Tuesday, October 30, 2007

Innovate like its your job

Some of the (ahem) younger folks in my office have a favorite way of emphasizing something. They like to tack on "like it's his job" when they indicate that someone is spending a lot of time or effort on some activity. So, for example, you could say that a person is hitting the buffet line at Golden Corral like it was his job. That would indicate that you believed the individual might be a bit too focused on the thirds or fourths.

What strikes me is that very few people innovate like it's their job. After all, most of the people I consult with already have a job - a day job, taking orders or managing clients or installing systems. Innovation is something they've been assigned to, or, possibly, have indicated an interest in. They are willing to work at innovation as long as they can sneak it in between meetings or work for their "real" job.

I find this thinking fascinating. It's like whistling past the graveyard or ignoring the big pink elephant in the room. I have to that in many firms, the focus and emphasis on innovation will have to increase. We as consumers will drive this focus, since we demand ever increasing differentiation and product introductions. We as consumers want new products, new services, new processes, and we are jaded by what we already have. Therefore, firms have to become more effective at generating ideas and producing new products and services.

If that logic is true, the growth area - the area of most significant focus and change in many firms - will be the team that can consistently innovate. But if no one thinks innovation is their "primary" job, then where does the innovation come from? Right now, at this moment, innovation skills and capabilities are valued but called on infrequently. Soon, innovation skills and leaders who understand how to manage innovative people and processes will be in high demand. Then, you'll innovate like its your job because there won't be an alternative.
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posted by Jeffrey Phillips at 4:51 AM 2 comments

Thursday, October 25, 2007

Book Review: Think Better

I received a new book to review called Think Better. The subtitle is "An innovator's guide to productive thinking" and the book was written by Tim Hurson from Thinkx.

There are a LOT of new books on innovative thinking, or just innovation in general, so I was a little leery of another book, but I found this one to be very insightful and useful. There's a lot to like, and a lot to use, in this book, whether you happen to hail from the consulting and services oriented side of innovation, or are just starting out and want your internal corporate team to become more productive innovative thinkers.

I'll admit to being a bit jaded, and the first few sections of the book offer more of a history lesson about innovation and innovative thinking than I felt necessary, but for those approaching the topic for the first time, the concepts of the monkey mind and gator brain are compelling, since they demonstrate that our current methods of thinking avoid risk and most often simply react to threats or patterns. The book starts to get really interesting in the fourth chapter, which deals with resisting the urge to quickly arrive at an answer. Instead, the book encourages us to "Stay with the Question". In his approach, Hurson sucks us in, peeling the onion a little at a time and getting agreement, till we are in violent agreement that we must change drastically. Then he rolls out section three of his book, which outlines a process for creative and innovative thinking, supported by a number of simple but powerful tools.

The phases describe a method to generate better ideas, use some divergent then convergent thinking to stretch them, then move on to evaluate and determine which ideas should be considered for evaluation. What I also like is that he adds a step for deciding actions and assigning resources. Too often we get excited about selecting ideas for further investigation without determining and identifying the resources and plans necessary for the critical next steps. Along this process he introduces a number of tools: the I-cube or the C-5 or the DRIVE model, all of which are relatively easy to use and bring shape and focus around thinking and decision making that traditionally has been very subjective.

I like this book because it aligns to what seems right to me - a useful process that anyone can follow to obtain better thinking and better ideas. From our experience in larger organizations, a defined set of steps or phases is necessary to help people understand what has happened, what should happen now and what should happen next. I think the next thing Tim and his team will need to do is decide how to "scale" this capability so that the thinking permeates an organization and the approach becomes a common one across organizations rather than simply in enlightened pockets. Of course, that's something near and dear to my heart.

Creative productive thinking is a great first step. However, creativity without action is interesting but ultimately a sideshow. Tim defines a method to help people think more creatively, but also outlines a set of steps and tools to move an idea through a consistent process to an ultimate conclusion. That's moving from creativity to innovation, and eventually from ideas to new products, services or business models.
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posted by Jeffrey Phillips at 11:50 AM 3 comments

Tuesday, October 23, 2007

In the CEO's shoes

I've struggled for a while to understand why there is so much positive talk about innovation from senior executives and so little direction and follow up provided to their staff. I constantly see announcements in the press and interviews from CEOs about the importance of innovation within firms that I know aren't funding any new innovations or ideas, that are in fact almost hostile to innovation. So I decided to place myself in their shoes, in the "walk a mile in his moccasins" theory.

If I am a CEO of a large corporation under attack by US competitors, foreign competitors and startups, I want to protect my position. I can do that by: 1) creating really interesting new stuff or 2) building walls to protect what I've already accomplished. The best way to create new stuff is to innovate. The best way to protect what I've got is to drive others out of the market or find other defensive positions.

Innovation is interesting, but very risky. Wall Street demands that I at least seem interested in innovation, so I will talk about it quite a bit. However, innovation requires significant investment and change, and my organization isn't too good at either. If we spend a good deal of time innovating, we may take our "eye off the ball" with our existing products and services and anger our customers. Also, innovation requires a lot of risk - what if we make some big investments and they miss the mark?

Defending an existing position is easier and safer (it appears). We'll add to the marketing budget to tell people why our widget is better than the other widget. We'll seek to cut costs by outsourcing production. We'll implement lots of continuous improvement processes to squeeze out costs. We'll lobby Congress to raise import restrictions and demand greater equity from overseas competitors. After all, if we put in place a cost reduction program, and can just hold on to existing market share and margins, profits will increase.

If we invest in an innovation initiative, we'll either succeed or fail. Success is problematic - the markets are uncertain, risks are high. What if we enter the market too early or too late? A small mistake in innovation can cost us dearly. However, even a big miss on cost cutting still results in some lower costs, most likely without a huge investment.

So, our strategy will be: externally, talk about innovation and its importance to the firm. Point out past successes that we can identify as innovation. Indicate vague plans for new products and services that are in the pipeline. Perhaps even name an innovation leader. Internally, work like crazy to outsource, cut costs, eliminate risks, become more "lean". For the internal staff, we'll implement Six Sigma and call it "innovation". After a year or so the focus on innovation on Wall Street will go the same way as SarBox or some other management fad, and we'll be OK.

Now, if only someone could help me get this @#$ iPod to work with Google...
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posted by Jeffrey Phillips at 5:30 AM 11 comments

Friday, October 19, 2007

Serving the needs of the customer first

I've just been notified that I can sign up for a new kind of credit card. Oh, I know that most of you like me are probably inundated with credit card applications. I've been saving mine to help heat the house over the long, cold winter.

What made this solicitation a bit different and intriguing was the premise that the card actually sought to reduce or eliminate interest charges for the consumer, and, if the consumer paid their bills on time, would actually refund money back periodically. That's got to be a first - a financial institution that's not seeking to make money on fees and other charges and seeks to help you remember to pay on time. It will even reward you for what would seem to be activities detrimental to its bottom line. When a financial services firm goes out of its way to help you avoid interest and penalties, that's not just innovation - that borders on cannibalizism.

Well, the new Motiva card from Discover does just that. It appears that the Discover card folks are flipping the table on the traditional credit card business. The dirty secret in most financial services firms is that most make the majority of their income from fees. With the Motiva card, the Discover folks aren't only working to eliminate fees and interest, they are actually offering to rebate the amount of what your interest for one month would have been if you make six on-time payments. This amounts to paying you for what is in your best interest!

Note also the phrase on the website - "timely reminders to help you avoid fees". Again, this amounts to slashing your own wrists as a financial institution. As noted previously, the biggest money maker for most of these firms is fees. Why would a firm create methods to help you avoid doing something that made them money?

The answer is that the Discover folks are innovators, and as one of the smallest of the credit card purveyors feel the need to constantly change the game. This is a classic guerilla move, attacking an opponent's apparent strength by challenging a practice or capability that they can't or won't easily change. We'll see how Visa and MasterCard, the dominant credit card issuers with over 80% market share respond.

Innovators are people who are willing to upset the apple cart and dramatically change the way business is done. It remains to be seen if Discover can pull off a line of business that seems to intentionally limit its profits, however they are to be commended for creating a product that serves the needs of the customer.

Note: while I am interested in the offering and will watch it closely, I don't YET have a Motiva card, nor am invested in any way in the success of the offering.
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posted by Jeffrey Phillips at 5:22 AM 5 comments

Tuesday, October 16, 2007

Nothing to lose

Janis Joplin was probably right when she sang "when you've got nothing, you've got nothing to lose". That's more than just philosophy, it's a mindset. And one that innovators and the firms they work for need to adopt.

I had the opportunity recently to sit in on a presentation that included footage from one of the recent TED conferences. This one was held in Tanzania. What made it interesting was the inclusion of several people who had solved problems or created solutions from virtually nothing. In one instance, a young man from Malawi had created a windmill to create electricity for his parent's home. He made the windmill by reading a book about windmills and then building the windmill from trash, scraps and spare parts he found or scavenged. Today the small windmill he built creates enough power to run several small appliances and some light bulbs in his parents house. See a short clip about him here.

The story made me think because the facilitator of the program was so overwhelmed by what the young man did. He built the windmill with no oversight, no training and no materials. At the time he built the windmill, he was 14. When you've got nothing, you've got nothing to lose and everything to gain, so you'll ask yourself - why not?

Conversely, in many businesses innovation is tough because we've got a lot - a reputation, an existing product line, profits, employees, etc. When you've got everything, you've got everything to lose, so rather than ask the question - "why not?" we start in with "why?" and then find all the reasons not to do something.

There's another piece to this as well. Many innovators or innovation teams will complain about how little they have - too few resources, too little commitment, a lack of funding. Rather than just doing something and proving value, many corporate teams will wait for approval, for funding, for resources. What struck me about this young man, and others like him, is that they did not have the patience to wait. Innovators have this kind of drive.

What can large businesses learn from African innovators? First, you've got something to lose. Improve it or change it before someone else does. Everyone is gunning for your position or product. Sitting safely defended is not a strategy. Take action. Second, stop waiting for the permission, resources and funding. Start doing something. Become inevitable rather than waiting for the inevitable. Where innovation is concerned, we need to find the strength and commitment to act like we've got nothing, and be willing to start with nothing in order to create great change.
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posted by Jeffrey Phillips at 5:00 AM 5 comments

Wednesday, October 10, 2007

Context is King

When you closely consider any important business function, it's fairly clear that most people within the function or process understand their roles and responsibilities. Since many business processes are based on consistent, repeatable transactions, it becomes easy to move up the learning curve and gain a deep understanding about how a process works and how it can be improved.

Innovation, however, doesn't work this way, for at least two reasons. First, in most firms there simply isn't a defined, consistent process for innovation. Frankly, in most firms, people simply invent an approach once they think they have a winning idea. That's not optimal but can be overcome. But what's really interesting is the second issue with innovation - context.

If I am part of the purchasing process, I don't need any context. I know that a requisition needs to be changed into a purchase order and placed with a vendor. Transactional processes have their context embedded in them. Innovation, on the other hand, needs to attach context to every idea or concept. The reason this is true is that an idea tends to be very fluid, and without context may be hard to evaluate or even consider.

This is one of the key reasons why suggestion boxes fail. People will place ideas in a suggestion box, but unless they define the context of the idea closely, it can be difficult if not impossible to evaluate the ideas. Additionally, if the idea isn't aligned with the needs of the firm or the corporate strategy, (also context) it will probably be ignored. Once an idea is generated, if other people are to consider, evaluate, prototype or test an idea, they need to understand the context of the idea - what problem it solves or opportunity it addresses, how it will be applied, its benefits and costs. Without this information, an idea is simply too disconnected to adequately consider, evaluate and convert into a new product or service.

Context comes in several dimensions. First, addressing the problem to be solved or opportunity to be addressed. Second, comparing the idea to existing solutions or proposed solutions. Third, finding teams or functions that can approve and adopt the idea. Fourth, determining the value of the idea. In a traditional transactional process, an individual doesn't need to consider these concepts. In an innovation process, context becomes the most important arbiter of success.
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posted by Jeffrey Phillips at 5:01 AM 19 comments

Tuesday, October 09, 2007

Is innovation important to senior executives?

Recently there have been two wildly different surveys of senior executives by respected organizations. Boston Consulting Group (BCG) released its annual survey on innovation in August, and the Conference Board released a survey of senior executives in September. At first glance, the two surveys seem at odds with one another and present a very schizophrenic look at management teams. If we dig a little deeper, however, we might find some consistent nuggets of truth.

As Mark Twain said, there's lies, damn lies and statistics. Or in this case he may have said, perspectives, question wording and intent. The BCG survey looks primarily at the importance of innovation as a key component of corporate strategy. The Conference Board survey looks at top CEO challenges overall, with innovation as one possible challenge or opportunity.

In the BCG survey, two thirds of the CEOs surveyed said innovation was one of their top three priorities for their firms. However, in the Conference Board survey, innovation ranked 9th of 10 key opportunities or challenges. In that survey, excellence in execution ranked first. Well, on the surface this appears to be quite a head scratcher, since we know that process execution and process excellence usually detracts from or inhibits innovation. Are the CEOs simply dysfunctional?

I think there are a few problems with the Conference Board methodology to examine first. In the Conference Board survey, there is a question about sustained top line growth. In fact this opportunity or challenge was ranked second in almost a dead heat with execution excellence. Then, there is a separate question about innovation, which ranked ninth. The error here is that innovation is one of the best ways to drive top line growth, so separating these two divides the vote, in much the same way that Ralph Nader and Al Gore divided the democratic vote in the presidential election. Or, asked another way, what's the purpose of innovation if not to drive top line growth?

Note that in the BCG survey, innovation is simply one of the top three opportunities or challenges for CEOs. It is not unusual to find out that execution excellence is important, because these firms must drive profits to invest in new innovations. CEOs are not dysfunctional at all - they want a well oiled machine creating existing products at the right cost structure, generating profits so they can invest in identifying and developing new products and services to grow the top line. These individuals obviously walk a very fine line - too much emphasis on execution excellence can create cultural barriers to innovation. However, a lack of focus on execution excellence makes it harder to generate the cash and resources necessary to innovate.

I find these two survey are actually in violent agreement. Execution excellence is necessary in a very competitive global economy, but no firm can rest on its ability to execute alone. To continually differentiate and grow profits, these firms must generate new products and services as well. These two surveys confirm the need for both execution excellence and a continuous focus on innovation.
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posted by Jeffrey Phillips at 7:05 AM 1 comments

Monday, October 08, 2007

Innovative Magazine Article

I was asked recently to contribute an article to Digitall Magazine, the in-house magazine for Samsung. I was not familiar with the magazine but have found its issues to be very interesting, focused mostly on new trends, new technologies and new ideas. I have a short article in the Fall 2007 article about the strengths and weaknesses of the Blue Ocean approach to strategic innovation.

Please check it out here and let me know what you think.
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posted by Jeffrey Phillips at 8:27 AM 2 comments

Wednesday, October 03, 2007

Innovation on the Cheap

I've just returned from the PDMA's Fall innovation event and had the chance to talk to a number of people who are involved in innovation initiatives. It's clear that many senior executive teams are very interested in becoming more innovative. It's also clear that few of them understand the commitment and investment necessary to innovate on a consistent basis. They want innovation on the cheap.

Now, it is entirely possible to create a new product or service on occasion, through the dogged determination of a small team of people or serendipitous insight, but no firm can count on that as a consistent basis for new products or services. Without defining an objective and consistently reinforcing the efforts of a group of people who support and enable an innovation process, most firms simply won't generate a lot of new ideas. And they certainly won't produce a lot of new products or services.

Sitting in on some roundtable discussions, the most consistent refrain was that the management teams recognized that they'd cut as much as they dared to, and now needed to grow or differentiate. Cost cutting as a long term strategy has just about run its course. Now, firms need to be able to create and launch interesting new products and services much faster. The product development process and launch processes have been refined, but there are few if any ideas flowing into the system.

Additionally, everyone seems very focused on PRODUCT innovation. Let's look at the figures. The US economy is over 80% services, yet most of us are still focused on product innovation. We need to think more broadly about service innovation, packaging innovation, new processes, new business models. The benefit of these types of innovation is that they are more easily developed and deployed, and don't necessarily cannibalize your existing positioning or products.

I sense a real frustration from many mid-level managers who've been asked to create new products and services but haven't been provided with sufficient leadership commitment, resources or funding. Innovative ideas can bubble up from anyone in your business, but the commitment and cultural attitudes flow from the top down. Too often, there's an expectation without the necessary investment or commitment.

Innovation is not cheap, and it is not easy. It requires a full commitment from the senior leadership - in terms of attention, communication, strategic focus and investment. If these are lacking, then the firm will suffer. Probably one of the most telling problems is that while every speaker identifies senior management commitment as one of the most important drivers for innovation success, none of the senior managers are at the event to hear the message.

I know I am preaching to the choir, but we need to find ways to create a compelling message to take to the senior executive teams to link corporate strategy, innovation investment and long term profitable growth. Without these linkages, the executives will continue to demand innovation but will not provide the necessary investments, and most of the rest of the organization will continue to operate as it always has. The complete dominance of process excellence as a strategic focus over the last ten years has stripped many firms of the ability to take risks, look beyond a quarter or two or even consider creating new ideas.
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posted by Jeffrey Phillips at 9:16 AM 12 comments