Tuesday, January 31, 2012

Shifting from occasional to Relentless Innovation

Last week I was working with a client in the midwest, trying to help build the case for making a shift from the traditional, half-hearted, unfocused and short-lived innovation initiative to a concept of consistent innovation built on a framework of processes and trained people - what I referred to as Relentless Innovation in my new book.  Those discussions made it clear to me that while many firms may need to make a switch from sporadic or occasional innovation, we innovators needed to provide a roadmap.

Below I've identified six factors that must change, and have attempted to document the starting point for most organizations, and the potential future state or result.  Note that making any one of these changes is difficult, but making most if not all of them is required for success in innovation in the long term.

From:                                                              To:
Incremental                                     Incremental & Disruptive
Continuous improvement and small changes are important, but every firm should embrace the idea that innovation must encompass both incremental and disruptive innovation.  Even if your firm doesn't intend to disrupt its own market or another market, it should at least be aware of the potential disruptions in the marketplace and prepare to defend against them.

Reactive                                                       Proactive
In most firms innovation is spawned in reaction to an identified threat or a shift in market conditions.  That means innovation is used to react to situations, rather than position the firm to be the first to market or take proactive action.  As the pace of change accelerates, waiting to react to disruptions may not leave enough time to respond effectively.

Ad-Hoc                                                         Methodology
Most innovation work in many firms is based on a method or process defined for the specific project or initiative. Innovation is ad-hoc, with few defined methods or processes.  This is inefficient but acceptable when innovation is infrequent and the stakes are lower.  As innovation becomes more consistent and the stakes are larger, defined methodologies will become far more important.

Isolated                                                          Everywhere
Innovation today is often isolated in small pockets of the organization where a visionary manager encourages innovation with her team, while the rest of the organization continues on, supporting business as usual.  These isolated pockets don't infect the organization with innovation skill or passion, and leave little trace once their work is done.  As in the previous definition, innovation is inefficient, not scalable and not repeatable.  This must change.

Occasional                                                      Discipline
Innovation is an occasional initiative spawned out of a reaction to a market threat or identified opportunity.  Once an initiative is completed, little or no innovation is enacted.  Innovation must become a business discipline, constantly engaged throughout the entire organization.

Closed                                                              Open
Traditional idea sources simply don't produce enough ideas or don't have the best insights and perspectives.  Increasingly every organization must participate in open innovation, as the breadth of ideas increases and the speed to respond belongs exists in capabilities within, and outside the organization.

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posted by Jeffrey Phillips at 6:09 AM 0 comments

Monday, January 30, 2012

Focus, Focus, Focus

I found today's (Saturday, January 28, 2012) Dilbert cartoon completely apropos for innovation.  This one cartoon does more to explain why innovation so often fails to achieve expectations that all the speakers, white papers and explanations out there.

If you haven't seen the cartoon, let me describe it to you.  Dilbert's CEO comes into a meeting and tells everyone to drop everything and spend all of their time building robots.  After he leaves, Dilbert turns to the rest of the folks in the meeting and says "Let's wait a week and see if he forgets".  Everyone knows that CEOs want to convey big visions, and occasionally don't follow up grand plans.  Good middle managers understand their role is to ascertain what's important to the CEO and implement it.  Given the predilection for grand pronouncements sometimes not carefully thought out, many middle managers will wait for confirmation on an unusual or dramatic request.

This truth is especially important for innovation.  Survey after survey show that CEOs "want" innovation.  At least that's what they tell the folks creating the surveys.  Some of that response is simply giving the answer they know they are expected to provide.  Some of that response is a cynical response to appear innovative while not changing the status quo.  Many of these CEOs actually want innovation, but don't understand how to implement it, don't understand the significance of the request or the amount of change necessary.  When they make a request for innovation, they expect their requests to be put into action.  Then, they become distracted with one of hundreds of other items that require their attention, and the demand for innovation is conveniently minimized or ignored.

CEOs are right to demand more innovation, but must become more realistic about the request and their expectations.  Businesses have spent years optimizing a very efficient and effective operating model and have very little room for change, especially the change demanded by embracing innovation.  Trying to implement more innovation is noble, but requires a lot of work, work that will distract the business from its normally efficient, effective processes.  Middle managers who've spent years developing robust processes to achieve short term financial success are loathe to see their work go to waste and don't want to distract their people and processes from what they do best.

Thus, the importance of "focus".  If CEOs really want innovation, they must focus, focus, focus on innovation.  A one time off-handed request for more innovation simply won't create much change.  Looking at many innovators, CEOs or other key executives have supported innovation while the culture shifts from a focus on efficiency to a focus on innovation.  Understanding the need for innovation is important, reinforcing, supporting and sustaining the focus and delivering on the commitments required are what distinguish the firms that desire innovation from the firms that deliver innovation.

Middle managers, you must understand if the CEO's request for innovation is similar to Dilbert's CEO demanding more robots, a whim or "flavor of the month", or, on the other hand, a real demand soon to be repeated, with commitments and resources.
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posted by Jeffrey Phillips at 5:07 AM 0 comments

Thursday, January 26, 2012

I'll Never Fall in Love (with ideas) Again

With apologies to Burt Bacharach for liberating his song title, I want to develop the concept of the innovator as a cold hearted killer, a love 'em and leave 'm type more suited as the villain in a dime store novel more than the passionate, heroic leading man. Because people who fall in love with ideas, or products, often don't have the strength to do what they must.  Create a new idea or new product that makes the old one obsolete.

Anyone who has worked as an innovator knows the risk.  It's easy to fall in love with an idea.  So many ideas are so perfect, so suited for the need or opportunity.  But falling in love with an idea is dangerous.  Falling in love with an idea means as an innovator you are too close to your ideas to evaluate them effectively, and will miss problems or conflicts in the idea.  A good innovator must be as willing to rework ideas and yes, even kill ideas as he or she is to promote an idea.  A detached aloofness is probably your best bet, emotion wise.

Falling in love with an idea, however, is an easily forgivable sin, while falling in love with an existing product or service is what stymies innovation and creates lethargy.  Far too many organizations have far too many executives in love with ideas that, like fading soap opera actresses have starred in their roles for far too long.  Falling in love with existing products or services isn't just dangerous, it's deadly. Look no further than Kodak for example.  Kodak continued to stick with the fading actress of film, all the while courting the emerging actress digital, but never made the clean break.  Too many people were entranced by film.  Too many people were reliant on the business models, revenues and programs that film created.  In the end, Kodak was wedded to a corpse, while a patient new bride waited to take its place.  Now, that bride may find itself in the arms of another.

Innovators and executives need to be ruthless.  In a training program today I asked the class "Who should force your own products into obsolescence?"  There are only two possible answers - yourself or everyone else.  If you fall in love with ideas or products, and ignore the signals of the market, you will suffer the same outcome as Kodak.  If your innovation efforts can be as ruthless as JR Ewing, as cold hearted as Gordon Gecko and as decisive as Churchill, then your innovation efforts will not be in vain.  If, on the other hand, you engage in a love affair with your ideas or your existing products, obsolescence will be your only friend.

Love the innovation process, love the creation of new ideas, love the exploration of customer needs.  Act with reserve in the evaluation of ideas and be absolutely ruthless when considering the further life of existing products.  Because that's how the firms seeking to disrupt your products will look at them.
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posted by Jeffrey Phillips at 7:35 AM 2 comments

Wednesday, January 25, 2012

Innovation Contradictions

Why is it that something as important as innovation should be so fraught with contradictions?  Today, as I was leading an innovation training class for a client, I stopped to think about the number and variety of contradictions that are embodied in successful innovation.  In fact these contradictions are what make innovation so difficult.

The first contradiction is that innovation requires a business to embrace processes and methods that are far different from the efficient, effective processes that sustain short term profitability.  Innovation creates new, risky, uncertain concepts that will pay off in quarters if not years.  Most "business as usual" processes reject these kind of ideas as contradictory to the existing operating model.  Which is like eating your seed corn.  I addressed this issue in my book Relentless Innovation.

The second contradiction is that while executives want innovation, they don't want the disruption or investment that innovation requires.  This simultaneous demand for innovation results and refusal to invest in innovation efforts creates dissonance in the teams that are actively trying to do interesting innovation work, and leads to confusion and then cynicism.

The third contradiction focuses on the importance of transparency, visibility and commitment.  Most innovation activities are isolated in the far reaches of a business, far from prying eyes and easily swept under the rug if the innovation doesn't pan out.  In an era of vocal leaders, we need far more emphasis on innovation, rather than the circumspect way many organizations approach innovation, out of sight and out of mind.  Doing innovation work is tough, and doing it without the full support of the senior team, constantly demonstrated, means that many innovators have far fewer resources than they need.

The fourth contradiction, and perhaps the biggest barrier to innovation, is the contradiction between what we TELL people to do and what we PAY people to do.  Often we express the importance of innovation and assign people to innovation teams.  We ask them to do important work, creating new products or services.  Yet we do nothing to change how these individuals are evaluated, compensated and rewarded.  In fact most of these people are held accountable in their evaluation period to the work they did in their "day job".  Which leaves the potential innovator in an awkward position - follow his or her passion and spend time on innovation that may detract from success in the day job, or work on the day job and give short shrift to innovation.

There are more contradictions than these I've listed.  I hope you'll be willing to add your own in the comments section.  Perhaps my other favorite is the old saw about protecting interesting ideas from others, to keep them from stealing your ideas.  If an idea is truly unique and disruptive, you won't have to worry about anyone stealing it - you'll have to cram it down their throat to get them to pay attention.  Oh, the irony of it all.  Perhaps it can best be said that good innovators are people who recognize the irony in their work.

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posted by Jeffrey Phillips at 8:37 AM 1 comments

Wednesday, January 18, 2012

What is the definition of "innovation"?

As an innovation geek, I always enjoy reading over the latest reports about innovation.  Like a kid at Christmas I eagerly await reports on innovation from management consulting firms like PWC or Booz Allen.  They provide a yearly assessment of the world of innovation, and especially what CEOs believe to be true about innovation.  And, like Christmas, many of them occur at this time of year.  Recently, GE published an innovation report entitled the GE Global Innovation Barometer.  It is worth taking a look at if you haven't done so already.

One of the items that surprised and, yes, troubled me the most is to be found near the back of the overview presentation, on page 30 of 32 pages.  That's where the report analyzes how CEOs define innovation.

The report offered five definitions and asked the respondents to choose two.  Here are the five definitions:
  1. The implementation of new processes, products, organizational
    changes or marketing changes
  2. An environment/culture that embraces positive change, creativity
    and continuous improvement
  3. Research and development, new intellectual property (IP), and
  4. Staying ahead in the market and being a market leader
  5. Solutions that benefit society and societal outcomes (including
    environmental outcomes)
These definitions don't trouble me too much, although they define very different things.  What troubles me is that no definition above was selected more than 35% of the time by the respondents.

I'm sure we could spend hours debating about the definition of innovation, much like ancient scholars argued about how many angels could dance on the head of a pin.  Unlike the angels on a pin, however, the definition of innovation MATTERS.  While it could get academic and esoteric, it needn't be.  The reason a definition of innovation is so important, if not at a global level at least at company level, is that a definition signals intention, commitment, direction and importance. 

Innovation is tough enough when well defined.  After all, in most cases an organization is asking its people to dream up new products or services that aren't aligned to existing products or services at a time when there are few resources or dollars to accomplish the most rudimentary tasks.  If innovation is poorly defined, innovation is like discovering a new continent without a map, without a compass, and without knowing what's important when you discover it.  Columbus went west to discover gold and spices.  Imagine his disappointment to discover just a bunch of sandy islands with little demonstrable wealth.  That's what innovators who work without clear definitions face.

Returning to the definitions GE used, the first (implementation of new processes, products, organizational changes, etc) is a COMPONENT of innovation, but only if those changes add significant value, are truly new and unique and important and relevant to a customer.  Implementing change is only innovation when it brings new concepts or new ideas that are valuable to a customer or stakeholder.

The second definition (environment/culture that embraces positive change, creativity and continuous improvement) is an ATTRIBUTE of innovation, not a result!  Good innovators know these conditions must exist, and by the way, this definition is too limiting.  It only mentions continuous improvement, not disruptive innovation.

The third definition (research and development, IP, inventions) is an INPUT to innovation, and too limiting.  R&D and IP are definitely a part of innovation, but this definition doesn't consider commercialization and market success.  Creating new ideas and new IP is great, but only if there is a market that needs and wants the concepts.  Moreover, this definition limits innovation to products, when innovation can clearly be applied to business models, services and customer experiences.

The fourth definition (Staying ahead in the market) is a STRATEGY, and not even a well-defined one.  You could accomplish this by cutting costs, acquiring other firms.

No wonder the CEOs struggled to define innovation - because true definitions of innovation are complex.  What a CEO says about innovation matters, in terms of the commitment of the rest of the organization, in terms of direction, in terms of investment, in terms of strategy.  The starting point for any successful initiative or venture in any business is a clearly articulated goal, definition or strategy, which is then backed by deep commitment.  If we can't define innovation well, how can we possibly be committed to its success?

Here's a really simple tip for any firm trying to become more innovative:  create your own definition of what innovation should be for your business - and not just for an initiative, but an overarching definition for innovation.  Then, ensure you have the commitment to follow through on the definition and that the people responsible for carrying out the definition understand it, and the vision, strategy and goals behind the definition.  Otherwise, like a rowboat with only one oar, you'll find your team constantly circling.
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posted by Jeffrey Phillips at 6:20 AM 2 comments

Monday, January 16, 2012

Is it a fools errand to try to create a culture of innovation?

I was reminded of the Forrest Gump mantra recently - stupid is as stupid does - and it got me thinking.  Strange, almost ironic, isn't it, that a saying like that could make one stop and think?  Or perhaps I'm just living the mantra.  But there's a deeper meaning here for innovators, and for those who babble endlessly about creating a culture of innovation.  What are some of the challenges?

First of all, most "cultures" aren't designed.  When Timmy and Jane decide to build an entrepreneurial company, they are doing so to solve a problem or bring a  new product to the world.  Most start-ups and entrepreneurs give exceptionally little thought to esoteric words like "corporate culture".  There are far too many pressing issues to face.  Second, culture is to a great extent driven by vision, strategy and, most importantly, compensation.  No matter how much any executive talks about the need for innovation, if employees' compensation isn't linked to innovation, its all just talk.  Third, since many firms lack a clear strategy and try to be all things to all people, the products and services they create necessarily have to address all needs and are tailored to the late majority and the laggards rather than the early adopter and early majority.  Want to know why your firm can't create a culture of innovation?  It didn't start out thinking about the importance of innovation, it didn't create a culture of innovation as it grew and it doesn't value or compensate people for innovation now.  Further, the customer base isn't all that keen on innovation.

Once an entrepreneurial firm achieves some reasonable size, their intent shifts from disrupting the market to defending their turf.  As firms scale and grow, they lose the sense of innovation and disruption and become very much like the firms they displaced - more interested in defending existing customer relationship and markets and less interested in innovation.  As that shift happens, business frameworks, service models and compensation schemes all band together to create a business as usual framework that is about providing for the needs of existing customers and defending the firm against disruption.  There's little incentive, motivation or focus on innovation.  The culture is increasingly attuned to short term profitability, defending market share and position and incremental improvements to existing products.
In the face of this hardened business model many firms are now becoming aware of the need for innovation - and not just occasional innovation or serendipitous innovation, but successive, repetitive innovation.  That's when many people realize that existing corporate culture - focused on efficiency, short term financial goals and defending the status quo - must be changed to become a "culture of innovation".  How's that going to happen?  The existing culture was built haphazardly in most cases, in response to shifting strategies and needs over time.  The culture can't simply shift overnight - the whiplash would be too great for the company, the processes and the people who do the important work.  Like eating an elephant, cultural shifts from efficiency to innovation must be completed one bite at a time, over a long period of time.  Which will doom the attempt since most executives and managers can't bear to think in long time horizons. 

It's the difficulty of creating a culture of innovation that led Apple to develop the Macintosh in a skunkworks, and is what makes the magic of 3M and Google so enticing.  But the reason these firms are successful and have a "culture of innovation" is that that's what their original structure, form and intention was.  Look no further than the development of Gore:  Bill Gore was determined to create a new kind of company and started from the beginning with a plan and a strategy that focused on eliminating hierarchies, highly integrated teams and communication and the support of innovation across the organization.  Gore, and other companies like that, were built from the ground up for innovation.  Most companies are now trying to attach innovation scaffolding to an existing business as usual culture, and finding the connection treacherous at best.

So, the question becomes - is it a fools errand to try to create a "culture of innovation" in an existing company that does not emphasize innovation?  Should all innovation in these firms be attempted in a skunkworks?  Can we shift teams and people to begin to embrace innovation as part of the culture?  I think the answer is "yes" - the only other response is to accept a slow slide into oblivion.  What we need to do now is understand what it will take to shift a business as usual culture to a culture that accepts and then embraces innovation.  That is not a quick journey, nor is it an easy one.  Many people, many trusted perspectives and long held beliefs may need to fall in order to achieve that.  Time, patience and commitment - attributes not often attributed to American business - must be applied to make the shift.

Eventually, though, it is the people of an organization who determine the culture.  What's good about this fact is that people are rationale actors - often concerned about change but open to influence by visionary leaders who show the way and by programs that demonstrate innovation is rewarded, not degraded.  Executives must decide that innovation is important, and communicate that decision through actions that demonstrate the importance of innovation:  what they value, who they promote, how they compensate and reward.  Middle Managers must become innovation accelerators rather than efficiency experts.  Clearly, this will take time, focus and energy.  And that's why a culture of innovation is so unusual, and so difficult to achieve. 
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posted by Jeffrey Phillips at 2:09 PM 3 comments

Tuesday, January 10, 2012

Should Innovation be "professionalized"

I read with some interest and trepidation the article in Co.Design entitled "Do Innovation Consultants Kill Innovation?".  Like many people who write for the web, I recognize a catchy title is meant to attract readers and create a distinct point of view.  As a person who earns a living as an innovation consultant, of course I'm concerned when anyone seems to cast doubt on my chosen trade.  So, perhaps it's a good question to ask - should innovation become a profession - whether inside an organization where innovation titles are appearing with increasing frequency, or should we expect to see more innovation consultants as the importance of innovation creates a potential vacuum of innovation talent?

When questions like this arise, my first notion is to consider the past and look a previous disruptions in thinking or in technology.  I'd like to consider disruptions because that's what I believe is underway - a disruption to how businesses run.  The traditional business methods are being swept away by increasing levels of global competition, free trade, economic calamities, the fact that the internet is lowering costs of entry into many businesses, increasing consumer demands and decreasing product life cycles.  I could go on but frankly I don't need to.  Innovation is becoming an ever more important capability, and that disrupts the status quo, business as usual way many businesses are run and have been structured.  So, if you believe as I do that a disruption is under way, then it makes sense to see how people and firms reacted to previous disruptions.

Take, for example, the development of the model-T.  When Ford made individual ownership of a car practical, it disrupted a lot of the existing order.  The example we all use is "buggy whips", since the need for buggy whips plummeted.  But think about all of the other disruptions - the need to produce and distribute fuel, the need for mechanics to work on the automobiles, the labor saving techniques and applications of a Model T.  Life and society were disrupted by the Model T.  And in that disruption rose a number of professional skills - mechanics, fuel refiners and distributors, road builders and many others.  These skills and professions became ever more important as the impact of the automobile was felt, and the automobile would not have been as successful if these professions that supported the automobile did not arise.  Did people decry the rise of the mechanic?  Were people upset that they didn't need to drill, refine and pump their own gas?  No, these professions and others simply enable people to move ahead and use the new tool (the automobile) as effectively as possible.  Today we don't question the value of a mechanic to fix our cars - thankfully, given how powerful and complex they've become.  Why would we think differently about professions that accelerate and improve innovation?

In any disruption, there are people who take advantage of their knowledge or simple showmanship to develop products or services that extract value from customers rather than delivering value to customers.  Whether those people are the internal managers who have innovation titles (the "custodians" of the article) or innovation consultants ("the word slingers") make no difference.  Every hype cycle has it's charlatans, which will be exposed soon enough, and every technology or capability has its experts who help others take advantage of new tools, methods, products or techniques.  Will the authors now complain about Lean and Six Sigma Blackbelts?

The authors rightly note that some firms - Apple, Google, GE and others have a culture of innovation that seems to propel these firms toward ever more innovation.  They also make the claim that these firms have entrepreneurs at the helm.  Seems a stretch except for Google anymore.  While I admire the leaders of 3M and P&G and GE I'm not aware that any of them were at any time an entrepreneur, so the hallowed sainthood of entrepreneur leaders is misleading if not untrue.  Most firms aren't lead by innovative, charismatic entrepreneurs and don't have a "culture of innovation".  They have cultures that sustain "business as usual" which conflicts with innovation.  Introducing a new tool or capability often requires either exceptionally bold internal managers (what the article derides as custodians) or insightful change agents from the outside (the dreaded word-slingers).  Change doesn't happen by itself - it happens through catalysts.

The article then makes claims that refute its own point, noting that industries like high tech, pharmaceuticals and the movie industry don't hire "dozens of consultants".  I'm not sure which firms the authors have worked with, but having worked in high tech and pharmaceutical, and as someone who actually watches movie trailers I can assure you that all of these firms work with consultants ranging from the strategy houses (McKinsey, Booz, Bain, BCG, etc) to innovation boutiques, and, what's more, firms in these industries are actively experimenting with "open innovation" to identify excellent ideas in their industries and in the wider world.  They aren't waiting just for good internal ideas.    Whether or not these consultants add value is a relevant question - but stating that these firms don't have specific processes or don't partner with consultants is almost laughable.

The authors make another point at the end that I find interesting and moving, but a bit naive.  They say that businesses need to provide the means to offer "freedom to explore the high-risk messiness and the fuzzy, nonlinear ways" in which innovation grows.  Hmm.  What other functions or processes within a modern organization could be described as fuzzy, high risk and messy?  Finance?  No.  Accounting? No.  Product Development?  No.  In fact no process or method that is used to drive any revenue or cut any cost in a business would survive if it were fuzzy, high risk and messy.  Large businesses don't operate that way.  Even in firms that have a strong innovation culture, there are still defined innovation processes, people with innovation titles and on occasion even the best innovators use innovation consultants!

The authors have a point - some innovation can be risky, messy and non-linear.  But that doesn't mean the entire innovation capability should be left completely to chance!  For anything to get done in a modern business, someone needs to be responsible and there needs to be some structure, some knowledge and some best practice.  We can't wait for the immaculate conception of innovation - we need to provide knowledge, tools, understanding and some people and process who understand how these things work.

Yes, just like the band director in the Music Man there will be people who take advantage of the situation to offer services that don't work, looking to make a quick buck.  But I think most of my clients will agree that many innovation consultants ACCELERATE innovation and build innovation capabilities rather than "kill" innovation.  So, should innovation become a profession - either as a staff or line position within a firm, or as a consulting position outside the firm?  Until the processes, tools, capabilities and methods of innovation are fully understood, fully interwoven into the culture and processes of a company and taken as second nature, I'd argue there's a huge need for innovation professionals.  The real trick, at least what the article is pointing out, is divining the difference between the Henry Hills ( of Music Man fame) who make promises but fail to deliver, and the innovation professionals who create real value.
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posted by Jeffrey Phillips at 6:07 AM 4 comments

Friday, January 06, 2012

When executives talk about Innovation, watch out

I'm upset about all the false promises and hot air I'm hearing right now, and I'm not even talking about the presidential race.  I'm talking about all the misguided talk by executives about "innovation".  Yesterday's NPR interview with new Yahoo CEO Scott Thompson provides an excellent example.  I don't know Scott Thompson and I have no animus toward Yahoo, or for any of its competitors, so what I am about to write should be viewed in the light of a neutral observer trying to wrap his head around some "innovation" claims.  Because increasing, when a new CEO starts talking about "innovation", grab your wallet and invoke the Reagan doctrine - trust but verify.

It's become almost a requirement for CEOs to expound on the need for innovation.  Every quarter like clockwork we see a survey from BCG or PWC or some other management consulting house telling us that CEOs rank innovation as the second or third most important initiative their firm should undertake.  I'd like to see the data on the question that goes unasked - how many of those same CEOs who talked about the importance of innovation last year made actual investments in innovation initiatives and programs?  While many CEOs are talking about innovation, far too many aren't actually implementing innovation.

Unfortunately the press lets them get away with this.  I was listening to the news on the radio when Scott Thompson was announced as the new CEO of Yahoo.  There's no doubt that Yahoo needs new focus and direction.  It can't decide whether it is a media company or a search company or something else.  When asked what he intended to do, he said he wanted Yahoo to do more "innovation and disruption".  That's  either the most optimistic or the most cynical statement I've heard in years.

Why cynical?  Because it plays on what is "hot" right now - innovation - without providing any specifics in terms of goals, or outcomes or investments.  By talking about innovation, he hits all of the right notes in the press, but doesn't provide any insight into what he means by innovation, and this is a critical point - when executives talk about "innovation" we need to know what innovation is meant to do.  Suppose for example we simply inserted the word "hammer" for innovation in many of these presentations.  We'd look askance at a person who repeatedly talked about hammers without giving us insight into what he planned to do with the hammer - build or destroy?  But we all nod at the sage reference to innovation.  Further, his statement is cynical because Yahoo hasn't been demonstrating much innovation capability lately, and hasn't been known for innovation.

What's Yahoo's record of innovation?  They were one of the first search engines, but were disrupted by Google.  Since then I'd have a hard time identifying a record of innovation from Yahoo, and certainly no record of disrupting other competitors or markets.  Yahoo has more experience being disrupted than acting as a disrupter, so what is Thompson going to build on?  What initiatives, investments and programs will he enact to make Yahoo more innovative?  Will innovation be used to drive more growth, increase differentiation, disrupt another market?  Why, when Thompson made a point of talking about innovation and disruption as key goals, didn't someone ask for further clarification?

Contrast Thompson's throwaway line about innovation with Arthur Lafley's statements about innovation at P&G.  Lafley made clear, definitive statements about innovation, such as setting a goal that 50% of P&G's products would originate from ideas from outside the company.  That statement confounded the market because P&G has a strong internal R&D team, and it set a goal that could be easily measured and quantified.

I hope Thompson succeeds in restoring Yahoo to its former prominence.  He and other CEOs are only guilty of latching onto a concept that's poorly defined, but which, when done correctly can drive increases in revenues, profits and market share.  Innovation is almost like alchemy - it seems to turn base metals into gold.  But just like the early alchemists, it seems that only a few people who attempt it have much success, while most of the alchemists are full of empty promises.

What I'd like to hear from Thompson, and other executives is a clearly delineated strategy, which emphasizes growth, or differentiation, or operational excellence, or customer intimacy, and then hear them talk about how innovation is going to help them achieve these strategies and retain leadership in these strategies.  Right now we are putting too much emphasis on innovation - a tool which should be used in service of strategy, rather than putting the emphasis where it belongs first - on the strategy.  This reminds me of the concept of "strategic bankruptcy" that another writer says Best Buy is guilty of.  I don't know if Best Buy is guilty of strategic bankruptcy, but I do know that many firms seem to lack clear strategy, which makes doing meaningful innovation even more difficult.

Will some journalists please follow up on a quarterly basis and ask this follow up question to Thompson - if innovation is important, what investments are you making and what results are you seeing?
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posted by Jeffrey Phillips at 5:43 AM 5 comments

Wednesday, January 04, 2012

Book Review: The Innovation Master Plan

Over the holidays several new innovation books arrived, so I'll be reviewing a couple of good books over the next few weeks.  Today I'm reviewing a book by Langdon Morris, who has written other books about innovation, notably Permanent Innovation, and who is one of the senior partners at InnovationLabs.

I was interested to review The Innovation Master Plan (hereafter TIMP) because much of what Langdon and his team write about falls very much in line with our thinking at OVO.  InnovationLabs have identified the importance of innovation methodologies and processes, which we believe creates a repeatable, sustainable innovation capability.  In The Innovation Master Plan, Morris provides an excellent overview of the entire innovation process.

TIMP is written for senior executives.  After all, the subtitle is "the CEO's guide to innovation".  Much of the book is written with a strategic viewpoint, and a "top down" approach.  What the book occasionally lacks in specific tasks and actions it makes up for in its focus on leadership, commitment and investment from senior executives.

In the first chapter, Morris tackles one of my pet peeves about innovation - asking readers to examine the purpose, reasons and strategies for innovation.  Far too often innovation is simply a reaction to a new entrant or a shift in the market.  That is, innovation is reactionary not planned or strategic.  Morris asks the reader to consider "why" he or she is innovating.  In our (OVO's) approach we work hard to link strategy, strategic goals and innovation purpose or outcome.  Without this focus, it is easy for innovation to produce interesting but irrelevant ideas.  Morris points out another important concept - the differences between "goals" and "strategies".  When CEOs state that they want 50% of their sales from new ideas, that's a GOAL, not a strategy.  A strategy may require thinking about what capabilities or competencies allow a firm to lead in an industry, or whether a firm should be a pioneer or a "fast follower".  Readers of my new book Relentless Innovation will know what I think about the concept of "fast followers".  As the pace of change increases and product lifecycles decrease, fast followers have less time to respond to market opportunities and less lifecycle in which to make a return.  Morris suggests there is a niche for fast followers but doesn't seem to offer them much hope either.

In subsequent chapters Morris talks extensively about innovation portfolios, which should help indicate what to innovate and the appropriate risk/reward matrix.  Again, this is focused on strategy which should be set by executives and used as directional information and constraints by innovators.  Far too often this thinking is missing, and causes innovation to go awry.

It's not until the middle of the book that Morris deals with "how" to innovate, and builds a case for an innovation process.  Aristotle said that we are what we do repeatedly, and only through the definition of a process can we repeat the same tasks and process steps to acquire more learning and knowledge.  Otherwise every innovation is ad-hoc, and no learning can be accomplished.  Morris' prescriptions for innovation process definition is right on the money.

Toward the end of the book Morris turns his attention to "who" should innovate, considering people and the culture within which they work.  InnovationLabs has always produced good insights on innovation culture and the book recaps much of that information.

On the whole this is an excellent book that covers much of the end to end process that good innovators should strive to achieve.  It is written with senior executives in mind, therefore it is occasionally a bit more abstract than I'd prefer, with less information on tactics and deployment than I'd like to see, but that is what the intended audience will want to read and absorb.  While we wrote our books in parallel and without collaborating, it is interesting to see at the end of TIMP Morris arrived at the same conclusion that I suggested was possible in Relentless Innovation:  innovation becomes a virtuous circle when implemented correctly.  Morris suggests that as innovators get better at innovation, they enjoy more success in the marketplace, which frees up more resources and attunes the culture toward innovation, making more innovation possible.  I developed the same theme in Relentless Innovation.  Good innovators know this, overcoming the inertia to invest in innovation and waiting for the returns is often far too difficult for most firms, so they never overcome the inertia and initial difficulties to realize the returns innovation can provide.

The Innovation Master Plan is a book I'd like to think I could have written, not necessarily because I'm a good writer or that I have great ideas about innovation, but because it makes so much sense and encapsulates so much good insight and information about what's needed to succeed at innovation as a business discipline.  This is an excellent primer for executives who are starting an innovation effort, or who need to understand the breadth and depth of a successful innovation undertaking.
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posted by Jeffrey Phillips at 5:43 AM 1 comments