Wednesday, December 17, 2014

In the beginning of innovation

I received an email from a colleague and prospective client recently, letting me know that a lot of his hard work on preparing the ground for innovation within his company seemed to be paying off.  A lot of long, lonely toil to advocate for innovation was finally being accepted.  Executives were starting to recognize the need for innovation and begin to pay attention to his presentations and advocacy.  There's nothing like the feeling when a long period of being a lone voice crying out in the wilderness finally begins to pay off.

But, like the proverbial dog that catches the car, the next reaction is:  now what?  Now that people within your organization buy into the fact that innovation is important, what should they do next?  What happens most frequently is that innovation moves from being important but not urgent, to being both urgent and important.  And when something becomes "urgent" in an organization, there's a mass rush to do as much as possible, as quickly as possible, as if innovation is something that can be fixed with an "all hands on deck" mentality for a couple of weeks.  This is, in fact, the worst way to go about introducing and inculcating an innovation capability in an organization.  Just like the development and cultivation of the need over time was slow and careful, the implementation and rollout should be the same.

So, what's the plan of action?  How can a firm with little innovation experience or internal capability define and rollout innovation?  Perhaps the best first activity is for senior executives to simply define what they think innovation is, and what it is for.  Often, in the "all hands on deck" mode, we simply skip past the definition and purpose.  Each executive, business line or geography adopts a meaning or purpose for innovation for itself, and soon we have a mishmash of meanings, definitions, investments and tools, all purporting to be "innovative" and none in synch or alignment.

Innovation is a tool, nothing more.  It should work in support of your company's goals, especially in terms of growth, differentiation, new product development and profitability.  Additionally it can help you disrupt adjacent markets or enter completely new markets.  What is innovation, and what is it for?  How much change and disruption do we want to create?

The next consideration should be:  what barriers currently exist to doing good innovation, and how do we overcome them?  If you aren't innovating now, there are reasons why not.  They may be monetary (no money for innovation) or skill based or risk based or culturally based issues.  Until and unless you identify these and decide how to remove the barriers or overcome them, all the good innovation intentions are worthless because every innovation activity will end in something less than success.  Executives need to be part of this discussion, because they created or sustained the barriers and only they can successfully change or remove them.

Once you have a good definition and have started removing the barriers, we'd recommend talking about and defining "how" you want to innovate.  There are literally thousands of innovation processes, capabilities, tools and methods.  Do you want to rely on external consultants or do you want to bring the capabilities "in house"?  Do you want a "free for all" where every line of business or product group defines its own innovation methodology, or do you want a common central methodology?  We advocate for the latter in both cases, but there's not an answer that necessarily wrong.  You just need to understand how decisions impact your ability to innovate and your capability to deliver on the innovation and strategic goals.

Now that you've got a good foundation, it's time to set some expectations.  Earlier we asked to eliminate the "all hands on deck" thinking and the quick rush to success.  Innovation defines an activity from recognizing an opportunity or need through to successful uptake of new products or services by consumers.  That timeframe may span years, even if your ability to generate ideas takes only a few days.  Recognize and set expectations that innovation isn't necessarily fast, but can be very powerful.  Without these expectation setting activities you'll start off with great confidence but may fail to deliver within unrealistic timeframes, and you don't get many second chances to start an innovation initiative.

Finally, work with some really committed senior executives who want to do innovation right.  When the CEO accepts that innovation is important, every executive will want to complete a project, but some will treat it as window dressing, or won't provide the appropriate resources or allow enough time commitment.  Some executives will be genuine in their commitment and understand the value and importance of innovation to their long term success.  Choosing your first projects wisely will make a lot of difference.

There's plenty more to say about beginning an innovation competency, but I'll leave it here for now.  The most important things to remember are:
  • Define what innovation is, and what it is "for"
  • Identify gaps or barriers that will resist innovation and work on removing them before or during your first innovation activities or projects
  • Define "how" you want to do innovation - tools, methods and partners.  Build a set of skills and processes before rushing in
  • Take your time!  Don't rush into innovation, but build competence and capability
  • Work with executives and senior managers who are committed and understand the investment, especially on early innovation projects.
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posted by Jeffrey Phillips at 6:32 AM 0 comments

Wednesday, December 10, 2014

Innovation through Subtraction

About a month ago I had to visit Austin for a meeting at the University of Texas, where I went to graduate school.  This meeting coincided with a home football game, so as you can imagine, hotels were at a premium.  Not to worry, I thought, this will give me a chance to check out AirBnB.  For those of you who are already fans, enough said.  For those who aren't familiar, AirBnB is basically a service to connect the traveler (me) to people who are willing to rent rooms in their houses or their entire house or apartment for a day or longer.  As I'm a business traveler, much of my travel is typically booked into hotel chains close to downtown business centers.  I prefer big chains like Marriott and Hilton, because they are very consistent, high quality places with restaurants, gyms, and internet connections.  I also enjoy earning points to use later to travel with my family.

But on this trip the major hotels were full, so I decided to try out AirBnB, and was pleasantly surprised by my experience.  What's interesting about AirBnB, and another major industry disrupter, Uber, is the fact that they are offering a competitive service to consumers in a long established industry - hoteling for AirBnb and cab or car service for Uber.  And both have practiced innovation through subtraction.

Imagine for a moment sitting in Marriott's corporate headquarters a decade ago, thinking about new hotel offerings and concepts.  I'm willing to bet the vast majority of the discussion was focused on new hotel concepts, more interesting color schemes, how to serve business travelers more effectively.  And every discussion started with the premise that there would be a physical building placed somewhere in a city or location, whether Marriott owned the hotel or simply leased the building.  Then, along comes a startup which asks an interesting question:  how might we offer hotel services without what appears to be the most important ingredient, the building?  How could we offer hotel services without a hotel?  Do you think the majors asked themselves this question?

This is innovation through subtraction, and it is disrupting two mainline industries right before our noses.  Hotel chains are panicking, as are municipal taxi services, because new entrants are overcoming what appeared to be high entry barriers and are reworking business models.  In both cases, the new entrants asked themselves:  how might we offer the same service, but without what appears to be a key, or the key ingredient in the solution?  Who every thought of running a hotel without a building?

But, as in all interesting and relatively disruptive instances, there's more to the story.  Traditional hotel chains can't afford to place more than a handful of physical hotels in a city, and these are usually clumped in one of three places:  downtown business centers, near airports or transit hubs, and out by the interstate exits.  AirBnB can "place" you in almost any corner of town where there's a person willing to rent you a room.  The range of choices is almost endless.  So too is the range of accomodations.  With Marriott in Austin I could stay downtown in a classic Marriott or in a Courtyard, or out by the interstate in a Courtyard or Fairfield.  These are known and trusted brands, but the range of options is limited.  With AirBnB I could choose a mattress on the floor in a room near the university (not my choice, but hey who knows?) or a penthouse near downtown, or an entire house in my old neighborhood north of downtown.  I could choose from a plethora of choices based on location and style of dwelling.  AirBnb is also a great marginal play, because as hotels fill up, they can't add more rooms, but as the price of a night's stay rises, more and more people may open up their homes to out of town guests.  There's flexibility and choice for the AirBnB host as well.  There's another factor at play here as well.  As AirBnB doesn't own the buildings or lease them, they have far less overhead, and far less worry about real estate and maintenance.  This makes it possible to generate far more profits on an equivalent night's stay.  By taking out the "given" - the hotel - they also removed one of the largest costs and largest management headaches of the hoteling industry.  Further, they don't have to employ thousands of people at a hotel site.  The host is responsible for maintenance, cleaning and so forth, so AirBnB can provide an equivalent number of "bed-nights" as a major hotel chain with a tiny fraction of the staff.

Imagine generating ideas in any established industry and trying to image offering your product or service but first removing or eliminating a critical component.  I seriously doubt that Marriott or Hilton folks sat around thinking about "hotel" services without a building.  That would have been strange or unusual, but that's how disruption occurs.  What the industry considers a "must have" or a given, the upstarts figure out how to do without.  What's even more interesting is that the upstarts still need a lot of the capabilities the hotel chains have.  They've got to be able to take reservations, or at least connect you with the property owners.  They've got to be able to show available inventory in a specific city and what's available on the dates you want to travel.  Imagine if Marriott or Hilton, noticing AirBnB growing rapidly had said:  we'll provide you with all the "back office" capabilities you need to scale up.  Then the chains could have played both sides of the fence and made money on their established hotels and brands and cashed in on what was going to be a competitor anyway.

Far too many innovation programs begin with these "fixed" assumptions. Hotel service requires us to build a hotel.  Taxi service requires a medallion.  Yet upstarts found very successful ways around these "requirements" that the industry considered must haves.  What are the "requirements" in your industry that you believe are immutable?  Can you imagine starting a brainstorming or innovation activity by imagining how to deliver the same service without a key component or ingredient?  What are the factors that lock you into the same recurring patterns, your starting premises, that disrupters are just waiting to overturn?  Could Marriott or Hilton have created AirBnB?  Sure, what's more, they already had software and management capability to do everything that AirBnB did.  They just never looked at the overnight stay as anything other than in a branded building.  And all it took to create a business worth billions is to ask:  how might we subtract the building from the hotel service?

If you don't practice innovation through subtraction, you better believe that someone in your industry, or some disrupter or entrepreneur is doing it right now.  Every industry is subject to innovation through subtraction.  The incumbents are often "locked in" believing their investments will be a high barrier to entry, when in fact they often become the boat anchors that drag them down when the "requirements" are demonstrated to be optional.
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posted by Jeffrey Phillips at 5:50 AM 0 comments

Friday, December 05, 2014

Innovation: Snake oil, placebo or wonder drug?

I was scanning the Twitterverse today when I saw that one individual, Rita McGrath, a professor at Columbia, posted the following tweet:

"Met with senior executive today.  Talking #innovation.  He says, deep sigh, "Innovation is the answer to everything".  Disillusioned?

This tweet represents the way a number of people think and feel about innovation.  Innovation has become for many people a magic elixir, capable of solving a whole host of problems.  Declining revenues?  Innovation!  Falling market share?  Innovation!  As if we don't need to worry about the underlying reasons for business challenges, only focus on innovation as a cure-all for everything.

So which is it?

I purposely titled this blog post snake oil, placebo or wonder drug, because there's a necessary and ongoing debate about what innovation is.  To many people, innovation is the latest snake oil, promulgated by people like the professor in the movie the Music Man, who swindles the citizens of a small Iowa town. It's true but unfortunate that many people have used innovation to paper over problems, to offer solutions that made great promises but failed to fix the more mundane existing business challenges before trying to create a new product or service.

To others, innovation is a placebo.  In medical terms a placebo is a harmless, inert pill that is used to compare results of a new test drug.  Half the population receives the placebo, the other half the new medicine, and results are tracked.  What's often true is that health improves even in the group taking the placebo.  They believe enough in the efficacy of the pill that they either will themselves to better health or they discount their real illnesses.  Innovation is often like that - just the introduction of innovation tools or consultants makes an organization more engaged, whether or not it is really more innovative.

To others, innovation is a wonder drug.  Innovation creates valuable new products that help achieve business goals and creates significant value and differentiation.  These are some of the firms you read about constantly, like Apple (at least in the past), 3M, Gore and others.  These firms seem to grasp something about innovation that others don't, and are able to parlay innovation into ever increasing returns.

What's the difference?

Instead of discounting or ignoring the differences between outcomes, we should acknowledge the differences and ask why they exist.  Some firms are snookered by "innovation" - they invest in something that looks like innovation only to realize it didn't deliver, or wasn't sustainable.  Others have a temporary success with innovation but it doesn't "stick".  Still others are consistently capable of innovating over time.  These are the realities, and why, to return to the quote above, there is distrust and disillusionment.  In many cases innovation is failing because of the lack of investment and even cynical implementation of innovation in companies.

The difference between these results lies in engagement and commitment by the executive team.  In case after case it's easy to see that the more a senior executive team is engaged and committed to innovation, the more it emphasized the purpose and importance of innovation and the more it directs how and when innovation should and can be used, the better the outcomes.  In the snake oil example, the leadership team, like the folks in the small Iowa town, fall prey to a "quick fix" that is on offer from unfortunately many unscrupulous innovation firms.  But much of the blame for this failure belongs to the executive team, who fail to research the investments and don't commit or engage in the innovation tasks.  They simply demand innovation and expect it to be delivered.

The firms that represent the placebo example are earnest and somewhat engaged in innovation, but are easily distracted and when they lose focus, their teams and staff lose focus as well.  A short success is followed by a withering of innovation capability.

Firms that are truly successful over the long run have deep commitment to innovation, not only at the executive level however.  Using 3M as an example we can see that while CEOs come and go, all with different goals and interpretations about innovation, the culture had innovation embedded in it, so innovation remained important.  And this is another factor for distrust and disillusionment.  I think that many executives aren't so distrusting of innovation as much as they realize how much work it will take to fully embed innovation in an organization.

So the way executives treat innovation has a lot to do with its success in an organization.  Do executives see innovation as a magic wand to wave around, reciting the word innovation in the hopes that something good will happen?  Or do they understand how much work is involved to fully embed innovation capabilities in the business, and focus their efforts to achieve a deep understanding of innovation?

What is it good for?

Finally, we need to ask what innovation is "for".  One of the other reasons the executive quoted above is so "disillusioned" is that everyone knows innovation is the hot new management buzzword, so it becomes the "go to" answer for every business problem.  Innovation solves everything?  Hardly.  There are many challenges where innovation tools aren't helpful.  Innovation should be a part of any business strategy, but only a component, not the entirety.  When people don't understand how to use innovation or its benefits, but do understand that it's becoming the lingua franca of management speak, then they frame everything in an innovation lens.  And that's unfortunate.  Because a powerful, capable tool in the right situation and the right hands becomes snake oil or a placebo.

When the US and the Russians were in the race to the moon, both were innovating.  But a good example of the overuse or misuse of innovation was in writing instruments.  Both countries recognized that astronauts would need to write notes in outer space.   The US came up with a pen that writes in zero gravity, an engineering marvel but very expensive.  The Russians sent their astronauts with pencils.  Did we need zero gravity pens, or could that innovation energy have been better allocated somewhere else?
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posted by Jeffrey Phillips at 6:24 AM 0 comments

Tuesday, December 02, 2014

Did you innovate today?

Increasingly, as I'm working with corporate clients, I'm beginning to ask the teams I work with a simple question.  I ask them "what did you innovate today"?  And I ask them that question every time I interact with them.  Because it's increasingly clear that innovation is still sporadic and haphazard, engaged in the moment but quickly put aside or forgotten.  Corporate cultures and pressing deadlines, not to mention a full calendar make it easy to "do" innovation when the consultant is there, or when the boss demands it, or when it's "on the calendar", but much more difficult to find the time or focus otherwise.  Let's create a new mantra:  did you innovate today?

Why is this important?  Well, why is breathing important?  Breathing moves oxygen into your bloodstream if you are doing it correctly, and helps distribute carbon dioxide out of your body.  These are good outcomes that happen naturally, every minute of every day.  You rarely think about breathing, so moment by moment it seems unimportant.  But it is vital to your survival.

Innovation needs to become as constant as breathing, because it's just as important.  It is vital to your survival as an employee, a team member and to your company.  We simply cannot "do" innovation occasionally, or when there's a panic situation.  That would be like breathing only in certain situations.  In fact one of the best responses to a panic is to slow down your breathing, to calm and to center yourself to face whatever is happening.  How often we do just the opposite. 

You don't have to practice breathing, because your medulla oblongata and other automatic systems in your body will do it for you.  You don't have to think about breathing, except in situations where you are under stress, fearful or in new or unique situations, where air becomes precious and scarce.  What would it look like if your innovation capability and focus were as sustained as your breathing?  What if you conducted innovation every day, automatically, and it seemed strange or unusual if you didn't innovate?  That's what we need to strive for - the feeling that the day was incomplete if we didn't innovate.

Now, you may think this is a diatribe about the importance of innovation, and you'd be right, but the fact that I place an inordinate amount of emphasis on innovation doesn't mean I'm wrong.  In fact most of us need to step up the level, involvement and capability for innovating, just to keep pace with the amount of change underway in our environment.  This is a time when smart, engaged people will lead companies by recognizing we are on the brink of a precipice.  While executives and managers may not want to acknowledge its presence, most industries are in full scale turmoil and need far more innovation than is happening currently.  People who recognize this and prepare themselves and their teams, and who use and engage innovation thinking, tools and processes every day will emerge as winners, and lead their teams and organizations to better outcomes.  Those that don't doom themselves and their companies to a slow death.

If you should innovate every day, what should you innovate?  What if you don't have a product that needs innovation, or a budget?  Then you should innovate your existing processes, innovate your business model, innovate how your team works or communicates.  Introducing small but relevant change every day, in a myriad of circumstances encourage people to ask the question:  how can I change this for the better?  Rather than spend time creating workarounds or accepting less than proficient internal systems, decision making, team dynamics and so on, innovate something.  By innovating every day you demonstrate that innovation isn't a special capability to be called on in an emergency but a normal component of day to day business.  Also, by innovating something every day, you gain more credibility and more skill.  Anything you practice frequently you learn to do more proficiently.  Skills you ignore wither and die, and are difficult to recall.

Every morning when you develop your "to do" list you should ask yourself:  what's one thing I can innovate today?  How do I bring innovation tools, perspectives or thinking to what I'm tasked with?  At the end of the day, as you recap and start to head home you should ask yourself:  what did I innovate today?  What experiments did I engage?  What new tools did I introduce?  What change did I create?  Sitting still, waiting complacently for the future to unfold only means you are more likely to be run over by change rather than prepared for it.
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posted by Jeffrey Phillips at 7:03 AM 0 comments