12/6/2012 12:46 PM
By Dar Schwanbeck, CMC Managing Director, NABI
Last week I attended a meeting where several large organizations were exploring the topic of innovation. I expected that groups, such as these, would be at the forefront of implementing new ideas and managing change. After all, aren’t our competitive advantage, economic growth and social well-being dependent on constant innovation? Our discussion revealed otherwise; we’re not as “innovative” as we’d like to be. There’s no shortage of ideas or good intentions, yet all lamented about how little innovation they experienced and how hard it was to make change. So what’s going on?
WHAT IS INNOVATION ANYWAY?
I found many definitions of innovation, ranging from
· “any project that is new to you or the organization and has an uncertain outcome,” (Govindarajan, Trimble),
· “the implementation of ideas to create value,” “a new method of production or handling,” “opening a new market,” “a new organization,” (Schumpeter),
· “the application of an existing technology (or technologies) in a new and useful way” (Hirsch), to
· “making desired outcomes easier to achieve” (Lawton).
So innovation reaches well beyond just technology. It applies to products, processes and services; technical invention and social invention. Henry Ford, for example, is famous for the model T, but also instrumental for implementation of the assembly line and use of part-time, seasonal workers to work on the assembly line. NOTE: Some writers distinguish “inventions” and “design improvements” from the definition of “innovation,” but my quick review suggests our bigger problem is in getting stuff done, and less so with a precise definition of “innovation.”
WHY IS INNOVATION IMPORTANT?
Why should we care about innovation in the first place? The dumb answer is probably that we are either, “moving ahead, and at least staying competitive, or, falling behind. In a global economy, nothing stands still. Todd Hirsch, in The Boiling Frog Dilemma offers 3 reasons:
1. This is how economies progress – otherwise we’d still be watching TV by candlelight, wrapped in animal hides; to improve our standard of living
2. We must compete or become irrelevant on the global stage; it’s necessary to long-term survival
3. Because we can. We have a well-educated, intelligent population, and it takes such attributes to drive innovation.
WHY IS IT (INNOVATION) SO HARD?
The business literature offers a host of reasons that individually and collectively might be getting in our road. The summary below is not presented in any particular order.
Lack of Clear Goals
Gregg Fairbrothers says its “key to understand why an individual (or organization) wants to innovate in the first place - to get what you want, you need to know what you really want; what is the real problem we are trying to solve? The goal sets direction, marshals resources, focuses learning, and provides criteria for decision making and measuring progress. The dilemma might be that organizations have too many, un-prioritized goals….and none specifically around a particular idea and getting it implemented. We expect our employees to be innovative, yet we don’t establish specific goals for implementing ideas.
Unwilling to Take Risks
Our organizations are often cultures of “devils’ advocates” versus idea builders. We fail to create a distinct culture that embraces calculated risk-taking. We conform (any innovation must fit within existing organization standards and measures). The “status quo” is a powerful force and innovation is known to be “risky.” Combine these factors and people usually run from innovation.
Funding for innovation usually means taking money from other parts of the business, hence competition, and of course, the timing of the funding is often a problem. Money doesn’t match the needed timing.
Beyond minor innovations or small design improvements, many innovations cross organizational boundaries and may create new categories. Further, because the pursuit of innovation requires human resources, there is conflict with the “day job.” Each of these factors sets up competition for resources and disputes around authority and decision making. As a rule, innovations don’t get their share, either of resources or anticipated benefits. Dedicated teams, separated from day-to-day operations might be the best choice to drive important innovations. Increasingly complicated environments in which to get change done (more complicated organizations, more procedures and regulations).
Innovation requires a time investment, and time is often a scarce commodity in many organizations. Further, in contrast to day-to-day operations, innovations often don’t behave according to a predictable schedule. Put these two together and it’s difficult to show innovation as a return on investment.
For many ideas/innovations it’s hard to quantify potential return on investment; potential costs, revenues, market share, impact on competitive advantage, etc. are simply unknown. And, potential innovations must compete within existing budget cycles for resources. Value propositions may not be clear for each group of stakeholders. New or different measures may be necessary to give innovations the chance they deserve.
Ideas Lack WOW!
“WOW” refers to the sum of an idea’s overall potential and likelihood of success. By definition, organizations should only pursue those ideas that have real competitive advantage, solve a burning problem and have a chance of implementation. If a new idea can’t deliver the table stakes (key benefits) and if the idea is not different from the competition, it should be killed. Unfortunately, it seems that many organizations are relentlessly pursuing ideas that will never deliver any significant value, either to customers or themselves.
Unaware or Disinterested in the Innovation Process
Over the last couple of years a number of new books have explored the topic of innovation.
These references offer valuable insight into why we struggle with innovation and what a new approach might look like; seems that a commitment to the right process matters. Like diets, fitness, smoking cessation and business strategy implementation, the innovation process requires dedication, preparation and commitment. We only get out of a process or plan what we actually put in, and expecting day-to-day business operations to drive major innovations (versus a separate team), is like expecting the pick-up hockey league to win the Stanley Cup.
HOW TO INNOVATE: Four Different Approaches
So where to look for help? Similar to the range of definitions for innovation, there is a wide variety of methods for getting it done. However, almost without saying, the selection of the tool box should align with the nature of the innovation challenge. Are we looking for new competitive direction? [Kim and Mauborgne, Blue Ocean Strategy] Do we know the direction, but are struggling with implementation? [Govindarajan and Trimble, Other Side of Innovation] Do we have real competitive advantage? [Wendy Kennedy, So what? Who cares? Why you?] What really needs to be fixed? [Lawton, Customer-Centered Culture] Regardless of the approach, our success will depend on our commitment and follow through.
In the Blue Ocean approach, Kim and Mauborgne propose that we should “systematically look across established boundaries of competition and reordering the elements to serve new markets where new demand is created. The authors pose 4 critical questions to help us identify new market space and opportunities:
1. What factors that the industry has taken for granted, can be eliminated?
2. What factors should be created that the industry has never offered?
3. Which factors should be raised well above the industry’s standard?
4. Which factors should be reduced well below the industry’s standard?
In Creating a Customer-Centered Culture approach, Rob Lawton offers a number of robust themes.
1. Organize everything by specific products and classes of customers; without these we can get our assumptions about value propositions wrong
2. Performance, perception and outcomes are the basis for customer satisfaction
3. Customers are always loyal to outcomes, not process
4. Always assume customer expectations are unmet
5. What me measure is what we value
6. Process improvement not positively experienced by customers is a competitive mirage
7. Vital lies are constraints on any change initiative.
An understanding of Lawton’s framework is critical to any innovation; innovation starts with an understanding of prioritized [product] outcomes, with a goal of making these easier to achieve or avoid. Lawton offers the tools to do this.
Vijay Govindarajan and Chris Trimble provide a comprehensive guide for solving the [innovation] execution challenge. Their 2010 book, the other side of Innovation, provides a road map to 1) Build the right team for an innovation initiative, and 2) run disciplined experiment. The first part addresses who will be on the team, how it should be structured, and how it can partner with ongoing operations. In the second part they talk about testing assumptions, translating results, measuring progress and combatting sources of bias.
Wendy Kennedy in So what? who cares? why you, propose a handful of steps to commercialize new technology ideas. And of course, if we stretch our thinking just a little, we can apply this approach to any business process or social invention.2
1. Scope out your idea in clear and simple terms; if you cannot communicate your idea in plain language, you have a problem]
2. Frame your idea in terms of the business problem being solved (and ideally it represents a “bleeding from the neck problem”).
3. Pinpoint the sustainable competitive advantage that makes your idea distinct
4. Build a financial model that is defendable
5. Pitch a compelling value proposition to a business backer or customer (and he or she might be in the next cubicle)
Kennedy sets the entrepreneur or innovator up with the information he/she needs to examine the value proposition around his/her proposed innovation. And if there is no value proposition that we can execute, there is no innovation, merely ideas and inventions. Don’t give up, but stop beating dead horses.
To sum up, as Randy Thompson, an Alberta based venture capitalist says, “it’s never the idea that really matters, it’s all in the execution.”
Andrews, Peter, Five Barriers to Innovation, IBM Global Business Services, 2006
Fairbrothers, Gregg and Winter, Tessa, From Idea to Success, McGraw Hill, 2011
Govindarajan, Vijay and Trimble, Chris, the other side of innovation, HBR, 2010
Heath, Chip and Heath, Can, Switch, Random House, 2010
Kennedy, Wendy, So what? who cares? why you?, Wendy Kennedy, 2006
Kim, Chan W. and Mauborgne, Blue Ocean Strategy, HBR, 2005.
Lawton, Robin, Creating a Customer-Centered Culture, ASQC, 1993.
See for example - Govindarajan and Trimble, “the other side of innovation,” HBR, 2010; Fairbrothers and Winter, “From Idea to Success,” McGraw Hill, 2011; Kim and Mauborgne “Blue Ocean Strategy,” HBR, 2005; Andrews,
Peter, IBM Executive Technology Report, “Five Barriers to Innovation,” IBM Global Business Services, 2006; Heath and Heath “Switch,” Random House, 2010.
 The Kennedy methodology is what NABI uses. We complement Wendy’s work with the tools provided by Lawton and Vijay and Goldsmith.