Tuesday, May 29, 2018

Why failure can be an innovation aphrodisiac

If you stick around innovation long enough you'll probably come to believe that we are all dead-enders.  After all, what group of people could willingly embrace as much failure with such a positive attitude?  Failure, you'll be reminded, is necessary for innovation.  I like to quote the saying that my ski instructor told me years ago - "if you aren't falling, you aren't trying hard enough".

Many believe that failure is important for innovators because people learn from their failures.  That is, they will fail once and try again, only hopefully not repeating the same old mistakes as the previous time.  Others believe that failure makes an innovator more resolute, more willing to stick to an idea even more aggressively the second time around. Both of these reasons have some truth to them.  Every innovator is (hopefully) smart enough not to repeat the same mistakes again and again, but I'm sure some do.  Every innovator knows that innovation is difficult and often insurmountable obstacles can be scaled through sheer determination.  But neither of these is the real reason that I think failure can be so important.

Failure changes your perspective

If nothing else, I think failure is so interesting and so vital for innovation because it changes your perspective.  If you've really failed, all your hangups and inhibitions may go right out the window with your failure.  When you've failed, you may have to start at rock bottom, without any assets, without any investments.  These facts may lead to an entirely new way of thinking.  When you start with nothing - no money, no credibility, no assets - you think about solving problems in a completely different way.

One way that reaching "rock bottom" can help clarify innovation opportunities is that do get started, you've got to create a solution that results in revenue.  No longer can you rely on friends and family or a generous corporate sponsor.  To rebuild a company or brand, you can't start on promises and VC money - you need to build a product or solution that can drive revenue now.  Which means you've got to do a better job understanding not only what customers want, but what they are willing to pay for.

Wants and needs are not enough

For example, I want to get to work in 10 minutes, although my commute is closer to 20.  I need to get to work safely, and in a state where I am prepared to do good work.  But I'm not willing to pay for saving 10 minutes if it means my jet backpack doesn't protect me from the elements or from low flying planes.  This is the classic mistake that the Segway made - it did revolutionize transportation, just in ways no one cared to experience.

What customers want to solve is important, but what they are willing to pay to solve is perhaps just as important.  When you start from zero, after a magnificent failure, one of the first things you must do is figure out how to drive revenue in the short run.  Because many sources of funding may dry up, and financial backers will want to see you create revenue before funding your business or project a second time.  This is when failure is an asset, if you are willing to treat it that way.

Too comfortable

Too many corporate innovation teams face this dilemma - they are overfed.  While they insist that they don't have enough money to innovate successfully, too many of them have in fact too much.  What they need is more constraints and less financial resources, but more time.  Time to discover needs, investigate markets and customers, find the real need customers want to solve and are willing to pay for.  I think a lot of corporate innovation fails because innovation teams are too removed from their customers and too reliant on reports and fail to go meet customers and identify needs that customers have that need to be solved, and that customers will pay for.   Perhaps every innovation team and entrepreneur needs at least one spectacular failure that will lead on to more inquisitiveness and the ability to innovation to get to revenue quickly.
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posted by Jeffrey Phillips at 10:34 AM 0 comments

Thursday, May 17, 2018

Why innovators should focus on product deconstruction

I've been thinking a lot lately about innovation and how we may have emphasized one component at the expense of another.  Here I'm talking about something that should appear obvious - the focus of innovation in building new things.  We are constantly reminded that innovation is about building new products and services and experiences.  And this definition is entirely right and proper.

But I think it neglects something very important.  I was reminded of this recently when at dinner with an executive from a large manufacturing concern.  This company makes many different products, one of them components for mattresses.  Now, all of us want far more innovation to make mattresses more comfortable, to make them last longer and so on.  But, strange to think, the internal coil mattress is actually a very complicated product, a virtual lasagna of layers of cover, cotton, and steel.  While that finished product is very comfortable, it is very difficult to deconstruct when an individual is finished with the product.  And herein lies the rest of the blog post.

How might we make our products easily deconstructable?

I've been thinking about this ever since that conversation, because when we bought a new mattress for our son we asked the company that delivered the new one (and hauled away the old one) what would happen to the old mattress.  Goes into the landfill, they said.  And I thought, what a terrible outcome.  So much of the mattress could be reused - the cotton batting, the inner springs, some of the foam siding.  But the cost of deconstructing a mattress, which wasn't designed to be easily taken apart, makes it difficult to get a lot of reuse from the components.

Here's the question - are we willing to accept slightly less sleek or beautiful products that would become far more easily deconstructed, and therefore far friendlier to the environment and creating components that could be reused?  Why doesn't innovation focus on the obsolescence problem - what happens when a product reaches near end of life and should be easily deconstructed to reuse the component parts?

This is question of design, of cost and of conscience.  For years consumers have acquired shiny new products and discarded them without a thought as to what happens to the finished good once it goes into the waste stream.  If you've ever seen people taking apart circuit boards by hand, or seen large electronic devices or mattresses go into the waste stream, you'll know that we are 1) dumping a lot of stuff that won't decompose well into large pits and 2) there is inherent value in this waste stream but our designs don't anticipate or accommodate the simple deconstruction of a finished good.

What if innovation and design focused on deconstruction as well?

I think that there is a huge opportunity for companies to create products that can be easily taken apart once the product end of life is reached.  Doing so may require changes to the manufacturing and packaging of a product.  Making it easier to deconstruct may make the product less visually appealing or less sleek, but it is something we can do and should be thinking about as we design new products.  Too often innovators think about building the shiny new product but don't fully consider what happens when a product reaches end of life, and frankly we ought to be far more concerned about how products are being deconstructed or simply dumped into the Earth.

Could we be as innovative in the deconstruction of a product at its end of life as we are about its initial design and development?  Would it cost a lot more to build a product that could be easily deconstructed and taken apart for its components, to encourage reuse and recycling?  I think the market for fully recyclable or reuseable products is out there, waiting for this.  Good innovators should be thinking not just about creating new products, but how to quickly and easily build products that can be deconstructed as well.
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posted by Jeffrey Phillips at 5:51 AM 0 comments

Wednesday, May 09, 2018

The innovation skills you need

When a noted doyen of the Fortune 500 like Coca Cola talks innovation, your ears should perk up.  After all the consumer packaged goods conglomerate has been in business for a long time, and has been successful, but is facing a number of headwinds in its core business.  Selling sugary drinks seems passe, as bottled water, energy drinks and other health conscious foods and beverages seem to be taking over the "share of mouth" or "share of stomach" that food and beverage companies like to talk about.

When a company that has both succeeded at innovation and failed utterly at new product development and launch (remember New Coke?) talks innovation publicly, it's worth listening to.  When the Chief Talent Officer talks about the skills that Coke needs in order to sustain innovation, it's worth listening even closer.  Stacy Panayioutou, Coke's Chief Talent Officer, was recently interviewed by CBS News.  What's interesting in the discussion is the types of skills she says Coke needs in order to succeed in the future.

Reading the article closely

If you read the linked article closely you'll see that Coke, traditionally a bastion of marketing and financial management, is now looking for people with different skill sets.  Panayioutou says that Coke needs people who can spot trends, help Coke analyze what customers want and create more agility and speed.  She also says that Coke has a new strategy and purpose, innovating both around food and drinks as well as issues like packaging.  She needs people who can understand the new strategy and help implement it.  She's looking for people comfortable with creating and promoting change, who can help disrupt existing products and markets.  These skills and traits describe true innovators, people who can understand corporate strategy, find new opportunities through future scanning and customer research and create new products that disrupt the existing markets.

But she goes on to say they need good thinkers, people who are good collaborators and who have good learning agility.  The last skill there - good learning agility - means that people will have to learn new things and then implement them quickly, and then repeat the process, because new opportunities and new information won't come in periodic cycles but will come quickly and repeatedly. 

Fast, Nimble, Agile, Innovative

Not to toot my own horn too much, but there's a methodology aligned to this way of thinking, that my co-author and I outlined in our book OutManeuver.  We made the case that too often American business is focused on head to head competition, where the larger firm hopes to overwhelm or subdue smaller firms through size or mass.  But increasingly large firms are finding that small firms use their agility and speed and innovative skills to bypass this head to head competition.

If the article is to be believed, Coke could have it both ways - size and speed, depth and agility.  Coke has a lot of products and deep intellectual property to leverage, as well as a revered brand.  If it can add to that the speed and agility to address rapidly emerging needs and more innovative thinking, it could become a really formidable competitor. 

Innovators take note:  speed, agility, the ability to learn in iterative cycles, think disruptively, these skills are now valued at what would appear to be large behemoths, companies you may not think of as innovators.  The question will be:  can these firms leverage those skill to great effect, or will their existing cultures squelch the new additions and overwhelm their skills and passion?
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posted by Jeffrey Phillips at 7:19 AM 0 comments

Monday, May 07, 2018

Evolution and its impact on business models, slow and fast

Darwin teaches us that evolution is a long, slow process, gradually leading to new adaptive species that emerge over time with specialized capabilities.  Therefore, the change in species from generation to generation may be relatively small, but always purposeful and testing the best ways to win in a niche.  Just as both the Chihuahua and the Newfoundland emerged from evolution (and a fair amount of selective breeding) from the wolf, modern businesses are slowly emerging and adapting new forms and styles based on the first modern enterprises - the army and the railroads. 

What Darwin acknowledged but didn't fully explore is that most evolution happens as described above, slowly, over generations, evolving to meet the opportunities and needs of environmental niches.  Evolution in this regard is based on a slowly changing environment and heavy but balanced competition.  What Darwin didn't spend as much time on is the discordant evolution that accompanied dramatic environmental change, as when the dinosaurs were wiped out by (most likely) an asteroid or when an invasive species with no natural predators enters a niche in relative balance.

Disruption and Evolution

Business structures, models and processes have been adapted from older, original large enterprises and slowly modified over time.  The competitive landscape from the turn of the 20th century has seen some dramatic change, from World Wars to the Space Race, and now the advent of the Internet, but until recently the evolution was relatively slow and constant.  This means that if we parachuted Henry Ford into a major corporation today, he'd probably feel right at home in most of the operational and structural processes and decision making.

However, the transition to a mostly service based economy, compounded with the growing ability of almost anyone, anywhere, to create a company and effectively compete on a global scale, has the potential to be the major disrupter that the asteroids were to the dinosaurs.  Major environmental and competitive transitions are afoot that call into question existing management structures and business models.  Slowly evolving corporations must wake up to the fact that a major environmental change is underway, in which identification of customer needs and development of virtual solutions is taking place at a far more rapid tempo than ever before.

To go back to Henry Ford for a minute, the Ford Corporation has acknowledged this and other trends by getting out of the car manufacturing business all together.  Strange that in a time when urbanization is rapidly increasing and concerns about fuel efficiency and greenhouse gas emissions are growing that Ford basically eliminates itself from the segment where the most growth should occur.  This is an instance of seeing the asteroids in the distance and surrendering to the inevitable, rather than preparing and shifting a business model to win where opportunities will be the best in the future.

Betting on Today or on the Future

Ford is betting on consumer appetites and demands that are true today by betting on building more trucks and SUVs.  As a shareholder concerned about short term revenues and profits, we are likely to applaud this move.  But this is equivalent to seeing the asteroids and knowing they'll hit in five to ten years and deciding to become a bigger dinosaur, rather than preparing for the inevitable switch.

Innovators need to understand this.  One of the biggest challenges to innovation is current success.  Ford is banking on customer sentiment and the desire for large vehicles to remain high.  Some of this bet is reasonable, as electric motors become more powerful and efficient and people seem to demand larger vehicles.  But other trends suggest that smaller cars will be very attractive, as the price of energy rarely falls and urbanization and other trends indicate the need for smaller vehicles.  One factor that cannot yet be measured or perhaps even understood is the impact of autonomous vehicles on vehicle usage and ownership.  Ford is banking on demand for larger vehicles increasing regardless of what happens with autonomous viability and usage.

Is there an innovation asteroid?

Like the dinosaurs before us, which dominated the Earth for far longer than humans, and significantly longer than human corporations, we need to ask - are their disruptive points of change in corporate evolution, just as their are in the evolution of species - and if so, what might they look like?  Does the shift toward full digital transformation of businesses create an asteroid targeting the existing corporate model?  Are they prepared?  Can innovators and innovation create a bridge to the future?

I think so.  With enough forethought and the appropriate use of trends and scenario planning, we should be able to identify some potential future scenarios and understand the impacts of dramatic environmental and competitive change.  Simply ignoring the change around us is a recipe for failure and obsolescence.  How long will it take for a new generation of management to rise to address the discontinuity emerging from new technologies and new business structures?
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posted by Jeffrey Phillips at 6:33 AM 0 comments