GUEST POST from Jeffrey Phillips

As any good journalism student knows, the most powerful toolset in his or her arsenal are the five Ws and the one H. Who, what, when, where and why, along with how, answer many questions and provide insight. This tool have been immortalized by many, including Rudyard Kipling, who wrote a short poem entitled Six Serving Men, in praise of these words.

Those of us in the innovation space use these powerful tools as well, but it is important to understand a distinction. For the journalist, capturing what happened and why it happened, the emphasis is on capturing a story accurately. To that end, it often doesn’t matter which word he or she leads with, or in which order. But for an innovator, it makes all the difference in the world.

There is a subtle distinction in these words that sets the stage for creativity or shuts it down. Several of these words – what and why especially – can become very speculative and open the door to broader thinking. For example, many good innovators will start a discussion with “why don’t we…” or “what if we…”. IDEO is known for asking “How might we…”. In this regard, these questions are expansive and open to interpretation. Starting an idea generation session or for that matter any innovation effort in this manner is empowering.

Meanwhile, many of these words are specific and functional. Who, how, when and where can be exceptionally limiting. Who should do this? By when should it be done? These are evaluative questions with specific answers, definitive scope. Starting an innovation program with these questions (except possibly for the planning) will limit thinking. However these questions are very important once the expansive thinking is complete and we must turn our attention to converting ideas into valuable products and services.

Timing the use of these questions, to place more of the speculative, open ended questions at the beginning and the more evaluative and close ended questions later in the exercise is the best use of all of these questions. While all are valuable, there are very significant differences as to when and where the words are best used.

Herein as well lies the distinction between being aware of a tool and fully understanding its use. Many of us are aware of the 5W1H technique, but awareness of the tool and understanding of its best use are two rather different things.

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GUEST POST from Jeffrey Phillips

I’ve just come across the National Science Foundation’s (NSF) survey from 2008 on Business R&D and Innovation. This was a study conducted by the NSF across a wide swath of US firms of all sizes and industries. The results should scare you. I’m surprised they haven’t been front page news.

The results suggest that about 1 in 5 manufacturers indicate they produced a significant new product innovation in the period 2006-2008 and about the same percentage produced a significant new process innovation in the same period. One manufacturer in five thinks they created a significantly new product or process over a two year period. Wow. But it gets worse.

The results suggest that 1 in 12 non-manufacturing firms indicate they produced a significant new product innovation in 2006-2008, and the same number suggest they created a new process innovation in the same period. We’ve suspected for a while that service firms weren’t keeping up with manufacturing firms in terms of their investment in innovation. Now we have some reasonably detailed evidence.

The reason this is even more alarming is that manufacturing firms make up only 8% of the firms in the survey. That means that the vast majority of firms (the 78% of manufacturing firms and the 92% of non-manufacturing firms) weren’t innovating during 2006-2008. The lack of innovation during that period should be especially evident now, as ideas generated in that period should be coming on the market as new products and service. Given that close to 80% of the firms (92% of the firms are non-manufacturers and 92% of them aren’t innovating) are not claiming to innovate at all, we have a significant hole in our innovation efforts in the US.

And these statistics come from a period before the financial meltdown, during the final years of the Bush administration. We can’t claim that the financial meltdown caused this lack of innovation, because these numbers reflect a time prior to that economic slowdown.

The survey also finds that firms with R&D investments claim to generate more innovation. This is like the newspaper reporting that weather in Hawaii is nice or that Canadian winters can be quite cold. Any firm with a significant investment in Research and Development had better be able to demonstrate a return – which is usually new products or services. That firms with deep R&D investments generate more product innovation isn’t a surprise. What was slightly surprising was that the focus on product innovation seems to translate to process innovation. Firms with investments in R&D also claimed to be significantly better at process innovation as well, yet most R&D probably isn’t directed at process innovation tasks. Interestingly, the more invested in R&D, the more likely the firm was to claim it was “innovative”. With R&D investments at less than $10M, (which accounted for 90% of those reporting an R&D expenditure) the number claiming new innovative products was 66%. For those very few firms with R&D spending over $100M, those claiming new innovative products was 81%. What on earth were the 19% of firms spending more than $100M in R&D and NOT delivering new products and services doing?

There are a couple of problems with this survey, which the authors recognize and will correct in the future. The first is that there is no clear definition of a significantly new product or service. In the future they will ask if the product is new to the company or new to the market. I’d like them to ask: new to the company, new to the market, new to the world, but perhaps we can add that later. This would begin to distinguish between incremental innovation and radical or disruptive innovation. Second, the authors plan to ask about the amount of revenue generated from newer products over the core or legacy products. This kind of measurement is the same as 3M uses – what’s the percentage of revenue driven by products introduced in the last X years?

I can’t wrap my brain around this – a scientific study conducted by the Federal Government that suggest that over 80% of the firms in the US didn’t create a significantly new product or process innovation in 2006 through 2008, and there’s almost no outrage or astonishment? During a period BEFORE the economic meltdown and recession, which is likely to make these numbers worse? These numbers are very serious, and indicate a real reduction in investment in innovation – regardless of the R&D investments. If our economy is to compete, in the US and globally, we need much more focus on innovation.

During the 2006-2008 period, according to the survey, only 8% of health care firms released new innovative products or services. This in a period when it was evident that the Democrats were going to take office and radically change health care. Rather than taking a proactive stance and working up ideas, the industry sat back and dug in its heels. Now it is in a purely reactive mode and will be for quite some time.

The missed opportunities are almost too numerous to mention. The lack of innovation is glaring, and the need for innovation at all levels and in all regions is stark. Where is the attention? Where is the outrage? Where are the investors, demanding their executive teams do more to generate new products and services?

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GUEST POST from Jeffrey Phillips

There’s been a blog post rattling around in my head for several days now, but I haven’t been quite able to grasp the handle of it. So stick with me here as I work it out on (virtual) paper.

We all are aware of the benefits for innovation that occur when we as individuals network with other people, other markets, other industries, other ideas. Research recently published by the Harvard Business Review indicated five attributes of successful innovators. One was a clear proclivity to network and exchange information and ideas with a broad array of people. Clearly, what I’ll call “outbound” networking is important.

But there’s another networking that’s at least as important for successful innovation, and that one is a little harder to pin down, yet like the nose on your face is sitting in the open right in front of you. This network has to do with the concept of critical mass and competition. If you think about this for a minute it will become obvious – markets or industries where competition is high see a high degree of innovation, and the converse is also true. Markets, industries and countries with little or no competition, whether that’s from government policies or a dearth of firms to compete or natural or unnatural monopolies suffer from low innovation. If we take that as a given, then innovation is more successful when there is a critical mass or network effect in an industry or market.

This says something to us about innovators in an individual firm as well. The myth of the “lone innovator” is a powerful one, since we are lead to believe from history that individuals like Edison worked alone and in a vacuum. Neither of those suppositions is true. Edison, for example, worked with a number of collaborators in a lab specifically designed to mix ideas from a number of different industries. This has implication for innovation in any firm – rather than “select” a couple of people and ask them to be innovative, we need to create a critical mass of innovators who are networking with each other and sharing ideas and concepts within the firm and outside the firm. Instead of selecting just a few people and asking them to be innovative, we need to create a critical mass of innovators inside a firm, and allow them to interact and exchange ideas, internally and externally. Walling off the innovators from the outside is dangerous, as we’ve demonstrated with the first concept of the network effect. They lack access to all the new ideas, trends and information created in their industry and in other markets and industries.

What’s also true is that kicking off one or two isolated and very small innovation efforts while the rest of the firm “stays focused” on the important daily tasks makes innovation more difficult. Imagine if Chicago were to allow only three pizza restaurants. Eventually innovation in pizza would slow down or cease due to limited competition and limited new ideas entering the Chicago market. Allowing as many pizza places as the market can bear, and watching the competition and new offerings closely creates lots of “pizza innovation”. Similarly multiple innovation teams within an organization that exchange information with each other, and with other firms and markets, will create more and better innovation.

Don’t read into this that “skunkworks” are the wrong solution however. Occasionally skunkworks are the best way to accomplish one specific innovation task – a big new disruption. But on the whole many actively engaged innovators in a firm, exchanging ideas and information, will create an internal network effect and accelerate ideas. Note that this is almost in opposition to what most firms construct when they attempt to become more innovative. Usually they designate one specific team while the rest of the business plods onwards. There are no other innovators within the business to interact with or compare notes. Additionally, there’s no one to “compete” with for the best ideas, and no “synergistic” effects created by multiple individuals or teams.

While there is definitely an external networking effect brought on by discovering new ideas, new trends and new information from other industries and markets, I believe there is an equally important and often overlooked critical mass or internal network effect that is missing from many firms that attempt to become more innovative. Creating more innovation teams or individuals and ensuring they interact, exchange ideas and compete for resources and attention will drive more and better ideas.

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GUEST POST from Jeffrey Phillips

It’s that time again – the time to breathlessly await which Fortune 500 firm will be anointed as “the most innovative” firm. Typically we see several “Top 50” lists each year nominating particular firms as the “most” innovative. This year, as in several previous years, BCG has created its “50 Most Innovative Firms” list.

I guess you can tell from my tongue in cheek introduction what I think of these lists. There are so many reasons to find fault in the listings that one scarcely knows where to begin.

First, I think many of these lists are simply to validate the egos of the firms in question. How can one compare an Apple to a Haier to a 3M and argue that one is clearly more innovative than the other? In what dimensions? 3M has a stated corporate goal to generate a significant share of its earnings from products that are less than 3 years old. Therefore they have a significant public stake in the financial markets on innovation. Apple, the “leader” in the innovation field, creates one new product about every 18 months. Those products don’t break new ground technically, but innovate around a customer experience or business model. Can these two firms really be compared? If P&G’s partnering and networking strategy can be compared with Apple’s “go it alone” strategy then we can compare apples and oranges. There’s really no good methodology to use to “measure” how innovative a firm is and measure it against another.

Second, the list is composed almost exclusively of large, well-known firms. Do we really believe that all the valuable and interesting innovation is happening in these firms? I’d have to disagree. There are many mid-sized and smaller firms that are doing much more innovation, and much more consistently,and as a larger percentage of their revenue and earnings, than the firms named in this list. Let’s simply look at another cultural phenomenon – the TED talks. Many of the firms or individuals who present at the TED talks are doing exceptionally innovative work, yet they aren’t on this list of the Top 50 most innovative firms. Why? They don’t have the same publicity engines. Yet where do disrupters come from? Christensen has shown they are usually smaller, new entrants rather than large, existing firms.

Third, as in most of life we recognize greatness only after it has reached its peak. Sports figures and actors often win awards later in their career, after their peak performances, once their body of work is established. Many of the firms on this list – Google for one, I have argued recently, may be past their innovation prime already. When people put lists like these together, they are usually looking backward at achievements from several years ago, not forecasting what the firm is likely to do next. This list includes potential up and comers (like Haier) and those who may be on the downslope of their innovation greatness already (Google).

And sorry, while GE is large and a very profitable company, it is not especially innovative, regardless of what their marketing wants us to believe. Good marketing and messaging don’t necessarily demonstrate good innovation, and a firm locked in the embrace of Six Sigma often finds it difficult to create interesting, disruptive innovations.

I understand the reasons for a list of innovative firms. We enjoy short rankings like this because they create an artificial hierarchy of firms. The list helps us focus on firms that at least one expert has told us are innovative, which makes it easier for the press and bloggers to respond to. However, I think this is a ranking of large firms with good publicity that may demonstrate occasional innovation , rather than the most innovative firms on a global basis.

These lists are moderately interesting but ultimately don’t tell us much. Are any of you surprised to find Apple at the top? What’s insidious about these kinds of lists, however, is that they distract from really interesting work being done in a number of firms not on the radar screen and direct our attention to firms that aren’t all that innovative but are constantly in the news. So, we ignore excellent innovation that is happening in smaller, less publicized firms and focus on firms that are actually becoming less innovative or that simply have great PR.

Editor’s Note: If you like lists, please check out our list of the Top 40 Innovation Bloggers of 2010

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GUEST POST from Jeffrey Phillips

It’s increasingly obvious that good innovators come in all shapes and colors, all moods and forms. What’s also obvious is that many of the best innovators seem to be “Renaissance” people – that is, people with a lot of interests or who are engaged in a lot of different fields. This always poses an interesting chicken and egg question for me: do you have to be a Renaissance person to be innovative, or do all innovators resemble Renaissance people?

For me, some of our Founding Fathers are real Renaissance people. Individuals like Franklin and Jefferson immediately spring to mind – people fluent in several languages who were well traveled, who could play music on several instruments and who investigated scientific theories and exchanged ideas on political issues. These men were innovators and resembled much of what we think of as Renaissance leaders today – people active accomplished in a number of fields and disciplines, well-read and well-rounded.

In our increasingly specialized world, deep industry or operational knowledge is often valued over breadth of knowledge and connections. The deeper and more arcane the knowledge, the higher the compensation. This leads to many information silos where individuals have great expertise but little motivation to network or learn outside of their silo. As long as the future doesn’t require integrated knowledge or insight, the deep but narrow model prevails.

However, when an industry is disrupted it’s the people who can link several disciplines or insights together who piece together the new offerings, or who have the insight for new products and services. Most research indicates that the best innovators are actively networked and constantly seek ideas that challenge their thinking. Our brains easily get locked into repetitive thinking and must be constantly challenged or inertia sets in and our thinking is exceptionally limited. Only through constant interaction and networking with people and ideas from a broad range of fields will we free our brains and our innovative skills from the inertia and barriers that exist.

This means you need to be getting out from behind the desk and meeting your customers, yes, but also interacting with people in adjacent industries and industries where you don’t participate. You need to be confronted with new ideas, new technologies and the shifting economics and demographics. It’s no surprise that people who travel and are confronted with different cultures are often better innovators. Yet too frequently our teams meet only people in their industries, and when they travel are housed in generic hotels in business districts indistinguishable from suburban US cities.

If you want to be more innovative, read outside your industry. Try something completely new. Read literature or watch TV shows that you’d never typically watch. Interact with people who are very different from you. Even better, gain new skills. Learn to play chess or pick up a new game, a new skill or learn to dance. All this new learning has a subsidiary benefit as well – it trains your brain and staves off Alzheimer’s and brain decay, as well as having the possibility to make you more innovative.

The “Renaissance” men and women were naturally curious and didn’t have Google or the ability to view information at their fingertips. They worked for the information they consumed and were happy to contribute information and insights back. This broad networking and learning made them more innovative, to our great satisfaction, at least where governance is concerned.

Editor’s Note: For more on this topic, please check out our Nine Innovation Roles

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GUEST POST from Jeffrey Phillips

I have to admit that Twitter has become a distraction for me. I use Twitter as a smart Feed Reader, relying on people I follow in the innovation community to alert me to things that are informative and interesting. Unfortunately there are so many people writing so much good stuff about innovation that Twitter itself becomes almost overwhelming. Here’s a case in point, which leads us to the case of the Subtle knife:

The folks at the Creative Realities created a really funny short video which they claim demonstrates what happens when someone presents a new idea to management. You can see that video here:

If you’ve watched the video you’ll recognize some truths and some fictions in the video, namely, the truth that ideas are often not well received even when they’ve been requested, and the fiction… Well the fiction that makes the video funny is the instant, almost visceral reaction by the executive to the idea. Sorry, but while funny it almost never happens that way.

In fact, most ideas perish in one of two ways: neglect, or the cuts from what I call the Subtle Knife. Not the book by Philip Pullman. No, the Subtle Knife is much more insidious than that.

First, ideas often “die” in larger firms due to inaction or neglect. In most organizations there are thousands of what we like to call “zombie” ideas – not really dead, or perhaps they just can’t realize that they are dead. No one has actually “killed” the idea but the idea has never gained enough traction or supporters to move forward. You recognize these ideas – they constantly resurface, seem viable momentarily, and are quickly discarded but never abandoned or eliminated. They are the reason your management team believes the firm has “lots of ideas” that don’t add value. The zombies are the idea that few people really like, don’t seem to solve an important problem, and are constantly reintroduced in brainstorming sessions. These ideas should receive the result of the ideas in the video. They need to be put out of our misery.

But the real focus of my post isn’t zombie ideas. It’s the mastery of the Subtle Knife. Most good ideas die as well-meaning executives wield the Subtle Knife. The Subtle knife is a metaphor for the small cuts, the slight twists, the indirect associations that chip away at an idea until it seems less valuable, less interesting and less important. The Subtle Knife is used when attacking an idea directly would seem inappropriate, but the Subtle Knife creates fear, uncertainty and doubt about an idea. Examples of the Subtle Knife include:

• This is a great idea but …
• If only this had been presented (yesterday, last week, last month…)
• We’ve looked at this before and sadly …
• While a valuable idea, it just isn’t “us”…
• I could get behind this idea if you’d (make a significant change)…
• There just aren’t the resources necessary to take on this excellent idea

These indirect assaults never suggest that the idea is “wrong”. In fact the idea doesn’t have to be wrong to be killed, it just needs to distract from someone else’s priorities or attack someone else’s sacred cows. The Subtle knife is always used with a smile, a shrug of the shoulders and a facial expression that demonstrates that only the best intentions are meant.

There’s a problem with this, however. Rather than deal with the merits of an idea, its strengths and weaknesses, many organizations prefer to react in a very indirect way, creating just enough fear, uncertainty and doubt about their own ideas(!) that the management team feels led to conduct “further research” or to investigate other ideas, delaying implementation and in many cases creating another zombie.

How do you avoid the Subtle Knife? The Subtle Knife works when objectives aren’t clear and goals are uncertain. It’s easy to chip away at an idea if the plans and goals weren’t very clear from the start. That’s why we always focus on obtaining a clear problem statement and scope for our innovation efforts. Once that is established, it’s harder to deflect an idea that meets a clear objective. Second, prioritize the work. Determine just how important the innovation effort is. If it is going to fall prey to a re-ranking later, intended to delay and obstruct, make sure you identify what the original prioritization was and what has changed. Third, innovation introduces change. If you want to create that change, you better arrive with proof in the form of market insights, market research and prototyping or piloting results. Don’t tell the management team the idea fulfills the needs – show them the needs and research and help lead them to the right conclusions.

Take away the mystery and the Subtle Knife is difficult to use. Then it becomes a question of how to prioritize innovation programs and outcomes versus other leaders’ priorities and personal needs.

Frankly, in many cases I’d prefer to see an executive bash the idea as forthrightly as is portrayed in the video. That kind of clarity rarely happens.

Editor’s Note: Here is an interesting article focused on zombie and vampire ideas

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GUEST POST from Jeffrey Phillips

I was thinking recently, with the demise of Google Wave, that it is entirely possible that Google has jumped the innovation shark. For those of you unfamiliar with the “jumped the shark” phrase, that hearkens back to a famous television show in the US. To boost ratings, a character decided to water ski and jump over a shark. The fact that the character couldn’t swim and was skiing in a leather jacket can tell you where this is headed. Everyone saw through the obvious ploy to drive ratings and the show continued to nosedive.

The question becomes then, has Google lost its edge, or is Google Wave an example of experimenting and failing forward, to bring new and better products to market?

I think it’s inevitable that small, interesting companies who tap into the global zeitgeist and grow quickly become media darlings. Firms like Facebook, Twitter and Google have been media darlings lately. The question is: are they really innovative, and as they grow can they continue to innovate? The inertia that comes with size is often a limiting factor in many firms for innovation. The larger the firm, the greater the diversity of products, the more a firm plays “defense” rather than “offense”. Will Google grow to the point where its ability to innovate is hampered or stymied by previous success? Are we actually witnessing that?

One of the best ways to evaluate an innovator is to determine not just the number of new products or services, but also consider whether or not those new products and services solve a problem or create new value. For example, Google has recently released the instant search capability, which provides results as you type. That’s perhaps interesting, but so far I haven’t found it to be valuable. Whether I get my results in three seconds after I type or “live” as I type really isn’t a big gain for me. So, here’s an “innovation” that lacks any real value proposition. Google gets points for trying to be innovative, but there’s really not much value in this innovation.

Google hasn’t capitalized on a number of its most solid applications – especially Gmail, and other firms, even Microsoft, have copied or duplicated many of the features that Google originated. Other than Google Voice, Google hasn’t created a really compelling new product or service in several years, which indicates that the pace of innovation has slowed. The question becomes – is that because there are more innovators in the space, or fewer innovation opportunities, or more overhead and bureaucracy? My personal vote is for the latter. Google’s employees didn’t suddenly get less interesting or insightful, and while there are a number of innovators few have the benefits of scale that Google has. This means that as Google has grown, it has actually become less able to create innovative new products and services.

They aren’t alone in this regard. As firms grow and their product and service portfolio get larger, their original mission and purpose gets fuzzy. They have more things to develop and support, so there’s less energy and enthusiasm for new stuff. New ideas may cannibalize existing profitable products, so the new stuff seems risky. As you get larger there’s more stuff to protect, and more process to follow. Whether you are Google or P&G, inertia and defensiveness sets in.

That doesn’t mean that Google, or P&G, or any large, distributed firm can’t be innovative. It simply means they need to be even more intentional about innovation. It needs to be part of their strategy, reinforced by their executives, and regularly reported and measured. There need to be explicit innovation goals that are regularly reviewed, and well-understood processes that people can follow. In other words, innovation has to move from a disorganized, ad-hoc initiative to a more consistent process.

Google may struggle with this transition, since it has had a fairly ad-hoc innovation methodology. Trying to lasso those folks who have had a significant amount of freedom and corral them into more defined processes may spark discontent. While the objectives and outcomes are the same, the more formal approaches may grind on those who had a lot of freedom previously. Google and its innovation teams may need to “grow up”.

Or grow out. The other model is to decide that once a product line, or business unit, reaches a certain size we spin it out to allow it some freedom out from under the corporate umbrella. W.L. Gore and others follow this model to ensure the business units and product groups don’t get too weighed down with inertia and overhead, which blocks innovation.

So, has Google jumped the innovation shark? We need to watch carefully. The executives are saying the right things about innovation, but will we continue to see interesting but not so valuable “innovations” like instant search, or will we see really valuable new products and services? Can Google scale its innovation models or will there be a backlash to try to organize innovation now that Google is a large conglomerate?

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GUEST POST from Jeffrey Phillips

Or at least his presidential campaign

by Jeffrey Phillips

Whether you like the Obama administration or not, one thing you have to give them credit for: during their campaign they sought out and identified people who were ready, willing and eager to help. In fact, many of the people who drove the success of Obama’s presidential race weren’t the establishment figures – they lined up behind the Clintons until the primaries were over. No, many of the people who drove the Obama campaign were just regular folks who were energized for perhaps the first time. This passionate, engaged volunteerism can’t be faked, it can’t be manipulated and it can’t be replaced, as evidenced by recent polling numbers.

This isn’t a political post – it’s a post that seeks to compare what went right with Obama’s presidential campaign and what we as innovators can learn about building a successful innovation effort in a business. Obama ran as something of an outsider – with new ideas, a fresh approach and as a radical change from the figures of the recent past (Bush, Clinton, Bush, etc). He based his campaign on grassroots volunteers, many of whom were not establishment figures but who had a lot of passion and energy to donate to the campaign. These folks, as well as Obama’s team, leveraged new social media tools and new methods to meet and interact to sustain their energy and passion and to reach and invite new people. We innovators would be smart to consider what was done well in that campaign and emulate it.

In most businesses today, if an executive decides that innovation is necessary or important, he or she assigns a (usually) poorly defined task to another subordinate executive to create some innovative product or service. That individual assigns the task to several people who:

1. Weren’t involved in the decision
2. Already have other responsibilities
3. Aren’t passionate about change or innovation

So, we get a team of the uninterested led by the unwilling focused on the abstract. There’s no passion, no energy, little enthusiasm. Additionally, there’s often little time allotted and no introduction of new tools or techniques. So we ask people who aren’t involved and aren’t passionate to create something interesting and new, using existing tools and processes.

This is exactly the opposite of what happened in the Obama presidential campaign. Obama created a clear change vision and attracted passionate, engaged people to that vision. Then, he and his team introduced a range of new tools to get people who might not normally have been involved actively involved in the campaign – reaching out and including others and building a grass roots program. Passion and energy are contagious, and having a vision to focus that passion and energy simply adds fuel to the fire. Imagine, however, if the campaign team had recruited all of these new people to support the race, but had forced them to use older, more traditional tools and techniques rather than social media and meetups. They’d have lost their enthusiasm and energy. Now, think about what we do when we build innovation teams in most businesses.

Do we:

• Create a clear, compelling vision?
• Invite anyone who is energized by that vision?
• Build on their passion and engagement?
• Give them the new tools necessary to succeed?

Umm, no. In most cases we:

• Have a poorly defined goal with weak commitments
• Assign people who are available and already overworked
• Ignore people who might have passion about the topic because they aren’t the “right” people or are from a different group or aren’t senior/junior enough
• Passion? Engagement? Really? Not during office hours!
• Ask them to use existing tools and techniques to create something new

Everyone tells me that they can’t afford to invest in their people and their innovation teams. Yet the Obama campaign is an example of a group of people who volunteered their time, crafted tools with little investment, using what was available to them, because they were passionate and engaged. I think that given the right goals, clarity and opportunity, innovation doesn’t have to be difficult or expensive. People will rush to the right vision and opportunity, and will work far beyond an “8-5” given the chance to do something powerful and meaningful – for a political campaign, or for their employer.

Too many firms have forgotten that their people are motivated by more than the job and the paycheck. People want to create new things and seek to express their passion. Too often we ask them to leave that at home, or exercise it outside of the office. Political campaigns are just one beneficiary of the fact that large firms often can’t excite and motivate employees to bigger, greater things.

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GUEST POST from Jeffrey Phillips

Every significant “leap forward” in the span of human consciousness has coincided with a significant change in the efficient use of a significant resource. For example – the transition from nomadic life to farming. This transition came about because people learned to till the ground and grow food that was dependable and sustaining. The fact that people could stay in one place and have a consistent food source meant that they could take on other tasks. The more efficiently they used the soil, the more crops they could grow, and the more time available for other activities.

Other “leaps” forward include the efficient use of labor (thanks Frederick Taylor) and the efficient use of capital, which has eventually brought us to the problems with financial engineering that we’ve encountered recently. All Taylor cared about was understanding how to get the most, best, productivity out of the labor of individuals, while bankers, financiers and CFOs have their own metrics about the efficient use of capital – return on invested capital as an example.

We’re at a cusp of a completely new competitive phenomenon I believe – I’ll call it the efficient use of ideas and insights. The fact is that product lifecycles are rapidly declining, and firms in any geography can complete for their home markets as well as export markets. This means everyone is competing for global market share, and the current “leader” in any category is really only as good as his or her next product or service. In this environment, a firm must be efficient with its use of labor, and its use of capital, but ultimately those are in service to the efficient use of ideas and insights.

The reason is that once a particular “efficiency” frontier is reached, additional investment doesn’t add much value – in fact, as evidenced by some of the financial instruments, it may detract from the market place. Eventually every competitive firm is relatively equal in terms of its use of labor and capital – although some have less expensive labor, which allows them to be less efficient with capital or vice versa. However, at some point, more and more investment in a frontier that is highly efficient across the competitors doesn’t add value. So a new differentiator or frontier must be identified.

I believe that new frontier is the efficient use of ideas. In the near future, firms that are very efficient at creating, developing and implementing new ideas as products and services will be the winners, because they’ll be the ones consistently creating the newest and best products, services and business models. In a world of global competition and ever shortening product life cycles, becoming very very good at spotting opportunities and creating new products and services to meet those needs will be the competitive differentiator.

What will it take to be a firm that has efficient use of ideas? A culture that encourages and embraces the identification of new needs and opportunities, that is willing to sacrifice the “sacred cow” before another firm takes that market and that share. A firm that encourages close examination of customer needs and expectations and that takes risks to create new products and services consistently. A firm that has a defined innovation process that everyone understands. Compensation and evaluation models that emphasize innovation, nimbleness and speed to market.

Soon, it won’t be enough to have an innovation capability – to be competitive a firm will have to have a focus on the efficient use of ideas within its boundaries, or it will rapidly fall into obsolescence.

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GUEST POST from Jeffrey Phillips

One of the most illuminating comments I heard recently in a training program we offered was one participant’s realization that innovation, especially bringing a new idea to fruition, might require more than just product innovation. It may involve innovating the way the firm thinks, the way it works, how it manages and how it performs. In other words, when you are just starting out in an innovation effort, you may have to innovate and invent new methods, new processes and new ways of thinking to bring a new product to life.

There’s a good reason for this thinking – it’s very difficult to create something entirely new to an organization that doesn’t fit to existing thinking and processes. You either adjust the new idea to existing thinking and processes, or you create new thinking and processes to enable the new ideas. And if you follow that thinking, you can see immediately why firms with highly entrenched methods and processes can find it very difficult to innovate, while firms with flexible thinking and nimble processes and systems can more easily innovate.

So, there really isn’t such a concept as “product” innovation as an isolated effort. Creating a new product or service will force you to rethink how you collect and synthesize market insights, how you conceive new products and how you bring them to market. Thinking deeply about a new product or service may in fact lead you to consider new business models or new sources of revenue or new channels as well. This means that what may initially seem like a simple act of creating a new product will in fact force your firm to reconsider how it works. That’s another reason why a half-hearted, let’s give it a shot innovation programs almost always fail. There are simply too many things that must change to do innovation easily. Yes, you can ramp through a new product or service without changing some of these other features and attributes of your business, but you’ll run roughshod over the existing thinking and processes. Not to say they don’t need to be roughed up a little, but they’ll give as good as they get.

Innovation at any level is interrelated to so many other factors of your business. A new product or service may require a new method to service customers or a new channel, or new business model. New ideas can’t live in isolation and may not play nicely with existing ideas – and that’s the point. A radically new or different idea needs different organizational structures, channels and models to survive. Innovation is also interdependent with other processes and strategies. Try creating a new innovation effort in your business without communicating what you are doing, or changing how the participants are evaluated or compensated. You’ll soon find that while innovation may seem isolated from the “regular” business processes, it relies on and demands services from those processes that may seem unreasonable.

Yes, you can create a skunkworks and hold innovation at arms length. That can create really interesting and radical ideas but will need to duplicate a lot of the capabilities and processes you have already in existence, and the new insights and learnings won’t filter back into your existing business. The skunkworks model is effectively like exercising only one arm and hoping the rest of the body benefits. If you plan to innovate, you need to know that you can’t simply create a new product. A really interesting new product or service will almost by definition force a rethinking of your existing management styles, business models and org structures.

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