GUEST POST from Jeffrey Phillips

I’m upset about all the false promises and hot air I’m hearing right now, and I’m not even talking about the presidential race. I’m talking about all the misguided talk by executives about “innovation”. Yesterday’s NPR interview with new Yahoo CEO Scott Thompson provides an excellent example. I don’t know Scott Thompson and I have no animus toward Yahoo, or for any of its competitors, so what I am about to write should be viewed in the light of a neutral observer trying to wrap his head around some “innovation” claims. Because increasing, when a new CEO starts talking about “innovation”, grab your wallet and invoke the Reagan doctrine – trust but verify.

It’s become almost a requirement for CEOs to expound on the need for innovation. Every quarter like clockwork we see a survey from BCG or PWC or some other management consulting house telling us that CEOs rank innovation as the second or third most important initiative their firm should undertake. I’d like to see the data on the question that goes unasked – how many of those same CEOs who talked about the importance of innovation last year made actual investments in innovation initiatives and programs? While many CEOs are talking about innovation, far too many aren’t actually implementing innovation.

Unfortunately the press lets them get away with this. I was listening to the news on the radio when Scott Thompson was announced as the new CEO of Yahoo. There’s no doubt that Yahoo needs new focus and direction. It can’t decide whether it is a media company or a search company or something else. When asked what he intended to do, he said he wanted Yahoo to do more “innovation and disruption”. That’s either the most optimistic or the most cynical statement I’ve heard in years.

Why cynical? Because it plays on what is “hot” right now – innovation – without providing any specifics in terms of goals, or outcomes or investments. By talking about innovation, he hits all of the right notes in the press, but doesn’t provide any insight into what he means by innovation, and this is a critical point – when executives talk about “innovation” we need to know what innovation is meant to do. Suppose for example we simply inserted the word “hammer” for innovation in many of these presentations. We’d look askance at a person who repeatedly talked about hammers without giving us insight into what he planned to do with the hammer – build or destroy? But we all nod at the sage reference to innovation. Further, his statement is cynical because Yahoo hasn’t been demonstrating much innovation capability lately, and hasn’t been known for innovation.

What’s Yahoo’s record of innovation? They were one of the first search engines, but were disrupted by Google. Since then I’d have a hard time identifying a record of innovation from Yahoo, and certainly no record of disrupting other competitors or markets. Yahoo has more experience being disrupted than acting as a disrupter, so what is Thompson going to build on? What initiatives, investments and programs will he enact to make Yahoo more innovative? Will innovation be used to drive more growth, increase differentiation, disrupt another market? Why, when Thompson made a point of talking about innovation and disruption as key goals, didn’t someone ask for further clarification?

Contrast Thompson’s throwaway line about innovation with Arthur Lafley’s statements about innovation at P&G. Lafley made clear, definitive statements about innovation, such as setting a goal that 50% of P&G’s products would originate from ideas from outside the company. That statement confounded the market because P&G has a strong internal R&D team, and it set a goal that could be easily measured and quantified.

I hope Thompson succeeds in restoring Yahoo to its former prominence. He and other CEOs are only guilty of latching onto a concept that’s poorly defined, but which, when done correctly can drive increases in revenues, profits and market share. Innovation is almost like alchemy – it seems to turn base metals into gold. But just like the early alchemists, it seems that only a few people who attempt it have much success, while most of the alchemists are full of empty promises.

What I’d like to hear from Thompson, and other executives is a clearly delineated strategy, which emphasizes growth, or differentiation, or operational excellence, or customer intimacy, and then hear them talk about how innovation is going to help them achieve these strategies and retain leadership in these strategies. Right now we are putting too much emphasis on innovation – a tool which should be used in service of strategy, rather than putting the emphasis where it belongs first – on the strategy. This reminds me of the concept of “strategic bankruptcy” that another writer says Best Buy is guilty of. I don’t know if Best Buy is guilty of strategic bankruptcy, but I do know that many firms seem to lack clear strategy, which makes doing meaningful innovation even more difficult.

Will some journalists please follow up on a quarterly basis and ask this follow up question to Thompson – if innovation is important, what investments are you making and what results are you seeing?

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