Thursday, September 27, 2012

Innovation: experts are the last to know

I have two wonderful teenage daughters who are in their senior year of high school.  They are gifted students, and have a range of college options ahead of them.  This last year has been a year to explore the depth and breadth of college offerings and opportunities.  And, it has been, without a doubt, an innovator's dream.  Because while education matters more than ever, many colleges are failing to understand the disruption that is about to unfold.

As a parent, I've heard tales for years about the cost of college and how it is rising rapidly.  This isn't going to be a screed about college costs, but with two prospective students looking at some of the best colleges in the country, it could be.  What my tours on college campuses have told me, however, is that much of what is important about education is going missing, and much of what isn't important is receiving focus and funds.  Take, for example, new buildings.  While there may be a dearth of construction in many regions and industries in the US, you cannot step foot on a college campus today without encountering construction.  I've been on a number of college campuses this spring and fall, and without fail there is construction everywhere.  New class buildings, new dorms, new administration buildings.  The money is flowing fast and furious into more and more construction, at a time when place and structure matter less and less to education.  As another article points out, virtual education is growing.  My alma mater, UVA, just experienced a heart-wrenching and embarrassing firing and rehiring of the president of the university, most of which was based how quickly the university can move to place more courses, and receive more funds, from online education.

Every college campus I've set foot on has gleaming new facilities which are very attractive, but many of those facilities don't do much to increase education.  And, simultaneously, the shift is on to virtual education, from Khan Academy to Coursera.  It is only a matter of time before major universities offer full degrees to people who never step foot on campus.  I suggested in a presentation several years ago to a university that the ultimate MBA is one where my finance courses are from Wharton, my marketing courses are from Kellogg and my entrepreneurial classes are from UT-Austin.  What would people pay for an MBA made up of the best of what the best programs have to offer?

While I promised not to focus on cost, cost opens up another innovation factor.  Increasingly, people can't afford college, and are evaluating the cost effectiveness of college versus taking a job.  When this happens, the educational system is ripe for disruption, and virtual programs offer another advantage.  A teacher in a classroom can teach at most 500 people at once.  On the internet the same instructor can teach thousands of people simultaneously, and can do so from home if he or she decides to.  Costs are lower, and spread across far more individuals.  Christensen pointed out that most disruption happens from products or offerings which provide less function or fewer features than the existing competition.  When colleges scoff at online learning, they are simply repeating what GM and Ford had to say about Toyota and Honda in the early days of market entry.

Experts are often the last to know when innovation is about to disrupt their market.  They resist the signals that don't agree with their long-held beliefs and information.  They cling to the way things have always been.  The collegiate education is traditionally based on coming to an iconic place, soaking up knowledge from fellow students and faculty.  That model has worked for over a thousand years, and will continue to thrive, but increasingly it will come under pressure as "place" becomes less important and costs open opportunities for disruption of the model.

Gandhi's maxim works especially well here.  Academics who sense the need to change and are currently experimenting with online courses are encountering the first phase of change.  Gandhi said that first they ignore you, then they fight you, then you win.  The first experiments by faculty in major universities in online education were considered experiments, until Stanford demonstrated they could teach programming to over 150,000 people.  Then the faculty and staff fought the outrageous dismissal of the UVA president, and rightly so, but over the issue of speed to market and the shift toward online education.  Khan Academy has already had an impact on primary and secondary education, with new "flip schools" underway, and Phoenix and other for-profit universities have demonstrated that online learning has potential.

My daughters represent the generation that is the tipping point.  Ten years from now it won't be at all unusual for "freshmen" to take classes from home for a year or two, remotely, and then matriculate on a university campus their junior or senior year.  It won't be unusual for an individual to achieve a bachelor's or master's degree from a Stanford, a University of Chicago, or a Princeton without setting foot on campus.  There will be a lot of wailing and gnashing of teeth through the change, but it will happen.  And the experts who dictate the norms of education will be the last to know.
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posted by Jeffrey Phillips at 6:43 AM 1 comments

Tuesday, September 25, 2012

Ask not what your customers can do for you

I was pondering recently the risks associated with innovation.  No, not the risks a firm bears to create a new product or service, but the risks that a customer bears when acquiring and using a new product or service.  I wonder - do we realize what risks we ask a customer to endure to use a new product?

After all, innovators are experts at risk.  Any new product or service that actually makes it to the market has been through the risk wringer.  A good innovation process has examined the new idea for financial risk, intellectual property risk, the risks associated with the actual use of the product, reputational risk, and many other types and forms of risk.  By the time the product actually emerges from the swamps of product development and legal review, it is often a pale shadow of what it was at conception.  Most businesses are more sensitive to the risks associated with launching a new product or service than they are to the potential benefits of the new product.

But what's interesting about all this fascination with risk is the seeming inability to understand risk from the customer's perspective.  If it is risky to create and launch a new product or service for a business, imagine how risky it is for a customer to acquire and use a new product or service.  In most cases a completely competent product already exists and is widely used.  It may not be the most effective or valuable solution, but it is known and trusted.  Further, the introduction of a new product or service introduces change, which most people dislike and avoid if possible.  There's also the matter of distrust.  We tend to distrust the new and untested, and rely on historical data and accepted products and services.  Sometimes that distrust is based on good reasons, and sometimes it is based on outdated assumptions.  But what a world of trouble we create for a customer when we introduce a new product.

Ask not what your customers can do for you

It's usually just after the release of a new product when the grumbling starts.  "Don't they realize the benefits our product creates?" or "Can't they see the value our new service provides?"  Every new launch is accompanied by a litany of complaints about potential customers, who don't share our enthusiasm for the new product.  In many cases, that's because the ideas have been shorn of any interesting features and attributes as they were processed through the internal "risk wringer" in the business.  Further, many ideas were off-target from the beginning, having been birthed as a concept that was never tested and never fully validated with customers before becoming a new product.  Too often ideas become products without a full investigation of customer needs and expectations.  We expect customers to adapt to our way of thinking about their problems, rather than we adapting to their needs and expectations.  What are you asking your customer to do?

Ask what you can do for your customer

Before the risk of launch, before the financial risks associated with developing a new product, before you strip out all the risk of a new product, there's a risk you've overlooked.  That risk is that you've become so confident understanding what your customers want that you neglect to ask.  Or that you are so confident in market research that you neglect to dig more deeply.  Or that you simply impose a new technology and assume customers will adapt and adopt.  You see, the biggest risk of all in a new product or service isn't intellectual property, or financial risk, or that your product will cause someone to lose an eye or a limb.  No, the biggest risk is at the conception, when your team fails to engage with customers in a meaningful way to understand their true challenges and needs.  When you fail to perform deep customer interaction, the risk in your product is baked in, and cannot be removed.  No amount of de-risking or marketing can make a product that started life as unnecessary and unattractive more attractive to customers.  What can you learn from your customers about their needs?

The best products and services don't ask customers to change and adapt, so much as to engage and embrace.  The biggest barriers to any new introduction are the amount of change necessary to adopt, the risk of an investment that does not provide benefits and inertia.  What can your product do for your customers that cannot be accomplished by what exists, or substitutes?  What is so compelling that they will overcome inertia to adopt?  What are the key unmet needs or gaps that your product fills, and do those matter to customers enough to make them change?

Ask not what your customers can do for you, ask what you can do for your customers.
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posted by Jeffrey Phillips at 6:30 AM 0 comments

Monday, September 24, 2012

Innovation - activity, tool or competence?

There is significant, and often damaging, dissonance about what innovation "is" and how it can be deployed effectively.  Innovation is something every business wants, but most aren't quite sure how to plan or implement innovation effectively.  Innovation exemplars like Apple seem to be able to spin out exciting new products and services on a consistent basis, with minimal effort and maximum gain.  Yet for many organizations, confusion reigns.  Is innovation an occasional activity? Is it simply a set of tools?  Is it a mindset or something that should be embedded in the corporate culture?  Can it be harnessed effectively?  Every management team is grappling with these questions.  The answers will determine how successful your firm is in the long run.

Innovation is, unfortunately, a buzzword, meaning that the user defines the word in his or her own context, and often the hearer defines the word in a different context.  We've been told that innovation created the success at Apple, and that innovation is also responsible for many "failures".  We've been told there are many innovation tools and techniques - Voice of the Customer, ethnography, idea generation.  We've been introduced to innovation management, software to capture and distribute ideas.  Open innovation is now in vogue, as a way to gather ideas from customers and partners.  I often imagine that the land rush to settle Oklahoma looked a lot like what innovation does in the business world today.  Everyone rushing to stake a claim, with little in common.

So, let's answer the titular questions.  Yes, innovation is an activity.  Any business unit or product group can engage in innovation to create a new product, new service or new business model.  Occasional innovation is the most frequently practiced, and one of the most difficult, because when innovation is attempted, it is often in response to a significant new need or gap in offerings.  This means that the firm is attempting new techniques (innovation) in the face of significant threats.  What do we typically revert to when something precious to us is threatened?  Certainty and trusted tools.  Trying to innovate occasionally in the face of significant risk or change is akin to placing a novice on the back of a bucking bronco.  The ride will be short, painful and the rider is likely to be trampled in the end.

Innovation is a tool, or, more distinctly, a set of tools, each of which can provide tremendous value when used appropriately.  I was recently talking to a potential client who described their "front end" as consisting of "voice of the customer".  While "voice of the customer" can be a useful tool for customer insights, it is simply one possible tool for customer insight.  Further, the "front end" encompasses much more discovery and insight than voice of the customer.  Using only one tool or technique is like describing a room while looking through a keyhole.  Using only one tool or technique is probably more dangerous than beneficial.  Innovation is a collection of tools and techniques.  When applied correctly and in the appropriate order, they can create incredible insights.  Used poorly or ineffectively, they are no better than guesswork.

Eventually, many organizations discover than innovation should be a core competence.  This requires, of course, careful definitions and strategic alignment at the highest reaches of the organization, and a defined set of innovation tools structured in a manner to provide valuable outcomes.  It requires people who understand the importance of innovation and who don't face obstacles and threats when they attempt to innovate.  When we look in envy at 3M or Apple or Google, we often look past the investments that led to innovate success, and seek to point out the tools, or techniques, or individual leaders, that seem to create the success.  It's all of that, and none of that.  The success of any capable innovator ultimately resides in the understanding that innovation requires continual focus, an engaged culture, people who understand and use innovation tools and insights successfully.  In other words, the best innovators understand that innovation is an activity, a set of tools, but most importantly, a competence.

You can achieve that competence through strategic alignment within your business.  Paul Hobcraft and I have defined an innovation workmat approach to help senior leaders align their goals and build innovation frameworks to sustain innovation as a core competency.
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posted by Jeffrey Phillips at 7:10 AM 0 comments

Wednesday, September 19, 2012

Innovation - fast and slow

I wrote a blog post once about the "right time" to innovate.  Many executives want to innovate at just the right time, but the right time never seems to surface.  There's always a reason to avoid innovating right now, and certainly the time will be better suited for innovation shortly.  Last year would have been a great time to innovate, so we'd have new, interesting products and services to offer now.  Sometime in the future will be a good time to innovate, when we work through the existing challenges and problems.  Frankly, there is no "right time" to innovate, other than "all the time".

Similarly, I find it interesting that most innovation teams are frustrated with the speed of innovation.  In their organizations, innovation is either far too fast, or far too slow.  I was speaking with a firm that is considering our services.  Their innovation leader is a reasonable guy, well versed in the opportunities and challenges associated with innovation.  However, since the CEO has declared that innovation is a new priority, every team, every product group, every geography has latched on to innovation and is off and running.  Innovation is now like a brush fire that the innovation lead needs to corral, control and focus.  Right now, innovation activities are moving far faster than he is comfortable with, and his fear is that innovation activities move faster than the organization can control, leading inevitably to disappointment and anger at innovation concepts, rather than recognizing the organization simply wasn't prepared to move at that speed.

Conversely, many organizations are frustrated that their innovation activities move far too slowly.  In these cases there's usually less emphasis on innovation from the top, and corporate bureaucracy and inertia simply stymie innovation attempts.  Interesting to see that corporate inertia and resistance can quickly become a runaway train given the involvement and focus of a committed senior executive.  The issue or challenge in both cases is that passion or commitment - or the lack of it - is just one ingredient in doing innovation well.  Very passionate people with poor preparation and few agreed tools and methodologies will end as poorly as disinterested people with adequate tools and methods.

Why do teams run off half-cocked and get ahead of the innovation tools and techniques?  Because "waiting" for good practice and knowledge isn't appreciated by demanding executives who want results now.  But where else would a team launch into a new development without careful consideration of skills, knowledge and capabilities?  In what other business endeavor would we allow such unformed and unprepared activity to take place, creating a lot of heat but little light?

It's not passion or engagement, or tools and capabilities, that matter.  It's both.  Teams that have high innovation passion but lack preparation, skills and capabilities for innovation will simply arrive at the "trough of disillusionment" a lot faster than teams that face resistance.  Speed is an ingredient to good innovation, as is good preparation, the right tools and frameworks, and deep customer insights.

It's rare to find a firm that thinks innovation is moving at the right speed.  Far too often, it is moving too fast and is in fact out of control, heading for disaster, or moving far too slowly, condemning those firms to obsolescence.  The real trick is to find the right speed, based on the right passion and executive engagement, coupled with the right preparation and the right tools and frameworks.  Once that appropriate speed is obtained, the next goal is to maintain that speed, or even accelerate to a higher speed, based on market conditions, customer needs and competitive threats.
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posted by Jeffrey Phillips at 8:47 AM 0 comments

Monday, September 17, 2012

Innovation never sleeps - wake up North Carolina

Few organisms are more reticent, or slower to change, than a bureaucracy that is convinced it is in the lead.  Once convinced that it is in the lead, a company, a non-profit or yes even a state can become a bit arrogant, and myopic in its world view, comfortable to rest on its laurels rather than reinvest and continue to grow and expand.  Every business, every organism reaches a point of stasis where it plays defense rather than offense.  The question is - can it rediscover the energy and passion that it had when it was hungry?

I've written in the past about my home state - North Carolina - and the challenges that faces the people and the state.  North Carolina is a study in extremes.  Home to banking headquarters, the Wall Street of the South in Charlotte, and the home of many fine universities linked by the Research Triangle Park.  Yet North Carolina has both creative and innovative deserts as well as these oases.  Many geographies and regions in the state are struggling while Charlotte and Raleigh continue to prosper.  North Carolina was once on the forefront of growth and innovation.  In the 1950s North Carolina had the largest economy in the Southeast, and forward thinkers took thousands of acres of worn-out cropland between Raleigh and Durham and made a big bet - they created the Research Triangle Park, which has become a model that is copied in many other regions and even countries.

I think the investments and foresight of the people who created RTP, of the governors who sought investment in the state, who funded roads and infrastructure that led to North Carolina being known as the "good roads state" were invaluable.  But today we are missing that same vision.  An article in the News and Observer on Saturday, September 15 should be a wakeup call for those who believe North Carolina is still a leading economy.  Entitled Is North Carolina losing its once-lofty perch, the article evaluates the competitiveness and innovation in the state over the last century.  The article casts this to some extent as a Republican - Democratic debate, but it is far more than a political discussion.  Once the largest economy in the Southeast, now Virginia, Georgia and Florida are larger.  North Carolina ranks 4th nationwide for unemployment after the recession.  These aren't political issues, they are issues of complacency and stasis. 

While the political sides debate about issues of tax credits or education reform, we could create a new vision for the next 50 years.  Governor Perdue, quoted in the article, said of the people who created RTP:

You had leaders from the public and the private sector who could dream a bigger dream for North Carolina,” she says. “They had those audacious ideas for this state, and they put their money together and took some long-term risk. ...We transformed the economy around people with big, bold ideas

We need that same energy, vision and enthusiasm now.  Most of the people who were BORN when RTP was created are now approaching retirement.  The concept of a large research site was valuable at that time and place, but we may need a new vision for North Carolina, less focused on a geography and more focused on sparking a lot of new innovations.  Those innovation should come in the government setting, the academic setting and the business world.  North Carolina should be an incubator and a laboratory of innovation.

To give credit where it is due, other states have noticed the opportunity to use a vision and to spark innovation.  Colorado just launched its COIN (Colorado Innovation Network) and states like Rhode Island have programs like the Business Innovation Factory.  These states have managed to bring together enough critical mass, and to create a vision that reinforces the importance of innovation across the government, academics and business.  We can do the same.

North Carolina's future isn't a political football.  It isn't up to one side or the other.  It's time we all got behind a big new vision for the state.  RTP served a wonderful purpose, but today's innovation needs to be more distributed across the state, and more attuned to the virtual nature of business and society.  Our vision needs to reinforce innovation in government, to make it more effective and accountable.  It needs to focus on innovation in academic settings, from kindergarten to the collegiate level.  New methods of education and learning are unfolding.  We should be at the forefront. 

We have all the puzzle pieces in this state - a wealth of smart people, a diverse economy, excellent universities, good businesses and entrepreneurs.  We are well positioned geographically and have the size and heft to be a leader domestically.  We need to reclaim the leadership we once had, not just of the Southeast, but of the nation, and prepare ourselves to compete, and out-innovate other regions and yes other countries.  We no longer compete just with Virginia or Georgia, but with Finland and Qatar and China as well.  Our pace of change must at least match theirs, otherwise we are doomed to fall behind.

Read more here:
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posted by Jeffrey Phillips at 6:24 AM 0 comments

Friday, September 14, 2012

Why you can't multi-task innovation

We were talking shop at the water cooler this morning, reminiscing about recent innovation project work.  One of our consultants described a recent idea generation session he led.

In this session, the CEO kicked off the morning describing the need for big, new Blue Ocean ideas.  Ideas that would really "move the needle".  A very senior VP who reports to the CEO also noted the importance of innovation and big ideas.  Everyone on the project team nodded sagely and were very engaged.  Once the work started and the CEO and senior VP left the room, everyone pulled out their laptops and cell phones and started responding to emails and voice mails.  Several took calls while nominally in the idea generation setting.  By the end of the first day the original team of 15 had been reduced to 12, as several people disappeared and weren't seen again.

Every participant in the room acknowledged the importance of ideas that create compelling new products, but had an exceptionally difficult time being 'present' in the room to generate ideas or develop ideas more completely.  As team members drifted in, and out, of the room they had to be constantly reminded of the reason for the event and the best ideas that had been discussed while they were away.

The failure of multi-tasking

In your regular job, you may be an expert at handling multiple tasks simultaneously.  You may be able to talk to a vendor on the phone while simultaneously writing an email while sitting in a meeting.  You may have enough knowledge and awareness to do all of those things well.  I doubt that is true, but let's stipulate that it is.

When you are trying to innovate, especially when you are trying to create new ideas that are unique or different from what your organization normally does, you cannot multi-task, you cannot dilute your engagement or awareness.  You cannot attempt to concentrate on day to day, routine tasks at the same time you are trying to create interesting new insights and ideas.  Your brain doesn't work this way, and you will be pulled in the direction of your expertise and competence.  Which means you will revert to incremental ideas at best.

Real creative insights happen when you release what you know, your expertise and frameworks, and focus on expanding your thinking and considering broader possibilities.  That kind of engagement and thinking cannot happen while you are answering emails on your cell phone, or while you are engaged on a conference call.  You simply don't have the expertise to handle routine, day to day issues and engage in broad, disruptive thinking at the same time.  One of these activities will suffer, and it is always the idea generation that goes lacking.

Firefighting is the focus

Unfortunately, the behavior we see is in direct correlation to what we reward.  People who rush in to solve problems at the last minute, like the superhero saving the damsel in distress, are always celebrated.  It's much harder to celebrate people who are doing deep thinking about the future of the business or the best new concepts to evaluate for new products.  Cell phones, laptops and tablets have made us more productive, but increasingly are making us slaves to the urgent over servants of the important.  If a team can't engage and focus on big opportunities and challenges for one day without losing a significant portion of the members to other "pressing" issues, then it cannot generate strong ideas internally, and will probably struggle to implement good ideas at all.

For some reason, firefighting and resolving small problems seems like "real work" and is valued and rewarded, while thinking up new revenue streams and new products that differentiate the company seems like a secondary activity that can be put aside at any moment.

Saying - Rewarding Gap

Paul Hobcraft and I wrote the Executive Workmat articles to describe what we call the "saying - doing" gap.  That is, we believe executives say they want innovation, but often fail to do the things necessary to help support and sustain innovation.  The issue I've described above details a "saying - rewarding" gap.  The CEO and senior VP asked for expansive, interesting, blue ocean ideas that would move the needle, but the members of the team responded by working on near term issues and crises rather than longer term interesting ideas.  Clearly the team believed that the incremental challenges and issues their teams face are more important and urgent than doing an excellent job thinking about the future of the company.  But these folks aren't rogue agents - they are simply doing what the organizational culture, society and their paychecks tell them to do.  They are rewarded and compensated for solving short term problems, not for generating long term solutions.

Getting Blue Ocean Ideas

How then do you get blue ocean ideas that change the needle?
  • Senior commitment - not just at the kickoff, but throughout the activity
  • Engaged people rewarded on the outcome
  • People willing to focus, completely and fully, on expansive thinking
  • The ability to relax or put aside corporate culture for a short time
  • Creative exercises meant to expand thinking and relax barriers
  • People fully present, fully committed throughout the activity
  • Leave the iPad, laptop, cellphone and other distractions in another room
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posted by Jeffrey Phillips at 6:54 AM 1 comments

Tuesday, September 11, 2012

Organizing for innovation

I'm reading a new book by Sarah Caldicott, about Edison's focus on collaboration and how collaboration spurs innovation.  Early in the book she recalls a presentation by C.K. Prahalad.  Prahalad suggested in 2009 that innovation, value creation and strategy would, over the next decade, become completely interwoven.  Which raises the question - if innovation, value creation and strategy are tightly linked, why do so many firms treat innovation as an occasional effort rather than a consistent capability?  Does this mean strategy and value creation are also occasional efforts?  No.  So are so many enterprises so inconsistent about innovation?

I think the answer is that value creation and strategy are top of mind for many executives, and have a long history of continuity.  Strategy defines WHAT we want to do and value creation defines how to create value.  In the recent past, when the pace of change was far more sedate and competitive threats and market shifts more incremental, innovation was required only occasionally.  As the pace of change increases, competitive threats and substitutions increase, innovation must become as constant as the change you face. 

But innovation has no long history of continuity, no over-arching framework.  Most organizations lack deep innovation experience and recoil from the assumed uncertainties and risks associated with innovation efforts.  Many executives long for more innovation from their teams, but don't understand how to lead their companies to sustained innovation.  There are few examples of long term innovation successes, and those often seem to suggest that their success is not repeatable.  What can we learn from Apple's success, or Google's, or 3M's? 

One concept that we can advocate with certainty is that anything that must be done well, and done repeatedly, in any organization, must be based on a defined process or framework.  In a corporation, nothing important is left to chance, or performed in an ad-hoc fashion.  If innovation is important and must become a more consistent capability, and if executives want to lead their teams to more innovation, then executives must provide and support a consistent method for innovation, in the same way that every other important activity has a defined approach or framework. Note that I'm not suggesting that executives must do the innovation work, but that they must define how the innovation work gets done, and create clarity about the approach and remove roadblocks or inconsistencies, so that innovators can work more effectively.

To this end, Paul Hobcraft and I have developed, and are currently publishing, a strategic innovation framework we call the Innovation Workmat.  The workmat consists of seven "domains" which we believe must be defined and developed by executives, to create a consistent and sustained environment for innovation to flourish.  In many organizations, these domains, including concepts like strategic alignment, corporate culture, governance and motivations, are hazy or simply block innovation attempts.  Executives often request innovation from their subordinates but don't provide frameworks or roadmaps for success, and fail to develop a sustaining infrastructure.  By developing a consistent, sustained innovation framework, executives demonstrate their commitment to innovation and build structures that enable far more innovation, with far more continuity and success.

Prahalad's suggestion was that executives had to organize for successful innovation - in fact it may be that he was merely reminding people of Drucker's statement that enterprises have only two functions - marketing and innovation.  All the rest are costs.  Strategy, value creation and innovation are now, and will continue to be, tightly intertwined.  Innovation is not an occasional activity but must become a consistent capability.  Executives can ensure that occurs by defining and supporting a strategic innovation framework.  The Executive Innovation Workmat we present is meant to define that framework and start a discussion in every organization. 

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posted by Jeffrey Phillips at 5:30 AM 1 comments

Thursday, September 06, 2012

Innovation's leadership and alignment gap

What do Robert Tucker, the authors of The Innovator's DNA, a recent DDI research report, Paul Hobcraft and I have in common?  Besides being handsome innovation consultants, we share the belief that there is a gap in innovation leadership and alignment.  That gap is often fatal for innovation.  When innovation struggles or faces difficult challenges, business growth and differentiation suffer.

The Innovation and Alignment gap

How do we know a gap exists?  That's the easy part.  Typically, on any survey of executives, innovation is identified as a top three priority by CEOs.  Surveys run by the top strategic consulting firms, small boutique firms, university professors all demonstrate the same result.  CEOs are constantly prioritizing innovation as a top priority. But here's the rub - the results suggest that something is going missing.  A recent study by the NSF in the United States indicated that less than 20% of manufacturing firms, and less than 8% of services firms, reported creating an interesting new product or service.  While close to 70% of CEOs rank innovation as a top three priority, less than 20% of manufacturing firms (which represent only 30% of businesses) and 8% of services firms (which represent the majority of firms) are reporting that they delivered innovation.  There is a huge gap between executive demands and expectations, and actual delivery of innovative new products and services.

Why does the gap exist

If the gap exists, as I've explained above, the interesting question is:  why does this gap exist?  Clearly, CEOs want innovation.  Most employees would rather work for companies that they think are innovative.  Everyone wants innovative new products or services that drive growth and differentiation.  Who doesn't want to do to their industry what NetFlix did to Blockbuster, or have the impact of the iPad on the computing market?  Yet innovation struggles in most organizations.

We stipulate that the reason the gap exists is that executives haven't done enough to establish a strategic innovation framework within which the rest of the organization can work effectively.  Even though executives ask for innovation, in many cases the goals aren't clear, the tools and methods aren't obvious, the culture is resistant to change, governance is lacking, common language and context are absent and the motivations and rewards are hazy at best.  Innovation is uncertain, unusual and risky.  Only clear goals, clear frameworks and definitive motivations will accelerate innovation, and these need to come from a committed executive team reinforcing a strategic innovation framework.

Defining a framework

Paul Hobcraft and I have developed, and will release next week on Innovation Excellence a strategic innovation framework meant to define important innovation roles and activities that help executives bridge the saying-doing gap.  We believe executives must fill several important roles that unfortunately haven't been well-defined.  This lack of definition and awareness means that executives ask for innovation but fail to provide tools, metrics and frameworks for innovators in their organization.  We've defined seven "domains" that form a strategic innovation framework, which executives must sustain in order for innovation to succeed.  Note that we aren't saying that executives must generate ideas or evaluate ideas - that work should be distributed throughout the organization.  We are saying that executives must sponsor innovation and create a strategic framework for innovation that allows anyone in the organization to generate and manage ideas.

Purposeful Innovation

We believe you can make your own luck, create your own destiny through purposeful innovation.  That means a program defined and reinforced by executives that engages the entire organization.  After years of right-sizing and a focus on efficiency and effectiveness, only a purposeful, strategic approach to innovation, reinforced by executives, will result in the change you need.

Please watch for our articles next week on Innovation Excellence, and please engage with us in a dialog about the importance of executive involvement, and the need for a defined strategic innovation framework.  Your thoughts are welcome, and we look forward to the dialog that the framework we'll unveil will create.
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posted by Jeffrey Phillips at 6:34 AM 0 comments

Wednesday, September 05, 2012

Book Review: Outside In

I'm using my blog post today to write about a book that many innovators should pick up and read.  The book, entitled Outside In, was written by several Forrester Research consultants, and is nominally on the topic of "Putting the customer at the center of your business".  But much of the book is focused on the concept of the "customer experience journey" map, which I believe is a powerful tool for innovators.

The book review

First, the book review.  Outside In, written by Harley Manning and Kerry Bodine, is an good book meant to remind people that customers are the reason we have businesses.  Without customers, there's no revenue, no growth, no profits.  Yet we structure our businesses with the customer as an afterthought.  Outside In suggests that customers should be the center of the business proposition, structure and design, and that we should build businesses with the customer at the center of every proposition.

Early in the book, the authors introduce the concept of the customer experience journey.  This is a tool many innovators and designers use to examine the trajectory of a customer's experience with a company or product from the customer's point of view.  Many organizations have process maps and flow charts that describe how the process should work, but processes are designed to minimize cost and improve internal efficiency, not to satisfy or delight the customer.  This means that there are often many interactions or "touchpoints" where the customer expects specific information, interaction or experience levels that are incomplete or missing.  As we become sated with product choices, the differentiators will increasingly become service and experiences, which is why a customer experience journey is so important.

Much of the book then focuses on the "six disciplines" of customer experience, as defined by Manning and Bodine:
  • Strategy
  • Customer Understanding
  • Design
  • Measurement
  • Governance
  • Culture
While these disciplines seem right on the surface, I would have hoped that "design" and "culture" would have received more prominence.  After all, placing the customer at the center of the business proposition is a design issue, and is supported by corporate culture.  The rest simply ensures that the focus happens.

I'm happy to see that the concept of a customer experience journey is gaining some prominence in the book, and that the concept of placing the customer in the center of the business proposition is highlighted.  The book also focuses on driving new customer insights using ethnography and voice of the customer, which are tools we at OVO regularly use to discover new needs.  The concepts in the book are valuable and should be embraced by innovators.

My continuing rant about the publishing industry is resonant here as well.  The book is loaded, may I say larded, with "case studies" that extend the length of the book but don't add to additional insight.  Like a Malcolm Gladwell book, the concepts here could have easily been documented in 30-50 crisp pages, but that's not a book that can be published.  So the book has excellent points and examples but often feels like there is significant filler as well.

Innovators take note

There are three important overlaps between the points in this book and innovation.

First, the concept of customer experience and innovation.  I'm not sure that the book mentions innovation, but the customer experience journey should be a vital component of innovation work.  The journey provides a different perspective - examining the services and experiences that a customer embraces or endures.  The journey helps suss out customer needs or expectations at critical interactions, exchanges or touchpoints.  This information is invaluable for innovators.

Second, the concept of the intertwining of design and innovation.  Good design is good innovation, and vice versa.  Designers don't own a lock on design concepts - design concepts should be constantly introduced through innovation activities.  Every new initiative should be started with a design focus in mind.

Third, traditional market research provides information on existing products bought and used by existing customers.  Innovation is about providing new products to existing customers, or attracting new customers to new or existing products.  That means that traditional marketing research is not helpful in most cases for innovation.  A customer experience journey map provides insights into customer wants and needs, as does ethnography and voice of the customer.  Trying to innovate without these tools is like starting out to navigate the Earth assuming the Earth is flat.  You may arrive at your intended destination, but the journey may be difficult.

While Outside In is not necessarily a book about innovation, it is one innovators should read.
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posted by Jeffrey Phillips at 5:46 AM 1 comments

Tuesday, September 04, 2012

There's no innovation without experimentation

Many times people will ask me what I think is "wrong" with so many companies.  Why can't they innovate? they ask.  Where are the innovative new products and services.  Many will look back to innovators like Edison, Marconi, Alexander Graham Bell and wonder why businesses today cannot seem to innovate the way these individuals did.  Was there simply a spark of genius, or is something larger at work?  I think one powerful answer is provided when we examine how many of these early innovators worked.

Perhaps my favorite quote (potentially apocryphal) from Edison is the statement than he knew 1000 ways not to make a lightbulb.  Edison is famous for many inventions, but what is often overlooked is how many different paths he attempted to create the significant success.  Edison was an inventor, yes, but at his heart he was a synthesizer and an experimenter.  He learned by combining disparate technologies and concepts, and experimenting repeatedly.  The failure of any given experiment didn't block his work, it simply opened new areas for exploration and created new learning.

Contrast that approach to the work we do today.  In many corporations, outside of research and development teams experimentation is a dangerous word.  Experimenting has lost its luster and is often equated with "winging it", rather than an attempt to extend insight and knowledge.  In an environment where everything must be perfect the first time, experimentation loses and sameness wins.  There are several reasons why experimentation is viewed with suspicion, and why sameness seems so compelling.


Good experimenting takes time, and is DIVERGENT.  Divergent in the sense that as one experiments, one attempts new things and strays from the "straight and narrow" since discovery and learning is part of good experimentation.  You can either experiment to prove something false, or experiment to learn something.  The mentality matters.  Good experimentation means you'll have lots of failures, but obtain a lot of learning.  However, no Six Sigma certified firm tolerates "lots of failures" for long.  Too often that experimenting looks like "non-valued added" work which should be eliminated.

Outside of R&D most business functions don't have experience with experimenting and don't understand the value proposition.  It's as if learning or attempting some new functions or offerings is verboten.  Only the fully expected and fully perfected are allowed.  Yes, I know we've trained our customers to expect only perfection.  Perhaps we should demonstrate for them why experimenting with new offerings, new services and new business models is potentially to their benefit.

Sameness is next to godliness

There's another reason experimenting seems so dangerous and outdated.  It is far safer and much easier to simply copy a competitor's product, or channel, or business model rather than experiment with new offerings.  While the returns are marginal when copying, there's no "wasted time" or wasted effort experimenting to create something new and interesting, that is more than likely to "fail".  Since marginal success is rewarded and failure is punished, it should be little surprise that experimentation, no matter how small or insignificant, is rarely attempted.

The Reverse of Edison

What we have today is the reverse of Edison.  Most organizations do so much research, so much perfecting of one product or service, and so little experimentation that they too can claim not to know hundreds of ways to deliver value to their customers, but not because they experimented and failed, but because they never experimented at all.  As the amount of experimentation falls, awareness and knowledge becomes narrower.  As the rate of experimentation falls, the organization becomes more conservative, isolating and fearing risk.  And this simply feeds a vicious circle, to the point where experimentation seems difficult, dangerous and unlikely to add value. 

On the contrary.  Good innovators understand that experimentation is vital to gaining new insights and new knowledge.  Many small, expected innovation "failures" based on experiments are far more valuable and tolerable than one large product introduction failure, but that's the tradeoff many make.  Experimentation doesn't just belong in the R&D suite, but is increasingly necessary across all business functions.  Experimenting doesn't increase risk and inefficiency, it lowers failure rates and increases insight and learning.  One of the first best questions to ask someone who wants to create new products is:  what have you tried?
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posted by Jeffrey Phillips at 7:17 AM 0 comments