Monday, November 20, 2006

Org Chart for Innovation

In many client situations we are asked "What's the best way to organize for effective innovation?" We believe this is very client-centric, and can be defined by the go to market strategy, how important innovation is as a strategic investment, the reach and breadth of the product lines and business units, and so forth. But gradually we are starting to see a more consistent organization theme, and I'd like to share it with you.

Organizing for innovation is difficult for at least three reasons:

1. Senior management is enthusiastic about innovation and wants more of it, but isn't sure how to structure or fund innovation, and sometimes is even unsure what "innovation" is.

2. Innovation cuts across organizational boundaries and functional groups, so it can be hard to determine who "owns" innovation

3. Ideas and initiatives need to have a home where the ideas solve a problem and can be funded.

So, corporate has involvement and interest in innovation, but probably should not dictate which ideas to implement or how to organize for success. The business units or product groups have a vested interest in innovation since they can fund short term and long term profits and differentiation, but are often distracted by day to day quarterly results and don't have the resources to bring to bear. Both agree it should be done, and both have a vested interest to see it done well.

In many organizations, we are beginning to recommend a "top-down" and "bottom-up" approach, where the corporate team provides some funding, strategic intent, resources and shared tools and processes, and the business unit provides the ideas, metrics and goals. In this approach, Corporate teams can be involved in innovation without dictating which ideas are right, and business units can find additional funding and resources to help evolve an idea and start evaluation and investment.

A shared model also means that as more business units or product groups take advantage of the shared resources from corporate, a more consistent language and approach can be used across the organization. Starting with only a few resources and processes, eventually the corporate Center of Excellence may include people, processes, a database of previous ideas and experiences, knowledge of what's worked and what's failed, software tools and other capabilities to assist the business unit. Business units will benefit from leveraging skills and dollars and consistent frameworks and tools, and by gaining insight into what other business units or product groups are doing.

This approach leads to more consistent innovation language, processes, tools and experience across the organization, helps ensure ideas work within the corporate structure and align to corporate strategy, provide greater visibility to ideas and increase collaboration.

There are clearly other approaches - on one extreme is an incubator, in which people leave the business unit to become part of the incubator and then return to the business unit or start a new business as a result of the evolution of the idea. I think taking people out of their structure entirely breaks relationships that can be valuable and makes it hard to return to the business unit. On the other end, innovation run completely at the business unit or product group level will create a host of problems with redundancy, investment in ideas that don't align to corporate strategy, rework and inefficiency.

I think in the end the shared model, with corporate providing the shared infrastructure, resources, tools and processes, and the business units providing the ideas and the people to work the ideas is probably the best approach. I've included a small graphic to begin the debate.

If you have ideas about the "best" organizational approach to innovation and care to share or debate our approach, please leave me a comment.
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posted by Jeffrey Phillips at 10:46 AM 48 comments

Thursday, November 16, 2006

Innovator, Fast Follower or Me Too

I was driving between meetings on Tuesday listening to NPR. There was a story on the new MP-3 player from Microsoft called Zune. The reporter voiced a lot of skepticism - hers and from the industry - about whether or not Microsoft would be successful with the Zune, given it's late arrival and the fact that Apple already controls much of the MP-3 market and mindshare.

What struck me about this is how Microsoft has become a real "me too" player in many spaces, rather than an innovator. In many markets - game controllers and MP-3 players as just a couple of examples - Microsoft is not an innovator, and not really even a fast follower. Of course these physical devices are not Microsoft's strong suit, but they do point the way for Microsoft to control more of our spending away from the traditional PC.

For any firm, there are going to be products and markets where the firm chooses to be an innovator, a fast follower or a "me too" player. These are perfectly valid strategies and should be considered as part of the business strategy. No firm, no matter how smart or strong, can differentiate only on innovation. Frankly, it would wear out the people inside the organization. Google's probably the closest example of a firm focused completely on innovation - but their real goal is dominance in the online ad space. Google will create or acquire anything that provides more opportunity for presenting data (and adds) online.

Every firm must consider its market and competitors and its own products and services and make determinations about which products or services it will position as innovative, and where it may make more sense to be a fast follower. The "me too" plays are often older products or services or areas where the firm believes it needs a presence but recognizes that for now it cannot be a dominant player.

Being the innovator can be rewarding but very tough. Often as an innovator your firm or team will break new ground and needs to expect some big successes along with some not so great failures. Fast followers, on the other hand, will never lead the market but try to quickly adapt to and copy successes in new markets, driving down the cost and adding other choices and options.

What struck me about the Zune is what a "me too" addition to the MP-3 world it really is. There aren't many new or innovative options the Zune offers over existing MP-3 players or the iPod. If you consider that MP-3 players have been around for five or six years, and the iPod phenomenon for over 3 years, this is a late "me too" offering by Microsoft, recognizing that it needs to play in this space and gain a better understanding of the hardware and the services wrapped around the MP-3 player. In this case, this is probably a good but fairly risk averse strategy.

As you examine your business, in which areas or products is your firm "innovative"? In which are you a "fast follower"? Is that strategy by design or accidental?
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posted by Jeffrey Phillips at 7:52 AM 27 comments

Thursday, November 09, 2006

An innovation process and software framework

In a recent press release, Archstone consulting reports on its findings in a recent survey on innovation. According to their survey, over 70% of the firms they talked to were planning to increase investment in innovation, yet over 50% were dissatisfied with the results of their innovation initiatives to date. Only 5% claimed to have "a highly effective innovation process".
Clearly there's a significant disconnect between these figures, and we believe one of the important reasons is that innovation is still so poorly defined from a process and systems perspective.

As many of you know, we at OVO have been working to define an "end to end" process that supports innovation, and to define the tools and software necessary to support that process. Much like a purchasing process has defined phases or steps, and enabling software, or as a sales team has defined phases or steps and underlying CRM software, we believe innovation needs to be defined from a process point of view to be repeatable, and will need integrated software applications as the number of people and number of ideas increase.

To that end, we've put together the following diagram to start a discussion about innovation processes and tools.

At the top, in green, are activities in the innovation process, starting with identifying trends and customer requirements. In the arrow are the steps we advocate for an innovation process: generate ideas, capture ideas, evaluate ideas, develop as products or services and launch the new products or service.

In blue are the data and system requirements to support each phase of the innovation. These are divided into two sections: software or data that support a specific step in the process (eg brainstorming software supporting the "Generate" step) and software or data that supports the entire process, which is represented at the bottom of the graphic. These applications or data requirements span the length of the process and include requirements like capturing metrics across the process and reporting across the process.

By creating this framework, we are trying to forecast what we think will happen to innovation, and use analogies from the ERP world and CRM world. Increasingly, firms value consistent, collaborative information that enables a business process. This means that the existing software applications that support "innovation" will have to consolidate and support the entire process in one component framework or integrated solution, just like the way ERP consolidated from financial software, purchasing software and inventory software. Innovation is an important and necessary business process, and probably the least well supported from the standpoint of process and software today.

This framework is one we've put forward as a representation of the processes and tools necessary for repeatable, successful innovation. If you care to, please comment or provide your feedback. I think if we practitioners, consultants and interested bystanders can create a consistent vision for the future of innovation and the tools and processes necessary for success, we can help our clients and business partners become more successful.

Let me know your thoughts and what you would change in the framework.
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posted by Jeffrey Phillips at 4:50 AM 43 comments

Monday, November 06, 2006

Just Innovating

I have come to the firm belief that too many firms have set too high a goal for innovation. We are frankly making innovation too "hard" in many organizations and setting such a high expectation that many people are looking at innovation and shying away from participation.

It's like reading Das Capital and trying to understand the dialectic, whatever that is. Why use simple explanations and examples when long, amorphous sounding phrases will work? I feel the same way about innovation. There's far too much talk about innovation and theory and discussion but just not enough action. And far too frequently the reasons behind that are not structural but expectations.

I spoke recently with a senior individual in a large firm who is convinced that innovation must happen outside the "normal" business process. This person felt that people were too ill-informed or too busy to innovate and generate new ideas. What gets in the way of people generating ideas as part of their day to day job? Expectations and quarterly result pressure. But surely most people in that rather large business experience challenges or identify opportunities that they can pass along as a new idea or product. Certainly they can take a few minutes out of their schedule to evaluate an idea that may have merit to their business. Otherwise we may as well transfer all innovation work to the business development guys.

There's simply too much talk about innovation and not enough experimentation and trials. As the talk increases, the level of discourse is not improving, and is only creating barriers as the expectations increase. What most firms need now is to provide tools, processes and training to their innovative folks and get out of the way. Instead, most firms keep talking about innovation and raising the bar, and more and more people are discouraged from getting anything started since it can't possibly measure up to the talk.

We need more experiments, more trials, more intentional accidents. We need to set the expectations that everyone should be involved in innovation - at least to the extent of generating and submitting ideas. As we define an innovation "team", let's take care not to create innovation ghettos. Too many people are being left out of the process, which means too many ideas aren't being discovered and evaluated.

Yes, we want ideas that the firm can capitalize on, and yes, there needs to be some evaluation of the ideas and better portfolio management, but right now we are reaching a cusp where the expectations for innovation are beginning to discourage the average employee from participating.

I'd like to see an approach where any employee can "just innovate". That innovation by any person is the baseline expectation, and that the organization will sponsor and support those who innovate. We need to build the enthusiasm and the processes at the same time. Right now I think we are raising the bar without increasing the involvement or investment.
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posted by Jeffrey Phillips at 6:48 AM 26 comments