Today's disruptions are tomorrow's incrementals

We hear a lot about disruptive innovation. Every firm we talk to has some interest in disruptive innovation - either to prevent some other firm from disrupting their market, or to disrupt another market.

Disruption has been held up as the nirvana for ultimate innovators - kind of the Olympics of innovation sport, and rightly so. Any real disruption in a product, or service, market or industry can radically remake opportunities and reshuffle the competitive deck. However, a really disruptive idea or opportunity faces two significant challenges.

First, by its very nature, a disruption is dangerous. Dynamite, used in the right hands, can be a powerful tool, but in the wrong hands can be dangerous or even deadly. That's why it is regulated. A disruptive idea can be advantageous if applied correctly, but can backfire or cannibalize your existing market. For these reasons, disruptions are usually managed very carefully. Which leads us to the second challenge:

Time. Any disruptive activity or idea will take time to vet, build and deploy. The more disruptive the idea, in general the longer to deploy, since your organization doesn't have the people or processes to build or deploy a truly disruptive idea. So, incremental ideas can be deployed relatively quickly with less risk, while disruptive ideas will almost always take much longer to deploy.

So that leaves us with this conundrum: what seems like a really disruptive idea RIGHT NOW may seem very incremental when it is finally launched as a new product or service, given the fact that many times the product or service development lifecycle can be rather long. If you could commercialize that really disruptive idea today, it would be disruptive. If it takes nine to eighteen months to commercialize, by then other products or services may be addressing the opportunity or need you spotted.

The implication? If you want to launch disruptive innovations, learn to do it quickly, outside the normal development life cycle, or make sure the ideas are exceptionally disruptive, since the time lag from concept to product or service may be long enough that others address the opportunity before you do.

What we know too well

In countless innovation projects, we've queried the management team about the state of research. What we're interested in is what the firm "knows" about its customers, its market and its opportunities. Typically we are quickly reassured that the firm has a significant amount of research, and it will be made available. What we usually find is that most research is focused on very specific product or service markets or niches, and on very short term opportunities. Most firms lack overall strategic insight, and most are heavily, if not exclusively weighted to quantitative research.

Now, there's nothing wrong with quantitative research, especially from a customer satisfaction perspective. After all, most firms want to be able to quantify their results and measure how well a particular service offering meets the needs of customers and satisfies their expectations. The problem in most firms is that "research" becomes obsessed with quantifying results of existing products and services. Ask any research team how happy the left-handed, red-haired baseball fans in the southeast like their existing product line, and you'll get an answer to three significant digits. Ask most research teams what these folks want next, or would consider a compelling innovation, and there's rarely a good answer or insight.

That's because most quantitative research (and, therein, most research conducted in major corporations) is focused on the existing products and services, and existing customers or strong prospects. This means we are experts at knowing what our existing customers are happy with or how satisfied they are with what we already offer. As noted above, from a customer satisfaction standpoint, that's great. From an innovation point of view, it's really not relevant.

Granted, it's hard to ask questions about what new products and services people want - most people can't tell you that on the fly. Often a new product or service must be experienced before customers can tell whether or not it will be valuable. But some insight about unmet needs or undiscovered opportunities should be conducted. Far too often we are asked to create new products and services that will "disrupt" a market, but with little direction and no sense of what customers want or need. Where most corporate research is focused, we know all too well what we know (quantitative, satisfaction oriented data) and far too little about what is important from an innovation perspective (qualitative, aspirational, unmet needs).

Further, we are quick to apply quantitative methods, which are internal strengths, to new ideas. Can we justify the new ideas using existing survey and research tools? Well, we definitely have the methodologies, but we may be asking the right questions in the wrong ways. As noted above, most people can't dream up new products and services on the fly, and even when presented with a new concept many people may find it hard to understand, or reject it simply because it represents change. It is dangerous to test new ideas using many quantitative tools, simply due to the fact that a new idea, regardless of its worth, is often rejected. After all, as Henry Ford said, if I'd asked my customers what they wanted, they'd have said a 'faster horse'.

So, there are two traps when thinking about innovation and the role that research can play. First, we have a preponderance of narrowly focused research in most firms that tells us how satisfied existing customers are with existing products, but little to tell us what new products these customers want, or what would attract new customers. Second, our reliance on this existing strength often leads us to validate new ideas using tools and methods that we understand, but might not be the right "validation" methods for new ideas.

What we know too well is not enough when it comes to innovation, and what we know too well may actually trip us up when it comes to validating new ideas. New thinking is important when it comes to generating new ideas, and when it comes to validating them as well.

The burning platform for innovation

Given all the bad news in the economy and the natural inclination to pull in the forces and cut costs, most businesses are having a difficult time doing anything from an innovation perspective right now. There are simply too many other factors in the marketplace that are commanding attention - the financial industry crisis, the possibility of changes in healthcare, the economic slowdown, cap and trade legislation, and the fact that things generally slow down in the summer anyway. All of these factors and more combine to put innovation on the back burner even at the most innovative of companies.

So, if your team wants to get something started, and you are fighting all of these factors in order to get time and attention, what can you do to get started? Create a burning platform for results.

This concept is really stolen from sales. A good salesperson knows that even if a prospect has money, and the solution is a good one for the buyer and the solution meets the needs of the buyer, the buyer often won't purchase unless there is another factor that makes the purchase URGENT. After all, people don't jump off of perfectly good platforms until they absolutely have to. That's why a burning platform is so important.

How do you create a burning platform from an innovation perspective? I'm glad you asked. There are a couple of approaches you can take. Note that none of these will necessarily create a innovation program or capability, but they will allow you to get something started, and perhaps that will light the flame for innovation in your business.

Create an innovation contest
Within your organization, identify one or two important opportunities or challenges and ask people to submit ideas to solve these challenges or opportunities. In this environment, certain challenges may be more acceptable than others. Those focused on cutting costs, or doing more with less. Be sure to appoint one or several winners and provide an award. With this approach, you've introduced the concept of a "campaign" and demonstrated the value of gathering ideas from the workforce. You can also extend this opportunity to customers as well.

Conduct a scenario planning workshop
Yes, I know, everybody is very busy, but even the most busy individuals need to get a grip on what the market looks like one, two or three years out. A short, focused workshop that looks at trends and competitors in the marketplace, and possible changes may identify new opportunities. Given the tremendous amount of change that may occur (health care, cap and trade, financial re-regulation) it makes sense to try to create alternative scenarios and get ahead of the change, rather than simply waiting for it to happen and then react to it. By then it will be too late.

Put a stake in the ground
This one is a little easier if you are the CEO or head up a line of business, but sometimes a deadline is worth more than anything else. Simply demanding an innovative new product or service nine months from today will force people to think differently and get started right now. While there are significant pressures on most businesses, there are also a significant amount of under-utilized and unemployed talent in the marketplace which can be directed to work on your new ideas.

Run a brainstorming session
This slowdown won't last forever, and as the economy turns more positive there will be people who want new products and services. Running a brainstorm or idea generation process now, in anticipation of the economy getting stronger, will provide you with the new product and service ideas that you can release then. Generating ideas and slowly developing them over time is much more effective in the long run than trying to do something quickly (see above), but either of these approaches can work, depending on the organization and the situation.

Identify important emerging needs
As the economy changes, and as legislation changes, there will be opportunities for new products and services. By the end of 2009 it is likely we'll see changes in how health care is delivered, financial re-regulation and an upswing in the economy. What opportunities do these factors create, and what existing products and services do they destroy? Knowing that, or at least having these insights will position you to take advantage as the opportunities unfold. Who is tracking trends in your organization?

These are a few ideas for getting a small innovation activity off the ground in this economy. At the worst, you could apply innovation skills and tools to cost cutting or operational excellence. But in that regard, rather than trying to save a few dollars or few minutes in a transaction or process, seek to find ways to eliminate the transaction or the process all together.

Innovation, more than any other function, needs a burning platform to kickstart it in most organizations. How can you create a burning platform in this economy?

Innovating outside the lines

This is going to be one of those posts where I try to take a trite concept, like coloring inside the lines, and turn it into something more insight. Stick with me, we'll see how it goes.

As long as people have created art, there have been critics. One can imagine the first caveman to sketch a buffalo or mastodon probably had a critic standing just behind him, commenting on his work. I was thinking about this recently after watching a "Monk" episode. Perhaps you've seen Monk on television - played by Tony Shaloub, the detective is obsessive-compulsive, and that's just on his good days. Monk volunteers to watch the kids of his friend and colleague, Captain Stottlemeyer. He takes the kids to their favorite restaurant, a 50s themed diner, where they start coloring the menus. It drives Monk crazy that the kids won't color within the lines.

That got me thinking - everything we do in school and in business encourages people to stay "within the lines". In art we encourage people to "stay within the lines" of conventional art expectations. In science we encourage people to stay within the lines of received wisdom - after all, it was a "known fact" that the sun revolved around the earth for thousands of years. Think we are above that now?

In business we encourage people to "stay within the lines" by carefully defining their job descriptions. People who work outside of their descriptions and responsibilities are quickly reminded of their responsibilities. We encourage people to "stay within the lines" by developing specific evaluation criteria. We communicate effectively what we want from people, and reinforce that by what we provide in the way of compensation and rewards. We encourage people to stay within the lines through the power of formal and informal corporate culture, which is constantly pushing people to remain within the fold, within the expectations of the organization.

Then, we wonder why we can't innovate, why no one will - wait for it - "THINK OUTSIDE THE BOX". Hmmm. Perhaps it's because we've been constantly told that coloring outside the lines, working outside our job grade or job description, questioning the status quo, is wrong. We've become the trained elephant, which only requires a cuff to be placed on its leg to believe it is staked to the ground. If everything in your culture reinforces thinking "inside the box" and coloring "inside the lines" then why is your team surprised to find that innovation can be difficult?

What to do? Well, there are several responses to this, none of them easy. One that is often attempted and never seems to work well is to hire a couple of "left brained" people and scatter them throughout the organization, hoping they'll influence the thinking. Most of these people will be co-opted into the group think very quickly or ejected like a virus as quickly as possible. Another response is to demand innovation and change from a group that has been educated by the firm over time that change is difficult and new ideas are risky. A quick, rapid change in this environment is exceptionally difficult. The third, and most permanent change, is a consistent change from the top down, starting with strategic direction and working its way from the management team and its priorities into business plans and individual evaluations. This change may take two or three years, but the subtle shifts will encourage the entire team to get on board.

Why do we think people can immediately and effectively "think outside the box" when for their entire lives we've reinforced "coloring inside the lines"?

Operational Excellence - once an enemy, now a friend to innovation?

OK I admit it. I've grown frustrated by the fact that a capability or insight that proves valuable to an organization - operational excellence - is also such a big impediment to innovation. It's strange that something that in some regards is so good for an organization can also be so detrimental as well.

How, you might ask, is a focus on operational excellence a detriment to innovation? Well, individuals measured on operational excellence want consistency, a clearly defined process that people follow closely, the elimination of failures and mistakes, the elimination of variance. These are GOOD things for an organization once it has determined the appropriate mix of products and services customers want. To be able to deliver the products and services at the highest quality and lowest cost is valuable.

However, all that focus on eliminating waste and variation and risk creates mental barriers for innovation that are very difficult to overcome. If a person or team has been evaluated and compensated for making the machine run efficiently and effectively, can they really stop in mid-stream and now work in a very different model - the model that innovation requires?

So, for years operational excellence has been my nemesis. But I've decided to use innovative thinking to turn the problem on its head. Perhaps what we should be asking is how to create an operationally excellent innovation process.

Those of you who follow this blog understand that firms that are successful at innovating have intentional innovation processes that are sustainable over time. It makes sense that if we want people in an organization to accomplish a complex set of tasks, we'd implement a defined process and method within which they can work. This is where the worm turns - if innovation is a defined process, then perhaps our friends who are interested in operational excellence can help us make those processes more effective and efficient.

Imagine changing the mindset of the organization - changing the cultural attitudes of the organization - by reinforcing the "operational excellence" concepts within a innovation oriented mindset. Let's find the best new ideas, and implement them in the best way possible. Suddenly these two concepts, which have been inimical, can now work in support of each other. This attitudinal change is not a simple one, but it is one that could happen. What's required is leadership from the senior executives to explain why innovation is so important, and how the concepts and methods of operational excellence can enable and support the organization to become more innovative.

It's at least worth a try.

Innocentive paints a bright future

I had a chance recently to talk with Dwayne Spradlin, CEO of Innocentive, about the growth of Innocentive over the last few years and its strategic goals. I've had the chance to interact with people from Innocentive over the years and have followed it as another example of innovation creating a solution to a thorny problem - how can we get smart minds from across the world to present us with solutions to clearly defined problems.

Innocentive has grown and changed as a firm since I had the opportunity to interact with them, and Spradlin paints a very clear future and some specific goals. In fact, we talked about four changes that he and his team have implemented, and that bear watching over time. The first is that Innocentive, which originated in the pharmaceutical space, is really branching out - targeting "challenges" in many different industries and many different scientific categories. From its original roots it initially focused on very difficult scientific challenges, but is gradually opening up to other industries and other types of challenges. Second, the kinds of challenges and types of "solutions" Innocentive can capture have expanded. The bread and butter work for Innocentive remains the scientific challenge and solution, usually a very specific, well scoped problem that has a scientific solution, but increasingly Innocentive is offering brainstorming challenges (on the more general level) and electronic RFPs (on the more specific level) which allows Innocentive to offer a full range of idea generation and solution identifying services.

Third, and one I found interesting, is Innocentive is offering solutions to firms outside the commercial sector. Spradlin and I discussed a very successful relationship Innocentive has with the Rockefeller Foundation, where non-profits can seek funding and Innocentive sponsors challenges on their behalf. Spradlin and his team believe that non-profits, NGOs and other organizations should benefit from the power of organized innovation. Finally, Spradlin and I talked about "customer driven innovation" - the cultural shifts in most organizations that happen when firms realize there are more good ideas, and more perspectives, and more insights, outside the organization than inside the organization. Putting the customer first, clearly understanding their needs, and building products and services that meet their needs is the ultimate goal - customer driven innovation.

We spent some time, as you might imagine, talking about crowdsourcing and the role Innocentive plays in the crowdsourcing arena. There are a number of easily recognizable players in the space, including solutions like Dell's IdeaStorm or IBM's Idea Jams. Innocentive participates in this market and supports the concept of open innovation and crowd sourcing, but departs from the crowdsourcing mentality when it comes to evaluation of the ideas. Rather than a "thumbs up" or ranking/voting mechanism, the solutions presented to Innocentive are not judged by the crowds (Wisdom of Crowds) but by a select team within the organization that sponsored the challenge. Given the nature of the challenges and the specific requirements of the problem, as well as the sensitive nature of the solution and its intellectual property, this is probably the best solution.

Finally we talked about the growth of innovation software and idea management. As the market matures, it's not unusual that a firm may have one, two or even three different applications - one for pure ideation, one for idea management and one for crowdsourcing or other activities. Spradlin is interested in working with other idea management firms to create open APIs or markup language so that firms that have more than one idea management application could exchange information more freely. There's an acknowledgement of history in this discussion. Both the ERP and CRM behemoths like SAP grew by aggregating various capabilities into one monolithic umbrella - perhaps there's the option to keep smaller, more nimble firms and integrate and exchange information rather than create a fully integrated idea management solution for the enterprise. Time will tell.

I came away very impressed with Spradlin's vision for crowdsourcing and for Innocentive. One has to believe that the existing economy will force firms to find the best ideas, as always, but using methods and mechanisms that control costs and speed identification of the best solutions. I think Innocentive is well positioned to capitalize on the need for innovation and the growth of acceptance of open innovation and crowdsourcing.

Can you afford to innovate?

Today we'll look at the affordability question of innovation from a contrary viewpoint. Usually people in my position sit hectoring business leaders about the fact that they "can't afford to not to innovate" which as we all know is poor grammar, a double negative and a lecture, all rolled into one. While saying this may make me feel righteous, and while I am probably correct, it behooves us to turn the tables around and ask ourselves - if we decide that innovation is important in our business, can we afford to do it?

Innovation has several costs associated with it as a practice. The first and most recognizable cost is financial - that is, the dollars that have to be spent in order to create new products and services. These dollars may be spent on consultants or third parties (feel free to ring us up for this kind of help) or on providing internal people and resources to an innovation team. Let's not kid ourselves. Innovation costs money - it is a form of experimentation, market research and investment.

The second cost is psychological and cultural. Can we enforce the change in thinking that is necessary to encourage the organization to think differently? This cost is actually more expensive than the fiscal cost. As a senior leader, you will need to invest your time and energy into ensuring that the cultural roadblocks and inhibitors are cleared out of the way so the innovation teams can function. It is a drain on your time and places stress on the organization and its culture. In many firms successful innovation will cost the culture something as well - which is why innovation is usually done in firms that are good at innovation from the start (already baked into the culture) or that are innovating their way out of a crisis (no other choice). Given any other option, most firms will grasp at other avenues out of a crisis - cost cutting for example, before turning to innovation.

The third cost is cannibalization. If your teams do a good job innovating, they are going to identify new products and services that overlap or make redundant existing products or services. In some instances they may create ideas that make a market or product line obsolete. Look no further than the big music stores to see what iTunes and music swapping/sharing has done to Tower Records. Would Tower Records have done this to themselves? Do they wish today that they had? Too many sacred cows in an organization will mean the cost is too high to consider innovation as a strategic tool.

The fourth cost is time. Innovation doesn't happen overnight. Well, idea generation may happen overnight, but validating an idea and bringing it to market certainly doesn't. Firms that demonstrate good innovation skills are constantly innovating, so there's not the concept of a "beginning" and "end" to innovation - it happens all the time, over time. We need a lot of time to be successful, and that time gets pulled from management, line workers and third parties. If your time is too valuable to share with an innovation team, then the innovation team ranks too low on your priorities.

So, if you look at this less than exhaustive list of cost elements, it's reasonable to ask yourself "Can we afford to innovate?". Innovation comes with exceptional benefits, but they are down the road, out a year or more, when the market is demanding return RIGHT NOW. Those returns are probable, and possibly big, but the costs are real and happening now. So the tradeoff is obvious. Many firms will argue that the possible payoffs are not worth the price in the short run, and will reach a reasonable conclusion that they can't afford to innovate. In the long run we have a name for these firms - market laggards. They have bought into the fallacy that innovation cannot "pay for itself" when strangely enough, all of the market leaders - J&J, P&G, Intel, Apple, Google, Boeing, Toyota, etc - are innovators and have found the investments necessary to innovate.

Can you afford to innovate? Of course you can. The real question is - do you have the "will" to innovate?