Wednesday, April 16, 2014

The state of Innovation, 2014

As a person who lives and breathes innovation constantly, daily in fact, it seems to me the right time to step back and look at the state of innovation broadly.  I'm doing this about a decade after OVO started its innovation focus, trying to assess what's working, and what's merely conversation, in the innovation sphere.

Ten years ago we formed OVO to transition some innovation processes and tools that we'd been using in the R&D and Federal space to start assisting clients in the private sector.  Dean Hering and I started OVO because we were convinced that the future of the US market would be based on better ideas that led to better products and services and business models.  At that time, it seemed the US was outsourcing everything, but we were convinced that the US could continue in a leadership role by doubling down on idea creation and intellectual property development.  While the manufacturing may be shipped overseas, we continue to lead the world on many aspects that contribute to great entrepreneurship and idea creation.

In 2004 many firms were struggling to create new organic growth and to create interesting differentiated products.  That's not so different from today, over 10 years later, because the predominant corporate thinking, decision making and cultures are so focused on efficiency and short term deliverables that it's nearly impossible to find the resources, the bandwidth and the time to simply think about new solutions, and even when you manage to achieve some new thinking, radical new ideas simply don't fit in the old containers of efficiency and 90 day increments.  I'm happy to report that some of this mentality is changing.  Many corporations are realizing that their internal, efficient, "business as usual" cultures are simply roadblocks to creating interesting new products and services.  But so much more needs to be done.

In 2004 we documented an innovation workflow or methodology we called Innovate on Purpose which was meant to describe a consistent workflow for innovation, starting with good opportunity or problem definition and moving through a defined series of activities to arrive at excellent ideas.  We still advocate that thinking today, that innovation is a process that can be taught, a set of intelligent steps to follow, based on powerful tools to drive insight and create ideas.  What many firms in 2004 were looking for wasn't so much a process as an activity - idea generation.  We were faced with talking about what came before idea generation - discovering customer needs, and what came after - actually evaluating, prototyping and developing the ideas that came out of the idea generation.  Today, a decade later, there's still far too much emphasis on idea generation, internal or "open innovation" seeking to find ideas or technologies in the external market, and not enough time given over to defining the right problem or opportunity, and understanding the breadth and depth of customer needs.  In many corporations the dominant methodologies are convergent, and instruct us to rush into solving a problem, rather than exploring the breadth and depth of the opportunity before rushing in. 

In 2004 we understood to some degree how important people were to the innovation equation, and over time we've come to appreciate even more just how important good, passionate people are to generating differentiated and valuable ideas.  You can select any random team in a business and get an incremental answer, but carefully build a team of passionate, empathetic people who are comfortable working in ambiguous settings and they will create ideas that are far better than the average team will.  Innovation is one of the last activities in a business that is truly dependent on the best people, yet time and again most businesses don't seek to build skills or place their best and most creative people on innovation activities.  To this end we are developing and will release in late spring an innovator assessment, which identifies a number of traits and characteristics your best innovators share, to help build the best teams.  But these individuals present only the raw talent for innovation, and need more training and skill development before they can work at peak performance.

In 2004 we defined a process but neglected one critical component, which we've added in the subsequent years.  That component is governance.  And while it may seem unlikely to add "overhead" and rules or governance to an innovation activity, proper governance reasonably applied will accelerate innovation, remove roadblocks and improve the opportunities for new products and services.  You see, gathering ideas from anyone with no sense of how those ideas relate to strategic problems is an exercise in futility.  You may gather a lot of ideas, but they aren't meaningful or valuable to anyone.  Understanding the burning platforms, addressing new market opportunities that matter to executives who have the funding, resources and power to make the ideas a reality matters.  Good governance, from choosing the right opportunities to gaining buy-in for the right funding and resources and having a champion who can remove roadblocks or raise the priority of your projects is paramount. 

So, where do things stand in 2014, looking back on over a decade of innovation consulting and services?  I think we can say a couple of things have improved over time.
  • First, there's far more awareness in executive ranks that the old efficiency model is running on empty and can't create new growth or differentiation.  But that model has proven so effective that many executives can't imagine another way to work.
  • Second, more people throughout the hierarchies of most corporations are far more open to change, risk and new tools and methods.  People are really ready for a new method to drive new growth, many are champing at the bit.  They are looking for signals from top management and permission to commit time and effort to new tools.
  • There are far more capable service providers and consultants to assist these corporations.  I've reluctantly come to the conclusion that consultants and service providers will remain the dominant force in innovation for another decade, not because the tools are difficult to learn and use but because the staffing levels and demands on internal managers and staff are so high.
There are also a couple of significant, consistent barriers that are holdovers from a decade ago.
  • First and most important, corporate culture.  No matter what anyone tells you, corporate culture is the biggest barrier to innovation, if for no other reason than inertia and fear of change.  No one person or one threat will change culture, and it will take time to change, but it must change and become far more comfortable with managing both efficiency and innovation.  In 2011 I wrote Relentless Innovation to focus on the fact that "business as usual" is THE barrier to innovation, and it remains that way today.
  • Clarity around the role that executives play for innovation.  While many existing executives didn't achieve their roles by innovating, they now need innovation to grow their businesses.  Executives need to understand the role they play as sponsors, to start projects, and resource providers and roadblock removers.  They need to build a framework under which innovation can thrive.
  • The markets.  Yes, we are all investors now, and yes we all want to see constant, consistent returns every quarter.  But we also must demand as investors that the firms we invest in show that they can be viable in the long run by creating interesting new products and services.  We as investors must tell the market that we value innovation, and that information must begin to change the incentives for executive management.
  • The cottage industry nature of innovation.  While some of us have attempted to present concepts and models to bring more consistency to innovation, and perhaps provide some common data models and standards, there's been significant resistance from many quarters.  Innovation tools and methods still have too much secrecy and mystery to them, which dampens adoption and slows innovation.  Other industries and functions have managed to thrive with standard, transparent tools and models.  We innovators are still quite far from that, and it retards the growth and adoption of innovation and the creation of more new products and services.  In 2013 I wrote the e-book 20 Mistakes Innovators Make because so many nascent innovators make the same mistakes.  This is due to the lack of consistent information and transparent processes and tools.
Looking back and looking forward

Over the last decade it's been quite a wild ride.  Corporate innovation was the mantra of Christensen and a handful of others in the early 2000s, and Christensen inspired us and others to offer services in this space.  Over the last decade we've seen a real blossoming of services, solutions and software for innovation, but much of this is still in its infancy, because of the issues I raised above.  As competition increases, consumer demands change and our economy adjusts to a "new normal" I expect innovation will become even more important in the future.  Will the demands on executive management make it clear that innovators are valued far more highly than laggards?  Will we begin to see the formation of consistent innovation tools and models that are more transparent?  Will we begin to identify people who have more innovation capacity and skill and promote them to positions of leadership?  Time will tell.  I hope to give you an update a decade from now on all that's gone right.
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posted by Jeffrey Phillips at 6:43 AM


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