countries.  One resounding consistent message I'm hearing is that the majority of the people I've spoken with are frustrated by the lack of innovation focus and effort within their organizations and the lack of engagement or emphasis placed on new growth and revitalization in large organizations.  While there is a lot of noise about innovation from all quarters, it appears from my discussions that there is little activity.  And this dissonance between noise and activity is beginning to impact senior people in significant ways.

In fact I'd go so far as to suggest that many people involved in innovation, new product development and who want to focus on growth in major corporations would gladly leave their current companies if they could find companies that would place more emphasis on innovation and growth.  It's strange to see so much frustration at a time when we hear that business is doing so well.

Enter the concept of Flow

Those who follow my blog know that I write fairly frequently about the concept of "flow", because it relates so perfectly with innovation.  Flow was first recognized and documented by a psychologist named Csikszentmihalyi.  He documented the idea that in some activities, people can lose themselves in their work. Time passes without notice.  People are deeply engaged and get great enjoyment from their work.  He defined flow as the confluence of the experience doing a task and the challenge of doing a task.  Too much experience with too little challenge?  Boredom.  Too much challenge with too little experience?  Fear.  The right match of challenge and experience?  The result is flow.

Note that the subtitle of the book is:  creating meaning, enhancing creativity.  These are factors that many people are searching for in their work.  People want to work with passion, on items that create or have meaning for them and others, leveraging their knowledge and creativity.  Talking to many people over the last year it's clear many of them want work that challenges them, creates meaning for them and is interesting and creative, yet they feel constrained by costs and efficient processes, trapped by cultures that are risk adverse, bound by short term thinking.  While corporations claim that people are their most important assets, few companies create structures or cultures or strategies that allow these workers to obtain the most value from their work.

Life in the silo

While many companies have shifted their work environments to more team-oriented work and more open plan offices, the majority of people still work in a very siloed model, constrained by their job title or description.  These job descriptions or titles define what the employee is supposed to do, day to day, but often don't reflect 1) what the company really needs from the employee and 2) what skills and capabilities the employee has that he or she could offer.  In other words, there are operational, psychological and structural mismatches between the actual needs of a company, the structures within which it asks people to operate, and the desires and goals of the employees. 

I'll argue that most large organizations waste 30-40% of their employees' knowledge, time and capabilities by defining roles and responsibilities too narrowly, and further distract or frustrate their employees by failing to create meaningful strategies and fully engaging their staff on a visionary goal.

Corporations are still too hierarchical, too top down, too siloed, too rigid in their definition of work and roles at a time when people are more capable, more educated and want to be more engaged than ever before.  Why are so many potential innovators in large corporations so frustrated?  Why are so many feeling unleveraged and underappreciated?  Because they are given so little leeway, so little support and the expectations and goals for their teams are so limited.

This is especially disappointing because more people have more education and more capabilities than ever before, and access to far more information about their customers, products and markets.  Many people don't need information interpreted for them in order to spot emerging opportunities - they can see the opportunities that their company is ignoring.  What's more, these same people have ideas about how to address those underserved markets, but can't get their ideas heard, supported or funded.

Good to Great

Jim Collins created at least one great idea in his book Good to Great:  the idea that we need to get the right people in the right seats on the bus.  In many cases in business we have the right people, but they are in the wrong seat or the seat doesn't define everything they can do.  Collins also suggested that some people might need to change seats or get off the bus entirely.  Increasingly however I think we might need to look at the drivers, because no matter how good the people on the bus are, if they aren't given effective direction and the freedom and challenges to live up to their skills, then the driver is at fault.

What does it say when an entire generation of people who are tasked with a very important and conceptually interesting task like innovation are frustrated and somewhat defeated by their roles and their work?  What does it say when this attitude is consistent across industries and geographies?  When people speak with passion about doing more, getting more engaged, doing more innovation but feeling constantly thwarted and frustrated by their own management?  

We are at an inflection point in business, where automation and artificial intelligence will cause some rather dramatic changes in how we organize and staff companies.  Now is the time to rethink how we engage people, and fully leverage their passion and energy.  We need to be thinking about how to get the right people in the right seats, and give them the right direction.  It's possible that with new thinking we could have a much more engaged workforce creating far more innovative products and services.  It's possible that we could actually create the conditions for "flow" in our organizations and that they would benefit from those conditions.

The alternative is underutilized people and assets, underachieving and feeling underappreciated, who float from job to job and eventually leave to go start something new where their energy and passion can be fully brought to bear.  Thoreau said many people live lives of quiet desperation.  I'm concerned that this is especially true among a very important subset of corporate employees - those who have the will and the passion for innovation.

What to do?

What can we do?  First, recognize that people ARE the most important assets, especially where growth, creativity and innovation are concerned.  These should be the places where we unleash our people and provide the time and funding necessary for them to create amazing new products and services.  Second, rethink how organizations are structured, the risk adverse cultures that have grown like kudzu, spreading slowly through the organization to stifle new growth and sustain the status quo.  Third, put the right opportunities and metrics in place and tell the innovators to "put up or shut up".  If you believe these folks can innovate, then get out of their way and reap the benefits.  If you think they can't, give them a fair opportunity and measure the outcomes.  Corporations that do this will benefit either way.

I can assure you that any company that demonstrates that it welcomes and encourages innovators will find itself overrun with high quality talent, and if it can put that talent to good use will create compelling new products and services that separate it from its competitors.

What U2 and Madonna can tell corporations about innovation

Let's get this right out there early:  I am a huge U2 fan.  From their earliest albums like October and Boy to their latest efforts, I'm a big supporter (well Zooropa not so much, but every great artist has at least one significant flub).  On the other hand, I've never much cared for Madonna.  Too packaged, too commercial, too much a formula it seems to me.  But both U2 and Madonna have something to tell major corporations about how to stay relevant for decades:  reinvent yourself.

Let's do a brief history lesson of U2 and see exactly what this means.

U2 - the early years

U2 started out as a punk band in Ireland, but with a twist - their lyrics were informed by their Christian beliefs and ethics.  They came on the scene just at the end of the punk era, where no one sound or formula dominated.  I think they became popular with their War album because of their commitment to social justice, their rock sensibilities and the way they came across as a fresh new voice. War was a breakout album and placed them on a path to success, but it did not define their sound in later albums.

And now for something completely different

U2's next album was the Unforgettable Fire, a major departure in sound and theme from the previous albums.  The Unforgettable Fire was a significant departure from War, and was somewhat controversial among fans.  It focused on the life of Dr. Martin Luther King, so the band was staying true to its social conscience but the music was different.  U2 quickly followed up with The Joshua Tree, where they pursued, like many European bands before them, the roots of the blues in the US.  The sound was different from their earlier albums, a bit more harder edged, more bluesy, but still with a social conscience.   Fans of Boy and October were disconcerted by War.  Fans that came of age with War were uncertain and sometimes estranged by The Unforgettable Fire.  Joshua Tree and the live album Rattle and Hum seemed to embark on an entirely different focus and sound. But it was the same band and underneath it all were the same sensibilities, just repackaged and repurposed, trying out different methods, constantly reinventing themselves.

The Electronica Period

U2 then entered my least favorite era - an era full of exploration, mostly of different forms of music that was more electronic, more synthesizer based, a major departure from their rock and roll, stadium-oriented sound.  But who can blame them?  You can only make the same record with the same sound so many times.  Albums like Actung Baby and Zooropa were less appealing to me as an original fan of U2, but followed the course and sensibilities of new types of music that emerged.

Return to the roots

Many of us who were early fans were really pleased by All that you can't leave behind, which combined some new sounds and ideas with a return to more guitar based rock, a more straight ahead sensibility. 

Exploration

After All that you can't leave behind U2 has been in an experimental phase, with several albums that explored different sounds and genres.  These albums seem to be searching for the right sound and focus, the right audience, and to me don't quite sound or feel like the U2 of old.  But perhaps that's because the U2 of old is now old.  After living in the limelight for 40 years, it's probably difficult to create new music.  Paul Simon had to go to South Africa to revive his sound and career after decades in the music industry.

Thanks for the history lesson

So, you may be thinking to yourself, thanks for the history lesson but what's the point about innovation?  Simply this.  If Madonna can shift from "Like a virgin" to Vogue to Material Girl to whatever the persona is this week, and if U2 can shift from Christian anthems to bluesy guitar based rock to synthesizers while remaining exceptionally popular, there's evidence that you can be in the same business but constantly reinvent yourself, your product and your persona.

Most businesses fail to appreciate this - reinvention isn't just important for musicians or actors or celebrities, it's vital for everyone.  Becoming too boring, too staid, too stuck in one way of thinking or one business model means you become less interesting and attractive.  There are a number of reasons the length of time corporations spend in the S&P 500 has been cut in half in recent years, and the lack of reinvention is an important one.

How do we reinvent?

If reinvention is important, how does a corporation reinvent itself?  You'll understand that since this is a blog about innovation, innovation will rear its head here.  To reinvent or remake a band, an actor or a company, we need to focus on keeping what is important and 'core' to the original and examine what is changing and what new customers want and need, as well as respecting the needs of employees who want both links to the historical past and new and refreshing ways of working.

U2 reinvents its sound, the way its packages itself (Joshua Tree and Rattle and Hum is all bluesy influenced, down to the way they dress while during Zooropa Bono takes on an entirely new persona) but underneath their songs and their sensibilities about righting wrongs and social justice remain fairly similar.  U2 went further with a controversial album release directly to consumers' iTunes accounts - innovating in a channel and in a business model.

Likewise, corporations need to reinvent themselves - constantly improving their offerings, products and services while thinking about how to interact and reach customers, how to revise and revamp customer service, how to leverage emerging channels and how to explore new business models.  Recognizing that it's a bit easier for a four man rock group to reinvent itself than a large corporation doesn't excuse the lack of reinvention that most corporations exhibit.

Corporations need to think more broadly about what they are good at, what their strategic intent is, why they exist and why they are important to customers.  Further, they need to shift with the times, and not just with a new logo or new branding but with renewed purpose and focus.  They need to do far more innovation outside of the core product, to reinvent themselves in new relationships with customers and prospects, in new channels, new service offerings and new business models.  Failing to do so leaves far too many options on the table, waiting to be exploited by new entrants.  My favorite examples are concepts like iTunes and the iPod, which probably should have been created by Sony, or the concept that became Airbnb, which could have been implemented by any major hotel chain.

Sticking to your guns or reinvent yourself

There's a sort of false equivalence here, the thinking that a company needs to either "stick to its guns" and stay true to itself or become a chameleon and constantly change with the times.  This is one of those times when we should choose the and rather than the or.  A company can be true to its capabilities and roots while reinventing itself to remain interesting and relevant to its customers.  An insurance firm can still do an awesome job selling and servicing life, auto and home insurance while completely reinventing itself in how it communicates with, serves, bills and attracts customers.  It can create new business models and experiences while continuing to provide similar services and products.  The sooner large corporations understand the need for reinvention, and the false equivalence of sticking to history or cosmetic reinvention, the better off we will all be.

Army Futures Command - fighting the last war?

In what may seem a bit of sour grapes, since my own hometown lost in a close race to Austin for the site of the Army Futures Command, I'd like to think through what's right, and more importantly, what's potentially wrong, with the Army Futures Command.  And I'd like to suggest that many of the factors that will cause the Army Futures Command to struggle are also issues that every large company also faces. The question Defense News asks is:  Can Austin make the Army weird?  That's an interesting but slightly incorrect question.  What matters is if Austin can make the Army innovative.

The Army Futures Command has from its very start attempted to be different.  It is meant to be more nimble and agile than "big Army", meant to cut through red tape and create new combat systems, weapons, and platforms at a faster pace.  I suspect it is meant to open the Army up to new ideas and help it embrace open innovation as well.  If the Army Futures Command does these things, then we all benefit.  We will have a faster, leaner, more well-prepared Army able to compete in future conflicts.  My sense is that the prevailing military industrial complex, risk aversion, bureaucracy and budgeting and funding cycles and processes will hold more sway than setting up in a civilian building in Austin.

First the Kudos

I'm glad the Army is recognizing the importance of emerging technology and placing its newest command in a high tech environment like Austin.  The future of warfare is technological, but also communication and data driven.  We are already at (virtual) war with several foreign entities in cyberspace, and those attacks will only continue to grow.  It's also good that the Army is seeking to distance itself from Washington DC and the governmental thinking that dominates there. It's a good sign that the Army believes it needs to be more agile and develop new ideas and systems more quickly. Finally, it's a good sign that the Army recognizes the overhead and bureaucracy associated with designing, building and deploying new systems.

The question marks

I believe (with no evidence whatsoever) that proximity to Fort Hood in Texas was a key factor in the decision.  Fort Hood is the place where the Army goes to drive large vehicles and tanks.  While we in Raleigh had Fort Bragg close by, Bragg is a special forces base, and special forces don't use large systems.  Fort Hood is based on the idea of large systems - tanks especially.  This line of thinking would mean that the Futures Command will focus on large platforms (tanks, rocket launchers, artillery, people movers, etc).  Which is fine to an extent, but I doubt that's the future of warfare.  The future of warfare has to do with command and control, taking out an enemy's ability to communicate and to manage data and information.  One small EMP device in a large city will cause more havoc than a tank battalion.  So it feels like we are simply repackaging a way to make big platforms and tanks in perhaps a new way.  If this is "futures" then we aren't looking far enough into the future, or we are at risk of preparing for and fighting the last war.

Second question is:  can you change the design, budgeting and procurement processes?  One of the most important vehicles in the Iraq war was the M-RAP, which saved thousands of lives and casualties.  The M-RAP was rejected several times by the Department of Defense and the defense contracting industry, not for reasons having to do with troop safety but for reasons having to do with budgeting cycles and platform prioritization.  Read Robert Gate's book to learn more about the resistance to new platforms, especially those conceived out of cycle or sequence.  Congress, the Department of Defense and military contractors have very entrenched notions about what systems matter and how they are procured and funded, and will fight to defend these.  The military may come up with great ideas about new vehicles but be unable to find means to fund them or place them into production.  Moving to Austin isn't going to change these issues.

How do these issues relate to corporate innovation?

So, what the Army Futures command wants to mimic to some degree is the famous Lockheed "skunkworks".  The typical skunkworks is usually set up to isolate an innovation unit attempting to build disruptive new products and services from the bureaucracy and culture of the existing infrastructure.  Jobs did this when he built the first Macintosh.  The problem is that locating in Austin doesn't isolate the Army from many of its cultural, budgeting and commercialization challenges.

The similarities arise when we think about what the "charter" of the group is. Army "Futures" should be, well, about the future.  But if they will focus on large fighting vehicles but neglect command and control, digital and cyber warfare, etc, it doesn't feel like the future.  It feels like horizon one or at best horizon two work.  Second, by focusing on large vehicles and platforms, are we once again building systems to win the last war, when we should be building solutions to fight the next war. Corporations fall victim to the same line of thinking when they double down on their best current products, while not realizing that the market and consumers are rapidly changing.

Another challenge that the Futures Command shares with corporate innovation is that it is always easy to create an organization in the 'front end' to create ideas but often exceptionally hard to create the programs to convert ideas into reality.  The development pipeline for any defense platform is long, complicated, political to an extreme and subject to funding whims of a Congress and President whose mandate changes often.  If you improve the front end process without addressing the execution issues you'll simply frustrate far more people more quickly.  If you'd like to know more about that from a military perspective, read the book about the best designer of fighter planes, John Boyd.  Similarly large corporations struggle with executing on good ideas.  It's often easier to generate ideas than it is to develop them as new products and services.

Corporate innovation and the Army Futures Command both struggle with:

• clear strategic direction
• looking far enough into a future that is rapidly changing
• innovation structures and governance
• access to the right resources
• the ability to execute ideas, not just imagine them
• political pressure and favoritism especially for pet projects and existing systems
• funding and budgeting, especially for large scale projects that span multiple years

Perhaps the Army has overcome these and other issues within or around the Army Futures Command.  I genuinely hope so.  However, having worked within the defense industry and in the innovation industry, I can see many challenges that may hold back the Army Futures Command from achieving their goals.  Most of these issues are the same ones that corporations face, but the issues the Army faces are often exacerbated by politics, funding cycles, an entire industry reliant on existing platforms and weapons, a tendency to learn too much from the last war and not consider the factors of the next war, and the cyclical nature of politics.  I doubt the Army Futures Command can be isolated from all of these pressures, which suggests to me that they will do a great job at Horizon One innovation, and falter at Horizon Two and Three.  Time will tell.