Tuesday, January 20, 2015

Innovation doesn't take a vacation

Yesterday, January 19th, we celebrated Martin Luther King Day in the US.  This is a Federal holiday meant to recognize and celebrate the work that MLK and others did to improve the lot of African Americans.  Since it is a Federal holiday, many businesses also recognize it, so yesterday, many employees stayed home, or used the long holiday weekend to visit family or make a quick get away.

Vacations and holidays are awesome. We all benefit from an opportunity to step away from our work, to recharge our batteries and refresh our thinking.  But one thing we all need to realize is that innovation, the inexorable march of change and emerging new ideas, never takes a vacation.  Innovation doesn't recognize holidays, or weekends, or sick days.  Innovation doesn't care about how busy you are just keeping up with day to day operations.  Innovation is out there, working, emerging, constantly evolving all the time.  When you take a day off, have a holiday or delay innovation activities or projects "until the time is right" then you are merely delaying the inevitable.  Because, to paraphrase Neil Young, innovation never sleeps, never vacations, never rests.  And the sooner you realize how quickly and how constantly innovation is occurring, the better you'll be able to either 1) decide to engage at the same level or 2) prepare to be eclipsed.

Now, this isn't a diatribe about holidays or vacations.  As Americans, we tend to work too much, ignore or reject vacation time.  Too much work leaves anyone tired, bored and uninspired.  Innovators recognize that new interactions or experiences can lead to new ideas or insights.  The challenge we face is that too often a vacation day or holiday simply compounds the amount of "business as usual" work we have to do the day we get back from holiday or vacation, because "business as usual" issues and work never sleep either.  If you are going to be behind in your work, and make choices between being behind at your regular work or your innovation efforts, which should you shortchange?  That depends.

It depends on how important you believe things like innovation, new product development, building the capability to change are to your business.  If your team believes that keeping pace day to day with existing competitors and products is most important, you'll shortchange innovation.  And you'll find yourself in good company, since most firms will emphasize day to day over the future.  You'll also have a much greater opportunity to commiserate with your colleagues, because all of those who focus on the mundane, business as usual will be disrupted, and far sooner than they can imagine.  Because innovation doesn't rest, doesn't sleep.  Here's the truth:  it only takes one innovator, one entrepreneur, one new entrant to disrupt a market.  If only one firm in your industry or one new entrant does innovate and create a compelling new product or service, it doesn't matter what the rest of the industry did.  If all of the other firms in your industry decide to shortchange innovation, and one new entrant creates a new product that customers demand, it's proof that innovation doesn't rest, doesn't take a vacation.

In fact it makes sense to say that new entrants, entrepreneurs and innovators should seek markets where the incumbents are taking a break, resting on past laurels, sure that existing channels, products and business models are secure.  We were busy celebrating Blockbuster just months before NetFlix swooped in to devastate its business model.  Nokia created and tested a touch screen phone years before Apple did, but safe and secure in cell phone handset leadership it did nothing.

If we were serious about innovation, here's what we should be using our vacations for - in fact what our employers should do:  intentionally send employee teams on vacation with the demand that they come back with interesting new ideas.  Send them someone new or different.  Send them somewhere that challenges their thinking and introduces new insights.  Perhaps every innovation project should begin with a vacation - a vacation from the mundane, day to day stuff that clogs our thinking. 

But this really isn't a blog about vacations.  This is a blog about persistence, about change, about the need to become far more vigilant.  As the character in the Great Gatsby replies when he was asked how he became bankrupt (gradually, then suddenly), innovators, entrepreneurs and new entrants don't sleep, don't put things off, don't wait until the time is right.  They are innovating now.  It's their number one priority.  Is it yours?  Can you afford to have another priority?
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posted by Jeffrey Phillips at 5:31 AM 0 comments

Monday, January 19, 2015

Sequels or new ideas

I was perusing Twitter, checking out the tweets of some of my favorite Tweeters, when a note from Saul Kaplan caught my eye.  He was poking fun at the prevailing need in the US to create "franchises" of successful ideas - the inevitable "sequel".  He wrote:

Sequel Nation. Windows 10, iPhone 6, Scary Movie 5.
From Saul Kaplan @skap5
Note that it is almost a given that any good product will spawn a sequel.  Whether that product is a software product (Windows moving on to its 10th "version") or a sequel of a TV show (Breaking Bad is spinning off Better Call Saul) or a movie (how many Terminator movies do we actually need?).  Just recently I saw that someone thought it would be a good idea to create the second "Hot Tub Time Machine", a movie that uses as it's central idea a bunch of morons who discover that a hot tub is actually a conduit to a worm hole that let's them travel through time.  Never mind the whole hot tub as time machine, did we really need a second one? Further, I saw an advertisement that the Odd Couple will return as a new series on CBS, with a Matthew Perry of Friends fame playing the Oscar role made famous by Jack Klugman.  So in this instance not only is the story a remake, but the actors are retreads from other sitcoms.  Given the overwhelming prevalence for sequels, we should start to investigate why there are so many, and what that means for innovation.

The rationale behind sequels

What every firm wants to create is a money making franchise that will spin out huge profits over a long period of time.  The idea of versioning or sequeling allows a company to take what was once a good idea and extend it, reaping more profits or benefits.  For strong product or good ideas, the concept of a sequel is almost a "no brainer".  You are simply building on a known success, which already has market viability and awareness. This minimizes marketing and advertising and creates links to what consumers already know.  In the minds of many execs, a sequel of an even poorly executed idea is often more promising than a completely new product or service.  Thus we are served Scary Movie 5, or a remake of Ghostbusters or Charlie's Angels, rather than completely new material.

This rush to sequels is supported by what I call the maximum loss hypothesis.  If I build on an already existing idea or franchise, I build on existing awareness and link to audience or client expectations.  While the audience may not expect much from Scary Movie 5, it knows WHAT to expect, and may already have decided that while the entertainment will be mediocre, it's worth what it costs.  Thus the maximum loss is relatively low.  If, on the other hand I invest in creating a completely new product, which the audience is unfamiliar with and doesn't link to other existing brands or products, the audience could ignore or reject it entirely, thus I lose both the investment in the new product and the opportunity cost of not investing in a sequel.  This is why we keep getting the same recycled dreck in the entertainment world, why Breaking Bad seems so unusual in a world of recurring Matthew Perry and other Friends cast spin-offs.  There's less to lose on the downside, which is accepted, along with the low ceiling that most sequels never do as well as their predecessors.

The rationale for new ideas

Genuinely new ideas are unusual and unfamiliar, and may not have the same social status or acceptance of older or reworked ideas.  Since the ideas are new, untested and unfamiliar, a larger investment in creating validity and awareness is often required.  Many corporations, in both the content world and the product world, shy away from an investment to create a brand for a new product.  It's much easier to extend a brand (Coke, Coke Zero, Cherry Coke, etc) than to create a new brand or market a new idea.  New ideas usually return only one of two outcomes:  they either strike out miserably or win big over the long term.  Note that neither of these outcomes is preferred.  A big strikeout - an investment without any return is a huge negative, as is a big return in the long term.  Most executives would rather settle for smaller, predictable returns in the short run rather than the opportunity for a larger but slower return overall.  New ideas that are really interesting or valuable take time to sell and take time to drive profits and revenue.

Thus we'll never really move all that far from the sequel.  Even firms like Apple, which seemed at first interested in "breaking the mold" are now more content to extend the brand.  The iPhone definitely broke the mold at the start, but now is satisfied to simply extend some features and add new "versions", but we're well past the risky stage.  What's the next iPhone that will disrupt the handheld market?  Will Apple create it, or will they simply version us to death?

Truly new ideas move us from certainty to a completely new insight or understanding.  They change the way channels work, the way we use products, even our expectations.  To become too dependent on sequels is to reject change.  We need new products and services, new innovation to refresh ourselves, our markets and our thinking.

We are our own worst enemy

Who is at fault for this avalanche of sequels?  We, the buying public, are.  As long as we pay money for Scary Movie 5, the firms that make decisions about which products to commercialize will create sequels.  We have far more power in this equation than you may believe.  This is a consumer driven economy, and if we consumers demand better and more interesting new products and services, the companies that create content, products and services will have no choice but to act.  So, if you want innovation, vote with your attention, your feet and your wallet.  Please do everything you can to avoid sequels and retreads.  Demand better, more interesting, more valuable products and services.  Otherwise, get ready for Scary Movie 6, coming to you in 2016.

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posted by Jeffrey Phillips at 8:51 AM 0 comments

Thursday, January 08, 2015

The difference between continuous improvement and innovation

It's a shame that no true standards body for innovation exists, because the lack of accepted definitions and standards allows anyone to claim anything is "innovation".  One of the biggest issues I face constantly is trying to help people understand why their continuous improvement programs aren't necessarily all there is to innovation.  After all, continuous improvement programs use brainstorming as a tool, seek to improve a situation or process or product and often result in a better solution.  Isn't that innovation?

Perhaps I can best illustrate by using an analogy.  Someone who uses a "paint by numbers" kit and a famous artist - let's use Picasso - can both be called "artists".  After all, they both use the same tools - paint and brushes, and they both produce finished paintings.  But, which would you pay more for?  Which is an incremental improvement and which is a masterpiece?

The problem with Six Sigma, Lean and Continuous Improvement adherents is that they act as if innovation is somehow derivative or subordinate to these tools, rather than acknowledging that innovation is a much broader set of outcomes and capabilities, and that continuous improvement is a small portion of a much larger innovation umbrella.  When innovation is defined in the context of Continuous improvement, it loses it's power to engage and to create, to generate completely new and unexpected products, services and business models.  Instead it is held captive to those who would seek a predictable but incremental solution every time.

The difference between the "painter" who dabs paint into numbered sections on a prepared canvas, and Picasso is that the paint by numbers adherent is merely improving an existing product, while Picasso is creating something new and unexpected.  In the paint by numbers example, there's little chance of failure, but the outcome is also fairly predictable - if not already presented on the box.  With little skill and little risk comes little reward.  If you want to call that innovation, that's fine, but your definition is far too limited.

A more comprehensive innovation definition will definitely include continuous improvement or "incremental" innovation, but expands to include radical or disruptive innovation which creates new and unexpected products, services, business models and other valuable outcomes.  We need this definition because it's possible to conceive of great new products and services that aren't based on incremental improvements to existing products, but the continuous improvement definition treats these outcomes as if they were magic.  They aren't, they are just the result of a more expansive definition and expectation for innovation.

Continuous improvement has its uses.  If the expectation and goal is to modestly improve an existing product or service, then continuous improvement makes sense and should be applied.  However, if the situation or need calls for a truly new product or service, continuous improvement can't countenance that need.  It turns to existing products and services and seeks to make them better, rather than confronting the fact that consumers or markets may require a completely new, radical and undefined solution.  This is innovation too, and it's not magic, just a different way of framing the definition.  Some of the tools are the same in incremental and disruptive innovation, but the mindsets, the expectations and the leaps of faith are very different.  If your innovation outcomes often result in products and services that look a lot like the products and services you already possess, your teams are too focused on continuous improvement.

Another difference between continuous improvement and disruptive innovation is that disruption (or creating entirely new products and services) requires creativity and the ability to recognize and respond to emerging or latent needs.  No one ever asked Picasso for cubism, and no one else was doing it until he created it.  Picasso was willing to step out of the impressionist school and create an entirely new way of looking at the world.  Anyone following a paint by numbers method will struggle to develop something new or different, until they choose to ignore the recommendations that link a paint color to a specific section of the painting, and go their own way.

Stop defining innovation by the tools you use, and start defining the innovation you need and want to do by the outcomes you expect.  The fact that I have a hammer in my garage does not make me a carpenter.  The fact that you can follow a manufacturer's color scheme does not make you an artist.  We need to remove these cramped and incorrect definitions of innovation, so our teams can fully explore and engage all that innovation has to offer.
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posted by Jeffrey Phillips at 7:17 AM 0 comments

Tuesday, January 06, 2015

Making sacrifices for innovation

A blog post by Jeff DeGraff prompted me to write this post.  His post was entitled "What are you willing to give up for Innovation", although on a closer read he's not really suggesting that you have to give up anything.  However, modern business thinking is based on winning a shrinking share of a fixed pie.  That is, most executives believe it's all a zero sum game.  If I spend resources to "do" innovation, those resources have to come from somewhere.  Therefore, I am sacrificing some other project, goal or capability in order to attempt innovation.  And this zero sum thinking, this ratio of tradeoffs, will never tip the scale in the direction of innovation.  Here's why.

If you keep doing what you are already doing and are reasonably adept at doing, you can anticipate approximately the same returns, unless a major disruption in your market happens.  If you attempt innovation, and you aren't particularly adept at innovation, you may end up with a less than satisfactory result.  Given the nature of innovation, even good innovators don't hit home runs every time.  So the equation boils down to preferring consistent singles and doubles versus the possibility of a home run or nothing.  When the game is cast in this light, the vast majority of managers will play small ball, seeking singles and doubles, over the riskier game of home runs or strikeouts, because predictability and marginal growth are rewarded over the short run, and disruption occurs only rarely in the marketplace.

Of course this model is developed with a number of assumptions.  The two most important assumptions are that 1) it's difficult to become a better player in the game and 2) the conditions and rules about the game never change.  That is, you can't improve the odds of a home run, and the playing field and the rules won't change, or will change very slowly, giving you time to react.  What if neither of these assumptions are true?

We know the first isn't true.  You can develop better innovators or hire the skills to innovate more effectively.  Whether you choose to "insource" and develop innovation skills or "outsource" innovation to trusted partners, your company can become more adept at innovation, forcing managers to be more circumspect in their singles and doubles versus home run thinking.  It turns out the second condition is also not true.  We've built organizations, corporate structures and hierarchies based on business models from the 19th Century, but the pace of change and nature of markets, consumers and competitors is evolving rapidly.  It wasn't that long ago that Border's was a Wall Street darling, but internet commerce made its business model and many other booksellers' models obsolete.  The market you compete in, the expectations of your customers and the types of competitors you face are all changing very quickly.  Playing for singles and doubles while the playing field changes may leave your team further and further behind.

The fact is that too many managers and too many business models are working on outdated premises.  These premises suggest that you have to sacrifice too much for too little gain to do innovation.  I'm here to tell you that you may need to make some small sacrifices for innovation, but it's no longer a question or when or how much, but how quickly.  It would be beside the point to argue that innovation doesn't require some sacrifice.  Any new initiative or change in corporate direction will require some sacrifice or rebalancing of resources.  Cultural inertia in places where innovation isn't a frequent activity will require the investment of personal capital and enough energy to spark momentum.  But once the skills are learned, the culture and people are aware of the importance, they will provide more energy and enthusiasm, because everyone wants to be part of something new.  You see, we managers believe that people view their jobs as a zero sum game as well - only putting in the minimum to accomplish the tasks they are assigned.

What we fail to realize is that we can call on their sense of adventure, their desire to create something new.  When people truly believe they'll have this opportunity, they'll commit more of themselves to the effort.  Thus, we believe there is a much deeper reservoir of resources and energy just waiting to be tapped, that you aren't tapping today.  You can enlarge the pie by asking for more innovation.  Once people believe you are serious, and that they can actually create new products and services that matter to themselves and customers, more time and more resources will be available, if for no other reason than your employees will want to see the ideas succeed.  Everyone wants to work for a company that is changing the world.  If all you ask people to do is to maintain the status quo, that's all they'll do.  Once you ask people to put a dent in the universe, and demonstrate that you mean it, they'll do more and do so happily.

Do you need to sacrifice something for innovation?  Yes, the first time you attempt innovation you'll be forced into tradeoffs.  But with the right communication and commitment levels,  the right cultural preparation and the right executive commitment, you can turn zero sum thinking into a situation where you begin to ask:  how much larger can we make this pie?
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posted by Jeffrey Phillips at 5:38 AM 0 comments