Innovate on Purpose

Four factors that drive the need for innovation

2012-02-01T06:26:00.000-08:00

Everyone, and I mean everyone, talks about innovation. We've got CEOs, academic leaders, the President of the United States, talking about innovation. It's clear everyone thinks that innovation is important. The challenge with all of this talk of importance is that few people stop to define WHY innovation is important. What's driving the need for more innovation? We all seem to agree that more innovation and more frequent innovation is important, even necessary. But are we to accept this as an article of faith? Should we allow innovation consultants, elected officials and business leaders to tell us innovation is important, but not demonstrate the underlying reasons why innovation is increasingly so important?

Herewith, in a series of photos, I'll try to describe at least four factors that I think are driving the need for more innovation. Given the time, I'm sure we can jointly come up with many more drivers, and you are welcome to add those in the comments section. These are distinct factors yet intertwined and to some extent mutually reinforcing.

First Driver: decreasing product life cycles, driven by increased competition, customer expectation, environmental shifts.

Used to be, in the dim, dark recesses of history, circa 1980, that a company could design, develop and commercialize a product and expect it to have a long useful life. Those days, sadly, are over. Many products, driven by expectations of lower cost, are less robust and less reliable. We consumers are more willing to use something and throw it away rather than repair or recycle. We have short attention spans and demand new capabilities from existing products. The media leads us to new shiny objects and causes us to reject our existing products. Whatever the reason, the expectation of long product cycles is a fallacy. And as product life cycles shorten, firms must engage in discovering new needs and generating new ideas for new products far more often than they did previously.

Second Driver: increasing global trade, opening the door to more competitors from every region.

Trade barriers have fallen globally. This means far more competitors have access to markets, and far more product offerings in a range of features and price points. Where a customer may have had only a few choices in years past, he or she has literally dozens of choices now. This range of choices has increased competition, increased customer choice and developed in consumers an expectation of constant change. Buyer's remorse is growing, as any new device is immediately replaced by something slightly better the new day or week. Innovators understand that while the treadmill this creates is difficult, they must either get on the treadmill and create a stream of new products and services, or be able to disrupt the treadmill.

Third Driver: The rapid distribution of information and education.

Time was, most advanced education happened in only a few countries, which were the sources of most innovation. Today, India generates far more highly trained engineers than the US does. Elite educational systems are being distributed in many sectors of the globe. Look at major US universities opening locations or partnerships in Qatar and China. As more education and knowledge is distributed, more insight and more capability is developed globally. That means more regions have a greater depth of knowledge and are able to generate far more valuable ideas at a far greater pace than ever before. This simply accelerates the global ability to generate more interesting and valuable ideas.

Fourth Driver: Reduced cost of entry into markets and industries

Open markets and lower trade barriers have provided increased access to markets, but other factors have reduced the cost of entering many markets. The internet by itself has transformed the marketplace, making it far easier to find interesting products in regions that may not have been available previously. The internet has lowered selling and marketing costs dramatically and linked many more people across the globe. Increasing wealth in many emerging economies means more capability to develop products and services. Lower cost of marketing, lower cost of development, increasing access to capital in emerging economies means more ideas, more products and services.

To recap: shorter product/service lifecycles, reduced barriers to trade, increasing access to information and lower cost of entry and lower cost of capital globally drive far more product and service development. To simply keep up with the change, innovation is important. To get ahead of this wave, innovation is a must.

Shifting from occasional to Relentless Innovation

2012-01-31T06:09:00.000-08:00

Last week I was working with a client in the midwest, trying to help build the case for making a shift from the traditional, half-hearted, unfocused and short-lived innovation initiative to a concept of consistent innovation built on a framework of processes and trained people - what I referred to as Relentless Innovation in my new book. Those discussions made it clear to me that while many firms may need to make a switch from sporadic or occasional innovation, we innovators needed to provide a roadmap.

Below I've identified six factors that must change, and have attempted to document the starting point for most organizations, and the potential future state or result. Note that making any one of these changes is difficult, but making most if not all of them is required for success in innovation in the long term.

From: To:
Incremental Incremental & Disruptive

Continuous improvement and small changes are important, but every firm should embrace the idea that innovation must encompass both incremental and disruptive innovation. Even if your firm doesn't intend to disrupt its own market or another market, it should at least be aware of the potential disruptions in the marketplace and prepare to defend against them.

Reactive Proactive

In most firms innovation is spawned in reaction to an identified threat or a shift in market conditions. That means innovation is used to react to situations, rather than position the firm to be the first to market or take proactive action. As the pace of change accelerates, waiting to react to disruptions may not leave enough time to respond effectively.

Ad-Hoc Methodology

Most innovation work in many firms is based on a method or process defined for the specific project or initiative. Innovation is ad-hoc, with few defined methods or processes. This is inefficient but acceptable when innovation is infrequent and the stakes are lower. As innovation becomes more consistent and the stakes are larger, defined methodologies will become far more important.

Isolated Everywhere

Innovation today is often isolated in small pockets of the organization where a visionary manager encourages innovation with her team, while the rest of the organization continues on, supporting business as usual. These isolated pockets don't infect the organization with innovation skill or passion, and leave little trace once their work is done. As in the previous definition, innovation is inefficient, not scalable and not repeatable. This must change.

Occasional Discipline

Innovation is an occasional initiative spawned out of a reaction to a market threat or identified opportunity. Once an initiative is completed, little or no innovation is enacted. Innovation must become a business discipline, constantly engaged throughout the entire organization.

Closed Open

Traditional idea sources simply don't produce enough ideas or don't have the best insights and perspectives. Increasingly every organization must participate in open innovation, as the breadth of ideas increases and the speed to respond belongs exists in capabilities within, and outside the organization.

Focus, Focus, Focus

2012-01-30T05:07:00.000-08:00

I found today's (Saturday, January 28, 2012) Dilbert cartoon completely apropos for innovation. This one cartoon does more to explain why innovation so often fails to achieve expectations that all the speakers, white papers and explanations out there.

If you haven't seen the cartoon, let me describe it to you. Dilbert's CEO comes into a meeting and tells everyone to drop everything and spend all of their time building robots. After he leaves, Dilbert turns to the rest of the folks in the meeting and says "Let's wait a week and see if he forgets". Everyone knows that CEOs want to convey big visions, and occasionally don't follow up grand plans. Good middle managers understand their role is to ascertain what's important to the CEO and implement it. Given the predilection for grand pronouncements sometimes not carefully thought out, many middle managers will wait for confirmation on an unusual or dramatic request.

This truth is especially important for innovation. Survey after survey show that CEOs "want" innovation. At least that's what they tell the folks creating the surveys. Some of that response is simply giving the answer they know they are expected to provide. Some of that response is a cynical response to appear innovative while not changing the status quo. Many of these CEOs actually want innovation, but don't understand how to implement it, don't understand the significance of the request or the amount of change necessary. When they make a request for innovation, they expect their requests to be put into action. Then, they become distracted with one of hundreds of other items that require their attention, and the demand for innovation is conveniently minimized or ignored.

CEOs are right to demand more innovation, but must become more realistic about the request and their expectations. Businesses have spent years optimizing a very efficient and effective operating model and have very little room for change, especially the change demanded by embracing innovation. Trying to implement more innovation is noble, but requires a lot of work, work that will distract the business from its normally efficient, effective processes. Middle managers who've spent years developing robust processes to achieve short term financial success are loathe to see their work go to waste and don't want to distract their people and processes from what they do best.

Thus, the importance of "focus". If CEOs really want innovation, they must focus, focus, focus on innovation. A one time off-handed request for more innovation simply won't create much change. Looking at many innovators, CEOs or other key executives have supported innovation while the culture shifts from a focus on efficiency to a focus on innovation. Understanding the need for innovation is important, reinforcing, supporting and sustaining the focus and delivering on the commitments required are what distinguish the firms that desire innovation from the firms that deliver innovation.

Middle managers, you must understand if the CEO's request for innovation is similar to Dilbert's CEO demanding more robots, a whim or "flavor of the month", or, on the other hand, a real demand soon to be repeated, with commitments and resources.

I'll Never Fall in Love (with ideas) Again

2012-01-26T07:35:00.000-08:00

With apologies to Burt Bacharach for liberating his song title, I want to develop the concept of the innovator as a cold hearted killer, a love 'em and leave 'm type more suited as the villain in a dime store novel more than the passionate, heroic leading man. Because people who fall in love with ideas, or products, often don't have the strength to do what they must. Create a new idea or new product that makes the old one obsolete.

Anyone who has worked as an innovator knows the risk. It's easy to fall in love with an idea. So many ideas are so perfect, so suited for the need or opportunity. But falling in love with an idea is dangerous. Falling in love with an idea means as an innovator you are too close to your ideas to evaluate them effectively, and will miss problems or conflicts in the idea. A good innovator must be as willing to rework ideas and yes, even kill ideas as he or she is to promote an idea. A detached aloofness is probably your best bet, emotion wise.

Falling in love with an idea, however, is an easily forgivable sin, while falling in love with an existing product or service is what stymies innovation and creates lethargy. Far too many organizations have far too many executives in love with ideas that, like fading soap opera actresses have starred in their roles for far too long. Falling in love with existing products or services isn't just dangerous, it's deadly. Look no further than Kodak for example. Kodak continued to stick with the fading actress of film, all the while courting the emerging actress digital, but never made the clean break. Too many people were entranced by film. Too many people were reliant on the business models, revenues and programs that film created. In the end, Kodak was wedded to a corpse, while a patient new bride waited to take its place. Now, that bride may find itself in the arms of another.

Innovators and executives need to be ruthless. In a training program today I asked the class "Who should force your own products into obsolescence?" There are only two possible answers - yourself or everyone else. If you fall in love with ideas or products, and ignore the signals of the market, you will suffer the same outcome as Kodak. If your innovation efforts can be as ruthless as JR Ewing, as cold hearted as Gordon Gecko and as decisive as Churchill, then your innovation efforts will not be in vain. If, on the other hand, you engage in a love affair with your ideas or your existing products, obsolescence will be your only friend.

Love the innovation process, love the creation of new ideas, love the exploration of customer needs. Act with reserve in the evaluation of ideas and be absolutely ruthless when considering the further life of existing products. Because that's how the firms seeking to disrupt your products will look at them.

Innovation Contradictions

2012-01-25T08:37:00.000-08:00

Why is it that something as important as innovation should be so fraught with contradictions? Today, as I was leading an innovation training class for a client, I stopped to think about the number and variety of contradictions that are embodied in successful innovation. In fact these contradictions are what make innovation so difficult.

The first contradiction is that innovation requires a business to embrace processes and methods that are far different from the efficient, effective processes that sustain short term profitability. Innovation creates new, risky, uncertain concepts that will pay off in quarters if not years. Most "business as usual" processes reject these kind of ideas as contradictory to the existing operating model. Which is like eating your seed corn. I addressed this issue in my book Relentless Innovation.

The second contradiction is that while executives want innovation, they don't want the disruption or investment that innovation requires. This simultaneous demand for innovation results and refusal to invest in innovation efforts creates dissonance in the teams that are actively trying to do interesting innovation work, and leads to confusion and then cynicism.

The third contradiction focuses on the importance of transparency, visibility and commitment. Most innovation activities are isolated in the far reaches of a business, far from prying eyes and easily swept under the rug if the innovation doesn't pan out. In an era of vocal leaders, we need far more emphasis on innovation, rather than the circumspect way many organizations approach innovation, out of sight and out of mind. Doing innovation work is tough, and doing it without the full support of the senior team, constantly demonstrated, means that many innovators have far fewer resources than they need.

The fourth contradiction, and perhaps the biggest barrier to innovation, is the contradiction between what we TELL people to do and what we PAY people to do. Often we express the importance of innovation and assign people to innovation teams. We ask them to do important work, creating new products or services. Yet we do nothing to change how these individuals are evaluated, compensated and rewarded. In fact most of these people are held accountable in their evaluation period to the work they did in their "day job". Which leaves the potential innovator in an awkward position - follow his or her passion and spend time on innovation that may detract from success in the day job, or work on the day job and give short shrift to innovation.

There are more contradictions than these I've listed. I hope you'll be willing to add your own in the comments section. Perhaps my other favorite is the old saw about protecting interesting ideas from others, to keep them from stealing your ideas. If an idea is truly unique and disruptive, you won't have to worry about anyone stealing it - you'll have to cram it down their throat to get them to pay attention. Oh, the irony of it all. Perhaps it can best be said that good innovators are people who recognize the irony in their work.

What is the definition of "innovation"?

2012-01-18T06:20:00.000-08:00

As an innovation geek, I always enjoy reading over the latest reports about innovation. Like a kid at Christmas I eagerly await reports on innovation from management consulting firms like PWC or Booz Allen. They provide a yearly assessment of the world of innovation, and especially what CEOs believe to be true about innovation. And, like Christmas, many of them occur at this time of year. Recently, GE published an innovation report entitled the GE Global Innovation Barometer. It is worth taking a look at if you haven't done so already.

One of the items that surprised and, yes, troubled me the most is to be found near the back of the overview presentation, on page 30 of 32 pages. That's where the report analyzes how CEOs define innovation.

The report offered five definitions and asked the respondents to choose two. Here are the five definitions:

The implementation of new processes, products, organizational
changes or marketing changes
An environment/culture that embraces positive change, creativity
and continuous improvement
Research and development, new intellectual property (IP), and
inventions
Staying ahead in the market and being a market leader
Solutions that benefit society and societal outcomes (including
environmental outcomes)

These definitions don't trouble me too much, although they define very different things. What troubles me is that no definition above was selected more than 35% of the time by the respondents.

I'm sure we could spend hours debating about the definition of innovation, much like ancient scholars argued about how many angels could dance on the head of a pin. Unlike the angels on a pin, however, the definition of innovation MATTERS. While it could get academic and esoteric, it needn't be. The reason a definition of innovation is so important, if not at a global level at least at company level, is that a definition signals intention, commitment, direction and importance.

Innovation is tough enough when well defined. After all, in most cases an organization is asking its people to dream up new products or services that aren't aligned to existing products or services at a time when there are few resources or dollars to accomplish the most rudimentary tasks. If innovation is poorly defined, innovation is like discovering a new continent without a map, without a compass, and without knowing what's important when you discover it. Columbus went west to discover gold and spices. Imagine his disappointment to discover just a bunch of sandy islands with little demonstrable wealth. That's what innovators who work without clear definitions face.

Returning to the definitions GE used, the first (implementation of new processes, products, organizational changes, etc) is a COMPONENT of innovation, but only if those changes add significant value, are truly new and unique and important and relevant to a customer. Implementing change is only innovation when it brings new concepts or new ideas that are valuable to a customer or stakeholder.

The second definition (environment/culture that embraces positive change, creativity and continuous improvement) is an ATTRIBUTE of innovation, not a result! Good innovators know these conditions must exist, and by the way, this definition is too limiting. It only mentions continuous improvement, not disruptive innovation.

The third definition (research and development, IP, inventions) is an INPUT to innovation, and too limiting. R&D and IP are definitely a part of innovation, but this definition doesn't consider commercialization and market success. Creating new ideas and new IP is great, but only if there is a market that needs and wants the concepts. Moreover, this definition limits innovation to products, when innovation can clearly be applied to business models, services and customer experiences.

The fourth definition (Staying ahead in the market) is a STRATEGY, and not even a well-defined one. You could accomplish this by cutting costs, acquiring other firms.

No wonder the CEOs struggled to define innovation - because true definitions of innovation are complex. What a CEO says about innovation matters, in terms of the commitment of the rest of the organization, in terms of direction, in terms of investment, in terms of strategy. The starting point for any successful initiative or venture in any business is a clearly articulated goal, definition or strategy, which is then backed by deep commitment. If we can't define innovation well, how can we possibly be committed to its success?

Here's a really simple tip for any firm trying to become more innovative: create your own definition of what innovation should be for your business - and not just for an initiative, but an overarching definition for innovation. Then, ensure you have the commitment to follow through on the definition and that the people responsible for carrying out the definition understand it, and the vision, strategy and goals behind the definition. Otherwise, like a rowboat with only one oar, you'll find your team constantly circling.

Is it a fools errand to try to create a culture of innovation?

2012-01-16T14:09:00.000-08:00

I was reminded of the Forrest Gump mantra recently - stupid is as stupid does - and it got me thinking. Strange, almost ironic, isn't it, that a saying like that could make one stop and think? Or perhaps I'm just living the mantra. But there's a deeper meaning here for innovators, and for those who babble endlessly about creating a culture of innovation. What are some of the challenges?

First of all, most "cultures" aren't designed. When Timmy and Jane decide to build an entrepreneurial company, they are doing so to solve a problem or bring a new product to the world. Most start-ups and entrepreneurs give exceptionally little thought to esoteric words like "corporate culture". There are far too many pressing issues to face. Second, culture is to a great extent driven by vision, strategy and, most importantly, compensation. No matter how much any executive talks about the need for innovation, if employees' compensation isn't linked to innovation, its all just talk. Third, since many firms lack a clear strategy and try to be all things to all people, the products and services they create necessarily have to address all needs and are tailored to the late majority and the laggards rather than the early adopter and early majority. Want to know why your firm can't create a culture of innovation? It didn't start out thinking about the importance of innovation, it didn't create a culture of innovation as it grew and it doesn't value or compensate people for innovation now. Further, the customer base isn't all that keen on innovation.

Once an entrepreneurial firm achieves some reasonable size, their intent shifts from disrupting the market to defending their turf. As firms scale and grow, they lose the sense of innovation and disruption and become very much like the firms they displaced - more interested in defending existing customer relationship and markets and less interested in innovation. As that shift happens, business frameworks, service models and compensation schemes all band together to create a business as usual framework that is about providing for the needs of existing customers and defending the firm against disruption. There's little incentive, motivation or focus on innovation. The culture is increasingly attuned to short term profitability, defending market share and position and incremental improvements to existing products.
In the face of this hardened business model many firms are now becoming aware of the need for innovation - and not just occasional innovation or serendipitous innovation, but successive, repetitive innovation. That's when many people realize that existing corporate culture - focused on efficiency, short term financial goals and defending the status quo - must be changed to become a "culture of innovation". How's that going to happen? The existing culture was built haphazardly in most cases, in response to shifting strategies and needs over time. The culture can't simply shift overnight - the whiplash would be too great for the company, the processes and the people who do the important work. Like eating an elephant, cultural shifts from efficiency to innovation must be completed one bite at a time, over a long period of time. Which will doom the attempt since most executives and managers can't bear to think in long time horizons.

It's the difficulty of creating a culture of innovation that led Apple to develop the Macintosh in a skunkworks, and is what makes the magic of 3M and Google so enticing. But the reason these firms are successful and have a "culture of innovation" is that that's what their original structure, form and intention was. Look no further than the development of Gore: Bill Gore was determined to create a new kind of company and started from the beginning with a plan and a strategy that focused on eliminating hierarchies, highly integrated teams and communication and the support of innovation across the organization. Gore, and other companies like that, were built from the ground up for innovation. Most companies are now trying to attach innovation scaffolding to an existing business as usual culture, and finding the connection treacherous at best.

So, the question becomes - is it a fools errand to try to create a "culture of innovation" in an existing company that does not emphasize innovation? Should all innovation in these firms be attempted in a skunkworks? Can we shift teams and people to begin to embrace innovation as part of the culture? I think the answer is "yes" - the only other response is to accept a slow slide into oblivion. What we need to do now is understand what it will take to shift a business as usual culture to a culture that accepts and then embraces innovation. That is not a quick journey, nor is it an easy one. Many people, many trusted perspectives and long held beliefs may need to fall in order to achieve that. Time, patience and commitment - attributes not often attributed to American business - must be applied to make the shift.

Eventually, though, it is the people of an organization who determine the culture. What's good about this fact is that people are rationale actors - often concerned about change but open to influence by visionary leaders who show the way and by programs that demonstrate innovation is rewarded, not degraded. Executives must decide that innovation is important, and communicate that decision through actions that demonstrate the importance of innovation: what they value, who they promote, how they compensate and reward. Middle Managers must become innovation accelerators rather than efficiency experts. Clearly, this will take time, focus and energy. And that's why a culture of innovation is so unusual, and so difficult to achieve.