GUEST POST from Jeffrey Phillips

I’m trying to recall the case study we used in my MBA program. This particular case study looked at the differences between an American car company and a Japanese car company in regards to quality. As I recall, the Japanese workers had responsibility for quality throughout the production line, and could stop the line at any time if they found a significant defect. Each person was responsible for the overall quality of the vehicle. In the American car company, the production line ran, and at the end of the line there was a station called “quality” which inspected the cars and pulled them off the line if, in the inspectors judgement, the cars didn’t pass a certain quality threshold.

In this instance “quality” was the responsibility of someone down the line, who could only accept or reject a finished product. Unfortunately, many cars were being pulled out for quality reasons. The object lesson there was that quality can be “tacked on” at the end of a production line. To create high quality products, quality must be a part of the process from the beginning. So firms introduced Quality Function Deployment, embraced Six Sigma, re-engineered their processes and now quality is embedded in all of the major functions of producing any product.

Why the obvious history lesson? I look back at the lessons we learned about quality to make a corresponding point about two other very critical capabilities that aren’t embedded but are simply tacked on: innovation and design. These two capabilities are, in many ways, in the same shape and offer the same promise as quality did as described in the previous paragraph. Yet far too many firms are content to make innovation a prefix and design a suffix to the development of new products and services.

I titled this the Prefix and the Suffix because increasingly it seems that most firms believe that innovation is a “prefix” to the real work of product creation. If only the “front end” worked better, then we’d create more interesting and valuable products and services. To an extent that is probably true, but this thinking isolates innovation as if it were:

1. Black magic
2. An occasional effort
3. Isolated to a small team
4. Very different from what the rest of the organization does

While improving the “front end” may be a noble goal, embedding the importance of innovation throughout many functions and processes within a business is the ultimate goal. After all, innovation in business models, services and customer experiences are just as important as product innovation. By treating innovation as an isolated prefix to the rest of the important work, we miss its true value proposition and belittle its capabilities.

I called design the “Suffix” because it is another very important capability that many firms isolate and seek to “tack on” at the end of the process. Design isn’t necessarily an interesting color or inventive packaging that can be slapped on as an afterthought. Well-designed products attract attention in the marketplace and price premiums, but to achieve those benefits you have to embed (there’s that word again) design thinking in the entire process. Currently, we have Design for Six Sigma (DFSS) and I’m sure there’s a Design for Lean (DFL), but where’s the Design for Design?

Can’t we develop an appreciation for the importance of design and build it into everything we do? Again, design, like innovation, is not simply about products. A firm can design its interactions with customers, its organizational structure, its processes. Too often design is left in the “product” ghetto, isolated and simply tacked on at the end.

In my mind’s eye I can see these virtual production facilities, where innovation dust is sprinkled on a robust manufacturing process, and eager designers await to apply the finishing polish at the end the process to boring, mundane products and services. It doesn’t work that way, and we have a clear example in quality to demonstrate that.

Gandhi had a saying that I have on my wall – First they laugh at you, then they fight you, then you win. In learning new skills, businesses have a three step learning process. First we ignore it, then we tack it on, then we embrace it fully. Innovation and Design are currently the prefix and the suffix of business – getting tacked on to the beginning and the end. In the near future, it will be vital that they are embraced and embedded.

Don’t miss a post (3,350+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

I was leading an innovation workshop last week. In that workshop we were using a number of different tools and techniques to generate ideas. Somehow the subject of the airline industry came up, and the debate centered around whether or not there’s any innovation “left” in the US airline industry. As someone who flies frequently, I’m not sure whether to hope for more innovation, which I always believe is possible, or to dread it.

But this raises an interesting question – does any industry face a range of factors, constraints, regulation and competition such that innovation reaches a point where innovation is nearly impossible – or, where innovation reaching some point of diminishing marginal returns? Can any industry be so commoditized, so constrained by competition, so easily copied that innovation simply isn’t worth the effort? If any industry could be, perhaps it is the airline industry. Perhaps no other industry in the US is so vital to doing business, so liberating in terms of providing a means for people to travel, and so terrible in terms of profitability and market capitalization.

Why is innovation so rare in the airline industry? Other than Southwest, no airline has been consistently profitable over the last twenty years. Are there factors in the airline industry which limit both innovation and profitability? Or, have customer expectations, regulations and business models forced most of the majors into one common business model that none can effectively escape?

Compare and contrast the airline industry – clearly a services industry, with other services industries. For example, many of us who fly also stay in hotels. If we look at hotels, especially defining it as “short stays” we can say there remains a significant amount of innovation, from couch surfing to micro-hotels to chains that span room offerings from bare minimums to the Taj Mahal. Why is it that Marriott can offer a range of hotels from Fairfield to the Renaissance, from Residence Inn to Courtyard, something for virtually every traveler niche, yet United, Delta, US Air and American offer basically the same product to every flier. And no, “first class” isn’t a real differentiation anymore unless you are flying internationally. The airline industry offers one commoditized product, where prices are quickly matched, and has done little to distinguish service in the air (actually all have reduced services by removing food). Rather than innovate their offerings, they’ve participated in a race to the bottom – who can be the most cost effective and anger the customer the least seems to be the motto.

Does it have to be this way? Could Delta or United or American offer differentiated classes of service on the same plane, or offer different benefits on different flights to the same location? If we argue that because of external factors the product is undifferentiated could they differentiate around services (baggage, food, linkages to other travel services, friendly service, etc)? Could they innovate around the business models – developing different mechanisms to charge customers or offer a “fee for service” model? If regulations were lower could a start-up airline offer more “point to point” flying for executives not yet ready to purchase or lease a plane? Could an airline allow passengers to manage their own bags, since many of us are forced to do this anyway? Or better yet, could an airline create a partnership with Fedex or UPS to deliver bags, so passengers simply drop bags at their Fedex location and pick them up at their hotel?

I suspect, dear reader, that even in a highly commoditized industry, laden with union rules and regulations, with a high focus on safety and reliability, that there is plenty of room for innovation. What we passengers need are some stark differences between the airlines so we can demonstrate our preferences by voting with our feet. I don’t think there is a diminishing return on innovation in the airline industry, any more than I believe there’s a lack of need for innovation in that industry. Every industry, every market has the potential for innovation. We customers simply need to demand more innovation and accept less of what is now a barely acceptable product.

While we’re talking about airline innovation:

I’d like an airline with either far more overhead space, or absolutely none, so boarding is simple and fast, and there’s no reason to worry for the people boarding last about whether or not their baggage will “make it” on the plane.

I’d like an airline with multiple entrances and exits. Why do we have cars with four doors and planes with only one entrance and exit? If large international flights can board on multiple doors, smaller planes can as well.

I’d like an airline that guarantees the lighting and air conditioning works. In the last few weeks I’ve flown on two planes where the overhead lights didn’t work – limiting what I could do on the plane, and on one airplane where the AC didn’t work in 90 degree heat. Unacceptable, and with a few sensors an easy fix.

I’d like a plane that offers a snack machine onboard. Why can’t I simply purchase snacks on the plane the way I can in my office? I’d pay a premium for the snacks and it wouldn’t take up much room.

I’d like a plane with far more comfortable seats – I’m not even asking for more knee or leg room, just something that is more supportive or comfortable. Perhaps the airline could have three different seat types scattered throughout the plane, and when you select your seats at ticketing you could indicate firmness, lumbar support or seat depth options.

I could go on, but I think you get the point. There are hundreds of ideas that are possible in even a highly regulated, highly competitive marketplace. Would many of these be instantly copied? Perhaps, but we need to kickstart more competition around innovation to stop the spiral of ever decreasing service. If the airline industry can innovate, any industry can innovate. I refuse to believe in diminishing marginal returns where innovation is concerned.

Don’t miss a post (3,350+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

Working with an innovation team that was formed to create a new product, I was detailing the type of work the team would need to do, and the likely timeframes for the work. One gentleman, in particular, demonstrated some discomfort through his facial expressions and body language. When we talked about the amount of time each week that should be dedicated to the effort, and the number of meetings likely to be necessary to complete the work effectively, he finally exploded. Don’t they know we have day jobs? he asked.

While his statement was a bit abrupt, it wasn’t unsuspected. In every innovation project I’ve lead, or coached, or participated in, someone has raised the question about priorities and time commitments. It’s a fair question, and one that is unfortunately left exceptionally vague. That question is: where should I spend my time – doing an excellent job completing near term priorities (my “day job”) or doing the best I can, using unfamiliar tools and techniques, to generate ideas that may, or may not, be successful?

This is an unfortunate, and unfair, dilemma to place an individual in. Both current work and innovation work are extremely important, so executives expect and demand both. Executives want and need perfect near term execution, to achieve quarterly forecasts. However, they also know that unless interesting and valuable new products are generated on a consistent basis, growth will slow and differentiation disappear. So, rather than force themselves to choose, they simply tell employees that both are exceptionally important, and leave it to the innovation team to decide how much work will be committed to each task.

Unless and until the executive team changes existing compensation patterns, however, this isn’t a real decision for most people. Compensation is based on completing the day job effectively, so the first bias is toward doing that work well. There are other factors that place a heavy thumb on the side of the scale that tilts toward the “day job”. Those include familiarity with the work, expertise and knowledge that can be immediately applied, low risk, low uncertainty, and the reasonable certainty of success in the short run. Against these, stacked on the other side of the scale are: uncertain outcomes, risky procedures, little or no new compensation, the risk the project will be cancelled or abandoned, the risk that good ideas don’t produce compelling new products or services, lack of expertise and many other barriers. So when an executive says innovation is very important, then neglects to change compensation schemes, neglects to reduce risks and uncertainties, and, most importantly in my mind, neglects to reduce short term responsibilities and burdens to free up appropriate bandwidth and time, he or she merely gives lip service to innovation, in the hope that a serendipitous idea will spring forth. Because certainly the executives know the dilemma that confronts the innovation team members.

When an innovation team debates about spending 4 to 8 hours a week to generate ideas to create the new product or service that’s supposed to differentiate the company and spark new growth, you know that the team is conflicted with its short term and long term mission. You cannot adequately pursue an important “day job” and effectively develop ideas for radical or disruptive change. One of the responsibilities will simply not receive the time and attention it deserves. If innovation is important to your company, make it the “Day Job” of a significant number of people, at least during the innovation effort, or don’t distract your team from their short term goals.

What’s your “day job”? If innovation is important, will differentiate your company and will drive new revenues and profits, why wouldn’t innovation be the most important “day job” in the business? We’d never think that people can close the books on a quarter on a part-time basis, or conduct basic R&D for just a few hours a week with any hope of creating a valuable new compound. Yet many organizations develop and deploy part-time innovators who have important day jobs, and wonder why innovation struggles.

Don’t miss a post (3,300+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

I’m a bit grumpy today, returning to work after a nice weekend. When you are an innovator, it seems you never really escape your work, or perhaps your vocation. Everything one sees or experiences seems to call into question – couldn’t this be done better, or differently? I suppose a really committed innovator could drive himself or herself absolutely crazy wondering about all the potential improvements and new products that are possible just within the things he or she experiences. But those experiences drive what we do and what we focus on, and are perhaps limiting the way we think about innovation.

Consider, for just a moment, my simple taxonomy about the “types” of innovation many firms will consider. There is, of course, the innovation that improves an existing product, which many of us call “incremental” innovation. There is, further, borrowing ideas from other industries, products or concepts that exist in one industry but not in another, which is still relatively incremental but sometimes a “breakthrough” idea. There’s a “mixing” innovation – peanut butter and chocolate – which combines two capabilities or benefits that haven’t been combined before. Again, often interesting but rarely disruptive.

Further along the “interesting and valuable” spectrum we’ll find Blue Ocean kinds of innovation – spotting unserved markets with a different new product or service, for example. Further along still is innovating around customer experiences or business models, and further still is creating a product or service completely new to the world.

I suspect that many of us who call ourselves innovators are constantly engaged with the products and services that we experience every day. We are wondering – what, exactly, could make this product or service better, more interesting, less costly, more engaging? This is the mental “busy work” that seems to advance the cause of innovation but I think often traps us in a dead end alley of innovation – the incremental trap, focused on improving existing products and services. That’s not to say there isn’t some value in incremental innovation – just that the work is frequently contemplated by a wide variety of people. The “winner” in this regard is often the firm that acts first. When many people or organizations are aware of a problem or opportunity, it’s the firm that understand the problem in depth, and produces a reasonable solution quickly that wins.

However, far too much of our time as innovators is spent in the incremental alley. We’re captivated by improving existing products and services, rather than focused on balancing incremental innovation with other forms of innovation. These other forms include identifying unserved markets, innovation focused on management hierarchies or business models, creating products that combine powerful capabilities not combined previously, and so on. These innovation “types” are implemented far less frequently, because there’s less extant evidence of the need, and less “proof” of the value. Once again, we innovators are like the drunk who lost his keys in the dark alley, looking under the street light, simply because the light is better there. The keys are still in the dark alley, much like many good ideas simply waiting to be discovered if only we’ll move out of our fascination with the here and now and explore broader ideas and opportunities.

And, yes, I know that the preference in many organizations is limited to incremental, but that’s because we innovators have allowed ourselves to be boxed in to a incremental innovation ghetto. If we can demonstrate the value and opportunity of broader innovation thinking, and the potential realities of innovation that’s focused on combination, or introducing ideas from other industries, or business model innovation, then we gain credibility and the scope of innovation expands.

If we aren’t careful, innovation is simply an interesting side show trotted out when the executives want a magic show and some incremental gains. What we need to demonstrate is that we are “investing” in a range of innovation possibilities across a spectrum of risk and return. Incremental innovation offers low risk and low return, while business model innovation and “new to the world” product or service creation is high risk but high return. Placing these concepts in terms that financial folks understand and value improves the chances that we can innovate in more than just the incremental space – and that there’s reason to do so.

Incremental innovation can become a trap. Innovators are lured in by the promise of innovation, only to discover that the boundaries of what’s acceptable are so limited that they can never do more than simple, incremental innovation, and all other types and possibilities are excluded from the scope of effort. Innovators must define the breadth and depth of innovation opportunities and outcomes and assign risks and potential returns. No firm places all of its investments in government bonds – financial managers spread investments across a portfolio of investment options, timeframes and risks to ensure the best possible return. We innovators need to ensure the same method is take when considering innovation initiatives.

Don’t miss a post (3,300+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

I had the opportunity to participate in the Business Innovation Factory’s always wonderful BIF #7 last week, and like many people who attended I’m still mulling over many of the presentations, ideas and relationships. One short tweet by Saul Kaplan, perhaps a throw-away line, struck me as really important. Saul said he had trouble staying in his “lane”. In fact he wasn’t sure if he had a “lane” at all. BIF and other innovation conferences should be about valuable, unplanned and somewhat random collisions.

What’s interesting about this idea of random collisions is that everything in life prepares us for the opposite. From our earliest educational experiences we learn how to take turns, stand in line and progress in an orderly fashion. We learn to color within the lines, answer questions with the expected answers. That’s because as a society we prefer orderliness, predictability, efficiency. While the stories we tell about heroes are usually those who overcame great burdens or achieved great successes through risk taking, most of our day to day lives are about staying in a lane, avoiding collisions and coloring within the lines. This is perhaps reflected in one of my favorite comparisons, the one about the difference between the Army and the Marines.

It’s said that the Army has a mantra that what isn’t expressly permitted is forbidden, and that the Marines have a mantra that what isn’t expressly forbidden is permitted. The former concept is restrictive – if you haven’t been told you “can” do it then you can’t. The latter is interpretive – unless you’ve been specifically told you can’t, then perhaps you can. Innovators work this way, and to an even greater extent. They interpret the rules, and often re-invent the rules to suit their needs and their markets.

Now, society can’t exist if we all interpret the “rules”. In fact for an orderly, productive society we need to establish rules for health, safety and continuity. But we can’t allow the rules to dictate how we think, and we must be open to reconsidering the rules when appropriate. What becomes a barrier is how few people are willing to reconsider the rules. David Keirsey, interpreting information from the Myers-Briggs personality tests, asserts that over 50% of the population are Guardians, who prefer order and stability. Only 3% of the population are likely to be engaged Inventors, who are willing to think differently and shake things up.

Is this a nature or nurture outcome? Are people naturally predisposed to prefer predictability and order, or is this something we instill early on in life, by insisting on neat lines, orderly turns and coloring in the lines? That will take more of a psychologist than I am. But between any predisposition and the education and expectations of our culture, most of us are very attuned to protecting the status quo, prefer predictability and dislike change.

So we can’t simply ask people to practice “random” collisions if they aren’t attuned to that. While many innovators (Saul, as an example) revel in interesting, random collisions and are good at combining seemingly different concepts into completely new insights, many people find the idea of staying in their lanes, coloring in the lines reassuring, and the alternative off-putting. That’s OK – we need people who are experts at running the existing stuff really well. If they have discomfort in the randomness and unpredictability of innovation, allow them to work and thrive where their passions and comforts are located. But don’t let these individuals establish the entirety of the organizational culture.

Another favorite quote of mine is from Thomas Jefferson, who wrote that the roots of the tree of liberty must be refreshed occasionally with the blood of patriots and tyrants. I think he meant for that to be read in two contexts – at the time he was writing, he meant it in all seriousness. There was, after all, a war going on. But I also think he meant it metaphorically, as a reminder that we can’t get too comfortable with our government, or for that matter with the “State of Affairs”. Every firm, every culture needs a regular rethinking and refreshing. The Guardians won’t be happy with this – they’ll want your organization to stay in its lanes, color in the lines. The Innovators will desire renewal, but their numbers are so small that they can’t make a big impact unless they are supported. Too often the refreshing or renewal happens under duress, while under attack by a disrupter or market transition, rather than a carefully conceived rethinking of the business.

We innovators love random collisions, connecting ideas, people and experiences that seem unrelated, and creating something new from that experience. What we often fail to realize is that what is interesting, valuable and joyful for us is terrifying, random and not valuable for many others. That’s why innovators get so much energy from meeting other innovators, especially outside the organization, and non-innovators get so much energy from people who share their view of stability and order. When you lock your innovators down, cut out travel to conferences, neglect customer insights and experiences, you risk the same outcomes as when you take a flower and neglect to water it or offer it sunlight. We innovators need our collisions, our experiences and the ability to swerve outside the lanes. That’s the only way most organizations are going to get the ideas they need to sustain growth.

So, here’s a question. How many times, how many opportunities do the few innovators in your organization get to “color” outside the lines? If/when they do, what’s the reaction from the rest of the organization? Rather than putting up barriers to this activity, you should encourage and welcome it, perhaps even provide opportunities for it to occur, inside and outside your organization. Otherwise the dominant Guardian roles, rules and structure will take over, and change and innovation will be increasingly difficult.

Don’t miss a post (3,300+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

Today, a light hearted post in which I get to quote two of my favorite philosophers – Jimmy Buffet and Albert Einstein. Buffet write in Changes in Latitudes that if we can’t laugh we’ll all go insane. Einstein said that insanity was doing the same things over and over again and expecting different results.

If Buffet and Einstein, both highly respected philosophers, are correct, then most large organizations are insanity factories – not just mired in insanity but actually producing insanity. Here’s why.

First, creativity is enabled by a lot of factors. These can range from artistic inspiration, to dire need, to innate skill or insight. But creativity is most often enabled by freedom of thought, a chance to do something a bit different, and a little humor. Why do you think all good idea generation sessions start with a joke or an ice breaker? Why do many good meetings seem more effective when even an old groaner is used to open up the dialog? Why is everyone more interested, involved and engaged when good humor is introduced? Because it demonstrates a different attitude, one that recognizes the opportunities and limitation of an organization and encourages, ever so slightly, the ability to step outside one’s perspective and poke fun at the existing way of doing business. Humor lightens the moment and allows people to reach for an entirely different part of their thinking and their brain. Humor is also one of the least used tools or techniques for management. How many times do you see people laughing at work? Usually, it’s when someone pops a Dilbert cartoon in a presentation to make a point. Ouch. While work may not always be “fun”, no one said it had to be drudgery. And if you want innovation and creativity, you’ll need to introduce humor into the mix.

Second, most firms are experts at insanity, at least in the way Einstein described it. Most large firms are experts at doing the same things, with the same people, and the same techniques, over and over again. Our business models are the ultimate examples of doing the same things over and over again. We’ve honed the models for ultimate efficiency and predictability. We’ve turned Six Sigma into a dogma rather than a tool. And along the way our businesses have become, by definition, insane. We think that innovation and creativity are risky, yet we constantly repeat and reinforce existing business models in the face of ever increasing change. Einstein suggested that doing the same things over and over again and expecting different results was the definition of insanity. That definition sounds a lot like our business culture today.

So, while many firms look askance at innovation, creativity and humor, we need these more than ever. We’re on a path to insanity, repeating tired business models, methods and processes, locked into dogmas about predictability and continuity when the real path to growth and differentiation is to break free from the same old tools and techniques and introduce what today seems risky, strange and uncertain – innovation, creativity and humor. Strange to think that what seems like insanity from the inside of a corporation may ultimately be its life preserver. Too many executives think innovation and creativity are dangerous. From the inside of a prison it can be hard to tell who is behind the bars – the visitors or the inmates. It all depends on your perspective. Innovation isn’t insanity – according to our two esteemed philosophers, it’s the cure.

Don’t miss a post (3,300+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

How much longer will countries outsource idea generation to the US?

I was thinking recently about the challenges and possibilities of outsourcing. It’s interesting if you think carefully about it, since what we call outsourcing is to some extent simple economics. Comparative advantage was first conceived by David Ricardo, who argued that each participant in a transaction should spend its efforts doing what it did best and acquiring goods and services from other participants doing what they do best. To the extent that free trade is possible, Ricardo argued that every country or participant benefits when each focuses on its comparative advantage.

For years we in the West have exercised this philosophy, outsourcing work that we can’t do effectively to locations where labor or other costs are cheaper. Textiles present an excellent example. In the 1700s England dominated much of the textile industry, until low labor costs and suitable locations in the Northeast of the US demonstrated that textile production could be accomplished at lower costs. Over time, textiles migrated to the Southeastern US and were a centerpiece of manufacturing in many small southern towns. In the last twenty years a significant portion of that textile production has moved overseas, to locations that can produce cloth more inexpensively. While we may decry this outsourcing of good jobs, it should not be unexpected if we argue for free trade. The alternative is to place high tariffs on imports, to prop up the price of cloth produced in the US, which raises prices for clothing and artificially inflates prices and costs for consumers. Sort of what we do for sugar, as an example, but I digress.

What’s interesting from an innovation perspective about this is that we in the US have no problem allowing others to “outsource” their idea production to us. What I mean by that is that we have staked out the position that we are at a comparative advantage where ideas are concerned – we produce and create ideas more rapidly and more effectively than other locations, so many countries have made an implicit swap – they’ll produce the goods that we conceive. This implicit agreement has paid dividends for us and for many other countries over time. Strangely, no one seems concerned about other countries outsourcing their idea generation and intellectual property development to us, while they seem very concerned about the US outsourcing production jobs to other countries. While the dichotomy about who produces what is interesting, note one other issue: comparative advantage suggests that each country should do what it does best within a free trade scheme, and it will be difficult for any country to compete head to head with the US in idea and intellectual property production, but we don’t live in a frictionless, free trade world.

Increasingly, rapidly developing countries (India, China, Brazil) aren’t going to “settle” for merely manufacturing products or packaging content that we imagine and create. There’s a market premium for innovation, and their countries and their firms are going to want that premium, and will place increasing emphasis on original IP and innovation. In other words, they’ll be less interested in outsourcing the idea generation and intellectual property development to us, and will attempt to do more and more of that at home. While the US is in a leadership position today in terms of higher education, deep research and intellectual property generation, rapidly growing economies are increasingly placing more and more emphasis on developing their own capabilities. When the Indian Institute of Technology graduates more engineers that all of the US engineering schools, and when doctoral and PhD candidates from other countries return home to create new companies and pursue their research, warning lights should go off across the US.

Our compelling national comparative advantage is creativity, innovation, spotting and recognizing new ideas, new market opportunities and creating compelling products and services faster than any other country or region. When we slow or shackle that capability, or neglect it, or, more worrying, become comfortable outsourcing it, we lose what had made the US an engine of capitalism and job creation. Will anyone worry if our firms “outsource” creativity, design and innovation to other countries in the same way they worry when we outsource manufacturing jobs? It will be interesting to watch.

In the mean time, we need to ensure our comparative advantage in innovation remains. This means we need to focus on our capabilities at a country level, through political policies and tax policies. We need to focus on our capabilities in educational settings, teaching and reinforcing creativity and innovation in all aspects of educational life. Our businesses need to determine how important innovation and creativity are for their competitive advantages and reinforce internal skills. It could be very easy to allow others to innovate for us, to allow others to dream and take on the risks of creation, but that would be to subvert the very nature of our economy. We need political leaders, business leaders and social leaders who realize the importance of creativity and innovation, and their vital place in our national lives.

Don’t miss a post (3,200+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

A recent survey of mid-western manufacturers reinforces a fairly serious issue where innovation is concerned. In the survey, the vast majority of executives recognize that innovation must start with the executive team. That’s a good thing. There are some issues of concern in the survey as well – the fact that only about a quarter of the firms survey set aside funds for innovation, and the fact that the same percentage have a defined innovation process. But another survey from the National Science Foundation shoots a bullet right through the heart. According to that survey, only 20% of manufacturing firms reported creating a new innovation in the years 2006 to 2008, and, even worse, only 8% of services firms reported creating an innovation.

Clearly, everyone “knows” that innovation is important, and one could argue even vital, to the success of our businesses and economy. But just as clearly, few firms are implementing the mechanisms for innovation success (see the Plante Moran survey) if only a quarter of the firms report that they set aside funds for innovation or that they have a defined innovation process. What’s perhaps even worse is that since there are few “standards” or agreed innovation methods or principles, what these firms are reporting as innovation processes or budgets could be optimistic or just plain wrong.

What accounts for the knowing – doing gap in innovation? This is the pink elephant, the emperor with no clothes in the innovation room. We all know that a few firms claim the vast majority of innovation success, while most firms attempt innovation occasionally only to abandon it when needs or interests change. If we are honest with ourselves, we can admit that “everyone” believes that innovation is important, but that few firms do it well, and most do it poorly, if at all. I doubt there’s another business function with such a large knowing – doing gap. Is this simply the nature of innovation, or is there something more at work?

I’m going out on a limb here, but that’s my normal perch. I’m going to offer up that innovation is actually fairly simple in practice, but rarely defined, reinforced and sustained. If we boil it all down, innovation is about three or four key capabilities or activities:

• Spotting opportunities and trends in the marketplace before others do
• Understanding customer needs before they are aware of them
• Generating interesting ideas that set the company apart from its competition
• Successfully commercializing and launching the new product or service

Yes, there is more to innovation than these four points, but you get the drift. Whether your firm uses “open innovation” to get the ideas from external parties, or practices business model innovation to transform not just products but your business model, you still ultimately end up with the same basic activities. So if the basic activities aren’t that hard, what’s creating the knowing – doing gap? Three things.

First, it is easier, less risky and less uncertain to cut costs than to create something new and drive increased revenue. Cutting costs is a certainty. If I cut three people, the costs drop out of the bottom line. Those costs are predictable and have immediate impact. If I create a new product, the costs impact now and the benefits don’t accrue for quarters or years, and even then aren’t guaranteed. In a short term focused world, skipping innovation for the sake of cost cutting is like skipping your green vegetables. Dinner tastes a lot better tonight, but the body might not be as healthy in the long run.

Second, while innovation isn’t “rocket science” it does require some new skills, process definition, new relationships and funding. This at a time when core staff are working like mad to keep their products above water. Most firms can’t afford to take on new ideas. They can barely handle the maintenance and sustenance of the products and services they’ve got. No slack in the system, no extra bandwidth and increasing demands mean that all focus is given to existing products at the expense of innovation.

Third, we’ve lost a bit of the cowboy culture in our executives. Jobs and a few others are willing to create some new stuff and see what happens. I think those leaders are smart enough to know that what looks risky to a lot of us is actually a lot more predictable than we believe. In most businesses, once a firm grows to a certain size it loses all, or most, of its entrepreneurial spirit. Instead of sticking it to the man, these firms prefer to lock in certain advantages and lock out disruptors or new entrants. And they slowly sink into the comfortable position of a large player, rather than a disruptor. That’s why firms like Apple and Virgin, and people like Jobs and Branson are so interesting. They are large, but retain a bit of the cowboy. Most of our firms could use a bit more cowboy and a bit less of the accountant and lawyer. If the executives don’t want to stick their necks out for new stuff, why would the middle managers and staff do so?

It’s not as though innovation is a mystery. There are hundreds of books, and more on the way (hint) that describe how to do innovation in large firms, design firms, military operations, services firms, health care, academic settings and so forth. OVO and plenty of other firms offer innovation training. There are plenty of models and success stories to follow. The knowing – doing gap is a gap of choice, then, rather than a gap defined by a lack of knowledge or information.

The real question, then, is whether innovation can be accomplished by firms that are hesitant, cautious and resource constrained, or whether they’ll simply need to outsource innovation for any measure of success. I find this dichotomy a bit strange. We know that any firm, pushed to its limits, can do amazing things. Innovation is often amazing, but is based on basic principles that any firm can do well. The question is – what will it take to push many of these organizations to the point where innovation becomes a capability that they adopt whole-heartedly internally, and will there be enough time for innovation to pull them out of the hole they created for themselves? The knowing – doing gap is self-inflicted, and while it causes only moderate pain at first will ultimately hollow out an organization.

Don’t miss a post (3,200+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.

GUEST POST from Jeffrey Phillips

For those of you waiting a recap of BIF-7 with eager anticipation and jealous longing, I can confirm that once again the folks at BIF have pulled together another excellent conference. Herewith, a few ideas, random thoughts, and synopsis of the first day.

First, a brief aside. I somehow missed the email (Tweet, document?) that circulated that demands that every speaker present a serio-comedic picture of himself or herself taken in the late 50s or early 60s. Did that memo go out? Because I think even the young mountain climber who could barely be out of middle school opened with a picture of himself in black and white taken on a Brownie in the early 60s. Just kidding Matt.

BIF, for those of you unindoctrinated, is the Business Innovation Factory, and each year BIF hosts a conference that is part TED talk, part innovation conference, with a significant portion of meeting interesting people involved in a wide range of innovation efforts. So the topics are interesting, the people are interested and the conversations are relatively deep and always enlightening

We had talks today from a wide array of speakers, including college professors, mountain climbers, the lead innovator at WD-40 and a gentleman who is the innovation lead at Willow Creek. Yes, BIF folks cast their nets wide and brought in quite a haul of innovators from a range of industries and focuses (foci?).

There were a couple of statements that I thought resonated nicely. For example, a photographer who spoke complained that many people wanted to know what camera she used. Her response – it’s not the camera, it’s the photographer and the vision. That resonates with me because far too often corporations trust innovation tools rather than the people, their ideas and their vision.

A community leader from Houston picked at an issue that resonates with me. Her argument is that we often look at downtrodden communities and talk about what’s “wrong” rather than what’s working. Her statement “you can build on broken” – you build on what works. Rather than sit around and talk about why ideas won’t work, build on the people and capabilities that will work, and do work.

Angus Davis, who is a successful serial entrepreneur, left us with this phrase that sits just beside the door as people exit his office – “Let’s make better mistakes tomorrow”. The connotation that innovation, and advancement in general for that matter, requires learning, which will result in failures and successes. Hopefully we are all learning and making better mistakes each day.

John Hagel from Deloitte’s Center for the Edge suggested that in corporations we’ve lost our risk-taking and exploratory mindset. Entrepreneurs and innovators have this by definition, but as firms grow larger they grow more risk adverse and more comfortable, defending markets and position rather than exploring new ones.

Perhaps the most provocative talk was from Dale Stephens who is a Thiel Fellow. Dale dropped out of college when he realized that academia is increasingly not a place to exchange ideas as it is to memorize and regurgitate information. I paraphrased his speech as “they pretend to teach us and we pretend to learn”. While I don’t agree with all of Dale’s arguments about the value of a college education, or lack thereof, his voice is one of many that argue that academia needs innovation desperately.

Why are these folks chosen as speakers at an innovation conference? Because they create and sustain meaningful ideas that challenge what is comfortable and routine for many of us and encourage us to think differently. I look forward to seeing what is presented on Wednesday.

Don’t miss a post (3,200+) – Subscribe to our RSS feed and join our Innovation Excellence group!Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.