Monday, April 18, 2016

Putting Brainstorming in its place

I find that I've become increasingly irritated with all of the narrow interpretations and self-serving definitions of what is, or isn't, innovation.  I'm happy to climb up on a soapbox again to talk about one of the most common scapegoats for innovation, the act of brainstorming.  No other activity is more miscast, more often blamed for failure, or more often denigrated.  Strange that the activity that should be the easiest, most natural activity in an innovation process is singled out as the most complex, difficult and dangerous.  But fact alone highlights how poorly understood the entire innovation process is.  So I rise today to neither praise nor bury brainstorming, but to place it in its proper context.

The Purpose of Brainstorming

Brainstorming is a technique that allows individuals or small groups to generate ideas.  Brainstorming resides in an activity or phase that we call Idea Generation, which in turn sits in the larger context of innovation.  In an appropriately defined and designed innovation journey, idea generation is preceded by activities like trend spotting and scenario planning, to understand the unfolding future and emerging opportunities, and by customer insight generation, to gain new understanding about what customers want, need and are willing to pay for.  Conducting idea generation without these leading activities is like assembling an IKEA desk without the instructions or those crazy little Allen wrenches.  You can do it, it just won't be done well.

Brainstorming is a group technique to generate, socialize and evaluate ideas. It is not the only idea generation technique.  Any interested person can find other approaches to generate ideas.  Further, brainstorming is not absolutely required for an innovation activity.  You can easily and safely complete an innovation activity without ever conducting brainstorming.  In those cases you may find other means to generate ideas, or you may be using "open innovation" to undercover ideas, products or technologies that already exist.

So, why beat up so much on one tiny step in an innovation activity, that as you can see is not necessarily required, and where substitutes or alternatives exist?  Why so much hate for brainstorming?

Love it or Hate it

Brainstorming is universally mocked because most organizations don't plan for it effectively, don't conduct it honestly, and most attendees don't treat it as important.  Once everyone has agreed to avoid any investment in brainstorming, what else can it be than a failure?  Brainstorming, or any group idea generation technique, is only as viable and useful as the planning and commitment that go into it.  If we committed the same time and energy to designing a building that we do to planning a brainstorm, you'd never safely set foot in another building.

A brainstorming activity is simply a meeting with a specific purpose - to generate ideas. Everyone knows this.  But what they don't often know is:  what kinds of ideas will be acceptable?  How disruptive or incremental should the ideas be?  What research or background has been developed?  Are we repeating old ideas or trying to discover new ones?  Can we generate ideas that are really divergent, or represent other outcomes like business models?  Without preparation, everyone assumes that the least common denominator rules apply, and all ideas are incremental and boring.

Plus, many brainstorms aren't meant to generate ideas, they are meant to give cover to a direction or solution that was already decided.  The brainstorming activity is simply a thin veneer to provide some validation on a course of action that was previously decided.

Without preparation, without defining the potentially viable outcomes, without providing the research or background, and without demonstrating that there is no ulterior motive, how could any meeting succeed?

Individuals are better than groups

Now, someone reading this diatribe is going to say "what about all the research that shows that people are better individually than in groups at idea generation".  And yes, there is research to show that people are sometimes better at generating ideas individually than in groups.  All that says is 1) brainstorming can be an individual tool rather than a group tool and 2) in some instances groups are less functional than individuals.  Have you seen the 2016 presidential race?  Groups are often poor decision makers where information is less than perfect.

But here's the rub:  in large organizations it's almost impossible for one person with a good idea to get anything done.  Large organizations require the ability to create and disseminate ideas, and get people to back the idea.  Thus, all innovation is a group dynamic in a large organization, and group brainstorms serve other purposes besides generating ideas.  They also serve to socialize ideas, validate and vet ideas and even evaluate ideas in a group setting, where more people mean more perspectives - assuming of course that you've got a heterogeneous team, where different perspectives are valued.  This is of course another problem with innovation generally, and brainstorming or group activities specifically:  most teams are far too homogeneous in their formation, thinking and perspectives. 

Fit for purpose

Ideally, the best situation you can find yourself in is when the tools you use are fit for the purpose you have.  For example, a pocket knife can help you chop down a small tree, but how much better is an axe, or even a chain saw to do the same job?  Likewise, if we think carefully about what our actual goals are, brainstorming and other idea generation techniques are actually very well fit for larger purposes.

If your purpose is simply to generate a lot of ideas, use a random number generator.  If your goal is to socialize needs, generate solutions, socialize and build on those solution, validate and evaluate those solutions and leave a meeting with more buy-in than was possible beforehand, brainstorming might be the best fit for purpose. 

What many corporate types want out of a brainstorm is simply words on paper, to be interpreted in whatever way they eventually want to interpret the "ideas".  Participation is welcome but not necessarily encouraged, especially ideas or submissions that deviate from the expected path.   These meetings don't emphasize socialization or buy-in, because the sponsors aren't looking for your support.  They have an idea and intend to pursue it, regardless of the outcomes.  And most savvy corporate types can recognize when the fix is in and play along, hoping one day that the same people will show up to their idea generation activities and play the same roles. 

What outcomes do you expect

A brainstorm, like any other tool, can be effectively used or used in a disastrous way.  Those who would blame the tool neglect the old aphorism that states that only a poor craftsman blames his or her tools for a poor outcome.  If you aren't getting the results you hoped for, check your assumptions.  Either you've defined the activity too narrowly (or not at all), you've failed to provide the research that will lead to understanding of the problem or challenge, your teams are too homogeneous or you are using brainstorming to validate an outcome you've already decided on, rather than discovering something new. 

Done well, with good preparation, good advanced reading and scoping, the right people with the right commitments and attitudes and effective leadership, good brainstorming is dynamic and creates ideas that take the team to new places.  If you read the buildup of that sentence you'll realize that all the predicates (good prep, good pre-reads, the right people with the right commitment) are prerequisites for any new activity.  In other words there's an investment required to do brainstorming, and it should be placed in its proper context - just after all the discovery necessary to find emerging needs and validate that customers have those needs, and just before building out prototypes and testing them in the market.  Again, brainstorming is a connected activity, with predicates and follow on activities closely linked, not a discrete, one-time, stand alone activity.

So, the next time your "brainstorming" fails to deliver, or you are dissatisfied with the outcomes, instead of searching for validating reasons that describe why brainstorming is so inept, first consider the role brainstorming plays in your innovation activity, and whether or not it is fit for your purpose.
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posted by Jeffrey Phillips at 6:42 AM 0 comments

Wednesday, April 13, 2016

Here comes the hypenated innovation offering

It's almost inevitable that innovation will grow to become an amorphous blob of ideas, techniques, processes, "experts", software and a host of other things.  It's the natural order of economics that when an opportunity is available, everything rushes in to fill the vacuum, and as the market becomes crowded various offerings must differentiate themselves from the others to demonstrate value.

It's like this with cheese, wine, beer (remember when there was only Budweiser and Miller?  Now you can have chocolate beer, artisanal beer, birch beer, pumpkin beer, beer from the mountains, from the coast, etc) and a host of other products and services.  Unfortunately, we are reaching peak innovation offering, which means we'll soon see the dreaded hypenated innovation offering.  We'll know we've reached peak innovation insanity when someone writes the "Chicken Soup" for innovators souls book.  Coming soon to a bookstore near you.

This slight rant of mine was started when I saw a new software application talk about its ability to help its clients in agile lean innovation.  Agile is a word adopted from software development, which is really just about stripping away a slow, steady development process replacing it with short "sprints" to complete a few features at a time.  Lean is about stripping away unnecessary assets to focus on doing the most with the least.  In case you haven't been around innovation very long, few innovation activities have too much funding and staff.  Most are already lean, but not intentionally.  And most are already sprints, because the people involved have other jobs they need to get back to. So the software purports to assist innovators in what they already do.

But we can expect to see much more of this - the unintentional obfuscation of innovation. As we pile on more modifiers and adjectives to define and differentiate innovation, we ought to take a moment to remind ourselves that the basic idea - developing interesting new products and services that fill a need that people have, and that those consumers want to buy - is not yet fully understood and incorporated as a strategic endevour in many companies.  Sure, executives talk about the importance of innovation, but they don't really know what it means.  Like the Supreme Court judge said of pornography, he may not be able to define it but he knows it when he sees it.  If the basic concept we are trying to modify isn't well defined or understood, what's the point of adding more adjectives and modifiers?  We simply risk creating even more confusion.

The Basics

Innovation, at least in the corporate world, should be defined in this way:

using creativity to create new ideas that address unmet needs that customers have and using those ideas to create new products and services that customers want to purchase, and which create differentiation for the company.

That's a good, basic definition of innovation, and believe it or not most companies don't have a common, shared definition.  Once one exists, it's easier to get people to align behind it.  Only then should we modify the definition by noting that innovation can be incremental, meaning small changes to existing products or services, or disruptive, completely new concepts that radically change the existing market structure or change industry dynamics.

Further, innovation can result in a number of outcomes.  We definitely use innovation to create new products, but also we can innovate new services, new customer experiences, new channels, new value networks and new business models (attribution here of course to Larry Keeley).

Layering On

Once we define what the act of innovation is, and what some of the potential outcomes can be, then we can define the methods of going about innovation - the "how" if you like.  This is where terms like "agile" or "lean" can come into play.  We at OVO often talk about "rapid" innovation, trying to start, conduct and end innovation before the culture becomes aware of the activity.  You can talk about "open" innovation, which is simply working with external third parties to exchange ideas, technologies, intellectual property or other tangible or intangible goods to make or improve ideas.

As your definitions improve and your team grows competency, then you can add complexity to the innovation definition and process, leading to...

Full Obfuscation

Then, of course we can begin to combine adjectives, types and modifiers, so we can expect to see something like Agile Open Radical Customer Service Innovation.  This is of course a combination of process, type, outcome and degree.  The ultimate obfuscation will arrive when experts debate the merits and rankings of various types of highly modified innovation, much the same way as ancient theologians argued about the number of angels that could dance on the head of a pin.

All of this obfuscation is dangerous and does nothing to assist the average innovator or the executive who must make innovation choices and fund innovation projects.  There is no better or worse innovation activity, process or outcome:  each activity should be driven by corporate needs, competitive realities and strategy.  All innovation types and outcomes are viable and necessary depending on the circumstances.  Unfortunately, given all the hubbub and lack of clarity, most decision makers settle for the simplest and easiest innovation type:  incremental product innovation, because it's easily understood and has little apparent risk.  But what you are doing is making decisions and setting policy based on the least common denominator.

When thinking about the language, definitions and modifiers that clog up innovation conversations, marketing and decision making, remember four important things:

  1. What outcome do we want to achieve:  a little more revenue, or make a significant "dent in the universe"
  2. What is the best method or process for us to achieve that goal:  working internally, working with partners, etc
  3. What type of outcome helps us achieve our goal: new product, new service, new business model, etc
  4. What do we as the leadership team need to do to see that the effort succeeds
If you can answer these questions, you will discover that each innovation activity deserves its own modifiers and adjectives, and the cycle should renew itself each time.

The more attention a market attracts, the more charlatans enter and the more obfuscation will be created.  Innovation, at its heart, is simple, but requires a lot of commitment and courage.  Like scaling sheer cliff walls, those who do it best use only a minimum of trusted tools.  Experts need very little accoutrements when they do their work.  Naive beginners lard up the process with every tool, trick, technique and process.  Go back to square one for greater success.  Beware of the constantly hypenated innovation solutions. 
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posted by Jeffrey Phillips at 5:53 AM 0 comments

Tuesday, April 12, 2016

The seven stages of innovation grief

I'm writing this a bit tongue in cheek, but the point of this blog is very serious.  There are a number of phases that innovators go through, accepting what they can about innovation based on what the executives and corporate culture allow.  Growing as an innovators is something like experiencing the seven stages of grief, only it's often in reverse.  

When we experience grief, as when we lose a loved one, psychologists note that many people progress through a number of stages. Those are:  disbelief, denial, bargaining, guilt, anger, depression and finally acceptance or even hope.  That is, at first we deny the issue, then we try to come to grips with it, then we express anger, then we finally come out of the darkness and end up with some hope.  If you've never seen it, one of the best examples of the seven stages was acted out by Tony Shaloub, who played the character Monk on television. He goes through the stages in about 2 minutes (accelerated because of his psychological makeup) Here's the clip:

In the clip Shaloub first denies that his psychiatrist is retiring, then bargains for his return, then goes through anger and depression, all in just a couple of minutes.

We innovators, especially corporate innovators are like this, but often in reverse.  We have these big expectations about what we can do, only to watch them get watered down, constrained, managed, defunded and so on.  Yet we are supposed to push on with the same enthusiasm. It's true that we often start out with hope, and end with denial and disbelief.  Let's examine why this happens, and more importantly look to Napoleon for methods to circumvent it.

The five stages of innovation planning

As good innovators, we should be planning to disrupt an existing market or industry, or create a new market or industry.  This type of innovation has an impact far beyond the existing corporate framework, creating new products or even new industries.  These plans will often be stymined because executives will find them too risky, because the firm doesn't have experience outside its own comfort zone.

So the next option is to migrate or compete in an adjacent industry - one where we can partner with other experts to extend a capability or do some open innovation that marries our products and services with anothers to enter an industry or segment where we don't compete today.  This places a significant bet on a partner that we don't control and may have other plans or motivations.  Trying to mitigate one type of risk, we simply transfer the risk elsewhere.

Once that has been considered and rejected, we seek to do whatever we can to innovate within our own footprint, discussing "disruptive" innovation in our own markets or industries.  But we are quickly reminded that disrupting the cash cow isn't smart - either tone down the innovation in the existing footprint or go innovate outside the footprint (which, of course, has already been rejected since we know so little about markets or industries outside the footprint).

Then, innovators will consider adapting or adopting existing capabilities for new uses within the industry or footprint.  This seems like a real possibility, until we discover that we really know very little about innovation beyond the product itself.  Channel, business model and customer experience innovation, building on an existing product and extending innovation beyond the product, seems interesting but we know nothing about how to do it.

So, eventually, we end up with incremental innovation based on existing products, or, in other words, product extensions.  This is a completely viable innovation outcome.  It just shouldn't be the only one, but inevitably becomes the only viable outcome.

Innovation Places and types

In a perfect world, we'd consider places to innovate and types of outcomes, and create an interesting mix.  We'd innovate in adjacent and completely new spaces, because it's a rare company that wants to disrupt its own industry or business model.  In other words, we'd attack other companies' models or industries, to keep them off-guard, which opens new markets for us and protects our nest eggs from attack.  We'd also keep up a constant drumbeat of innovation in channels, business models, customer experiences, services and so on - to retain the value proposition of our products by extending innovation in other means and types. 

Innovators all know this, and live with consistent hope.  We go through innovation denial, giving up first disruptive innovation, then adjacent innovation, then other types of innovation to settle into incremental innovation.  It's no wonder that so much innovation is simply incremental.  It almost doesn't matter where your starting point is, or what your original targets and expectations were, most paths lead to the same place.  Paul Hobcraft covered this in his Snakes and Ladders posts a few weeks ago.  The Snakes are everywhere, causing you to fall back to the lowest common denominator.

Environment shapes Attitude

This reality is the reason so many innovators are so often also fatalists.  They've seen the mountain, and even think they know how to get there, but the obstacles placed in their way, by their own sponsors, executives, corporate culture and others simply wear down their hope and initial enthusiasm.  Ask almost any experienced innovator and they'll be able to describe the proposed journey and the almost inevitable outcomes.  New innovators are full of possibility and energy.  Experienced innovators constantly seek ways to get a lot more done under the radar, or before the barriers are raised.  Experienced innovators skip quickly past disbelief and denial.  Anger they've got plenty of.  They become masters of bargaining, and still retain a lot of hope.

When you stop to consider how important attitude, belief and commitment are to a successful innovation effort, it won't surprise you that fatalism and inertia are deadly.  The best innovators never give up hope, never stop believing, always overcome obstacles.  But it can be difficult to remain optimistic when your own organization is the culprit that builds the obstacles.

What Napoleon can teach us

Napoleon would make a great modern innovator. Of course he was a pretty good innovator in his own time, in warfare and in governance.  He had a couple of sayings that I think would apply nicely to modern innovation activities.  The first was Audacity, always audacity.  He meant that the winning side was often the one that plunged in and took big risks.  He was known for dividing his army in the face of the enemy, doing crazy, audacious things that no other commander would do.  He grew from a lowly second lieutenant to commander of most of western Europe by doing things others did not expect.  I think the same is true with most successful innovators. They have hopeful plans and are audacious, doing things that others can't imagine.
Another important Napoleonic aphorism was "if you go to take Vienna, take Vienna". In other words, no half-hearted attempts.  Make big plans and execute on those plans, ideally before the decision makers and corporate culture becomes aware of just how audacious your plans really are.  If you want to bypass or overcome the steps of innovation denial, move with audacity, make big plans and achieve them quickly.  Otherwise, the slowly moving corporate forces will introduce fear, uncertainty and doubt which will cripple your efforts.

In the world of corporate innovation, there are many possibilities but a few certainties.  One certainty is that the faster you move, the less time the culture has a chance to develop antibodies against your plans. The second certainty is that no matter how audacious your plans are, they will encounter resistance and will be watered down. Therefore, go for the biggest opportunity you can imagine.

The third certainty is that innovation grief works in the opposite direction to psychological grief.  Innovators often start with hope, move to bargaining and end with denial and disbelief.  Move so quickly, with such force and determination that you don't have to go through the steps.

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posted by Jeffrey Phillips at 6:00 AM 0 comments

Wednesday, April 06, 2016

Destructive and Constructive Innovation

Today I read a long post that claimed that up to 30% of the banking jobs in the US would be "destroyed" by innovation.  No longer will we need bank tellers. Any job that can be automated or done by machines will be.  This is a classic case of creative destruction, described by Schumpeter as a component of innovation.  Innovation will always create disruption in existing conventions, economies and industries.  This means that it will also destroy EXISTING jobs.  It does not mean, however, that innovation is constantly destroying the net number of jobs.  This is what the media tells you, and it is wrong.  What does happen is that the type of job changes.

For example, at the turn of the 20th century something like 60% of the population lived on farms, and we could barely create enough food to feed ourselves.  Today, something like 2% of the population lives on farms, and we create enough food in the US to feed ourselves and to spark a world-wide obesity epidemic.  I'm sure that people in the 1920s, 30s, 40s, 50s and onward decried the loss of jobs in farming, but innovation - better equipment, better methods, better seeds, better fertilizer - meant that fewer people could be enormously more productive.  This meant that the marginal labor or unnecessary labor was sloughed off.  It wasn't always easy, but we can expect the same thing to occur in every industry, all the time.

Yet, if we take a close look at employment and overall job creation from the turn of the century to today, we see a steady increase in the number and range of jobs, and, until recently a rising income level.  If all those people had remained on the farm, if we resisted innovation and kept producing at the same levels as in the 1900s, we'd still have millions of people on farms, using mules as their tractors, barely subsisting.  Instead, many of those people left the farms and went to college or worked in industry, creating the largest manufacturing boom in the 40s, 50s and 60s the world has ever seen. And, yes, I'm ignoring the Great Depression, because it was a once in a lifetime confluence of a recession made worst by international trade practices and poor administration of the currency.

Innovation will always destroy existing jobs.  That's just a fact, and rather than get exercised about it we should understand it and expect it.  This doesn't mean that people should simply accept that their jobs are "going away" or, as we've seen with Carrier and Ford, going to Mexico, it simply means that older jobs and older skills will migrate to lower cost, lower technology areas.  This means that we all bear responsibility for constantly updating our skills, and understanding how rapidly the world around us is changing.

However, innovation also creates jobs.  For every teller job a robot takes away, the robot creates jobs in robot design, robot programming and testing, robot maintenance.  Every innovation destroys old jobs and creates new ones.  We need policies that help people whose jobs are destroyed, yes, but we also need to build capabilities to predict what new jobs are being created and help people prepare for those jobs.  And, just like the move from the farm to the factory, this will require more knowledge and skills.

Having grown up on a farm, I can tell you that tractors replaced mules (yes, I'm old enough to remember when my grandfather used mules) but they do the same things.  Farmers are definitely smarter than they were in my grandfather's time, but technology has simplified what they do, not replaced it.  Consider manufacturing and the amount of change.  The original mass production lines were divided into very discrete (and often manually intensive) activities. But as throughput increased, complexity increased and demands for quality increased, shop floor knowledge increased. Today you'd have a hard time finding a job in many factories without an associate's degree, because of factors like computerization, automation, statistical quality control and a host of other factors.  The demands for greater knowledge and capability only increase, they don't decrease.

We are in a significant transition, similar to the one from farm to factory, where we move from manufacturing work to knowledge work.  This will only accelerate innovation and exacerbate a problem our education system is slow to recognize - faster innovation requires faster knowledge development and better education.  The new jobs are out there, but our willingness to obtain the education necessary, and the education system itself is lagging behind.

Innovation isn't at fault - it is agnostic and systemic.  Innovation will continue and cannot be held back, as we've learned from the Luddites.  The question is:  are we creating awareness of the speed and depth of change in our culture?  Are we building the right basic, secondary and post-graduate education systems to meet the rapidly changing needs?  Because this creation of new jobs and destruction of the old is only increasing.  Bernie Sanders may rail about "good jobs" but many of those jobs are likely to disappear, replaced by jobs that demand more knowledge, more skill.  Rather than cling to the old jobs and become a stagnant economy, let's recognize that innovation is inexorable and build the culture, training and systems to meet or exceed its pace.
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posted by Jeffrey Phillips at 7:43 AM 0 comments

Wednesday, March 30, 2016

There's very little luck in innovation

My good friend Paul Hobcraft wrote a nice piece recently about how corporations seem to experience innovation. He compared it to the game of snakes and ladders.  In this country (the US) we recognize it as chutes and ladders, a game that allows a player to progress quickly if they land on a ladder, and regress quickly if they land on a chute.  Paul notes that corporate innovation seems to reflect this experience, sometimes rapidly progressing, then just as rapidly relapsing.  He notes that the game, which he calls Snakes and Ladders, has no strategy. It's simply based on luck.  And to some extent he is making the claim, indirectly, that corporate innovation is not based on strategy, but on luck.

I'd like to take his claim, such as it is, and extend it by noting that many commentators describe luck as when preparation meets opportunity.  Seneca, a Roman philosopher, was the first to suggest that luck is simply the intersection of preparation and opportunity.  If we accept this somewhat trite but accepted definition, we can think a bit about what holds corporate innovation back.


If luck is made up of opportunity and preparation, we can first examine the idea of opportunity.

The question then becomes:  does every organization in a market understand and experience the same opportunity to innovate, and at the same time?  The simplistic answer is: yes.  New customer, market, business model and other opportunities are emerging all the time.  No individual firm has a claim to any emerging opportunity.  These opportunities are agnostic; they don't care who spots them and capitalizes on them.

This means then that opportunities are ubiquitous and available for those who spot them and act quickly to capitalize on them. This means that good innovators are firms that are paying attention to emerging opportunities.  If you aren't paying attention, if you aren't scanning for emerging opportunities you can only be a fast follower.  In the end, every firm has the same chance at spotting an opportunity, the only question is whether or not they are looking.


If luck is when preparation meets opportunity, then what is innovation luck?  Being prepared to act, with the appropriate skills and knowledge, when an innovation opportunity emerges.  This assumes that the firm can 1) spot an emerging opportunity and 2) act on the opportunity, which emphasizes preparation.

Preparation to many organizations looks like an investment that has a low potential for pay-off.  Why invest in skills and training for innovation opportunities that may not occur, when budgets and bandwidth is limited?  And, since innovation skills aren't regularly exercised, they often wither or dissipate when they are introduced and not used regularly.  Or they appear strange and unusual when introduced at the last moment, when an opportunity is spotted but the people are unprepared.

The Answer?

We believe the answer lies in a continuous evaluation process, constantly looking for emerging needs, emerging segments and emerging opportunities. Spotting these before others do provides the chance to steal a march on competition. This requires a regular scanning of the market and customers and competition, as well as a close examination of trends that will impact market dynamics.  Along with this scanning and analysis, a regular program of both incremental and disruptive innovation builds and sustains innovation skills, so that people and processes can execute quickly against a new opportunity.  Additional skills or competencies can be added "just in time" when a new opportunity is validated, building on existing skills and processes.

Sometimes, in rare occasions, a firm will find itself alone in the midst of an opportunity and will simply need to act to win.  Far more often, opportunities are emerging than any firm can respond to, and those with the best sensing capability and most preparation will be able to win.  There's another trite but true saying that applies here:  hope is not a strategy.  Rather than hope that you'll end up in a non-competitive but attractive opportunity, act to understand the future that provides innovation opportunities you can meet fully prepared.
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posted by Jeffrey Phillips at 8:46 AM 0 comments

Wednesday, March 23, 2016

The gulf between innovation goals and execution

Accenture has recently published an innovation survey of 500 executives in the US.  I'm particularly partial to portions of this survey because the authors identify a real and growing problem - the gap between what executives want from innovation, and the organization's ability to deliver.

By now everyone knows that innovation is a top three priority for executives.  That's not news.  You'd have to be a monopolist or simply crazy to suggest as a senior executive that innovation isn't one of your priorities.  But saying that innovation is important doesn't mean it will get funded, get prioritized and get done.  The Accenture article goes to great lengths to note that "US executives are unrealistic in believing they have the capabilities they need to achieve their bold innovation goals".  Ouch.

The authors go on to suggest that "a significant gap exists between what companies want to do in the area of innovation and what they are able to do".  Again, the idea of a distinction between desire and capability.  This isn't new.  There's always been a gulf between desire for innovation and capability.  It's just rare to see a well-known and respected analyst or practitioner admit that the gulf exists, and with their data acknowledge that the problem is actually getting worse, not better.

Even Accenture pulls its punches a little.  In the first figure of the research they note that 84% of executives surveyed know they are dependent on innovation.  But Accenture doesn't ask the commitment question - how many of these executives who admit knowing that innovation is important are actively investing in innovation, building skills, resetting corporate cultures, building bigger visions?  I think this was a miss on the part of the survey.

From the data presented it's clear that "innovation" is still defined very narrowly, as improvements to existing products and services.  While "disruption" is bandied around, few companies have plans to attempt more radical or disruptive innovation, or regularly stray from product innovation into other outcomes like business model innovation, service innovation, channel innovation and so forth.  In other words, most of these executives and their teams are just scratching the surface, when right underneath the surface a range of innovation options and outcomes is just waiting to explode.

Rather than count results and outcomes, the survey is forced to count inputs, so we get the usual stories:  74% say they have established formal innovation processes.  We at OVO have seen some of these "established" processes, which often aren't complete, and no one has been trained to follow.  As I like to say, just because I have a hammer, that doesn't make me a carpenter.  One of my favorite quotes from the survey is about executive engagement.  If you want to know how important innovation is to a company, let's track the time and engagement of the senior executives.  To quote the survey:  superior innovation performance requires more than c-level oversight.  It demands engagement from all levels of the organization.  But I don't see any measures or metrics of increased involvement.  There are all kinds of statistics about how many firms have digital systems such as project management platforms to manage innovation process (85%) or how many are doing virtual prototyping (84%).  If these numbers are to be believed, there are only a couple of conclusions that can be drawn:  either these are highly ineffective (assuming they are being used) because the results don't equate to the investment, or they aren't being used at all.

But my favorite quote in the survey was this one:  Companies' confidence in their innovation performance is not justified.  Wow.  Like a teen-aged driver convinced he's king of the road, executives are convinced that their teams are all well-above average when it comes to innovation.  In this Lake Woebegone environment, where everyone and every firm is well above average, 83% of companies surveyed said their companies were the same or stronger than their closest competitor when it came to the outcomes of innovation.  Clearly, we are awash in great innovation talent, we just haven't seen the new products, services and business models that are on the cusp of delivery to stores and channels near you.

It's not until page 10 that we get this dinger:  67% (two-thirds!) of respondents believe that their organizations are more risk averse than before.  So we are supposed to believe that more companies are doing more innovation, while risk aversion is growing?  And, worse, 82% of respondents do not distinguish between incremental and radical disruption.  They are using the same tools, methods, thinking and decision making criteria for incremental and disruptive innovation, and wondering why all the ideas seem so bland. 

Accenture's recommendation, the two engine solution, is appropriate but not new.  Their suggestion is to define a path for incremental ideas, and a separate methodology and philosophy for radical or disruptive ideas.  In this manner the ideas would be treated differently.  What's missing is a portfolio approach, which would indicate how many ideas of each type are valuable or necessary.  OVO has set up systems with clients that track incremental or continuous improvement ideas, and a separate track for disruptive ideas. But until there's clear sponsorship for disruptive ideas, funding and risk tolerance for those ideas and clear metrics and measurements, all ideas will eventually become incremental.

I applaud Accenture for its honest assessment of the state of innovation.  At a time when innovation is in high demand, far too many companies are paying it lip service, then are astonished when new entrants and startups completely disrupt the industry or market.  That disruption is simply going to increase as the pace of change increases.  Large corporations can't afford to pay lip service to innovation or treat it as an interesting experiment.  They need to embrace innovation and make it a core strategic philosophy, well funded and with plenty of resources.  Otherwise they'll play defense and wake up to discover their markets or products have been disrupted.
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posted by Jeffrey Phillips at 5:05 AM 0 comments

Tuesday, March 15, 2016

Innovation and N "X" D

Henry Ford is perhaps one of the most well-known innovators in the US.  After all, it was his mass production line that helped people make the shift from horses or high cost / low quality automobiles to a reliable, affordable car - the Model T.  Ford wasn't the first to manufacture a car, but he was the first to realize the power of a low-cost, reliable automobile.  Strange then, that his position in the automobile industry was usurped only a few years later.

Ford perfected a process by which he determined the model, the shape, the size and especially the color of the automobile.  "Any color as long as it's black" was his motto.  And when people did not have cars, the allure of a car, even if it did not have many options, was appealing.  Under pressure, Ford introduced the model A as an upgrade from the model T, but Ford wasn't interested in creating a range of alternatives, of introducing a number of options.  Ford was a synthesizer and a manufacturing innovator.

The guy who stole a march on Ford, and really defined the automobile company structure that we have today was William Durant.  Durant foresaw that people would want a range of products and options.  He created what became General Motors by offering people more choice of options, more flexibility and product families.  While Ford grew rich on the Model T, his company grew stagnant and failed to understand the wants and needs of customers.  Durant understood the breadth of customer expectation and worked hard to meet it.  Durant was a merchandiser and understood the potential of product families and brands. 

There's an innovation analogy today

Currently, many innovation teams are shaping up a lot like Henry Ford's company.  Instead of cars, they are working on innovations.  And you can have any innovation you like, incremental or disruptive, as long as it results in a tangible product.  We've even got separate names for the different activities:  "fuzzy front end" where ideas are generated, and "new product development, or NPD" for the activities where the ideas are converted into products.

When companies are just beginning their innovation journey, and innovators are far from mature, product innovation focus makes sense.  But eventually companies and individuals mature, and their innovation production should broaden and meet expanded needs.  Instead, today, most innovation teams create product ideas, and feed a machine called New Product Development, which is built to receive product ideas and convert them into new tangible products.  What happens when innovation generates outcomes other than products?  Where do the new ideas go to become new business models or new customer services?  Here lies the rub:  Just like Henry Ford, most corporations have perfected the innovation process, as long as it's a product.  And somewhere out there, in existing firms or new companies, are the Billy Durants, who are thinking about how to expand the definition of innovation and create a range of outcomes, that will simply swamp companies that only think about product innovation.

Beyond New Product Development (NPD) teams

I was thinking about this issue recently when talking to a client about their innovation process.  In their case, innovation is a well-oiled machine (as long as it's a product) and the front end works reasonably well with the new product development process.  What would happen, I asked, if new ideas that represented business model innovation, or channel innovation, or customer experience innovation, originated from the fuzzy front end?  Where would those ideas "go" for further development?  Where was the defined process for business model development?

Of course we both knew the answer.  The NPD process is optimized and streamlined for developing tangible products.  The NPD process will reject anything it can't make.  And, there is no defined process for any of the other types of innovation outcome.  There's not a "New business model development (NBMD)" process or team.  There's no "New Customer Experience Development" process or team.  With luck the CX or UX team associated with product development might recognize a need, but it would have to be related to a new or existing product.

What's the Need?

Sure you might say, but most companies need to create a stream of new products, whereas we may only change a channel or service or business model periodically.  Therefore we don't need a standing process in order to do business model innovation.  But what's true about businesses generally is that they are very good at things they do regularly and are terrible at things they do infrequently.  Without definition, without practice, can your organization create new services, new customer experiences, new channels and new business models?  Because I can easily imagine a "front end" of innovation that generates not only products but services, customer experiences and business models, and further I can imagine a day in the not too distant future where you may decide that one product line or business unit needs more product innovation, while another needs channel or service innovation, while another needs business model innovation.  Is your firm nimble enough to do this?  Does it have enough experience to develop and commercialize different forms of innovation successfully and potentially in parallel?  How long did it take to get new product development processes right?

You need a New business model/service/channel/customer experience Development process

Now that you've got a refined and perfected (well, almost) NPD process, it's time to start thinking about a New Business Model Development process, a New Customer Experience Development process and so on.  The good news is that developing new business models and customer experiences may be a bit less work than developing new products.  The bad news is that there really aren't any well-defined methodologies or worse, much experience around this. Yet the need will only grow as demand for innovation beyond the product grows.

As the range of innovation outcomes increases, the ability to convert new ideas into services, channels, business models and experiences will become paramount.  This doesn't negate the need for NPD, but emphasizes the need for NXD, where X stands for business models, services and experiences.

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posted by Jeffrey Phillips at 6:13 AM 0 comments