Innovate on Purpose

I'll Never Fall in Love (with ideas) Again

2012-01-26T07:35:00.000-08:00

With apologies to Burt Bacharach for liberating his song title, I want to develop the concept of the innovator as a cold hearted killer, a love 'em and leave 'm type more suited as the villain in a dime store novel more than the passionate, heroic leading man. Because people who fall in love with ideas, or products, often don't have the strength to do what they must. Create a new idea or new product that makes the old one obsolete.

Anyone who has worked as an innovator knows the risk. It's easy to fall in love with an idea. So many ideas are so perfect, so suited for the need or opportunity. But falling in love with an idea is dangerous. Falling in love with an idea means as an innovator you are too close to your ideas to evaluate them effectively, and will miss problems or conflicts in the idea. A good innovator must be as willing to rework ideas and yes, even kill ideas as he or she is to promote an idea. A detached aloofness is probably your best bet, emotion wise.

Falling in love with an idea, however, is an easily forgivable sin, while falling in love with an existing product or service is what stymies innovation and creates lethargy. Far too many organizations have far too many executives in love with ideas that, like fading soap opera actresses have starred in their roles for far too long. Falling in love with existing products or services isn't just dangerous, it's deadly. Look no further than Kodak for example. Kodak continued to stick with the fading actress of film, all the while courting the emerging actress digital, but never made the clean break. Too many people were entranced by film. Too many people were reliant on the business models, revenues and programs that film created. In the end, Kodak was wedded to a corpse, while a patient new bride waited to take its place. Now, that bride may find itself in the arms of another.

Innovators and executives need to be ruthless. In a training program today I asked the class "Who should force your own products into obsolescence?" There are only two possible answers - yourself or everyone else. If you fall in love with ideas or products, and ignore the signals of the market, you will suffer the same outcome as Kodak. If your innovation efforts can be as ruthless as JR Ewing, as cold hearted as Gordon Gecko and as decisive as Churchill, then your innovation efforts will not be in vain. If, on the other hand, you engage in a love affair with your ideas or your existing products, obsolescence will be your only friend.

Love the innovation process, love the creation of new ideas, love the exploration of customer needs. Act with reserve in the evaluation of ideas and be absolutely ruthless when considering the further life of existing products. Because that's how the firms seeking to disrupt your products will look at them.

Innovation Contradictions

2012-01-25T08:37:00.000-08:00

Why is it that something as important as innovation should be so fraught with contradictions? Today, as I was leading an innovation training class for a client, I stopped to think about the number and variety of contradictions that are embodied in successful innovation. In fact these contradictions are what make innovation so difficult.

The first contradiction is that innovation requires a business to embrace processes and methods that are far different from the efficient, effective processes that sustain short term profitability. Innovation creates new, risky, uncertain concepts that will pay off in quarters if not years. Most "business as usual" processes reject these kind of ideas as contradictory to the existing operating model. Which is like eating your seed corn. I addressed this issue in my book Relentless Innovation.

The second contradiction is that while executives want innovation, they don't want the disruption or investment that innovation requires. This simultaneous demand for innovation results and refusal to invest in innovation efforts creates dissonance in the teams that are actively trying to do interesting innovation work, and leads to confusion and then cynicism.

The third contradiction focuses on the importance of transparency, visibility and commitment. Most innovation activities are isolated in the far reaches of a business, far from prying eyes and easily swept under the rug if the innovation doesn't pan out. In an era of vocal leaders, we need far more emphasis on innovation, rather than the circumspect way many organizations approach innovation, out of sight and out of mind. Doing innovation work is tough, and doing it without the full support of the senior team, constantly demonstrated, means that many innovators have far fewer resources than they need.

The fourth contradiction, and perhaps the biggest barrier to innovation, is the contradiction between what we TELL people to do and what we PAY people to do. Often we express the importance of innovation and assign people to innovation teams. We ask them to do important work, creating new products or services. Yet we do nothing to change how these individuals are evaluated, compensated and rewarded. In fact most of these people are held accountable in their evaluation period to the work they did in their "day job". Which leaves the potential innovator in an awkward position - follow his or her passion and spend time on innovation that may detract from success in the day job, or work on the day job and give short shrift to innovation.

There are more contradictions than these I've listed. I hope you'll be willing to add your own in the comments section. Perhaps my other favorite is the old saw about protecting interesting ideas from others, to keep them from stealing your ideas. If an idea is truly unique and disruptive, you won't have to worry about anyone stealing it - you'll have to cram it down their throat to get them to pay attention. Oh, the irony of it all. Perhaps it can best be said that good innovators are people who recognize the irony in their work.

What is the definition of "innovation"?

2012-01-18T06:20:00.000-08:00

As an innovation geek, I always enjoy reading over the latest reports about innovation. Like a kid at Christmas I eagerly await reports on innovation from management consulting firms like PWC or Booz Allen. They provide a yearly assessment of the world of innovation, and especially what CEOs believe to be true about innovation. And, like Christmas, many of them occur at this time of year. Recently, GE published an innovation report entitled the GE Global Innovation Barometer. It is worth taking a look at if you haven't done so already.

One of the items that surprised and, yes, troubled me the most is to be found near the back of the overview presentation, on page 30 of 32 pages. That's where the report analyzes how CEOs define innovation.

The report offered five definitions and asked the respondents to choose two. Here are the five definitions:

The implementation of new processes, products, organizational
changes or marketing changes
An environment/culture that embraces positive change, creativity
and continuous improvement
Research and development, new intellectual property (IP), and
inventions
Staying ahead in the market and being a market leader
Solutions that benefit society and societal outcomes (including
environmental outcomes)

These definitions don't trouble me too much, although they define very different things. What troubles me is that no definition above was selected more than 35% of the time by the respondents.

I'm sure we could spend hours debating about the definition of innovation, much like ancient scholars argued about how many angels could dance on the head of a pin. Unlike the angels on a pin, however, the definition of innovation MATTERS. While it could get academic and esoteric, it needn't be. The reason a definition of innovation is so important, if not at a global level at least at company level, is that a definition signals intention, commitment, direction and importance.

Innovation is tough enough when well defined. After all, in most cases an organization is asking its people to dream up new products or services that aren't aligned to existing products or services at a time when there are few resources or dollars to accomplish the most rudimentary tasks. If innovation is poorly defined, innovation is like discovering a new continent without a map, without a compass, and without knowing what's important when you discover it. Columbus went west to discover gold and spices. Imagine his disappointment to discover just a bunch of sandy islands with little demonstrable wealth. That's what innovators who work without clear definitions face.

Returning to the definitions GE used, the first (implementation of new processes, products, organizational changes, etc) is a COMPONENT of innovation, but only if those changes add significant value, are truly new and unique and important and relevant to a customer. Implementing change is only innovation when it brings new concepts or new ideas that are valuable to a customer or stakeholder.

The second definition (environment/culture that embraces positive change, creativity and continuous improvement) is an ATTRIBUTE of innovation, not a result! Good innovators know these conditions must exist, and by the way, this definition is too limiting. It only mentions continuous improvement, not disruptive innovation.

The third definition (research and development, IP, inventions) is an INPUT to innovation, and too limiting. R&D and IP are definitely a part of innovation, but this definition doesn't consider commercialization and market success. Creating new ideas and new IP is great, but only if there is a market that needs and wants the concepts. Moreover, this definition limits innovation to products, when innovation can clearly be applied to business models, services and customer experiences.

The fourth definition (Staying ahead in the market) is a STRATEGY, and not even a well-defined one. You could accomplish this by cutting costs, acquiring other firms.

No wonder the CEOs struggled to define innovation - because true definitions of innovation are complex. What a CEO says about innovation matters, in terms of the commitment of the rest of the organization, in terms of direction, in terms of investment, in terms of strategy. The starting point for any successful initiative or venture in any business is a clearly articulated goal, definition or strategy, which is then backed by deep commitment. If we can't define innovation well, how can we possibly be committed to its success?

Here's a really simple tip for any firm trying to become more innovative: create your own definition of what innovation should be for your business - and not just for an initiative, but an overarching definition for innovation. Then, ensure you have the commitment to follow through on the definition and that the people responsible for carrying out the definition understand it, and the vision, strategy and goals behind the definition. Otherwise, like a rowboat with only one oar, you'll find your team constantly circling.

Is it a fools errand to try to create a culture of innovation?

2012-01-16T14:09:00.000-08:00

I was reminded of the Forrest Gump mantra recently - stupid is as stupid does - and it got me thinking. Strange, almost ironic, isn't it, that a saying like that could make one stop and think? Or perhaps I'm just living the mantra. But there's a deeper meaning here for innovators, and for those who babble endlessly about creating a culture of innovation. What are some of the challenges?

First of all, most "cultures" aren't designed. When Timmy and Jane decide to build an entrepreneurial company, they are doing so to solve a problem or bring a new product to the world. Most start-ups and entrepreneurs give exceptionally little thought to esoteric words like "corporate culture". There are far too many pressing issues to face. Second, culture is to a great extent driven by vision, strategy and, most importantly, compensation. No matter how much any executive talks about the need for innovation, if employees' compensation isn't linked to innovation, its all just talk. Third, since many firms lack a clear strategy and try to be all things to all people, the products and services they create necessarily have to address all needs and are tailored to the late majority and the laggards rather than the early adopter and early majority. Want to know why your firm can't create a culture of innovation? It didn't start out thinking about the importance of innovation, it didn't create a culture of innovation as it grew and it doesn't value or compensate people for innovation now. Further, the customer base isn't all that keen on innovation.

Once an entrepreneurial firm achieves some reasonable size, their intent shifts from disrupting the market to defending their turf. As firms scale and grow, they lose the sense of innovation and disruption and become very much like the firms they displaced - more interested in defending existing customer relationship and markets and less interested in innovation. As that shift happens, business frameworks, service models and compensation schemes all band together to create a business as usual framework that is about providing for the needs of existing customers and defending the firm against disruption. There's little incentive, motivation or focus on innovation. The culture is increasingly attuned to short term profitability, defending market share and position and incremental improvements to existing products.
In the face of this hardened business model many firms are now becoming aware of the need for innovation - and not just occasional innovation or serendipitous innovation, but successive, repetitive innovation. That's when many people realize that existing corporate culture - focused on efficiency, short term financial goals and defending the status quo - must be changed to become a "culture of innovation". How's that going to happen? The existing culture was built haphazardly in most cases, in response to shifting strategies and needs over time. The culture can't simply shift overnight - the whiplash would be too great for the company, the processes and the people who do the important work. Like eating an elephant, cultural shifts from efficiency to innovation must be completed one bite at a time, over a long period of time. Which will doom the attempt since most executives and managers can't bear to think in long time horizons.

It's the difficulty of creating a culture of innovation that led Apple to develop the Macintosh in a skunkworks, and is what makes the magic of 3M and Google so enticing. But the reason these firms are successful and have a "culture of innovation" is that that's what their original structure, form and intention was. Look no further than the development of Gore: Bill Gore was determined to create a new kind of company and started from the beginning with a plan and a strategy that focused on eliminating hierarchies, highly integrated teams and communication and the support of innovation across the organization. Gore, and other companies like that, were built from the ground up for innovation. Most companies are now trying to attach innovation scaffolding to an existing business as usual culture, and finding the connection treacherous at best.

So, the question becomes - is it a fools errand to try to create a "culture of innovation" in an existing company that does not emphasize innovation? Should all innovation in these firms be attempted in a skunkworks? Can we shift teams and people to begin to embrace innovation as part of the culture? I think the answer is "yes" - the only other response is to accept a slow slide into oblivion. What we need to do now is understand what it will take to shift a business as usual culture to a culture that accepts and then embraces innovation. That is not a quick journey, nor is it an easy one. Many people, many trusted perspectives and long held beliefs may need to fall in order to achieve that. Time, patience and commitment - attributes not often attributed to American business - must be applied to make the shift.

Eventually, though, it is the people of an organization who determine the culture. What's good about this fact is that people are rationale actors - often concerned about change but open to influence by visionary leaders who show the way and by programs that demonstrate innovation is rewarded, not degraded. Executives must decide that innovation is important, and communicate that decision through actions that demonstrate the importance of innovation: what they value, who they promote, how they compensate and reward. Middle Managers must become innovation accelerators rather than efficiency experts. Clearly, this will take time, focus and energy. And that's why a culture of innovation is so unusual, and so difficult to achieve.

Should Innovation be "professionalized"

2012-01-10T06:07:00.000-08:00

I read with some interest and trepidation the article in Co.Design entitled "Do Innovation Consultants Kill Innovation?". Like many people who write for the web, I recognize a catchy title is meant to attract readers and create a distinct point of view. As a person who earns a living as an innovation consultant, of course I'm concerned when anyone seems to cast doubt on my chosen trade. So, perhaps it's a good question to ask - should innovation become a profession - whether inside an organization where innovation titles are appearing with increasing frequency, or should we expect to see more innovation consultants as the importance of innovation creates a potential vacuum of innovation talent?

When questions like this arise, my first notion is to consider the past and look a previous disruptions in thinking or in technology. I'd like to consider disruptions because that's what I believe is underway - a disruption to how businesses run. The traditional business methods are being swept away by increasing levels of global competition, free trade, economic calamities, the fact that the internet is lowering costs of entry into many businesses, increasing consumer demands and decreasing product life cycles. I could go on but frankly I don't need to. Innovation is becoming an ever more important capability, and that disrupts the status quo, business as usual way many businesses are run and have been structured. So, if you believe as I do that a disruption is under way, then it makes sense to see how people and firms reacted to previous disruptions.

Take, for example, the development of the model-T. When Ford made individual ownership of a car practical, it disrupted a lot of the existing order. The example we all use is "buggy whips", since the need for buggy whips plummeted. But think about all of the other disruptions - the need to produce and distribute fuel, the need for mechanics to work on the automobiles, the labor saving techniques and applications of a Model T. Life and society were disrupted by the Model T. And in that disruption rose a number of professional skills - mechanics, fuel refiners and distributors, road builders and many others. These skills and professions became ever more important as the impact of the automobile was felt, and the automobile would not have been as successful if these professions that supported the automobile did not arise. Did people decry the rise of the mechanic? Were people upset that they didn't need to drill, refine and pump their own gas? No, these professions and others simply enable people to move ahead and use the new tool (the automobile) as effectively as possible. Today we don't question the value of a mechanic to fix our cars - thankfully, given how powerful and complex they've become. Why would we think differently about professions that accelerate and improve innovation?

In any disruption, there are people who take advantage of their knowledge or simple showmanship to develop products or services that extract value from customers rather than delivering value to customers. Whether those people are the internal managers who have innovation titles (the "custodians" of the article) or innovation consultants ("the word slingers") make no difference. Every hype cycle has it's charlatans, which will be exposed soon enough, and every technology or capability has its experts who help others take advantage of new tools, methods, products or techniques. Will the authors now complain about Lean and Six Sigma Blackbelts?

The authors rightly note that some firms - Apple, Google, GE and others have a culture of innovation that seems to propel these firms toward ever more innovation. They also make the claim that these firms have entrepreneurs at the helm. Seems a stretch except for Google anymore. While I admire the leaders of 3M and P&G and GE I'm not aware that any of them were at any time an entrepreneur, so the hallowed sainthood of entrepreneur leaders is misleading if not untrue. Most firms aren't lead by innovative, charismatic entrepreneurs and don't have a "culture of innovation". They have cultures that sustain "business as usual" which conflicts with innovation. Introducing a new tool or capability often requires either exceptionally bold internal managers (what the article derides as custodians) or insightful change agents from the outside (the dreaded word-slingers). Change doesn't happen by itself - it happens through catalysts.

The article then makes claims that refute its own point, noting that industries like high tech, pharmaceuticals and the movie industry don't hire "dozens of consultants". I'm not sure which firms the authors have worked with, but having worked in high tech and pharmaceutical, and as someone who actually watches movie trailers I can assure you that all of these firms work with consultants ranging from the strategy houses (McKinsey, Booz, Bain, BCG, etc) to innovation boutiques, and, what's more, firms in these industries are actively experimenting with "open innovation" to identify excellent ideas in their industries and in the wider world. They aren't waiting just for good internal ideas. Whether or not these consultants add value is a relevant question - but stating that these firms don't have specific processes or don't partner with consultants is almost laughable.

The authors make another point at the end that I find interesting and moving, but a bit naive. They say that businesses need to provide the means to offer "freedom to explore the high-risk messiness and the fuzzy, nonlinear ways" in which innovation grows. Hmm. What other functions or processes within a modern organization could be described as fuzzy, high risk and messy? Finance? No. Accounting? No. Product Development? No. In fact no process or method that is used to drive any revenue or cut any cost in a business would survive if it were fuzzy, high risk and messy. Large businesses don't operate that way. Even in firms that have a strong innovation culture, there are still defined innovation processes, people with innovation titles and on occasion even the best innovators use innovation consultants!

The authors have a point - some innovation can be risky, messy and non-linear. But that doesn't mean the entire innovation capability should be left completely to chance! For anything to get done in a modern business, someone needs to be responsible and there needs to be some structure, some knowledge and some best practice. We can't wait for the immaculate conception of innovation - we need to provide knowledge, tools, understanding and some people and process who understand how these things work.

Yes, just like the band director in the Music Man there will be people who take advantage of the situation to offer services that don't work, looking to make a quick buck. But I think most of my clients will agree that many innovation consultants ACCELERATE innovation and build innovation capabilities rather than "kill" innovation. So, should innovation become a profession - either as a staff or line position within a firm, or as a consulting position outside the firm? Until the processes, tools, capabilities and methods of innovation are fully understood, fully interwoven into the culture and processes of a company and taken as second nature, I'd argue there's a huge need for innovation professionals. The real trick, at least what the article is pointing out, is divining the difference between the Henry Hills ( of Music Man fame) who make promises but fail to deliver, and the innovation professionals who create real value.

When executives talk about Innovation, watch out

2012-01-06T05:43:00.000-08:00

I'm upset about all the false promises and hot air I'm hearing right now, and I'm not even talking about the presidential race. I'm talking about all the misguided talk by executives about "innovation". Yesterday's NPR interview with new Yahoo CEO Scott Thompson provides an excellent example. I don't know Scott Thompson and I have no animus toward Yahoo, or for any of its competitors, so what I am about to write should be viewed in the light of a neutral observer trying to wrap his head around some "innovation" claims. Because increasing, when a new CEO starts talking about "innovation", grab your wallet and invoke the Reagan doctrine - trust but verify.

It's become almost a requirement for CEOs to expound on the need for innovation. Every quarter like clockwork we see a survey from BCG or PWC or some other management consulting house telling us that CEOs rank innovation as the second or third most important initiative their firm should undertake. I'd like to see the data on the question that goes unasked - how many of those same CEOs who talked about the importance of innovation last year made actual investments in innovation initiatives and programs? While many CEOs are talking about innovation, far too many aren't actually implementing innovation.

Unfortunately the press lets them get away with this. I was listening to the news on the radio when Scott Thompson was announced as the new CEO of Yahoo. There's no doubt that Yahoo needs new focus and direction. It can't decide whether it is a media company or a search company or something else. When asked what he intended to do, he said he wanted Yahoo to do more "innovation and disruption". That's either the most optimistic or the most cynical statement I've heard in years.

Why cynical? Because it plays on what is "hot" right now - innovation - without providing any specifics in terms of goals, or outcomes or investments. By talking about innovation, he hits all of the right notes in the press, but doesn't provide any insight into what he means by innovation, and this is a critical point - when executives talk about "innovation" we need to know what innovation is meant to do. Suppose for example we simply inserted the word "hammer" for innovation in many of these presentations. We'd look askance at a person who repeatedly talked about hammers without giving us insight into what he planned to do with the hammer - build or destroy? But we all nod at the sage reference to innovation. Further, his statement is cynical because Yahoo hasn't been demonstrating much innovation capability lately, and hasn't been known for innovation.

What's Yahoo's record of innovation? They were one of the first search engines, but were disrupted by Google. Since then I'd have a hard time identifying a record of innovation from Yahoo, and certainly no record of disrupting other competitors or markets. Yahoo has more experience being disrupted than acting as a disrupter, so what is Thompson going to build on? What initiatives, investments and programs will he enact to make Yahoo more innovative? Will innovation be used to drive more growth, increase differentiation, disrupt another market? Why, when Thompson made a point of talking about innovation and disruption as key goals, didn't someone ask for further clarification?

Contrast Thompson's throwaway line about innovation with Arthur Lafley's statements about innovation at P&G. Lafley made clear, definitive statements about innovation, such as setting a goal that 50% of P&G's products would originate from ideas from outside the company. That statement confounded the market because P&G has a strong internal R&D team, and it set a goal that could be easily measured and quantified.

I hope Thompson succeeds in restoring Yahoo to its former prominence. He and other CEOs are only guilty of latching onto a concept that's poorly defined, but which, when done correctly can drive increases in revenues, profits and market share. Innovation is almost like alchemy - it seems to turn base metals into gold. But just like the early alchemists, it seems that only a few people who attempt it have much success, while most of the alchemists are full of empty promises.

What I'd like to hear from Thompson, and other executives is a clearly delineated strategy, which emphasizes growth, or differentiation, or operational excellence, or customer intimacy, and then hear them talk about how innovation is going to help them achieve these strategies and retain leadership in these strategies. Right now we are putting too much emphasis on innovation - a tool which should be used in service of strategy, rather than putting the emphasis where it belongs first - on the strategy. This reminds me of the concept of "strategic bankruptcy" that another writer says Best Buy is guilty of. I don't know if Best Buy is guilty of strategic bankruptcy, but I do know that many firms seem to lack clear strategy, which makes doing meaningful innovation even more difficult.

Will some journalists please follow up on a quarterly basis and ask this follow up question to Thompson - if innovation is important, what investments are you making and what results are you seeing?

Book Review: The Innovation Master Plan

2012-01-04T05:43:00.000-08:00

Over the holidays several new innovation books arrived, so I'll be reviewing a couple of good books over the next few weeks. Today I'm reviewing a book by Langdon Morris, who has written other books about innovation, notably Permanent Innovation, and who is one of the senior partners at InnovationLabs.

I was interested to review The Innovation Master Plan (hereafter TIMP) because much of what Langdon and his team write about falls very much in line with our thinking at OVO. InnovationLabs have identified the importance of innovation methodologies and processes, which we believe creates a repeatable, sustainable innovation capability. In The Innovation Master Plan, Morris provides an excellent overview of the entire innovation process.

TIMP is written for senior executives. After all, the subtitle is "the CEO's guide to innovation". Much of the book is written with a strategic viewpoint, and a "top down" approach. What the book occasionally lacks in specific tasks and actions it makes up for in its focus on leadership, commitment and investment from senior executives.

In the first chapter, Morris tackles one of my pet peeves about innovation - asking readers to examine the purpose, reasons and strategies for innovation. Far too often innovation is simply a reaction to a new entrant or a shift in the market. That is, innovation is reactionary not planned or strategic. Morris asks the reader to consider "why" he or she is innovating. In our (OVO's) approach we work hard to link strategy, strategic goals and innovation purpose or outcome. Without this focus, it is easy for innovation to produce interesting but irrelevant ideas. Morris points out another important concept - the differences between "goals" and "strategies". When CEOs state that they want 50% of their sales from new ideas, that's a GOAL, not a strategy. A strategy may require thinking about what capabilities or competencies allow a firm to lead in an industry, or whether a firm should be a pioneer or a "fast follower". Readers of my new book Relentless Innovation will know what I think about the concept of "fast followers". As the pace of change increases and product lifecycles decrease, fast followers have less time to respond to market opportunities and less lifecycle in which to make a return. Morris suggests there is a niche for fast followers but doesn't seem to offer them much hope either.

In subsequent chapters Morris talks extensively about innovation portfolios, which should help indicate what to innovate and the appropriate risk/reward matrix. Again, this is focused on strategy which should be set by executives and used as directional information and constraints by innovators. Far too often this thinking is missing, and causes innovation to go awry.

It's not until the middle of the book that Morris deals with "how" to innovate, and builds a case for an innovation process. Aristotle said that we are what we do repeatedly, and only through the definition of a process can we repeat the same tasks and process steps to acquire more learning and knowledge. Otherwise every innovation is ad-hoc, and no learning can be accomplished. Morris' prescriptions for innovation process definition is right on the money.

Toward the end of the book Morris turns his attention to "who" should innovate, considering people and the culture within which they work. InnovationLabs has always produced good insights on innovation culture and the book recaps much of that information.

On the whole this is an excellent book that covers much of the end to end process that good innovators should strive to achieve. It is written with senior executives in mind, therefore it is occasionally a bit more abstract than I'd prefer, with less information on tactics and deployment than I'd like to see, but that is what the intended audience will want to read and absorb. While we wrote our books in parallel and without collaborating, it is interesting to see at the end of TIMP Morris arrived at the same conclusion that I suggested was possible in Relentless Innovation: innovation becomes a virtuous circle when implemented correctly. Morris suggests that as innovators get better at innovation, they enjoy more success in the marketplace, which frees up more resources and attunes the culture toward innovation, making more innovation possible. I developed the same theme in Relentless Innovation. Good innovators know this, overcoming the inertia to invest in innovation and waiting for the returns is often far too difficult for most firms, so they never overcome the inertia and initial difficulties to realize the returns innovation can provide.

The Innovation Master Plan is a book I'd like to think I could have written, not necessarily because I'm a good writer or that I have great ideas about innovation, but because it makes so much sense and encapsulates so much good insight and information about what's needed to succeed at innovation as a business discipline. This is an excellent primer for executives who are starting an innovation effort, or who need to understand the breadth and depth of a successful innovation undertaking.

How innovation becomes infectious

2011-12-30T06:34:00.001-08:00

If you are like me, a person who is interested in innovation, you've probably experienced the following scenario. A meeting is called, where an executive announces that he or she wants more innovation. Other heads nod sagely, having seen this play before. The executive directs attention to the innovation facilitator, advocate or consultant in the room. At that moment, time freezes, as the shields go up and everyone searches your face to determine what wild party trick you have up your sleeve. It's clear from that moment on that it's "us" versus "them", and while great outcomes are expected, they'll happen on another person's watch.

Having lived my life as an innovation consultant, I'm familiar with the unintentional cold shoulder, the lack of belief and the patient settling in, waiting for the party trick to emerge. That's my business, so I've learned to lower expectations about immediate outcomes and hopefully build consensus for change. But what about an internal innovation advocate? Must they constantly be the virus that seeks to infect corporate cells that simply don't have receptors? How does an organization become truly "infected" with innovation when most of them have anti-bodies actively pursuing and eliminating any wayward innovation viruses?

Since we are talking about infections, let's start at the cell level. At the cell level, receptors are located on cells and receive instructions for the cell to do something. There are two types of chemicals that work with receptors, interestingly called agonists and antagonists. An agonist is a drug or chemical that binds with a receptor to help it do its work and engage the cell. An antagonist is a drug or chemical that blocks or binds the action of another chemical or drug, blocking the receptor.

In most organizations, the receptors are attuned to short term gains, maintaining business as usual and slowly, steadily growing the company. Antibodies or "antagonists" act against ideas or actors that suggest concepts that would conflict with these receptors. Innovation is often a foreign element that seeks to enter the corporate cell, but finds few receptors and most of those are blocked by antagonists who seek to maintain the existing order, protect business as usual. Innovation is viewed by the corporate body as an invading virus, bent on destruction rather than as a positive force with beneficial outcomes.

To overcome these corporate barriers we need to do three things: reduce antagonists, create more receptors and make innovation less of a foreign substance and more familiar to the cellular structure. To accomplish these goals, corporate bodies need to do the following:

Reduce antagonists. In the cellular world, antagonists block messages or disable receptors so cells can't or don't do what they should. In the corporate world, antagonists are represented by corporate culture, which dissuades people from taking actions, compensation, which encourages consistency over change, history and perspectives, fear of risk and uncertainty. Until these antagonists are removed through changes in corporate culture, communication, compensation and reward structures, innovation will always be viewed as an invading virus rather than a beneficial cell.
Increase receptors. The more receptors available for a specific signal, the more likely the signal is to be recognized and enacted. If only a few receptors exist and antagonists are plentiful, the messages don't get through. In a corporate world, we need more people in management roles who are willing to try out innovation initiatives and programs. These can be existing people, newly motivated and directed to be more open to innovation, or new people hired for their perspectives and attitudes toward innovation. Good ideas that aren't received and aren't supported aren't useful.
Make innovation familiar. Going beyond the cellular level into the DNA level, our DNA for years has baffled scientists, who at one time claimed that over 95% of DNA was "junk". Now, scientists are realizing that our DNA have incorporated many different types of information, which allowed us to evolve. These "junk" DNA may not control our destiny but help us adapt. In a corporate setting, we need to add innovation into corporate "DNA" to make it more familiar to business as usual and to help the organization adapt. As long as innovation is seen as an external intruder or virus, we will resist it and create antibodies to suppress it. Once it becomes part of the DNA we'll develop receptors and agonists for it.

So the next time I'm in a meeting and getting the feeling I'm the virus and the executives around the table are antagonists (in the receptor sense) I'll try to introduce some agonists or seek to introduce more receptors in the room, with the ultimate goal of introducing innovation into the DNA, so innovation is seen in a positive light as opposed to being viewed as a virus.

As innovators, we need to find ways to make innovation infectious. That means innovation needs to seem more valuable, more effective and less risky than the existing state of affairs. It also means reducing the antibodies and inoculations against innovation in the team you are trying to convince. Learning from nature is important here as well. Some of the most infectious diseases are spread by 1) fun activities (sex) or 2) by many carriers or 3) being easy to transmit (through the air). New ideas and the methods and tools to realize them, to become infectious, must be fun to do, or at least more fun and interesting than existing work, supported by many people, who can transmit the ideas easily. The ideas need a short incubation period, to take root and grow quickly. The ideas need to be resistant to inoculations, like "we're not innovative" or "that's too risky".

In short, we innovators could learn a lot from infectious diseases.

More efficiency or more innovation?

2011-12-28T06:11:00.000-08:00

Every once in a while someone can illuminate a point so well that you simply have to stop and pay homage. Paul Sloane crystalized a key point about innovation recently when he tweeted:

Businesses are good at getting better but poor at getting different.

The reason this crystalized one of the key innovation issues is that it reminded me of my early economics classes. I suspect you remember those somewhat simplistic "guns vs butter" tradeoffs. Should a country produce more guns, or more butter? Who benefits from the selections? What happens if more butter is produced? Are fewer guns necessarily produced if more resources are shifted into butter production?

If this rings a bell from somewhere back in freshman economics, but at the same time seems too simplistic when viewed in light of the modern economic enterprise, then consider this simple question:

What is the appropriate balance between efficiency and innovation in a business?

Eliminating all other factors, how much of your time, your efforts and your resources should be invested in driving ever more efficiency in your organization? How much of your time, effort and resources should be invested in innovation? It's not until we think of these as investments and force specific tradeoffs that the conundrum becomes clear. Just like guns and butter, we probably need a reasonable investment in both efficiency and innovation to thrive over time.

A national economy will demand guns for defense and butter for nourishment - those demands will shift and evolve depending on the threats the economy identifies externally and the needs of the population internally. Businesses, with timelines and incentives that are somewhat different, focus on short term financial results, which tends to shift the balance between innovation and efficiency toward efficiency. Most initiatives that focus on improving efficiency have an immediate, and positive financial impact. Thus efficiency is rewarded, and initiatives that are rewarded are repeated. Innovation often has a negative short term impact - costs without an immediate benefit - so innovation is far less likely to produce a short term financial benefit, and therefore much more difficult to do. Slowly, over time, the scales shift from a balance between efficiency and innovation to ever more efficiency and increasingly less innovation. Eventually efficiency is well understood and easily accomplished, but it has ever decreasing marginal returns. Innovation, on the other hand, becomes more difficult the less it is practiced, and is viewed as risky, uncertain and become even less likely to be taken up.

Clearly, every business needs both - a focus on efficiency and a focus on innovation. My new book Relentless Innovation provides examples that demonstrate why a balance between innovation and efficiency is so important, and extracts lessons from firms that manage to do both well simultaneously - P&G, Apple, 3M, Google and Gore. These firms have capabilities and investments that other firms would do well to emulate, because an ever increasing diet of efficiency will create a firm that is exceptionally efficient, but indistinguishable from its competitors.

The economics example of tradeoffs between guns and butter is meant to help students think about investments and tradeoffs. Both guns and butter are necessary for every economy, but in different degrees. Likewise, innovation and efficiency are necessary in every company. Establishing "how much" investment in efficiency and innovation is necessary, and then carrying out that strategy, is very important. Firms that can achieve an appropriate balance will thrive, while firms too focused on efficiency will become one trick ponies.

Who would have thought that the guns vs butter tradeoffs could illuminate an important business challenge?

8 - the perfect innovation number

2011-12-21T07:12:00.000-08:00

Every sport has a specific team size. Basketball allows five players on the court at one time. Baseball allows nine on the diamond. American football and international football both allow eleven on a side. It's a mystery how these numbers were arrived at, but they've become codified in the sports we play.

Other initiatives and efforts have a "right" number. Three wise men. Three musketeers. Four horsemen of the apocalypse (just saying). However, the old adage is that "too many cooks spoil the broth", and like many old adages it carries a ring of truth. There's an appropriate team size or number for almost any effort, and we at OVO have decided that the magic number is eight. As in, eight people.

In my experience innovation suffers from the Goldilocks phenomenon, not necessarily too hot or too cold, but either too few participants or too many. In the first case, innovation seems challenging and requires a lot of work with little possibility of payoff, so only the hard core dedicated types show up. In the latter case innovation seems like the approved strategic flavor of the month, so lots of people show up but don't, you know, expect to have to do anything.

When you have a team that's too small, there are too many perspectives missing and too much work for the team to do effectively. A small team rarely spans all of the business lines, business functions and insights necessary, so the team is constantly calling on other people and eventually makes itself a nuisance. Conversely, when the team is too large it is unmanageable and easily distracted. People who probably shouldn't be there, or people who are there to make sure they don't receive assignments simply get in the way of people who are actually trying to get things done.

But on the whole, smaller teams are more powerful than larger teams, for this reason: only smaller teams can grapple with disruptive ideas. Getting people to think disruptively means getting them to think outside their comfort zone and outside the products, services and strategies of the business. If even one person can't or won't free themselves from those confines, then the team will be dragged back down by the doubter. The larger the team, the more likely it is that you'll have a doubter. And the power of one person who can't or refuses to get on board with a new perspective or scope is enough to drag down the rest of the team.

So, in most regards, five people is at the lower end of a viable innovation team, simply due to the workloads and the range of experience and perspectives. Ten is probably at the upper end, due to the cost of the commitments and the increasing likelihood of people who simply won't get on board. Eight is a nice, round number somewhere in-between, and the number we've found to be about the best for innovation. Oh, you might say, that seems on the high side. You're right, and we err on the high side in this case because many innovation teams consist of people who have other, important jobs, so they can't attend every meeting. Working on a quorum philosophy we always keep working and expect absent members to catch up. This philosophy works if you have 8 members and 2 can't come, but becomes difficult when you have five members and 2 can't come.

There is another aspect of the Goldilocks phenomenon mentioned above. Team members can be too hot (too excited about their own ideas) or too cold (assigned to the team but with little desire to be on the team). Smaller teams can be formed around volunteers - people who WANT to be there, while larger teams are formed from people who were TOLD to be there or people who want to be sure they are represented but don't actually plan to do any work. Like Goldilocks and her choices, you don't want too hot or too cold, too large or too small, you want the team and the people to be "just right" for the effort. That magic number for innovation is eight.

Innovator as Storyteller

2011-12-20T06:33:00.000-08:00

I've been catching up on some reading, and thinking about my own experiences working with customers who are trying to become more innovative. A pattern is beginning to emerge that has been sitting there in front of me for years, but is only now becoming clear. Perhaps, like viewing a pointillist painting, one needs the proper distance or perspective for all of the dots to come into focus as a picture. My realization this week has less to do with viewing a picture, and more to do with other forms of communication and thinking that block innovation.

I read today a paper by Malcolm Gladwell, published in May 2011, which tells some interesting stories about innovation. Gladwell's point is that all innovation is basically evolution of an original concept. For example, Apple didn't create the idea of the mouse, it borrowed it from Xerox PARC, who borrowed it from a researcher at Stanford Research Institute, who probably borrowed it from someone else. Gladwell writes about this continuous evolution as a model for innovation, stripping away the things that aren't necessary and introducing simplicity to reach a larger audience. But what's also interesting about the story is the number of times the innovators he interviews were told "no" about their innovations. So here's the critical question: do we innovators lack the ability to communicate to others the value and importance of our ideas? Do the "business as usual" folks who predominate most businesses fail to hear and understand our messages? Are innovators from Venus and business people from Mars? Do we speak different languages or simply not value the stories we are told?

Reading this article and thinking about what I learned writing Relentless Innovation, I've come to realize that perhaps the most important capability of good innovators is their ability to communicate. What I mean about the ability to communicate is that the excellent innovator communicates the value proposition of his or her idea in the correct manner, using the correct channel, and touching on the correct needs and values of his or her audiences. Note that I used the plural - audiences. Because an innovation within a corporate structure has many audiences and has to run many traps not simply to succeed, but to remain true to the initial vision.

The first audience is the executive or sponsor who has a problem that needs solving, or needs an interesting and valuable new product or service. These sponsors must exist to fly cover for the innovator, so the innovator must be able to demonstrate that his or her idea helps an executive achieve an important business goal or corporate strategy. Key message: why this idea links to important goals or strategies.

The second audience is the people who have to move the idea from concept to product or service. Usually an idea is different from and in opposition to much of the existing internal investment and process. That means the innovator must be able to demonstrate to people who are used to doing work in often diametrically opposed processes that the idea is valuable enough to short circuit or change the existing ways of deciding and working. Key message: why this idea requires a different development process than existing "business as usual".

The third audience is the financial team, who will want to understand the ROI of the innovation as quickly as possible. The innovator must assuage the financial team's worries about the "R" - return, revenues and profits, because the "I" - investment, costs, and so forth are easy to calculate. This means the innovator must be able to tell a story about his or her idea that is also a financial story. Key message: why this idea, or any idea, must be judged differently from existing concepts, while recognizing the importance of return.

The fourth audience is the development team. Every new idea generated and transitioned to a product or service development team faces an uphill climb, as these teams are already overwhelmed with existing priorities. What is so important about the new idea that should land it on the top, overriding existing priorities? The innovator has to be able to tell a story that sells the importance and value of the idea, and why it should take precedence over the existing priorities. Key message: why this idea is so important it should take precedence over other priorities.

The fifth audience is the customer base. Why should they adopt a new product or service that often demands that they change buying habits or behaviors? What is so valuable about the product or service that will encourage them to switch? Key message: This product or service solves an important need that you have, in such a way that you may be willing to change your buying habits or behavior in order to receive the benefits.

Note that at each interaction with an audience, the messages about the idea, or product or service, can be modified, watered down, manipulated and changed. In fact this is often what happens, and why a good idea at the outset becomes a mediocre idea in implementation - the concept, messages and stories about the idea change subtly in every interaction and telling, reshaping and refocusing the idea. This is perhaps why Steve Jobs was such a consummate innovator - he was able to define a message about an idea and carry that message forward through all of the audiences in a relatively consistent fashion.

Many innovators and people in the innovation community will argue that storytelling is a vital aspect of innovation, and I think they are correct. But while storytelling is important, it's telling a consistent story, and the right story, and a compelling story, over and over again that drives an idea from an interesting concept to a market winner. Innovators need not only have great ideas, they need to be able to tell good, consistent stories about their ideas, or partner with people (again, Jobs and Wozniak as examples) who can craft and communicate the story. Ultimately Jobs' genius wasn't in design, or technology, or integration, or user experience. Jobs' genius was in the storytelling - what he told his team, and what he told his consumers.

Innovation and Efficiency: Opposing Forces

2011-12-16T05:43:00.000-08:00

I'm big on irony, so it's always exasperating yet amusing when my clients realize that attributes or characteristics they've thought of as strengths are revealed as barriers or weaknesses. As organizations grow and mature, they stop trying to evaluate their business models and the factors that sustain those models, and begin to take factors within the business model for granted - or argue in their defense. While older, mainline firms are comforting themselves by talking about how unassailable their business models are, innovators and new entrants are working to make those factors unnecessary or obsolete. So Blockbuster has all the valuable real estate for movie rental stores locked down. Yep, that's a barrier to other firms who plan a real-estate based strategy, but perhaps not so important to an innovator who seeks to innovate through completely different channels, rendering an advantage in real estate obsolete.

So it will come as no surprise to you that I come today both to praise Lean and Six Sigma, along with a number of other management methods, tools and mantras, as well as to bury them. Nietzsche is supposed to have said that whatever doesn't kill you makes you stronger. Perhaps the corollary is true as well - whatever makes you stronger makes you blind to your potential weaknesses and faults. Like Blockbuster, which was fighting the real estate battle while NetFlix was shifting the competitive landscape to mail and then direct downloads, many firms in the US are still fighting the efficiency and cost cutting battle, while the battlefield is shifting imperceptibly toward innovation. The tools and techniques used to further hone existing business models to ever higher effectiveness and productivity are exceptionally valuable in the short run, and are building ever increasing barriers to innovation. In many firms innovation and efficiency aren't simply at odds, they are at war. And efficiency is winning.

Efficiency is winning because, to continue the warfare analogy, all the troops have been trained in the cost cutting and efficiency models and methods. We have ninjas stalking through the business reinforcing Six Sigma and Lean concepts. The coin of the realm is paid out to reward efficiency gains far more frequently than innovation outcomes. Business models, processes and methods are much more attuned to efficiency. As these concepts are reinforced, they remind the rest of the troops to place emphasis on reducing risk, reducing variability, reducing costs. When an officer (read executive) argues for a new battle plan, based on innovation, the majority of the organization looks on in horror. No one is familiar with those tools and methods. They introduce risk and uncertainty, with a very indefinite outcome. And innovation doesn't reinforce the strengths of the existing business model and strategies - in fact it may weaken or destroy the very fortress the firm has worked so hard to build. While I've written this in rather florid language, make no mistake, there's a battle underway in every firm between efficiency and innovation, and efficiency is poised to win in most organizations.

It doesn't have to be this way. Many of the Relentless Innovators I write about in Relentless Innovation are both innovative (recognized by consumers, customers and their industry competitors as leaders in developing valuable new products and services) and are also efficient (they use their inputs and their resources at least as effectively as their direct competitors). So some firms seem to have bridged the gap, and are using both strategic capabilities in harmony, rather than seeing them in conflict.

To compete in the future, deep capabilities in both strategies will be vital. A firm must be efficient to compete, and must be innovative to remain top of mind with customers. Rather than allowing innovation to be constantly overwhelmed by the far more experienced and superior forces of efficiency, it may be time to call a truce between what are often unfortunately opposing forces: innovation and efficiency.

Relentless Innovation Introduction

2011-12-13T06:10:00.000-08:00

I have written a new book entitled Relentless Innovation, of which I am, I think, suitably proud. I hope many of you will rush out and get the book as a present for that special middle manager or senior executive in your life. Because innovation is no longer a nice to have. To compete in the emerging economy, you must become a Relentless Innovator. Why?

There are several reasons that are examined in the book, but the simple answer is that there are three compounding factors, all interrelated:

Increased global competition and easy access to markets. Any firm, anywhere in the world can compete with you, due to rising technological competence, trading networks and lower trade barriers. You don't need to worry just about your local competitors, but also regional, national and global competitors. As global trade barriers fall and economies become more integrated, competition will only increase.
The costs and barriers to enter virtually any market are falling, thanks in part to the Internet, which becomes a global sales channel, and the fact that we are acquiring more content, information and services rather than physical goods. More money is available in developing countries to start new businesses, so watch for more new entrants attacking existing wealthy markets.
These two factors mean that the pace of change is increasing dramatically, customer demands and expectations for new products and services is exceptionally high and product life cycles are shrinking. If your innovation and new product development capacities are more lethargic or simply less capable than those of your competitors, you won't simply fall behind, your firm will simply lose relevance.

These factors point to the fact that innovation isn't a nice to have or an occasional initiative in reaction to a new threat in the marketplace. No, innovation must become a consistent capability and core discipline in order to compete in an exceptionally fast moving and competitive marketplace. There are companies, such as Google and P&G and 3M and Apple that understand this. I call these firms the Relentless Innovators. Your firm must learn what they know and adopt the methods, attitudes and perspectives of these Relentless Innovators if it hopes to stay relevant. Your firm must become a Relentless Innovator.

There are two key factors that stymie innovation. You know these factors and trust them. These two factors create value for your business today. They are called "business as usual" and "middle management". Business as usual and middle management are the engines of productivity and short term financial profit. They make sure business operates effectively and efficiently, with little variability and minimum risk or variance. They enforce the rules and maintain order. They are responsible for achieving your quarterly numbers and they are responsible for choking all the innovation out of your organization. In subsequent posts I'll address why both are so important to efficiency and short term financial goals, and why their existing focus is so destructive to innovation.

In support of the ideas in the book I have developed a separate book website, and I have also begun to detail the key ideas in the book in a series of short PowerPoints which are shared on Slideshare. I would encourage you to post your comments about the ideas I'm presenting and the recommendations I make at the book website or here on the blog posts about Relentless Innovation. There is also a Facebook page about Relentless Innovation, and if the discussion warrants we can create a discussion group.

Whether you buy the book or not (I hope you will!) I encourage you to ask key questions about how your firm operates, and how it SHOULD operate. Is there a powerful "business as usual" mentality? Does that business as usual mentality stifle innovation? Is innovation important to not just the success but the very survival of your business? Who besides middle management supports and enables business as usual? How do you begin to shift business as usual and incorporate innovation? Can you create an "innovation business as usual?" These questions are answered in the book, and I hope to have an online dialog/discussion with anyone who is interested in discussing the importance of consistent, sustained innovation.

Of course we'll be happy to help you think about the factors that must change in order to become a Relentless Innovator. Changes to important attributes like the formal and informal rules that govern "business as usual" won't come easy, and helping middle managers rethink and rework their training, their focus and their compensation in order to achieve more innovation is time consuming but paramount. There is no "right time" for innovation, and the work isn't simple, but may propel your firm into a completely different competitive capability that sustains it far after many firms that can't innovate fall away.

Bridging the gap between ideas and products

2011-12-12T05:12:00.000-08:00

It's time to assess where things stand from an innovation perspective. Clearly it won't be news to alert you to the fact that the vast majority of CEOs report that innovation is very important for the success of their businesses. Increasing competition, from a wide range of countries and geographies, increasing customer expectations, rapidly shifting business models, new entrants and a host of other governmental, financial and demographic shifts mean that innovation is no longer a "nice to have" but a must-have for ongoing success. Firms that have spent the last two decades right-sizing, outsourcing, cutting costs, getting "lean", implementing Six Sigma and a host of other management tools are rapidly realizing that you simply can't cut your way to growth and differentiation.

The economic conditions in the global market suggest that smart firms will hunker down, save their ammunition in order to fight another day once consumer demand returns. This approach seems reasonable from behind the confines of the ivory towers built in many large, complacent organizations. Meanwhile, emerging new entrants are developing interesting, valuable products and services and learning to compete in this environment while established players simply hunker down. Right now, as the first "green shoots" of economic growth are becoming visible, is the time to develop the skills and capabilities to improve innovation processes and disciplines within your firm and build innovation networks to spot and adopt great ideas that exist outside your firm. The real question becomes - what are the critical skills necessary to thrive in an environment where innovation becomes a critical success factor.

In many organizations, good ideas are a dime a dozen. In fact one could argue that there are too many ideas about too many different priorities. Executives must do a better job of defining important corporate goals that innovation should support. Once fewer but better ideas are generated, the real work begins: spotting ideas that have the best chance to become disruptive products and services and moving those ideas through the decision points and approvals to become a new product or service. This is the key innovation problem that all firms face. There is a yawning gap between idea generation and product commercialization.

This problem can be addressed in one of two methods. First, we can train innovation experts who understand innovation challenges and goals, and are very experienced in every phase of an innovation effort. These individuals will work above the existing business as usual processes and will have the opportunity to supersede existing products, services and processes. The challenge with this approach is that very few people possess the knowledge, skills, breath of insight, thick skin and simple desire to help ideas accelerate through the barriers that they must clear to become new products or services. In this model, the necessary skills to succeed include excellent vision, the ability to spot promising ideas, the strength to champion an idea over a long period of time against significant odds and the ability to attract funding to the ideas they favor. Few people possess all of these skills and can survive and thrive in existing corporate environments.

The other model is to develop an innovation process which defines how ideas should be recognized, developed, evaluated and converted into products and services. These roles are filled by many people throughout the organization rather than one "champion" trying to do all of the work. This innovation process ensures that more people are involved which brings more skills and insights into the process. The process should be funded on an annual basis, so searching for funds should be less of an issue than in the "champion" model. Since the process is dominant, rather than the ideas or champions, there's less chance of exhaustion or frustration of any one individual. In this model it is important that a broad range of people gain skills in each of the critical steps and phases of the innovation process. In this regard many people can fill the roles necessary to improve ideas and move them through the innovation process.

So, if you choose to follow the "champion" model, you should be recruiting a few people with a very broad range of skills who can spot great ideas, develop the funding and approval models and move them rapidly to new products. You'll need to constantly recruit these people, as they will burn out rather rapidly and will be hard to find and hard to replace. Most of the innovation effort will be centered on these individuals. They will be unlike your typical recruits.

If you choose to create a systematic model for innovation, then the skills you need have far more to do with defining and improving innovation processes. There may be a bias to simply apply your deep lean and Six Sigma skills to innovation efforts. They can help with defining a process and improving the process, but the vision and perspective for innovation is far different. Ensure you set big goals, including differentiation and organic growth as the targets for your innovation process, otherwise a bias toward process perfection may lead to incremental ideas.

The first model is about finding a few PEOPLE in whom your innovation potential rests. The second model is about defining an innovation PROCESS, which is less reliant on any small group of people. In the end it really doesn't matter which model you choose. The real choice is in whether or not to consider innovation as a key capability or discipline. That choice, and the investments to bring the choice to reality, are what will matter.

What the crowd knows

2011-12-07T14:41:00.000-08:00

In one of my favorite movies, The Blues Brothers, the guys get themselves into a jam. They are supposed to play at Bob's Country Bunker, and don't really know what kind of music the audience enjoys. When they ask the waitress she responds, "Both kinds. Country and Western". Like the folks at Bob's Country Bunker I happen to enjoy both kinds of innovation, internal "closed" innovation and external "open" innovation. In fact I wrote a chapter in this book about the different kinds of open innovation. Both have their uses and both have their limitations. Understanding when and where to apply the different kinds of innovation will help you find the most relevant and valuable ideas. Using these innovation types in the wrong way will frustrate your teams and reinforce the image that innovation isn't effective.

I wanted to write today about crowdsourcing, or the instance of open innovation where we ask our clients, customers, partners and channels to submit ideas. Open innovation is gaining a tremendous amount of awareness. I think this is due to programs like Dell's IdeaStorm and P&G's Connect+Develop program, as well as work by Nine Sigma and Innocentive. But recognize that each of these "open innovation" programs represents a different approach and method of open innovation. Only the IdeaStorm model really represents true "crowdsourcing", while Connect+Develop is an open innovation approach based on proprietary networks and trusted partners, and Nine Sigma and Innocentive are a mix of RFPs and contests.

So, if the idea that crowds can help generate ideas, the next question we should ask ourselves is: what does a crowd know? What does a crowd of people, who represent our customers, partners, competitors and channels know about new products or services that is relevant, timely and valuable for us? And, if they have good insights, why would they give them to us with no compensation?

Crowds, especially large, energized and homogeneous crowds, know a lot about a product or service. They know what they like about the product. They know what they dislike about the product. They know what substitutes or alternatives exist and the strengths and shortcomings of the substitutes and alternatives. But, as has been demonstrated time and again, crowds, and individuals have a hard time conceptualizing something completely new and different. To quote Henry Ford once again, "If I'd asked my customers what they wanted they would have said a better horse". No one asked for a car, because it wasn't within their worldview or perspective. Crowds, especially large crowds, revert to the mean, and in this case they revert to the mean of their collective understanding. What this means in general terms is that crowds are good if you are trying to understand short term needs, short term frustrations and incremental solutions. On the other hand, crowds and crowdsourcing aren't valuable if you are seeking radical or disruptive ideas, for several reasons:

They can't imagine a major change or the absence of the product or service
They have a vested interest in the existing product. They prefer slight improvements to radical change
They forecast the future to look a lot like the present and can't image a reason for significant change
They don't believe that companies will invest to create something radically new and different

I don't mean to belittle crowdsourcing, and I know a number of firms that have used the tool reasonably well. After all, it is only a tool, and only one method or approach in a range of tools and methods lumped under the open innovation umbrella. Appropriately used, it can have good value, especially for identifying acceptable incremental innovations or understanding the challenges and frustrations caused by an existing product.

If you are looking for ideas outside of an incremental solution, or hoping that you'll get a lot of ideas that are interesting and radical simply because you are asking more people the question, you'll be disappointed in crowdsourcing unless you invite a lot of people who aren't your customers or don't think they need your product. But then your team will have to deal with the kind of feedback that may be a bit more difficult to hear.

If crowdsourcing is an important tool for innovation, then we need to use it effectively and appropriately. Our first question should be: what is it that the crowd knows that I don't, and how can I use that effectively? What kinds of ideas and innovations can they imagine, and what kinds of ideas do I want or need? If you are seeking radical or game changing ideas, or ideas with deep intellectual property, then this particular open innovation tool may not be right for you.

Give the people what they want

2011-12-02T05:52:00.000-08:00

One of the reasons that innovation seems to miss its promise so often is that great many products and services are presented with great fanfare and expectations about how those products and services will delight customers. Far too often, those expectations are wrong. That's not to say the product or service is inadequate, or that the need doesn't exist. There's simply more to the story that innovators often overlook.

There are 50 ways to leave your lover, and perhaps almost as many ways to identify a need in the marketplace. Here are five of the most common ways to identify and define a need for a new product or service:

Have the R&D guys create the next iteration of your existing technology platform. If they liked the last one, they'll love the new one. I call this "inside-out" innovation.
Ask customers what they want or need. You'll get reasonable responses from people who genuinely want to help you. These answers, for the most part, will indicate incremental products and services at best. As Henry Ford said, if I'd asked my customers what they wanted, they would have said a faster horse.
Conduct market research with your existing customers. This is the natural starting point for most companies, since they've grown to trust statistically significant market research data. The problem with this approach is that it is exceptionally good at telling you what existing customers think about existing products, and practically useless otherwise.
Conduct a trend spotting workshop and synthesize the trends into scenarios. While this approach won't result in specific product needs, it will identify emerging markets, emerging segments and emerging threats to your business. The problem with this approach is that trends are usually assessed over a long period of time, and most of us want to create the next big thing tomorrow. The future is too far away to be of any use today.
Use tools like the Strategy Canvas from Blue Ocean Strategy. This is a useful and powerful tool that practically no one understands, because it forces a user to think about their existing industry and competitive position in entirely new ways. If you can get a team to do this, you can spot many opportunities. Otherwise, you'll simply reconfirm the existing competitive strategy.

The problem with these, and with many other innovation approaches, is that we are too focused on the parameters and attributes and specifications of the outcome, rather than the shape, size and emotion of the needs and gaps. Spotting needs is an empathetic exercise, one that is qualitative and not quantitative. We need to understand the depth of the need, the reason for the work-around, the failures and frustrations the gaps create. Instead, we are trained to be excited about the specific parameters (feeds and speeds) of the shiny new object that we can create.

Giving people what they want means solving a gap, a barrier, a challenge or a need that they may not be able to articulate, and that they may not think can be solved. The famous example is the microwave oven. No one ever demanded a microwave oven, but they certainly would have enjoyed and appreciated the value of faster food preparation. Far too often we innovators are too focused on the here and now, on the practical, on what can be accurately measured and statistically proven, rather than simply understanding a customer's frustration, the overlooked market segment. We trust our own instincts about what customers want and need rather than interact with them in ways that illuminate the opportunities for us.

Perhaps the only person who seemed to do this well was Steve Jobs. He had some kind of a mystical mind connection to the population, but ultimately his solutions were common - better design, better usability, better coordination and compatibility. While the rest of the tech world focused on feeds and speeds, Apple focused on accessibility, and that made all the difference.

If you want to innovate, create truly new and valuable products and services, you will have to leave your office. You will have to go out and mingle with the populace, the great unwashed, and learn not just what they think they want, but what the biggest barriers, challenges, problems and gaps to achieving whatever it is they want to achieve that you can solve. For Apple, it started by helping people manage their music more effectively. You need observational skills, empathy and interpretive skills that often aren't valued in the traditional business setting. The more disruption you seek, the further from your comfort zone you'll need to travel. The more disruption you seek, the more you'll need to talk to people who aren't your customer today and who have little stake in the existing systems and infrastructure.

The reason so many "innovations" seem so hum-drum or fail to miss the mark is that they are only logical extensions to existing solutions that seem obvious by the time they reach the market, or completely miss the important, relevant needs that people actually need to solve. Ideas are a dime a dozen, but ideas that are focused on the right insights, the right needs and opportunities, are immediately important and relevant. Good work up front to spot needs and trends will simplify idea generation and make it more effective. Poor or non-existing understanding of needs, barriers and challenges means idea generation will fail to achieve its goals regardless of the facilitator, regardless of the participants, regardless of the tools.

Good innovation is doing your homework, which is really doing your fieldwork. Sure, give the people what they want, but more importantly, help them achieve the outcomes they desire.

Why Prototyping is integral to innovation

2011-11-28T05:16:00.000-08:00

"Will they work with Play-Do"?

That was the question a participant in one of our recent innovation workshops asked me at the end of the second day. We'd examined how to spot trends and identify customer needs, and the following day we were going to focus on generating ideas and using rapid prototyping to refine ideas and develop them more effectively. The participant, an innovation leader in a large organization, doubted that many of the people in the class would be willing to develop physical prototypes of the ideas we generated. He knew we would bring prototyping materials like modeling clay, pipe cleaners, construction paper, and other ingredients. He questioned whether or not "serious" business people would be willing to be creative and develop a rapid prototype out of simple ingredients. Based on my experience, I had no doubt.

"Tomorrow will surprise you" I told him, and it did. We made prototypes of ideas that had been generated, and the sheer energy and enthusiasm that went into the development was (and always is) astonishing. People who will flatly tell you they aren't creative can take simple, readily available ingredients and artifacts and create a realistic model of their idea. And what follows next is even better - the insights, questions and refinements of the idea now that a physical representation is available.

Later, after the prototyping, the gentleman approached me. He as a bit sheepish, as he had developed his own prototype and demonstrated it proudly. "You were right - these people did more than I imagined. Prototyping is powerful. I was surprised by what I learned."

If a picture is worth a thousand words, then I think a prototype is worth a thousand ideas. Most ideas originate as a few words on a page, or a nascent concept in one person's head. Developing a physical prototype or representation of the idea will spawn new ideas and new insights. Yet few firms do anything to encourage rapid prototyping as a means to develop and refine ideas. Far too often teams generate ideas in brainstorming sessions, record ideas on a flipchart and fail to develop the ideas in any meaningful way. Prototyping - building very simple representations of ideas - will help people understand the ideas more effectively, will help teams understand the value proposition of an idea, and will help people interact and provide refinements and identify weaknesses. Individuals and teams who "aren't creative" can, in less than 30 minutes, significantly improve an idea and gain dramatically better insights.

Many firms will argue that they build prototypes, but what they actually build are engineered scale models of final ideas. What they don't do is use simple, readily available and easily disposable ingredients to create a rough representation of an idea. An initial prototype should be something you can build in less than half an hour, with materials that cost less than $5. No engineering, no specifications, no advanced materials. Only through inexpensive, rapid prototyping are you able to explore an idea effectively and improve it rapidly.

I've attached a few photos of some of the prototypes developed in our latest workshops. Remember, these were built by groups of people who met for a three day workshop that included about an hour of instruction on prototyping and had just one hour to assemble a prototype of an idea they generated as a small team. As I said before, I'm constantly astounded by the creativity demonstrated and the insights that are generated.

A prototype that explores using solar energy to separate water into hydrogen and oxygen, so hydrogen can be burned to produce energy.

A prototype of a cell-phone service selection that allows cell phone customers to select the ingredients of their plan, rather than use company developed packages.

A model of a store intended to increase sales of specific components.

A prototype to demonstrate and discuss financial transactions between industry, individuals and government agencies.

I paraphrased the old saying above, and I believe it to be very true: if a picture is worth a thousand words, a prototype is worth a thousand ideas. What is your team/organization doing with its ideas? Prototyping is an exceptionally simple yet powerful way to discover more about your ideas, generate more ideas and refine existing ideas. You'll discover the creativity that lies dormant in each of us when you prototype, and best of all, it costs next to nothing.

Contact us if you'd like to learn how to integrate prototyping into your idea generation or idea development methods.

Places to watch for innovation

2011-11-22T03:28:00.000-08:00

I'm just finishing my second innovation training workshop in Dubai, and having a chance to think about the opportunities and challenges for innovation in Malaysia and the United Arab Emirates. While these two locations may seem very different from each other, in many ways they are very similar, and they combine aspects and ingredients for long term innovation.

Both Kuala Lumpur and Dubai are cross-roads, where people from different religions, cultures and countries meet. Both are very welcoming to people from different locations, with different opinions and different ideas. This willingness to welcome others, to combine different concepts, perspectives and viewpoints, offers the potential for a significant amount of innovation. What's more, both are growing and increasingly embracing their place in a global market. Both cities understand their strengths and are increasing the emphasis on overcoming challenges in education and infrastructure.

While I have worked in the innovation space, I've had the opportunity to work with a broad cross-section of people from the US, Europe, South America, the Middle East and Asia. I can say with no uncertainty that the people in Kuala Lumpur and Dubai are excited about innovation, engaged and enthusiastic about embracing change and creating new concepts, in a way that I suppose existed in many other countries. Perhaps innovation leadership, as exemplified by the US, tends to lead to complacency, because I see far more excitement and commitment to gaining innovation skills and learning about innovation methods and practices in Dubai and Kuala Lumpur than I see in many Western countries. And while there is a gap in knowledge and experience, this is not an insurmountable gap.

Much innovation is accomplished through excitement, engagement and persistence, rather than through expertise and knowledge. While we in the west need innovation to continue to grow and prosper, we often lack enthusiasm and a sense of adventure. It's simply too easy to be comfortable with the existing systems and parameters. Perhaps we've reached a level where all of Maslow's needs are fulfilled, and innovation seems to be too much work or place too much at risk for too little reward. Have we become jaded to the power and possibility of innovation, or have we simply become far too comfortable? Andy Grove was right, only the paranoid survive.

I've had the good fortunate too see many emerging and growing economies where many of the ingredients for innovation are percolating. Beyond the simple ingredients - a good blend of many people and culture, strong educational systems, a desire to compete and win in the global economy - people in Kuala Lumpur and Dubai have energy and enthusiasm to learn more about innovation, animal spirits to create new attempts.

Mark Twain said the rumors of his death were greatly exaggerated, and I'd be remiss to be one to write the eulogy of the US in regards to innovation too early. But I'd also be remiss if I didn't note how much innovation potential exists in places like Dubai and Kuala Lumpur. I look forward to see what happens in these locations where so much of the recipe for successful innovation is in place, and I hope we in the States can recapture the sense of urgency we need to accelerate innovation to retain our leadership position.

Innovation Workshops in Dubai and Kuala Lumpur

2011-11-19T06:16:00.000-08:00

I'm back in Asia and the Middle East, delivering a workshop on rapid, disruptive innovation based on a methodology that we developed to help our clients speed up disruptive innovation work. My time in Kuala Lumpur was great, and the city and people are wonderful. Unfortunately I did not have a lot of time for touring.

I just spent a day touring some of the amazing sites in Dubai. I'm going to attach some of the photos at the end of this post. Both Kuala Lumpur and Dubai seem unreal. Their growth is simply amazing and the mixture of people, cultures, races is bound to produce interesting results. If we believe that innovation happens when industries and cultures intersect, these cities are two to watch.

Here are some pictures I took in Kuala Lumpur:

Great streetside food.

Petronas Towers at Night

Next it was off to Dubai. Here are just a few pictures from my travels.

That's the skyline at sunset. The Burj Khalifa, tallest building in the world (right now) is seen at the left.

The Dubai business district as seen from the top of the Burj Khalifa.

Innovation's limiting factor

2011-11-15T03:18:00.000-08:00

Ask anyone what limits innovation and they'll have a hundred different answers - unsupportive management, uncertain goals, unrealistic resource allocation, and many, many more. What's more, each of these, in their own way, are obstacles to innovation. But what ultimately sets the speed and capability of your organization when it comes to innovation is your ability to experiment, prototype and introduce the learning from experimenting and prototyping back into idea development quickly.

Even if you have all the resources you need, all the support you need and all the management support you can stand, your innovation pace will still be dictated by how rapidly you can experiment and prototype new ideas, and how quickly you can react to what you've learned. Plenty of firms have plenty of support for innovation, but are unable or simply don't have the experience to conduct short, rapid experiments with less than perfect prototypes.

Why is experimenting and prototyping so important? No idea is perfect from its first documentation and capture. Ideas must develop and must be exposed to real world situations in order to hone the value proposition and correct unseen flaws that often aren't exposed until the idea is presented to potential customers. Most organizations skip this step, or conversely, take far too long to conduct the experimentation, substituting more market research for simply placing a prototype in front of the customer.

Rapid experimentation leads to a lot of learning and new insights, but it also means that some experiments and prototypes will be crash-test dummies - that is, they were developed for learning and proved a point. Their success is based on the fact we validated a problem or discovered, like Edison, how not to do something. This isn't failure, it's learning and validation. Perhaps if we framed it that way, more organizations would spend more time experimenting and prototyping. because these two functions dictate a significant amount of the speed with which your firm can innovate.

Most firms need to learn that rapid, messy, inexact experimenting, iterating to get it just right, is far more valuable than slow, careful, perfect experiments that only validate what we expected. Innovation should solve unmet or unexpected needs and opportunities, therefore the results of the experiment should also be uncertain and unexpected. And as fast as is possible, because ultimately this sets the drumbeat for innovation in your business.

The nine lives of brainstorming

2011-11-08T06:02:00.000-08:00

I read yesterday, in one of the leading papers in our country, that brainstorming is useless and doesn't work. This reporting announces, yet again, what everyone who stands on the outside of innovation circles has assumed is true - brainstorming, idea generation and the rest of the work that innovators do is hocus-pocus. Regardless of over 60 years of investment in Creative Problem Solving, brainstorming doesn't work.

This eulogy is the second I've read from leading business writers. Just a few years ago Bruce Nussbaum at Business Week wrote a long article entitled Brainstorming is dead. I wrote a rebuttal to that statement which you can find here. And, like the Pavlovian dog responding to the bell, I rise yet again to wonder - what in the world are these people talking about?

I come, to paraphrase the play, not to bury brainstorming but to praise it.

In the latest article to bury brainstorming, Jena McGregor at the Washington Post states that brainstorming doesn't work. Hmm, that would be news to my clients who have just filed two patents after a round of brainstorming just a few months ago. Or another client who introduced a radical new product that was the direct result of a brainstorming effort from earlier in the year. Who knew? We were crediting a tool that produced a result that experts have demonstrated doesn't work. Or, perhaps, were the experiments and research that led to the conclusion somewhat flawed?

McGregor points in her article to research conducted by professors at Texas A&M, in which a similar problem is presented to a group, and to a range of people working on their own. The research demonstrates that people working on their own will come up with more ideas, and sometimes more radical or "better" ideas than the group will. The professors stipulate that one reason is "Cognitive Fixation", which means that people become fixed on ideas, especially ones suggested by others, and neglect to pursue other pathways. I think this argument, on its face, is mostly true.

What this research fails to mention is that no good idea facilitation company would pursue idea generation in this way. Just as I don't eat at restaurants where the cooks all prepare meals independently with no central plan or menu, good innovators understand that to generate great ideas, there's far more involved than simply "dumping people in a room together" to paraphrase the article. Is idea generation abused - often used to achieve a predefined goal or to steer teams in a particular direction? Yes. But do we blame the cars for the automobile accidents?

The problem with this analysis is that while it is accurate, it portrays events that happen for a reason, and does not fully investigate all of the "best practices" that good innovators follow. To establish a successful brainstorming or idea generation session goes far beyond dumping people into a room. The steps a good innovator follows include:

Excellent problem or opportunity definition - to scope the opportunity and ensure everyone is focused on an important, relevant problem or opportunity
A clear definition of outcome - should the ideas be disruptive or incremental? Should they result in physical products, services, new marketing material or some other outcome?
Selecting a heterogeneous group - the broader the perspectives and the wider the experiences the better
Selecting a team size appropriate to the outcomes - small teams do a better job of generating disruptive ideas. The more people that participate, the more likely the result reverts to the norm of the group.
Preparation - telling people what the problem is (see above) and giving them the background information necessary to participate effectively. In this way you don't spend valuable time trying to get everyone "on board" during ideation
Removing the "anchors" - brainstorming and idea generation is serious work, and seriously different from what people do day to day. Just as I can't rush into surgery without preparation, most people can't quickly release all the constraints and barriers imposed by their day to day jobs to think more expansively. Good facilitators know how to break the ice and help people think expansively
Excellent facilitation - good ideation comes about from preparation and excellent facilitation. If you want excellent results in any effort you find people who are expert in their field. If your ideation sessions are led by people who aren't experts, or who have agendas, or who can't help the group think more broadly, then what did you expect? Do you use the Brain surgery at Home kits as well?

So, I think this article and others like it have successfully skewered the strawman of ineffective, unplanned and unfacilitated brainstorming. We can now rest assured that yes, poorly planned, poorly led and poorly executed brainstorming doesn't work. Just like poorly led firms with little strategy are often unsuccessful.

It's not as though there aren't documented "best practices" for idea generation, or that there are thousands of practitioners who do this work effectively. Too bad you can't find training on idea facilitation or read books (like, oh, Think Better by Tim Hurson) to understand how to do this. Or Group Genius by Keith Sawyer. If only there was a documented canon of material or a knowledge base about how to do this effectively. If it's academic rigor you need, you could check out Sawyer, identified above, or perhaps Clayton Christensen or Teresa Amabile at Harvard.

On the other hand, there are literally thousands of examples of successful brainstorming every day. Why isn't that mentioned in this article, or when people complain about the lack of success in idea generation? Here's an offer - if you believe brainstorming or idea generation doesn't work, contact me. If you'll agree to work within the strategy I've identified above, I'll guarantee a successful result - you'll see a dramatic difference in your idea generation.

Fortunately, innovation and idea generation are feline - they are mysterious and have more than one life. Having been declared dead by Nussbaum and declared useless by McGregor, idea generation still remains a viable and valuable function in an innovation program. Still seven more lives to go yet.

Innovation: a new paradigm

2011-11-04T11:10:00.000-07:00

I was thinking recently that the reason some people grapple with innovation with little success is because it requires a new paradigm, which is simply a big word that means a new perspective or new model of thinking. Traditionally, most businesses follow a fairly predictable model. They develop an idea, or product, or service, they scale up to deliver those products and services to more people, they optimize their models for efficiency, then they attempt to lock in to a very optimized model for profitability, and to lock out other competitors and substitutes or alternatives. So I'll stipulate that the paradigm most businesses are familiar with look like this:

Develop
Scale
Optimize
Lock in

And this model is then repeated. As a business grows, it turns its attention to the "next" product or service, and develops, scales and optimizes the new product or service within the umbrella of the locked in market or solution. This does two things - attracts new customers with new products while reinforcing the existing core capabilities, making the firm even more efficient - a larger market on the same cost basis.

There are some problems that are easily identified with this model, but no one has yet determined how to resolve them. First is that a firm scales (gets more customers) before it optimizes. This means that growth is expensive early in the process, because many firms ignore efficiency and costs when scaling up. The idea is to get big fast, then go back and optimize the model. The second is the concept of "lock in". In the past, a firm or small set of firms could establish a market and lock in their advantages and lock out competitors and substitutes, by controlling the access to the market, by controlling channels of distribution or by colluding on pricing. The airline industry is a great example of all three.

This model has worked for a long time, but increasingly is under pressure. There simply aren't enough large firms that are good at development or scaling. More and more, these critical activities are left to entrepreneurs and startups, or are done ineffectively or poorly by larger firms. Also, consumer tastes and expectations have changed. We consumers expect more change, more diversity, more selection and more innovation in the products and services we buy, and are less patient to wait for new products and services. Thus, a model that expects long development and scaling times and a long lock-in period when profits are realized is running headlong into markets and consumers who expect rapid response, and don't care when the firm makes money. The existing model has encouraged firms to become monolithic, slow and bureaucratic at precisely the time they should be agile, nimble and aggressive.

So, how does innovation change this paradigm? Clearly, innovation addresses the "develop" phase, by defining the right products to develop and speeding development. Done correctly, innovation should reduce the risk and uncertainty surrounding development of new products and services. Further, innovation should help firms rethink their organizational structure and product/service delivery process. Innovation is more than bringing new products to market. Innovation can also address new services, new business models and new experiences as well.

Competitive forces, new entrants and consumer expectations are chipping away at the develop/scale/optimize/lockin model that has been successful for years. Innovation is clearly one answer to help companies become more agile and meet customers' needs and expectations, but it flies in the face of the existing paradigm, and that is awfully difficult to change. It's difficult to change because this is the mental model that many people in business have about the "way things should be done". When you innovate, it threatens to change the existing paradigm (although competitive forces are making those changes as well) and changing the paradigm makes it hard for people to accept. None of us likes change when it is thrust upon us, especially to tried and trusted models that have "worked" for years.

So whether your existing paradigm is destroyed by the markets, competitors and consumer expectations, or you replace it with innovation, it is under attack. The question becomes - will you create an orderly transition to a new model, loved or unloved, or will you allow the markets and competitors to undercut and disrupt your business paradigm?

Innovating for the early majority

2011-10-31T05:35:00.000-07:00

Here's an interesting question - one that the folks at P&G are obviously trying to grapple with: what segments of the customer population is your idea or innovation targeted at? Traditionally, many firms have segmented customers in terms of geographic location, or age, or educational status. Over time we've developed far more detailed segmentation capabilities, using more subtle psychographic segmentations. This customer segmentation allows a firm to create products that appeal to very specific, very targeted customer segments, or at least create marketing messages for me-too products that seem to resonate with specific customer needs.

But customers and their needs aren't stagnant. Customers change as their needs and awareness changes. Further, a customer may exist in one of several psychographic or demographic segments, or their needs may abruptly change - moving to a new location, taking a new job, getting married and so forth. All of these "life events" may suggest a change in segmentation. Further, as Geoffrey Moore pointed out in Crossing the Chasm, beyond demographic and psychographic segmentation, customers also exist in another spectrum - how eager they are to adopt new technologies. These segments range from very early adopters who are willing to bear some challenges to learn and use a new product, to the late majority and laggards who don't adopt a new product until the vast majority of the population has tried it and in many cases moved on.

So, an interesting question is posed here. Moore suggests that over 70% of the population is in the early/late majority and laggard segments. That means, for volume sales or acquisition, we should target the needs and wants of these customers, who, while slow to adopt new things, represent the largest portion of the market. Many innovators, however, believe that their needs and wants represent the market as a whole and target the early adopters. Early adopters represent that small segment of the population who eagerly await new technologies and are happy to adjust their thinking and habits to incorporate new technology.

And, perhaps, we come at last to the true genius of Steve Jobs. He was able to package his "iProducts" as shiny new technology for the early adopters, while creating products that were simple and accessible for the early/late majority. With many innovations, the technology and learning hurdles are simply too great for the majority and laggards. Thus, a good product or service experiences rapid initial adoption which flattens out, as the majority waits for more testing, more documentation, more simplification. Jobs and Apple squared the circle by creating products that were attractive to the early adopter and easily acquired and used by the early/late majority. Apple didn't create the iPod or iPhone or iPad for technologists, although the technologists and early adopters snapped them up. They created them for the high school student, the soccer mom and the grandparent, who would normally be adverse to new products and technologies.

There's a lesson here. New products and new technologies are always interesting to the small subset of early adopters, but real innovation value happens at the intersection of new technologies that are easy to adopt and use by the majority. This means that innovation scaled to the majority of the market must be new and interesting, but also combine insights into customer experience and even business model innovation, to smooth the way for fast adoption by the early/late majority. Far too often innovators focus on product innovation but neglect customer experience innovation and business model innovation, leaving adoption barriers for the early and late majority.

So, the question remains - do you want to innovate for the technology fan boys and get locked into a niche, or do you want to understand the needs and challenges of the early and late majority and create a new product that is easy to adopt and easy to use, which will attract the majority of the market much more quickly.

Customer Retention and Loyalty programs hamper innovation

2011-10-28T05:40:00.000-07:00

I think one of the biggest challenges that many organizations face when they think about innovating is that innovation creates real cognitive dissonance. Innovation is often so different, and in some cases so opposed to what seems "right" that it can be difficult for executives and managers to wrap their thinking around what they need to do to innovate. Many times I've seen executives shake their heads when confronted with the fact that to innovate a firm must often stray from the proven path into actions or strategies that on the surface seem to reject all the conventional wisdom. Most people aren't good at this - holding two diametrically opposed ideas in the head at the same time. We've been trained to be effective and efficient, and trying to square the circle with ideas that seem to refute investments and training that have proven successful cause distraction and confusion. Let's look at one example which on the surface seems absolutely correct but creates barriers for innovation - customer loyalty and retention.

While customer retention and customer loyalty are vital to your firm in the short term, a deep focus on these factors create significant barriers and obstacles for innovation. While I'm not going to tell you to stop thinking about retention and loyalty, or that a focus on customer retention and loyalty is wrong, I am going to suggest that too much focus on these factors simply becomes a barrier to doing anything interesting from an innovation perspective.

We've all seen the data - loyal customers drive a fair amount of the revenue and often account for a substantial amount of profit in a business. Businesses don't have to work as hard to attract and retain loyal customers and they are less likely to look elsewhere. Loyal customers create a dependable revenue stream through repeat purchases. But too much focus on loyal customers creates a thinking trap that is hard to escape from.

Loyal customers are, for the most part, happy with existing products and services and expect only small, incremental improvements. To them, a radical or disruptive new product or service may introduce new methods, new technologies or new solutions that force them to learn something new, to adopt new solutions or that disrupt their comfortable understanding and lifestyle. They aren't adverse to innovation, necessarily, they just don't want existing products and services changed radically. Think about how a focus on customer loyalty and retention impacts innovation. As customer retention and loyalty become more important, firms narrow their focus to these "best" customers. How can we best serve existing customers? How do we keep them happy? And much of the answer is: same products and services, slightly improved customer service, all at a lower price. Over time, focus on loyal customers means shutting out prospects and occasional but not loyal customers and their insights and needs. Increasingly, this means blinkered feedback from a very small subset of your potential customer base, who are already fairly happy with your products and services and don't want significant change.

However, disruption rarely occurs from within your existing, happy customer base. Disruption happens in customer segments or from prospects who are unhappy or felt that your products and services never met their needs, or didn't understand or relate to their needs and wants. So while focusing on existing customer loyalty is right in the short run, it is devastating for the long run. As your firm carefully monitors a small subset of the potential customer population and caters increasingly to its needs, you ignore or reject feedback from the vast population of potential customers whose needs and wants you don't fulfill. And it's in these segments and customer populations where new demands are created. And, since you are paying attention or are actively rejecting the feedback and insights from these prospects, other innovators enter the market to fill these needs, which ultimately results in disruption of even your loyal customer base.

Happy customers rarely want to upset the status quo - they want to tinker around the edges. Unhappy, pissed off customers or people who are simply outside the system or ignored want to bring down the status quo, and that's where real change and disruptive innovation happens. Don't believe me? Ask Tower Records, or any of the physical media firms, about Napster and eventually iTunes. Ask Blockbuster about NetFlix. People were beside themselves about late fees. NetFlix basically delivered the same service to people who were angry enough with Blockbuster and its fee structure to make the switch. Meanwhile Blockbuster continued to focus on its happy core customers, ignoring change in the marketplace.

Perhaps you need some cognitive dissonance in your product management and innovation team - one focused squarely on existing, happy, loyal customers and one equally committed focus on unhappy, disaffected and disloyal customers. The former will drive near term revenue and profit, the latter will drive insights to new innovation. Too often we are far too happy to see an unhappy or disaffected customer go, not realizing that they carry with them the germ that will spark a significant change in our market or industry. While interacting with customers who aren't loyal or who are unhappy or disaffected doesn't make for comfortable reading, it will open your eyes to disruptive opportunities and new innovation.

What's your CIO - Chief Innovation Obstacle?

2011-10-24T05:14:00.000-07:00

If you studied composition in high school, somewhere along the line you learned this. In literature all stories can be categorized into one of five or six types:

Man versus himself
Man versus man
Man versus nature
Man versus supernatural
Man versus society

When you think of all the stories you hear, all the books you read, this list seems almost too short, too simple. Yet this kind of taxonomy is relatively common. When you drill deeply into many different subjects you'll find many variations on just a few common types.

This concept is also true, and consistent, when you consider the factors for innovation success or failure. There are perhaps four or five key plot lines when we look at the success or failure of innovation in an organization:

Idea versus idea
Idea versus existing product
Idea versus existing culture
Idea versus decision maker
Idea versus budget

So, the question becomes, what is your CIO - chief innovation obstacle - when it comes to innovation? And, by the way, the CIO is not necessarily permanent and not consistent initiative to initiative. In one initiative, good ideas may be blocked by existing products. In another initiative, innovation may be stymied by existing culture. In yet another attempt, innovation may be slowed by inadequate resources or a lack of funding.

It should come as no surprise that perhaps one of the most important activities a new innovation effort can entertain is to define the likely CIOs for the work they are about to do, and attempt to resolve or mitigate the CIOs before starting to innovate. If the ideas generated threaten or cannibalize an existing product, can you bring the product managers and executives whose success depends on the existing products on board? If limited funds or resources are likely to stymie your efforts, can you use radically fast, disruptive innovation to overcome concerns about resources and budgets?

Innovation is, in the abstract, a good thing and in the specific often challenging, because it presents so many challenges to the existing operations of a business. Many people who are enthusiastic about innovation are often naive about the barriers and obstacles their initiatives are likely to encounter, and should spend time early in an effort identifying and finding factors to mitigate the CIOs. Chief Innovation Obstacles can be people who feel threatened by innovation, or cultures that are uncomfortable with the risks and uncertainties, or new tools and methods, of innovation. Identify possible innovation obstacles early and pursue activities and information that will mitigate or eliminate the obstacles. Even more to the point, create innovation accelerators, especially cultural expectations and attitudes, the encourage innovation and diminish innovation obstacles.

In any business, in any situation, a new idea, no matter how valuable or how perfectly aligned to business needs and goals will have an obstacle. Newton's law - for every action there is an equal and opposite reaction - applies. Your job as an innovator is to fully support your idea, and at the same time recognize the potential CIOs that will stand in the way of your idea. For every idea there is at least one corresponding CIO. Good innovators know how to identify the CIO and mitigate it or eliminate it. Most innovators struggle with their CIO and blame the CIO for innovation failure, when the innovator should really blame themselves for not spotting and eliminating the CIO.

Moving beyond product innovation

2011-10-21T05:39:00.000-07:00

Those of us who advocate innovation as a business methodology or discipline often talk about the different possible outcomes for innovation. That's because innovation is often defined far too narrowly as a new "product". Product innovation is the most well-known, and most consistently performed type of innovation. However, there are other potential uses and outcomes for innovation, and several evolving changes in the marketplace that will require far more investment in these other outcomes. Let's look at these two points and understand why they suggest far too much emphasis is placed on product innovation, and far too little on other outcomes.

First, let's consider the US economy. In the early 1960s, when JFK was talking about sending a man to the moon, manufacturing accounted for over 50% of our Gross Domestic Product (GDP). In the last 50 years, the percentage has fallen to approximately 20%, as manufacturing has become more efficient and many manufacturing jobs have been outsourced. There hasn't been a fall off in the number of manufactured products even though the number of jobs and the percentage of our GDP from manufacturing decreased - the products now are imported. But think about this another way - over 80% of our economy is based on services, which begs the question: how much service innovation is underway, given the growth and importance of services in this country?

And oh, by the way, we're simply in the vanguard of a big shift toward services. Other economies will follow this same path. Western Europe and Japan are sure to follow quickly, and even the emerging economies will shift their mix of manufacturing and services more rapidly than we did. So, it's not hard to see that services will dominate the economy as a percentage of GDP. But where is the current focus of innovation?

On products primarily. Although this is a bit unfair. Many service oriented firms offer "products" that aren't manufactured, and those service oriented "products" require innovation. But services haven't had the focus that manufacturing and the subsequent products have had traditionally, and this means there's a big, and emerging, opportunity for service innovation. And for innovations beyond services.

Many of the things we think of as innovative - the iPad, for example, are still physical products. That's because it's easier to talk about and display a tangible item and compare its features and benefits than to talk about an innovative service. Services are more ephemeral, and exist in a moment in time. Services are more difficult to deliver consistently, because they rely on inconsistent people to deliver them. But services, along with experience innovation and business model innovation, are clearly the next focus area for many firms, simply because of the economic shift toward services, and the overwhelming focus today on product innovation.

Of course we can combine experience, service and business model innovation and deliver it around familiar product innovations. Experience innovation can be delivered through packaging, through channels and through marketing and support of existing products. OXO has done some of that by "innovating" common kitchen equipment to make it more comfortable to use. That's experience innovation in at least one dimension. Few firms have thought deeply about the concept of radically improving or changing a customer's experience of their products and services, and even fewer firms are actively considering business model innovation, yet these outcomes are all available. They are more difficult than product innovation, yes, but they are also more differentiable and more defendable.

In the book Blue Ocean Strategy the authors argued that many firms needed to find "new blue oceans" to conquer rather than compete in the same red oceans with other firms. Perhaps that same idea should be put forth for innovation. Product innovation is increasingly a "red ocean" while relatively easily observable blue oceans of service innovation, experience innovation and business model innovation are available. As our economy shifts and places ever more importance on services, innovation models and capabilities will surely follow.

Who is the archetypical user?

2011-10-17T07:11:00.000-07:00

Hah! Today I get to use a big, interesting word: archetype, which means "the model from which all things of the same kind are based". This means that any random selection of a product will demonstrate the properties and attributes of every other product of the same type. For mass produced products, like toasters or pencils, any product selected is probably a good model of any other product in the same line.

But, as innovators we don't seek to create archetypical products. We seek to create interesting, differentiated products. Even more to the point, when we create interesting products, we need to have customers in mind. And often, as innovators, we use ourselves or the people we know to stand in for, or represent, the eventual users. In many cases, this thinking leads to all kinds of problems. Innovators often are poor choices for archetypical users.

Why? Because many innovators see further and are willing to endure more pain and difficulty using a new product or service than the typical customer. Look no further than Geoffrey Moore's excellent book Crossing the Chasm. Innovators are similar to the "early adopters" who are willing to sacrifice ease of use or a completely finished product in order to gain the latest technology. Early adopters and innovators are OK with workarounds, spotty support and occasional hiccups in the operations of their products. The large majority of customers, however, don't reflect these values. Using an innovator as a stand-in for an average customer is dangerous, for two reasons.

First, innovators or early adopters care more about technology and less about what Moore calls the "whole product". What the rest of us depend on when we use new products or services - manuals, support, interoperability - early adopters and innovators often don't use or don't value. Consumers in the majority want to adopt technology when it is "safe" to do so, when there are plenty of other people who have "broken it in". By then many early adopters and innovators have moved on, and become bored with the technology. Innovators and early adopters don't reflect the needs and expectations of the large majority of your customer base.

Second, using an innovator to stand in for an archetypical user will create products that are far more sophisticated and far beyond the use of many of your potential mainstream customers, and will probably miss many of the mainstream customers' needs and expectations. While everyone wants a new shiny object, the majority of customers are much more constrained in their spending and tend to ask themselves questions about the value of a new product or service in their lives. Inventors and early adopters are often more interested in the newness factor and the opportunity to explore rather than the hard benefits.

Third, mainstream users don't like to learn new technologies or interfaces or change dramatically from their known interfaces or usage patterns. Steve Jobs greatest gift to consumers was the "one button" idea on the iPhone. Inventors, entrepreneurs and early adopters like lots of options, lots of functions, lots of services, while the majority would rather wait for a simple, clean interface that doesn't require a lot of new learning.

So, if you are innovating, who is your archetypical user? Something you find useful, interesting and valuable may appeal to early adopters, but may miss the mark for the vast majority of consumers you need to buy your product in order to achieve financial success. The product world is littered with failed products that many early adopters purchased but which failed to cross the chasm to the majority of customers. Just because you are interested and find the concept valuable doesn't mean the majority will. Who is your archetypical customer, and what do they want? What do they find valuable? What unmet or undiscovered need do they have?

Innovation as a profit center

2011-10-15T12:53:00.000-07:00

No matter what a business tells you is important, what's really important is what drives profits. Yes, many CEOs will talk about sustainability, or being more green, or being more empathetic with customers, or a whole host of other foci and factors. But at the end of the day, CEOs and other executives have a fiduciary responsibility to themselves, their employees and especially shareholders to create profits that allow for reinvestment in the firm or growth or dividends and a rising stock price for the investors. That's the capitalist way.

In that regard, understanding that what drives profits gets attention, gets the best people and gets executive focus should help a nascent innovator. If you want to know how to attract attention to your capabilities and ideas, demonstrate that you can develop an innovation capability as a profit center.

There are plenty of examples, but the one I wanted to focus on was GE and how GE treats its tax department as a profit center. GE uses legal tax loopholes to find ways in the tax code to pay as little tax as possible. With a tax department of over 1000 people, GE has a significant investment in its tax team, and they pay huge dividends and contribute substantially to the bottom line. I know that there is a hubbub about GE paying so little in taxes, but they are acting in the interest of their shareholders, and following laws that accommodating politicians created. GE is understandably proud of its tax department and treats the team as a profit center, which means it gets focus and attention from management, good resources, funding and a lot of other things that a typical "overhead" department would not receive. Or, to put it another way, GE's tax department receives a lot of attention and benefits that many innovation teams would kill to receive.

If GE can designate a tax team as a profit center, and demonstrate the results, why can't innovation teams designate themselves as profit centers? Sure, it's rare we can move a billion dollars around and impact the income statement in a given year merely by recognizing revenue in certain ways, but innovation teams will drive the new products, services and business models that will create the real, organic revenue. Manipulating revenue and costs doesn't increase the top line, and while investors like firms that produce consistent profits they become concerned by firms that don't seem to increase the top line.

Certainly the challenge with much innovation work is that the costs are in the near term and the revenues and profits are in the out years, which doesn't do much for this year's profits. This means innovators can try to work on ideas that will "pay off" in less than one year, or acknowledge that the initial "investment" is expensive but the downstream opportunities and impact on revenue and profits are substantial. But if we allow our teams to be designated as "overhead" to the business or to a product line, we are doomed to poor staffing, constant scope reduction and limited thinking. Sometimes the way you position a thing is as important and valuable as what the thing really is. If innovation is considered an overhead cost, then don't be surprised when you have difficulty finding funding and talent. What gets funding and talent? Things that drive profits.

Give a team an idea and they'll innovate today

2011-10-14T05:21:00.000-07:00

There are a number of old, tired sayings that actually create a tremendous amount of insight when considered in a new light. Perhaps no phrase is as hackneyed as "give a man a fish and he'll eat for a day. Teach a man to fish and he'll eat for a lifetime." While probably true, the phrase has been overused and misused. However, I think considering this phrase in a slightly different context could shed new light on a subject near and dear to my heart - innovation.

After leading several idea generation sessions for clients recently, several concepts that had been at the edges of my vision but now came into view with startling clarity. Most of my clients think what we do for them is to help them create ideas, but I think what's more important, and often completely missed, are the tools and methods we offer to help clients move out of their comfort zones and into creative zones. In other words, while the ideas seem important, its the process, the tools and the attitude shift that is really valuable. Or, put another way, "give a team an idea, and they'll innovate in the short run. Give them the tools and the time, and they'll innovate forever."

Given the attitudes and focus of many management teams, however, there are two barriers to that thinking. First, idea generation sessions must immediately return a result - preferably one, or several, ideas that are so compelling the firm can immediately implement them for profit. These expectations exist even though these same firms have neglected innovation and idea generation for months. Somehow a team brought together at the spur of the moment, using unfamiliar tools and with uncertain goals, is often expected to produce a miracle, what I like to call Immaculate Innovation.

Further, given the constraints on budgets, resources and funds, innovation must happen very quickly. Learning a process that can be repeated later is less valuable than producing a result quickly. It is this combination of short time horizons and expectations of immediate returns that result far too often in incremental innovation that is eventually yawned off the shelves by customers. This, in turn, creates a vicious cycle of ever increasing demands for new ideas in ever decreasing timeframes, ratcheting up expectations because of unmet needs.

Increasingly, I find ideation sessions evolving into idea production sessions - with the clients turning hopeful eyes to the consultants, hoping that we have ideas that will create the next radical product or service. This is the "give a team an idea" approach. In some regards, this isn't necessarily a poor alternative, since idea generators and creativity consultants are free from the expectations and biases that our customers live with each day. We are free to suggest outlandish ideas that don't conform to corporate capabilities or strategies. However, if you desire a great idea from a third party consultant, you must immerse that individual in the capabilities of the firm, the competition in the marketplace, the emerging trends, the expectations of the customer base and much more, then be willing to implement the ideas the consultant creates.

Simply accepting ideas from consultants solves a short-term problem but doesn't address the challenge of product or service development. Even if a consultant generates a perfect idea, so beautiful in creation and so aligned to customer needs that the skies part and angels descend, that idea still must be developed as a new product or service, launched in the marketplace and supported by your organization. This means you need both the Immaculate Conception combined with a miraculous Commercialization. Simply having a great idea is not enough - the provenance doesn't matter if you can't get it to market.

Innovation success doesn't come to the most insightful, or the most committed, or the most desperate. It doesn't come to those with the deepest pockets, the wisest managers or the best marketers. Innovation success comes to those who:

stake out a vision,
encourage creativity internally and
partner well externally, and
develop a mechanism to convert excellent ideas, regardless of source or scope, into vital new products.

Whether those ideas come from experienced internal employees who understand the tools and techniques of idea generation, or from consultants well versed in the needs of the marketplace, or from a web of customers, business partners, research universities or other sources, ideas, like the fish in the proverb, are merely the outcome. Teaching a team to innovate and allowing them to innovate over time is, like teaching a man to fish, transferring skills and knowledge which is inculcated and reused. And that's the real value innovation can bring.

The real question you should ask your executives, and your team, is: what is the appropriate role for innovation in our organization? Should ideas be generated internally or externally? If internally, what are the important skills, methods and cultural attitudes to accelerate the capability? How do we acquire and constantly use those skills? If externally, who do we trust to do this with us? And, most importantly, regardless of the source of the ideas - the Immaculate Conception - what is our capability to convert ideas into valuable products and services that exceed customer needs - the miraculous commercialization.

Innovation and Design: The Prefix and the Suffix

2011-10-12T05:42:00.000-07:00

I'm trying to recall the case study we used in my MBA program. This particular case study looked at the differences between an American car company and a Japanese car company in regards to quality. As I recall, the Japanese workers had responsibility for quality throughout the production line, and could stop the line at any time if they found a significant defect. Each person was responsible for the overall quality of the vehicle. In the American car company, the production line ran, and at the end of the line there was a station called "quality" which inspected the cars and pulled them off the line if, in the inspectors judgement, the cars didn't pass a certain quality threshold. In this instance "quality" was the responsibility of someone down the line, who could only accept or reject a finished product. Unfortunately, many cars were being pulled out for quality reasons. The object lesson there was that quality can be "tacked on" at the end of a production line. To create high quality products, quality must be a part of the process from the beginning. So firms introduced Quality Function Deployment, embraced Six Sigma, re-engineered their processes and now quality is embedded in all of the major functions of producing any product.

Why the obvious history lesson? I look back at the lessons we learned about quality to make a corresponding point about two other very critical capabilities that aren't embedded but are simply tacked on: innovation and design. These two capabilities are, in many ways, in the same shape and offer the same promise as quality did as described in the previous paragraph. Yet far too many firms are content to make innovation a prefix and design a suffix to the development of new products and services.

I titled this the Prefix and the Suffix because increasingly it seems that most firms believe that innovation is a "prefix" to the real work of product creation. If only the "front end" worked better, then we'd create more interesting and valuable products and services. To an extent that is probably true, but this thinking isolates innovation as if it were 1) black magic 2) an occasional effort 3) isolated to a small team and 4) very different from what the rest of the organization does. While improving the "front end" may be a noble goal, embedding the importance of innovation throughout many functions and processes within a business is the ultimate goal. After all, innovation in business models, services and customer experiences are just as important as product innovation. By treating innovation as an isolated prefix to the rest of the important work, we miss its true value proposition and belittle its capabilities.

I called design the "Suffix" because it is another very important capability that many firms isolate and seek to "tack on" at the end of the process. Design isn't necessarily an interesting color or inventive packaging that can be slapped on as an afterthought. Well-designed products attract attention in the marketplace and price premiums, but to achieve those benefits you have to embed (there's that word again) design thinking in the entire process. Currently, we have Design for Six Sigma (DFSS) and I'm sure there's a Design for Lean (DFL), but where's the Design for Design? Can't we develop an appreciation for the importance of design and build it into everything we do? Again, design, like innovation, is not simply about products. A firm can design its interactions with customers, its organizational structure, its processes. Too often design is left in the "product" ghetto, isolated and simply tacked on at the end.

In my mind's eye I can see these virtual production facilities, where innovation dust is sprinkled on a robust manufacturing process, and eager designers await to apply the finishing polish at the end the process to boring, mundane products and services. It doesn't work that way, and we have a clear example in quality to demonstrate that.

Gandhi had a saying that I have on my wall - First they laugh at you, then they fight you, then you win. In learning new skills, businesses have a three step learning process. First we ignore it, then we tack it on, then we embrace it fully. Innovation and Design are currently the prefix and the suffix of business - getting tacked on to the beginning and the end. In the near future, it will be vital that they are embraced and embedded.

Book Review: Nanovation

2011-10-11T03:48:00.000-07:00

I've come today to write a short review of a large book about a small innovation. And if that seems interesting and convoluted all at the same time, then you'll have just an inkling of what Nanovation is all about. Winston Churchill once suggested that Russia was a riddle wrapped in a mystery inside an enigma. Nanovation, the new book about the Nano, the "People's Car" in India, can be as intricate and involved as Winston's description, but given time and patience there's a lot to learn from the experience.

The challenge that the authors faced with writing Nanovation is that there are at least three different kinds of stories embedded in the Nano story. One is the tale of India itself, bursting with possibility yet still striving to enter the first world. The second is the innovation tale of the Nano, an almost unimaginable product offering which has made automotive transportation much more affordable and practical than ever before. The third story are the management lessons we can glean from the first two stories. At over 500 pages, the authors might have been a bit more judicious in their story-telling, or have created a book about the creation of the Nano and extracted the management lessons separately. But if you are a dedicated reader, you'll enjoy the whole thing.

The story of the Nano is really a story of asking "why not". Ratan Tata, head of one of the largest conglomerates in India, wondered why there were no affordable automobiles for the vast majority of India's population. Far too many people were left in the dangerous and often humiliating position of riding on a scooter, exposed to traffic, weather and other conditions. He wondered why India, with its technology capabilities and large market, couldn't solve this problem, and put his engineers to work. What made this project somewhat unique was his personal belief that the car must be seen by consumers as more than a scooter with a windshield, that it must be affordable and practical, and his personal commitment to the project. Oh, and the fact that he placed an almost impossible price on the car in public to a journalist before the engineering had been started.

When Arthur Lafley stated he wanted P&G to attract 50% of its ideas from external sources, he shocked the marketplace but I am relatively certain he had already put the mechanisms in place to achieve that. Tata, on the other hand, speaking to a journalist at a trade show, suggested he could create a people's car in India that cost $2000. He said this in an off-hand way, but the journalist published a paper with his statement. Tata could either backtrack from his statement or use it as a stretch goal for the team. He chose the latter. To give you some perspective on what a $2000 car means, consider just the tires. On a regular automobile in the US, tires comprise approximately 1% of the cost of the car - say $300 for a $30,000 car. If the costs are scalable, that means the tires for the Nano had to cost approximately $20 - all four of them. To many people, it seemed impossible to create a car for $2000, much less one that was safe, practical and could seat four people. Further, everyone was sure the car would be dangerous and would pollute. Tata and his engineers did the unthinkable, creating a car that the average consumer saw as valuable and respectable, that meets safety requirements and offers great value. The signal that the car was seen as valuable was in the pre-orders, over 200,000 preorders - and each order had to be accompanied by an 80% deposit.

And, oh, by the way, just as the firm was starting production, after years of engineering and innovation to achieve a great car in an impossible price point, social and political unrest caused Tata to move its primary production facility from one end of India, to the other. Yet Tata, and the Nano, have accomplished great things.

The authors draw a lot of management lessons about innovation out of the story of the Nano. Much of what I take away is based on the executives and their commitment. Ratan Tata and other executives saw a need, felt strongly about the need, and committed themselves to filling the need at the price point necessary. Once they had done that, they gave the team the resources necessary and asked them to do the near impossible. When they ran into obstacles, like suppliers who didn't want or couldn't believe the price points, they found others who were hungry for business and recognized the opportunity in the volumes of Nanos to be made.

The book is divided into three parts. If you are interested in the story of the Nano, read parts one and two. If you are a management theory junkie and want to gain insights on what Tata learned from the Nano in regards to innovation, read section three, where eight "Rules" of Nanovation are listed. These rules reflect learning that are evident in other big innovation efforts, including consistent executive support, really creative thinking, close observation of customer needs, a culture of innovation and many more. None of these rules are unique to the Nano, but how they intertwine with a story that is almost as good as Slumdog Millionaire for its twists and turns makes them all the more readable.

I wish I could simply write that this book is for everyone, and perhaps in some ways it is. There's a compelling drama of an almost impossible task, with the backdrop of all the change and drama that is India. There's an engineering feat almost unduplicated in the automotive industry, which is taken on not by the large manufacturers but by an Indian firm for Indian needs. There is a passionate executive who is politely told his vision is impossible by everyone who is an expert, and finally realized by those who decided to try. Which book do you want to read? The drama, the Indian history lesson, the management tome about innovation in emerging economies? Because they are all here. And all worth reading.

Diminishing returns on innovation?

2011-10-10T05:47:00.000-07:00

I was leading an innovation workshop last week. In that workshop we were using a number of different tools and techniques to generate ideas. Somehow the subject of the airline industry came up, and the debate centered around whether or not there's any innovation "left" in the US airline industry. As someone who flies frequently, I'm not sure whether to hope for more innovation, which I always believe is possible, or to dread it.

But this raises an interesting question - does any industry face a range of factors, constraints, regulation and competition such that innovation reaches a point where innovation is nearly impossible - or, where innovation reaching some point of diminishing marginal returns? Can any industry be so commoditized, so constrained by competition, so easily copied that innovation simply isn't worth the effort? If any industry could be, perhaps it is the airline industry. Perhaps no other industry in the US is so vital to doing business, so liberating in terms of providing a means for people to travel, and so terrible in terms of profitability and market capitalization.

Why is innovation so rare in the airline industry? Other than Southwest, no airline has been consistently profitable over the last twenty years. Are there factors in the airline industry which limit both innovation and profitability? Or, have customer expectations, regulations and business models forced most of the majors into one common business model that none can effectively escape?

Compare and contrast the airline industry - clearly a services industry, with other services industries. For example, many of us who fly also stay in hotels. If we look at hotels, especially defining it as "short stays" we can say there remains a significant amount of innovation, from couch surfing to micro-hotels to chains that span room offerings from bare minimums to the Taj Mahal. Why is it that Marriott can offer a range of hotels from Fairfield to the Renaissance, from Residence Inn to Courtyard, something for virtually every traveler niche, yet United, Delta, US Air and American offer basically the same product to every flier. And no, "first class" isn't a real differentiation anymore unless you are flying internationally. The airline industry offers one commoditized product, where prices are quickly matched, and has done little to distinguish service in the air (actually all have reduced services by removing food). Rather than innovate their offerings, they've participated in a race to the bottom - who can be the most cost effective and anger the customer the least seems to be the motto.

Does it have to be this way? Could Delta or United or American offer differentiated classes of service on the same plane, or offer different benefits on different flights to the same location? If we argue that because of external factors the product is undifferentiated could they differentiate around services (baggage, food, linkages to other travel services, friendly service, etc)? Could they innovate around the business models - developing different mechanisms to charge customers or offer a "fee for service" model? If regulations were lower could a start-up airline offer more "point to point" flying for executives not yet ready to purchase or lease a plane? Could an airline allow passengers to manage their own bags, since many of us are forced to do this anyway? Or better yet, could an airline create a partnership with Fedex or UPS to deliver bags, so passengers simply drop bags at their Fedex location and pick them up at their hotel?

I suspect, dear reader, that even in a highly commoditized industry, laden with union rules and regulations, with a high focus on safety and reliability, that there is plenty of room for innovation. What we passengers need are some stark differences between the airlines so we can demonstrate our preferences by voting with our feet. I don't think there is a diminishing return on innovation in the airline industry, any more than I believe there's a lack of need for innovation in that industry. Every industry, every market has the potential for innovation. We customers simply need to demand more innovation and accept less of what is now a barely acceptable product.

While we're talking about airline innovation:
I'd like an airline with either far more overhead space, or absolutely none, so boarding is simple and fast, and there's no reason to worry for the people boarding last about whether or not their baggage will "make it" on the plane.

I'd like an airline with multiple entrances and exits. Why do we have cars with four doors and planes with only one entrance and exit? If large international flights can board on multiple doors, smaller planes can as well.

I'd like an airline that guarantees the lighting and air conditioning works. In the last few weeks I've flown on two planes where the overhead lights didn't work - limiting what I could do on the plane, and on one airplane where the AC didn't work in 90 degree heat. Unacceptable, and with a few sensors an easy fix.

I'd like a plane that offers a snack machine onboard. Why can't I simply purchase snacks on the plane the way I can in my office? I'd pay a premium for the snacks and it wouldn't take up much room.

I'd like a plane with far more comfortable seats - I'm not even asking for more knee or leg room, just something that is more supportive or comfortable. Perhaps the airline could have three different seat types scattered throughout the plane, and when you select your seats at ticketing you could indicate firmness, lumbar support or seat depth options.

I could go on, but I think you get the point. There are hundreds of ideas that are possible in even a highly regulated, highly competitive marketplace. Would many of these be instantly copied? Perhaps, but we need to kickstart more competition around innovation to stop the spiral of ever decreasing service. If the airline industry can innovate, any industry can innovate. I refuse to believe in diminishing marginal returns where innovation is concerned.

What's your day job?

2011-10-07T04:51:00.000-07:00

Working with an innovation team that was formed to create a new product, I was detailing the type of work the team would need to do, and the likely timeframes for the work. One gentleman, in particular, demonstrated some discomfort through his facial expressions and body language. When we talked about the amount of time each week that should be dedicated to the effort, and the number of meetings likely to be necessary to complete the work effectively, he finally exploded. Don't they know we have day jobs? he asked.

While his statement was a bit abrupt, it wasn't unsuspected. In every innovation project I've lead, or coached, or participated in, someone has raised the question about priorities and time commitments. It's a fair question, and one that is unfortunately left exceptionally vague. That question is: where should I spend my time - doing an excellent job completing near term priorities (my "day job") or doing the best I can, using unfamiliar tools and techniques, to generate ideas that may, or may not, be successful?

This is an unfortunate, and unfair, dilemma to place an individual in. Both current work and innovation work are extremely important, so executives expect and demand both. Executives want and need perfect near term execution, to achieve quarterly forecasts. However, they also know that unless interesting and valuable new products are generated on a consistent basis, growth will slow and differentiation disappear. So, rather than force themselves to choose, they simply tell employees that both are exceptionally important, and leave it to the innovation team to decide how much work will be committed to each task.

Unless and until the executive team changes existing compensation patterns, however, this isn't a real decision for most people. Compensation is based on completing the day job effectively, so the first bias is toward doing that work well. There are other factors that place a heavy thumb on the side of the scale that tilts toward the "day job". Those include familiarity with the work, expertise and knowledge that can be immediately applied, low risk, low uncertainty, and the reasonable certainty of success in the short run. Against these, stacked on the other side of the scale are: uncertain outcomes, risky procedures, little or no new compensation, the risk the project will be cancelled or abandoned, the risk that good ideas don't produce compelling new products or services, lack of expertise and many other barriers. So when an executive says innovation is very important, then neglects to change compensation schemes, neglects to reduce risks and uncertainties, and, most importantly in my mind, neglects to reduce short term responsibilities and burdens to free up appropriate bandwidth and time, he or she merely gives lip service to innovation, in the hope that a serendipitous idea will spring forth. Because certainly the executives know the dilemma that confronts the innovation team members.

When an innovation team debates about spending 4 to 8 hours a week to generate ideas to create the new product or service that's supposed to differentiate the company and spark new growth, you know that the team is conflicted with its short term and long term mission. You cannot adequately pursue an important "day job" and effectively develop ideas for radical or disruptive change. One of the responsibilities will simply not receive the time and attention it deserves. If innovation is important to your company, make it the "Day Job" of a significant number of people, at least during the innovation effort, or don't distract your team from their short term goals.

What's your "day job"? If innovation is important, will differentiate your company and will drive new revenues and profits, why wouldn't innovation be the most important "day job" in the business? We'd never think that people can close the books on a quarter on a part-time basis, or conduct basic R&D for just a few hours a week with any hope of creating a valuable new compound. Yet many organizations develop and deploy part-time innovators who have important day jobs, and wonder why innovation struggles.

The Incremental Innovation trap

2011-10-03T05:52:00.000-07:00

I'm a bit grumpy today, returning to work after a nice weekend. When you are an innovator, it seems you never really escape your work, or perhaps your vocation. Everything one sees or experiences seems to call into question - couldn't this be done better, or differently? I suppose a really committed innovator could drive himself or herself absolutely crazy wondering about all the potential improvements and new products that are possible just within the things he or she experiences. But those experiences drive what we do and what we focus on, and are perhaps limiting the way we think about innovation.

Consider, for just a moment, my simple taxonomy about the "types" of innovation many firms will consider. There is, of course, the innovation that improves an existing product, which many of us call "incremental" innovation. There is, further, borrowing ideas from other industries, products or concepts that exist in one industry but not in another, which is still relatively incremental but sometimes a "breakthrough" idea. There's a "mixing" innovation - peanut butter and chocolate - which combines two capabilities or benefits that haven't been combined before. Again, often interesting but rarely disruptive.

Further along the "interesting and valuable" spectrum we'll find Blue Ocean kinds of innovation - spotting unserved markets with a different new product or service, for example. Further along still is innovating around customer experiences or business models, and further still is creating a product or service completely new to the world.

I suspect that many of us who call ourselves innovators are constantly engaged with the products and services that we experience every day. We are wondering - what, exactly, could make this product or service better, more interesting, less costly, more engaging? This is the mental "busy work" that seems to advance the cause of innovation but I think often traps us in a dead end alley of innovation - the incremental trap, focused on improving existing products and services. That's not to say there isn't some value in incremental innovation - just that the work is frequently contemplated by a wide variety of people. The "winner" in this regard is often the firm that acts first. When many people or organizations are aware of a problem or opportunity, it's the firm that understand the problem in depth, and produces a reasonable solution quickly that wins.

However, far too much of our time as innovators is spent in the incremental alley. We're captivated by improving existing products and services, rather than focused on balancing incremental innovation with other forms of innovation. These other forms include identifying unserved markets, innovation focused on management hierarchies or business models, creating products that combine powerful capabilities not combined previously, and so on. These innovation "types" are implemented far less frequently, because there's less extant evidence of the need, and less "proof" of the value. Once again, we innovators are like the drunk who lost his keys in the dark alley, looking under the street light, simply because the light is better there. The keys are still in the dark alley, much like many good ideas simply waiting to be discovered if only we'll move out of our fascination with the here and now and explore broader ideas and opportunities.

And, yes, I know that the preference in many organizations is limited to incremental, but that's because we innovators have allowed ourselves to be boxed in to a incremental innovation ghetto. If we can demonstrate the value and opportunity of broader innovation thinking, and the potential realities of innovation that's focused on combination, or introducing ideas from other industries, or business model innovation, then we gain credibility and the scope of innovation expands.

If we aren't careful, innovation is simply an interesting side show trotted out when the executives want a magic show and some incremental gains. What we need to demonstrate is that we are "investing" in a range of innovation possibilities across a spectrum of risk and return. Incremental innovation offers low risk and low return, while business model innovation and "new to the world" product or service creation is high risk but high return. Placing these concepts in terms that financial folks understand and value improves the chances that we can innovate in more than just the incremental space - and that there's reason to do so.

Incremental innovation can become a trap. Innovators are lured in by the promise of innovation, only to discover that the boundaries of what's acceptable are so limited that they can never do more than simple, incremental innovation, and all other types and possibilities are excluded from the scope of effort. Innovators must define the breadth and depth of innovation opportunities and outcomes and assign risks and potential returns. No firm places all of its investments in government bonds - financial managers spread investments across a portfolio of investment options, timeframes and risks to ensure the best possible return. We innovators need to ensure the same method is take when considering innovation initiatives.

Everything you learned in kindergarten is wrong for innovation

2011-09-29T07:06:00.000-07:00

I had the opportunity to participate in the Business Innovation Factory's always wonderful BIF #7 last week, and like many people who attended I'm still mulling over many of the presentations, ideas and relationships. One short tweet by Saul Kaplan, perhaps a throw-away line, struck me as really important. Saul said he had trouble staying in his "lane". In fact he wasn't sure if he had a "lane" at all. BIF and other innovation conferences should be about valuable, unplanned and somewhat random collisions.

What's interesting about this idea of random collisions is that everything in life prepares us for the opposite. From our earliest educational experiences we learn how to take turns, stand in line and progress in an orderly fashion. We learn to color within the lines, answer questions with the expected answers. That's because as a society we prefer orderliness, predictability, efficiency. While the stories we tell about heroes are usually those who overcame great burdens or achieved great successes through risk taking, most of our day to day lives are about staying in a lane, avoiding collisions and coloring within the lines. This is perhaps reflected in one of my favorite comparisons, the one about the difference between the Army and the Marines.

It's said that the Army has a mantra that what isn't expressly permitted is forbidden, and that the Marines have a mantra that what isn't expressly forbidden is permitted. The former concept is restrictive - if you haven't been told you "can" do it then you can't. The latter is interpretive - unless you've been specifically told you can't, then perhaps you can. Innovators work this way, and to an even greater extent. They interpret the rules, and often re-invent the rules to suit their needs and their markets.

Now, society can't exist if we all interpret the "rules". In fact for an orderly, productive society we need to establish rules for health, safety and continuity. But we can't allow the rules to dictate how we think, and we must be open to reconsidering the rules when appropriate. What becomes a barrier is how few people are willing to reconsider the rules. David Keirsey, interpreting information from the Myers-Briggs personality tests, asserts that over 50% of the population are Guardians, who prefer order and stability. Only 3% of the population are likely to be engaged Inventors, who are willing to think differently and shake things up.

Is this a nature or nurture outcome? Are people naturally predisposed to prefer predictability and order, or is this something we instill early on in life, by insisting on neat lines, orderly turns and coloring in the lines? That will take more of a psychologist than I am. But between any predisposition and the education and expectations of our culture, most of us are very attuned to protecting the status quo, prefer predictability and dislike change.

So we can't simply ask people to practice "random" collisions if they aren't attuned to that. While many innovators (Saul, as an example) revel in interesting, random collisions and are good at combining seemingly different concepts into completely new insights, many people find the idea of staying in their lanes, coloring in the lines reassuring, and the alternative off-putting. That's OK - we need people who are experts at running the existing stuff really well. If they have discomfort in the randomness and unpredictability of innovation, allow them to work and thrive where their passions and comforts are located. But don't let these individuals establish the entirety of the organizational culture.

Another favorite quote of mine is from Thomas Jefferson, who wrote that the roots of the tree of liberty must be refreshed occasionally with the blood of patriots and tyrants. I think he meant for that to be read in two contexts - at the time he was writing, he meant it in all seriousness. There was, after all, a war going on. But I also think he meant it metaphorically, as a reminder that we can't get too comfortable with our government, or for that matter with the "State of Affairs". Every firm, every culture needs a regular rethinking and refreshing. The Guardians won't be happy with this - they'll want your organization to stay in its lanes, color in the lines. The Innovators will desire renewal, but their numbers are so small that they can't make a big impact unless they are supported. Too often the refreshing or renewal happens under duress, while under attack by a disrupter or market transition, rather than a carefully conceived rethinking of the business.

We innovators love random collisions, connecting ideas, people and experiences that seem unrelated, and creating something new from that experience. What we often fail to realize is that what is interesting, valuable and joyful for us is terrifying, random and not valuable for many others. That's why innovators get so much energy from meeting other innovators, especially outside the organization, and non-innovators get so much energy from people who share their view of stability and order. When you lock your innovators down, cut out travel to conferences, neglect customer insights and experiences, you risk the same outcomes as when you take a flower and neglect to water it or offer it sunlight. We innovators need our collisions, our experiences and the ability to swerve outside the lanes. That's the only way most organizations are going to get the ideas they need to sustain growth.

So, here's a question. How many times, how many opportunities do the few innovators in your organization get to "color" outside the lines? If/when they do, what's the reaction from the rest of the organization? Rather than putting up barriers to this activity, you should encourage and welcome it, perhaps even provide opportunities for it to occur, inside and outside your organization. Otherwise the dominant Guardian roles, rules and structure will take over, and change and innovation will be increasingly difficult.

Innovation is the opposite of insanity

2011-09-28T05:20:00.000-07:00

Today, a light hearted post in which I get to quote two of my favorite philosophers - Jimmy Buffet and Albert Einstein. Buffet write in Changes in Latitudes that if we can't laugh we'll all go insane. Einstein said that insanity was doing the same things over and over again and expecting different results.

If Buffet and Einstein, both highly respected philosophers, are correct, then most large organizations are insanity factories - not just mired in insanity but actually producing insanity. Here's why.

First, creativity is enabled by a lot of factors. These can range from artistic inspiration, to dire need, to innate skill or insight. But creativity is most often enabled by freedom of thought, a chance to do something a bit different, and a little humor. Why do you think all good idea generation sessions start with a joke or an ice breaker? Why do many good meetings seem more effective when even an old groaner is used to open up the dialog? Why is everyone more interested, involved and engaged when good humor is introduced? Because it demonstrates a different attitude, one that recognizes the opportunities and limitation of an organization and encourages, ever so slightly, the ability to step outside one's perspective and poke fun at the existing way of doing business. Humor lightens the moment and allows people to reach for an entirely different part of their thinking and their brain. Humor is also one of the least used tools or techniques for management. How many times do you see people laughing at work? Usually, it's when someone pops a Dilbert cartoon in a presentation to make a point. Ouch. While work may not always be "fun", no one said it had to be drudgery. And if you want innovation and creativity, you'll need to introduce humor into the mix.

Second, most firms are experts at insanity, at least in the way Einstein described it. Most large firms are experts at doing the same things, with the same people, and the same techniques, over and over again. Our business models are the ultimate examples of doing the same things over and over again. We've honed the models for ultimate efficiency and predictability. We've turned Six Sigma into a dogma rather than a tool. And along the way our businesses have become, by definition, insane. We think that innovation and creativity are risky, yet we constantly repeat and reinforce existing business models in the face of ever increasing change. Einstein suggested that doing the same things over and over again and expecting different results was the definition of insanity. That definition sounds a lot like our business culture today.

So, while many firms look askance at innovation, creativity and humor, we need these more than ever. We're on a path to insanity, repeating tired business models, methods and processes, locked into dogmas about predictability and continuity when the real path to growth and differentiation is to break free from the same old tools and techniques and introduce what today seems risky, strange and uncertain - innovation, creativity and humor. Strange to think that what seems like insanity from the inside of a corporation may ultimately be its life preserver. Too many executives think innovation and creativity are dangerous. From the inside of a prison it can be hard to tell who is behind the bars - the visitors or the inmates. It all depends on your perspective. Innovation isn't insanity - according to our two esteemed philosophers, it's the cure.

How much longer will countries outsource idea generation to the US?

2011-09-27T06:05:00.000-07:00

I was thinking recently about the challenges and possibilities of outsourcing. It's interesting if you think carefully about it, since what we call outsourcing is to some extent simple economics. Comparative advantage was first conceived by David Ricardo, who argued that each participant in a transaction should spend its efforts doing what it did best and acquiring goods and services from other participants doing what they do best. To the extent that free trade is possible, Ricardo argued that every country or participant benefits when each focuses on its comparative advantage.

For years we in the West have exercised this philosophy, outsourcing work that we can't do effectively to locations where labor or other costs are cheaper. Textiles present an excellent example. In the 1700s England dominated much of the textile industry, until low labor costs and suitable locations in the Northeast of the US demonstrated that textile production could be accomplished at lower costs. Over time, textiles migrated to the Southeastern US and were a centerpiece of manufacturing in many small southern towns. In the last twenty years a significant portion of that textile production has moved overseas, to locations that can produce cloth more inexpensively. While we may decry this outsourcing of good jobs, it should not be unexpected if we argue for free trade. The alternative is to place high tariffs on imports, to prop up the price of cloth produced in the US, which raises prices for clothing and artificially inflates prices and costs for consumers. Sort of what we do for sugar, as an example, but I digress.

What's interesting from an innovation perspective about this is that we in the US have no problem allowing others to "outsource" their idea production to us. What I mean by that is that we have staked out the position that we are at a comparative advantage where ideas are concerned - we produce and create ideas more rapidly and more effectively than other locations, so many countries have made an implicit swap - they'll produce the goods that we conceive. This implicit agreement has paid dividends for us and for many other countries over time. Strangely, no one seems concerned about other countries outsourcing their idea generation and intellectual property development to us, while they seem very concerned about the US outsourcing production jobs to other countries. While the dichotomy about who produces what is interesting, note one other issue: comparative advantage suggests that each country should do what it does best within a free trade scheme, and it will be difficult for any country to compete head to head with the US in idea and intellectual property production, but we don't live in a frictionless, free trade world.

Increasingly, rapidly developing countries (India, China, Brazil) aren't going to "settle" for merely manufacturing products or packaging content that we imagine and create. There's a market premium for innovation, and their countries and their firms are going to want that premium, and will place increasing emphasis on original IP and innovation. In other words, they'll be less interested in outsourcing the idea generation and intellectual property development to us, and will attempt to do more and more of that at home. While the US is in a leadership position today in terms of higher education, deep research and intellectual property generation, rapidly growing economies are increasingly placing more and more emphasis on developing their own capabilities. When the Indian Institute of Technology graduates more engineers that all of the US engineering schools, and when doctoral and PhD candidates from other countries return home to create new companies and pursue their research, warning lights should go off across the US.

Our compelling national comparative advantage is creativity, innovation, spotting and recognizing new ideas, new market opportunities and creating compelling products and services faster than any other country or region. When we slow or shackle that capability, or neglect it, or, more worrying, become comfortable outsourcing it, we lose what had made the US an engine of capitalism and job creation. Will anyone worry if our firms "outsource" creativity, design and innovation to other countries in the same way they worry when we outsource manufacturing jobs? It will be interesting to watch.

In the mean time, we need to ensure our comparative advantage in innovation remains. This means we need to focus on our capabilities at a country level, through political policies and tax policies. We need to focus on our capabilities in educational settings, teaching and reinforcing creativity and innovation in all aspects of educational life. Our businesses need to determine how important innovation and creativity are for their competitive advantages and reinforce internal skills. It could be very easy to allow others to innovate for us, to allow others to dream and take on the risks of creation, but that would be to subvert the very nature of our economy. We need political leaders, business leaders and social leaders who realize the importance of creativity and innovation, and their vital place in our national lives.

BIF-7 Day One Recap

2011-09-20T19:04:00.000-07:00

For those of you waiting a recap of BIF-7 with eager anticipation and jealous longing, I can confirm that once again the folks at BIF have pulled together another excellent conference. Herewith, a few ideas, random thoughts, and synopsis of the first day.

First, a brief aside. I somehow missed the email (Tweet, document?) that circulated that demands that every speaker present a serio-comedic picture of himself or herself taken in the late 50s or early 60s. Did that memo go out? Because I think even the young mountain climber who could barely be out of middle school opened with a picture of himself in black and white taken on a Brownie in the early 60s. Just kidding Matt.

BIF, for those of you unindoctrinated, is the Business Innovation Factory, and each year BIF hosts a conference that is part TED talk, part innovation conference, with a significant portion of meeting interesting people involved in a wide range of innovation efforts. So the topics are interesting, the people are interested and the conversations are relatively deep and always enlightening.

We had talks today from a wide array of speakers, including college professors, mountain climbers, the lead innovator at WD-40 and a gentleman who is the innovation lead at Willow Creek. Yes, BIF folks cast their nets wide and brought in quite a haul of innovators from a range of industries and focuses (foci?).

There were a couple of statements that I thought resonated nicely. For example, a photographer who spoke complained that many people wanted to know what camera she used. Her response - it's not the camera, it's the photographer and the vision. That resonates with me because far too often corporations trust innovation tools rather than the people, their ideas and their vision.

A community leader from Houston picked at an issue that resonates with me. Her argument is that we often look at downtrodden communities and talk about what's "wrong" rather than what's working. Her statement "you can build on broken" - you build on what works. Rather than sit around and talk about why ideas won't work, build on the people and capabilities that will work, and do work.

Angus Davis, who is a successful serial entrepreneur, left us with this phrase that sits just beside the door as people exit his office - "Let's make better mistakes tomorrow". The connotation that innovation, and advancement in general for that matter, requires learning, which will result in failures and successes. Hopefully we are all learning and making better mistakes each day.

John Hagel from Deloitte's Center for the Edge suggested that in corporations we've lost our risk-taking and exploratory mindset. Entrepreneurs and innovators have this by definition, but as firms grow larger they grow more risk adverse and more comfortable, defending markets and position rather than exploring new ones.

Perhaps the most provocative talk was from Dale Stephens who is a Thiel Fellow. Dale dropped out of college when he realized that academia is increasingly not a place to exchange ideas as it is to memorize and regurgitate information. I paraphrased his speech as "they pretend to teach us and we pretend to learn". While I don't agree with all of Dale's arguments about the value of a college education, or lack thereof, his voice is one of many that argue that academia needs innovation desperately.

Why are these folks chosen as speakers at an innovation conference? Because they create and sustain meaningful ideas that challenge what is comfortable and routine for many of us and encourage us to think differently. I look forward to seeing what is presented on Wednesday.

The knowing-doing gap in innovation

2011-09-15T06:19:00.000-07:00

A recent survey of midwestern manufacturers reinforces a fairly serious issue where innovation is concerned. In the survey, the vast majority of executives recognize that innovation must start with the executive team. That's a good thing. There are some issues of concern in the survey as well - the fact that only about a quarter of the firms survey set aside funds for innovation, and the fact that the same percentage have a defined innovation process. But another survey from the National Science Foundation shoots a bullet right through the heart. According to that survey, only 20% of manufacturing firms reported creating a new innovation in the years 2006 to 2008, and, even worse, only 8% of services firms reported creating an innovation.

Clearly, everyone "knows" that innovation is important, and one could argue even vital, to the success of our businesses and economy. But just as clearly, few firms are implementing the mechanisms for innovation success (see the Plante Moran survey) if only a quarter of the firms report that they set aside funds for innovation or that they have a defined innovation process. What's perhaps even worse is that since there are few "standards" or agreed innovation methods or principles, what these firms are reporting as innovation processes or budgets could be optimistic or just plain wrong.

What accounts for the knowing - doing gap in innovation? This is the pink elephant, the emperor with no clothes in the innovation room. We all know that a few firms claim the vast majority of innovation success, while most firms attempt innovation occasionally only to abandon it when needs or interests change. If we are honest with ourselves, we can admit that "everyone" believes that innovation is important, but that few firms do it well, and most do it poorly, if at all. I doubt there's another business function with such a large knowing - doing gap. Is this simply the nature of innovation, or is there something more at work?

I'm going out on a limb here, but that's my normal perch. I'm going to offer up that innovation is actually fairly simple in practice, but rarely defined, reinforced and sustained. If we boil it all down, innovation is about three or four key capabilities or activities:

Spotting opportunities and trends in the marketplace before others do
Understanding customer needs before they are aware of them
Generating interesting ideas that set the company apart from its competition
Successfully commercializing and launching the new product or service

Yes, there is more to innovation than these four points, but you get the drift. Whether your firm uses "open innovation" to get the ideas from external parties, or practices business model innovation to transform not just products but your business model, you still ultimately end up with the same basic activities. So if the basic activities aren't that hard, what's creating the knowing - doing gap? Three things.

First, it is easier, less risky and less uncertain to cut costs than to create something new and drive increased revenue. Cutting costs is a certainty. If I cut three people, the costs drop out of the bottom line. Those costs are predictable and have immediate impact. If I create a new product, the costs impact now and the benefits don't accrue for quarters or years, and even then aren't guaranteed. In a short term focused world, skipping innovation for the sake of cost cutting is like skipping your green vegetables. Dinner tastes a lot better tonight, but the body might not be as healthy in the long run.

Second, while innovation isn't "rocket science" it does require some new skills, process definition, new relationships and funding. This at a time when core staff are working like mad to keep their products above water. Most firms can't afford to take on new ideas. They can barely handle the maintenance and sustenance of the products and services they've got. No slack in the system, no extra bandwidth and increasing demands mean that all focus is given to existing products at the expense of innovation.

Third, we've lost a bit of the cowboy culture in our executives. Jobs and a few others are willing to create some new stuff and see what happens. I think those leaders are smart enough to know that what looks risky to a lot of us is actually a lot more predictable than we believe. In most businesses, once a firm grows to a certain size it loses all, or most, of its entrepreneurial spirit. Instead of sticking it to the man, these firms prefer to lock in certain advantages and lock out disrupters or new entrants. And they slowly sink into the comfortable position of a large player, rather than a disrupter. That's why firms like Apple and Virgin, and people like Jobs and Branson are so interesting. They are large, but retain a bit of the cowboy. Most of our firms could use a bit more cowboy and a bit less of the accountant and lawyer. If the executives don't want to stick their necks out for new stuff, why would the middle managers and staff do so?

It's not as though innovation is a mystery. There are hundreds of books, and more on the way (hint) that describe how to do innovation in large firms, design firms, military operations, services firms, health care, academic settings and so forth. OVO and plenty of other firms offer innovation training. There are plenty of models and success stories to follow. The knowing - doing gap is a gap of choice, then, rather than a gap defined by a lack of knowledge or information.

The real question, then, is whether innovation can be accomplished by firms that are hesitant, cautious and resource constrained, or whether they'll simply need to outsource innovation for any measure of success. I find this dichotomy a bit strange. We know that any firm, pushed to its limits, can do amazing things. Innovation is often amazing, but is based on basic principles that any firm can do well. The question is - what will it take to push many of these organizations to the point where innovation becomes a capability that they adopt whole-heartedly internally, and will there be enough time for innovation to pull them out of the hole they created for themselves? The knowing - doing gap is self-inflicted, and while it causes only moderate pain at first will ultimately hollow out an organization.

Innovation - a capability not an activity

2011-09-13T14:15:00.000-07:00

I get this fairly regularly, a senior executive who is in somewhat dire straits. Their firms, once leaders in their industries, neglected R&D, postponed interesting new products and services and failed to innovate consistently. Now, they are no longer the lead dog, and are unhappy with the view from behind.

To begin to remedy three to five years of focusing on efficiency, cost-cutting, right-sizing and ignoring innovation,they often want to conduct a week-long workshop to generate disruptive new ideas. You can almost imagine where this is going....

My first question when I get this request is: OK, once the idea generation event is over, what next? Since I know most organizations don't have an organized innovation process or workflow, or a deep bench of people and resources to throw at such a significant problem, I know the likely outcome is a few people assigned part-time to evaluate and select an idea to develop. They'll lack training and skills, since little or no innovation has been done recently. They'll lack frameworks for evaluating and selecting ideas, because no one has established what the long term strategies are and what should be emphasized. They'll be pulled back into their day jobs constantly, since the fiscal quarter is far more important than achievement in a year or more. And, ultimately, without a lot of commitment, time, resources and effort, they'll likely generate at best an incremental idea that management half-heartedly accepts and which fizzles in the marketplace.

Is this an "innovation" failure? No, because innovation wasn't implemented. It is a strategic failure, a failure of focus, a failure of resources and a failure of expectations. Innovation isn't a parlor trick or a time machine. It is not going to make up in one week for three or four years of neglected innovation, and can't overcome a lack of skills or training, a lack of resources and a lack of focus. If it were as simple as a one week exercise to create a compelling new product or service, then we'd see lots of them. What people forget about even good innovators like Jobs at Apple is that it took four or five years for Apple to create the iPod. None of their innovations were developed overnight, but over a long time, based on a consistent vision, with lots of resources. Apple intentionally cut a lot of other products to clear the decks for the iPod and other "i" products, rather than force the nascent products to compete with existing products which had their own demands.

Innovation is not a short-term activity, but a long term capability. Farming may provide an excellent analogy. I come from farming stock, and I can assure you that no farmer would wait until July to plant crops, hoping to harvest them in a week or two. No, he or she would tend the land, working year round to till the soil, break up the ground, plant the seed when the time is right, weeding, fertilizing and caring for the tender young plants. When adversity in the face of cold, fire, hail, insects arise, the farmer confronts the issues immediately. He works, understanding the commitment and timeframes of his plants and the vicissitudes of nature - rain, snow, clouds, sun, drought, wind. He harvests when the plants are ready, on the agricultural time scales, not perhaps what he wants, but what nature gives. You cannot toss seeds in an unprepared field and expect to harvest valuable crops from that same neglected field a week or even a month later. Likewise, you can't extract good ideas from an unprepared organization, and even if you could, the skills, capabilities, methods and processes aren't established, and the ideas face tremendous headwinds but have few protectors and even fewer accelerators.

Let me say it again. Innovation is a capability developed and nurtured over time, not a once and done activity. If you want a rabbit from a hat, buy a magician's kit. If you want real, powerful innovation to drive new ideas that create value and differentiation, be prepared to get your hands dirty, till the soil, pull the weeds and spend the time necessary to harvest the crop of ideas. There are no easy innovation fixes to long neglected strategic problems.

Do you have an innovation "edge"?

2011-09-12T09:03:00.000-07:00

One of my favorite quotes is by George Bernard Shaw. The quote concerns itself with progress.

The reasonable man adapts himself to the conditions that surround him... The unreasonable man adapts surrounding conditions to himself, therefore, all progress depends on the unreasonable man.

The problem with this formulation is that few people enjoy being unreasonable, and many of those that we know who are unreasonable aren't being unreasonable to advance knowledge or innovation. Many of the unreasonable people in your life are simply cranks.

But let's not miss out on the concept of unreasonableness, or, as the title of the post suggests, edginess. Innovation relies on the edge, and on edginess, for survival. Here's why.

People who are comfortable with the status quo tend to resist change and the introduction of "new" things. Most corporate cultures are far more comfortable sustaining existing products and services, which are predictable and well-known, over the introduction of new, risky and uncertain products and services. In that regard, only people who are willing to create and sustain change, who are comfortable in the face of uncertainty and are willing to push against the corporate culture will sustain innovation. And these people often seem a bit "edgy" to the rest of the organization. They zig when others zag. They have different perspectives, ones that many people try to tamp down. Yet if everyone in the organization had the same perspectives and same comfort level with existing products, what new thing would get done? Perhaps we should say that, paraphrasing Shaw, that "all innovation depends on the unreasonable man (or woman)."

OK, if innovation relies on an edgy, unreasonable person with the organization, but most organizations are staffed primarily with people who are comfortable sustaining the "status quo" products and services, where does the edgy person get their inspiration? Usually, from external sources. This means that for an "edgy" or unreasonable innovator to thrive in most organizations, they must be closer to the "Edge" of the business than the center, for two reasons. First, the closer to the "core" of the business an idea or person is, the more difficult it is to change anything. Whatever is at the "heart" of a business, right or wrong, is harder to change than issues, values or products that are more peripheral. Second, information, trends and signals only penetrate a corporate culture so far. Corporate culture acts like a barrier to external signals, filtering and weakening messages from the outside. The closer one is to the center of the business, the less interesting information penetrates, and the more it is garbled when it arrives. To get the best, most untainted information, the innovator must have access to the "edge" of the business - that is, have ready, unfiltered access to information that preferably he or she gathered and analyzed themselves.

Finally, innovation relies on edges of corporations and even industries, because many disruptive innovations happen not at the core of a business or industry, but at the edge where two businesses or industries intersect. It is on these extreme peripheries where two or more capabilities or needs intersect that really interesting and disruptive innovation happens - again, at the edge. Yet, more and more many firms are restricting travel, limiting interaction with partners and third parties. We know that interesting innovation happens at the intersection of technologies, markets and geographies, but increasingly these intersections happen by accident. There's no one on the "edge" of the business, and even fewer people who explore the "edge" of the industry or technology.

Further, edgy people aren't appreciated, and the more important a person is, the more likely we are to find them at the center of the business, insulated from external signals and rarely engaged at the edge of the business, much less at the edge of the industry or technology.

Corporate structures and cultures have it all wrong. Increasingly, your best people need to be on the periphery, identifying the best ideas and creating linkages and intersections with other industries and technologies. Your best people need to exist on the edge of your business, rather than in the center of your business.

Book Review: The Progress Principle

2011-09-07T11:48:00.000-07:00

I wrote recently that Maslow’s hierarchy of needs is as pertinent to the world of work as it is to the rest of an individual’s life. Organizations that want more innovation from their employees need to understand that innovation is more likely to happen when many of the “lower order” functions of Maslow’s hierarchy are fulfilled for an employee or a team. This means that simple needs like safety, security and basic needs are fulfilled completely and are not at risk. Only then can issues like esteem and creativity be fully engaged. Since far too many employees in far too many businesses are worried about the basics of their job – security, safety, continuity – they don’t have the investment or time to engage in higher order activities.

Teresa Amabile and Steven Kramer have conducted extensive research into issues of employee engagement, productivity and creativity. In a far-reaching survey of over 12,000 diary entries created by hundreds of employees across a number of firms, Amabile and Kramer identified factors that lead to satisfying what they call “inner work life”, which consists of emotions, motivations and perception of employees’ organization, work and colleagues.    Amabile and Kramer have now documented the research and discussed their findings and the implications of their analysis in a new book entitled The Progress Principle. In the book they introduce inner work life and its components, and identify factors that support and sustain a positive inner work life. Most interestingly, they identify “progress” as perhaps most important to a positive inner work life. What they mean by this is progress of a project or initiative toward a goal – even small, incremental steps. Progress was so important to a positive inner work life that they included “progress” in the title of the book.

The authors stipulate there are three components of inner work life: perceptions (how we make sense about work and what we do), emotions (reactions to events) and motivation (desire to do the work). These seem fairly obvious on their face, yet few managers are attuned to assess this concept of inner work life, and few know instinctively how to create an environment where inner work life is developed and sustained. The authors attempted to assess how employees felt about their inner work life through surveys that asked the employees to report on four significant criteria: creativity, productivity, commitment and collegiality. Based on this feedback, they confirmed what many other management thinkers and researchers have already discovered – intrinsic motivation is more important than extrinsic motivation, especially where higher order activities like creativity are concerned. This aligns to work by Daniel Pink in his book Drive.

Once the authors have defined the inner work life, they turn their attention to progress. On page 68 they define the benefit of progress as “Real progress triggers positive emotions like satisfaction, gladness, even joy. It leads to a sense of accomplishment and self-worth as well as positive views of the work and, sometimes, the organization.” The authors argue that making progress on an initiative or project, even small, incremental steps, leads to an enhanced inner work life, which creates engagement and can lead to greater creativity and productivity. However, progress is just one of three factors that influence inner work life. The other two factors are catalysts, which are actions that directly support work on the project, and nourishment factors, which are interpersonal triggers like praise, respect and encouragement.    As every action has an equal and opposite reaction, progress is opposed by setbacks, catalysts by inhibitors and nourishment by toxins.

The book includes a list of catalysts that should be relevant to any manager: clear goals, autonomy, adequate resources, adequate time to work on an initiative, providing assistance, learning and allowing ideas to flow. These catalysts engage and accelerate efforts and promote progress, which reinforces inner work life. Clearly, inhibitors work in opposition to catalysts. Inhibitors are uncertain goals, lack of autonomy, limited resources, limited time, lack of assistance and a restricted view of ideas. These inhibitors limit how people work, stymie their progress and impact inner work life, leading to frustration and a lack of engagement.

Similarly, nourishment adds to a positive inner work life through respect, encouragement, emotional support and affiliation. These factors encourage a very positive working environment and improve perceptions, emotion and motivation. Toxins, on the other hand, block this nourishment and poison the atmosphere, again leading to a poor inner work life and lack of engagement.

So far, so good. The research is exhaustive, the insights are compelling, but the implications aren’t quite so clear. Amabile and Kramer have done an excellent job peeling back a layer of management obfuscation to remind us that people need to be engaged in what they do, and as work becomes a bigger part of everyone’s life, inner work life must be effectively understood and managed. This means that every corporation must consider its corporate culture and make adjustments to ensure the appropriate catalysts and nourishments are in place. Executives and managers must examine their management style to understand how they impact progress and inner work life. The authors devote an entire chapter to “Tending your own inner work life”, yet at the end of the book I am left asking the question: who is this book for? Is it a prescription to radically change corporate cultures for greater engagement and creativity? If so, it should be directed at senior leadership. Is it a book about recruiting, hiring and training the best managers to sustain inner work life? If so, then it should be targeted at middle managers and talent management. Is it a “self-help” book targeted to individual contributors? It’s simply not clear who should hear this message and how they should respond.

Further, the benefits of a radically improved inner work life aren’t described adequately. If an organization can dramatically improve inner work life, what are the potential outcomes? Drastically improved employee engagement? Improved creativity and innovation? A reduction in unplanned employee turnover? The book doesn’t make a lot of claims about what the outcomes will be in what will be a relatively significant investment in training and management coaching.   The authors spent a significant amount of time building their case for progress and for the other factors, but they neglected to spend enough time describing the outcomes and benefits of improving inner work life. One could argue that the benefits are obvious – happier, more engaged people who feel encouraged and respected at work. But those psychological benefits have to be converted into meaningful, quantifiable outcomes that shareholders will care about – higher revenues, lower costs, higher growth. I’m sure that many firms on the end of bankruptcy demonstrate many inhibitors and toxins, and conversely many fast growing firms demonstrate catalysts and nourishers. Yet we need a bridge between qualitative “good” outcomes and quantitative results if we are to ask executives and managers to embrace what will be significant cultural change, and I’m not sure the authors have provided that bridge.

Earning respect for innovation

2011-09-06T06:03:00.000-07:00

Like Rodney Dangerfield's character, innovators often get very little respect. Even noted innovation consultants, like yours truly, have learned to weather a questioning glance when we admit that we work to promote innovation. Usually, that's followed up with a question that can best be paraphrased as: "That's a real job?"

Yes, Dorothy, innovation is a real job, an often thankless, lonely and neglected job, until someone in the organization really, really needs new products or new revenue. And for that brief, shining moment, innovation moves to the fore. The real question we need to ask ourselves is: why isn't innovation a respected skill? Why do Chief Financial Officers or Chief Marketing Officers seem to feel no reason to justify their existence or validity, while anyone who wants to create innovative new ideas must first admit that, yes, innovation is not a real "role" or "job", but will be tolerated in a pinch? Why is a financial or accounting role deemed important, necessary, even critical to a corporation, while innovation is considered frivolous, or at best a temporary position?

There are several reasons that innovators don't receive the respect they deserve. The first is based on experience, the second on expectation and the third is based on results. Let's break down why innovators, and innovation, doesn't get any respect, and look at the options for creating the environment for respect.

In the first instance, innovation doesn't get any respect because many people have no experience with true innovation work. Since we are typically suspicious of any topic or body of knowledge that we have little experience with, innovation is held in contempt until it can prove its value. Unfortunately, many people attempt to "innovate" half-heartedly or with little preparation and no previous experience, so innovation doesn't produce the usually outsized goals the team has. Strange to think that a tool, attempted once, with little preparation and no previous experience, doesn't produce the iPod of your industry, but that's the way it often works. Most of us, for example, wouldn't agree to close the books on a quarter, swapping jobs with the CFO, or wouldn't agree to lead a significant new marketing campaign, swapping jobs with the lead marketing person, yet many agree to jump right in and lead an innovation effort with no experience, no training and few trusted guides. Isn't leading an innovation effort to create valuable new products and services at least as important as getting the (backward looking) financials correct? In the end, most teams don't have experience, and don't respect the work or body of knowledge that supports innovation.

The second reason that innovation doesn't get any respect is because of the expectations of failure. In any other function in the business, failure is tantamount to abdication of duties. If the quarterly closings don't "tic and tie" to the penny and within a penny a share of the projected revenues and profits, the CFO has "failed". There are real penalties for getting it wrong. Where innovation is concerned, your team will definitely fail. After all, noted innovation financiers, also known as venture capitalists, are hopeful of betting correctly on one or two of ten investments, knowing that the majority of their investments will return nothing. Further, since many teams attempt innovation without prior knowledge, training or experience (see paragraph above), the expectations of many teams are that innovation won't succeed in developing an excellent idea, or that even if a great idea is generated, it won't be accepted or implemented by the company. This is almost learned helplessness in action!

The third reason innovation lacks respect is in the results of the effort. As mentioned previously, even strong ideas must cross the chasm from concept to new product or service, and that's a very large chasm to cross internally. Development teams have more work than they can handle with existing products and services, never mind new and potentially risky products. Even if the idea can be translated into a new product or service, it may not succeed in the marketplace. The opportunity window is open only briefly, and time and competitors, or market conditions, may shift.

We innovators need to demonstrate that innovation isn't frivolous, isn't doomed to failure and isn't a last-gasp attempt at differentiation. Rather, innovation should be a consistent, important capability that generates and commercializes new products and services that drive new revenue, and is supported by internal disciplines and people trained to the work. Rather than hang our heads and smile sheepishly when people suggest that innovation is a side-show, we need to demonstrate that innovation is as vital to an organization as any "relevant" or trusted capability, like finance or engineering.

Respect must be earned, and innovation will earn its respect when it demonstrates its importance and relevance to an organization's growth and success. As long as innovation is used to respond to desperate situations by teams who are unwilling and unprepared, the results will not emphasize the value or importance of innovation. We innovators must demonstrate that innovation is CENTRAL to the success of a firm, and gain as much credence within a firm as the finance or accounting teams. Then, and only then, will we have the respect that we need, and that we are due. Respect will be paid on the day that the CFO's job is to count all the profits and revenue that innovation creates, and the CMO's job will be to create more press and awareness about your firm's innovation efforts.

Let H-P be H-P

2011-08-31T06:19:00.000-07:00

I've written a couple of posts recently about the importance of being earnest. No, not the Oscar Wilde play, but the importance of understanding, communicating and simply "being" what and who you are as a company when you innovate. The common mistake that many firms have is that they believe innovation is about a cool product. While a cool product is interesting, unless your firm has clear goals, plans and trajectories, a product is here today, gone tomorrow. That why I wrote about innovating your "purpose", not just your product.

Today, I'd like to further that argument by using two simple examples - Apple and H-P. I'm writing as Jobs steps down and Apotheker steps up. Jobs is stepping down due to health reasons, and his imminent departure leaves us wondering if Apple can be Apple without Jobs. Will Apple sustain its ability to predict the market, perhaps even lead its customers to want its new products and services? Well, since Jobs returned Apple has had a clear vision and purpose. The real question is: can Apple sustain that vision and purpose without Jobs, or does it become a more careful, cautious company?

On the other hand, Leo Apotheker takes over at H-P and seems ready to jettison the last 15 years of investment in consumer hardware. The story goes that Apotheker wants H-P to be cool like Apple. This, in my mind, is missing the point, and missing the entire history of H-P. H-P has a backstory - and one actually very similar to Apple. Further H-P had far more people who knew and respected H-P for its history, its culture and its story. Apotheker either doesn't know, or doesn't care, about this core story and its importance sense of purpose.

H-P was Apple before Jobs was even born. H-P was, and in many parts of its business still is, the engineer's choice of product. Raise your hand if you are an engineer and had an HP calculator in school, or if you are in any scientific endevor and use H-P equipment. H-P stood for something - high quality, tools for people who did important thinking work, equipment that worked and lasted, built for engineers by engineers. For some reason, none of this seems to matter anymore, yet I suspect that even today, H-P has as big, and as loyal, a customer base as Apple, they've just forgotten about it or de-emphasized what was and still is a loyal H-P base. H-P was never cool. In fact H-P products sat in engineering labs, in places where real work got done, and on belt loops and pocket protectors. But H-P products built stuff, took men to the moon, designed and ran chemical plants. H-P products, and the loyal people who used them, designed and built the stuff that all innovators now use as platforms.

And that's the point of this post - create a story about who and what you are and your value proposition, build a loyal following and innovate with those loyal followers. After all, they are far more likely to adopt your new products and services than prospects and strangers who don't know your products. As a loyal H-P guy I acquired one of the first H-P handheld devices, the Jornada, even though the Palm seemed like a better product, because I was convinced that H-P made better equipment. H-P is trying to be the next IBM, or SAP, and wants to be cool like Apple. H-P should look back to its history and decide to re-invigorate what made it great - great, innovative products that stood the test of time for people doing serious work who needed excellent machines.

I'm sure that's not in vogue right now as Google, Facebook, Twitter and god help us, Groupon take all the publicity. We are at another "eyeballs" inflection point, where solid firms like H-P believe innovation is about capturing more prospects through interesting interfaces, rather than capitalizing on their intellectual property, reputation and loyal customer base. When innovating, copying someone else's strategy or persona is akin to wearing someone else's clothes and driving their car - you may borrow their look and feel for a while, but inevitably your persona shines through. H-P was never cool, and that should be OK. H-P was a great company, is, and will be in the future if it realizes who and what it is, and who and what it is for. H-P needs to be itself - it's real self, only better and faster.

H-P can't adopt another firm's strategy or pretend to be a fashionable consumer company. That's not in its roots, its purpose and not where its loyal customers are. Right now H-P stands to risk angering its loyal engineering, technical and scientific customers who number in the tens of millions, trying to become something that it is not, a follower in consumer goods and software, a purveyor of "cool. Those fickle customers may not accept H-P's entrance into "cool" and the die-hard H-P fan boys are losing heart as H-P increasingly seems set to ignore the stuff that made H-P what it is. H-P needs to be what H-P was, and is, rather than what it thinks Apple is. Only then can it be successful innovating.

Why tribes are the answer to innovation needs

2011-08-29T06:12:00.000-07:00

A friend, whose love of life and judgement I am growing to mistrust, suggested that I participate with him in a "Warrior Dash". He talked about it for a few weeks and finally I signed up. This weekend, I participated in the Warrior Dash in Huntersville, NC and I am far older and wiser for having done so. His description of the event did not do justice to the actual gauntlet that we ran. Still and all, for an over-the-hill guy who is a weekend jogger, I was somewhat proud of my results, even if my mud-soaked T-shirt and socks will never be the same again.

I'm wiser, not just because I learned how to duck under barbed wire in a mud bog (not me in the photo) or how to climb into and out of a dumpster, but because I learned something about innovation even in the midst of the Warrior Dash. And what I learned should be instructive to your work in a nice, safe, clean cubicle or even the more dangerous corporate environs of a conference room.

I haven't discovered the history or provenance of the Warrior Dash, but it appears to be an interesting confluence of your typical summer festival in a field, with bands, booze and general mingling, mixed with a BMX course in which you, personally, are the bike and rider. So, right from the start there's an innovation lesson - the confluence of a number of trends to create something new. People who are into fitness need new exploits, and those of us who would merely like to imagine themselves as the cover model for Runner's World need some new exploit to attempt. So much more fun if the finish line includes a mud bog, getting hosed off by a fire truck, and the handy access of a large beer.

What was even more instructive to me, however, was that few of the runners in my "wave" seemed to be at all athletic. Many were dressed in costumes or had team t-shirts, and lagged well off of my (rather slow) pace. It seemed to be something they decided to do together, as a group, for the experience rather than for the best time or result. Another innovation lesson - they were out for experience, hoping for the best but understanding the experience of the course would improve their knowledge or outlook. What's more, each team, and everyone who participated, became part of a tribe, even if only for a little while.

Seth Godin wrote a book about tribes, but I think he got one thing wrong. There were no leaders at the event, and everyone decided how to run, whether to run or walk, how to dress and so forth. All of these people (over 6000 racers in two days at Huntersville) became part of the Warrior Dash tribe. My wife is already talking about doing another one. Ouch. But what great insight for innovators!

I stood, transfixed, as the first wave went out. Clearly very few of the people racing were tri-athletes out to win a medal. They were there for the fun, for the difference and for the experience. It was a new experience, a new challenge that they embraced. These folks paid good money to roll under barriers, crawl under barbed wire, scale a rope ladder and jump over the burning chemical logs (cough, environmental hazard, cough). For this they got: scraped knees, blisters, heat stroke, mud in every possible orifice, clothing stained beyond repair and a cheap T-shirt. In other words, the "awards", especially extrinsic ones, didn't measure up to the pain. There was far more intrinsic reward than extrinsic benefit, which is also very relevant for innovators.

I don't know if the people who created the Warrior Dash know what they've got, but they've got the perfect model for an innovation initiative. Innovation will work best when people come together to face an inordinately large or difficult challenge that they have great personal interest in solving. There won't be an easy path to the finish, with many difficult barriers, hurdles and setbacks along the way. The only people who will complete the task will be those who were in it for more than extrinsic rewards.

There were some key differences between an innovation effort and a Warrior Dash, however. One notable difference was the fact that unknown strangers were yelling encouragement to me while I was hip-deep in the mud bog. People I'll never meet face to face were cheering for my (really our) success. In most innovation activities, there are as many people silently or publicly rooting for failure as there are for success, and much innovation is done in isolation, far from the prying eyes of employees or customers. Another difference between the Warrior Dash and most innovation initiatives? When I see someone with the Warrior Dash shirt on I'll have instant respect and knowledge of what they went through - we are now compadres in some larger sense with respect for each other. Innovators are often outcasts even when successful, and can hopefully form tribes with other innovators in their own organization at best and are difficult to identify in the "real world".

Yes, I recognize that a 3 mile dash over difficult obstacles in the Carolina heat is a far cry from corporate innovation, but in many ways the lessons and outcomes are strangely familiar. Innovation is about doing something unusual and difficult, often poorly prepared, with people you often don't know that well. The barriers and obstacles are physical, cultural and monetary, but the work plays out in air conditioned offices, conference rooms and hallways. Perhaps one of the best activities a new innovation team could embrace before starting a project would be to participate in a Warrior Dash together. Then, the corporate hurdles may seem a little lower, the risks a bit more bearable and the team work a lot more integrated.

We innovators, internal and external, are a tribe. We may not share all of the same capabilities, strengths or knowledge, but we've all been through the same fires. Respect other innovators and acknowledge their scars and sacrifices. We are the sharp end of the corporate spear, and carry the slings and arrows of outrageous fortune to prove it.

The Warrior Race

Innovation as self-actualization

2011-08-26T06:44:00.000-07:00

I've been reading a number of books about how to increase engagement and excitement at work. Two on my desk right now are Bury my heart at Conference Room B (which I have mixed feelings about) and the other is The Progress Principle (which I will be reviewing on this blog shortly). Both books speak to the fact that businesses are more effective when they engage their people in what their values are, what the employees care about. To boil it down, the best businesses, the most successful businesses are those that have a purpose, and that purpose resonates and is important to the people within the business. Whether you want to call this bringing your "whole self" to work or engaging your passion at work, or another descriptor, I think the main points are correct.

What's interesting is to explore this effect on the ability to innovate in an organization. I've often argued that most firms innovate when they are forced to, by competitors or circumstances, or when they believe they can accelerate into even greater leadership. The first is reactionary, based on fear, while the latter is proactive, based on confidence and vision. In my experience, firms that attempt to innovate in a reactive way often have cramped views of the future, are fearful of short term results and are limited in their thinking and creativity. The Progress Principle has chapters that confirm this - the more stress that employees are under, the more antagonistic the atmosphere, the less creativity and the more difficult innovation becomes.

Perhaps the best way to think about this is to consider Maslow's Hierarchy of Needs. If you've had Psych 101, you've studied Maslow. In the early 1940s he devised a way to think about the kinds of needs we have as humans and the prioritization of those needs. They are, in order:

Physiological
Safety
Love/Belonging
Esteem
Self-Actualization

Maslow's point was that we first look for our physiological needs and satisfy them - air, water, food, shelter. Once those are satisfied we seek safety and security - in our bodies, in our jobs and so forth. Then we seek to join groups - family, community and networks. Then, once these needs are satisfied, we seek esteem, which he defines as achievement and the respect of others. Finally, we seek self-actualization:

This level of need pertains to what a person's full potential is and realizing that potential. Maslow describes this desire as the desire to become more and more what one is, to become everything that one is capable of becoming.^[9] This is a broad definition of the need for self-actualization, but when applied to individuals the need is specific. For example one individual may have the strong desire to become an ideal parent, in another it may be expressed athletically, and in another it may be expressed in painting, pictures, or inventions.^[10] As mentioned before, in order to reach a clear understanding of this level of need one must first not only achieve the previous needs, physiological, safety, love, and esteem, but master these needs. (Taken directly from the Wikipedia site)

In other words, we seek to develop and acquire higher order skills and capabilities once lower order needs are fulfilled. I'll argue that innovation can help solve problems in any of these levels - certainly you can use creative thinking and innovation to find more food, which our early ancestors did, or to create more safety using weapons. However, the culmination of human experience - self-actualization according to Maslow, is about becoming everything you want to be and can be, as innovative and as creative as you want to be, in any field or course of action you choose. Maslow's pyramid actually includes the words "creativity" and "problem solving" as examples of self-actualization. This is the point where innovation and creativity become activities that drive ever more beneficial outcomes, rather than satisfying physical and psychic needs.

So, perhaps we are designed for creativity and innovation, but only when other, very important needs are fulfilled. And right now, in this time and in this economy, uncertainty about basic needs is creeping in. Many find innovation and creativity difficult to consider when issues like job security or financial security are at risk. In this economy these lower level needs are now less fully satisfied, and this uncertainty is distracting innovators from achieving higher levels of innovation.

We certainly can't "wish away" the uncertainties of the present, and we must acknowledge the risks to "safety" and "belonging" but everyone, in every firm, must refocus our efforts on innovation and creativity to help accelerate our economy out of these doldrums. In effect, we are working toward achieving some of our most ascendant goals - creativity and innovation. When we focus on lesser goals, it creates disappointment, disengagement and frustration. Our brains are built, and our psyches are designed to dream bigger and want more, which is the basis for innovation. Let's continue to focus on the larger goals, even in the midst of uncertain times.

What can this mean? For businesses that want more creativity and innovation, help your people, as much as possible, fulfill these lower level needs of safety, security and esteem. Only then can they focus their efforts and their thinking on creativity and innovation. Think specifically about "belonging" - who do your innovators "belong" to? Are they well-respected and constantly reinforced, or isolated and considered a bit out of the mainstream? What about "esteem"? Is their work rewarded and recognized, or is it held in some sort or contempt? If your culture inhibits the innovators from belonging or limits esteem, it will inevitably inhibit innovation, which in some way creates barriers that don't allow people to achieve their highest goals.

For governments, we need to establish more certainty so people are more focused on higher order needs. This means creating and sustaining clear courses of action, so that people can plan and understand what will happen, and how they can achieve more within the frameworks.

As long as people are uncertain about their base needs, innovation takes a back seat in any sphere - private or public, government or for-profit. But once we help people shore up those basic needs, we can then encourage, sustain and reward innovation that will flow naturally if we allow it to.

CEO as Chief Innovator

2011-08-25T05:49:00.000-07:00

So, after days of pondering exactly what's missing I realized that several of my most recent posts have had a relatively common theme, and perhaps, subconsciously I was working to a specific insight or point. After pondering this possibility, it's become clear, at least to me, that the person who is most vital, most necessary for innovation, is the CEO. And not just in a cheerleading role, but in an active, engaged role in all levels of the organization. But perhaps most importantly, in innovating the "idea" of the company itself.

First, remember, that I argued that many firms need to innovate not just their products, but their purpose. By that I mean that innovation is often demanded by CEOs and senior executives, who want the latest and greatest products and services. If I hear one more time how company "X" wants the next iPad of their market...but I digress. Today, many executives and firms think innovation is something that product teams do, and if they could only do it more effectively then the firm will benefit dramatically. That thinking isn't necessarily incorrect, just misguided. Good innovation, in products, services or even business models, doesn't happen in a strategic vacuum. The best innovators, the ones we constantly look to as the pinnacles of innovation success, have executives who are active in innovation and set clear goals and objectives. Merely stating that the firm needs to become more innovative isn't enough. Firms need to innovate their thinking, their purpose, their reason for being, and to do so they need executives who are tuned in to the importance of innovation, and executives who are actively engaged in innovation.

However, most people in leadership today of major firms didn't achieve their roles through innovation success. Most achieved their ranks through cost cutting, improving efficiency and keeping the fire of existing products and services burning. In other words, innovation is not a skill that was emphasized as many executives climbed the ladder, and it has not been actively developed. What's more, I believe, is that the emphasis on financial returns has led increasingly to a reduction of time thinking about strategy, and testing new strategies. More and more, most firms in any industry follow the same, tired strategies, which makes firms like Apple or Google or JetBlue stick out. They seem to zig while the majority zags. I wrote about this phenomenon recently, suggesting that many organizations suffer from Strategic Exhaustion - that is, they've either exhausted all the possible strategies or the leadership has simply exhausted its imagination for new markets, opportunities, strategies and business models.

Which brings us to the crux of the post today. Innovation is difficult at best in the absence of clear strategy, and will probably only exist at a product level. Without clear strategic goals and the understanding of the strategic intent and purpose of a business, innovators will struggle and most innovation will be incremental. As strategic exhaustion sets in, firms become followers of other business models or other organizations, rather than creating crisp, clear strategy and striking off where their vision leads them. Adam Hartung has an excellent evisceration of Hewlett-Packard which describes how the last three CEOs have identified strategies that simply followed other firms, rather than staking out H-P's value proposition.

My conclusion is that innovation can only be successful in the long term in a firm that understands its purpose and has clear, consistent strategy. Those two factors come from the developed vision of a senior executive team, lead by the CEO. In the absence of a vision or strategy, innovation is difficult, incremental and often futile. This is why I say the CEO must be the Chief Innovator - not merely as a spokesperson, or cheerleader, or the individual with the deep pockets, because those belief systems take the CEO off the hook for vision and strategy. While it is important for product managers to innovate new products, it is equally as important for CEOs to innovate the idea or purpose of the company.

In recent research I found a statistic that of the original 500 firms in the S&P 500, first developed in 1957, only 125 remain today, and of those 125 only 94 remain in the current S&P 500. Corporations and their purposes are transient, not permanent. What many CEOs and corporations fail to realize is that shifts in demand, shifts in technology, shifts in demographics create new needs and expectations. The mere fact that an organization exists does not guarantee existence into the future, unless the corporation changes its products, its services and ultimately its purpose or its "idea" of itself. Schumpeter's concept of creative destruction applies precisely to large firms that become locked into a business model and worldview while the rest of the world changes. CEOs own the responsibility to create and communicate a vision or strategy, and ensure that that vision or strategy is carried out. In the presence of clear strategy, innovation is challenging. In the absence of clear strategy, it is almost impossible and eventually incremental, in a world where disruptions occur constantly. The CEO and his or her executive team must be full partners in any innovation effort - supporting and engaging innovation in product groups, yes, but just as importantly innovating the purpose and idea of the organization. Innovation isn't simply a process that's isolated in one business unit or in R&D, but a set of capabilities that must be exercised at all levels of the organization. The executives who understand this principle are the ones who will keep their firms vital in the face of constant change. Those that fail to grasp this concept will be left following those that do.

Innovation and Strategic Exhaustion

2011-08-24T05:44:00.000-07:00

I write today about a beloved company - Hewlett-Packard, and all that it has meant to my life. One of my first consumer electronic purchases was an H-P calculator, and as a young engineer fresh out of college we were regaled with the history of H-P: born in a garage, during a depression, making excellent products. The H-P story is in many ways the story of Silicon Valley writ large, or at least the story that used to be.

H-P represented the entrepreneurial story of two guys who decided to do it on their own, in a garage, developing great products, scaling up a company. They built real products and delivered real value - not "eyeballs" or advertising revenue, but a solid business built on excellent products which created a lasting reputation. But over the years, the company has lost its way, and become in many of its product and service lines a fast follower rather than an innovator.

I'll argue that it started with the acquisition of Compaq. In this acquisition, H-P decided to compete with Dell and other fast growing PC manufacturers. At the time, the decision was controversial, and now, as H-P seeks to divest some of its consumer hardware, it looks wrong-headed. Rather than stake out a vision of what computing could be, Fiorina and others around her followed the consumer PC business, but didn't fully grasp Dell's model, which was far more efficient, or, eventually, Apple's model, which was far more profitable.

Next, Mark Hurd entered the picture and started slashing costs, placing a premium on slimming H-P down. From what I've heard, innovation and research took a back seat to cost cutting. Under Hurd, H-P acquired EDS to bulk up on computer services. Then, of course, Hurd left under less than optimal circumstances and Apotheker has taken over. In less than six months H-P has announced and retracted a complete line of tablets, and switched its strategic course yet again, this time to follow IBM, Oracle and other "big system" software and service integrators. Yet again, I suspect this is a following strategy that places H-P at the back of the line just as the trends lead to a different emerging reality.

This isn't a problem just for H-P. Microsoft created and retracted an entire product line of smart phones. Motorola, once the leader in handset development, is now split into two pieces and will be purchased by Google. Many of our former innovation leaders have run up on hard times, and will seek to blame the economy, foreign competitors and fickle customers, when I think they should be examining their so-called strategies. I think many of these larger firms suffer from what I'll call strategic exhaustion.

Many seem to have decided to avoid creating a clear strategy, or have decided to simply follow what appears to be the prevailing strategies of the current ascending firms. Rather than break out simple innovation tools like trend spotting and scenario planning and carve off a path that is interesting and unique, and may solve customer needs or even create new customers, most seem content to follow what are already tired strategies and focus on cost cutting and right sizing.

This strategic exhaustion can only lead to a few outcomes. For the really large firms, like Microsoft, they will remain stagnant with little growth until they free up their smaller product teams where real innovation can occur. Microsoft is "too big to acquire" and too stagnant to change, so only by freeing up ideas on the margins will it regain its momentum. H-P and others like it, including firms like Nokia and Motorola, will cast about, seeking to acquire or be acquired, hopefully by others who have more energy, innovative spirit and vision. Who knows if the Motorola/Google acquisition will pay benefits? Will it be the Compaq/H-P merger of its day? Finally, strategic exhaustion will lead those firms that are too small to acquire to reconsider their purpose, their place in the market and their strategies. This re-assessment will most likely result in a flowering of innovation, because the firm will have to rediscover its focus, its purpose and its markets. The other option is a slow withering away, gradually then suddenly slipping into irrelevance.

I've often argued that innovation happens in many companies once all other management initiatives are pursued and all other options are exhausted. As more firms exhibit signs of strategic exhaustion, perhaps they'll rekindle their innovative spirit to identify a new purpose. Perhaps they'll return to the garage, to base principles, to an original vision, to chart out a new direction and re-energize the organization, rather than simply follow the strategies of other, equally exhausted management teams. Now, more than ever, innovation is the important management tool, not simply to generate new products or services, but to identify new purposes, new markets and new strategies.

Innovation: out of sight, out of mind

2011-08-19T07:34:00.000-07:00

There's a famous George Orwell quote that is one of my favorites, and it speaks volumes about where many organizations are with innovation today. Orwell's quote is:

To see what is in front of one's nose needs a constant struggle.

What Orwell meant is that the obvious stuff that exists in front of us often disappears into the woodwork as we become consumed with daily activities, priorities and pressures. I'd suggest that for big businesses, the quote could be appended to say

To solve customer problems using innovation requires constant attention

I write this today prompted by several topics.

The first is Scott Anthony's post wondering if the economy changes innovation. My answer is perhaps the opposite - can innovation change our reaction to the economy? Innovation is now more important than ever, but what's like to happen is that the economy and the turmoil and uncertainty surrounding it will simply cause people to lose focus on innovation, at a time when they should be more focused on innovation. Innovation needs a constant struggle for attention.

The second prompt is the silence from one of my customers. We are scheduled to talk about innovation projects, but I can already play the conversation in my head.
Me: We were going to talk about kicking off that new innovation effort to (blah blah)
She: Yes, well, I've been so busy reacting to all of the short term issues I haven't had a chance to think about innovation.
Me (in my head only, hopefully) How can innovation ever take a back seat?
Innovation needs a constant struggle for attention.

The reality is, innovation is for most organizations an occasional, strange, painful event to be avoided unless specifically demanded by executives. It is akin to eating vegetables and ruffage - we know we should be doing it, but it is easy to put off, especially with all the other demands and tasty choices. Unless and until innovation is constantly at the forefront of your organization's thinking, it is very unlikely to happen, and will never happen well.

At Notre Dame's football stadium, over the door the football players use to enter the stadium, are the words "Play like a champion today". You can't go through that door without seeing those words, and the tradition is that every player touches that doorframe to remind themselves of the task at hand. What would it be like if the words "Did you innovate today?" appeared over every door and on every screen saver in your organization?

The truth is, unless innovation is front and center, every day and in every location, constantly reinforced, it will become an afterthought, engaged only when the firm is in a commanding position and hopes to accelerate away from competitors, or when the firm has exhausted all options and turns to innovation as a last resort. Innovation needs a constant struggle for attention.

So, what are we to take from this? If your CEO says innovation is important, look around for the signs that suggest it will be supported and reinforced constantly. Or, absent that, take the CEO at his/her word and put up the messaging to remind people about the importance of innovation. Hold a meeting to recognize innovation efforts every week or month. Include innovation activities in your weekly reports. If innovation isn't part of the drum beat, it will be exceptionally hard to hear the innovation music, until it fades away.

Open Innovation is about to become a lot more open

2011-08-16T04:55:00.000-07:00

In case you've been out of town or very busy with your workload, you haven't failed to miss the fact that the ongoing recession (or very slow recovery, if that's what it is) is not creating the atmosphere for a lot of hiring by larger corporations. In fact, somewhere in the neighborhood of 10 million people are out of work, and the workforce participation rate is the lowest it has been since the Great Depression.

What this means is that there are a lot of people out of work, for whom there are few options in the traditional employment pool. Large companies aren't hiring, government is actually shrinking, the military is overachieving its quotas. So, what this means, and what it has meant in the last few recessions or depressions, is that many unemployed people will decide to start their own companies or create their own jobs. In several recent recessions, there's been a flowering of entrepreneurship as those displaced from larger corporations started anew and created their own businesses. I guess this is a logical progression, as new industries, new businesses and new corporations are formed by those who are let go, or never had a chance in larger organizations. I suspect what we'll also see is a large but static set of firms and a growing number of smaller, more dynamic firms less interested in size and more interested in networking, agility and flexibility.

What this means is that innovation increasingly becomes a networking and connectivity exercise, as the smaller firms need access to markets and channels that larger firms provide and larger firms rely increasingly on smaller firms for new ideas and new technology. This is the open innovation paradigm writ large, far larger than today. Today, many large firms have a handful of corporations as partners and perhaps a few dozen smaller firms in their networks. With over 10M unemployed, if only 20% start new businesses, there could be up to 2M new businesses with plenty of new ideas, products and services available in just a few months. That means the scouting and business development portions of large businesses must increase. Simply identifying the firms that have good ideas will become much more difficult, as the numbers increase and as new firms enter the marketplace. Many of these new businesses will be started by corporate outcasts, who have toiled on new ideas and new technologies for years in larger firms, only to see their ideas stymied. These new businesses will take advantage and push their long-stalled or rejected ideas forward in new businesses or as idea or technology generators for larger firms.

What's needed in the near future for innovation to accelerate is better networks, better connectivity and better communication. As the number of new innovators and inventors grows, the number of ideas and technologies will grow as well. Larger firms must do a better job communicating their needs and goals to this constellation of new entrepreneurs, and both small firms and large firms must create a marketplace for the exchange of ideas and needs. Open innovation will get a lot more open, and a lot more interactive. I suspect that we'll see larger firms increasingly outsource innovation to entrepreneurs, and the large firms will acquire those ideas through open innovation or through outright acquisition of the entrepreneur.

Yes, we are in the middle of a tremendous economic slowdown, and the news doesn't look all that promising from a jobs perspective for larger firms. History tells us that many of these displaced individuals will start new businesses which will spark new economic growth, but more importantly become the catalyst for innovation in firms of every size. In fact, this has probably already started, we just aren't aware or paying attention. It is time to pay attention, and the time for large firms to build the networks, connections and communication to identify, source and acquire the best ideas, and the means to convert the excellent ideas and technologies into new products and services. If history is any guide, new entrepreneurs will flood our markets in the next few years with new companies, new products and new technologies. Larger firms will constrain hiring to drive up stock prices, but will need new ideas to keep pace with change. Open innovation will simply become even more important, and the people who can create the networks and connections between the innovators and the corporations will profit.

Innovate your purpose not just your product

2011-08-12T05:43:00.000-07:00

It's with so sadness that I note the latest news from the United States Postal Service. Their plans currently call for the reduction of hundreds of thousands of jobs, and the elimination of thousands of post offices across the country. The Washington Post reports that the Post Office must make billions in payments for employee and retiree pensions, while mail volume has fallen over 20% year on year.

I grew up on a farm, at a time when there were three major TV networks, of which we could receive two. We had a party line telephone at first, and our contact with the outside world consisted of interactions at the country store, or when we received mail, which included catalogs, magazines and letters from friends and family scattered throughout the US and across the world. The mail at that time and in that place opened up a world beyond the farm.

We've watched, over the last few decades, as the USPS has been racked with competition, from UPS for packages, Fedex for overnight delivery and by the advent of email. Much bulk rate and important document transfer goes to UPS and Fedex, and we've become a nation of Tweeters, emailers and Facebook posters rather than letter-writers. Even many businesses have recognized the power of the internet and encourage online bill-pay, so soon all that will be left for the post office is unsolicited mail and advertisements.

It didn't have to be this way. The Post Office, like GM, like the big steel companies fell victim to its importance and its world view. GM, recall, was happy to cede the "low end" of the market to new entrants, Toyota and Honda. In a Honda dealership recently I saw one of the earliest Honda imports to the US, and I wondered how desperate the buyers in the US were to acquire that car over US manufactured cars. Big Steel ceded the low end of the market to Nucor and other mini-mills, and the mini-mills discovered that they could do everything Big Steel could do, with better quality and lower costs. Clayton Christensen's concept of disruption rings true in all of these stories. Could the Post Office have competed or even introduced the concept of overnight shipping a la Fed Ex? Of course it could have, but the offering probably would have cannibalized existing customers and services. Is the Post Office bound by inflexible scope and rules, having to visit every household 6 times a week? Yes, but could it turn that requirement into an advantage?

Here's the point - it's often as important to innovation your "purpose" as it is your "product". I'm sure the USPS has introduced a number of new products and services, but has it carefully thought about its purpose? The famous example being buggy whip manufacturers. Perhaps, if they had defined their purpose as "Starting Transportation" rather than "whipping horses" they might have made the transition when the car took over. Who really knows? But using the Post Office as an example, let's explore a few concepts for purpose.

The USPS states that it has an unfair requirement to visit every home six times a week. Could that visit be used to create other services or information? Why not have the Postal Carrier help with the Census? Why not have the Postal Carrier offer to check in on the lonely or isolated people? Why not have the Postal Service read a utility meter for the utility company? Why is Google photographing homes when the Post Office visits every home every day?

Or, could the USPS have delivered something other than the mail? Could they have structured their routes to deliver groceries or other goods? After all, they have the most thorough and complex routes of any local delivery service.

Could the USPS have defined their mission as message delivery, rather than mail delivery, and entered the business of managing email systems and servers? I'm sure there were many barriers put in place to attempt to keep them out of that business, but a simple redefinition of their business and purpose could have placed them at the center of messaging. Why is a small firm called Twitter managing much of our short messaging to each other?

There were many opportunities, and perhaps some still remain, for the USPS to question its purpose and to reinvent and innovate its purpose. Historically, in our economy and society, firms had long runway to recognize societal and technological change and adapt to that change. A firm could be slow, but adaptive. Those days are over. Firms must adapt not just their products and services, but must innovate their purpose as well, because even purpose and strategy have much shorter lives than they once did.

Innovate your products, yes, and your services and your experiences. But don't neglect to constantly question your purpose. That may be the most important thing to innovate.

Failing to innovate while surrounded by ideas

2011-08-09T05:59:00.000-07:00

Samuel Taylor Coleridge wrote the Rime of the Ancient Mariner, with the couplet

Water, water everywhere and all the boards did shrink;
Water, water everywhere and not a drop to drink.

He wrote this imagining a sailor, adrift at sea, who is driven mad by thirst. It's ironic that the sailor is floating in a sea of water, literally surrounded by water, but none that he can drink.

I wonder what Coleridge would have thought of our political and business climate today, which seems shackled, stagnant and stalled, while there are literally thousands of ideas available. Following a 600 point drop in the stock market, a political system that seems deadlocked and an economy that seems very uncertain, it would appear that we are heading for 70s style stagflation, only without the inflation. So just stagnation. Yet we are literally awash in ideas, if only we have the foresight, courage and energy to start adopting them.

Yesterday I wrote a post that suggested that of all the critical resources or inputs that have propelled our economy (land, labor,oil, ideas) only ideas were truly inexhaustible. We have, or will, exhaust all of the arable land available for agriculture. We will exhaust our ability to add value with labor. We will exhaust our oil supplies. But the exhaustion of those inputs does not have to stymie our economy or growth. We have an inexhaustible source of creativity, ideas and innovation, which if applied correctly can create solutions to these and many other challenges.

To see just one example of human-kind's ability to innovate, consider the Simon-Erlich wager. In 1980 two economists made a public wager about a basket of commodities. Erlich, who was concerned about increasing populations and uncontrollable demand, bet the basket of commodities would rise. Simon bet that human ingenuity and innovation would keep the prices of the commodities low. In 1990 Erlich conceded the bet. Although population grew and demand for the commodities increased, the price of every commodity but one in the basket fell. Over a much longer period of time, all of these commodities are exhaustible but the ingenuity and creativity that kept prices low for a decade remains, and will discover alternatives or replacements as the original commodities are exhausted.

Our generation is the most interconnected, well educated generation on the planet. We have access to information unsurpassed in human history - in fact we generate more information on a daily basis than was collected in the first 10,000 years of human history. We can spot trends, generate ideas and test those ideas with greater speed than ever before. We have access to a diverse pool of knowledge - from the Middle East, Africa, India, China and Europe. We are literally awash in ideas, yet stagnant in opportunity.

Further, we have the possibility of a network effect. The benefit of the network effect is that as the number of nodes in a network increases, the value of the network increases. As we have far more people who are well-educated, creative and innovative who are connected to the internet and other communication devices, we have a virtuous worldwide circle of innovators who can generate ideas, validate ideas and test ideas with ever increasing speed and accuracy. We stand on the threshold of innovation capabilities unlike any ever seen on our planet. It's as if we have thousands of Edisons or Marconis or Einsteins waiting, with pens poised, to lavish our markets with ideas. Yet we are told our economies, our markets and our governments are stagnant. Little to no growth is forecast. The hopelessness and apathy are palpable. Markets are unsettled, many experts uncertain which way to turn.

This reality is absurd. It is time for innovators to push aside those with tired, outdated viewpoints and to introduce completely new concepts and ideas. I am convinced that there are thousands of good ideas available to our businesses, governments and economies. Perhaps no one idea is a game-changer, but many ideas and many experiments conducted now will lead us out of this malaise far faster than replaying the same old exercises.

Like the Ancient Mariner we are adrift in the calms in a boat, convinced that our position is stagnant, when all around are ideas full of motive power that can literally change our businesses, economies and governments. We only need to face stagnation if we choose to remain stagnant, because ideas are inexhaustible, innovation accelerates in the interconnected networks and new products, services, business models and governance will rapidly change our settings, course and speed.

So, innovators, what's your choice? Apathy, dejection, stagnation and wasted decades of inactivity, or innovation, new concepts and ideas, new products, new services, new governance? If ever the power of innovation was more necessary, and the capabilities more relevant, we'd be hard-pressed to name that occasion. For too long the static ways of the past have stood as barriers to better ideas in all facets of life. Innovators of the world, unite and innovate, you have nothing to lose but the stagnation, apathy and fear of those who will not.

Ideas: Perhaps the last inexhaustible commodity

2011-08-08T05:59:00.000-07:00

The story of development, at least in the US, is the story of identifying and exploiting the seemingly inexhaustible commodity, then spotting and exploiting the next one. I’d argue that right now, late summer 2011, we are still shifting to discover the next inexhaustible commodity, even though it is right in front of us. But first, a brief history lesson.

In the US, the first inexhaustible commodity was land. From the first settling of the US till the Great Depression, land and what it could produce was the inexhaustible commodity. At first there was always more land, to the south and to the west. Brave pioneers went inland to discover vast tracks of land, land that could grow crops and feed the family, crops that could be sold to the larger communities on the coasts and overseas. Even after a significant portion of the land was claimed, land was still the inexhaustible commodity to exploit – we simply found ways to get more production out of the land with the cotton gin, artificial fertilizers and advanced farming techniques. In fact we became so good at farming that the number of people necessary for farming fell dramatically, to the point where the rural population today is the smallest it has ever been.

Once the land issue was settled, manufacturing became the inexhaustible commodity. From the end of the first World War till the present day, manufacturing drove the economy, and the economy drove manufacturing. We fed a tremendous number of people into the factories to generate physical goods to local and international consumers. And, in the same way as the farm, once the easily exploitable manufacturing segments were exhausted, we found ways to improve. Thanks to Frederick Taylor, the Toyota Production System, integrated manufacturing systems and software, and many more advances, our manufacturers make more stuff at higher quality than at any other point in time. In fact the diminishing marginal return for manufacturing may be approaching. Further, we've discovered and exploited petroleum, what seemed like an inexhaustible source of energy. Since the first major discovery at Spindletop in Texas approximately 100 years ago, we've found ways to extract oil from a range of locations once thought impossible to tap. Yet we are constantly told that "peak oil" has passed us by. Oil, natural gas and other carbon-based energy systems are approaching or past peak production.

Next, we turned to financial engineering and other services to exploit. Clearly in a global economy, the markets for financial services and other services are more profound, and since the late 1970s barriers to international finance have fallen as the world’s economies became more integrated. Financial engineering has led us to ever increasing integration but exposed the gaps between fiscal probity and financial risk. We may never approach the limit of our capability to engineer financial products and services, but we may need to wait for our legal and regulatory systems to catch up to our ability to engineer financial products and systems. Yet again, we may exhaust our ability to exploit another market, as foreign competition is adept at financial engineering and foreign markets, while integrated, retain financial levers to restrict some product development and engineering. All three will follow the same trajectory, leaving us to define the next significant area of growth for our economy. Note as well the almost exponential decay in the length of time of each exploitation. It took thousands of years for farming to fully exploit its capabilities and the available land. Manufacturing, it can be argued, was fully exploited in less than a few hundred years and financial engineering and services may be fully exploited in less than 100 years. As the world becomes more interconnected and more interdependent, and as the ability to document information becomes ever more prevalent, knowledge is disseminated faster, which enables more people to capitalize on the knowledge and exploit the opportunity.

What then, is the next inexhaustible commodity? We’ve tapped the land, we’ve mastered and optimized manufacturing and we’ve exploited the ability to engineer financial products to the extent that many of the people who were selling and marketing the products either didn’t understand the implications or were actively betting against their own products.

My supposition is that human creativity is one of the last inexhaustible commodities, with ideas as the fruit of that capability and new products, new services, new business models and new experiences as the realization of the ideas. As we’ve demonstrated before, once a seemingly inexhaustible commodity is identified, it will be exploited for all the gain possible. Currently, many organizations have identified idea generation and innovation as a potential source of great return, but are uncertain as to the methods to convert ideas into value. After all, you can’t “farm” ideas and eat the fruit, and you can’t manufacture ideas and sell the ideas to others. Ideas require an additional step to exploit – they must be converted into viable technologies or intellectual property or services. At that point their value can be recognized.

We are in the midst of a shift to begin to exploit this seemingly inexhaustible commodity, and the shift is really only beginning. Like the early farmer or first manufacturers, our systems, methods and processes are still crude. There’s little experience and little refinement of the processes by which ideas are generated and then converted into viable, profitable actions. Our Frederick Taylors, the people who define the systems that create efficient systems that accelerate the exploitation of ideas, have only just emerged, and many industrial leaders don’t understand the shift that’s occurring. They remain focused on driving more efficiency from a rapidly diminishing manufacturing model or attempting to conduct financial engineering in the face of a rapidly growing regulatory administration, ignoring the potentially inexhaustible commodity at their doorsteps.
In the 1800s over 80% of the population worked in farming. Today the number is in the single digits. The same decrease can be seen in manufacturing. After the Second World War over 60% of the population worked in manufacturing. Today the number is near 20% and declining. After explosive growth in financial services, this market will become fully exploited, automated and the employment levels will fall.

Each seemingly inexhaustible commodity experienced the same exponential growth, the same diminishing returns and the same investments in efficiency, process definition and skill development. The future growth in this country and in the world economy depends on identifying the best possible new ideas, converting those ideas to relevant products, services and business models, and scaling our capabilities to produce more and better ideas at an ever increasing rate, which requires new innovation methods, new processes and new innovation skill development. This industry is no different than farming or manufacturing – we are simply at the early stage of a shift into a new paradigm in our economic development, and the faster we make this transition, the better.
One especially salient point to make about innovation: unlike land, ideas are not constrained by physical continents, local weather patterns or the richness of the soil. We cannot exhaust our creativity. Unlike manufacturing, we cannot ever exploit every idea in every market sector and cannot outsource our creativity and innovation to countries with lower costs. Innovation and creativity is the one inexhaustible commodity if we will only understand it and begin to become more effective deploying the existing skills and talents that we have, and building new skills and talents to fully exploit the capability.

Experience your product like a customer

2011-08-04T11:00:00.000-07:00

Did you ever have the feeling that everyone around you knew something that you didn't? An experience like that leaves you convinced that you've missed out on something - some experience or insight that may have brightened your day or given you more insight or enjoyment. I suspect that far too many product developers and managers know far less about the actual use of their product or service than they expect. That lack of insight and knowledge means that the products and services never achieve the outcomes that are possible.

Take, for example, the building where I work. We have a fine office space in a building managed by a large management company. This summer, we've experienced very hot weather, and the temperature in the building has been hard to maintain. The management, to their credit, installed new HVAC equipment and to some extent the building is now more comfortable. Except for the fact that you could hang cattle carcasses in the restrooms. The temperature in there must be in the low 60s. That's good for productivity, since no one is going to spend much time in there, but terrible from an energy use and conservation point of view.

Now, I am certain that everyone on our floor is aware of how cold the restrooms are. In fact, passing people in the hall we often comment on it, and I've seen several people wearing jackets or sweaters (when the outside temperature is in the mid 90s) to the restroom. I'm also willing to bet that while we all know about the problem, no one has reported it, since everyone knows that it is a problem but it's not an important problem. Further, since the management group hasn't had reports or complaints, they assume there are no problems. Everyone is a little less better off, but no one is severely damaged either. In the absence of critical feedback, the management team thinks everything is fine, while we sit here, wondering why they waste so much energy cooling a restroom, when the rest of the building has traditionally been problematic.

What would fix this problem? The best result would be for the management team to regularly visit the building and enter as many offices and common areas as possible. It's clear that no one from the building management group has entered our restrooms in several months, because they would take action if they had visited. A second option would be to regularly poll the tenants, asking about the services and also seeking information about even small concerns or issues. But we've been trained to avoid knowledge of these issues rather than request them and seek alternatives.

Perhaps the best answer would be if the person responsible for managing our building had an office here - and had to experience the baking heat and freezing temperatures along with us, her customers. The absence of complaints does not signal that all is well - it merely signals that we've either given up asking or are tired of having small issues ignored. We'll be voting with our feet later in the year, leaving this building to move to another location, hopefully one that can manage the simple art of HVAC. But that building has an added benefit - the management team for the building resides in the building. Instant feedback!

What's this got to do with innovation? Everything. Far too often we are guilty of creating products and services that we don't consume, don't use or don't need, so we don't experience them from the customer's point of view. Every business should require its employees to use some of its products and service and listen carefully to feedback - small complaints that many would choose not to even voice, and large concerns as well. Small problems cause barriers and resistance just as much as large problems, but the small problems fly under the radar screen, rarely reported or rising to the attention of product developers who don't experience the problem first hand. If you don't experience your product or service the way a customer does, how can you expect to find interesting innovations or important gaps?

And I don't mean that you simply deploy the product in a lab and pretend to use it in the way you believe a customer would use it. I mean take it home, use it under all conditions, without the support of the product development team. Then, report on what works well, what things didn't work the way you expected, and what quirky or uncertain behavior exists. Next, what would you change if you had all power? Do this with your own products and services and innovation opportunities will be obvious, as well as the issues and challenges your product or service creates for others.

I know from working in the banking industry that many people who work for large banks (Wells Fargo, Wachovia, Bank of America) have accounts with ING and other web-only banks. Why? Why would a bank employee have accounts with a competitor? Because ING solved problems or offered service that the larger banks couldn't or wouldn't. If your own employees acquire products and services from competitors, how much more likely is it that your customers and prospects will? Why not simply ask your employees if they acquire goods and services from competitive offerings or companies, and if so, why they take those actions.

Being blind to customer needs or expectations is a dangerous place to be. Willful blindness, not wanting to see or not taking the time to discover, is even worse. But it happens every day, and is how so many products and services are disrupted.

What is a "culture of innovation" anyway?

2011-08-03T06:01:00.000-07:00

I read a significant amount of material on innovation. Even though I'm deep in the trenches of innovation, and have written a fair bit about it myself, I think many of us (self included) are guilty of asserting positions without diving into them very deeply. When we talk about the importance of culture, especially when we advocate a "culture of innovation", we often write or say these words as if there is a general agreement as to what it means. While I suspect that everyone has some interpretation of that statement, I thought it would be interesting to write a post that describes what I think a "culture of innovation" is, after all, and ask you, gentle readers, to append your thoughts about my oversights or areas of over emphasis.

After all, the more we define our methods and clarify our approaches, the better we'll communicate and the simpler it will be to actually implement this stuff rather than simply talk about it. Herewith, my dissertation about "a culture of innovation".

To define this, we should start first with what is "corporate culture". To me, corporate culture is the set of assumptions, beliefs, practices, formal and informal rules and attitudes about how a company operates. Corporate culture evolves over time, and is both formal and informal. Corporate culture often shifts over time as well. Young entrepreneurial firms and startups have a culture that thrives on risk, speed and change. Growth is paramount. Older, established firms have a culture more typically based on rules, hierarchy, achievement of predictable milestones. While many firms have elaborately detailed organizational hierarchies and established workflows, corporate culture is often much more informal, and more powerful than any individual, and often more powerful than senior executives appreciate or expect.

In an organization with a strong corporate culture, people learn to fit in quickly, adjust their thinking to the predominant culture or are quickly ostracized. Corporate culture, more than any other factor, details how people think, what they believe is important and valuable, and dictates how work should get done. It is difficult to change, especially under duress, and often communicates much about the values and intentions of a business. For a blog post, that's as far as I'll go to define culture. There are plenty of other resources that, given time and space, will do a better job defining culture.

Now, to our main question: what is a culture of innovation, and is it very important? If corporate culture is as overarching and powerful as I've described above, if it can dictate how people think and what people do, then culture is clearly either a significant barrier to innovation or a significant enabler to innovation. And yes, it is binary. Most cultures, especially in larger companies, are focused on consistently achieving quarterly goals, eliminating risks, reducing variances. These corporate cultures make perfect sense - they are tuned to achieve what the markets tell the firm is important: consistent quarterly achievement against financial goals, with few hiccups or surprises. However, in most firms these cultures are at best resistant to innovation if not actively fearful of the implications: change, uncertainty, new tools and skills, variance, failure and risk.

A culture of innovation, therefore, indicates that an organization is at least willing to embrace many of the tools and techniques that innovation requires, but moreover is able to endure the potential outcomes. For every innovation success there are many attempts and several failures. Every innovation is potentially cannibalizing an existing product or service, and innovation forces constant change - not just to products and services, but to experiences and business models. This means that a culture of innovation is agile, nimble, constantly adapting and learning, open to experimentation and many points of view. A culture of innovation tolerates and learns from failure, incorporating the best parts of the failure into new efforts. A culture of innovation understands that innovation is a continuous, consistent process rather than an occasional effort. A culture of innovation seeks out internal and external viewpoints and perspectives that are different from what the team "wants" to hear, and works closely with customers, partners and even the disinterested to understand future needs. A culture of innovation has as much invested in understanding the future as it does in delivering value in the present. A culture of innovation constantly generates ideas but also has the ability to commercialize the best ideas and ships valuable products. A culture of innovation isn't just an idea machine, it is a commercialization machine.

So, how does a firm shift its culture to become more innovative? Just as it takes miles and a lot of space to turn a battleship, a corporate culture doesn't shift overnight. A culture of innovation is enhanced by leadership that reinforces it, but as 3M demonstrates a resilient culture of innovation can bear leaders who aren't supportive of innovation, and rebound when new leaders are announced. Strong cultures are more powerful than strong leaders. To build a culture of innovation, establish clear, consistent innovation goals, hire people with broad perspectives and interesting networks, encourage collaboration internally and externally, seek out new needs and new customers or market segments, train your teams on innovation tools and techniques, shift reward systems, compensation systems and most importantly evaluation systems. Make innovation as important as whatever the culture once thought was the most important thing - and do all of this over an extended period of time, because cultures have great inertia, a lot of patience and much resilience. A half-hearted approach won't work, and once a culture feels threatened it will simply burrow more deeply into the fabric of the organization.

We are simply too blithe about "a culture of innovation" as if this concept is simple, obvious and well-defined, as if we can take the red pill and suddenly our culture embraces innovation. Most cultures are actually resistant to innovation - at least its implications and many of its outcomes - so we need to move beyond the throw-away lines and recognize how important a culture of innovation is, and how difficult it is to achieve, and also how valuable it will be to have a culture of innovation when innovation becomes one of the few differentiable competencies left to us.

Taking your eye off the innovation ball

2011-08-02T05:38:00.000-07:00

I'd like to tell you a parable about an innovation effort. This parable has the additional benefit of being true, though the names and descriptions have changed to protect the innocent. As many of you will know, a parable is a story that instructs or informs. I hope this parable will instruct and inform many of you.

The parable has to do with choices and blinders. It has to do with what is an unfortunate but common approach to management in many organizations. That management philosophy believes in whittling down ideas to solve one very specific problem, and failing to pursue viable alternatives or ideas. I've written about this before - what we call the idea gauntlet - the slow stripping away of interesting options, valuable attributes and potential markets to arrive at one final concept that doesn't seem to meet any of the original objectives. Here's the parable.

Several years ago a young innovation consultant was approached by a company that wanted far more growth and differentiation in a specific market segment. The segment had experienced little growth and little product innovation, and there was significant room for innovation and for change. The focus of the innovation effort was to create a new component in this market that would radically change the final product offering. After some scenario planning and customer insight gathering, the consultant and team went to work, generating some truly interesting ideas.

One involved creating a radically new product, so new that there was no known way to create it mechanically. But if the product could be made, it could reduce costs by significant amount and create benefits that the staid market had never seen. So, the new idea was approved and research went to work.

That's where the whittling down began. Rather than consider every market that had a need for the new product, the team focused on just one industry. Rather than focus on several potential partners in that industry, the team focused on just one partner, and not one of the leading players. Rather than consider a range of end products in which the new component could be introduced, the team selected the entry level product which competes on price, not value or benefits. With just a few decisions, the team narrowed the field from many potential applications in a range of industries to one application in one industry with one (middling) partner, and their lowest priced offering.

Further, during the time the research and development of the new product were underway, the economy changed dramatically. The needs and wants of the customer base changed as the economy got worse. People's buying habits and expectations were lowered, meaning that the new product had to deliver even more value than originally expected or cost less than originally expected. However, the shifts in the market conditions did not get communicated to the research team, which continued to develop the product for the market and customers as originally envisioned.

When the product emerged from research, focused only on one potential partner customer in just one of several potential industries, and after a radical dip in the economy, the firm was surprised to discover that while everyone praised the new product, it didn't meet the needs and expectations of the market NOW. Of course with a little scenario planning and careful communication of the shift in customer needs and expectations, these insights could have been filtered into the research and development group, which may have been able to shift components or manufacturing concepts to lower costs or produce more value.

The morale of this parable? First, time and customer expectations wait for no firm. If your idea takes time to develop, ensure you understand what's happening in your target market. If the market is changing, you need to feed that information back to the development team to ensure the concept is relevant. Just because you identify a need and opportunity at one point in your investigation doesn't mean that your idea will remain viable if the market shifts, especially if it shifts dramatically.

Second, don't trim your idea too narrowly and focus too specifically on only one industry, customer segment or outcome. In the parable above, several potential industries and applications were recognized but ignored by the team, which quickly focused on just one application, in just one industry, with just one partner. While the concept generated had a lot of potential in several industries, no research or business development was conducted, placing all of the eggs in one industry basket. When those needs became less important as the economy shifted, other potential opportunities that were passed up earlier on now appear far more interesting, but will require new investigation.

Final morale: innovation is a continuous process, not a once and done effort. Even after a good idea is generated, innovators must continue watching trends, forecasting scenarios and understanding what the future will look like when the idea is ready for consumers. Snapshots of the future are interesting, but the future is always in motion. While we can't predict the future, we can assess the potential for many different outcomes. Selecting one outcome based on a snapshot while ignoring the continuous stream of activities, trends and scenarios can leave even a really promising product missing the boat.

Anticipating future needs - buying up the beachfront

2011-07-26T06:08:00.000-07:00

We went, along with a significant number of other North Carolinians, to the beach last week. We swam and we built sand castles and we got slightly burned, just like a host of other folks at the beach. My son, who is 12 and thinks like a young entrepreneur, wanted to know why houses are so expensive at the beach. He could see that there was plenty of demand.

He wanted to know why people in the "early days" of the country didn't buy up all of the beachfront property, and if they had, wouldn't they have been rich? If my great, great, great, great, great grandfather had purchased the Outer Banks, for example, would we be wealthy now? I'll give him credit for thinking like an entrepreneur, but his history is a little off.

In the 18th century and well into the 19th century most people avoided the beach. There were few roads, few facilities and the food and water at any beach was relatively lacking. Not to mention that bathing or swimming weren't in vogue, and most people worked 6 days a week. A vacation was something only the wealthy enjoyed, and they took long trips to Europe primarily. I'm sure if my long lost ancestor had turned up to purchase a significant chunk of the Outer Banks, the few residents would have been happy to sell, but it would have taken several generations before the vision paid off.

Few people bought beach front property because no one at the time thought beaches were particularly healthy, few people had time for vacations and if they did they wouldn't spend it at a beach. Anyone buying beach front property with the anticipation of extremely high demand for that property in the 18th or 19th century would have been a visionary at best, and probably considered a crackpot.

Which brings us to modern times. Instead of creating a time machine and going back to purchase the beach front property, I asked my son to consider what people will "demand" in 25 to 50 years in the future. If we can think through what will be in demand in a generation or two, and start cornering the market now, he will retire rich. When we discussed this he nodded solemnly and said - "in the future, they'll all vacation like the guy in the Matrix" - meaning we'd simply plug into our computers and experience virtual vacations in any setting we chose.

The story I've told above is true, and gets to a much larger point. Innovation is as much about discovering what new opportunities or needs may exist as it is about creating the product, service or business model that satisfies that new need. In fact, I'll argue that understanding the emerging opportunity or need is more important, because once the need becomes evident everyone will try to fill it with a product or service, but few of those firms have done the research to understand the real underlying opportunity or need. These fast followers often miss a deeper reality or set of expectations, and offer only a surface solution, rather than addressing the deeper need.

Today, few firms spend any time investigating the future. Most will argue that given the rate of change and the number of "crises" that are occurring simultaneously, they have no time for that. Plus, the market demand attention on a quarterly basis, and is a strict taskmaster. Yet, we don't live in the past, and live only momentarily in the present. All the rest of our lives are in the future, the time we understand the least. While we may not be able to understand the potential futures perfectly, having any understanding about the future has the potential to place a firm in a much better competitive situation than its competitors.

Why is there so little focus on understanding the future, and identifying emerging threats, opportunities and markets? Is it because the work seems too ephemeral or untrustworthy, or because it is too uncertain? Too often firms examine the future hoping to identify a new product or service, which is tangible, when they should be examining the future to understand the setting and scenarios which may occur. Once the scenario is understood, there may be dozens of solutions, products and services that fill the needs. Far too often we assert a product in a specific future setting rather than assert the setting and seek new products and services that are implied by that scenario.

True innovators are working now to discover the "beachfront" property of the future, staking out ownership of valuable real estate that will rise as customers understand the features and benefits. This new real estate may require a change in mores (as it did in swimming) or a change in culture or attitudes (paid vacation) but good innovators understand that everything changes, and often not in the way we anticipate. Less than 50 years after bathing became popular, French designers created the bikini, an article of clothing that if worn in public less than a century before would have caused mass disruption and social condemnation. Henry Ford's development of a standard workweek led to the idea of a regular job with regular hours and eventually to paid vacations, which led to middle class folks seeking entertainment on the beach. Several social, demographic and economic trends combined to make the beach an attractive vacation alternative in less than two generations, and today the beach is in demand even in a recession.

Will that be true in two or three generations? What will happen if the seas rise due to global warming, or the temperatures rise? What if the atmosphere thins and more people become more susceptible to skin cancer? What if the weather at the beach becomes more violent and unpredictable? Many societal, technological and governmental trends could curtail interest in the beach in just a generation or two, just as trends and scenarios may identify new vacation concepts or new products and services.

Trend spotting and scenario planning are the most powerful innovation tools available to a firm, and are often simply ignored or overlooked. The arguments against these tools include:

A lack of vision to pursue opportunities in the future
A lack of commitment to big ideas in the future
Not enough time
Too much uncertainty about the predictions
The possibility of new concepts disrupting or cannibalizing existing products
A new idea or scenario may require a new business model
A lack of skills or capabilities to conduct the work

These arguments are the same ones presented about any innovation effort, and are rationales I discount. If your firm is going to innovate, this is where it should start - understanding the opportunities, threats and emerging markets that exist in the near future. You can "innovate" without doing so, but don't be surprised if the future markets look different when you arrive than they did when you started. Only by anticipating the future can we arrive well informed. There are literally thousands of small reasons to avoid trend spotting and scenario planning, and none of them are really valid. There a few really compelling reasons to do scenario planning and trend spotting, and they all have the same outcome - a firm that consistently succeeds and thrives in relation to its rivals.

Yes, buying up all of the beachfront property in 19th century North Carolina would have take a lot of guts, vision and commitment, but imagine the wealth you'd have today. Since we don't have a time machine, we can't go back and second guess the people living at that time. But we can wonder - what will our grandchildren wish we had anticipated? What is blindingly obvious in their day that with a bit of luck, foresight and commitment we can acquire now?

When will the innovation fad end?

2011-07-25T08:15:00.000-07:00

I suspect that many people who've been around the block a few times are good at spotting fads. Fads come in all shapes and sizes, and touch our lives in a number of ways. One of my favorite fads was the "Pet Rock" - literally a rock with eyes glued on it. But during the Pet Rock craze there were thousands of people lining up to buy pet rocks. People were caught up in the humor and whimsy of a "pet rock" and wanted to be part of the joke.

Fads exist in consumer markets, yes, but also in management circles. For example, I think job performance reviews have been subject to a number of fads, from the self-evaluation to the 360 evaluation. In each of these attempts to change or augment the standard job appraisal, there is some core kernel of value, but the additional fluff that often arrives with a new concept detracts from the value. Executives and businesses are subject to fads, just like consumers. That knowledge, and the experience of acknowledging and riding out fads, has meant that many people are cynical about innovation.

You see, many executives want to align to what's current, or what appears important, in the press. If other firms seem to acquire benefits from being "innovative", then more and more executives and firms will claim to be "innovative". Yet in many heart of hearts, most are simply waiting for the innovation fad to end. They are convinced that like 360 degree job reviews, Malcolm Baldrige awards and Cabbage Patch dolls that innovation will run its course. In a few years good thinking, logical people will all look at our collection of innovation work and chuckle, just as we do with our Pet Rocks. What were we thinking, they'll ask themselves. Many of our current executives are certain that innovation is just a passing fad, and while some attention must be paid, the less the better.

Here's the issue: innovation has the appearance of a fad, since many individuals and organizations are rushing to join the bandwagon. But unlike Cabbage Patch dolls, Pet Rocks or bell bottoms, innovation does something that many fads don't: add value. At the end of the Pet Rock fad, the person who acquired a Pet Rock had a river pebble with eyes glued on, and was out $10. The underlying needs for innovation aren't driven by fashion, but by increasing consumer demand and expectation, and increasing competition. If a firm invests in innovation capabilities, they'll be able to innovate consistently and repeatedly. That's an investment of great value.

Meanwhile, the individuals who believe innovation is a fad will pay some lip service to innovation, attempt a project or two to demonstrate their bona fides, and wait patiently for the fad to end. Don't get me wrong - many of the hucksters who thrive on a fast buck will fall away as their inability to deliver value will be exposed. But that doesn't mean that innovation is unnecessary or a fad. No, because the underlying drivers that increase the need for innovation aren't short-term and aren't based on passing fashion or whim. The drivers for innovation are factors that are simply accelerating: growing consumer demand, an expectation of new products and services, rising global trade and the increasing knowledge of consumers. These factors reduce expected product life and increase competition. Innovation is merely the means to address the increased demand and to stay relevant with consumers.

Innovation still suffers from an attitude that describes innovation as "important but not urgent". That's because many executives prefer to solve short term issues through cost cutting, waiting for the innovation fad to die out, to see what's next. Actually, innovation is both important and urgent, because of the pace of change and the persistence of change. Until executives and managers grasp the underlying currents that propel innovation and realize that it is the tool to sustain the new normal, rather than a passing fad, innovation will often be considered a side-show to the real work of the organization.

There will come a time, in the not too distant future, when executives realize that innovation isn't a fad, but a set of tools and techniques to help increase growth and differentiation in a market that is rapidly changing. And in the immortal words of Warren Buffet, that's when we'll know who has been swimming without any trunks. Because the executives who consider innovation a fad will be exposed.

Is innovation enabled by a process?

2011-07-19T07:46:00.000-07:00

So, once again, dear readers, we plunge into the deep waters that refuse to be sated. Many an innovation consultant, author and commentator examine the question of innovation and process. It is a conundrum, certainly. Can something that relies on creativity, on passion, on insight be improved by something that defines a methodology or framework?

The latest missive in this ongoing saga is by Helen Walters, a deep thinker and innovator at Doblin. In her lastest post - Can innovation be reduced to a process - Helen seems to argue that no, innovation can't be reduced to a process, and uses design thinking as a framework to shape her discussion. In all sincerity, I'll argue that her heart is in the right place, trying to advance the thinking around innovation, but her argument is framed incorrectly. Innovation isn't "reduced" to anything. It can't be boiled down, reduced to base parts and reconstructed more efficiently. But that isn't what many of us who argue that innovation is ENABLED by processes are trying to accomplish. Rather than atomize and try to incrementally improve all the steps within an innovation effort, thus reducing innovation to Taylorism, we are trying to argue that innovation can and should be enabled by methods and processes that people can understand, and learn. Innovation shouldn't be reduced to a process, it should be enabled BY an underlying method or process.

This is a subtle but important distinction. I don't think many people claim to have the definitive innovation "process". In other words, I have yet to see any consultant state that given a few ideas and a bit of time, his or her process will definitively produce the end results a client expects. Everyone understands that there are tools, and methods, and techniques that are appropriate for situations. Tools like TRIZ, approaches like Open innovation, methods like "jobs to be done", all of which are situational and sustain only a small fraction of the total innovation effort. Just as there are horses for courses, there are tools for situations.

But what inevitably gets in the way of innovation is nothing more than unfamiliarity, uncertainty, lack of definition and inertia. People will argue that ideas are fragile. That's simply not true. Ideas aren't fragile, it's the people and processes that don't understand how to advance ideas that are fragile. Without some defined methods and workflows that people can readily understand and follow, ideas stagnate and are eventually left to wither and die. In large organizations, the only work that gets done effectively is the work that is well defined, and that people understand how to accomplish. Most of the time, you'll discover underneath that work is a well understood formal or informal process that everyone has agreed on and follows religiously. Yet we seem to need to argue that innovation is somehow different. It doesn't need a process to work effectively - no, actually, process inhibits innovation! This is simply not true. Innovation isn't a process, but it is accelerated by agreed methods, workflows and roles.

Walters states in her post:

A codified, repeatable, reusable practice contradicts the nature of innovation, which requires difficult, uncomfortable work to challenge the status quo of an industry or, at the very least, an organization. Executives are understandably looking for tidy ways to guarantee their innovation efforts -- but they'd be better off coming to terms with the fact that there aren’t any.

In fairness to Walters, she's intertwined the ideas of an innovation process with a focus on design thinking, and perhaps that is informing her perspectives. Of course executives want methods that will speed ideas to market with less risk and less cost. There's no denying that innovation is the new shiny object that all firms want at as little risk and cost as possible, and perhaps we consultants have been guilty of arguing that processes will bring them closer to that goal. But let's deconstruct the first sentence of her statement.

"A codified, repeatable, reusable practice contradicts the nature of innovation, which requires difficult, uncomfortable work" Does this mean that Dobin invents new methods and procedures for every project, or that it uses its perspectives to bring fresh eyes to new challenges, and then relies on a familiar set of tools and techniques to present concepts to its customers? I suspect it's the latter. I think it is difficult to "systematize" creativity and idea generation, but once ideas are generated, a process simply accelerates and enables the best ideas to rise to the top. And even in the so-called "front end" where opportunity identification and trend spotting and idea generation happen, there are tasks and steps that can be identified, and tools and methods applied.

I particularly agreed with this statement that Walters makes:
"Design doesn’t -- shouldn’t -- live in a bubble and designers need to bridge the divide between their world and business, not just lob ideas over the fence and hope for the best." The same is true for innovators. Too often businesses try to append innovation on top of, or adjacent to, existing practices and methods. Ideas do appear to be simply lobbed over the fence. Hope is not a strategy, or a well-defined process. Whether we are talking about design, or a larger innovation perspective, clearly we need processes that accelerate both and INTEGRATE both, rather that simply tacking them on.

At the end of her article, Walters is talking about the misuse of design:
"For now, the real issue with design thinking is that executives run with it as they see fit, design practitioners continue to shrug their shoulders at the discussion, and corporate continues to trump creative." However, she could just as easily be talking about innovation. The real issue with innovation is that executives believe it is a utility, which can be switched on when demand or need is high, and switched off when demand is low. Innovators accept this belief and try to work within these constraints, rather than demanding a consistent, continuous innovation discipline, supported by enabling processes. Short term focus trumps long term innovation discipline, and the result is ineffective and inefficient.

Can innovation be reduced to a process? No, but I think that's the wrong question. The real question is: Can innovation be improved or enabled by a process, and I think the answer to that is a resounding YES!

Transition from pattern matchers to innovators

2011-07-12T07:26:00.000-07:00

Reading James Gardner's excellent post today on the discoveries he made while listening to a new string composition, I felt that he had identified a very important issue that was worth expanding on. James identifies the concept of familiarity and patterns, which are central to our lives. When those patterns are interrupted or changed, we tolerate the change and wait for the patterns to revert to our expected norms. What's going to happen, then, if we can't adjust to new patterns of behavior, or outcomes?

As humans, we excel at pattern recognition. We find patterns in nature, learn from those patterns and apply them to our benefit. The same is true in education. We train students to learn according to patterns, then we reinforce the patterns. All of this focus on patterns culminates in business. Most businesses are about identifying a few important patterns, determining that the patterns are viable and sustainable, and reducing the patterns to an algorithm which can be improved and made more efficient.

If you consider most large businesses today, they work to specific patterns. Within an industry, the vast majority of competitors in an industry have the same business models and make money in the same ways. The patterns are repeated - the same customer needs are met by a range of competitors using many of the same channels, offerings and features. Over time the patterns and algorithms become more important than the market, which build walls and silos which dictate how businesses provide services to customers. These patterns and algorithms create blind spots. Businesses forget that patterns aren't permanent, and build monolithic structures to provide ever more efficient pattern matching solutions.

This is all well and good as long as patterns have long lives, and businesses are able to spot the shift in patterns and behaviors before they cause significant shifts in customer demand. I believe that the era of long-lived patterns of behavior is ending, and with it much of what we hold dear about education and the way we do work.

Today, we place emphasis on validating patterns and developing algorithms which allow us to serve those patterns successfully. Those algorithms take on more and more importance and become harder and harder to change. We train people to spot patterns and align to the patterns. All of this training and development may become moot, and perhaps even a hindrance, if patterns change more frequently, or if there are fewer and fewer consistent patterns of behavior. If that's the case, we can't afford to train people to spot patterns and create algorithms, we need to train them to think about what's next. Businesses can't scale up algorithms in monolithic solutions, they must remain flexible and nimble to address rapid shifts in patterns. In short, if the life of patterns of behavior changes, everything about the way we educate people and the way most business processes work will need to change.

And that's when innovation, and the skills and capabilities inherent in innovation, will become even more valuable. I'm arguing that we are living in the transition between long patterns and short patterns, driven by global shifts in demand, the rise of China and India, the decreasing importance of Western Europe, increased global trade, and many other factors. What has been true for decades if not centuries is not likely to be true even in the next ten years. How will your business react? How will your educational systems react?

The Shuttle program demonstrates innovation lessons

2011-07-11T04:42:00.000-07:00

Friday, July 8, 2011, is a bittersweet day for every American, because Friday marked the last shuttle launch and practically the end of our space exploration for some time to come. For those like me who came of age in the space race, the fact that we're reduced to hitching rides to space with the space agencies from other countries is astonishing. Heck, we don't even have the means to rescue the shuttle, so the crew has been reduced to four astronauts. But melancholy isn't the purpose of this post. No, what I want to talk about instead is how a rocket launch is similar, and dissimilar to innovation.

First let's consider a rocket launch. Years of planning and careful consideration go into every aspect of a launch. Several exceptionally well-trained astronauts enter the cockpit and prepare to launch. Tremendous energy is required to overcome the gravitational forces that would keep the rocket tethered to the earth. The rocket launches, slowly at first, overcoming gravity and inertia, and increasingly accelerates until it is in space. The actual work in space is almost an afterthought compared to the planning, the preparation and the launch. Finally, after the mission is complete the astronauts must return safely to Earth.

Compare, and contrast, that description with much of what masquerades as innovation. Instead of careful planning, most innovation is spur of the moment, based on a pressing need or a shift in a market. Innovation, unlike a rocket launch, is often reactive rather than planned and proactive. Astronauts proceed through significant training - many are military pilots, engineers or have highly specialized skills, and prepare for the mission for months or years. In contrast, most innovation teams have exceptionally little preparation, are unfamiliar with important innovation tools and methods and have little time to come up to speed before they are expected to create a powerful and interesting new idea. Training and preparation are at best an afterthought, and often simply skipped.

The rocket, much like an innovation project, is tethered to the here and now. Both the innovation project and the rocket must escape the bounds of gravity, inertia and conventional thinking. The rocket overcomes gravity and inertia slowly but bit by bit climbs into space. Many innovation projects fail to reach escape velocity, captured by the gravity well of inertia, poor planning or poor alignment. While both a rocket and an innovation project's trajectory can be carefully planned, both can encounter unexpected problems and turbulence. NASA demonstrated during Apollo 13 the ability to innovate on the fly when problems occurred on the spaceship, because lives were at stake and people were demanding action. When turbulence hits an innovation project, many times the project withers and dies, since few people are aware and the stakes aren't quite as high.

Both the shuttle program and innovation struggle with another common problem: clear definition of the mission. The shuttle program, along with the entire space program, has no clear mission. Should it explore near space? The moon? The possibility of a station on Mars? What can space exploration provide? What benefits can it contribute? What new research or learning is possible, or even desirable? No one has clearly stated this since JFK. Likewise, while many firms want "innovation", it often isn't clear what the appropriate outcomes or results should be. Does innovation mean a new product, or a new service, or an entirely new business model? What are the benefits of innovation to the firm? How should innovation align to corporate strategy? Both the space program, and many corporations, lack clear goals and strategy. This makes it more difficult for the government, and for executives, to invest in the space program and innovation, respectively.

Both a rocket launch and an innovation program share one other significant attribute. Both must come back to earth safely and with a specific benefit or outcome. Fortunately, most of the space shots we've launched have gone into space and returned safely to Earth, having carried out an important mission. Many innovation programs, after successful launch, flounder and don't return any valuable outcomes. Part of this is simply mission definition. Where people in space are concerned, returning safely to Earth is the only reasonable option. Failure isn't an option. Where innovation is concerned, the only failure is to fail to innovate and fail to incorporate the learning. Every successful innovator has had spectacular failures. What distinguishes them is their ability to incorporate what they learned into their next attempt. Many innovation attempts fail at the start because executives can't stomach the possibility of failure, even when the stakes are much lower.

At the end, we've become far too comfortable with the shuttle and it's "delivery van" missions to near space. That is a problem corporations confront as well. After a brief surge of innovation, corporations become comfortable with the status quo and what was interesting and new becomes routine. It's then that new innovations should take place, but in this case they haven't. We've allowed the majesty of space flight to be reduced to the equivalent of a UPS truck.

Both a rocket launch and an innovation project are high stakes events that unfortunately occur far too frequently. Yet innovation teams have a lot to learn from the space program, about defining mission, training and preparation, and overcoming gravity and inertia. Will innovation efforts end the same way as the space program, with a quiet success full of melancholy or will we develop the strategies and goals to sustain even more and better innovation efforts?

Why innovation can't be benchmarked

2011-07-07T11:20:00.000-07:00

I must confess that in a previous life I was fascinated by the concept of "benchmarking". This was during my wild and uncertain years, when issues like Total Quality Management seemed the order of the day. Every firm in the late 80s and early 90s was determined to improve quality, and the nascent Baldrige award and ISO certification programs encouraged firms from different industries to benchmark their best practices against the "best in class". Many firms opened their doors to demonstrate their efficient processes to others. In hindsight it's clear that benchmarking was simply an exercise in defining and then achieving some industry standard "best practice" as personified at one firm. We never stopped to ask ourselves if the process was necessarily important, relevant or if it could be eliminated entirely. At that point we were only interested in whether or not it was efficient and error-free.

Many business processes could be benchmarked across industries because much of the focus was on "back office" processes that didn't need to differ much from one industry to another. For example, it didn't really matter how an electronics firm and a pharmaceutical firm processed purchase orders - there didn't need to be many radical differences and there really wasn't a competitive advantage to be gained. So, teams of employees focused on improving internal processes trooped around to examine other firm's processes in the hopes of discovering the secret sauce that made one firm more efficient than another in a given process.

But now I hear of firms talking about benchmarking the innovation methods and processes of other firms. For example, it's not unusual to hear a firm just starting an innovation initiative ask to review the innovation processes or methods of an industry "leader". Many books have been written that intend to depict how Apple innovates, or how Google innovates, or P&G, since these are some of the recognized leaders. You can gain some insights from these books or from reviewing another firm's innovation process, but more often than not you'll discover the differences are more important than the similarities. Benchmarking innovation isn't just misguided, it's misdirected.

The reasons why benchmarking innovation is difficult, if not impossible, are many, but here are a few:

Innovation is closely tied to strategy and vision. Unless you share a common strategy and vision with another firm, you can't mimic or benchmark their processes
Innovation is time sensitive and time bound. Some firms consider opportunities in time periods of decades. Some consider anything longer than 90 days far too distant. Your time planning horizon and ability to scan the future must align in order to benchmark methods and approaches
Innovation is dictated by wants/needs/jobs to be done or technology vision. Some firms assert the future and the market and reject customer insights. Well, not completely, but Apple does claim to ignore customer needs and build what it thinks people want. Some firms, like P&G, do an enormous amount of customer research. Your approach - inside/out or outside/in - must match in order to compare your approach to that of other firms.
Innovation is expansive or contractive. Some firms encourage interaction with customers and partners through open innovation. Some place far more emphasis on internal innovation. Some use a mixture. Again, your approach must align to the approach of a firm you plan to "benchmark".
Innovation can be insourced or outsourced. Many firms rely on trusted partners to help generate ideas, develop alternatives and in some cases even develop products. Others do the majority of this work in house. Your methods and insourcing/outsourcing strategy must match to those of firms you plan to benchmark

Finally, there a real cultural difference between firms that "get" innovation and those that don't, that simply can't be benchmarked. In firms that innovate consistently, the expectations, culture and attitudes are attuned to innovation in a way that simply can't be copied, benchmarked or replicated quickly in another firm. Those changes come with time, and with proof of the commitment of the firm to innovation over the long term.

And thats, perhaps, the biggest reason you can't simply benchmark another firm's innovation success. While you may eventually adopt the tools and replicate the methods, if you can't also adopt the cultural shifts, the urgency and the commitment, then your firm simply won't be successful.

This isn't to say that innovation doesn't have good, consistent methods and approaches, or that the tools are necessarily unique to each deployment. Only that each firm innovates in its own way, to its own needs and visions, and in its own timeframes.

Art imitating life - an Innovator's dream

2011-07-06T07:36:00.000-07:00

I was running last week (a great way to get ideas) and listening to NPR while I was running. During All Things Considered, there was a story about how the music industry works. The story is called How much does it cost to make a hit song? What was fascinating about the story was how packaged and cynical the pop music world is, but also what a great demonstration of an innovation engine the process is. We innovators can learn a lot from the production of pop songs, especially considering how relatively inexpensive it is to write and produce an "album". Do they make those any more?

The story related that a star's manager will determine it's time for a new record, and will host a writing camp for two weeks. There, some of the best song writers come to write songs and are paired with music producers who have a music tracks but no words. Here's what the transcript says:

Here's who shows up at a writing camp: songwriters with no music, and producers toting music tracks with no words.

For two weeks the song writers and music producers develop songs, and at the end the "artist" - in this case Rihanna - comes in and selects the tracks she likes best, and then records those songs.

The cost? According to the transcript:

The writing camp for Rihanna's album "had to cost at least 200 grand," Daniels says. "It was at least forty guys out there. I was shocked at how much money they were spending! But, guess what? They got the whole album out of that one camp."
A writing camp is like a reality show, where top chefs who have never met are forced to cook together. At the end, Rihanna shows up like the celebrity judge and picks her favorites.
Her new album has 11 songs on it. So figure that the writing camp cost about $18,000 per song.

Yes, $200,000 for two weeks, but they create an entire album's worth of material. $200K sounds like a reasonable sum of money in any business, until you realize that figure represents, on average, less than two full time equivalent people fully loaded. In other words, it's not a very large expense and the value generated in that very short amount of time is incredible. If your firm could spend $200K once every six months or so and come away with, say, 11 really valuable ideas that those executives could implement, wouldn't that be the best investment you could make?

We innovators need to learn from this - we need to encourage our teams or clients to bring together the best people, in very short projects, to generate and develop powerful and valuable ideas quickly. This concept shouldn't be a once in a while approach, but a regularly scheduled effort. There's clearly an important need to be solved (the public expects a new record from Rihanna) and a lot of urgency (excellent people and recording studio time aren't cheap), but bringing these resources together under these conditions created a tremendous amount of value.

Yes, I can hear you now, wondering about how to free up some of your best people for a few days, much less two weeks. If your best people can spend one week a quarter preparing to present the results of the quarter that is just finished, then certainly you can find two weeks every six months or so for them to develop the game changing ideas for the future. Too many executives spend far too much time evaluating and reporting on the past, which can't be changed, only dressed up, and spend far too little time investigating the future and generating ideas that will impact the future. We need to change this dynamic.

When change is slow, contemplation of the past is reasonable. When change is fast, contemplation of the future is vital. Where are your best people spending their time? Assessing and reporting on the past, or evaluating and understanding the future?

The appropriate distribution of innovation work

2011-07-05T05:26:00.000-07:00

We read, quite consistently, that innovation should be "everyone's" job. That's a simple encomium that is at least partially true. However, we also know that innovation is difficult, exacting work that requires new insights and new skills. How can "everyone" do innovation when barely anyone gets any training?

So, what is the appropriate distribution of the work involved in innovating? Should "everyone" participate, and by that do we mean literally everyone - customers, partners and employees, or are we only talking about internal employees when we say "everyone"? Or, if innovation is as important as we suggest that it is, shouldn't we have experts doing innovation work? Shouldn't our best people focus on innovation?

I think in many firms innovation is the triumph of hope over experience. Innovation is fraught with risk, so few people are willing to dig deeply into what makes innovation work. Further, because everyone is so busy, it can be hard to find time to innovate, so while many are called, few actually choose to participate. In my experience, and in the experience of other innovation consultants, it's not rare to discover that of those invited to submit ideas, only 10% of those invited submit ideas, and of the ideas submitted, about 2 or 3% of the participants are responsible for most of the ideas. A relatively small population of any "crowd" submits the lion's share of the ideas, and that's the involvement in the simplest activity.

When it comes to managing, evaluating and selecting ideas, that work can be difficult if not impossible without a defined set of processes, a transparent evaluation template and a reasonable amount of training. Otherwise evaluation is simply opinion. There's real work to be done to manage and select ideas. The hangers-on who submitted ideas now often fall away, leaving only the truly committed to see ideas through to the end.

Or perhaps when we say "Everyone" should be involved in innovation we mean that different people can play different roles, even if they don't participate in the entire innovation process. For example, some people may be good at spotting trends, and that's their contribution. Others are good at generating ideas, and that's what they do. Others are willing to take on a larger role with more responsibility, so they work on the evaluation and selection of ideas. This role based approach can work if you can find the people who have strengths in the different requirements each phase of innovation presents. This approach requires less from each individual and allows each to play to their strength, but suffers from a lack of continuity and consistency.

An innovation team formed to solve a problem moves through each of these phases, but the skills and capabilities of the team aren't uniform. While some may enjoy trend spotting, many may feel the time is wasted and want to proceed immediately to generating ideas. Others may feel idea generation is not valuable and want to simply flesh out a couple of ideas in great depth. While the team approach offers consistency and continuity, there are often conflicts as to the importance of the work in each phase.

Further clouding the issue, innovation work is often thrust upon people who are overworked. Innovation becomes more more requirement that they must complete. Many of these people aren't "bought in" to an innovation vision and are frustrated that their regular work is diminished by the new innovation requirement. Both innovation and their regular work suffer. The question arises - should the people who work on innovation initiatives be part-time or full-time? The easy answer is full-time, with requisite compensation and rewards. That way regular work doesn't send a siren call to return to the day to day grind, and the team has a singular focus to create a new product or service. However, asking people to step outside their regular jobs for a significant period of time may take them off the "fast track" for advancement in their functional role. A strong marketer may find advancement and promotion simpler by sticking to that core work, rather than taking on a long, risky and uncertain innovation initiative.

The final answer is that there is no definitively correct distribution of innovation work, except with these caveats:

Wherever and whenever possible, assign people to the team who are passionate about change and about innovation. In fact, seek volunteers.
Wherever possible, assign people to a team and free them up from their regular job, and describe how they'll return to the job or a better one at the end of the innovation effort.
Understand the broad set of skills necessary and when they are necessary. Trend spotters are needed early, ideators in the middle, idea managers and evaluators late
The individual who leads the innovation initiative must be a strong motivator, well connected and open to radical change. He or she will "make or break" the rest of the team, so choose your leader carefully

Let's face it: everyone may want the "ability" to participate in an innovation initiative, but many won't, and that's OK. It's better to have a few truly committed and passionate about the idea, while leaving the opportunity open for "everyone". What's just as important is freeing the right people up to do the work without distractions, and giving them the tools and training they need to be successful.

Finally, decide whether you want an innovation project, or an innovation capability. A project is a one-time, discrete event. Your people or your innovation team can gear up, work the opportunity and disband. Training is less important and your methods are less important, since the work won't be repeated. It will be even more important in a discrete project to place your best people and best leadership on that project, since the team will invent most of its methods. If, on the other hand, you want a more consistent flow of idea and see innovation as a long term capability, training and process development should take precedence.

Are you Experienced?

2011-07-01T06:22:00.000-07:00

There are several movements or phenomena underway right now that strike me as "important". Two of those that are near and dear to me are innovation and social media. Both are especially interesting and vibrant, and both are full of promise and yet are potentially hollow.

Innovation is gaining traction for several reasons. Businesses want more innovation because they've picked all the low hanging fruit, wrung all the efficiency from their existing businesses and face consumers who want new, shiny things. Businesses that rest comfortably on their existing products and services will be left puttering in the right lane of the historical superhighway, with a safe view of the crazy innovators flying by in the passing lanes. Some of those crazy innovators will inevitably crash and burn, but some will create a new product or service so compelling that it radically changes the market, and endangers the safe, plodding firms and industries.

Governments, increasingly want more innovation. No longer can we justify a $400 hammer, or spend money as if we print it (well, you get the point). As the boomers age and people place higher and higher demands on government programs, governments across the globe must become more innovative in the way they obtain funding and deliver services. Constituents understand the power of innovation in the private sector and expect to see the same advances in the public sector.

Consider as well social media. From the first instances of blogs, to Facebook and now on to Twitter and a host of other applications which encourage and foster virtual communities, the explosive growth of social media is unparalleled. Recently it was announced that if Facebook became its own country, it would be the third most populous country in the world. Not too shabby for a website that was developed less than a decade ago.

But both of these nascent phenomena demonstrate, at least to date, the triumph of hope over experience. Granted, the skills and techniques for innovation aren't new, and people have been dreaming up new ideas since the dawn of time, but real, involved innovation as a core focus is new in business and in government. There's simply not a lot of experience doing good innovation work, and much of what you'll see and hear about are the few successes, rather than the catastrophic failures. The same fact is true in the social media world. Simply put, this is an entirely new capability, and the rules are being written as new capabilities and technologies unfold. A deeply experienced social media expert is someone who built a blog site a few years ago and tweets regularly. They don't, and we don't, have any real understanding of how all of social media fits into life and into business.

What's missing from both innovation and social media is deep experience, and one can argue that there are benefits and drawbacks from that lack of experience. The benefit is that we don't rely on "old" thinking when we innovate, and we certainly can't rely on old methods for social media. I chuckle when I listen to people comparing social media to broadcasting, or other known entities. We are casting about for models to begin to understand how to manage and model social media. It may be that we have to define the models as we build the businesses.

The drawback is that there aren't many "gray heads" deeply involved or engaged in either phenomena. I think especially of social media here. Ask a question on Facebook or Twitter or LinkedIn, and you are likely to get an answer, but that answer comes with a caveat - most of the people answering are self-described experts who are technically savvy, but not necessarily life-savvy. Many of our most experienced citizens aren't as active, or active at all, in social media or innovation, and we risk missing a tremendous amount of knowledge and insight since they aren't as engaged. The number or breadth of answers to a question on social media or the number of ideas generated in an innovation effort aren't as important as getting the best answer, or finding the right idea, and at least some of that success is based on life lessons, experience and deep knowledge. Too often what passes for knowledge on social media or good ideas in innovation are concepts that thrive only in the shallow end of the pond, unaware of the dangers that lurk in the deeper end. Only people who have been to the deep end know what lurks there, and how to deal with what lurks there. Shallow end thinking is thinking, but it may not be the best thinking.

So, who is experienced, and does that experience come with a price? Is social media and innovation less valuable than they could be because of the absence of people with experience, or should we simply expect to build experience as we exercise the tools? At a minimum, everyone using social media and participating in innovation should understand that they are new tools, not completely understood, and often lack participation and involvement by the people most experienced in life. Those lessons are hard-won, and we don't need to re-learn them.

Old models disrupted by new innovation

2011-06-28T13:34:00.000-07:00

I listened yesterday to an NPR story about the difficulties that Hulu presents to its existing owners - primarily NBC, ABC and Fox. The headline for the story: what do you do with an interesting creation that you aren't sure you can control any longer?

I laughed out loud, because like atom bombs and genetically engineered creatures, the people who create really interesting innovations are always surprised when the creation is larger, more disruptive and more powerful than they can control. Hulu was started almost as a lark - a way to provide more and better content on the web than cats playing pianos. No one was sure if the millions of people looking at Youtube videos would watch feature length programming. Now, however, while Hulu and other outlets are drawing millions of viewers, the traditional channels for content distribution - otherwise known as cable and satellite providers - are growing increasingly restless. These distribution channels are losing the opportunity to control a franchise, and the traditional media distribution channels provide more revenue and profits today, even though viewership is growing far more quickly on the web.

What is NBC, ABC and Fox to do? If they retain Hulu and it continues to grow and siphon viewers from traditional distribution channels, then the cash cow gets gored. Cable and satellite distributors will demand to pay far less for the content, and may decide to look for other, unique sources of content. If NBC, ABC and Fox decide to sell Hulu, they can either continue to provide content, which doesn't really solve the problem, or can delay or shift how they provide content to Hulu, which won't make it an attractive acquisition target.

NBC, ABC and Fox have innovated, without understanding or recognizing that really interesting innovation is almost always disruptive and cannibalizes the existing markets or channels. Now, they are stuck with a creature of their own making, with no clear strategy about what to do or how to "control" their innovation. People increasingly aren't tied down to a place to watch TV or content, or to a "time" to consume the content, or even to a specific channel or distribution media. People will watch what they want, where they want and when they want. The best content will be found, where ever it is, and on whatever device it can be consumed. That's the customer need, which is ultimately paramount.

Hulu's success also identifies the misconception that we "all" are going to be publishers or content creators. After all, if there were enough good content on Hulu, we wouldn't need Fox, ABC and NBC. While more film makers have had their chances given new outlets, there's still a value in telling a good story. So Hulu demonstrates the fact that there were at least two misconceptions of content and viewship. First, that the major networks could control a disruptive innovation, They are now afraid of the creature they've created. Second, that having a publicly available and free media for exchanging content meant that anyone could be a producer of content, and that would detract from the major producers. If anything, the web and Youtube have shown how important good storytellers and producers can be. Otherwise, it's cats on skates all the time.

What shouldn't be surprising to the major networks, or to any innovator, is that a real, disruptive innovation not only creates new products and services, but if it is truly disruptive it will change business models and distribution channels. The networks assumed they could control their innovation, but in fact their innovation to a great extent has impacted their business models in ways they didn't expect. The interesting thing will be to see how the networks try to cut the Gordian knot and keep both their important channel partners, and web viewers, happy. Doesn't seem like an easy solution.

Four kinds of innovation time

2011-06-27T05:37:00.000-07:00

We innovation consultants often talk about the value of ideas. Good ideas, well managed, in time can become new products and services that drive new growth, revenue and profits. But while ideas are valuable, the input that really matters is time. Even if you have the best ideas in the world, if you don't have the time necessary to work them effectively, they don't matter.

Today's insight is brought to you by your wristwatch, your calendar and your annual planning cycle, all of which are different ways to measure different blocks of time. I believe there are at least four different kinds of innovation time, which can make it difficult to innovate regularly, if at all.

Right time
The first time barrier that many firms struggle with is "when is the right time" to innovate? I guess when product life cycles were longer and customer demand less intense, a periodic innovation pattern was acceptable. A firm could afford to innovate, then rest on the revenues and profits of the new product or service that was introduced. In that scenario, all the firm had to do was to correctly predict when the product would lose favor in the market or when customer demand would change. In many cases, the firm simply produced a "new model" and expected customer demand to shift to the new model. Those days, my friends, are over.

The right time to start innovating was yesterday. And, if you missed it, you can start today. The pace of change is accelerating. Firms don't dictate customer demand anymore, and can barely respond to it effectively. Now, you need to either anticipate it, or if you are really insightful or lucky, like Apple, create it. There is no "right" time for innovation, it needs to occur all the time.

Finding Time
If you can convince yourself, your team and your management that innovation should be happening regularly, the next time barrier will be to "find" time to innovate. After years of rightsizing, outsourcing and cost cutting, there's no slack in the system. To innovate, real tradeoffs have to occur. An individual or team must put aside important short term work to address important long term opportunities. In most organizations, everyone is working 40-50 hours a week. The real question isn't "can we find the time" but "is what John is working on now as important as a new product or service a year from now?"

And yes, there's the myth of Google's or 3M's 20% time. That investment is actually begun by people who spot an idea and start working on their own time. They then get some time to validate the idea "on the clock" so to speak, but many of the ideas created under 20% time were on the employees' time. If firms want to innovate, they must create some slack in the system for excellent employees to have time to consider future products, not current problems.

Time to Market
One of the most interesting thought experiments I use when leading an innovation workshop is to ask: how long is your product development cycle? If we had an approved project that we could submit to the product development team today, how long would it take for that product or service to launch in the market?

Typically the answer ranges from 9 months to 24 months, depending on the complexity of the product and the regulations in the market. But then, to really get the team thinking, I'll ask: OK, how long do you think it will take from the recognition of a customer problem or the identification of a customer need till we have a good idea validated and ready to present to product development. Typically, this elicits blank stares. So we'll just pull a number out of a hat and estimate 3 to 9 months. Which, if correct means that from the identification of a need or problem to product launch is 12 to 33 months. Yet most executives have no clue that it will take more than a handful of months for an innovation team to spot an interesting need, validate the need, conceive new products and launch a new product.

Further, if your idea to market timeframe is 33 months, you'd better dream up ideas that will be important and relevant at least 40 months from now, or you'll be late to the market. Innovation takes time, and the longer your idea to market cycle is, the more interesting and disruptive your ideas need to be.

Time to value

Once your new product or service launches, it can be difficult to ascertain whether or not it has been successful for quite some length of time. Many consumer good manufacturers will pull a product from shelves only after 6 to 9 months, to ensure customers are aware of the product and to let advertising and market alert the customer and to ensure a sufficient trial. How much time will your executives allow for your new product in the market before they start deciding to "pull the plug"?

While we all love the proverbial "hockey stick" growth curves, they are rare in the real world but prevalent in PowerPoint. New products require time for adoption, since they usually require customers to become aware of the product and recognize the value proposition. Usually there is a need to test the concept, or see others test the concept, before the majority acquires the product. This is what Geoffrey Moore called "Crossing the Chasm". This means your first adopters aren't the majority, and it will take a little time even for a good idea to enter the consciousness of the marketplace.

We're all out of time
The problem with these different perspectives on time is that most executives have been brought up in the school of the stopwatch. They expect everything to happen in the very short term, and have little awareness and patience for the time necessary to bring a wholly new idea to market, and even less patience for the time necessary for a new product to gain traction in the market. Wall Street has trained executives to meet quarterly numbers often at the expense of longer term growth, and many opportunities are passed over because there simply isn't time, or the time isn't right. You can only postpone innovation so long, before it bestows insights on other firms that aren't time-bound.

Putting the idea cart before the capabilities horse

2011-06-23T07:39:00.000-07:00

The phrase "putting the cart before the horse" is meant to help us quickly identify that priorities or actions are in the wrong order. A horse does a far better job pulling a cart than pushing a cart, therefore the horse goes before the cart. In innovation projects, however, far too frequently the idea goes before the capability or competency.

Let's stipulate that to innovate successfully there are at least five key ingredients or attributes that are necessary. The one most people recognize without prompting is, of course, the idea, which is the celebrity of the innovation show. Of course, the show can't go on without a number of other valuable and often overlooked features. Those are:

Capabilities - processes, methods and workflows that define what to do with an idea
Competencies - the knowledge and skills to act on the idea effectively
Clarity - to understand key strategic goals and how innovation aligns to those goals
Bandwidth - enough time to work on the ideas
Confidence - the ability to work without fear of failure

A typical innovation project begins when someone has a big, pressing need and gathers a team to generate ideas. However, exceptionally little thought is given to these other ingredients, and they are very valuable. For example, we don't ask our team members to participate in important activities without proper training and supportive systems, except in the case of innovation. We don't ask people to work on important projects but severely limit their time to do so, exception in the case of innovation. Why is it so easy to start an innovation project without considering these important factors and implementing a solution for each? Or do we believe innovation is so easy that these ingredients aren't necessary?

Perhaps it's because by the time we decide to innovate, we've wasted a lot of time, and it appears there's little time to "invest" in these activities, because they would further delay the innovation process. When in fact we know that well defined innovation processes, leveraged by people who have been introduced to innovation tools and techniques and who work within a framework that provides enough time and commitment are much more likely to create relevant, meaningful ideas.

We've got to stop placing the idea or concept ahead of the important and necessary innovation capabilities. While it requires an investment to train people and define methods and workflow, simply generating ideas in a team with little experience, no clear work rules and no investment in training will end in frustration. Training on innovation techniques and methods, and definition of innovation processes and workflow should PRECEDE idea generation. If those activities don't precede idea generation, then the idea is unlikely to proceed any further, since the people, processes and skills won't support advancement of the idea. Again, why should we expect innovation, which is uncertain, risky and new to most organizations, to work well without the underlying foundations and frameworks that buttress other business processes?

Firms that do innovation well aren't necessarily smarter, or more creative, than other firms. They are firms that understand the value of systematic approaches to innovation, coupled with a culture that provides time for innovation and reduces risk. They put the capabilities and culture horse in place, which pulls along the ideas cart.

Now, we just need a 21st Century analogy to replace this whole horse/cart thing...

Improving the innovation gauntlet

2011-06-21T05:56:00.000-07:00

You are probably familiar with the concept of a gauntlet. A gauntlet in its origins meant that an individual had to pass through a narrow passage formed by ranks of soldiers who were striking the individual as he or she passed by. Originally a gauntlet was used as punishment for defeated enemies or soldiers who demonstrated cowardice. The concept of running a gauntlet go back at least to the Roman times, when Roman soldiers used a gauntlet to punish criminals in their ranks or enemy soldiers.

I often compare many innovation projects to running a gauntlet, especially from the perspective of the idea.

If you think about innovation in just about any company, the work seems to start with the generation of an incredibly interesting, new idea. Often the idea is novel in several respects, and has the possibility to disrupt a market space or attract a range of new customers. I always want to archive that moment and the possibilities of those ideas, because once the idea leaves this stage, it is rare that the idea remains the same.

Typically the idea is pelted from all sides by individuals who want to shape the idea to their interpretation of the needs and wants of the market. Or by people who need to make the idea "fit" the existing business models, financial models, annual plans or other artificial containers we try to force upon the model. Then there are the people and processes that want to ensure the new idea doesn't cannibalize any existing product or service the firm offers. Then there are the individuals who have regulatory concerns, or health and safety concerns, or reputation concerns. As the idea moves through this gauntlet, each organization takes the opportunity to chip away the aspects of the idea that are threatening to them, or that challenge the status quo. Over time the idea is smoothed, rounded and polished, and becomes so incremental as to be hardly comparable to the original idea cooked up in the idea generation session.

If our organizations do one thing really well, it's paring down strange, hairy, audacious ideas into carefully contrived, simplistic concepts that can be presented without fear to mass audiences. No wonder so many firms have so many look-alike products and services.

How do you escape the "gauntlet" mentality and commercialize the really interesting, radical idea that was what you started with? Through focus on the customer need.

In almost every situation where the idea is trimmed, shaped or reduced, the individual or team doing so isn't reshaping the idea to meet or exceed customer wants and needs, they are changing the idea to make it fit with internal goals, methods and expectations. Once the idea leaves idea generation, suddenly the customer's wants and needs take a back seat to what the firm believes is important and worthy. Most of the work done on an idea once it leaves idea generation is not to the benefit of the customers to satisfy their unmet needs, but is done to satisfy the internal machinery and expectations of the internal processes. Most organizations aren't adding value to the idea to improve it for the customer, they are simplifying and reducing the concept to make it internally tolerable.

Here's what you should do. Any idea that must run the evaluation, funding and commercialization gauntlet should have an exceptionally clear definition of the problem or opportunity it is meant to solve, and a clear rationale about why it is important that the features or attributes of the idea exist. Any team or individual who wishes to change or modify the idea must justify their actions on the basis of customer needs, not on the basis of internal processes or to protect existing products or services. Instead of saying "we can't do..." the arguments should always be "the customer needs...".

The unfortunate but often true fact is that the best way to do this is to assign an "idea champion" for each idea, a person who is passionate about the idea and willing to run the gauntlet with the idea to ensure consistency from start to finish. Idea champions bring with them their own set of challenges, not least of which is temporary blindness to ideas that have missed the mark. Rather, we prefer to hold each team to an honest accounting of the work they've done to further an idea, and any changes, especially in the scope of the idea, the features and attributes of the idea are documented in light of the customer need, not in terms of the business process or decision making.

Why do we subject our ideas to processes akin to torture devices developed by the ancient Romans to punish criminals and cowards? Why do we allow really interesting ideas to be shaped, formed and molded into "me too" products because of internal competition, fear and uncertainty rather than creating the compelling solutions that existed at the start? Let's turn the innovation gauntlet into a mechanism to improve and speed ideas to market, rather than a process to reduce and distract ideas from becoming interesting new products and services.

Innovate, replicate or evaporate

2011-06-20T05:51:00.000-07:00

I had the opportunity to sit in on a meeting with the president of a leading consumer goods company late last week. I had been invited to the meeting to introduce some open innovation concepts, but I was there more for support and encouragement than to lead the discussion. The president of the firm we were meeting with welcomed us graciously and explained some of the concepts his organizations was pursuing to find and manage new ideas.

Then, he said something that I wrote in the margins of my notepad. Unprompted by us, he looked at us and said:

In this business, you innovate, replicate or evaporate.

Truer words were never spoken.

His business is a fast paced consumer business, driven to a certain extent by market trends and customer whims. His business is constantly bringing out new products and working with large retail establishments to understand how to meet the demands of fickle customers.

Think with me for a minute about his statement: either innovate, replicate or evaporate. What he is saying, and I confirmed it after the discussion, is that firms in his business either create really interesting new products that meet customer needs, or they compete by replicating what the innovators do. In his market you are either an innovator or a very fast follower, or your firm is out of business. There is no third option. Like the role Alex Baldwin played in Glengarry Glen Ross, the third prize is you lose your job.

This trinity that our client identified is true in every industry, all that differs is the timing. Whether you evaporate in a few months in a rapidly moving industry or market or slowly wither away in a market where customer demand evolves a bit more slowly, you really only have two choices. And, what's even more difficult to grasp is that the "replicate" option is slowly dying away as well.

As new innovators come online across the globe, product life cycles and customer attention spans and loyalty are shrinking. We are becoming an online, all the time, consumer, and we want what is new, valuable and exciting now. Even fast replicators will have a hard time driving sales, as consumers shift their allegiances to the latest trend, fashion or look.

I wonder how decisions would be made if in every corporate boardroom in America these four words were posted in large font on the walls: Innovate, Replicate or Evaporate. Would that mantra drive new decisions and more innovation?

Fishing as a metaphor for innovating

2011-06-15T13:09:00.000-07:00

I had the opportunity to go fishing over the weekend, at a pond on my grandfather's farm. I love to fish, and want to pass down the pleasures of fishing to my kids. Whether it's fishing for salmon in Alaska, for trout in the mountains of Virginia or simply tossing a worm into a pond, there's something magical about fishing. And, since I am neck deep into innovation, I am constantly thinking about what the activity I have underway has to do with innovation. Fishing, a sport or livelihood almost as old as time, has a lot of things to tell us about innovation.

First, a good fisherman scouts the scene. That may be a lake, a river, a pond or a likely spot in the ocean. It is a waste of time to put good bait into a spot where there are no fish, unless your idea of fishing is absolutely no distractions and no catching either. Scouting the scene helps you determine where the fish may be, their likely habitats and their habits.

Second, once you've scouted the scene you need to determine if the fish are biting, and if so, what they are biting. Different fish feed at different times of the day, and on different baits. Trout fishermen are notorious for matching the hatch. That means they are trying to decide what bugs are hatching currently and how they can present lures or flies that look like the bugs that are hatching in the water. Timing is everything - even if the fish are in the water, fishing when they are more likely to be dormant (heat of the day) is a waste of time, as is fishing with bait that doesn't align to their diets or interests.

Third, if you've got the right spot and the right bait at the right time, then placement is everything. You don't want to spook the fish, and you want to place the bait in the right place without disrupting the normal activities. A loud splash or a poor cast disrupts the habitat and spooks the fish. Good placement and presentation is paramount.

Fourth, you've got to know when you are getting a bite, and when that bite is a commitment and not simply a test. Many wily fish will nibble your bait but are almost impossible to hook, because they take small bites rather than swallow the bait entirely. Only when a fish commits to the bait do you stand a good chance of reeling him in.

Fifth, and most difficult for my kids: fishing requires patience and experimentation. Perhaps the bait isn't right. Try a new bait. Perhaps the fish are lying deeper in the water (where it is cooler) on a hot day. Lower your bait. Try, try, try and then move to a new spot. Experiment, use what you know, learn and incorporate. While we'd all love to see the fish bite immediately, good fishermen know that it can take time and patience.

So, if all of these things are true about fishing, what do they have to say about innovation?

First, scouting is important. Is there a viable market opportunity? If so, where? How important is that need or opportunity, and when will it arise? Is the customer or market aware of a need? Knowing your customer or prospective customer and understanding his or her need is important. Scouting (trend spotting) and scenario planning helps define the best opportunities.

Second, what do the market, environment, technology conditions look like? A great idea ahead of its time is simply another failure in the making. You need to identify the right opportunity, in the right timeframe, with the right solution in order to be successful. You also need to generate lots of ideas within your scope or context, just as a fisherman has many different baits at his disposal.

Third, match your offering to the spoken or unspoken needs and demonstrate its benefits in a way that doesn't cause disruption to the customer. Yes, you may cause significant disruption in the market, but the customer must be able to find and adopt your solution easily. No matter how great your solution is, inertia says that customers will stick with a simple but inadequate solution rather than a more elegant solution that requires them to change or learn something new. The best ideas are easily adopted, require little learning and seem obvious in hindsight. The worst ideas are difficult to adopt, require a lot of change or learning and disrupt the user to gain a benefit.

Fourth, everyone is interested in new stuff, but not everyone is committed and will acquire new stuff. You have to distinguish between interest (nibbles) which you will receive a lot of, and commitment (acquisition) which is valuable and a step beyond interest. Few people will tell you your idea stinks, but don't use compliments to suggest the idea is valuable. Value is indicated when they acquire your new product or service, not when they praise it.

Fifth, just because an idea doesn't pan out immediately, be patient. Conduct lots of prototypes and experiments. If you are on to some key need but can't break through, revisit your assumptions and change your hypothesis. In other words, experiment within the scope of the product or solution or market set. Know "when to fish and when to cut bait". Sorry, couldn't resist. Don't assume your idea will take off dramatically, immediately. The "hockey stick" curve of growth we all want to achieve is exceptionally rare, except on PowerPoint slides pitching the idea.

Finally, both innovating and fishing are proactive activities that engage the mind and the body. Good fishermen are good thinkers, always planning, moving, experimenting. They are engaged and passionate about their sport. Good innovators display the same characteristics, and do it without the worms. Who knew fishing and innovation had so many commonalities?

Once innovation leaders, Governments lag now

2011-06-15T06:07:00.000-07:00

When I was a kid in the halcyon 60s and the crazy 70s, we knew that while there was a "Cold War" the US Government, and many European governments were active, working to protect us from the Communist threat. Millions, no billions of dollars, pounds, francs, marks and other currencies were expended in scientific and military research that formed new offensive and defensive weapons. Much of that research made its way into the public sector, where it became the basis for new electronics, new semiconductors, new medicines and other new innovations.

Once, in the not too distant past, faced with threats from clearly identifiable and significant enemies, our governments invested heavily in R&D. After the end of the Cold War, a "peace" dividend was declared. Many countries in Western Europe and the US decreased military spending, which led to lower rates of government sponsored research. Further, aging populations and the demand for improved services from the populations led to shifts in investments and budget allocations. Primary R&D, a key driver for many innovations, has taken a back seat to many other government programs. Our NATO allies, fighting a war with Libya, have admitted that in the next 30 to 60 days they will have exhausted their armaments. Many European governments leading the air war in Libya will have to decide how to continue to fund the air battle, as many have allowed their militaries to atrophy. Britain, once the most powerful naval force in the world, no longer has an active aircraft carrier. While the peace dividends may be welcome and the specter of war diminished, at least large scale land war, the downgrading of military research and the fall off in government R&D has left governments as innovation laggards rather than innovation leaders.

Some will argue that this is what "should be" - governments should not dictate industrial policy or pick and choose challenges to solve, technologies to promote and so forth. However, few organizations do long term basic research better than governments, because they can take on problems over a much longer span of time than private enterprises, and can invest in challenges that may not attract funding or investment from private organizations. Yet much of the basic R&D work a government does leads to new innovations and new products once the ideas are commercialized. The knock-on effect of basic research is tremendous.

We risk losing a significant portion of our longer term research as national governments in Europe, the United States, Japan and other countries focus increasingly on other investment priorities - improving medical care, caring for their aging populations and so forth. Everyone benefits from strong governmental R&D funding as those concepts filter out into the market as new products, new services and new capabilities. While I have some concerns about the overt focus on sustainability and green technologies that the Obama administration favors, we in the US need to continue to support R&D investments in all phases of our government spending, and seek new methods to convert that research into new products and services, which will create new jobs.

Europe is waking up to this problem. Witness the latest report from their Innovation Union, which points out many of the problems the European Governments face from an innovation perspective. While the EU is in fact larger than the US and creates more PhDs, it lags the innovative power of the US, even as the US is losing its innovative edge to places like China.

It is almost inevitable that in these dire economic times that funding for the military and for basic research across the board will be cut, and basic government R&D has fallen over 5% just in the last few years. This lack of investment has a knock-on effect, as private industry is also suffering through some difficult years, and new policies make investments in private R&D less attractive. Large enterprises in the US currently have stockpiles of cash that should be translated into new research, but we need new tax incentives and less regulation to encourage these firms to get that cash working on new research. As the US government continues to shift its focus from R&D investments to cash payments for medical care, health care and other benefits, private industry must step in and take up the R&D slack, working with universities and research institutions. A significant engine of prosperity is slowly fading away with little to replace it. Something must step into the breech, or innovation in the US will suffer. The European commission report is a wake up call for all taxpayers in the US and in Europe. Basic research drives innovation, which drives new products and new job creation. Don't let government R&D die, and press to extend private enterprise R&D tax credits.