Monday, November 13, 2017

Shared innovation language accelerates innovation

I was leading an innovation workshop recently with a company that invited in some of its customers to talk about the future.  We were interested in getting feedback from key B2B customers about the future of the industry, where things were heading and what strategies and programs my customer should begin to put in place.  I was hired to lead a trend spotting and scenario planning workshop, but I had successfully convinced my client that we needed to establish a common framework and language about innovation first.

The participants were senior executives drawn from several industries the company serves.  Each were leaders in their respective industries and several of them promote innovation as a core operating capability.  Nevertheless I felt it was important to establish a common definition and scope of innovation before moving ahead.  What surprised me was the response from the participants when I started defining innovation, and seeking their definitions so we could arrive at a common framework.

I'll know it when I see it

Like the Supreme Court justice called on to define pornography (I know it when I see it) the participants had very different, and frequently very narrow definitions of "innovation".  While they were casually tossing words around like "disruptive", they couldn't really describe what it meant.  Further, the narrow definitions extended to outcomes.  For the most part many of them were focused, when they were spending time on innovation, almost exclusively on product innovation.

Needless to say, I spent time talking about the difference between "incremental" innovation and disruptive innovation, their purposes and meaning, and the "three horizons" model of innovation, as well as a 70:20:10 portfolio plan.  Thinking about concurrent innovation across several goals and horizons was really new and interesting for these participants.

Ten Types

But we went further.  It's really a waste, I told them, to only focus on product innovation, when so many potential types are available.  I then introduced Doblin's Ten Types, which is basically received gospel to innovators but may as well be Sanskrit for most business types.  They've never seen it, never thought deeply about it, but when its deciphered they understand it immediately.  What was funny about this was several of the participants were talking about the importance of customer experience but never seemed to realize that CX could be an intent or outcome of an innovation exercise.

Freeing their thinking

By working collectively to create a shared (if just for the moment) definition of innovation, which seems like a constricting activity, we actually freed up some thinking because we were broadening the definitions of innovation, in several dimensions.  First, across a spectrum of incremental to disruptive.  Second, from discrete to continuous and often concurrent projects.  And third, from an overemphasis on product innovation to the realization that innovation can happen over a range of outcomes (products, services, channels, business models, experiences, etc).

Once you fully grapple with the opportunities and range of innovation activities and outcomes, the range of innovation possibility can seem a bit limitless.  Then will come the natural convergence to start choosing where or what you want to innovate, and a natural divergence as you start to explore the possibilities again.

Language and common definitions are critical to any interaction.  When each party has their own definitions of innovation and rather narrow definitions at that, little can be accomplished and many opportunities are left by the wayside.  Stopping to create a shared definition, expanding the range of opportunities and options, means we can explore more together.  Why we still need to do this - go back to the basics of key factors like definitions and language, exploring the range and potential outcomes of innovation - indicates that we are closer to the end of the beginning of innovation as a corporate capability, rather than at the beginning of the end.
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posted by Jeffrey Phillips at 7:37 AM 0 comments

Tuesday, October 24, 2017

Understanding the future leads to better innovation

As many of you loyal readers know (thanks Mom!) I'm a big believer that success in life, as in innovation, is about understanding the future and bringing products and solutions to the market just as the market realizes its needs.  This builds on the famous quip that to win the future you should create the future.  The unspoken but obvious counterpoint is that you can wait to see what the future holds and then react to it.  Many is the company that has decided to take the more passive, reactive, wait and see model, rather than invest a few dollars into trend spotting and scenario planning.

Why aren't we doing more work on understanding and predicting the future?  It's pretty obvious that most companies aren't good at understanding and predicting the future, and they are so bound up in efficiency and quantitative metrics about the next month or quarter that they don't believe they have the time or insights to get it right.  There's a famous quote attributed to Niels Bohr, a renown physicist, who said it is very hard to predict, especially about the future.

The future is already here

Contrast that quote with one of my favorites, by William Gibson.  Gibson is quoted as saying "the future is already here, it's just not evenly distributed".  What he meant was that there are events and trends underway in some corners of the world that are advanced and futuristic.  Imagine how primitive tribes in the Amazon jungle think about airplanes.  In the same way imagine how your grandparents think about Snapchat and Facebook.  Signals about the future are all around us.  Some places (Tokyo and Dubai come to mind) feel like they are already a few years or even a decade ahead of us.  What's required is for us to identify the trends that are occurring and make sense of them, to visit the places that are moving forward and experimenting, to see what the future might hold.

Rejecting the "straight line" future

I've coined what I call the "straight line" future, from my work with customers in trend spotting and scenario planning.  When we ask people to imagine what the future will look like 3-5 years from now, most people will imagine a future that looks and feels exactly like the one they are living in, with minor tweaks around the edges.  In other words, the journey from here to there is a straight line with few disruptions or deviations.  This is the future that we expect and want if we are comfortable and don't want uncertainty or risk.  This is not what is going to happen.

Just a few years ago, Obama was president and the thought of Donald Trump becoming president would have seemed laughable.  Hillary Clinton seemed likely to win and there were an acceptable range of leading, plausible Republican candidates.  Yet history and fate intervened and we have a future few would have expected, with very different political, economic and perhaps military consequences.

The future will look subtly different than the present does, in ways we often don't anticipate or expect.  Those companies that discover the differences with enough time to create valuable products and services will win big.  Bill Gates of Microsoft fame said that we often overestimate the change that will occur in the next 2 years and underestimate the amount of change that will happen in the next ten.  With the pace of change accelerating, we might make that 2 years and 5 years, as you'll see further down the page.


The Point of all This

The point of this post is that change is happening very quickly, and companies that wait to react to emerging events simply cannot react fast enough, with products and services that are compelling enough to win.  Rather than wait, you must create and shape the future that you want to participate in.  Much of the information and signals about the future are out there, waiting to be discovered.  Don't fall into the trap of plotting "straight line" futures, because they aren't real.  Small, subtle changes in the economy, technology or society will create new customer segments, new needs and introduce new threats and potential product or service substitutions. 

Think this can't happen very fast?  iTunes was first released in 2001 as a way to store and manage music.  It was the first really successful commercial way to acquire and manage digital music files.  Tower Records, the largest distributor of CD and albums, declared bankruptcy five years later.  An entire music industry and major distribution channel was destroyed in only five years.  And this didn't happen without clear signals.  Napster and other music sharing platforms proved that customers could strip and share music files for years before iTunes was released by Apple.  The future, as Gibson said, was out there, just not widely recognized or distributed.

Even if you aren't interested in innovation, but merely want to remain competitive and keep pace with your industry and your competitors, understanding trends and predicting the potential direction of your industry and customer base is vital.  It's the minimum to simply keep up with your market.  Good innovators will be looking for clues to find the big shifts that they can take advantage of.


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posted by Jeffrey Phillips at 7:03 AM 0 comments

Friday, October 06, 2017

We could all use a little Sharknado thinking

I saw a sign in my Twitter feed recently that spoke volumes about innovation culture.

 Image result for somebody came up with the idea of sharknado

Let's contemplate the audacity of suggesting an idea about a movie full of sharks in tornadoes for just a moment.

Creativity and Combinations
To suggest a movie about sharks in a tornado demonstrates creativity.  Good innovation often happens when you combine two unexpected attributes or components together to create something new.  In this case I think everyone understood that Sharknado was over the top. And why not?  If you look at the rest of the movies being made, something a little tongue in cheek makes sense.  The first thing to take away that someone in Hollywood did right from an innovation perspective is making unusual connections.

The guts to go beyond the obvious
But beyond the idea of combining unlike objects, imagine the guts it takes to suggest something so new and unusual.  In many organizations even reasonable ideas get shot down very quickly.  Participants will wonder about profitability or ROI.  Others will question customer demand or technical feasibility of ideas that seem possible and not outlandish.  That's because all of the possibility and "wonder" has been squeezed out of us in the corporate world.  The vast majority of people live lives of quiet desperation, recognizing opportunities but quickly looking away, aware of the challenge to create new ideas or the price one might pay for suggestion them.  What environmental, economic, and emotional conditions must exist for people to suggest outlandish ideas?

Accepting the impossible
Now, place yourself back in that setting, where some low level production assistant has just suggested making a disaster movie, one that places sharks (looking back to Jaws and other killer aquatic animals) in tornadoes (again, looking back at classic disaster movies).  The idea combines two traditional Hollywood tropes, but in an unexpected way.  You'd think even Hollywood producers would have laughed the idea out of the room.  But they didn't, and that's why Hollywood creates more stuff (that's good and bad) than most other organizations and industries even contemplate.

Some producer or producer's assistant had the guts to say:  tell me more.  Rather than shooting down an idea that marries two very unlikely protagonists, someone accepted the nearly impossible idea and said, go further.  This is what divides innovators and creatives from the realists and the execution-oriented folks.  Realists and operationalists would scoff. They'd say "Sharks don't get caught up in tornadoes" or "That's unrealistic, no one would believe it".  Yet today we walk around with more processing power in our smart phones than a spaceship had that carried men to the moon.

We in corporate America need to regain a sense of wonder and possibility.  We need to stop thinking about what customers need next week, and start imagining what they'll be doing or what need they'll have in 3, 5 or 10 years.

But that's Hollywood, you'll say
Some of you reading this will argue that it's Hollywood's job to create funny, compelling, mindless entertainment, and that means stretching the genre or combining or creating really different concepts to attract and retain an audience.  But isn't that also our jobs in corporations?  To create really interesting and valuable products to attract the attention and revenue of new and existing customers?  Do we really think that in a time and place where change happens so frequently, societal norms and tastes shift rapidly, where information flows so freely that we can win by developing safe, me-too products?

Did AirBnB or Uber create a safe, me too product, or did they dream up something new, audacious and quite different that clearly threatens the existing industry players?  Corporations, in all industries and of all sizes need to get some of this Hollywood spirit, to foster new and outrageous ideas, to encourage new growth, to create new and interesting products and services for customers.

Conclusion

We need a little more Sharknado thinking in corporate America, and to get it we'll need a lot more Hollywood style interaction - mixing unusual stuff together, extending ideas or concepts beyond the breaking point, being willing to generate and speak out loud really outlandish ideas, with the sense that someone will say:  tell me more.  The people in Hollywood aren't that much more creative than the folks you'll find in many Fortune 500 companies, but they have an expectation and culture of creating new things, and a tolerance and expectation of failure and experimentation that many companies lack.


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posted by Jeffrey Phillips at 6:42 AM 0 comments

Tuesday, October 03, 2017

Authoring ideas

As a sometimes writer of blogs, white papers and even a few books, I understand the challenge of facing a blank page, trying to form the words into meaningful and insightful sentences.  A lot of times the concepts and ideas that sound so good in my head get misplaced and mis-translated on the page or simply don't ring with the same clarity when written that they seemed to have when I thought about them.  Writing in any form is a challenge, and increasingly I think writing is very similar to innovation.  Writing, after all, is the act of dreaming up something new to say about something old, bringing new concepts or new stories to light in a new way.  Writing, like innovating, is creating.

What's more, writing, especially stories, takes real creativity.  Tolstoy wrote that there are only two basic story lines:  a person goes on a journey or a stranger comes to town.  When you think of the diversity of stories, the creativity it takes to make them compelling and the range of story types, characters and plots, you can easily see that writing is creativity and innovation.  So perhaps we innovators can learn something from good writers.

What good authors know about writing

It turns out that many writers don't think they know much about writing.  Joe Fassler, who wrote the article that prompted this post, says that many authors find writing difficult, frustrating and challenging.  Even those that you would think are "experts" describe their struggles.  Steven King, Amy Tan and others talk about writing and re-writing, often rethinking and reworking their ideas and stories over and over again.

Reading Fassler's article made me think of my own writing and how it relates to innovation.  There are a number of interesting parallels.  First, when writing an article, blog or story, the author must have an interesting story to tell, a new perspective, and make the story as interesting as possible to the potential reader. In the same way an innovator must target customers who have needs, and shape ideas into new products or services that customers want to buy.

Second, authors will tell you (and they do so repeatedly in the article) that first drafts are for discovery and experimentation.  These drafts identify gaps and weaknesses and potential areas of opportunity or discovery.  Amy Tan notes that she throws out 90 to 95 percent of her initial work.  Innovators face the same challenge, but often have very different expectations.  In business we think because we have detailed processes and deep experience, we should get ideas right the first time.  Instead we should learn to diverge and converge and iterate until the ideas achieve their correct shape, but time and cost pressures rarely allow innovators to fail, restart and reshape ideas.

Finally, the article says that the artistic process never gets easier. Even experienced authors struggle with phrasing, story lines and plots.  They constantly work at their craft.  Innovators could learn from this dogged determination.  Most innovators arrive unready and unseasoned, attempt to perform an innovation activity quickly, declare victory once they've defined a new product or service, and return to their regular jobs.  They don't hone their innovation skills and are surprised when innovation is difficult or requires learning, discovery and iteration.

Paralyzed by your thoughts

One author described being "paralyzed by her thoughts".  This statement made me think of many people in idea generation or brainstorming sessions who are unable to generate ideas in the moment, placing far too much pressure on themselves to get an idea right.  The pressure we place on ourselves as writers or innovators is often detrimental to creative thinking.

The author of the paper sums it up nicely when he says "I’ve learned, bigger feats, bolder ideas unfold over the long haul—in the space where success feels uncertain, even unlikely".  Good innovators recognize the agony and humility in this statement, but the best ideas do take time and require hard work. 

One final quote that I think captures both writing and innovating:  "I'll keep at it stubbornly and gladly until the job is finished".

Innovators and authors have similar jobs and similar challenges.  Most authors write because of a passion for a story or an idea, and learn to iterate and rewrite/rework.  Most true innovators also have a burning passion for an idea or a problem, and most successful innovators are more than willing to describe their experiments, their failures and their iterations that ultimately led them to success.  We need to understand how these two jobs are similar, and what authors and innovators could learn from each other.
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posted by Jeffrey Phillips at 7:31 AM 0 comments

Tuesday, September 19, 2017

Context Matters in Successful Innovation

I think we often over complicate the work of innovation, because we believe it cannot be simple and straightforward.  After all, how can an activity that can disrupt an industry, create compelling new products or services and reap significant riches be simple?  To drive all of this change, certainly innovation must be difficult and complex, right?  Consultants often benefit from this assumption that innovation is difficult or unusual.  Unfortunately the presumption that it must be difficult also means that many people are afraid they don't have the requisite skills.  Fear, uncertainty and doubt about innovation and the knowledge and skills it takes to do it well mean that far less innovation is attempted than probably should be.

In order to accelerate the pace of innovation and increase the amount of innovation that's done, we need to simplify it, or at least remove some of the uncertainty.  To do that I'm going to argue in this relatively short post that innovation has three important deliverables:
  • problem definition, 
  • ideas and 
  • solutions.
Between those deliverables are two very important activities that illuminate and contribute the the generation of those deliverables.  Those two activities create context and content. While we focus on the deliverables it's actually the content/context that really drives innovation value.  Let's review the deliverables and the activities between them to understand what I mean.

Problems/Opportunities

The first real deliverable in any innovation activity should be defining and scoping an interesting problem or opportunity.  To ask for innovation without defining a need or opportunity is useless - but to innovate based on a key insight, opportunity or problem is exceptionally valuable.  Your first goal is to find the right problems to solve, the right opportunities to address.  I don't have enough pixels in this blog post to tell you how to do that, but have written about this previously.

Too many innovators and innovation teams start out without a good problem definition or opportunity, and this lack of scope dooms their work.

Ideas

Many people think an innovation activity begins with an idea, but they are wrong.  An innovation activity begins with a problem or opportunity that you investigate, and learn more about, and discover needs, all of which is context, and the next deliverable is a set of viable ideas to solve the problem.  Ideas are simply a waypoint in an innovation process or exercise.  Unfortunately many people think they are the output. 

And, even when innovation teams generate ideas, they often limit their thinking to small changes, incremental ideas, and a small handful of ideas rather than fully exploring the innovation opportunity.

Solutions

Innovation doesn't begin or end with ideas.  It ends with a valuable solution that customers can acquire and use, that makes their lives better or easier or more valuable.  There really isn't any innovation without this final value realization, so a valuable solution, well launched and well marketed, is the final deliverable of an innovation activity.

Now that we've identified the three deliverables of an innovation activity, let's turn to the activities that shape and inform the deliverables:  the context setting and content development that helps shape and inform ideas and solutions.

Trends and Needs:  Context/Content between problems and ideas

Once you have settled on a problem or opportunity to solve, you need to back up and gather context.  What are the issues?  What are the challenges?  Why does this problem or opportunity exist?  Who else is working on it?  Do customers understand the need or opportunity?  Is there value in solving it?  This context helps you shape the problem and begins to point at potential solutions (ideas).

We typically frame this in two activities:  trend spotting to understand the evolving nature of the world, the market, customers and technologies, and customer insight gathering, to understand the gaps and needs of customers and what they value.Without this insight, discovery and context you cannot generate meaningful ideas, and if you do manage to generate good ideas you won't be able to describe to anyone why they matter.  Too often innovators assume that they know what customers want or need, or simply believe their solutions and technologies are so valuable that they can address any needs or gaps.

Evaluation, Prototyping and Development: Context/Content between ideas and solutions

Once you have good ideas you must evaluate them against customer needs, corporate viability and competitive reality.  Then you must determine how to produce them and launch them in a timely fashion.  These activities too require investigation, discovery and context setting.  In many cases if the ideas are very new or different, you may need to create new product or service development capabilities or develop new business models or channels.  This may require new discovery and new experimentation - something your existing product development processes won't value or understand.  You may simply need new context for new ideas to be realized as new products.

Where the real work lies

The real work of innovation lies in this context and content development, between a good problem statement, ideas and solutions.  We often get far too caught up in these discrete deliverables, never realizing that the value lies in how well we understand the context and generate and evaluate the content between the deliverables.  If you want to know - its in these content and context activities that the innovation magic happens.

We innovators place far too much emphasis on the deliverables of innovation, and on ideas in particular, when we should be focused on the generation and understanding of the context and content activities that must occur between the deliverables.
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posted by Jeffrey Phillips at 5:54 AM 0 comments

Monday, September 11, 2017

3 innovation types: evolution, preventative and creative

I was thinking over the weekend that for years we've positioned innovation incorrectly.  Too often we position innovation as creating a new and valuable offering or solution, ready when customers are ready to demand new products and services.  In other words, we've positioned innovation as something to do to prepare for future business, future needs and future demands.  Innovation does answer for these issues - identifying needs and developing ideas for products and services for unmet and perhaps unanticipated needs. 

But in the hustle and bustle of day to day business, the main focus is on the now.  What can you deliver today, this week, this month, this quarter?  How can you help me achieve my quarterly revenue and income goals?  Sure, the future is nice, but I'll worry about that when I get there.  With this mentality, cost cutting, becoming more efficient, gradual but general improvement is the key focus, not innovation per se.

Making innovation more relevant right now

So the question becomes, how do you make innovation more relevant, right now, to executives and managers who are so focused on the short term?  One approach would be to focus on the "short term", what can innovation do for us to put better products on the shelves in less than 90 days.  The general answer to that, given product development cycles, channel issues and customer awareness is:  no much, except perhaps in the virtual world.  Building, modifying and releasing a physical product is going to take more than 90 days, and 90 days is the magic timeframe.  Anything we can do to impact revenue and cost within 90 days is good.  The timeframe beyond 90 days seems almost imaginary.

Innovation, where practiced at all, becomes incremental because of this pressure to generate rapid results.  Even if we can speed up innovation activities (we've run innovation programs from problem definition to fully developed prototypes in under a week) you've still got to go through the product development and launch cycle.  This means innovation will be focused on items and attributes around the periphery - messaging, packaging, claims, rather than interesting or radical innovation of the product or solution.

Another approach is to use innovation to ferret out efficiency gaps.  If we can't create better products and services, can we use innovative thinking to shorten any barriers or gaps to bringing our products to market with less cost or with fewer inputs?  This has been the management focus for years - right-sizing, outsourcing, automating.  It doesn't necessarily lead to new products but may lead to less expensive products or more rapid turns of incremental products. 

So, while we can speed up the existing processes and use innovation to identify gaps or inefficiencies, or use innovation to make some changes to the periphery of the product or service, there's not a lot of innovation that can be delivered and impact the bottom line in 90 days or less.  So we need to think about innovation differently, or perhaps in different categories.

Categorizing innovation

Clearly, as I've defined above, there's a real need for focus on process and peripheral innovation.  These innovations are meant to gradually improve the product or service, cut costs and deliver more bottom line value, and to do so quickly.  The driving pressure for this innovation focus is cost reduction, time reduction and the desire to show customers something "new", even if the newness is relatively minor.

There's also a need for preventative innovation.  I'll call any work to blunt attacks by existing competitors or new entrants as preventative. This kind of innovation identifies potential openings and gaps in a product line, or new "in demand" features or benefits that you don't currently offer.  Preventative innovation considers a slightly longer time frame - perhaps 2 or 3 quarters - doesn't necessarily create a new product as much as identify missing features or product line gaps and carefully evaluate what competitors and potential entrants are doing. 

Then there's radical or disruptive innovation, creating a completely new product or service, or disrupting an existing adjacent market.  This kind of innovation takes focus and planning, commitment for quarters or even years, and full commitment over several planning and budgeting cycles.  This kind of innovation ends up on the magazine covers and is what every CEO wants but can't quite understand how to deliver given the demands for quarterly results.

Three horizons

The three categories I've defined above are exceptionally similar to the "three horizons" model that many innovation consultants talk about.  But rather than call them "incremental", "radical" and "disruptive" I think it makes more sense to describe them based on what they are:  constant evolution, preventative and creative.

The first type of innovation is necessary (and is almost always underway) because your products and offerings can't sit still.  You must find ways to cut costs, make your delivery more efficient and tinker around the edges of existing products.  The second type of innovation is probably the least understood, because too many companies don't understand what their competitors are doing, and are often shocked by the offerings of new entrants.  Companies need to do a lot more preventative innovation, from a defensive point of view, to ward off new entrants and sustain or grow market share. 

Everyone acknowledges the importance of creative innovation - that is, the creation of a completely new offering that radically changes the competitive landscape - but few truly know how to do it or are willing to commit the resources to do it.

Investment cycles

Here's where every innovation consultant will lecture you about how much time and investment should be made in each of these three portfolio segments.  You can think about the three horizons, or my evolution, preventative and creative phases, as components of an innovation portfolio and next ask:  how much time, energy and investments should go into each one?  The general rule of thumb answer is 70:20:10.  Seventy percent of your innovation effort should go into evolution, 20% into preventative and so on.  But what if your budget for innovation is:  zero?  What if executives demand innovation but don't provide budgets or funding or resources?

The inevitable fall back position is to conduct efficiency innovation (evolution) because that's something your teams understand and can do relatively well now.  And, of course, you'll build and staff one high profile team to explore some really interesting innovation (creative) but they won't have the commitment or funding to stick it out - it's merely window dressing, because you expect to show some immediate results from the evolution innovation in the next few weeks and everyone will be satisfied.

Let's change the language

I think innovation champions and teams would do themselves a big favor by refocusing innovation language and talk about innovation in line with processes and outcomes.  We can flavor our language with:  evolutionary innovation to deliver short term benefits, preventative innovation to resist new entrants and sustain market share, creative innovation to win adjacent markets and customers. 

Once we win the language battle and demonstrate we can deliver on evolution and preventative efforts, we can get the funds and resources to do truly creative innovation.
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posted by Jeffrey Phillips at 6:23 AM 0 comments

Wednesday, September 06, 2017

Innovation lessons from Lego

In television, an outlandish episode that seeks to introduce revive a series often signals the eventual downfall of the show.  Those old enough to remember the TV series Happy Days will remember the episode when Fonzi jumped the shark on water skis.  This gave us the expression that something had "jumped the shark", an event signalling an inevitable downfall.

Today I'm wondering if making a movie about toys is a signal that something has "jumped the shark".  In strange and disappointing news, Lego announced that it was facing dire sales projections, with growth slowing from over 25% per year to low single digits.  Strange, when just a few years ago Lego was on top of the world, with great new toys, Lego kits, Lego Robots and the Lego movies.  While the management team blames internal complexity for the slowdown, those factors don't necessarily contribute to slowing sales.  Rather, I suspect that a company that had been on the brink of bankruptcy only a little over a decade ago discovered how to innovate in desperation, and began to neglect innovation as growth accelerated.  What we are seeing now is the aftermath of too little innovation and too much marketing.

What lessons can we learn?

Of course I should admit I'm doing this analysis from a distance, without complete information since Lego is a private company, but over the last few years Lego hasn't done nearly the innovation or introduced nearly the range of products and services that it did from the mid 2000s until 2012 or so.  Lego management turned the company around in the mid to late 2000s, and growth accelerated, only slowing in the last year or so.  The signals were out there, of course.  A new CEO was hired and let go within only 8 months.  What can we learn from Lego's example?

Growth can lead to bureaucracy and risk avoidance
Lego may be challenged by its aggressive growth, and with that growth came size and complexity.  However, and complexity isn't necessarily a factor in its innovation success, unless Lego allowed complacency and bureaucracy and risk avoidance to grow as sales grew.  Innovating at the brink of bankruptcy clarifies the mind (Steve Jobs would agree) and forces companies to focus on what's really important.  Getting large and perhaps bureaucratic can mean that concerns grow about taking new risks.  Internal bureaucracy didn't cause slow sales growth unless it blocked new innovative products or redirected investments.  Lego probably just lost some of its edge and taste for risk and innovation.

Only the paranoid survive
To me, one of the most important take aways should be, you simply cannot become complacent.  Good innovations from just a few years ago will only sustain your growth and differentiation for so long.  Customers are hungry for new solutions, rapacious in their research and unforgiving in their quest for new stuff.  In the past products and solutions had long shelf lives.  You could create an interesting product and merely tweak it, adding a handful of new features every few years.  Those days are over.  Customers demand and expect new capabilities and features on a regular, recurring basis.

Companies need to gin up a consistent innovation program which aims for incremental and disruptive innovations to occur all the time.  Lego is just an extreme example of desperate but winning innovation to avoid bankruptcy followed by a period of less interesting or less successful innovations while harvesting the profits of the prior innovations.  Lego and companies like this are particularly subject to this boom and bust cycle because of their target audience (children and teenagers primarily) who age out and don't want the same toys their siblings or parents had.  But while Lego is an extreme example, companies in every industry should take note.  From the peaks of profitability and industry acclaim to laying off 8% of its workforce in a period of only a few years.

Explore the adjacencies
I had hopes for Lego when they built some of the early Lego robots, because 1) the robots were cool 2) the robots extended Lego's audience into older kids, teens and even adults and 3) they were more expensive and had pull through.  But more importantly the robots were an exploration of an adjacent market or customer group.  Good innovators must constantly evaluate the adjacent markets and customer segments and provide new capabilities, features and products that entice new customers.  The apocryphal story is that Lego discovered lead users building robots with basic Legos and entered the market with their own product.  If that story is true, perhaps it's time for Lego to go back to evaluating what users are doing with Legos and capitalizing on new adjacencies.

The quote from the Lego chairman that he wanted to simplify the business model in order to reach more children suggests that Lego isn't reaching for new adjacencies, but doubling down on a fickle core market.

Grow up but don't grow old
Lego's problem mirrors Disney's problem in a way.  The business scales, but only so far.  Both attract children and young adults, but have difficulty really capitalizing on the adult market.  Disney has made forays into music and movies with some success, but they should be able to win more share and more business from adults.  Both of these firms need to grow up (expand their customer base using their trusted names and capabilities) but not grow old (build sclerotic bureaucracies that resist innovation).


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posted by Jeffrey Phillips at 7:43 AM 0 comments