Friday, August 12, 2022

Creating the conditions for disruptive innovation

 In what is probably one of the most revered books among innovators, Edward De Bono wrote about six "thinking" hats.  The point of his book is to recognize and acknowledge that many people, either intentionally or often unintentionally, play roles or "wear hats" that represent a specific point of view.

De Bono identified six perspectives or "hats" that people wear.  The hats he defined are:

  1. The conductor hat - the role that drives a meeting
  2. The creative hat
  3. The emotions hat
  4. The optimist hat
  5. The judging hat
  6. The factual hat
Whether we mean to or not, it's likely that when we attend meetings, listen to pitches, create ideas, we are listening and participating in one or more of these perspectives.  Often, many people will be wearing either the factual hat - like the famous detective, just give me the facts, or the judging hat - does what is being said meet with my experience?  Conversely, few people are willing in most business settings to wear the emotions hat - it seems too illogical in businesses where we have divorced ourselves from emotion, or the optimist hat - no one wants to be seen as naïve or too optimistic in a business setting.

So, many businesses, for many different reasons, start out with unbalanced perspectives, typically over weighted toward what is reasonable and expected today.  If what you hope to do is approve approaches or ides that fit into the existing standards, this approach is probably OK, although it will only reinforce the status quo.  If you are hoping to "shake things up" or create new products or services, these perspectives will simply block most ideas.

New perspectives needed

In fact, the more your environment is changing, the more competitors you have, the more intense the competition within your industry is, the more you need new perspectives.  Whether you refer to this as the "creative hat" as de Bono did, or refer to it as a naive or uninformed opinion, or think about it with the wonder of a child, your teams need this perspective.

The more change you want to create, the more you need the creative hat, the wonder and discovery inherent in child-like thinking.  And this flies in the face of everything we hold near and dear in a business setting, where hard facts and past experience are supposed to hold sway.  As if personal gains, politics, favoritism and other factors never play a part in what is decided!

Getting naïve to get ahead

There is an old saying, attributed to African tribes, that says if you want to go fast, go alone, but if you want to go far, go together.  I'd suggest a corollary to this idea:  if you want incremental ideas, rely on the existing perspectives.  If you want new, fresh and radical ideas, get new perspectives and don't shout them down.

But let's be honest - no business worth its salt is going to welcome in a bunch of naive idea generators or better yet children into the boardroom to create new products and services, even if the businesses need these perspectives.  Every growing business needs someone, internal or external, who is willing to contribute insights and ideas that are outside the norm.  

Some companies have successfully partnered with third party idea generators who are active provocateurs - who openly question the status quo.  Third parties don't have a stake in the way things work today and can question existing norms in ways that internal personnel can't or won't.  In other settings, I've watched de Bono fans use the hats - actual hats in a meeting - to ensure someone is playing the role.  But playing a part, like an actor who may or may not truly believe in the concepts, is different than expressing ideas from a sense of new discovery or wonder.

Who within the business can take on the role of the naïve perspective?  How long can someone last in that role?  

Why can't we innovate?

I get asked quite frequently - why can't large firms create interesting new ideas?  I have a litany of answers, but ultimately they boil down to this:  lock-in.  Once a company reaches a certain size and has an investment to protect, the thinking shifts from creativity and growth to defend and protect.  Good ideas are often going to call existing products, services and even business models into question.  

It's not that people lack creativity or can't think in child-like exploration and wonder, it's that they will be ridiculed for creating ideas that call the existing product line or business model into question, or that they are so well compensated within the existing model that it is anathema for them to think outside of it.

By the way, I have had the opportunity to work with some large firms on some relatively disruptive ideas.  Those that were able to bring those ideas to market were most successful doing so in a way that did not disrupt their existing operations.  This means that many disruptive ideas need to be launched as a new business or in new channels or markets.

Outside the box?  Hardly

CEOs will often say they want ideas that are "outside the box" meaning that they want new ideas that create new value.  You can get new ideas from old sources - just look at Einstein.  You can get new ideas from a team wedded to the existing operating models.  To do so, you simply need to make the status quo untenable.  As long as the status quo is reasonably safe, and other options are reasonably risky, the only ideas you'll get are incremental ideas, and the folks who do manage to generate and sponsor radical ideas will be considered difficult troublemakers who "don't get the business we are in".

There's a leadership gap here as well.  Executives need to tell their teams that "what got us here won't help us succeed in the future".  If that is the case, then segregate the core business and its operations from innovation, and run them separately.  Insulate the existing core business from your new ideas, to protect the nascent ideas from the resistance the existing business will create, and protect your core business from the disruption you are going to cause.  Otherwise, don't ask for interesting ideas, you'll only waste time and anger some of your best thinkers.

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posted by Jeffrey Phillips at 7:24 AM 0 comments

Tuesday, August 02, 2022

Why expertise is a seductive trap for innovation

 I've been thinking for years that we have innovation all wrong.  We treat innovation as it if requires years of experience, deep knowledge of an industry or a technology, or mastery of a specific subject.  I think far too often we fall into the fallacy of expertise, and look for great ideas from people who are deeply experienced in one technology or field.  This seems like a logical approach.  People who have deep experience must know where opportunities lie, right?

The problem with innovating with experts in a field is that they think they have explored every nuance and pathway, or that someone else in the field has.  These are the people who are most likely to say an idea "won't work" or that "it has been tried before".  And, in many cases, they are probably right.  But not always.  Experts told us that heavier than air flight was impossible.  Lord Kelvin, one of the brightest scientific minds of his day, felt that nothing heavier than air could fly.  Scientists expected that any craft exceeding the speed of sound would break apart.  In 1942 Thomas Watson, the CEO of IBM, was quoted as saying that the world market would need a maximum of 5 computers.  All were experts in their field, and all either accepted the received wisdom, were too confident in their own knowledge, or could not forecast how much and how rapidly technologies would change.

No, it took a couple of bike mechanics to develop the first viable heavier-than-air plane.  A couple of enthusiasts who tinkered and explored, while other, more well-known scientists received thousands of dollars in government grants failed.

We come not to bury experts

I'm not interested in castigating experts, except when it comes to innovation.  We, all of us, become experts in our chosen paths and fields, and most of us, when confronted with a "new" idea, will search our memory banks to consider whether this idea has been presented before (some version probably has) and what happened the last time it was presented.  We call on our store of knowledge to rapidly eliminate ideas, rather than our store of wonder, to consider what could be possible.  Don't worry, like a lot in modern life, it's not your fault.  You've been taught to use your time efficiently, to place bets only where there is a significant return on investment and winnowing out a list of any proposed alternatives is something we've perfected.

What we often don't recognize are the fallacies that lie within the questions we ask.  For example, are "old" ideas always useless?  There are Roman aqueducts that still carry water thousands of years later.  If an idea failed previously, is it possible that technologies have adapted, market needs have changed in such a way that the idea is now valid?  In our haste to reject ideas, we ignore our own narrow viewpoints.

From the mouths of babes and neophytes

You know who won't express concerns about most ideas?  Children.  Children are filled with wonder and are naturally creative.  You will rarely hear a kid exclaim "that won't work" about a new idea and they never say "that's been tried before", Of course, some ideas that children have are probably far-fetched and impossible, but that's what childhood is for.  Our educational system, unfortunately, squeezes all of the creativity and wonder out of us by the time we reach high school, in the hopes that we will all learn the same facts and regurgitate them in the same way.  No wonder so many of our best innovators and entrepreneurs seemed like such outsiders.  Most did not fit into the standard educational mold that we created.

Children don't run businesses

Ah, but you'll say, we cannot trust the future growth of our company to kids with crazy ideas. Again, there is a strange dichotomy at work.  Venture Capitalists are shoveling money into companies run by recent college grads with little professional experience but deep belief in ONE IDEA.  As an established corporation, it makes sense to ask:  are we ready to outsource our idea generation and next generations of products and services to startups, assuming we can afford to license their products or acquire their companies?

Established businesses need solid, business-ready ideas that are practical with a high degree of success to invest in.  This is true, to a point.  As anyone who has been in or adjacent to innovation work in the past 20 years knows, there is a need for consistent, predictable innovation that moves the needle just a bit (incremental innovation) to create the next version of an existing product.  This is vital work but should not consume more than 50% of your innovation budget.  What, don't have an innovation budget?  That's another sign your company isn't serious about innovation.

In-source or Out-Source the other 50%

Which leaves 50% of your company's time, resources and funds to do real exploration.  Who do you want to lead that?  An expert who is likely to tell you what's wrong with your ideas before they leave the drawing board?  The scientists who said that airplanes could not fly?  Is this who you want leading the portion of your work that will dictate future product and service offerings?  Corporations have a choice - start evaluating the startups and neophytes who are attacking your industry and gobble them up as they become viable, or do your own homework.

The department of wonder

Every decision and every department in your organization seeks predictability and efficiency.  You have a strong finance team that can calculate your EBITDA to three decimals.  You have a top notch sales team that hits its sales targets quarter after quarter.  You have product teams and engineering teams that work at exceptional rates of efficiency.  All of these in service to current state.

You need one team that focuses on what's next, what unlikely combinations may occur, what new markets and needs may emerge.  There's no one doing that work - R&D is looking for new technologies, so you may not need to sweat that side of things, but they aren't responsible for seeking out new markets, new needs, new combinations.  

You need a department of wonder.  This department would exist to explore new opportunities, finds new emerging needs and markets, consider unlikely mash-ups of technologies and capabilities, seek out adjacent opportunities.  While this seems entirely unscientific and a likely source of ridicule, done correctly, it will generate far more, and far better ideas, than anything you are doing today.

In case you think this recommendation is unusual, hark back to Edison and his Menlo Park team, a number of people who were experts in emerging technologies, trying to create mash-ups.  Or the original Bell Labs, where scientists from different disciplines were in regular interaction, seeking happy accidents.  

You don't need to entrust your future innovation decisions to children or neophytes, but you do need a sense of child-like wonder and the ability of the people who are focused on that work to suspend disbelief if you are to create any really interesting ideas.  After all, Airbnb was not created by experts in the hotel business, but by a couple of guys who decided to rent out a spare room.  

In the end, the choice is yours, and you won't be alone if you follow the safe and proven path of trusting in experts to delivery near-term product improvements.  Most companies in most industries follow this path. It's not until some upstart, some college kid with venture backing, two guys with a spare bedroom create a solution that becomes more valuable than the established competitors that someone says - how did we miss this opportunity?  Were the Airbnb guys smarter than the combined intelligence in Marriott?  I seriously doubt it.  Moreover, I'm willing to bet you lunch that there were people at Marriott who have presented plans that looked a lot like Airbnb before Airbnb existed.

And, if I am wrong about Marriott having prior exploration about the potential market opportunity that Airbnb explored, what does it say about Marriott's leadership and its sense of possibility and wonder?

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posted by Jeffrey Phillips at 6:53 AM 0 comments

Wednesday, July 27, 2022

Working "in" versus Working "on"

 In entrepreneurial circles, there's a lot of talk about the concepts of working "in" your business versus working "on" your business.  The distinction is that working in the business defines the work that drives the business day to day - going to meetings, answering email, providing products and services for customers.  Working on the business is the time you spend thinking about why the business exists, how it should operate and what it should become.  Far too many entrepreneurs get caught up in working in their business, because there are few people to delegate important day-to-day work to, and neglect to focus their thinking in the other vital category - working on their business to make it better.

I'd like to borrow this idea from the entrepreneurial community and turn our gaze to mid-sized and larger firms, and think about how much time, if any, companies spend on two critical aspects of their business:  strategy and innovation.  It seems to me that both of these functions lack both "in" and "on" engagement, leading to organizations that aren't quite sure of their direction and that have trouble creating interesting new product and services.

I'll address both briefly below.

In Strategy or On Strategy?

It's far easier to talk about activities that are in the business (doing the day to day activities) versus on the business (thinking about the future, competitors, growth and change) than it is to talk about time in strategy versus on strategy.  I'll provide a definition of what I mean by in strategy and on strategy.

In strategy is the work of executing a viable strategy, developing an organizational structure that reflects what the strategy is trying to achieve.  Building processes and systems that enable and support the defined strategy.  What's difficult working "in strategy" is that it appears to be a lot like "in the business" except that it is informed by a definitive strategy.  You can imagine how easy it is to slip from working "in strategy" to "in the day to day" or becoming more reactive, since competition and market pressures are extreme and it is easy to forgot or ignore your stated strategy.  That is, if you have a strategy.

Working "On Strategy" means taking time to think carefully about your competitive advantage, where you want to focus limited resources, asking why you believe you can win.  Strategy is about understanding the market, understanding competitors and seeing emerging opportunities that you can serve.  Working on strategy means putting aside the day to day and seeing beyond the immediate tasks.  It means imagining the future and the new opportunities and challenges.  It means coming up with a value proposition, market segmentation and clear differentiation, and then communicating the strategy to the team, so that they can understand it and act on it.  

Most organizations spend about 95% of their time in the business, hoping that the work they are doing is not reactive but is guided by strategy.  In reality, most firms lack definitive strategy, and even those that have a good strategy often fail to communicate it effectively.  Executives would do well to pay heed to Stephen Covey, and learn to both "start with the end in mind" - build strategy and to "Sharpen the Saw" - do the work that is needed before other work takes precedence.

In Innovation or On Innovation?

Innovation is perhaps just as vital as strategy, and receives less attention.  Working "In Innovation" means doing work that is meant to create new products or services, generating ideas, spotting new trends or needs.  Most importantly, this work also entails converting ideas into products or services that are launched to consumers or the marketplace.  There are often several breakdowns in the "in innovation" sequence:  poor or lacking innovation methods or process, unclear direction about key opportunities or challenges to solve, no connection between idea generation and the product or service development process.  Work goes on "in innovation" but much of it lacks good direction, does not have definitive methods or processes, skips key activities, does little exploration and has little chance of becoming new products or services, due to a lack of integration between the "front end" and the product or service development funnel.

Working "On Innovation" rarely happens.  To work on innovation, companies and teams would need to define their approach to innovation, define goals, define working patterns and relationships, identify important innovation opportunities, customer challenges or emerging markets.  To work on innovation, companies need to train employees and build bridges between front end discovery and product or service development funnels BEFORE ideas are generated.

Far too much innovation effort is wasted because companies move directly into the activities of innovation without defining them, develop ideas that are not aligned to customer needs, solve problems that customers don't care about, and do not have the funds or means to develop and launch ideas.  What I've described is both of failure of being "On Innovation" which leads to failures "In Innovation".

We need more time On Strategy and On Innovation

It's clear companies need to spend more time on strategy and on innovation.  The countervailing argument to that is that the executives are stretched, time is compressed, markets are constantly changing.  To leave working "in the business" for any period of time risks the very existence of the company.  

Executives need to delegate day to day operations to their leadership and managers, and spend far more time thinking and acting on strategy and on innovation.  The increasing pace of change will not slow down, competitors don't give day passes if you cannot keep up.  Only by investing on strategy and on innovation will you be able to compete and perhaps even steal a march on your competitors.

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posted by Jeffrey Phillips at 8:01 AM 0 comments

Monday, June 27, 2022

Why incremental innovation is so easy; disruptive is so difficult

 After years, no decades, of working in and on the margins of innovation, I think I had an epiphany recently.  It's interesting to know that the more you work in a field, you become more aware of the things that you don't know, rather than confident in the things that you do know.

For me, one epiphany that happened this week was when I was thinking about how valuable truly disruptive innovation is, and why it is done so rarely.  Then, there's the added question of why almost all disruptive innovation is typically undertaken by an industry upstart or outsider, rather than a company currently in the field.

For quite some time, it has been relatively obvious that the reason disruptive innovations are almost always an outcome of industry upstarts or outsiders is because the industry incumbents have a vested interest in the way things work now.  All of their thinking, training and systems are aligned and optimized to the way things work now.  Their staff and their management team are familiar and comfortable with how things work now.  This familiarity and comfort, along with good margins, creates blind spots that many executives choose to ignore, or in some cases aren't aware of.

But that never really answered the question of why so much innovation is incremental - adding a new feature to an existing product.  Yes, there is value in extending the life of an existing product, but at some point the extensions risk becoming parodies of the original product.  

Why incremental is easy

Incremental innovation is easier for several reasons.  First, you are working with a proven entity.  The product or service already exists and to some degree is already pressure tested in the marketplace.  So, there's little risk of an abject failure.  Second, the new idea doesn't stretch the bounds of the existing customer relationship.  Customers are familiar with the current product and can often make the lead to understand the new features of the augmented product or service.  You don't have to re-introduce the product or train the customer on a new product.

But the biggest reason that incremental innovation is easy, and why executives support it, is that it fits within the processes, distribution models, pricing models and customer expectations, in ways that disruptive innovation can't.  An incremental change to an existing product that enhances or extends the life of a current product does not create new pricing issues, new distribution concerns, new questions about shelf space or questions about reworking a business model.  New and disruptive ideas for new products and services don't simply create a new offering, but call into question the marketing, the social media support, the channels used to market and distribute the product, and in some cases even call into question the basic business and revenue model.

When you stop and think deeply about the amount of change that a new disruptive product creates, not just in product development but in manufacturing, distribution, marketing, channels, pricing and business models, you can see why disruptive innovation rarely begins in an established industry player.

Disruptive innovation cuts both ways

Truly disruptive ideas, therefore, cut both ways.  They disrupt existing markets, competitors and offerings, but can also disrupt existing business models, distribution channels and revenue models.  Thus, companies may want to create disruptive products but are often uncertain about the secondary and tertiary impacts of actually launching the disruptive product or service, because it does not fit into the carefully constructed frameworks of the previous products or services.

In other words, when you seek to introduce a disruptive product or service, you have to be prepared to rethink and rework your own channels, offerings, business models and revenue streams.  And this is something that few companies will do willingly.  Also, this is why almost all disruption happens from outside the industry.

Getting disruption done

What this says, meanwhile, is that companies SHOULD pursue disruptive innovation, but must carefully consider how to take a disruptive product to market.  In many cases, setting up a new business or a new distribution model may make more sense than trying to launch and support both the original existing product or service and the disruptive product or service at the same time.

Companies that want to pursue disruptive innovation (and most should) should be spinning out new businesses to take the disruptive products to market.  They'd gain in two ways.  First, knowing that a disruptive product or service is about to be launched, they can take steps to protect or at least prepare for the impact on their existing products, in ways that others in the industry can't.  Second, a new product or service housed in a new company that is not tethered to the bureaucracy, distribution channels and business models of the past can launch and support a new product or service in the way it should best be launched and marketed, without concerns about protecting the original products.

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posted by Jeffrey Phillips at 9:30 AM 0 comments

Tuesday, May 31, 2022

Maintain and extend or create something new - where do you want to be?

 One of my favorite questions when I work with software teams is this:  given a choice, would you rather work on existing systems in a support and maintenance role, or would you rather work on developing or implementing new systems with new technology?  The answers are always the same.

About 30% of the group I'll survey is comfortable with the existing systems and code and is happy extending it and maintaining it.  About 50% of the people surveyed will say they want to either build new systems or implement a new system.  There's almost always 20% who aren't sure.

When I was in software development, I always wanted to be working on the latest technology.  It often felt like working on a platform or programming language for too long would pigeon-hole me and my skills.  Of course, there are still demands for my rusy COBOL skills even today, since may mainframes still run on older technology.  

Some folks are comfortable with the things they know - the tech they've mastered - and they want to work with tools and technology that are familiar and comfortable.  Others want to try out new platforms or languages and have little interest in supporting, maintaining or extending what already exists.  This is a good thing - we need both people to maintain existing systems and technology AND people to explore and develop new platforms.

What this dichotomy fails to recognize is how rapidly the existing stuff becomes a commodity - no matter how comfortable you are with it, no matter how much expertise you have.  Except in pockets where companies or governments are simply unwilling to replace older technology (like COBOL), it is risky to bet your career or company on simply extending or maintaining current platforms.

The implication for innovation

So, why does it seem so different when we talk about creating new products or new services?  It's easy to see why technologists want to work on the new stuff - maintenance and support are boring and not overly challenging, and you can only hope to satisfy existing customers, never wow them.

People who develop or support products or services seem to have different characteristics.  In fact, I'd argue that the numbers are almost reversed.  Only 20% of the people I've worked with in large corporations want to risk working on new products and services.  At least 50% are confident in maintaining, extending and supporting existing products or services.  In this case, I'll attribute the remaining 30% to the "I don't know" category.  Far more people are focused on, and derive value from, extending and supporting existing products, than creating new products.

If you think about this for a second, this is really strange behavior.  Technology is for the most part a corporate COST - technology and IT don't drive revenue.  Therefore, even if new tech is sexy and interesting, there should be a greater risk of trying to work on new and emerging technology that can only represent a new cost to the business with the hope of achieving benefits later.  New products and services, on the other hand, have a short term cost but promise greater returns and increased revenue.  There should be more people betting on the future of new products and services, and willing to stake their careers on developing new products and services, but it simply isn't so.

Why the strange dichotomy?

There are several reasons for the strange dichotomy.

First, we all witness technological change, and see the benefits new technology introduces for society.  We are all capable witnesses to interpret just how much value new technology brings, and conversely we can see how quickly older technologies go out of fashion, and then out of support.  My recently acquired printer no longer has a driver for the latest Windows update.  Losing out on staying up to date on technology risks everything, even if technology has a significant cost and little impact on revenue.

Second, sticking with an existing product that drives revenue and profits, however, is almost always a safe bet,  Even a product that has declining sales and margin is still generating profits, and seems less risky than working on a new product or service that may not be accepted or perform well in the marketplace.

But this calculus is all wrong, because what seems safe (working on extending existing products) will become very risky as new competitors enter, new substitutions emerge.  Our corporate cultures have taught workers to value current, near term revenue and profits even when the medium term outlook is dire.  This is, of course, the fallacy of measuring a business in quarters rather than in years.

Jobs dictum

When Jobs recruited Scully to Apple, he reportedly asked if Scully wanted to sell sugar water or wanted to change the world.  I think this is a question all managers should ask themselves and their teams.  Do you want to maintain what exists, as it slowly declines, or do you want to grow something new?

Just as IT teams have "maintenance" teams and new project teams to focus on both aspects of IT, we increasingly need product "maintenance" teams to maintain and extend existing products and services, and a fully realized new product identification, development and launch team to bring new products and services to market faster.

Do you want to simply maintain and extend what exists, or do you want to be part of birthing something new and incredible?  We need to reframe the power and attractiveness of new product and service opportunity, definition, development and deployment.

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posted by Jeffrey Phillips at 7:17 AM 0 comments

Tuesday, May 24, 2022

You need a red team, not a red pill

 In the Matrix, Morpheus offers Neo the choice of a blue pill or a red pill.  Take one, and you remain as you are.  Take the other, and the scales fall from your eyes.  Those of us who watched the movie or have seen it on ubiquitous reruns, know what happens next.

As an innovator, it would be awesome to pop into a completely different meta-world to understand the hidden workings of the metaverse I just left.  However, that isn't going to happen by taking a pill or wearing a VR headset.  The metaverses we create for ourselves merely build on what we already know - they don't show us the hidden hands and string pullers behind the scenes.  You don't need a pill, you need a team.

Red Team / Blue Team

The idea of a red team (attacker or hacker) versus the blue team (defender or good guy) has become a staple of cybersecurity, but it has an older history than that.  Red teams and blue teams originate from the military, where one team takes on the role of an attacker or proposes a strategy and another team seeks to disrupt or destroy the strategy.

What often happens in an innovation setting where new ideas are presented is that everyone not fully behind or read into a new idea becomes the red team, trying to discover reasons - valid and self-serving - that the idea won't succeed.  In other words, rather than a formal assessment of ideas, most organizations line up the idea to take fair and unfair shots at the idea and the team from every vantage point, making the idea almost impossible to defend.

Why you should consider a red team

Let's imagine, instead, that your innovation team, the people with the great new idea, are the blue team.  They've developed an idea based on a set of insights, voice of the customer work, great idea generation and a lot of testing.  The believe their idea solves an important problem or addresses an emerging opportunity that could create value for the company.  If they've done their job well, they should be able to define their scope, the need, the opportunity and the facts and assumptions they are basing their ideas on.

What should happen next, and rarely does, is the creation of a disinterested red team.  The red team should be presented with all the insights, facts, and assumptions that the innovation team used to develop their solutions.  Then the red team should look for missed signals, incorrect assumptions, optimistic interpretations and other mistakes or errors in the work.  But only using the defined scope, the research and insights, the same data and the list of assumptions from the blue team.

Where innovators go wrong

What a good red team investigation could do for innovation teams is to identify assumptions that are subject to a lot of variation, research that is a bit suspect or limited, unexpected competition or future shifts in customer needs or behavior that were ignored or overlooked.  When the red team operates with the same facts, but different interpretations of the insights, assumptions or understanding of future scenarios, it can create a range of likely outcomes that the blue team did not consider.

In some instances, the red team insights and discoveries will doom the blue team ideas, but not their work.  Instead, new ideas or opportunities will emerge.  In other instances, the red team will validate or even discover new opportunities the blue team missed.  

Running the gauntlet

A fair red team assessment not just of the ideas presented but of the information and scope that led to the ideas is what most ideas - especially transformative and disruptive ideas - really need.  Too often, ideas run a gauntlet of decision makers who have other priorities, leaders who have tight budgets, jealous co-workers who believe the ideas aren't really valid and corporate cultures which prefer safety over change.  Trying to fend off all of these individuals, teams and the corporate culture at large is a daunting task.  Yet doing a good job evaluating ideas and the markets and conditions they will be launched into is vital.

Today, most ideas run an unfair gauntlet of skeptical opponents lined up to knock ideas down rather than adequately test ideas and find issues or challenges.  These "evaluation" processes are often conducted by people who don't understand the original request, lack information on the process and who lack methods and processes for adequately reviewing the idea and discovering both weaknesses and strengths in the ideas.

A small investment creates enormous opportunity

According to a Harvard Business Review article from 2011, entitled Why most product launches fail, over 75% of consumer packaged goods products launched each year fail to achieve event a few million dollars in sales and are considered failures.  Think about the investment to create a new CPG product, develop it, manufacture it and place it into the fulfillment process, let alone find room for it on a retailer's shelf.  For 75% failure rate, you'd think someone would come up with an approach to cut these failure rates by 20-30% at a minimum.

The military uses red teams and blue teams to fight battles on paper, because the cost of a wrong decision in wartime means the loss of too many lives.  Cybersecurity experts use red teams and blue teams to determine how easy it is to steal data from a computer system, in order to better anticipate future attacks and improve defense.

Why can't we innovators borrow a great idea from these examples and dramatically improve the rate of success of new ideas?  After all, good artists borrow and great artists steal...

Implementing a red team review

If you'd like to know more about how to implement a red team review, contact me at innovateonpurpose@gmail.com.  We have used red teams to review, find missing information and to improve and harden ideas.  

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posted by Jeffrey Phillips at 4:43 AM 0 comments

Friday, May 20, 2022

The best job to have in the near future - data strategist

 As you know if you follow my blog, I generally write about the intersection of strategy and innovation.  Increasingly, however, we need to invite data into this mix.  As more and more data is generated, it creates new opportunities in the strategy realm and in the innovation realm.  This post will consider the importance of data in strategy development and execution, as well as in innovation.

Past, Present and Future

In the past, data was an afterthought, if we are being honest.  Until the era of big systems like ERP and CRM, most data was recorded manually in ledgers.  Since it was compiled manually, data basically took up space in three ring binders in shelves around the office.  Data was occasionally consulted for reporting or historical evidence, but rarely drove decisions.  Data was really more of a hassle to manage than a benefit to the business.

When larger, integrated systems like ERP entered the business world, this unlocked data from the paper ledgers and placed it in computer systems which often had reporting solutions attached.  It is interesting to note that many of the ERP systems called (and some still call) these functions ledgers.  What these electronic ledgers and the associated databases and reporting applications created was the ability to capture and report data much more easily.  However, a lot of this data was stove piped - the manufacturing floor might have its view of the data, and the marketing team it's view of the data, but the organization lacked good integrated data to report on.

So, data warehouses were created to combine and pre-process data and make it more readily available to people who wanted to combine shop floor data and marketing data into a report or KPI.  That's great, but data warehouses are really only great with structured data, and just as data warehouses became really capable, unstructured data became more important.  I've seen statistics that indicate that 80% of the data companies ingest is unstructured data, which is harder to parse and interpret.  Also seen statistics that suggest that most companies have the ability to access, interpret and report on about 15-20% of the data they possess.  A lot of the data being captured and stored is virtually useless, because it cannot be interpreted or understood by current systems and people.

It's about here that people began to realize that, like the California mountains the 1840s, there was gold in there somewhere.  Data became, and is still becoming, a source of value rather than a problem to be solved.  Now, we need to learn to access data, unlock it, and have it tell it's story to all of us.

Water, Water everywhere

As we move into the future of data as a source of value, we'll need to understand a few things:

 - Where it is coming from

 - How we can best manage it

 - Most importantly, how to extract the value it contains

First, where is it coming from?  Honestly, everywhere.  The digital transformation that everyone was talking about before COVID is arriving.  The Internet of Things that seemed like such a futuristic opportunity is happening.  Billions of devices generating data, some of it interesting and useful, some of it not so much.  Consumers are generating data on social platforms, and if businesses are smart they'll find ways to get consumers to build relationships and exchange data with products and brands.    In the near future, robotics and automation will create data about processes and products.  Finally, and we are nearing this threshold, the data will start generating data about itself.

Second, how can we manage it?  Today, most firms are fortunate if they can adequately manage and interpret 15-20% of their data, and the data volumes and varieties are exploding.  Companies need to start with a data strategy, to understand what insights they need and which data streams can provide the supporting evidence.  What companies need to do is develop a data strategy that supports and enables the business strategy, then put the requisite systems in place to capture, manage and interpret that data.

Timing is also important.  Our traditional way of interpreting data is in hindsight - reports that tell us what we did yesterday, last week or last month and compare to previous periods.  This information is helpful but does not fully illuminate future activities.  Corporations need data about the present and indications about the future as well.  We have to analyze and interpret the data in real time, but also allow the data to predict what is going to happen next.

But what's most important is to extract the value the data contains.  We need to move from being content with reporting last week's sales, or even yesterday's revenue, and move toward what the data tells us might happen and use that insight to take proactive actions.  Some companies talk about being data-driven, I like to think about being led by the data to new opportunities, new markets and new needs.  Most companies are fortunate if they can report on old data, and the data scientists they are hiring are working to create real-time interpretation and some prediction capabilities.  This is where we need to be spending our IT dollars.

What's this got to do with strategy?

So, if you are still with me at this point, you may say - this is all interesting, but what's all this got to do with strategy?  This is an interesting question.  Companies in the past wrote a three or five year strategy and, if the company was lucky, communicated it out to the leadership.  Then the business went on its merry way, mostly adhering to the strategy.  These businesses often did not have data to indicate if the market was moving in a different direction than their strategy indicated.  If there were gaps between the strategy and reality in the market, this was usually discovered two or three quarters later.

Today, we need our strategies to be more dynamic, and based on what data about markets, economies, currencies and other internal and external factors are telling us now, and signalling about the future.  We need to write strategies informed by data, and create strategies that are course corrected by data, and that are regularly testing new hypotheses about the future direction of strategy.  In other words, we need to reject the old view that the world is static and data belongs in ledgers, and adopt the thinking that the world and the markets in it are exceptionally dynamic and data should be used to tell us what's new and what's next.  Companies and executives need to be led by data, not informed or "driven" by data.

What's this got to do with innovation?

Another good question.  What impact will all this data have on innovation?  In my opinion, it may radically change what we innovate and the products and services we create.  First, more data about customers and their needs will allow companies to make better decisions about the products and services they create.  Hopefully it will not mean they abandon Voice of the Customer activities and engaging with customers and prospects to learn their needs.  Data is valuable but we cannot be overly reliant on it in all circumstances.  Further, all this data and our emerging ability to manage it will lead to new products that the data suggest or new services or solutions that are purely informational.

Whereas the light bulb has been the classic symbol for innovation in the past, a symbol for data and how it is put into use and converted into revenue may be the emerging symbol for innovation in the future.  How we develop new products and services may shift from a mostly creative, manual and emergent process to a more automated, still creative but directed process - directed by insights and data.

If all of this is true...

So, if my analysis is true, the best job to have in the future will be a position that makes sense of all the data that is generated, finds the data that really matters and converts that data into information or knowledge that speeds the business up or helps position a business for opportunities as they emerge.  In other words, some form of data scientist or data strategist.  I distinguish these terms because in my experience many people who frame themselves as data scientists are too close to the data - they see trees and not the forest.  What we need are data strategists - people who see the data and understand its implications but have the ability to pull back and see the bigger picture.  People with these skills and capabilities will be able to dictate their salaries and will be in high demand in the coming years, because they will impact the strategy of a business and its product lines or service lines, as well as direct new product development.

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posted by Jeffrey Phillips at 6:13 AM 0 comments