Wednesday, November 02, 2022

Time for Innovation 2.0

 I've been writing about innovation for close to 20 years.  During most of that time, I've had the good fortune to lead innovation projects for clients as well. The work I get to do, and the material I see online and read in (yes, I still read paper magazines) has provided a lot of fodder for this blog over the years. There are kids out there, getting ready to graduate from college, who were just being born when I started doing innovation work.  Not to say I have a lot of experience, because equating years on the job with experience is a risky proposition.  Longevity is one thing, results is another, and renovation and renewal are a third.  It's really time to renovate innovation, or perhaps redefine or reclaim it from those who misunderstand or abuse it.

The problem with the word innovation is that it has multiple meanings.  It means whatever the person speaking intends it to mean and is often interpreted far differently by the listener.  Many executives understand this truth, so they litter their annual reports with the word innovation, hoping that the reader will assume the company is actually a leader in creating new products, services or business models.  This is yet another thing about innovation that needs to change.  Much like the green movement identifies greenwashing as talking about the environment without acting, we need to identify the use of innovation without results as what it is:  hype.

Innovation.  We're so over it

Sometimes I feel like Luther, asking the janitor to post the arguments for next week's debate on the church door.  Luther was frustrated with the way the Catholic church operated.  He felt that the Church needed to look closely at its practices and that it needed to reform.  He did not start out to overturn the Catholic Church or create the grand Reformation, or to create a new Protestant faith.  But, in the time and in the space in which he lived, his focus and passion, and the growing distance between the origin of the Church and what it had come to stand for, meant that many people were as frustrated as he was, and wanted to see change.

I'm no Luther, no deep thinker or scholar, but I can tell that corporations need change.  The economy is in a state of flux - the market up 500 points today, down 600 points tomorrow.  In a recovery from a pandemic, we are still working out supply chain issues.  Inflation is causing people to adjust their spending habits.  A futile and unnecessary war in Ukraine is creating global instability.  

In the midst of this Volatility, Uncertainty, Complexity and Ambiguity (VUCA), many corporations are frozen.  They need new revenue streams, new growth opportunities, but are terrified of making the wrong bets.  Managers, who have been taught to avoid risk and uncertainty, are now living in a period where every decision seems risky and uncertain.  In a period of high volatility and a lot of uncertainty, doubling down on what worked before is not a recipe for success.

Time to stop talking and start defining

We need to stop talking about innovation.  We need to start defining what it is, why it matters and then how we can deliver on its promise.

Recently, a good friend who works at a university asked me to provide some questions for an interview.  I asked:  what's the role?  Why do you need questions from me?  My friend replied that there was a new role opening up for innovation at a local university.  My first question was:  how are they defining innovation?  As tech transfer of intellectual property out of the university?  As a way to innovate the way the university works - content delivery and student experience?  To teach innovation to students?  All of these and more are possible.  The answer came back - they aren't sure.  My sense is that it seemed like a good idea to have a senior person at the university who had "innovation" in their title.

We need to stop playing word games, stop using innovation when we mean incremental change, stop implying that we are creating larger change than we really are.  The word innovation, and the act of innovating need to mean something.

What role should innovation play in your business?

Once we've defined what innovation is, we can next decide what role it will play in your organization.  Innovation can be very strategic - helping companies identify new opportunities and to create radically new products and services.  Innovation can also be rather incremental - improving existing products, services and business models.  The role and scope of innovation is important, and often poorly defined, which leads to confusion.  The speaker talks about innovation and the hearer thinks - innovation = big change, radically new ideas.  But in the end, what is delivered is an incremental change to an existing product or service.  The gap between the definitions, and between expectations, creates a lot of cynicism about innovation.  It seems to be more ephemeral, more filled with magic and possibility, that never fully delivers.  This is wrong, and it is detrimental to businesses and to those who could fully engage innovation if it were defined correctly, implemented fully and embraced by executives.

Right now, as inflation grows, uncertainty presides, and we have a looming election and very unsettled global trade and economy.  businesses need to accelerate their growth while defending their margins.  Few companies are going to take on large, uncertain projects at what could be the cusp of a recession.  Except history shows that many innovative firms were launched in a recession, and because they were new and different as the economy emerged out of the recession, they grew much faster and were more profitable than the firms that merely hunkered down.

There's never a right time to innovate, just as trying to time the market is a fool's errand.  In investing, dollar cost averaging, doing a little bit of investing each month, is a proven winner.  Similarly, doing some innovation all the time is far more effective than a periodic spurt of innovation followed by no activity.

Innovation 2.0

Meet the new innovation.  Makes many of the same promises as the old innovation.  New revenues, new profits, new market share.  Increased differentiation. What could be different about this innovation is its application and its purpose.  Rather than simply talking about innovation, perhaps we can actually "do" innovation, and do more than extend the life of existing products and services.

What's going to be important in 2023 and for the next few years is addressing the post-pandemic needs.  More virtual work, less 9-5.  More people juggling more things with less time and bandwidth.  A rising young segment who feels left out of the Boomer prosperity and wants some of that for themselves.  An old political guard that may finally step aside and let new voices, with perhaps more radical ideas, take over.  

This leads me to believe we'll need innovation in our government, in our societal structure, in how we interact with each other.  It leads me to believe that corporations will spend time innovating on climate change, becoming more carbon neutral.  Companies will evolve their business models to become more flexible for their employees, to allow people to work when and where they can.  Businesses will finally understand that services business are people-centric businesses and move away from ideas like shifts and recognize output rather than clock hours.

Older, larger, more entrenched companies will find this difficult to do.  Newer and younger companies will find that creating value and generating margins is more difficult than their young managers had been led to believe.  All will need to innovate their business models.  

Innovation 2.0 will be about innovating business models and business processes, along with government structures.  As we become more diverse, and a younger generation with new ideas and attitudes presents itself to take on the leadership mantle in both the economy and the government, we can expect change.  And change opens the door for a new, more purposeful innovation.

Mostly though, Innovation 2.0 will be about being honest about what innovation is, the role it plays, how it is defined.  Innovation 2.0 will be about fully funding and supporting what are risky and uncertain projects, hoping to gain new insights and create meaningful new products, services and business models.  A new generation of leaders who are more open to experimentation and change may be coming on the scene.  They are less steeped in Jack Welch's GE models and perhaps more open to learning, discovery and experimentation.  Or, at least, I hope they are.

Let's get innovation right this time.

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posted by Jeffrey Phillips at 7:21 AM


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