Wednesday, January 19, 2022

Practical Innovation throughout the business

 One of the big challenges to innovation is that many people think of it as a big program, like implementing the quality programs of the 1980s, or rethinking everything, like the re-engineering programs and right sizing programs of a more recent vintage.  Thus, innovation is often "too big" and too disruptive, because it is seen as a platform change, or is defined too narrowly to create real results.

I happen to be a fan of the big, platform basis innovation programs, where an organization sets out to build innovation capacity as a core competency.  And, yes, in this light there is a fair amount of investment and some change required.  Committing to becoming a far more innovative company requires training people on the tools and methods, introducing more risk and uncertainty in the business and experiencing occasional learning experiences that others might call failures.

Every day innovation

There are, however, plenty of opportunities to introduce innovative thinking and innovation tools in a wide variety of ways throughout the business without a full scale platform change.  Many innovation tools and ways of thinking are scalable to a specific need and are reasonably user friendly, and often generate a tremendous amount of value for a small investment.  Today, I want to talk about using innovation tools, creative thinking and other factors in a more humble setting - less organizational change and platform implementation and more getting better in small ways across the business.

Service Excellence

Let me start with the idea of service excellence.  Many organizations are trying to improve their service to customers, partners and internal stakeholders.  There are a number of ways of measuring the service delivered, including net promoter score (NPS), so we often know where we stand in regard to the service we deliver.  There are plenty of tools and methods to help define service and what service excellence might look like.  But innovation and design thinking have something to offer here.

First, there is the concept of the customer experience journey.  This is a powerful tool that helps internal teams understand the customer experience from finding a product to acquiring it to using it.  A true service experience should consider the end to end cycle I've just described, and ideally will describe it from the customers' point of view.  The customer experience journey maps the steps from learning about a solution to acquiring it, using the solution, requesting support and deciding to retain the service or abandon.  Within each of those steps, the team considers what the customers' expectations are and how well they are being met.  In really radical cases, the company goes and talks to customers to get real world feedback about the journey.  Using this insight, we can begin to understand where in the journey we are meeting or exceeding customer expectations, and where we are failing to meet expectations.

In my experience, this tool introduces eye opening insights, because most organizations focus on services for customers where the company believes it adds value, but often the internal thinking and belief don't match what customers want or expect.  Many times we'll find that there is an over-emphasis on some portions of the journey and a lack of emphasis on other phases or steps that the customer prioritizes.

Using the customer experience journey, a tool from the design thinking and innovation toolkit, you can radically improve customer service and service excellence.  You can do so in the guise of service excellence, without bringing in the labels and anticipated risk or overhead of "innovation".

Doing more with innovation tools and thinking

This is just one example of where you can apply design thinking and innovation tools and frameworks to improve a process or activity that does not seem at all related to innovation.  Most innovators know that we can create projects to focus on service or experience innovation, but that may be too much change or uncertainty for your management team.  Knowing that the tools work, regardless of the label we place on the activity, can make for better insights and better outcomes.

What customers want

I'll turn to looking at a critical need - understanding what customers want - as another example.  In a large innovation project, we might consider the Jobs to be Done (JTBD) method, or Voice of the Customer, or Ethnography as a way to gather and assess needs.  I think these tools work exceptionally well, but they are often grouped with other "innovation" tools and seem risky.  So many teams proceed with surveys or focus groups and miss a lot of what customers actually want.

This, again, is a problem of context and labels.  Tools like JTBD, VoC, ethnography or the strategy canvas from Blue Ocean Strategy are all very easy to use and produce excellent results, whether they are part of a full-fledged innovation project or simply used to gather more insight into customer needs.  

Using tools that make sense for the problem or opportunity

It's too bad that too many of the tools and frameworks of creative thinking, innovation and design thinking are corralled and labeled as innovation tools, because that groups them into a risky and uncertain category, which means fewer people learn them or understand how to use them.

These tools, and plenty of other innovation tools and methods, can create real value in spot activities not attached to a larger innovation program.  The more people learn these tools, and see their value, the more the tools and thinking models will be used and become familiar, and then innovation itself won't seem quite so daunting.

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posted by Jeffrey Phillips at 1:31 PM 0 comments

Tuesday, December 28, 2021

Exploring the Executive Innovation Workmat with Video discussions

 Over the last few weeks, Paul Hobcraft and I have developed a series of short videos.  The purpose of these videos is to explore a tool that Paul and I created, which we call the Executive Innovation Workmat.  The Workmat is meant to help executives understand their role in innovation activities, and to identify the key attributes of a business that must be aligned and in synch for innovation to flourish.

You've perhaps read some of the material we developed originally about the Workmat.  You can see the Executive Innovation Workmat graphic just to the right.

Each of these sections represents a factor that needs to be understood and developed for innovation to thrive.  To build a really successful innovation capacity, all of these components must be fully developed and working together.

 

In the videos we've created, we explore why each factor is important to innovation.

Strategy - we discuss the relationship between corporate strategy and innovation.

Governance - we examine how to govern an innovation project, and why this work requires different governance models from other projects.

Function/Structure/Design - we examine the way innovation should "work" - design and processes - and why it is vital to focus on an innovation capacity.

Common Language/Communication - we look at the importance of having common definitions, common language and regularly communicating about innovation.

I think the videos allow us to explore each of these, and I think you'll find them helpful if you are starting to build an innovation capacity, or trying to improve your innovation activities or outcomes.

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posted by Jeffrey Phillips at 7:56 AM 0 comments

Thursday, November 11, 2021

Building a lasting innovation capability

 I've been asked a number of times, by companies large and small, how to create an innovation capacity that lasts.  This is a really interesting and important question, with a distinction.  Note that what my clients are asking for is to create an innovation capacity that outlasts a product need, or market gap, or executive team member.  After all, most (probably 90%) of all innovation projects undertaken in large corporations are reactive projects trying to respond to a market threat or competitive move.  In these cases, innovation is a one and done activity, in order to respond to a new product or service, and aren't meant to be retained in the culture or processes or consciousness of the organization.

So, how do you build a lasting innovation competency in any business, of any size?

First, make innovation important to the CEO and the executive team.

If innovation isn't important to them, or seems like a distraction from day to day operations, then you can't do the real infrastructure development you are going to need to do.

  • How do you make innovation important to an executive team?  Most of them already say that innovation is important.  You need to demonstrate that innovation is not "a" strategy, but is a way to accomplish strategies - growth, differentiation, new line extensions and so on.  In fact, every strategy, every business and every product should have an innovation component.
  • Demonstrate that innovation can be purposeful, and managed through a process.  This reduces the risk of innovation and increases visibility
  • Introduce the idea of innovation portfolios and the need to innovate across the three horizons.  A company needs to make reasonable bets across the incremental, transformative and disruptive horizons in proportions that make sense based on competition and speed of change.
  • Demonstrate that innovation depends on finding the most innovative people, who by definition are rarely the more efficient people.  Efficient people run day to day operations really well and defend those products and practices.  Innovative people wonder why we aren't doing better or something new, or why we are sticking with these products long after they've been superseded in the marketplace.
  • Tie their compensation to innovation goals.  For example, you could tie their bonuses to the number of products less than 2 years old generating revenue.

Next, focus on the corporate culture. 

In reality, you should work on culture first, since the culture will be around long after the executives that start the innovation effort will move on or retire.  The average time an executive is in a role in a corporation is about 3-4 years, and significant cultural change will take much longer.  But no one will want to start all of this work focused on the culture without other changes in place that can move more quickly.

Culture is as powerful, and lasts longer, than any executive tenure, market depression or other factor.  If you have an innovative culture, deeply embedded, it will respond to any adversity.

  • How do you create a corporate culture that embraces innovation?  It actually isn't hard, just takes a lot of time and discipline.  Most cultures are like Newton's first law.  They are at rest and want to stay at rest.  Change is always difficult, and changing factors like informal decision making, beliefs and attitudes, risk taking and other factors is more difficult because it requires buy in at all levels and constant reinforcement.
  • Create a burning platform - let the company know that the existing culture - while it got you to where you are - isn't what will take you to the next level and opportunity.  Create a reason to change the culture and get people to buy in to the need for change.  Let them see "what's in it for me"
  • Show them a future vision of what the company and it's culture should be (these last two bullets are classic change management)
  • Change how people are compensated, measured and rewarded.  Today, very few companies measure or reward people based on innovation activities or outcomes.  If it is important, it will be expected, measured and rewarded.  This can go as far as incorporating innovation measurements in an annual review, requiring evidence of innovation work to get promoted into new roles.
  • Talk about innovation, communicate constantly at all levels, and follow up the communication and talk with action.  Too often, companies participate in what is known as innovation theater, where executives talk about innovation but little actually gets done.  Executives need to talk about innovation, but also engage in innovation, check in with direct reports, better yet, go do some innovation work.
  • Make it easier to take risks, to experiment, to test ideas and hypotheses.  Reduce barriers and encourage more risk taking, more experimenting with new ideas, more prototyping. 
  • Extend innovation work broadly throughout the organization - don't pigeonhole it in R&D.

Next, find the best people to do innovation work and give them the skills necessary to lead and conduct innovation projects.  

There are plenty of ways to find people who are really good at day to day operations, and those folks are vital.  There are also ways to find people who are good and passionate about innovation, and many times the Venn Diagram of these two segments leaves little in the middle.  Put the right people in the right jobs, and give them the training and development they need to do good innovation work.

  • How do we find people who are good at innovative work?  There are a number of assessments (FourSight, KAI, some Myers-Briggs, my own Innotraits assessment) to help discover who is more likely to be a good innovator.  Rather than choose people that are trustworthy or have delivered in the day to day model, take time to find the most passionate, most capable and most motivated people who can lead change.
  • Develop real training to build skills.  By now, everyone in your organization knows how to do lean, agile and six sigma.  They have been trained in all kinds of tools and processes, but have little to no training in creativity, trend spotting, synthesizing various data points to create a new vision of the future, understanding customer needs or the customer journey, good idea generation, prototyping and so on.  Innovation is challenging and complex, moving from a very nebulous world of trends and needs and emerging capabilities to a very definitive set of features and requirements.  This process requires skills that are not being developed in the educational system or in corporate training.  
  • Develop a process or at least define a consistent set of tools.  I am a firm believer in defining a fungible innovation process - a set of steps to help ensure that innovators complete a set of activities and learnings before they recommend an idea.  We do best what we do regularly, so innovators need consistent methods and tools just like anyone in any other business process.

 
 The difference between one off projects and building an innovation process

So, you'll now see that the difference between an innovation project and building a process is a difference of degrees.  You'll need to do much of what is listed above to conduct a reasonable innovation process, but if you don't plan to make it permanent much of this can be stood up and executed and then folded away in little time, with little impact to the organization.  Building an innovation competency requires more investment, more impact to the organization and something that sustains this capability, which requires more time and energy from executives, a consistent budget and incorporation into strategy.

The real challenge in what I've written is in culture.  You can find great people, have great leadership, have some interesting innovation processes or tools and do innovation occasionally if the culture will alllow it.  You can have all of those things and do little or no innovation if the culture has enough resistance.  You can fail on many of these aspects and still do innovation if the culture expects to do innovation and embraces the risk.

Why is so much innovation work so temporary?

It's difficult to build an innovation capacity that lasts, for a number of reasons.  Much of the "memory" in a company is based in its culture, and culture takes time to build, and time to retrain.  We all know this, either instinctively or because we've tried to change a culture.  If your culture is not tuned and ready to embrace innovation, you will at best succeed with a few disparate innovation projects, mostly manned by people who are comfortable overcoming the resistance.

Executives can help, but are also a bit helpless.  They know that innovation is important, and realize that innovation requires a supportive culture, but most executives are in their roles for such a short period of time that they can't create the amount of change necessary to sustain innovation.  They aren't to be faulted for focusing on shorter term innovation projects or other work.

The better answer is that building a true innovation capacity takes funding, commitment, engagement from a succession of executives, and a culture that embraces innovation. 

 

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posted by Jeffrey Phillips at 11:12 AM 0 comments

Wednesday, November 10, 2021

The great GE innovation experiment

 GE, once a large conglomerate, has announced that it will divide itself into three companies, a healthcare company, an energy company and an aviation company. There are a few things I'd like to comment on about this announcement, but what is really interesting (at least from an innovator's point of view) is that we get to have a live experiment about the innovation capabilities and capacities of three sister businesses, all entering the market at the same time. 

Here are a few things we can learn:

  • We can discover if being relieved of corporate overhead really matters to the individual businesses. 
  • We can find out if the three companies become little GE corporate clones or pave their own way.
  • We can also find out which leaders will adopt innovative measures, and change the cultures of their businesses, and which will "stay the course".

A word about the change in the marketplace

But first, as the advertisers used to say, a brief word about what this calving of a behemoth into three still very large companies says about the market and competition.  When the pace of change was slower, and change was more predictable, getting to economies of scale and growing a conglomerate made sense. This "history" as I am describing it, takes place in the 1950s, 1960s and 1970s, and probably began to end in the 1980s. As change accelerates and there's an increasing need to be agile or nimble, getting smaller and faster is key. As several commentators have noted, the future belongs to the fast, not the large.

If you needed evidence that competition, the pace of change, the need for agility and new business models is creating profound change, look no further than the house that Jack Welch built, which is being broken down and sold for parts.  All business must be fast, agile and innovative.

This division of the company is meant to make the new, smaller companies more focused, faster and more agile.  The question in my mind is:  what do they change?  Do these firms retain their existing processes, decision making models, org structures and so on, and hope to get more done with less cost?  Do they strive for greater efficiency, or do they dramatically rethink their cultures and become more innovative?

An experiment, hosted in real time

Scientists long for such a naturally occurring and easily observable experiment.  We've got a doozy.  Three new companies will be launched from the mother ship of GE.  They will bring with them the same people, the same products, the same culture as they had when they were operating divisions within GE.  They will also bring along existing decision and risk models, investment models, hiring structures and policies, pay scales, and more, as a legacy of the GE mothership.  In other words, they'll bring along the existing leadership and the existing corporate culture.

The folks who are the leaders of these businesses will (probably) remain the same as they were when launched, so the executives aren't likely to change dramatically.  This means that we're likely to see one of a few scenarios:

  1. The individual businesses reform themselves as mini-me's, built and organized and operating like GE did previously, with the hope that the GE brand and historical power, and some operational improvements are what is necessary to succeed.
  2. The individual businesses double down on efficiency, now that they no longer have to pay the corporate tax.  They strip down and operate as efficiently as possible, using lean practices and six sigma guidance (already well embedded) to improve operating margins.
  3. The individual businesses decide that scale is the only way to play, so they go on an acquisition binge.  It would not surprise me to see one or more of these businesses attempt to get bigger faster, since that too is a legacy of the GE business thinking.
  4. The individual businesses attempt a radical rethinking of how they work and operate in their chosen industries, and aim for more growth, driven by new products and services powered by innovation.  This will require the most radical change, since it attacks the decision making, cultural and risk factors that the organization may want to cling to from the mother ship.

The experiment we'll all watch is:  what works?  Getting smaller faster?  Getting larger through acquisitions?  Trying to become more innovative?  While I realize that the different businesses are in different sectors and therefore the competition is not the same, it won't be difficult to understand the decisions that the executives make, and see the results that occur.

What does Wall Street want?

My bet is that there is a lot of institutional pressure to grow margins, but these new companies aren't working in greenfields.  They are going up against established competitors that have competed with GE for years. Many of their competitors are much more aligned to their industries than GE as a whole was, so the competitors are more optimized to compete, and may make reaching for cost gains difficult, even without the GE corporate tax.

Michael Treacy built on Porter's work to argue that there are three interesting competitive positions:  product leadership, operational excellence or customer intimacy.  Which will the three companies choose?  The bias will be (I think) for operational excellence, since much of that is in GE's DNA, and cultures are difficult to change.  For some of the businesses, customer intimacy could be an option, but this avenue adds cost and changes the dynamic with customers.  Product leadership (the strategy most closely linked to innovation) seems possible but perhaps the most difficult to justify, especially in the short run, as there will be a lot of pressure on the new CEOs to demonstrate strong margins and to raise their respective stock prices.

Which matters most - executives, strategy or culture?

The final item that will be interesting to watch is to determine which matters most - the leadership and executives and the direction they want to go, stated strategies and how they are implemented, or how much of the legacy culture remains in the smaller businesses and how much resistance these cultures present to any change.  My bet here is that it will be difficult to change the culture, and only committed executives who are willing to create a burning platform and regularly engage with their teams will move their cultures.  And with a background and culture like GE's, it will be difficult to change, but I think necessary to change.

All in all, a very interesting experiment to watch, one in which we may witness several different strategic directions from the different corporate "sisters".  

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posted by Jeffrey Phillips at 12:52 PM 0 comments

Monday, November 01, 2021

Exploding the explosion of innovation myths

 I found an article today on the web that was published by the Wall Street Journal in September 2021, that claims to explode the myths about innovation.  I was excited to read it, because 1) I like things that explode 2) I like myth-busting and 3) I am always curious to see what people who aren't in the actual corporate innovation space believe about innovation.  Perhaps you can tell from the way I framed this set up that I didn't think all that much of the discovery.

We should separate the insights and hard work that went into the research - the authors of an upcoming paper are serious scientists and have great credentials.  Basically, what they found, at least from what I read, is that innovation is deterministic, based on the advance of underlying physics.  So, some breakthroughs are only going to happen when the physics are correct.  

I am simplifying, of course, and will link to the Wall Street Journal article here.  

Is this really news?

Having worked in the semiconductor industry, and knowing something of Moore's Law, this finding is not a surprise to me.  Almost all technical innovation is driven by the advance of underlying science, whether it is the number of transistors on a chip, or the amount of data we can send in a packet.  For any science or technology advancement that is based on the constant evolution of a technology, or an advance in physics, this is good news - the future is somewhat predictable, and all of us who do innovation work should be constantly monitoring - and forecasting - how these technologies will advance.

The first signal that all was not right from a big "I" innovation point of view was the counting of patents in the algorithm.  Counting patents is a favorite of many companies - the more patents, they claim, the more innovation.  If you stop to look at a lot of patents, and what happens to those patents, you'd recognize that we are counting what is countable, but that they don't always count.  Many patents are put in place to block competitors from creating new products, not to create new technologies or products, and thousands of patents are filed and never acted on.  So, while counting patents seems logical, we need to ask what is the purpose of the patent, and will the patent be converted into new products or technologies.

Not all innovation is technology based

Further, while a lot of tangible products are reliant on advances in physics and other technologies, that portion of the overall "innovation" marketplace is small and getting smaller.  Product innovation is just one of at least ten types of innovation Doblin defined decades ago, and most of the rest of the types aren't overly reliant on advances in physics.  Service innovation, experience innovation, business model innovation and other types of innovation either don't rely on technology at all, or aren't as dependent on advances at the nuclear or physical level as innovations in, say, high definition televisions.

Uber, for example, or Airbnb, did not need advances at the physical layer in order to create new innovations, and the model the scientists created, while valuable, would not say anything about the opportunity they addressed or the need for technology to provide the solution.  In these cases, the opportunity was there for the taking for incumbents, who could have addressed the markets with existing technology.  They simply did not see, or did not look, at the market opportunity.

Market and customer shifts

Then, of course, there are the shifts outside of the technology that also matter.  While the article points out that nuclear power will lose out to solar power because the cost per watt is rapidly decreasing for solar, there are literally dozens of reasons why really great and valuable technologies do not achieve market dominance.  Our regulatory, oversight, and legislative processes will determine winners or losers many times, far more than a good technology by itself will.  We are getting very close to the potential of autonomous vehicles.  What will limit the use of these vehicles is not the technology, but the overlapping legislative areas, the complexity of regulation, the concerns about insurance and risk - in other words, what will limit autonomous cars is not the technology, but the regulatory, insurance and administrative oversight and buy in.

And, if technology alone was the main driver, then we'd all have standardized on Betamax tapes rather than VHS, since Betamax had better sound quality and a better picture.  What made VHS more popular was consumer demand, because most Betamax tapes did not last for two hours, while many movies and other popular shows did.  So the consumer was faced with a dilemma:  switch the tapes half way through the show to ensure everything was captured, or accept a less onerous, but slightly less high quality recording.

 Hero Worship - the other myth

I really love this sentence about corporate innovation in the article - "Looking at innovation this way, as an almost mechanistic, deterministic process, might not be as romantic as our countless hero-worshipping stories of daring inventors and entrepreneurs taking huge risks to bring us the next breakthrough".  It's just that any experienced innovator will tell you that while the stories are great, they are stories we tell to engage ourselves, but most innovators know that innovation happens when any of us work to understand trends, understand customer needs and blend in emerging technologies (when necessary) to create solutions that meet or exceed customer needs.  There is no hero-worshipping, but more getting down to work in your overalls, to paraphrase one of the individuals the article would seem to suggest that we deify.  (Edison's quote about opportunity)

Most innovation happens every day, through hard work, by people in all kinds of companies, who are combining insights, needs, technologies and market openings to create new products, new services and new business models.  We celebrate the pioneers of innovation (like Edison or Jobs) but don't expect to innovate the way they did, or necessarily need to work they way they did.  To suggest otherwise is to signal that you don't know or understand corporate innovation, or entrepreneurs.

No explosions, no myths

So, in a nutshell, the research the scientists did is excellent and should be an input to trend spotting, scenario planning and technology forecasting.  The technologies that are reviewed will drive a small portion of the overall portfolio of innovation outcomes.  We innovators respect the early pioneers and we stand on the shoulders of those giants, but we are as capable and do innovation every day.

Let's get rid of these myths and recognize that innovation is happening in many places, simultaneously, driven by many different people in large and small companies, in research labs and universities, without mystery or hero worship.


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posted by Jeffrey Phillips at 1:14 PM 0 comments

Monday, October 25, 2021

Book Review - Built to Innovate by Ben Bensaou

Since I am an innovation consultant, working with Fortune 500 companies to build innovation capacity, and I regularly blog on this site about innovation topics, I often have the opportunity to review new books about innovation.  In the coming days I will review two books, one by an old friend (Roger Von Oech) and one by a professor at INSEAD who I have not had the pleasure of meeting.

In this blog, I am going to be reviewing the book Built to Innovate by Ben Bensaou.  The book was published in September 2021.

This is an interesting and difficult book to categorize and to review, for a number of reasons.  First, the book pulls together a lot of innovation theory and practice from a number of innovation practitioners, particularly the authors of Blue Ocean Strategy, which is often referenced in the book.  To that end, reading the book, at least in the early chapters, can seem a bit like a recap of good innovation tools and practices.  I do like the fact that Bensaou creates a new framework that he calls the BTI Framework, which shows what and how three different groups within a company participate in innovation - Frontline innovators, Mid level coaches and Senior leaders.  This is a useful framework for thinking about who does what in innovation, and the roles they play and the challenges they face.

The second reason it is a bit difficult to review is that a significant portion of the book relies on vignettes about successful innovators.  Since innovation is unusual and there aren't a lot of successful examples, many of us (I covered some of the same companies in my book Relentless Innovation) rely on the success of a few companies to illustrate what others should do, often not fully aware that these companies that are successful are often somewhat unique.  Bensaou does a good job relating the factors that make these companies successful, but I think he overlooks or ignores two critical points early in his book.

Perhaps the third reason this book is a bit difficult for me to review is that I find the material in the latter sections of the book more interesting and useful than the vignettes at the front of the book.

One point that he writes about but is not specific about is that all of these successful vignettes have deep engagement from the CEO or a board member.  My copy of the book has several sections where I have underlined the unique commitment from senior executives.  For example, on page 37, talking about the transition at Samsung, the author writes about a "painstaking, decades-long process" of building an innovation engine.  Many of the vignettes are told from a CEO or board member perspective and illustrate just how important senior executive engagement is, and this quote and others highlight the second concern:  building an innovation engine takes time.  Lots of time, because companies aren't just creating a new product, but a new process, and changing culture along the way.  In another chapter, the author notes that BASF expects culture change to take 8 to 10 years.  

These two ideas - the deep engagement of senior leadership in innovation skill and process development, and the time it takes to build innovation competence, and scattered throughout the book but not directly addressed.

The book, in my opinion, spends too little time on the importance of executive commitment, and on the impact of culture as a barrier to innovation.  Finally, in Chapter 8, Bensauo has a chapter on the role of senior leadership, but it feels somewhat too little, too late.

So, for the first 3/4ths of the book, the text and what it says seems a rehash or a repeat of many innovation books, full of vignettes with senior leadership, with the introduction of new frameworks and some new insights.

Then, in Chapter Ten, Bensauo introduces the BTI seven step innovating process, built on work from INSEAD.  This process is interesting and helpful.  In this chapter, he defines what a good innovation process could look like and uses good examples.  I think this is a good way to approach an innovation capacity, and I would add a few things to the process or surround the process with:


  1. The first step in his process is Choosing a subject for innovating, which I think is vitally important.  Innovation is too risky to leave it to chance - we need to be working on strategic issues.  As such, it's not just choosing a subject, but also having a senior sponsor who cares about the success of the project.  Again, I think Bensauo is anticipating that a senior, engaged sponsor is involved, but it is important to say so, because without that senior sponsor who flies cover for the work, the barriers and resistance most projects face will cause it to fail.
  2. I think Bensauo does a good job considering the customer experience and emphasizing customer needs.  Here he relies on Jobs to be Done, a fine methodology, but ignore ideas like the Customer Experience Journey and nice tools from design thinking.
  3. What is interesting in his process is that there is no specific idea generation "step".  The process moves from one phase (Exploring non-customer space) to a new phase (Selecting and fast prototyping the best ideas) without an idea generating step, assuming that ideas are generated in the research phases.  This omission is interesting, as it anticipates that all ideas are generated during the research phases, with no need for additional idea generation.  
  4. The next phase is in my mind one of the most important, but it gets a little short shrift in the process definition.  Selecting the best ideas is a task that involves considering the strategy of the business, key customer needs, market demands, future industry shifts, investment models and so forth.  Without this information, it is difficult to "select the best idea), yet we don't get enough detail in the writeup about this.  I'd have liked to see more detail here.
  5. One omission from the process is in the final step.  Bensauo has as his final step "Presenting and selling the idea" which is exceptionally important.  Too many innovators fail to realize that a great idea does not sell itself to executives.  They need help seeing its value.  But what Bensauo leaves out or does not address is what I like to call the crossing the chasm problem for innovation. That is, getting executives to agree to a new idea is one thing, getting the idea into a product or service development process and fully developed and eventually launched is a completely different thing.  Most companies lack a good method and process for moving ideas that executives like into product or service production.

While it may seem I've reviewed the book rather negatively, there is a lot to like in this book.  Bensauo introduces some new frameworks and a new innovation process, and does a good job of describing the work it takes to "wire innovation" into a business.  There are some areas where I wish he had placed different emphasis, and the books suffers a bit from vignettes with executives that tell similar stories to ones we've heard before, but this is a good book and I think it will have an impact how innovation gets done in corporations.

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posted by Jeffrey Phillips at 8:20 AM 0 comments

Tuesday, October 12, 2021

Why corporate innovation is harder than a startup

 Since innovation is a difficult and often misunderstood word, or perhaps just because it is used to mean different things in different contexts, it can be difficult to understand why innovation at an entrepreneurial company or a startup is different from innovation in a corporation.  I think the matter is obvious, but I wanted to explore the challenges and issues of innovating as an entrepreneur and contrast them with the challenges and opportunities of innovating in a larger corporation.

First, let's just get the record straight.  Both the entrepreneur and the corporate innovator have equal claim to the word "innovate".  Both, if they are doing their job well, are creating new products and services that have value for customers or stakeholders.  It's just that the conditions and context each faces is radically different.  Since I've had the opportunity to work for funded startups and for larger corporations, I've seen the differences, and, while I'd like to say it's getting better all the time (Modern English reference there), it's actually getting worse, for both parties.

Innovating as a startup

No one starts a business without a great idea.  The source of that idea may be frustration with the way things work today, or an insight about new products or feature, or observation of an emerging market that has new and unmet needs.  But every entrepreneur has an idea.  If they are doing their job well, they have exactly one idea, and they place everything they have behind that one idea and explore it until it wins, or until they need to pivot to a new idea or a new delivery model.  Note the emphasis on one idea.

Entrepreneurs are blessed with the fact that they need to focus everything - all mental time, all resources, all hopes and dreams - on one idea.  This focus is a blessing, since it allows the entrepreneur to ignore other opportunities or alternatives.  Since most entrepreneurs are building their businesses from scratch, and hope to have a significant impact on the status quo, they don't have past infrastructure or products to keep whole, and aren't worried about upsetting the existing market or infrastructure.  This is also a blessing for the entrepreneur when innovating - there are no existing investments or infrastructure or revenue streams that constraint you.

What has become more of a challenge lately for entrepreneurs is outrageous expectations.  In corporations, if you can create a new product, you are celebrated.  In startups, if you can't create a billion dollar unicorn in three years, people wonder why.  The unicorn phenomenon makes it exceptionally difficult to get good ideas funded, when everyone wants to see a "nine zero" or "ten zero" outcome.  

The recent shakeup in the workforce due to COVID, and due to a great rethink about how people want to work and live will create benefits for the entrepreneur.  I think good talent is going to be easier to obtain, since many people will leave their corporate jobs and start companies or join startups or smaller companies.

Innovating in a corporation

The corporate innovator can be just as much an innovation and an entrepreneur (or intrapreneur) as an external entrepreneur.  The internal innovator simply has to juggle different issues and priorities. 

First, within any company there are likely to be five to ten people who think they have a great idea that the company should fund and launch.  This means there are competing interests for an often limited set of innovation funds (assuming any funds are available for innovation).  Further, it's likely that each of these innovators have radically different ideas, making it hard to compare them and understand their value to the company.  Thus, an innovative company with multiple intrapreneurs or innovators should have a regularly evolving portfolio of ideas, which leads to selection and prioritization.

Not all the ideas in a company can get funded and resourced, so good internal innovators need to understand what is vital to the company and how their idea will be evaluated and prioritized.  A really great idea that can't get funded or resourced has no value.

Internal innovators also face the fact that many of their ideas will create great risk to existing operations, in one of several ways.  First, the idea may threaten an existing product or service which is already generating revenue.  This asks the company to bet on future earnings not yet proven over current predictable earnings, always a difficult choice.  Second, the idea may threaten not a product, but an entire opportunity or industry.  It may create a new business model or way of working that, while valuable to customers, the company cannot shift to meet, and threatens the company.  Third, good ideas may simply be beyond the reach or capability of a company, and while recognized as valuable, simply cannot be realized by the company except as a spin out.  There are more examples but you can see that corporate innovators have to confront the fact that the company is currently making money and has investments, and any new idea, no matter how good an idea it is, could threaten those existing revenue and profit streams.

There's another significant difference, but it is more subtle.  Entrepreneurs are naturally risk tolerant or even risk seeking, but corporations have been trained and refined over time to mitigate and minimize risk and uncertainty.  External entrepreneurs know and accept risk as part of their founding - many, many startups fail.  Failure in a funded project in a corporation is typically judged rather harshly, and over the last 3 to 4 decades with outsourcing, rightsizing, cost reductions, six sigma and more, we've trained a management cadre to dislike change, risk and uncertainty.  So any new idea is often called into question, and closely examined for risk.  Corporate cultures play a significant role in limiting innovation in large companies, but should not create nearly the same barriers for startups.

Funding is both a blessing and a curse for corporate innovators.  I've rarely worked in a large company that could not afford to conduct an innovation project - most innovation projects cost at most a few million dollars, from initial trend spotting and idea generation to launch of a new product.  This is a price tag that most companies can easily afford.  The funding is available, but hard to acquire.

Funding is hard to acquire for a couple of reasons.  First is the budgeting cycle.  Most firms plan and budget on an annual cycle, so if the product group or business unit did not budget for an innovation project, they either need to wait for a new round of budgeting or need to steal or borrow funds from another project.  Which means someone's ox is going to get gored in the process.  Funding is also difficult to acquire because it's easier to spend money on cost saving activities (which impact the bottom line quickly) rather than new product or service development ideas, which may generate future revenues, but not in the next few quarters.  Third, since most organizations don't have a lot of experience developing and running innovation projects, they don't have good frameworks or models about the costs of the projects.

Development and launch can be difficult for an internal innovator, because those can be different "departments".  Even if the innovator can develop and validate an idea, there are many competing priorities to get limited development and launch time, and often an innovator in a large company does not own or manage the development and marketing resources needed to complete the project.

Differences

The entrepreneur places all their emphasis on one idea, and has little concern about disrupting a market or industry.  In fact, many ideas hope to do just that.  The entrepreneur does not worry about existing products or revenue streams or competing internal products, because they don't exist.  What the entrepreneur does worry about is funding, and especially the expectations of the funders, in a time when unicorns and billion dollar valuations are possible.

The internal innovator worries about funding, market opportunities, competing projects, the risk associated with conducting innovation in a large corporation, decision making and timeliness.  Added to this the internal innovator worries about funding but in a very different way than an entrepreneur.

Both worry about the value of their ideas, their insight into market needs or emerging markets, and the impact or power of the culture of their organizations.  Both use the same set of tools and frameworks.

Hat tip to the corporate innovator

So, here's a tip of the hat to the corporate innovator, and an explanation for what draws me to want to work with them.  They have a tremendous opportunity, and a significant number of obstacles to overcome.  Not only must they find valuable ideas, they must run a gauntlet of competing interests, difficult funding mechanisms, development and launch programs they don't own or manage, and a culture that is at best neutral to what they are doing.  All the while realizing a new idea as a valuable new product or service for customers.  They are doing everything that an entrepreneur is attempting, but with many more intangible obstacles in the way.

The one really compelling factor for the external entrepreneur is job risk - an entrepreneur is betting everything on themselves, their small team and their idea.  If the idea fails, if the market shifts, if another company beats them to the punch, then the entrepreneur may have to start all over again from scratch, with no safety net.  While the obstacles for the external entrepreneur may be fewer, the results can be either much more beneficial (an IPO) or much worse (shutting down the startup).

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posted by Jeffrey Phillips at 6:20 AM 0 comments