GUEST POST from Jeffrey Phillips

I get this fairly regularly, a senior executive who is in somewhat dire straits. Their firms, once leaders in their industries, neglected R&D, postponed interesting new products and services and failed to innovate consistently. Now, they are no longer the lead dog, and are unhappy with the view from behind.

To begin to remedy three to five years of focusing on efficiency, cost-cutting, right-sizing and ignoring innovation,they often want to conduct a week-long workshop to generate disruptive new ideas. You can almost imagine where this is going….

My first question when I get this request is: OK, once the idea generation event is over, what next? Since I know most organizations don’t have an organized innovation process or workflow, or a deep bench of people and resources to throw at such a significant problem, I know the likely outcome is a few people assigned part-time to evaluate and select an idea to develop. They’ll lack training and skills, since little or no innovation has been done recently. They’ll lack frameworks for evaluating and selecting ideas, because no one has established what the long term strategies are and what should be emphasized. They’ll be pulled back into their day jobs constantly, since the fiscal quarter is far more important than achievement in a year or more. And, ultimately, without a lot of commitment, time, resources and effort, they’ll likely generate at best an incremental idea that management half-heartedly accepts and which fizzles in the marketplace.

Is this an “innovation” failure? No, because innovation wasn’t implemented. It is a strategic failure, a failure of focus, a failure of resources and a failure of expectations. Innovation isn’t a parlor trick or a time machine. It is not going to make up in one week for three or four years of neglected innovation, and can’t overcome a lack of skills or training, a lack of resources and a lack of focus. If it were as simple as a one week exercise to create a compelling new product or service, then we’d see lots of them. What people forget about even good innovators like Jobs at Apple is that it took four or five years for Apple to create the iPod. None of their innovations were developed overnight, but over a long time, based on a consistent vision, with lots of resources. Apple intentionally cut a lot of other products to clear the decks for the iPod and other “i” products, rather than force the nascent products to compete with existing products which had their own demands.

Innovation is not a short-term activity, but a long term capability. Farming may provide an excellent analogy. I come from farming stock, and I can assure you that no farmer would wait until July to plant crops, hoping to harvest them in a week or two. No, he or she would tend the land, working year round to till the soil, break up the ground, plant the seed when the time is right, weeding, fertilizing and caring for the tender young plants. When adversity in the face of cold, fire, hail, insects arise, the farmer confronts the issues immediately. He works, understanding the commitment and timeframes of his plants and the vicissitudes of nature – rain, snow, clouds, sun, drought, wind. He harvests when the plants are ready, on the agricultural time scales, not perhaps what he wants, but what nature gives. You cannot toss seeds in an unprepared field and expect to harvest valuable crops from that same neglected field a week or even a month later. Likewise, you can’t extract good ideas from an unprepared organization, and even if you could, the skills, capabilities, methods and processes aren’t established, and the ideas face tremendous headwinds but have few protectors and even fewer accelerators.

Let me say it again. Innovation is a capability developed and nurtured over time, not a once and done activity. If you want a rabbit from a hat, buy a magician’s kit. If you want real, powerful innovation to drive new ideas that create value and differentiation, be prepared to get your hands dirty, till the soil, pull the weeds and spend the time necessary to harvest the crop of ideas. There are no easy innovation fixes to long neglected strategic problems.

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GUEST POST from Jeffrey Phillips

One of my favorite quotes is by George Bernard Shaw. The quote concerns itself with progress:

“The reasonable man adapts himself to the conditions that surround him… The unreasonable man adapts surrounding conditions to himself, therefore, all progress depends on the unreasonable man.”

The problem with this formulation is that few people enjoy being unreasonable, and many of those that we know who are unreasonable aren’t being unreasonable to advance knowledge or innovation. Many of the unreasonable people in your life are simply cranks.

But let’s not miss out on the concept of unreasonableness, or, as the title of the post suggests, edginess. Innovation relies on the edge, and on edginess, for survival. Here’s why.

People who are comfortable with the status quo tend to resist change and the introduction of “new” things. Most corporate cultures are far more comfortable sustaining existing products and services, which are predictable and well-known, over the introduction of new, risky and uncertain products and services. In that regard, only people who are willing to create and sustain change, who are comfortable in the face of uncertainty and are willing to push against the corporate culture will sustain innovation. And these people often seem a bit “edgy” to the rest of the organization. They zig when others zag. They have different perspectives, ones that many people try to tamp down. Yet if everyone in the organization had the same perspectives and same comfort level with existing products, what new thing would get done? Perhaps we should say that, paraphrasing Shaw, that “all innovation depends on the unreasonable man (or woman).”

OK, if innovation relies on an edgy, unreasonable person with the organization, but most organizations are staffed primarily with people who are comfortable sustaining the “status quo” products and services, where does the edgy person get their inspiration? Usually, from external sources. This means that for an “edgy” or unreasonable innovator to thrive in most organizations, they must be closer to the “Edge” of the business than the center, for two reasons. First, the closer to the “core” of the business an idea or person is, the more difficult it is to change anything. Whatever is at the “heart” of a business, right or wrong, is harder to change than issues, values or products that are more peripheral. Second, information, trends and signals only penetrate a corporate culture so far. Corporate culture acts like a barrier to external signals, filtering and weakening messages from the outside. The closer one is to the center of the business, the less interesting information penetrates, and the more it is garbled when it arrives. To get the best, most untainted information, the innovator must have access to the “edge” of the business – that is, have ready, unfiltered access to information that preferably he or she gathered and analyzed themselves.

Finally, innovation relies on edges of corporations and even industries, because many disruptive innovations happen not at the core of a business or industry, but at the edge where two businesses or industries intersect. It is on these extreme peripheries where two or more capabilities or needs intersect that really interesting and disruptive innovation happens – again, at the edge. Yet, more and more many firms are restricting travel, limiting interaction with partners and third parties. We know that interesting innovation happens at the intersection of technologies, markets and geographies, but increasingly these intersections happen by accident. There’s no one on the “edge” of the business, and even fewer people who explore the “edge” of the industry or technology.

Further, edgy people aren’t appreciated, and the more important a person is, the more likely we are to find them at the center of the business, insulated from external signals and rarely engaged at the edge of the business, much less at the edge of the industry or technology.

Corporate structures and cultures have it all wrong. Increasingly, your best people need to be on the periphery, identifying the best ideas and creating linkages and intersections with other industries and technologies. Your best people need to exist on the edge of your business, rather than in the center of your business.

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GUEST POST from Jeffrey Phillips

Like Rodney Dangerfield’s character, innovators often get very little respect. Even noted innovation consultants, like yours truly, have learned to weather a questioning glance when we admit that we work to promote innovation. Usually, that’s followed up with a question that can best be paraphrased as: “That’s a real job?”

Yes, Dorothy, innovation is a real job, an often thankless, lonely and neglected job, until someone in the organization really, really needs new products or new revenue. And for that brief, shining moment, innovation moves to the fore. The real question we need to ask ourselves is: why isn’t innovation a respected skill? Why do Chief Financial Officers or Chief Marketing Officers seem to feel no reason to justify their existence or validity, while anyone who wants to create innovative new ideas must first admit that, yes, innovation is not a real “role” or “job”, but will be tolerated in a pinch? Why is a financial or accounting role deemed important, necessary, even critical to a corporation, while innovation is considered frivolous, or at best a temporary position?

There are several reasons that innovators don’t receive the respect they deserve. The first is based on experience, the second on expectation and the third is based on results. Let’s break down why innovators, and innovation, doesn’t get any respect, and look at the options for creating the environment for respect.

In the first instance, innovation doesn’t get any respect because many people have no experience with true innovation work. Since we are typically suspicious of any topic or body of knowledge that we have little experience with, innovation is held in contempt until it can prove its value. Unfortunately, many people attempt to “innovate” half-heartedly or with little preparation and no previous experience, so innovation doesn’t produce the usually outsized goals the team has. Strange to think that a tool, attempted once, with little preparation and no previous experience, doesn’t produce the iPod of your industry, but that’s the way it often works. Most of us, for example, wouldn’t agree to close the books on a quarter, swapping jobs with the CFO, or wouldn’t agree to lead a significant new marketing campaign, swapping jobs with the lead marketing person, yet many agree to jump right in and lead an innovation effort with no experience, no training and few trusted guides. Isn’t leading an innovation effort to create valuable new products and services at least as important as getting the (backward looking) financials correct? In the end, most teams don’t have experience, and don’t respect the work or body of knowledge that supports innovation.

The second reason that innovation doesn’t get any respect is because of the expectations of failure. In any other function in the business, failure is tantamount to abdication of duties. If the quarterly closings don’t “tic and tie” to the penny and within a penny a share of the projected revenues and profits, the CFO has “failed”. There are real penalties for getting it wrong. Where innovation is concerned, your team will definitely fail. After all, noted innovation financiers, also known as venture capitalists, are hopeful of betting correctly on one or two of ten investments, knowing that the majority of their investments will return nothing. Further, since many teams attempt innovation without prior knowledge, training or experience (see paragraph above), the expectations of many teams are that innovation won’t succeed in developing an excellent idea, or that even if a great idea is generated, it won’t be accepted or implemented by the company. This is almost learned helplessness in action!

The third reason innovation lacks respect is in the results of the effort. As mentioned previously, even strong ideas must cross the chasm from concept to new product or service, and that’s a very large chasm to cross internally. Development teams have more work than they can handle with existing products and services, never mind new and potentially risky products. Even if the idea can be translated into a new product or service, it may not succeed in the marketplace. The opportunity window is open only briefly, and time and competitors, or market conditions, may shift.

We innovators need to demonstrate that innovation isn’t frivolous, isn’t doomed to failure and isn’t a last-gasp attempt at differentiation. Rather, innovation should be a consistent, important capability that generates and commercializes new products and services that drive new revenue, and is supported by internal disciplines and people trained to the work. Rather than hang our heads and smile sheepishly when people suggest that innovation is a side-show, we need to demonstrate that innovation is as vital to an organization as any “relevant” or trusted capability, like finance or engineering.

Respect must be earned, and innovation will earn its respect when it demonstrates its importance and relevance to an organization’s growth and success. As long as innovation is used to respond to desperate situations by teams who are unwilling and unprepared, the results will not emphasize the value or importance of innovation. We innovators must demonstrate that innovation is CENTRAL to the success of a firm, and gain as much credence within a firm as the finance or accounting teams. Then, and only then, will we have the respect that we need, and that we are due. Respect will be paid on the day that the CFO’s job is to count all the profits and revenue that innovation creates, and the CMO’s job will be to create more press and awareness about your firm’s innovation efforts.

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GUEST POST from Jeffrey Phillips

I’ve written a couple of posts recently about the importance of being earnest. No, not the Oscar Wilde play, but the importance of understanding, communicating and simply “being” what and who you are as a company when you innovate. The common mistake that many firms have is that they believe innovation is about a cool product. While a cool product is interesting, unless your firm has clear goals, plans and trajectories, a product is here today, gone tomorrow. That why I wrote about innovating your “purpose“, not just your product.

Today, I’d like to further that argument by using two simple examples – Apple and HP. I’m writing as Jobs steps down and Apotheker steps up. Jobs is stepping down due to health reasons, and his imminent departure leaves us wondering if Apple can be Apple without Jobs. Will Apple sustain its ability to predict the market, perhaps even lead its customers to want its new products and services? Well, since Jobs returned Apple has had a clear vision and purpose. The real question is: can Apple sustain that vision and purpose without Jobs, or does it become a more careful, cautious company?

On the other hand, Leo Apotheker takes over at HP and seems ready to jettison the last 15 years of investment in consumer hardware. The story goes that Apotheker wants HP to be cool like Apple. This, in my mind, is missing the point, and missing the entire history of HP. HP has a backstory – and one actually very similar to Apple. Further HP had far more people who knew and respected HP for its history, its culture and its story. Apotheker either doesn’t know, or doesn’t care, about this core story and its importance sense of purpose.

HP was Apple before Jobs was even born. HP was, and in many parts of its business still is, the engineer’s choice of product. Raise your hand if you are an engineer and had an HP calculator in school, or if you are in any scientific endevor and use HP equipment. HP stood for something – high quality, tools for people who did important thinking work, equipment that worked and lasted, built for engineers by engineers. For some reason, none of this seems to matter anymore, yet I suspect that even today, HP has as big, and as loyal, a customer base as Apple, they’ve just forgotten about it or de-emphasized what was and still is a loyal HP base. HP was never cool. In fact HP products sat in engineering labs, in places where real work got done, and on belt loops and pocket protectors. But HP products built stuff, took men to the moon, designed and ran chemical plants. HP products, and the loyal people who used them, designed and built the stuff that all innovators now use as platforms.

And that’s the point of this post – create a story about who and what you are and your value proposition, build a loyal following and innovate with those loyal followers. After all, they are far more likely to adopt your new products and services than prospects and strangers who don’t know your products. As a loyal HP guy I acquired one of the first HP handheld devices, the Jornada, even though the Palm seemed like a better product, because I was convinced that HP made better equipment. HP is trying to be the next IBM, or SAP, and wants to be cool like Apple. HP should look back to its history and decide to re-invigorate what made it great – great, innovative products that stood the test of time for people doing serious work who needed excellent machines.

I’m sure that’s not in vogue right now as Google, Facebook, Twitter and god help us, Groupon take all the publicity. We are at another “eyeballs” inflection point, where solid firms like HP believe innovation is about capturing more prospects through interesting interfaces, rather than capitalizing on their intellectual property, reputation and loyal customer base. When innovating, copying someone else’s strategy or persona is akin to wearing someone else’s clothes and driving their car – you may borrow their look and feel for a while, but inevitably your persona shines through. HP was never cool, and that should be OK. HP was a great company, is, and will be in the future if it realizes who and what it is, and who and what it is for. HP needs to be itself – it’s real self, only better and faster.

HP can’t adopt another firm’s strategy or pretend to be a fashionable consumer company. That’s not in its roots, its purpose and not where its loyal customers are. Right now HP stands to risk angering its loyal engineering, technical and scientific customers who number in the tens of millions, trying to become something that it is not, a follower in consumer goods and software, a purveyor of “cool. Those fickle customers may not accept HP’s entrance into “cool” and the die-hard HP fan boys are losing heart as HP increasingly seems set to ignore the stuff that made HP what it is. HP needs to be what HP was, and is, rather than what it thinks Apple is. Only then can it be successful innovating.

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GUEST POST from Jeffrey Phillips

A friend, whose love of life and judgement I am growing to mistrust, suggested that I participate with him in a “Warrior Dash“. He talked about it for a few weeks and finally I signed up. This weekend, I participated in the Warrior Dash in Huntersville, NC and I am far older and wiser for having done so. His description of the event did not do justice to the actual gauntlet that we ran. Still and all, for an over-the-hill guy who is a weekend jogger, I was somewhat proud of my results, even if my mud-soaked T-shirt and socks will never be the same again.

I’m wiser, not just because I learned how to duck under barbed wire in a mud bog (not me in the photo) or how to climb into and out of a dumpster, but because I learned something about innovation even in the midst of the Warrior Dash. And what I learned should be instructive to your work in a nice, safe, clean cubicle or even the more dangerous corporate environs of a conference room.

I haven’t discovered the history or provenance of the Warrior Dash, but it appears to be an interesting confluence of your typical summer festival in a field, with bands, booze and general mingling, mixed with a BMX course in which you, personally, are the bike and rider. So, right from the start there’s an innovation lesson – the confluence of a number of trends to create something new. People who are into fitness need new exploits, and those of us who would merely like to imagine themselves as the cover model for Runner’s World need some new exploit to attempt. So much more fun if the finish line includes a mud bog, getting hosed off by a fire truck, and the handy access of a large beer.

What was even more instructive to me, however, was that few of the runners in my “wave” seemed to be at all athletic. Many were dressed in costumes or had team t-shirts, and lagged well off of my (rather slow) pace. It seemed to be something they decided to do together, as a group, for the experience rather than for the best time or result. Another innovation lesson – they were out for experience, hoping for the best but understanding the experience of the course would improve their knowledge or outlook. What’s more, each team, and everyone who participated, became part of a tribe, even if only for a little while.

Seth Godin wrote a book about Tribes, but I think he got one thing wrong. There were no leaders at the event, and everyone decided how to run, whether to run or walk, how to dress and so forth. All of these people (over 6,000 racers in two days at Huntersville) became part of the Warrior Dash tribe. My wife is already talking about doing another one. Ouch. But what great insight for innovators!

I stood, transfixed, as the first wave went out. Clearly very few of the people racing were tri-athletes out to win a medal. They were there for the fun, for the difference and for the experience. It was a new experience, a new challenge that they embraced. These folks paid good money to roll under barriers, crawl under barbed wire, scale a rope ladder and jump over the burning chemical logs (cough, environmental hazard, cough). For this they got: scraped knees, blisters, heat stroke, mud in every possible orifice, clothing stained beyond repair and a cheap T-shirt. In other words, the “awards”, especially extrinsic ones, didn’t measure up to the pain. There was far more intrinsic reward than extrinsic benefit, which is also very relevant for innovators.

I don’t know if the people who created the Warrior Dash know what they’ve got, but they’ve got the perfect model for an innovation initiative. Innovation will work best when people come together to face an inordinately large or difficult challenge that they have great personal interest in solving. There won’t be an easy path to the finish, with many difficult barriers, hurdles and setbacks along the way. The only people who will complete the task will be those who were in it for more than extrinsic rewards.

There were some key differences between an innovation effort and a Warrior Dash, however. One notable difference was the fact that unknown strangers were yelling encouragement to me while I was hip-deep in the mud bog. People I’ll never meet face to face were cheering for my (really our) success. In most innovation activities, there are as many people silently or publicly rooting for failure as there are for success, and much innovation is done in isolation, far from the prying eyes of employees or customers. Another difference between the Warrior Dash and most innovation initiatives? When I see someone with the Warrior Dash shirt on I’ll have instant respect and knowledge of what they went through – we are now compadres in some larger sense with respect for each other. Innovators are often outcasts even when successful, and can hopefully form tribes with other innovators in their own organization at best and are difficult to identify in the “real world”.

Yes, I recognize that a 3 mile dash over difficult obstacles in the Carolina heat is a far cry from corporate innovation, but in many ways the lessons and outcomes are strangely familiar. Innovation is about doing something unusual and difficult, often poorly prepared, with people you often don’t know that well. The barriers and obstacles are physical, cultural and monetary, but the work plays out in air conditioned offices, conference rooms and hallways. Perhaps one of the best activities a new innovation team could embrace before starting a project would be to participate in a Warrior Dash together. Then, the corporate hurdles may seem a little lower, the risks a bit more bearable and the team work a lot more integrated.

We innovators, internal and external, are a tribe. We may not share all of the same capabilities, strengths or knowledge, but we’ve all been through the same fires. Respect other innovators and acknowledge their scars and sacrifices. We are the sharp end of the corporate spear, and carry the slings and arrows of outrageous fortune to prove it.

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GUEST POST from Jeffrey Phillips

I’ve been reading a number of books about how to increase engagement and excitement at work. Two on my desk right now are Bury my heart at Conference Room B (which I have mixed feelings about) and the other is The Progress Principle (which I will be reviewing on this blog shortly). Both books speak to the fact that businesses are more effective when they engage their people in what their values are, what the employees care about. To boil it down, the best businesses, the most successful businesses are those that have a purpose, and that purpose resonates and is important to the people within the business. Whether you want to call this bringing your “whole self” to work or engaging your passion at work, or another descriptor, I think the main points are correct.

What’s interesting is to explore this effect on the ability to innovate in an organization. I’ve often argued that most firms innovate when they are forced to, by competitors or circumstances, or when they believe they can accelerate into even greater leadership. The first is reactionary, based on fear, while the latter is proactive, based on confidence and vision. In my experience, firms that attempt to innovate in a reactive way often have cramped views of the future, are fearful of short term results and are limited in their thinking and creativity. The Progress Principle has chapters that confirm this – the more stress that employees are under, the more antagonistic the atmosphere, the less creativity and the more difficult innovation becomes.

Perhaps the best way to think about this is to consider Maslow’s Hierarchy of Needs. If you’ve had Psych 101, you’ve studied Maslow. In the early 1940s he devised a way to think about the kinds of needs we have as humans and the prioritization of those needs. They are, in order:

• Physiological
• Safety
• Love/Belonging
• Esteem
• Self-Actualization

Maslow’s point was that we first look for our physiological needs and satisfy them – air, water, food, shelter. Once those are satisfied we seek safety and security – in our bodies, in our jobs and so forth. Then we seek to join groups – family, community and networks. Then, once these needs are satisfied, we seek esteem, which he defines as achievement and the respect of others. Finally, we seek self-actualization:

This level of need pertains to what a person’s full potential is and realizing that potential. Maslow describes this desire as the desire to become more and more what one is, to become everything that one is capable of becoming.^[9] This is a broad definition of the need for self-actualization, but when applied to individuals the need is specific. For example one individual may have the strong desire to become an ideal parent, in another it may be expressed athletically, and in another it may be expressed in painting, pictures, or inventions.^[10] As mentioned before, in order to reach a clear understanding of this level of need one must first not only achieve the previous needs, physiological, safety, love, and esteem, but master these needs. (Taken directly from the Wikipedia site)

In other words, we seek to develop and acquire higher order skills and capabilities once lower order needs are fulfilled. I’ll argue that innovation can help solve problems in any of these levels – certainly you can use creative thinking and innovation to find more food, which our early ancestors did, or to create more safety using weapons. However, the culmination of human experience – self-actualization according to Maslow, is about becoming everything you want to be and can be, as innovative and as creative as you want to be, in any field or course of action you choose. Maslow’s pyramid actually includes the words “creativity” and “problem solving” as examples of self-actualization. This is the point where innovation and creativity become activities that drive ever more beneficial outcomes, rather than satisfying physical and psychic needs.

So, perhaps we are designed for creativity and innovation, but only when other, very important needs are fulfilled. And right now, in this time and in this economy, uncertainty about basic needs is creeping in. Many find innovation and creativity difficult to consider when issues like job security or financial security are at risk. In this economy these lower level needs are now less fully satisfied, and this uncertainty is distracting innovators from achieving higher levels of innovation.

We certainly can’t “wish away” the uncertainties of the present, and we must acknowledge the risks to “safety” and “belonging” but everyone, in every firm, must refocus our efforts on innovation and creativity to help accelerate our economy out of these doldrums. In effect, we are working toward achieving some of our most ascendant goals – creativity and innovation. When we focus on lesser goals, it creates disappointment, disengagement and frustration. Our brains are built, and our psyches are designed to dream bigger and want more, which is the basis for innovation. Let’s continue to focus on the larger goals, even in the midst of uncertain times.

What can this mean? For businesses that want more creativity and innovation, help your people, as much as possible, fulfill these lower level needs of safety, security and esteem. Only then can they focus their efforts and their thinking on creativity and innovation. Think specifically about “belonging” – who do your innovators “belong” to? Are they well-respected and constantly reinforced, or isolated and considered a bit out of the mainstream? What about “esteem”? Is their work rewarded and recognized, or is it held in some sort or contempt? If your culture inhibits the innovators from belonging or limits esteem, it will inevitably inhibit innovation, which in some way creates barriers that don’t allow people to achieve their highest goals.

For governments, we need to establish more certainty so people are more focused on higher order needs. This means creating and sustaining clear courses of action, so that people can plan and understand what will happen, and how they can achieve more within the frameworks.

As long as people are uncertain about their base needs, innovation takes a back seat in any sphere – private or public, government or for-profit. But once we help people shore up those basic needs, we can then encourage, sustain and reward innovation that will flow naturally if we allow it to.

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GUEST POST from Jeffrey Phillips

So, after days of pondering exactly what’s missing I realized that several of my most recent posts have had a relatively common theme, and perhaps, subconsciously I was working to a specific insight or point. After pondering this possibility, it’s become clear, at least to me, that the person who is most vital, most necessary for innovation, is the CEO. And not just in a cheerleading role, but in an active, engaged role in all levels of the organization. But perhaps most importantly, in innovating the “idea” of the company itself.

First, remember, that I argued that many firms need to innovate not just their products, but their purpose. By that I mean that innovation is often demanded by CEOs and senior executives, who want the latest and greatest products and services. If I hear one more time how company “X” wants the next iPad of their market…but I digress. Today, many executives and firms think innovation is something that product teams do, and if they could only do it more effectively then the firm will benefit dramatically. That thinking isn’t necessarily incorrect, just misguided. Good innovation, in products, services or even business models, doesn’t happen in a strategic vacuum. The best innovators, the ones we constantly look to as the pinnacles of innovation success, have executives who are active in innovation and set clear goals and objectives. Merely stating that the firm needs to become more innovative isn’t enough. Firms need to innovate their thinking, their purpose, their reason for being, and to do so they need executives who are tuned in to the importance of innovation, and executives who are actively engaged in innovation.

However, most people in leadership today of major firms didn’t achieve their roles through innovation success. Most achieved their ranks through cost cutting, improving efficiency and keeping the fire of existing products and services burning. In other words, innovation is not a skill that was emphasized as many executives climbed the ladder, and it has not been actively developed. What’s more, I believe, is that the emphasis on financial returns has led increasingly to a reduction of time thinking about strategy, and testing new strategies. More and more, most firms in any industry follow the same, tired strategies, which makes firms like Apple or Google or JetBlue stick out. They seem to zig while the majority zags. I wrote about this phenomenon recently, suggesting that many organizations suffer from Strategic Exhaustion – that is, they’ve either exhausted all the possible strategies or the leadership has simply exhausted its imagination for new markets, opportunities, strategies and business models.

Which brings us to the crux of the post today. Innovation is difficult at best in the absence of clear strategy, and will probably only exist at a product level. Without clear strategic goals and the understanding of the strategic intent and purpose of a business, innovators will struggle and most innovation will be incremental. As strategic exhaustion sets in, firms become followers of other business models or other organizations, rather than creating crisp, clear strategy and striking off where their vision leads them. Adam Hartung has an excellent evisceration of Hewlett-Packard which describes how the last three CEOs have identified strategies that simply followed other firms, rather than staking out H-P’s value proposition.

My conclusion is that innovation can only be successful in the long term in a firm that understands its purpose and has clear, consistent strategy. Those two factors come from the developed vision of a senior executive team, lead by the CEO. In the absence of a vision or strategy, innovation is difficult, incremental and often futile. This is why I say the CEO must be the Chief Innovator – not merely as a spokesperson, or cheerleader, or the individual with the deep pockets, because those belief systems take the CEO off the hook for vision and strategy. While it is important for product managers to innovate new products, it is equally as important for CEOs to innovate the idea or purpose of the company.

In recent research I found a statistic that of the original 500 firms in the S&P 500, first developed in 1957, only 125 remain today, and of those 125 only 94 remain in the current S&P 500. Corporations and their purposes are transient, not permanent. What many CEOs and corporations fail to realize is that shifts in demand, shifts in technology, shifts in demographics create new needs and expectations. The mere fact that an organization exists does not guarantee existence into the future, unless the corporation changes its products, its services and ultimately its purpose or its “idea” of itself. Schumpeter’s concept of creative destruction applies precisely to large firms that become locked into a business model and worldview while the rest of the world changes. CEOs own the responsibility to create and communicate a vision or strategy, and ensure that that vision or strategy is carried out. In the presence of clear strategy, innovation is challenging. In the absence of clear strategy, it is almost impossible and eventually incremental, in a world where disruptions occur constantly. The CEO and his or her executive team must be full partners in any innovation effort – supporting and engaging innovation in product groups, yes, but just as importantly innovating the purpose and idea of the organization. Innovation isn’t simply a process that’s isolated in one business unit or in R&D, but a set of capabilities that must be exercised at all levels of the organization. The executives who understand this principle are the ones who will keep their firms vital in the face of constant change. Those that fail to grasp this concept will be left following those that do.

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GUEST POST from Jeffrey Phillips

Rapid, Disruptive Innovation

Overview:

In many organizations a false dichotomy is taken as innovation gospel. The choices offered are easy, short, “safe” incremental innovation or difficult, time consuming, risky disruptive innovation. Given these attributes, there is little wonder that most innovation is incremental innovation. We argue that this is a false dichotomy because given the appropriate methods, tools and management support, a team doesn’t have to choose between “safe” incremental innovation or “risky” disruptive innovation.

On the surface incremental innovation seems less expensive and less risky, more likely to create a useable outcome. However, we all also recognize that incremental innovation is rarely a “game changer”. In fact incremental innovation is what many firms settle for once they are convinced that disruptive innovation is too dangerous, too risky, too uncertain or too expensive.

But this is simply conventional wisdom about disruptive innovation, learned over many failed attempts using traditional methods with little management support. Innovators would be right to shy away from “disruptive” innovation given some historical experiences. What are the factors that make disruptive innovation seem so difficult and dangerous? First, it is risky and somewhat open ended. That means the costs and timeframes can be hard to determine. Second, disruptive innovation is uncertain. It’s much harder to define the likely outcomes, which may lead to an increased chance of “failure”. Third, there often aren’t clear processes to use or maps to follow for disruptive innovation, so teams are less familiar with the process. All of these reasons suggest that companies will favor incremental innovation over disruptive innovation more often than not. But when disruptive innovation is successful, it can “change the game” in an industry, leading to dramatically increased revenues and profits.

While disruptive innovation has the potential for a very valuable outcome, the risks typically outweigh the potential opportunity. If we could achieve the benefits of disruptive innovation while reducing the risks and the costs, that solution would offer the best of both worlds. The solution to this paradox, the 90 Day BHAG methodology, offers rapid, disruptive innovation outcomes using a proven methodology, which reduces risk, uncertainty, investment and project length. This approach helps achieve the goal of disruptive innovation in a more controlled framework, leading to greater success and less risk.

The 90 Day BHAG

First, let’s define our terms. The approach we’ve developed and will document here we call the 90 Day BHAG. In that title are two important concepts. First, a very specific timeframe. In reality, the actual timeframe doesn’t matter all that much, as long as it is short. We chose 90 days because 90 days reflects a “quarter”. That is the unit of time most businesses are trained to use to measure their operations. Ninety days will seem like too little time to explore needs and develop disruptive ideas, and that’s exactly why the time frame needs to be short: to establish a sense of urgency in the team, and to encourage them to use new methods and new tools rather than rely on known, existing tools that won’t allow them to accomplish the goals in the shortened timeframe.

Second, in the title we’ve introduced the concept of the BHAG. Jim Collins, the author of Good to Great, is credited with coining the BHAG, or Big Hairy Audacious Goal. In our model the BHAG stands in as the outsized or outrageous goal your disruptive innovation is meant to achieve. Only a large, difficult to achieve goal will introduce the need for disruptive thinking and shake the team loose from their reliance on existing models and methods.

By now you’ve probably picked up on a couple of key points. First, in the 90 Day BHAG model we want to constrain the timeframe to create a sense of urgency. In many businesses innovation becomes a “nice to have” solution that is important, but not urgent. In this approach we seek to make the disruptive innovation urgent, by creating a very restricted timeframe. Additionally, by restricting the timeframe the methodology reduces uncertainty, risk and investment. Second, the team needs a big, unusual goal, a new market or an important emerging threat to address. The team needs clarity about its outcomes and goals, and those outcomes need to be interesting and radical in nature. Third, we seek to demonstrate to the team that their existing tools, methods and processes aren’t sufficient and can’t help them accomplish this task. In this approach the innovation team has no choice but to let go of their “known” tools and methods, which won’t help them be successful given the objectives and timeframes, and to quickly instruct them in new tools and methods which will encourage disruptive thinking.

The 90 Day BHAG is unlike any other innovation project that your company has attempted before, and for good reason. It seeks innovation outcomes that your team hasn’t achieved often, if at all. As Einstein said, we can’t solve new problems with old thinking. To achieve disruptive innovation success, we must introduce new models, new skills and new thinking.

Rapid, Iterative Prototyping

Further, the 90 Day BHAG doesn’t end with the presentation of a few written ideas. We believe ideas that are simply documented in a list are too easy to discount. The outcome of a 90 Day BHAG includes physical prototypes of ideas that will result in physical products or simulations of ideas that are services or experiences. In fact the 90 Day BHAG methodology insists on rapid, iterative prototyping which results in the presentation of a well-developed prototype as part of the final presentation of the ideas themselves. Obviously, adding the requirement for a physical prototype of the recommended ideas places even more urgency on the process. To investigate an opportunity and develop some ideas on paper is reasonable within a short timeframe, but to request disruptive ideas with physical prototypes in 90 days or less forces the team to consider new tools and new techniques and to work with a definite sense of urgency.

Executive Commitment

There’s one other stipulation we impose when conducting a 90 DAY BHAG. We recognize that the 90 Day BHAG demands a significant investment from the innovation team, and therefore we believe a corresponding significant commitment is necessary from the executive team. To that end, every 90 Day BHAG we run includes a commitment from the executive team to make a clear decision about the ideas that are presented within one month of the completion of the project. This means that the individuals who man the 90 Day BHAG team, who have to learn new tools and new techniques and create ideas in a new space can work with the assurance that the ideas they generate will be presented to the appropriate executive team and that they will receive a definitive answer to their recommendations. This commitment from the executive team reduces concerns about how “serious” the executive team is about the ideas and their willingness to implement the ideas. This commitment also demonstrates that the work the team conducts isn’t simply an exercise, but is expected to produce real results.

Running a Rapid, Disruptive Innovation Project

How do you run a 90 Day BHAG? With careful definition and great purpose. The tasks involved in running a 90 Day BHAG project are similar to other innovation projects, but are limited by time and project scope, while focused on a disruptive outcome.

We start with a careful but quick assessment of the industry trends, and develop three to four scenarios which help illuminate the possible future outcomes over a five to seven year period. Based on these scenarios we investigate new customer needs or emerging markets or threats to discover unmet needs using basic ethnography and observational research.

This insight is quickly folded into short, focused idea generation sessions followed immediately by rapid prototyping of the best ideas. In this iterative process the team moves quickly to identify the best concepts that meet the scenarios and customer needs and fleshes out the best prototypes to prepare for presentation.

In the final steps the team “packages” the idea using marketing tools and techniques, in order to present their ideas in the best light to the executive team. This packaging links the ideas to specific trends and unmet customer needs, and provides a clear positioning statement about the idea, along with a physical prototype or service/experience simulation. Note that each of these phases may introduce new tools and techniques. We train the team using a “just in time” training model, introducing a new tool or technique just prior to its use and then quickly reinforcing the tool or technique with project work that capitalizes on the new knowledge. This way, new knowledge is deployed as it is needed and quickly reinforced.

Benefits

These factors – clear strategy, management commitment, short timeframes, stretch goals and new techniques and methods – force the team to work in a completely different way than they normally do, encouraging more disruptive ideas and better results. Conversely, since the team is constrained, executives receive something they need as well – less cost, less uncertainty and less risk. By constraining the project to a specific time frame, the project costs and investments can be determined and controlled. As executives engage with the team regularly, there’s less chance of the team pursuing ideas that don’t meet the stated goals. Requiring the team to present prototypes at the end of the project, rather than just ideas, ensures the ideas have been tested and can be demonstrated, again reducing risk and uncertainty. Thus, we achieve what seemed almost impossible – disruptive ideas created with less risk, less cost and less uncertainty in a very short period of time.

What’s required for success?

The 90 Day BHAG has different requirements for success than traditional incremental innovation efforts.

The 90 Day BHAG creates more urgency, a deeper sense of commitment and addresses a much larger opportunity than other efforts. To this end, more emphasis must be placed on key factors for project success.

Key Ingredients:

• A strategically important BHAG – An important challenge or opportunity for the business, clearly defined and scoped
• Executive commitment and active involvement – in the planning, execution of the project and evaluation of the ideas
• Engaged participants – people who recognize the need for new tools and solutions and are energized by the BHAG
• Customer Insight – understanding unmet customer needs
• Training – on new techniques and tools
• Excellent facilitation – to move the team with all due speed toward their goal
• Rapid, Iterative prototyping – to refine the best ideas and develop new products and services quickly
• A limited timeframe – to keep the team focused and to create a sense of urgency

Typical Outcomes

In our experience, firms that follow this methodology generate disruptive ideas and validate them very quickly. We’ve worked with clients that created completely new materials or radically new products and services in far less time and with far less uncertainty than they thought possible. Further, once a team has been through the constrained BHAG process, they are more engaged and more willing to innovate, as they are willing to break away from the constraints of the organization to stretch their thinking.

Case Study

For a client in the home furnishings market, we deployed a 90 Day BHAG project to help the company create new and differentiated products in a specific market segment. Starting with just a few key attributes, we pursue market trends and customer insights which led to very disruptive thinking. After a very quick review of trends and customer needs, the team pursued divergent/convergent idea generation strategies and iterative prototyping, which spawned new ideas and new avenues of pursuit. In less than 90 days the team generated hundreds of ideas, but more importantly a significant number of truly disruptive ideas that were developed as physical prototypes. The team was able to claim one completely new material, one new integrated process and two patents out of the project and released new products in the market less than one year later. The results of the BHAG project were two-fold: first, interesting, valuable disruptive innovations that quickly became new products and services, and second, the sustained ability to generate and develop disruptive ideas using the frameworks we introduced.

If a slideshare is more your style, here you go:

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GUEST POST from Jeffrey Phillips

I write today about a beloved company – Hewlett-Packard (HP), and all that it has meant to my life. One of my first consumer electronic purchases was an HP calculator, and as a young engineer fresh out of college we were regaled with the history of HP: born in a garage, during a depression, making excellent products. The HP story is in many ways the story of Silicon Valley writ large, or at least the story that used to be.

HP represented the entrepreneurial story of two guys who decided to do it on their own, in a garage, developing great products, scaling up a company. They built real products and delivered real value – not “eyeballs” or advertising revenue, but a solid business built on excellent products which created a lasting reputation. But over the years, the company has lost its way, and become in many of its product and service lines a fast follower rather than an innovator.

I’ll argue that it started with the acquisition of Compaq. In this acquisition, HP decided to compete with Dell and other fast growing PC manufacturers. At the time, the decision was controversial, and now, as HP seeks to divest some of its consumer hardware, it looks wrong-headed. Rather than stake out a vision of what computing could be, Fiorina and others around her followed the consumer PC business, but didn’t fully grasp Dell’s model, which was far more efficient, or, eventually, Apple’s model, which was far more profitable.

Next, Mark Hurd entered the picture and started slashing costs, placing a premium on slimming HP down. From what I’ve heard, innovation and research took a back seat to cost cutting. Under Hurd, HP acquired EDS to bulk up on computer services. Then, of course, Hurd left under less than optimal circumstances and Apotheker has taken over. In less than six months HP has announced and retracted a complete line of tablets, and switched its strategic course yet again, this time to follow IBM, Oracle and other “big system” software and service integrators. Yet again, I suspect this is a following strategy that places HP at the back of the line just as the trends lead to a different emerging reality.

This isn’t a problem just for HP. Microsoft created and retracted an entire product line of smartphones. Motorola, once the leader in handset development, is now split into two pieces and will be purchased by Google. Many of our former innovation leaders have run up on hard times, and will seek to blame the economy, foreign competitors and fickle customers, when I think they should be examining their so-called strategies. I think many of these larger firms suffer from what I’ll call strategic exhaustion.

Many seem to have decided to avoid creating a clear strategy, or have decided to simply follow what appears to be the prevailing strategies of the current ascending firms. Rather than break out simple innovation tools like trend spotting and scenario planning and carve off a path that is interesting and unique, and may solve customer needs or even create new customers, most seem content to follow what are already tired strategies and focus on cost cutting and right sizing.

This strategic exhaustion can only lead to a few outcomes. For the really large firms, like Microsoft, they will remain stagnant with little growth until they free up their smaller product teams where real innovation can occur. Microsoft is “too big to acquire” and too stagnant to change, so only by freeing up ideas on the margins will it regain its momentum. HP and others like it, including firms like Nokia and Motorola, will cast about, seeking to acquire or be acquired, hopefully by others who have more energy, innovative spirit and vision. Who knows if the Motorola/Google acquisition will pay benefits? Will it be the Compaq/HP merger of its day? Finally, strategic exhaustion will lead those firms that are too small to acquire to reconsider their purpose, their place in the market and their strategies. This re-assessment will most likely result in a flowering of innovation, because the firm will have to rediscover its focus, its purpose and its markets. The other option is a slow withering away, gradually then suddenly slipping into irrelevance.

I’ve often argued that innovation happens in many companies once all other management initiatives are pursued and all other options are exhausted. As more firms exhibit signs of strategic exhaustion, perhaps they’ll rekindle their innovative spirit to identify a new purpose. Perhaps they’ll return to the garage, to base principles, to an original vision, to chart out a new direction and re-energize the organization, rather than simply follow the strategies of other, equally exhausted management teams. Now, more than ever, innovation is the important management tool, not simply to generate new products or services, but to identify new purposes, new markets and new strategies.

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GUEST POST from Jeffrey Phillips

There’s a famous George Orwell quote that is one of my favorites, and it speaks volumes about where many organizations are with innovation today. Orwell’s quote is:

“To see what is in front of one’s nose needs a constant struggle.”

What Orwell meant is that the obvious stuff that exists in front of us often disappears into the woodwork as we become consumed with daily activities, priorities and pressures. I’d suggest that for big businesses, the quote could be appended to say:

To solve customer problems using innovation requires constant attention

I write this today prompted by several topics.

The first is Scott Anthony’s post wondering if the economy changes innovation. My answer is perhaps the opposite – can innovation change our reaction to the economy? Innovation is now more important than ever, but what’s like to happen is that the economy and the turmoil and uncertainty surrounding it will simply cause people to lose focus on innovation, at a time when they should be more focused on innovation. Innovation needs a constant struggle for attention.

The second prompt is the silence from one of my customers. We are scheduled to talk about innovation projects, but I can already play the conversation in my head.

Me: We were going to talk about kicking off that new innovation effort to (blah blah)

She: Yes, well, I’ve been so busy reacting to all of the short term issues I haven’t had a chance to think about innovation.

Me (in my head only, hopefully): How can innovation ever take a back seat?

Innovation needs a constant struggle for attention.

The reality is, innovation is for most organizations an occasional, strange, painful event to be avoided unless specifically demanded by executives. It is akin to eating vegetables and ruffage – we know we should be doing it, but it is easy to put off, especially with all the other demands and tasty choices. Unless and until innovation is constantly at the forefront of your organization’s thinking, it is very unlikely to happen, and will never happen well.

At Notre Dame’s football stadium, over the door the football players use to enter the stadium, are the words “Play like a champion today”. You can’t go through that door without seeing those words, and the tradition is that every player touches that doorframe to remind themselves of the task at hand. What would it be like if the words “Did you innovate today?” appeared over every door and on every screen saver in your organization?

The truth is, unless innovation is front and center, every day and in every location, constantly reinforced, it will become an afterthought, engaged only when the firm is in a commanding position and hopes to accelerate away from competitors, or when the firm has exhausted all options and turns to innovation as a last resort. Innovation needs a constant struggle for attention.

So, what are we to take from this? If your CEO says innovation is important, look around for the signs that suggest it will be supported and reinforced constantly. Or, absent that, take the CEO at his/her word and put up the messaging to remind people about the importance of innovation. Hold a meeting to recognize innovation efforts every week or month. Include innovation activities in your weekly reports. If innovation isn’t part of the drum beat, it will be exceptionally hard to hear the innovation music, until it fades away.

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