Making innovation your organizing theme

In my continuing series of posts about lessons learned from corporate innovation, today I'd like to expand on the idea of innovation language, and go even further.  I'd like to riff on the idea of innovation as central, organizing idea in a business rather than an occasional distraction.

Last Friday I wrote about the importance of defining a common language for innovation, so that people within a company are talking and working on the same things.  I've previously written on a number of other topics that are simply take aways from doing corporate innovation for a while, and seeing many of the same mistakes repeated over and over again.  Today's feature:  what if innovation was the central theme of your business?

A brief history lesson

I came of age as a consultant in the Malcolm Baldridge award days, when companies vied with each other to demonstrate how capable they were at delivering high quality goods.  This was in response to the Japanese companies doing a better job building high quality cars and electronics.  From that wave we've had successive efficiency strategies:  Six Sigma (an outgrowth of the quality movement), business process re-engineering, lean, outsourcing and right-sizing.  Over the last 40 years or so, the vast majority of our management time and attention has been focused on efficiency.  To the point where many strategies begin with - how does this help us cut costs, or help us increase throughput at the same cost?

Today, efficiency is the organizing theme of most businesses.  Leaders reinforce the idea that the company can do anything as long as it stays efficient.  Efficiency is used as a ruler to judge other activities. Does this new idea increase productivity and efficiency, remove risk and variance?

My concern with this approach is that we will tailor our systems and narrow our thinking and efficiency ourselves right into obsolescence.

What if innovation was the organizing theme?  

What if, instead of trying to wedge innovation activities into a culture and strategy focused on efficiency and productivity we had an organizing theme that said innovation was central to everything we do?  I venture to guess that many companies have slogans that say that innovation is central to what they do, but a brief exploration of what they focus on, what they measure and what they produce suggests otherwise.

Why would it make sense to make innovation the organizing theme of a business, rather than efficiency?  Making efficiency the core theme of the business assumes that the competitive environment changes slowly, and that efficiency and size matter when competing.  It also seems to suggest that small changes to existing products are preferred by customers over new products and solutions.  I'm going to suggest that in an era where change is as dynamic as we are seeing, large corporations need to be far more creative and innovative, because change is ever present, new technologies and solutions are being introduced faster than ever before and customer expectations and demands are changing constantly.  Slow and steady may have been the watchword in the past, but it seems like innovation is more critical to long term success.

Revisiting the innovation portfolio

And while introducing innovation as the central organizing theme may seem radical, it's not if a company has an intentional strategy for innovation investments - a viable innovation strategy and portfolio.  If we borrow the "three horizons" model for just a second, we can see that horizon one innovation is "incremental" innovation - small changes to existing products and services - which seems familiar to many companies.  It's horizon two and three where most falter.

Creating a meaningful program of investment across the three horizons will mean that a significant portion of the innovation activity is likely to fall in the incremental or horizon one sector, so that's doesn't introduce a lot of change.  And creating an intentional investment strategy in horizon two and three can only help the company look forward. So this suggestion isn't as radical as you'd think.

Plus, there is a way to loop back to the idea of productivity and efficiency.  By creating intentional innovation strategy, and defining innovation goals and processes, a company can make innovation a bit more understandable and even somewhat predictable.  Creating methods and innovation processes and training your teams helps them become more capable and productive.  Then we'll be using efficiency skills to drive more innovation.  Which is probably where we ought to be.

Keeping efficiency, introducing innovation

So a new way to organize, to set strategy and to infect a culture should be to organize around intentional innovation, while leveraging past efficiency tactics and tools.  Defining a three horizons model and making innovation strategy and outcomes more central to the business to learn to work at faster speeds while constantly adjusting to market and consumer needs will require some of the skills learned from the days of efficiency first.  But efficiency alone won't create new products or services or adapt to new customer demands.  It's time to shift our organizing theme from efficiency to innovation.

Language: the most challenging and trival innovation barrier

In my continuing series of lessons I've learned from 15 years of corporate innovation, I've tackled issues including the reasons ideas need sponsors, or why ideas are easy and good ideas are difficult.  In this episode I'm going to talk about my experiences as a translator and interpreter.  You see, one of the most important things I've learned is that no one has a standard language for innovation, and one of my most important tasks as a consultant (and least appreciated roles) is to create a language for innovation and act as an interpreter, often between people within the same company.

I'd like to discuss the problems with innovation definitions, labels and language and what you can do to avoid all this confusion.

Innovation Language

Unlike, say accounting, where assets are assets and liabilities are liabilities (I'm joking a little but there is a great amount of consistency in accounting) few innovation activities, deliverables or strategies are consistently defined.  For example, I regularly talk about and use the "three horizons" model for innovation, which defines incremental, breakthrough and disruptive innovation as three risk and technology driven horizons and potential innovation outcomes.  This is a fairly common innovation framework developed originally by McKinsey I believe.

In speaking with a prospect recently who has been in the innovation space for close to five years, I referenced the three horizons model.  Even though my prospect was using language like "incremental" innovation, he had never heard of the three horizons model.  What some of us take for granted as a proven and useful model, others who have been in the innovation space for some period of time have never heard of!

Common language simplifies communication and improves meaning, shortening work and improving understanding.  Where innovation is concerned, none of that statement above is true.  We lack standard definitions and labels, because we lack agreed standards.  Some of this is because innovation is a cottage industry.  Some of it is because different organizations want to own certain language or terms, while others don't want to use a competitor's language or framework.  Others try to over complicate innovation by introducing new, complex language and frameworks that make clients dependent on consultants.  The industry itself is guilty for some of the language issues.

Uncommon and infrequent

However, corporations also bear part of the blame.  Just like my Spanish usage comes and goes based on my trips to Cancun, many corporations have occasional visits to innovation land and need to learn the unusual jargon, then quickly forget it once they leave.  Since innovation is uncommon and infrequent, different teams in companies pick up different language or jargon based on who read what book or which team used which consulting partner.  Several times I've been in innovation meetings in corporations where different teams were arguing about the same thing, just giving it different titles or labels.

The tower of Babel had nothing on modern innovation speak.  Between competing frameworks and consultants with their own branded solutions and infrequent usage by internal teams, we spend far too much time on any innovation activity simply trying to arrive at a common language when we all happen to speak English.  But what we say, what we frame and what we define matters.

Disruptive or Transformational

One of my favorite definitional debates was in a corporation where the CEO wanted disruptive innovation and the team settled on performing transformational innovation.  To this day I'm not sure what the difference was, because disruptive means disrupting an existing market with a new offer, and it would seem transformational would "transform" a market or product, but the time spent getting the language right was, for the most part, time wasted because everyone eventually fell back on whatever labels and language they were comfortable with, which meant that we eventually adopted operational language, which narrowed the scope of work.

If you can't define something in a way that everyone understands exactly what you mean, you'll create confusion and others will rush in to create clarity based on their own understanding or biases.  That's what happens when the CEO requests innovation and gets small changes to existing products.

Nothing more important, nothing more trivial

However, not matter how important the right labels and language are to innovation work, trying to get teams to do this work and share their definitions is almost impossible.  First, you are trying to define something that people may believe is already defined.  Second, you were hired to create new products, not tinker with definitions.  Working on internal communications and language doesn't seem to create a new revenue producing product, so let's move on.

However, if you can't agree on "what" the outcome should be, you can't agree on "how" to do what you need to do and more importantly "why" you should do it.  Getting the language right, creating shared definitions and vocabulary doesn't seem important, but it is.

Ideas are easy, good ideas are hard

I'm writing a series of posts that examine some of my lessons learned after over 15 years of corporate innovation consulting.  Past posts have included the concept of needing a why and a how for innovation, why ideas need a sponsor and how to understand the range of innovation options your company will consider.  In this post I want to discuss the proliferation of ideas and their relationship to innovation. 

Ideas are easy

Ideas are the raw material of innovation.  There can be little doubt about that.  Whether your innovation process is need driven (finding a need and then finding a solution) or emergent technology or idea driven (having a technology or idea and seeking a market) ideas represent a recurring theme.  And the fact is, ideas are easy.  If you doubt this, ask a five year old about their ideas for their bedtime, what to have for dinner or any other situation.  Everyone has ideas, some have better ideas than others, but we are awash in ideas.

The fact that so many people are spending so much time generating ideas creates a problem.  There is only so much bandwidth to review, evaluate and process ideas, so many ideas never get reviewed or considered.  And, since many ideas carry the idea generator's hope and dreams, it's really easy for cynicism to creep in to any idea generation or innovation process.  After all, hundreds or thousands of ideas could be generated, but only a handful will be selected.  There's only so much resource availability in any business to consider and manage ideas.  Many will never be selected.

Good ideas are hard

Few ideas ever reach the point where they are carefully considered, evaluated and moved on to become new products and services.  As an example, I used to have a sticky note on my PC to remind me of the rather fatal statistics.  ABC once published the number of show ideas they received in a year, the number of pilots they made and the number of shows they actually premiered.  I no longer have the data but it was approximately 800 show ideas, 50 pilots and 5 premiers.  Or, a little less than a 1% return on ideas.  Which seems about right given other statistics on new idea generation and conversion I've seen.

Does this mean all the other ideas (785 in the case of TV shows) were terrible?  No, it just says that the producers and sponsors felt the five were the best at that time.  Ideas have moments when they are more compelling or less compelling.  You don't want to be too early or too late with an idea.  An idea can be a "good" idea for a certain setting, or for a particular demographic but not for everyone.  Ideas may be "good" or "bad" based on their ability to generate revenue or profits (or not).  In other words, there's a lot that goes into determining whether or not an idea is good or bad, some qualitative, some quantitative, and some simply in the eye of the beholder.

What's needed is more context

For companies to innovate successfully and continually, they don't need more ideas, they need better ideas more attuned to current and emerging needs and opportunities that align with corporate strategies.  To get those ideas, companies need to do a better job educating their people about what matters in an idea, why it matters, and what key issues, opportunities or strategies good ideas must solve or address.  This means that strategy must be clear, goals and needs carefully defined and emerging opportunities constantly identified and communicated.  When companies do a better job of identifying emerging needs, markets and opportunities, people can do a better job creating ideas that match those opportunities, reducing ideas that are interesting distractions.  Fewer, better ideas reduces the number of ideas that can't be reviewed, increases the probability of success and build confidence in the entire team.

This observation means that there is actually more pressure on senior executives and product and service leaders to get their strategies right, to identify emerging opportunities and communicate them, and to tell people what ideas they actually want and need, and to act when their teams provide the ideas that meet those needs.  Good innovation is rarely a failure of the masses of people trying to generate ideas, it is a failure to provide the best context and identify needs and opportunities that are worth solving.

Understanding the innovation options in your business

I'm writing a series of blog posts to document some of the things I've learned in innovation along the way, over 15 years of leading corporate innovation work.  So far I've written several blogs, the first about the importance of defining a why and a how for innovation, the second about the importance of an idea sponsor.

Today I'm going to focus on the key drivers for innovation and explain what drives innovation in many organizations.  And in doing so I'm going to revert to a bit of probability and statistics, using a normal distribution curve.

Which firms innovate and why

Before we go deeply into the analysis, let me first say that most firms innovate, occasionally and sporadically, so to be fair, innovation is often happening in many organizations.  That's important, but what's more important is the nature and type of innovation.  For the vast majority of companies, the vast majority of innovation work is incremental at best, adding a new feature or capability to an existing product.

Now, incremental innovation isn't necessarily easy and it is important.  Incremental innovation is what ensures you have something new and attractive to provide to customers three to six months from now.  It's a new flavoring in an existing soft drink or a new feature for an electronics device.  Incremental innovation is relatively safe, and usually returns a small value for the investment, but rarely fails to flop.  That's why incremental innovation is so valued, and also why it is so dangerous.

Interesting and disruptive innovation

More valuable and far more risky are different types of innovation, those that achieve true breakthroughs or disrupt existing markets or industries, or create something really new and different.  The investments are often higher, and the risks of failure are often far higher with this type of innovation.  This could include innovating to offer a physical product as a service, or introducing an entirely new relationship or business model (ala Airbnb).  Disruptive innovation often originates from outside the standard players in an industry, because most of the existing players have too much to lose to make a significant transformation in their existing industry.

This leads back to the normal distribution curve

All of this leads back to the normal distribution curve.  If we assume that in every industry, companies are distributed across the risk and success curve in a normal (bell shaped) distribution, then the companies in the middle (moderately successful) are likely to conduct incremental innovation.  It's the firms two or three standard distributions away from the mean (industry leaders and industry laggards) which are most likely to conduct interesting, disruptive innovation, for two different rationales:

• Industry leaders can afford to make big bets and investments, to try to keep a significant differentiation between themselves and the second tier competitors.  The leaders will double down, introducing new capabilities and features at an increasing rate, and will expand the definition of innovation beyond purely product features and shift into channels, service and experience innovation.
• Industry laggards, falling behind the leaders and the second tier competitors, have no choice but to swing for the fences.  They will conduct disruptive innovation activities because they need to become relevant again to customers and to do that they must change the nature of competition.  These companies are more likely to conduct disruptive innovation that changes offerings and especially business models.

Which company are you?

From this simple analysis we can see there are three categories of companies within an industry (note I am not considering new entrants because they typically try to disrupt the industry or offer a significantly new business model, channel or experience).  Leaders will attempt to reshape the industry with new products, new services and new experiences to lock in their advantage.  Second tier competitors will fiddle around the edges and respond to innovations that the leaders introduce, but most of the second tier competitors will conduct incremental innovation.  Industry laggards, more desperate for attention and needing to change the nature of competition are more willing to take risks and conduct disruptive innovation.

Knowing which kind of company you are in, and the stomach for risk and change in your company and in your industry, will tell you a lot about the potential for the different forms and types of innovation.  Doing incremental innovation in a laggard is whistling past the graveyard.  Most second tier companies prefer to wait to see what the leaders do and then follow those actions, rather than define a new course for the industry.  Leaders lead, until like Apple they no longer innovate and simply rest on their laurels and watch their share get taken away.

What kind of innovation you want to do, and perhaps can do, is to some degree dictated by what kind of firm you work for, its position in the competitive pecking order and the amount of risk it is willing to undertake.

Every idea needs a sponsor

As I noted yesterday, I'm writing a series of posts about what I've learned over the last 15 years of corporate innovation work.  Yesterday I wrote about needing a "why and a how" rather than a "what" for innovation.  Today, I'd like to write about sponsorship, and why it is critical to have engaged sponsors for ideas and for innovation.

This idea is important enough that I took the extra 30 seconds and looked up the definition of sponsor.  The definition that I felt was appropriate for this discourse was "one who assumes responsibility for some other person or thing".  I think this is as close as we can get to what an innovation or idea sponsor is.  Now we just need to understand how this fits into innovation, and why I think it is so important.

Free radicals

Most ideas are free radicals - that is, they don't necessarily "belong" to anyone, and if they are interesting or have real potential impact they are probably a bit dangerous or radical.  Since it is easy to generate lots of ideas, every business has plenty of incremental and disruptive ideas floating around.  It's not hard to generate ideas, obviously, but much more difficult to decide which ideas to test and validate, and even more difficult to convert an idea into a new product or service.  To test and convert ideas successfully and consistently, you'll need to match an idea to a sponsor.  Otherwise, ideas will remain free and interesting, but they won't be implemented.

I've used the term "free radicals" intentionally.  Ideas themselves are necessarily dangerous the way free radicals in our bodies are dangerous, yet ideas left unaccounted for tend to hang around and become the subject of discussion and debate, leading to skepticism and cynicism about innovation.  So over time ideas without sponsors can become like a free radical in the human body, doing unintended damage.

Sponsors

An idea sponsor is simply an individual with enough seniority to ensure that an idea receives the attention, funding and resources it needs to be carefully considered and promoted to a stage where it has a chance to enter new product or service development.  Idea sponsors typically don't sponsor ideas out of the goodness of their hearts - this isn't a charitable exercise - but for purposes of advancing a new opportunity that has value to them or to their business.

This means that ideas need to be matched with people who have enough power or clout to move them ahead, and also matched with people who have an opportunity or need that the idea addresses.  No matter how good an idea is, if there isn't a person who has the need or understands the opportunity and is willing to invest in the idea and push it forward, it will remain a free radical.

There's a potential downside to sponsorship, which we must also consider.  Sometimes "pet" ideas or concepts that aren't really interesting or innovative have sponsors.  Projects or ideas that could not receive investment or funding under other mechanisms will be relabeled as "innovative" and pushed through an innovation process.  That's why every good innovation process has a gating function or steering committee to determine if the idea has real value and impact, as well as having a sponsor.

What do sponsors do for ideas?

Ideas may be free, but managing, evaluating, testing and validating ideas isn't free.  These activities require investment of time and money, and that's where sponsors come in handy.  Given that many organizations have lots of ideas and few resources, resource allocation and prioritization is in order.  For ideas to succeed - moving from the "front end" to product or service development and on to launch, a lot of investment, focus and pressure must be applied.  That only happens when someone takes an interest in an idea and helps focus attention and resources on the idea.

Sponsors help build a business case for the idea, provide resources to shape and vet the idea, encourage the innovation teams when obstacles occur and make the case for the idea to bridge the gap from a concept in the front end to a defined project in product or service development processes.  Sponsors keep attention on an idea, ensure funding flows to critical ideas even when other projects are getting sidelined or killed.

What happens without sponsorship?

When we make a case for a specific course of action - such as assigning sponsorship to ideas - we ought to demonstrate that the course of action has merit over a 'do nothing' or status quo activity.  So let's imagine what happens to ideas in a front end funnel without any sponsorship.

Teams or individuals will generate ideas, and will seek funds to test and validate ideas.  They will have to ascertain what ideas are most valuable and important based on corporate or business unit strategy, since no one will forcefully argue for an idea.  They will have to prioritize a handful of ideas - because they can't work on more than a few at a time - based on their own judgement, since no one is placing emphasis on a specific idea.  The team will have to negotiate for funds to prototype, test or license ideas or conduct research from a funding source who isn't necessarily keen on any specific idea or course of action.  All this time ideas are free radicals, not aligned to any product group or business function, and therefore not receiving any input or shaping by a potential adoptee.

Any idea that must go through a front end process, that must bridge the gap from the front end to product or service development, that must go through a marketing and launch cycle and have an impact on its market needs a sponsor, ideally the same one throughout.  We can debate whether or not small, incremental ideas need sponsorship, but anything reasonably new of different simply cannot run this gauntlet without the careful attention of someone with enough need, vision and clout to make it happen.

How does your organization decide who sponsors ideas?  How do you avoid the pet idea practice?

You need a why and a how, not a what, for innovation

I'm going to start a series of blog posts about what 15 years of innovation consulting has taught me.  I'm happy to say I've learned a lot about innovation in corporations, and also somewhat excited to say I'm still learning, because the pace and nature of innovation is changing so rapidly.  However, there are still so many basic, fundamental things that companies either overlook or fail to realize that going back to the basics is important.

Over the next few blogs posts I'll focus on one aspect of innovation that I believe is overlooked, ignored or simply given short shrift.  I'll explain why I think the innovation method, tool, approach or philosophy is important and why it doesn't receive focus.  Finally, I'll address some thoughts on how to fix it. 

Whether this is your first time innovating, or you consider yourself a grand master of innovation, I hope you'll weigh in.  I've long believed, and along with several others - including Paul Hobcraft - have often suggested, that we need more clarity and transparency around innovation, to remove the mystique and to simplify the work, so we can have more, and better, innovations.

Today, I'm going to focus on what I think is an important fallacy:  We need a what, not a way.

We need a "what"

So often I hear from companies that they need a new something.  It can be a new product, a new process, a new way of working or thinking.  The most common reason they need this new thing - and need it now - is because some other firm has something and they need to respond.  They need a new innovation and they need it now.  To some extent, what the new thing is, and does, isn't as important as its novelty.  I call this fallacy - we need a what.  But what many companies really need is not a "what" - things, products, services are easy to create.  What they really need is a why and a how.

Most often the reason they need a "what" is because the "why" is lacking.  By why I mean a good strategy that defines where they want to compete, what they hope to win.  Too many firms are too focused on the short term, locking in and protecting the market share and product portfolios that they have.  When another firm creates a compelling new product, the company feels it must respond.  So a team is spun up and given an ultimatum - create a new thing that competes with our competitor's new thing.  Very little thought is given to why this should be done or the outcomes or benefits.

You need a clear "why"
So teams race around trying to create a new thing - without the benefit of strategy (the "why") and typically without benefit of the "how" - methods, processes and tools that support innovation.  Creating a new and compelling product or service WITH the how and why in place is challenging.  Doing so without a definitive why and lacking the how is almost impossible.  This is one reason so many innovation projects "fail" - they were rarely defined with success in mind.

Supplemented with a definitive "how"
Nietzsche is quoted as saying "if you have the why for your life you can endure almost any how".  For innovation to thrive, having the "why" - a clear strategy that indicates what innovation should do, how it impacts the business, a way of thinking about the future competitive conditions and putting in place the factors to succeed - is vital.  Lacking that, all innovation success is luck.  Beyond the why is the how.  Nothing in business is left to chance except innovation.  As the demand for innovation increases it is interesting to see so many companies focus so much on day to day operations and leave so little time, energy, experience and enthusiasm for innovation.  These firms lack the "how" and leave much of innovation to chance.

When you have a why (strategy) and a how (process) then innovation opportunities will regularly present themselves.  You won't need suggestion boxes or crowdsourcing to find good ideas - your executives and teams will suggest good ideas because they understand the strategy and know how to create and implement good ideas.

But we have a strategy

Many reading this will argue that they have a strategy, but I'll suggest what they have are at best goals.  Strategies indicate not only direction and destination but also indicate how to get there and most importantly what to ignore or stop doing.  Even in instances where clear strategy exists, it is rarely communicated or well understood below the C-level officers of an organization, and the pressures felt by the mid-management to operate efficiently and with least risk and variance are what win out.  Is your strategy definitive and clear?  Do your people understand the strategy and the implications to their investments and decision making? 

Many innovation teams are left with an unclear goal, asked to respond to a competitor's product or service, unsure how what they create will fit into the strategic direction of the business, and asked to do this work without clear tools, roles or processes. 

In the end, it's rarely one new killer product or service that wins, because competitors and copycats will often quickly match an interesting product or service.  It's the ability to communicate what your company wants to do, and how it should execute on what it wants to do, that drives innovation success.  If you have a good corporate, business unit or product strategy, ensure that innovation supports it.  Also, ensure you communicate it effectively and people understand what the strategy means.  Second, define some innovation methods, processes and tools.  Even a simple "how" helps accelerate innovation work.