Monday, June 30, 2014

Slogan, Carnival or Capacity: What's your innovation commitment?

By way of explaining innovation - what it is and what it isn't - I often write about the innovation efforts we've seen and seek to illustrate successes and failures using (hopefully) humorous analogies.  Today I'd like to illustrate some of the different methods or types of innovation implementation and why they fail to deliver any value.  I'm building a list in precedence order, from the least beneficial to the most beneficial.  Bear with me, because I think you'll see the point and with patience gain insights into what to do, and what not to do, when deploying innovation.

Based on our experience, we believe that there are at least five forms of innovation deployment, ranging from insincere to fully engaged and committed.  In ascending order they are:

  • The Slogan
  • The Carnival
  • The Potemkin Village
  • The Skunkworks
  • The Embedded Capability

Let's quickly describe each implementation, what it means and how it innovates, if it does.

The Slogan

Many companies pretend to innovate by talking a lot about innovation.  You maybe aware of this solution - many call it the 'flavor of the month".  This alternative isn't isolated to innovation.  Plenty of other management fads go through this phase.  There is often a weird hope propounded by executives that if they simply talk about innovation, it will happen.  I've never understood if this is cynical,  disingenuous or both.  If they know enough to talk about innovation to their employees and shareholders, they understand to some degree both the potential benefits and the investments.  Yet all they do is talk about innovation, without ever creating direction or strategic goals, without setting aside resources, without committing to do any real work.  Sloganeering just creates cynicism within the organization and makes real attempts at innovation even more difficult later.  Slogans and demands with no investment or support may lead to a brief flowering of innovation, which quickly withers and dies.

The Carnival

We've all been to the state fair or other carnivals.  You know the drill.  After a lot of fanfare, the carnival arrives and sets up on the edge of town.  We know it will be there for only a brief time, and we are both curious and cautious.  Curious because it seems new and exciting, full of strange characters and risk taking adventurers, and cautious because the carneys and their ways are different than ours.  The same is true with "carnival" innovation.  Carnival innovation shows up occasionally to great fanfare, exists for a week or two (Innovation Week) and then the tents are packed up and put away.  The carnival doesn't remain in town long enough to create meaningful change, and in many cases the employees are too embedded in existing processes and reward schemes, so they merely enjoy the rides and the deep fried foods, and then go right back to what they were doing previously.  Innovation was a thrilling ride, but only a short term distraction.

The Potemkin Village

In the old Soviet Union days, the Soviet government would stand up what came to be called Potemkin Villages.  These were picture perfect examples of the bounty of life under communism.  Every house was perfect, the people were happy and well-fed, children ran and played in the streets.  These villages were there for the consumption of journalists and other governments who wanted to believe that communism, or Soviet Socialism, worked.  But they weren't villages any more than the false fronts at Disneyland.  They existed only when necessary, and were quickly emptied when the journalists or government officials left.  Many innovation programs in corporate America resemble Potemkin Villages.  There is an edifice, and perhaps even a few people actively engaged, but looking behind the facade there's no "there" there.  Companies can point to an innovation center that remains in place over a long period of time, but everyone knows when the focus shifts that little work is actually completed.  Waiting for innovation to emerge from the Potemkin Village is futile.  In reality it doesn't exist to create things, only to stand as a potential representation of what could be.

The Skunkworks

Lockheed and other defense contractors created the first skunkworks to work on top secret new defense programs.  Originally the idea was to hide away important military developments, but others like Apple adopted the approach.  In later years the idea became to isolate the innovation from the corporate antibodies.  The skunkworks allowed innovators to escape the "business as usual" mentality and work unencumbered, with greater creativity.  This promoted more innovation, but those ideas met harsh reality when the ideas came out of the skunkworks and had to be developed in the traditional product development processes.  Some firms have used skunkworks successfully, but the risks of isolating the "front end" from the rest of the organization are high.  If the ideas seem unusual or risky when they are re-introduced to the business, the existing business as usual antibodies and day to day demands can swamp good ideas that emerge from a skunkworks.

 The Embedded Capability

It's not until innovation becomes an embedded capability - where people understand the importance, align to specific goals, have common tools and language, and healthy debates about what is and isn't innovation - that innovation can actually thrive.  When innovation is fully and completely embraced by an organization, when it becomes "business as usual" rather than a short term carnival or a Potemkin village, innovation flourishes because everyone can engage and everyone wants to engage.  Note that to become an embedded capability, innovation will require communications (slogans) and perhaps even carnivals or skunkworks.  The list of solutions I've described above often fail because they are components in service to a larger solution rather than ends to themselves (except of course the Potemkin Village). 

Which Innovation Installation does your company have?

Often, innovation implementation goes through a number of these cycles.  Executives propound innovation but recognize that merely talking about it doesn't change things.  Then they promote frequent but short term Carnivals, projects that come and go with little impact.  Some then feel the need to establish a permanent innovation center or team but don't task the teams or fund them.

Eventually the innovation activities morph into skunkworks or the executive team realizes the need for sustaining innovation capability, and that's when innovation becomes a continuing core capability and competency, which is its rightful place.  The "ideal" approach to innovation is recognizing the amount of investment, change, skill development and commitment that is necessary to embed innovation capacity in a business, and not flinching.  Too many firms recognize the investment necessary but attempt to get by with less commitment, less investment or less risk, and end up with carnivals that arrive and leave quickly, or Potemkin Villages that remain but are only hollow shells that deliver no value.
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posted by Jeffrey Phillips at 6:00 AM 0 comments

Tuesday, June 24, 2014

Powerful innovation relies on weak signals and forces

For a long time I've wondered if we don't pay far too much attention to the obvious aspects of innovation - brainstorming, ideas, trends, etc - and pay far too little attention to the connective activities and culture that moves ideas through an integrated workflow.  It's easy to focus on and celebrate activities and definitive results.  A team can hold a brainstorming session and measure the number of ideas, for example. These events are often what we talk about, even celebrate, when we talk about innovation.  but they aren't the most critical components for innovation.   It's more difficult to build the connective tissue between these activities and deliverables and the next activity or action.  When we celebrate the visible, discrete activities like idea generation, we place emphasis on that activity and raise the consciousness of the culture to embrace ideas and tangible outcomes.  When we fail to focus on the culture, processes and connective tissue that sustains an idea or an innovation process, we denigrate the components that are ultimately just as valuable, and frequently harder to develop.

Strong and Weak forces

  I'd like to use a model of the atom as an analogy for the importance of components and connectivity.  The concept of the atom is relatively well-known to many people.  I think we often picture it in much the same way that we think of the solar system - a central core made up of protons and neutrons, circled in progressive orbits by electrons.  This has been the central theory of the atom for years, and even elementary school children can tell you what a proton is, and its purpose and charge, or what the electrons do.  What they often don't know, and don't recognize or celebrate, is the important and often misunderstood forces that keep the components bound together.  After all, if the forces that hold protons and neutrons together in the center of the atom, and the forces that retain electrons in their shells didn't work, atoms wouldn't form, and without atoms, no larger building block of life would exist.

You see, we celebrate the understandable, tangible forms of the atom - the proton, neutron and electron - but we don't understand what may be more important:  the forces that bind them together and connect them in ways that sustain them and make them useful.

There are four fundamental forces at work in nature:  gravity, electomagnetism, the strong force and the weak force, and at least two of them are vital for the structure of the atom.  It's the strong force that binds protons and neutrons together, a force that is far stronger than gravity.  Fortunately the force acts over a very small distance, otherwise it would collapse everything to the center of the atom.  Similarly the electrons are bound to the nucleus by electromagnetism and their various valence shells.  These forces are less powerful than the forces that bind the neutrons and protons together, but equally as important.  The ability to gain or lose electrons means that atoms can combine to create new complex compounds, sodium can combine with chlorine to make salt.  Both the strong interactive force and the electromagnetic force are vital to the structure, function and composition of the atom, but are less understood and less celebrated than the tangible components.  The same is true for innovation.  Good connections, strong connective tissue, a defined innovation process or workflow is more important than any specific step or output.

Celebrate and emphasize the weak forces

When we innovate, everyone wants to know when we'll generate ideas, because that is a fun, but also tangible activity that leads to measurable outcomes.  What few people want to focus on is the connectivity and process, the "weak forces" that bind the innovation process together.  Many, many times you'll see teams reach a peak "high" generating ideas and rapidly dissipate when they don't know what to do next, or even how to define what to do next.  It's these weak forces, connective tissue, underlying processes, workflows or next steps that matter, as much, if not in many cases, more than the celebrated activities.  Just as a proton is relatively useless without its neutrons and electrons, held together by the binding forces, so too are ideas relatively useless without the defined connective forces and processes to accelerate them toward commercialization.

What's an even greater issue, however, is how much resistance these innovation "weak forces" confront.  They face resistance from "business as usual" processes and structures, from people uncomfortable with risk and uncertainty, from decision making metrics and frameworks that aren't suitable for use in innovation (like ROI) and many other competing factors.  Cultures that sustain innovation over long periods of time have strong connective forces that bind activities and processes together and overcome resistance, while most firms lack the connective tissue or fail to constantly strengthen the connective tissues and processes.  The common refrain from many executives is that they have plenty of ideas.  That's often correct, but they fail to realize that it's not an issue of the number of ideas, but an issue of how those ideas get translated from a nascent idea into a viable product or service.  That work is done primarily through these weak forces and defined processes.

Weak Signals

Another factor that good innovators understand is the value of "weak" signals.  Innovation is based on gathering and understanding trends and weak signals that indicate emerging needs or emerging markets.  These weak signals are often overlooked or ignored by firms that will only listen to a "sure thing".  Innovators understand that once a signal is predictable and validated, everyone else has registered the signal and begun to decrypt it.  Good innovators gather weak signals and attempt to understand what those weak signals may be telling them, and they act on the messages within those weak signals.  It's often too late to respond to clean, clear signals, but almost never too early to start gathering and interpreting weak signals.

 Good innovation is based on understanding what the "weak" signals - messages that other firms are ignoring or overlooking - are telling you about future market needs, and constructing enough connective tissue or "weak forces" that will manage the space between innovation activities and deliverables to create an innovation workflow that allows to you accelerate ideas from nascent, vague ideas into polished products and services.  There is great strength in these "weak" concepts, and while they are rarely celebrated they do the hard work of good innovation.
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posted by Jeffrey Phillips at 5:51 AM 0 comments

Friday, June 20, 2014

If you give an innovator an idea, he'll want to launch it

When my kids were little, we used to read bedtime stories.  We had a number of favorites.  The classics of course were always in demand - books like Goodnight Moon were perennial favorites.  Another set of books that has really stuck with me were also favorites, and they've been in my mind lately because they illustrate issues with innovation so well that are so often overlooked.

You may be familiar with the book If you give a mouse a cookie, or perhaps If you give a moose a muffin.  These books open with farcical but funny conundrums.  For example, if a mouse were to show up in your kitchen and ask for a cookie, you might be inclined to give him one.  That's just kindness.  However, that act of kindness will lead to unexpected consequences.  Because, as the book points out, if you give a mouse a cookie, he'll want a glass of milk to wash it down.  And, being the kind individual you are, once you give the mouse a glass of milk and he finishes it, he may want to check his appearance in the mirror to ensure he doesn't have a milk mustache.  But when he views his visage in the mirror, he decides he needs to trim his mustache, and so on.  The book is filled with these If, Then statements that lead on to more or less logical next actions.

How does this illustrate something about innovation?

From my experience, it seems that everyone thinks about innovation, but they think about it in very discrete, disconnected ways.  R&D folks think about innovation as creating a new polymer.  Marketing folks think about innovation as changing a marketing channel or delivering a new product.  Finance folks think about innovation as driving new revenue or perhaps modifying a business model.  What very few people think about are the knock-on effects, consequences and series of events that are required to unfold when you innovate.

For example, if your management instructs you to innovate, you are going to want some scope, instruction and definition of goals or outcomes.  Lacking those you'll create your own, or wait for someone to provide them.  Once you have defined the goals or scope or had them offered to you, you'll want to ensure your skills are adequate to the effort.  You'll acquire skills or hire them, or attempt innovation with the skills you have.  If you generate ideas, you'll want to know how to evaluate them.  You'll seek input on what matters, how to evaluate and measure ideas and what ideas matter most.  Once you have good ideas that you are happy with you'll want to know how to commercialize them.  That means getting the best ideas in front of people who can make decisions about product development, prioritization and funding.  If you can't get your ideas in front of these people with a really compelling argument, all your previous work is for naught.  Even if you can get your ideas in front of these people with a compelling argument, it won't matter unless there are available resources to implement the ideas.  And even if there are available resources all the capabilities or technologies may not reside internally, so you'll need help to find and acquire the intellectual property or technologies and bring them in house.

It's all interconnected

Like my relatives in the small rural community where I grew up, all the aspects of innovation are related.  Some of the relationships are strong and evident - to get new products I need new ideas.  Some of the relationships and interconnections are less obvious - to get new ideas I need to do good research to understand customer needs.  Some of the obvious relationships and actions aren't comfortable conversations - to move new ideas into production, something else has to be removed from production, or we need more production capabilities or assets.

The real problem is that the individual acts are all easy to define, and somewhat easy to conduct.  The "magic" in the innovation process is defining and understanding all the strong and weak interactions, dependencies and decisions and building a - wait for it, here comes the MBA consulting word - holistic innovation approach that recognizes and understands all of the interrelationships, consequences and dependencies.  If I build the best idea generation facility in the world in a large corporation but neglect to consider and rework the means of getting ideas into a product or service development process then all I create is cynicism.  But idea generation tools and techniques are easy, and rethinking priorities and product portfolios and rejiggering priorities for existing products and services to make way for new product development is risky and difficult.

The hip bone is connected to the thigh bone

This isn't really a mystery - everyone knows how interconnected and tightly woven an efficient, effective organization is.  What most managers and executives recoil from is the work necessary to unwind 20 years of ever-increasing efficiency and capability to make room and recognize the consequences of incorporating more innovation into these processes.  Introducing innovation tools like brainstorming or idea management software solutions is easy.  Incorporating them into end to end processes that recognize the knock-on effects, decisions and consequences is difficult, time consuming and introduces a tremendous amount of risk.  In the old song about the skeletal system we learn that bones are connected to other bones, but sometimes we forget that it is muscle that holds the bones together in the joints.  Skeletons hold together through tension created by tendons and muscles that make up the joints.  In a similar way we need more muscle and better design around innovation process, so that good ideas have a workflow that makes sense and considers the knock-on effects and consequences.  We can't simply string the right bones in the right sequence and expect a skeleton to stand without the muscles that link the bones together, anymore than we can introduce a lot of innovation tools or techniques and neglect to link them together to lead to logical outcomes.

Building a competency versus introducing tools

If you want to sustain innovation, you need to build a competency for it, and perhaps the most significant part of that competency is a well-considered, integrated, fully thought out workflow that describes how ideas are defined, created, evaluated and converted into products and services, and that considers all of the consequences, changes in prioritization and resource allocation.  Without that you have a set of tools that while powerful individually will consistently fail to deliver results.

Too many firms introduce interesting, powerful innovation tools but fail to create the linkages between the tools, and the bridges between innovation phases and product development phases.  These bridges, and more importantly the consequences of the decisions within those bridges, are perhaps the most difficult component of innovation.  That's because it is in these bridges that real trade-offs and resource allocations are made.
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posted by Jeffrey Phillips at 6:39 AM 0 comments

Wednesday, June 18, 2014

The debate about "disruptive" innovation

If you are interested in innovation, and you should be, and have been awake and sentient for the last week or so, you have probably noticed a slight dustup in the innovation force.  Jill Lepore, a writer for the New Yorker, penned an article that calls into question the idea of "disruptive" innovation as framed by Clayton Christensen.  Since the publication of that article, many people have weighed in, on both sides of the debate.  Some noted innovation specialists have leapt to Christensen's defense, while others have been happy to knock old Clayton down a peg or two off of his high innovation horse.

Christensen based his book The Innovator's Dilemma on much of his PhD thesis work, and it's this research and the conclusions that he drew that Lepore calls into question.  For many of us, The Innovator's Dilemma was and to some extent still is a seminal kind of book - one that defines a new way of thinking.  Lepore calls into question a lot of the research Christensen uses to draw his conclusions, basically accusing him of "cherry picking" the industries and studies, and ignoring data that didn't meet his hypothesis.  Further, she notes that in many of the industries he selected for review, where the initial leaders in the market were 'disrupted', many years later those leaders are still the leaders in their space.  Was Christensen wrong, misguided or simply viewing the data in the best possible light?  Or, should we ask another question:  did Christensen set out to define a science, and a provable scientific thesis that is iron-clad, or did he introduce a new way of thinking about innovation and new product development that is applicable in situations and usefully strategically?

I don't have the brainpower or bandwidth to review and refute or concur with all of Lepore's claims.  I think, in fact, that if we look closely at any management philosophy, especially years later with perfect hindsight, we'll find reasons to believe and reasons to doubt.  Whether we are talking about disruptive innovation, balanced scorecards, 360 degree evaluations, open plan offices or many other management advances, time will show that there are both advantages and disadvantages to all of these.  I missed the part in The Innovator's Dilemma where Christensen said that his insights were perfect and infallible, and that the insights he had would be consistent throughout time and in all conditions and industries.  Perhaps that was in the appendix.

Christensen's interesting point was that what we call innovation was actually several different flavors of outcomes - sustaining and disrupting.  Sustaining innovation means the constant improvement of a product or service based on what customers know and expect, and in line with existing capabilities and business models.  What many people might call incremental innovation.  It's the most common form of innovation, and it is what adds incremental revenue and growth to many bottom lines.

There has always existed the idea of disruption.  In the computer industry the mainframe was the dominant computing model, until the mini-computer came along, which was then "disrupted" by the PC.  Did any of these disruptions mean the demise and death of the mainframe?  No, but often the new innovation opened up new computing opportunities with lower cost and in smaller teams than the previous platform.  Disruption has always existed, and firms have always needed to prepare for it or get subsumed by it.  What I think Christensen did that was a bit new was to consider the style of disruptive innovation.  Previously many assumed that "disruptive" innovation would happen "from above" - that is, a new product or service that added a tremendous number of new features and benefits.  This has led to many examples of product feature "bloat" - and yes I'm looking at you Microsoft Word, while I find myself using Google Docs and Microsoft Pages far more often.

Christensen's insight was that many "disruptive" innovations came from "below" - that is they often had fewer features or less functionality than the existing product or offering, but opened new markets or attracted new segments that were overlooked or underserved before.  Some of this insight is evident in the Blue Ocean Strategy book as well - the idea that there exist in any industry a multitude of underserved customers or simple unmet needs.

Christensen's case studies - computer hard drives, mini-mills, etc, all use examples of smaller, less capable or less feature-rich solutions "disrupting" the existing paradigm.  Lepore isn't happy with the selections for various reasons.  She argues that US Steel was hampered by unions and had fairly rigid work rules, while Nucor didn't, and that assisted the disruption, and oh by the way US Steel is still the largest producer of steel.  Sure, but Nucor is the most profitable, and I'd far rather be the most profitable than the largest.  Did Christensen highlight only the research that reinforced his theories?  Most likely he was inclined to do so, because we all suffer from confirmation bias.  Were there other reasons why these firms were disrupted, or failed to compete effectively?  Probably, but after all a PhD thesis is usually carried out in very narrow fields of study.  Did Christensen set out to create an iron-clad "law" or to introduce the possibility of different kinds and styles of innovation?  Most likely the latter, and the former grew as legions of readers interpreted his work.

So, is disruption a predictable science, a goal or an outcome?  We tell our clients that innovation is a spectrum, with small incremental change on one end and disruptive change on the other.  Each activity a firm undertakes should be defined by the goal and expected outcome.  Do we want incremental solutions to drive small changes in existing product, or do we want to create radical new products or "disrupt" an existing market space?  These are goals, not perfectly predictable outcomes.

Note also that most "disruption" is created by people who have no stake in an existing industry.  Competitors within an industry will tweak around the edges, but they often have too much at stake in the way things are to create radical change or cannibalize their own products and markets.  New entrants will "disrupt" a market by changing the channels, services or business models in ways that incumbents seek to protect or reinforce.  Therefore, when companies talk about "disruptive" change in markets they already serve, what they hope to do is create interesting, new products that add a lot of value over existing solutions, not destroy the market for their existing products.  This is also what often leads to feature bloat.

Finally, who gets to decide what is 'disruptive' and what isn't?  There isn't a master arbiter of products and language, and while every CEO I know wants disruptive products and services, most aren't ready for the investments or risks associated with truly disruptive solution.  Therefore, disruption, like innovation, is a word without a lot of meaning except in context.  Disruptive innovation is whatever we want it to mean in the moment or situation, rather than a carefully scripted model where we can check off five or six conditions and declare the idea is 'disruptive" or isn't.  As Lepore notes, much of what we can describe as disruptive can only be done in hindsight, and then we ought to consider all of the factors involved in the disruption, not just one new offering or product but the entire system that changed.  The theory or concept of disruptive innovation is not like the theory of relativity, where we can simplify the definition into an equation of known dimensions.  The theory of disruptive innovation is more directional or notional, but no less valuable from a strategic perspective.

I'm not sure what Lepore was shooting for with her takedown of Christensen, which to some extent has been deconstructed by others.  What we do need to remind ourselves of in the innovation space is that everything is fungible and poorly defined - there are few absolutes.  But I suspect that's what drew many of us to the space in the first place.
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posted by Jeffrey Phillips at 12:22 PM 1 comments

Monday, June 16, 2014

The Signal to noise ratio for innovation

You hear people talk about the "signal to noise" ratio in a number of settings.  Signal to noise simply compares how much of the message you want to transmit is encapsulated and accompanied by "noise" - information, misinformation and clutter that you didn't intend to transmit.  In common business terms, the signal is the core essence of your goals, strategy, intent, vision and action plans that you want people to understand.  Noise is all the other stuff that gets communicated, translated, heard or interpreted along the way.

Innovation suffers from a huge signal to noise ratio, and both the numerator and denominator play a role.  The numerator, the signal, presents difficulties because we are so inexact and inexperienced with innovation.  We lack clear strategic goals, we are inexperienced with innovation tools and processes.  This leads to watery communications full of flowery, empowering language that fails to describe shared definitions, specific goals and definitive actions.  You'll get a message along these lines:  "XYZ corporation needs to innovate, to engage its workforce and harvest the best ideas for competitive advantage".  Which sounds great, especially if it is read out in the radio announcer voice, but is vague and leaves interpretation to the listener.  Far too much communication about innovation is indistinct, inexact and vague, leading to interpretation by the listener, who acts with very little established frameworks or experience.

The noise portion of the equation - the denominator - also plays a significant role in the failure of innovation communications.  In many cases the "noise" portion isn't what's communicated, but the filters and interpretations of the communication, or the many "waterfall" conversations that happen after the initial communication or goal setting.  For many companies, an initial communication from an executive sets off a waterfall of communications, as the CEO's reports interpret and communicate goals and directions to their reports, and their reports interpret and communicate to their reports ad nauseum.  If the communications are vague, they simply get watered down or ignored through the waterfall.  Even if the communications are distinct and memorable, they are still subject to change as different managers read out and interpret the messages to their staffs.  Years of cultural acclimation encourage the middle managers to read into any communication the need for efficiency, cost cutting and doing more with less, so innovation is either quickly incrementalized or bucketed into cost saving activities. 

How do you improve the signal to noise ratio, which is vital for innovation success?

1.  Improve your signal - create clear vision statements, goals and expectations for innovation.  Create clear definitions.  Establish what you are willing to invest in innovation, the risks you will take, the failures or setbacks you will accept.  Set out the tradeoffs between efficiency and innovation, short term results and long term goals.  Be definitive, be clear, communicate consistently.
2.  Change your filters - work with your middle managers and resource managers to change their thinking and interpretation.  Help them recognize the importance of innovation, and the vital role that communication plays.  Don't allow them to interpret everything through the filter of efficiency.  Help them make resource allocations and prioritization tradeoffs.
3.  Eliminate noise - ensure common definitions throughout the organization.  Remove distractions and align rewards and compensation to the outcomes you hope to achieve.  Reward some notable failures.  Reinforce your message with your actions.

We've found that many of the best innovators are often those firms that understand the value of change and change management.  The more innovation you do, the more change you encounter.  The better you are at change, the better at innovation.  And both change and innovation are enabled by excellent, consistent and concise communication.
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posted by Jeffrey Phillips at 9:57 AM 0 comments

Monday, June 02, 2014

You are what you innovate

In many philosophical circles, the mantra behind much of the belief system is that you are what you (think, eat, do, believe).  In dietary circles, you are what you eat.  Is it also the case that you "are what you innovate" or is it often the other way round?  I think in many cases we actually "innovate what we already are".

The reason that most people aren't what they innovate is that it would require change in two dimensions.  To be what I innovate requires me first to be open to change from my current state.  Far too many of us as individuals and corporations are comfortable with our current states.  Note I didn't say fully satisfied, because most people and corporations aren't fully satisfied with their current states.   We all simply feel that the risks inherent in change and the uncertain outcomes aren't yet worth the work of creating change.  So first I must be willing to change.

Second, I must be willing to innovate, and innovate in areas or markets or solutions that are new and perhaps unfamiliar to me.  If I innovate only within the context I know and understand, I don't change.  I merely reinforce my knowledge and expertise in a specific area, and become an "expert" in that space.  Over time the potential space within which to work becomes very limited, and I build on an increasingly narrow base, easily disrupted as my expertise loses out to other emerging ideas.  Yet this description of constantly innovating in an exceptionally narrow base describes many innovators, and describes why we innovate what we are.

We innovate what we already are because we understand what we are.  We understand the scope and risks.  We understand the likely outcomes.  When we innovate what we already are we lower the risk of failure, and often unintentionally limit the possibility of success.  If you've heard the saying that when you have a hammer, all problems look like nails, then the same principle applies.  When we focus innovation only on what we know and what we already are, we can't help but be disappointed when the innovation results look very similar to what we already know and do.  We are constantly optimizing the hammer, looking for more and more specific nails, rather than asking the question:  is there another way to affix this to the wall?  But merely asking that question means we must embrace difference and change. 

Far too frequently, many firms will "innovate" but they limit their innovation to what they already know.  The scope for innovation is exceptionally narrow, and over time it becomes ever more narrow. This creates expertise, which is a good thing, but limits the breadth and depth of knowledge and experience, and draws the scope for the next innovation even tighter.  So, to a great extent, many firms innovate what they are, rather than are what they innovate.

For example, we worked with a firm in the life insurance business, which you may know is highly competitive and highly commoditized.  They were seeking to innovate life insurance products, but we wanted them to think more broadly about innovation beyond the product.  For example, they had decades of information about their customers.  Couldn't they leverage that information to provide new sources of insight to other businesses?  But we were told they weren't a data company, they were an insurance company.  They weren't ready to let go of expertise, history and existing business models to innovate to a new position.

In the long run, many businesses are what they innovate, to the point that they can't innovate any further without a significant shift in focus, market, business model or solution.  But are they willing to innovate what they are?
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posted by Jeffrey Phillips at 8:54 AM 0 comments