What we talk about, when we talk about innovation

 After over 15 years of work in the innovation space, sometimes I get a bit weary talking about innovation.  After all, innovation is a frequently misused word, and it's often used with a lot of naive optimism on the part of some speakers (hope before experience) and cynicism on the part of other speakers.

Increasingly, in businesses large and small, we talk, and we write, and we debate about innovation.  I've tried to define what innovation is (people putting ideas into valuable action) and tried to provide the breadth (Doblin's Ten types of innovation) and depth (three horizons - incremental/transformative/disruptive). Yet people persist in creating their own definitions about innovation, often creating dissonance where none is necessary.  What you'll find is that you cannot talk meaningfully or logically about a topic where there are no shared definitions.

What we fail to talk about is the purpose of innovation.  In all this talk about innovation, I think we often get caught up in the "ways" of innovation but lose sight of the purposes and outcomes.  And I think that's why there is often a lot of talk about innovation that frequently fails to come to fruition.

That is to say, we know we want innovation, but we aren't sure exactly 1) how to go about it or 2) what the measurable outcome will be if we innovate successfully.  And all the while, many of us talking about innovation are whistling past the graveyard, failing to talk about two very important aspects of innovation - the ability to do what we are talking about doing, and the risks we will face if we innovate.

All that to say - most people talking about innovation are similar to people who have never climbed a mountain who get together over coffee in a Starbucks to talk about summiting Everest.  More than likely they don't have the ability, the knowledge or the skills, but they have a BHAG goal.  They more than likely don't know the risks and probably aren't willing to face them.  The outcomes and recognition seems great, but they aren't familiar with the work or the risks, and all the talk will amount to nothing.

So, when we talk about innovation, perhaps we should refocus what we talk about. 

We should:

• Start by defining our terms
  
• Start talking about specific, measurable outcomes and how to achieve them.
• Start talking about the skills and capabilities we need in order to make those specific and measurable outcomes occur - and then implementing the programs to build the skills
  
• Start talking about the risks we'll face and how we'll prepare for them and address them.
• Stop talking about innovation as if it is something that anyone can do without preparation.
• Stop talking about generalities and start talking about specifics.
• Stop talking about BHAGs without talking about budgets and resources.

In fact, if possible we should stop using the word "innovation" because it has been so maligned and misused as to be almost meaningless.  As long as we recognize that our misuse of a word does not negate its power or its meaning.

So, I hope you keep talking about "that which cannot be named", but do so in entirely new ways, using my recommendations about to start talking in new, more specific ways and to stop misusing the word.

Most importantly, stop talking in the abstract and start talking in the specific, the definitive.  And further, put some of that talk into action, to build skills, to plan for and address risk, and to carry out new growth and differentiation activities (see what I did there?)

Two documents that tell you all you need to know about innovation

 If you believe everything you hear, or read, within your corporation about innovation, you may end up a bit disappointed.  As we've seen over the last two decades, talking about innovation is easy, but implementing it and realizing the benefits are a bit more difficult.  Plus, with all the swirling definitions of innovation, what is one woman's innovation is another woman's incremental change.

To cut through the confusion about the importance of innovation and to understand how important innovation is the your company, there are two documents that you can examine that will tell you exactly how much the organization you work for values innovation and the priority it places on innovation. 

These two documents I am referring to aren't necessarily about innovation, but what they say (or don't say) about innovation will tell you all you need to know.

One important document that doesn't matter

You may think that the "strategy" document or plan is important, but it really isn't.  Today, every strategy talks about innovation - it's a requirement, like ants at a picnic.  A strategy document or plan that does not talk about innovation will be tossed back, but writing about innovation in a strategy plan does not mean that innovation will be implemented.

The two documents that do matter are easy to access and easy to read, so anyone in a company can see where the business places its emphasis.  I'll unmask the two documents below and what they tell you.

Budgets

The first document is a budget.  In the political world, the saying is that the President proposes and Congress disposes.  That is, the president proposes actions and plans (similar to a strategy) and Congress decides and prioritizes and determines the funding.  

You can see how important innovation is by looking at your company's, divisions's, and team's budgets. Budgets are where company leaders decide to place important bets, and where they fund the important operations of the business.  If budgets don't all out specific funds for innovation, then it's very likely that no innovation will get done, and even if people manage to create new ideas, there won't be money to realize the idea or convert it to new products and services.

While a strategy that defines innovation is nice, a strategy is high level.  A budget defines what is going to be spent - where the company will place its resources. Budgets are much more definitive than strategy.  You can regularly hear concerns about going over or under budget, but rarely hear people get called out for going beyond strategy.

 While a strategy document is forward looking, and a budget is the realization of the forward looking plans, the second document(s) are somewhat backward looking.

Evaluations and Measurements

While these are two separate items, they are really tightly related, because both assess what happened and why it happened.  We evaluate people and processes based on earlier plans, and their accomplishment of the plans.  If your monthly, quarterly or yearly evaluation doesn't include explicit measurements and goals for innovation, then your company isn't really serious about innovation.

 Think about it - periodically you are evaluated, your team is evaluated, your division and its leadership is evaluated.  Are you evaluated on the amount, scope or nature of the innovation you do?

Here's where another old saying becomes meaningful:  what gets managed gets measured.  If you aren't measuring innovation activities and outcomes, then you aren't managing it, and it isn't important.

Not new news

This probably isn't news to most employees - they know that the budgets don't include money for innovation and further they know that working on innovation is more like sticking their neck out rather than something they'll be rewarded to do.

However, what these two documents say about executive teams and their focus speaks volumes.  If a company constantly talks to investors and outsiders about innovation, but internally does not budget for innovation and does not evaluate people or teams on innovation work, there is no longer any dissonance.  Employees recognize a cynical marketing messaging ploy, and are even less likely to try to innovate when innovation is important and necessary, and somewhat supported by executives.

If your company is serious about innovation, it will include innovation goals and outcomes in its strategies and plans, include funds for innovation in its budget cycles, and evaluate people and teams on their innovation work.  Anything else simply displays an unserious approach to innovation.

Thinking about innovation and strategy

 I've been asked several times lately to write about, or perhaps more specifically, to opine about, innovation strategy.  If you are a somewhat regular reader of this blog or my work generally, you may know that I think talking about innovation strategy conflates two very important ideas that are related but not the same thing.  I find it useful to consider first the definition of these two concepts.

 Innovation Definition

Innovation, in its simplest form, is simply turning good ideas into some valuable action.  That action may be creating a new product, or developing a new channel or business model.  Of course, innovation can span a range of impacts and outcomes, from very incremental product innovation to industry changing business model innovation.

Strategy Definition

Strategy, on the other hand, is an entirely different beast.  Strategy is often difficult to define.

When I Google definition of strategy, this definition pops up.  It's just one of several, but I think I like it the best:  a plan of action or policy designed to achieve a major or overall aim.  

Several important things to note about this definition:

1. It is a plan of action or a policy - that is, strategy is extenuated over a period of time.  Strategy is not a momentary action or a project.
2. It is designed - which means that strategy is carefully considered with a significant end goal in mind
3. It has a specific outcome - the successful execution of strategy should result in a meaningful outcome

Now, reviewing the two definitions, we can see why these words are often conflated.  Innovation hopes to achieve a specific outcome, but most often a much more tactical solution like creating a new product.  Innovation is an action, but it is not often a plan or policy.  Innovation should be designed, but is rarely so carefully considered.

How are these two concepts related

In my view, innovation is a means through which strategy can be realized.  That is, once you've identified a strategy, innovation is one of the important tools in the toolbox that may help you achieve your strategy.

One of my favorite frameworks for thinking about strategy is Treacy's 3 competitive positions, which are competitive positions that are simplified from Michael Porter's work.  The three competitive positions are:

 - Product Leadership

 - Customer Intimacy

 - Operational Excellence

Typically, you can look at a market or industry and see one clear leader in each of these competitive positions, and others simply trying to compete.  

When we consider these positions, one could argue that Product Leadership is most closely aligned with innovation, and to some extent that's true.  Note that product leadership isn't necessarily the newest or the most ornate product.  Product leadership is simply the best product, and a company can create and iterate good products without a lot of innovation.

Next, consider customer intimacy.  This means getting as close to the customer as possible and understanding their needs. In this case you can innovate the customer experience by understanding customer journeys, and create new relationships and touch points, but you can accomplish some of these results through other means.

Some people would argue that Operational Excellence is not associated with innovation, because it typically has to do with efficiency and cost reduction.  I am as comfortable innovating in this regard as any other focus, just the actions and outcomes are different.

Perhaps you'll see where I am going with this.

Innovation is a tool that may help you accomplish your strategy.

It's an interesting conundrum that the companies that have excellent strategy and use innovation as one means to accomplish their goals are very successful, but companies that lard up their language with innovation but lack good strategy aren't as successful.

There may be a few companies that have "innovation" as their strategy, but I'm not aware of them.  A singular focus on innovation as a "a plan of action or policy designed to achieve a major or overall aim" will leave a company exhausted and bankrupt.  Innovation is always important, since growth and differentiation are important, but strategy is more important than innovation, and "innovation" by itself is not a corporate strategy.  

Now, if you were to ask:  OK, where should I focus my innovation efforts?  Then I'd respond with, tell me what's most important in your strategic efforts and where innovation can make a difference.  If your strategy for example is customer intimacy, then I would ask:  how might we use innovation to create new channels, new customer journeys and new relationships to improve customer intimacy.  Note that innovation should be able to provide a major impact on customer intimacy, but it is not the only tool in the toolbox.  You can also improve customer intimacy by training your front line workers, changing how you communicate with customers, shifting corporate focus and rewards and compensation models to emphasize customer intimacy.  

That is to say:  Innovation is one tool to help you accomplish your goals, and once you have clarity about your strategic goals, you can then determine where and when to leverage innovation.

Takeaway

The purpose of this post is not to relegate innovation to a lesser role, but to place its priority and use in a context.  When executives say they need innovation, the response should be:  we need strategy.  Once the strategy is determined, (hopefully well developed and implemented successfully) then where and when to leverage innovation should become much more clear.

Conditions for innovation to succeed

 I was asked recently to write a short post about the conditions necessary for innovation to succeed.  It's actually not possible to write a short post about innovation, much less the conditions necessary for innovation to succeed, but I've tried to simplify this into nine critical factors for success.

They are:

• Scope and opportunity framing
• Executive commitment
• Clear definition of the outcome (incremental/disruptive, product/service/business model)
  
• Adequate resources and funding
• Recruiting the right people
  
• Understanding customer needs
• Cultural realities - risk taking, openness to new ideas
• Agile idea development and testing (MVP)
• The ability to accelerate ideas into product or service development

The first question I often get when I create a list like this is - are all these criteria important?  Can we rank them and decide which ones need more development?

The answer is, yes, you can rank them - I think good scope, executive commitment and the right people are the most important criteria for success - but really good ideas can be killed by other factors.  For example, one of the biggest idea killers is the inability for many companies to take really good ideas and get them prioritized in the existing product development process.

 If I had to choose, I'd prioritize the right people with the right support and give them the right problem.  With those basics in mind, you can do a lot of good innovation.

If you are interested, here's a brief definition of each of the factors that contribute to success.

Brief explanations

I'd like to provide a brief explanation of these criteria and explain why I think they are important for innovation success.

Scope - too often executives ask for innovations, but can't describe or won't identify the scope of the work, what they hope the innovation activity will produce (see clear definition of the outcome) and what investment or risks they are willing to endure.  Without this clarity, or in absence of a defined scope, the teams adopt the business as usual thinking and infer a narrow, limited scope even if the executive team wanted more disruptive innovation.  This is why so many "innovation projects" result in incremental or "me too" ideas.

Executive commitment - It's hard enough to get the existing products or services to market, let alone try to create new solutions in an uncertain innovation process. Plus, some good ideas will require that businesses rethink their existing offerings or channels.  And, the work isn't free and requires air cover. Executive involvement and commitment in an innovation activity is critical for success. As the old saying goes, at breakfast the hen is involved and the pig is committed.  Innovation needs really deeply involved executive involvement and commitment.

Adequate resources and funding - I'll deal with the funding here and the resources in the next bullet.  Discovering needs, testing ideas, conducting research and getting new ideas through the development process and then launching a new product costs money. Starving the teams to get more creative solutions isn't necessarily wrong, but failing to invest small budgets when the potential payoffs are huge is simply misguided.

Right people - I've written extensively that the right people for innovation are typically NOT the "best" people in the current processes.  That's because they are wedded to the existing products and processes.  You need to find the creative thinkers, the outliers, the people plugged into customers and markets.  I think this is so important that I wrote an entire white paper and personality analysis called the Unusual Suspects.  Getting the best innovators involved, rather than the "best" people, will definitely accelerate your innovation work.

Needs - most innovations solve current but unfilled or unmet needs, or anticipate and create solutions for needs that customers don't yet know they have.  Your current market research is mostly focused on your existing customers and existing products.  Discovering new opportunities and needs requires a refocusing of your research and a new way to interact with customers and prospects.

Culture - The old saying is that culture eats strategy for breakfast.  Guess what's for lunch?  A highly optimized, cost conscious culture that is moderately risk adverse and focused on the short run will not conduct expansive innovation projects, and will not carefully consider risky, unproven ideas.  Want more innovation?  Make your culture more welcoming to innovation.

Idea Development and validation - you need a really good, agile and rapid MVP development process to bring an MVP to customers and prospects for testing.  This is NOT a complete product but provides a tremendous amount of insight into what the product or service should be and...

Solution Development - You've got to figure out how good ideas are going to get converted into new products or solutions.  Most companies have products and product development pipelines that are overtaxed and not prepared to accelerate new ideas.  So good ideas often languish in the decision making process just trying to enter product or service development

Other conditions

There are other conditions of course.  Two that should be relatively obvious but not covered here are:

• The ability to launch a new idea - new ideas may reach new customers through new channels.  This can require rethinking marketing strategies and channels
• Legal and regulatory issues - there are ideas that require the development of industry standards or regulatory programs.  If the standards aren't complete or regulatory frameworks don't exist, some new products, no matter how promising, can't be realized

Why would anyone try

In light of all of these criteria, why would any reasonable executive try to innovate?  The answer is that many don't.  Instead, they wait for smaller firms and entrepreneurs to create new ideas and simply acquire the company or technology.

In fairness, other companies have skunkworks or separate organizations that seek to become the innovation engine of the organization, so innovation is isolated from a lot of cultural and decision making overhead.

Some organizations, like 3M, Apple and Google, rely on a deeply embedded corporate culture which encourages innovation and risk taking.  I wrote about this approach in Relentless Innovation.

However, as we can see from examples like AirBnb or Uber, 3M or Apple, different organizations with different philosophies can successfully innovate and relentless innovation does drive a market premium over companies that do not innovate.