Makinginnovationmore

I'm going to reach for one of those grand unifying theory type of thought experiments today, connecting what Carl Sagan said about science with what we believe to be true about innovation.

Sagan had a wonderful way of explaining science.  I especially enjoy what has come to be called the "Baloney Detection" kit.  You can see the entire discussion of the Baloney Detection kit on the wonderful Brain Picking site (which you should visit regularly for its expansive look at a whole host of topics).  Sagan introduced his Baloney Detection kit to help people make decisions about science, but we can also use a lot of his nine tools to ask questions about innovation as well.

Sagan's nine rules, roughly stated, are:

1. Independent verification of "facts" - no secret knowledge, no opinions
2. Encourage debate from all perspectives
3. Arguments from "authorities" carry little weight.  In science there are experts but not authorities.
4. Test multiple hypothesis rather than selecting the first answer
5. Don't become overly attached to a hypothesis because it is yours
6. Quantify whatever is possible.  Vague hypothesis and qualitative reasoning are open to interpretation
7. Every link in the chain must work
8. Use Occam's Razor - the simplest answer is usually the best
9. Test your hypothesis and ensure others can validate it

What would happen if innovators adopted these rules?

Facts not opinion.  First, we'd agree to always share information openly about our ideas.  There would be no secret insight, no preferred perspective, and we'd debate ideas based on the information at hand and the ideas' merit, not on someone's secret knowledge or opinion.  Sagan would suggest that innovation should include research, to gather facts and share those facts, rather than simply based on opinion.

Debate from different perspectives. Next, innovators would work in cross-functional teams to share different perspectives about customer needs, internal capabilities and the challenges that need to be solved.

Openness to new ideas.  Innovators would finally overcome the burden of history and experience.  Too often good ideas are rejected because authority figures reject them, rather than understanding that past experience and information are subject to change and disruption.

Conceiving and testing multiple ideas.  Innovators would understand that experimenting and testing several ideas or hypothesis is important, and would resist the demands to rapidly converge around one idea.

Clearly we could go on , describing how Sagan's rules for evaluating scientific claims can also enlighten how we develop and manage ideas.  Which should suggest a couple of things to innovators and the people who manage them:

1. Innovation shares a lot of methodology with scientific inquiry, which means it can be taught, and can be managed to some degree
2.  Innovation is a discipline that can be reduced (to some extent) to a set of practices and "rules" - these are just more elastic than other practices and rules
3. Sagan's recommendations are good practices regardless of the "discovery" - whether your team is cracking the genome for a gene that causes cancer or exploring customer needs to solve consumer financial issues.  
4. Past information, experience and the figures that rest on this information (the authorities) often resist new insights and information just at the point where they become irrefutable.  Look no further than Galileo.  Innovators need to understand how to make their case effectively without judgment, and "authorities" (read managers, decision makers and executives) need to learn to look at new ideas with less prejudice and more openness.

Like many other hyped and highly anticipated phenomena, innovation has reached its saturation point, becoming a constantly used concept that simply isn't delivering as much meaning and value as has been promised.  That's not to say the hype or potential impact of innovation isn't true.  It's just that, as with any other new technology or capability, the advocacy gets ahead of the reality.  There are several reasons we should stop talking about innovation, a few of which I'll share in this post.  Note that I'm not recommending we stop doing innovative stuff, or stop building innovative skills, or stop hiring innovative people, or stop taking on uncertain but interesting innovation challenges.  All of that should still go on.  But, like the folks who love Fight Club, we should learn the first rule:  nobody talks about Fight Club.  But the reasons are very different.

First reason:  it's passe

The first reason we should stop talking about innovation is that it is passe.  Everybody knows that innovation is important, and equally everybody "knows" that it is unusual, infrequent and difficult.  Thus, the more we talk about innovation, the more it becomes a poorly defined word and concept that everyone has heard of and everyone is already "over".  We run a significant risk of weariness and worse, cynicism if we don't stop talking about it.

Second reason:  it's meaningless

"Innovation" as a word had a tremendous amount of power, once.  But it's overuse and intentional misuse has led us to the point where innovation means whatever the speaker wants it to mean.  While true innovation is complex, with many subtle differences and a range of potential outcomes, we've mostly limited it to incremental changes to existing products, while telling fairy tales about the impossible disruptive innovators like Apple, who must require some magic pixie dust to achieve those incredible innovation outcomes.  Too often corporate executives declare a new product or service "innovative" because that meets their needs, regardless if there's anything new or innovative about the offering. Thus, the word and concept has lost a lot of meaning.  You shouldn't be talking about innovation unless you can define it.

Third reason:  it's really about the customer and the outcome

Innovation is in the eye of the beholder, frequently acknowledge by purchase or acquisition.  While we in the corporate world may call something "innovative" the real measure is the product or service impact on the customer and the competitive landscape.  If customers and competitors shrug their collective shoulders at what you think is "innovative", then there's a good chance that you don't know what is innovative (see reason two).  We need to stop talking about what's innovative, and start talking about the measurable impact new products and services will have.

Fourth reason:  it becomes an ends rather than a means

Innovation is simply a tool to help you achieve outsized growth, profits and differentiation.  These need to be your targets, and innovation a capability to help you achieve these goals. Far too often, innovation becomes the ends rather than the means.  We want to demonstrate that we are innovative in activities rather than in outcomes.  The more we focus on "innovation" and the less we focus on the results, the more innovation becomes important and the more we distract from or obfuscate the specific ends and means.

What's true is that most corporations don't really care how they achieve goals like greater profitability, increased revenue and significant differentiation.  It turns out that one really effective way to achieve those goals is through innovation.  But what get's lost in the conversation is how much innovation activity contributes to real profits, revenue or differentiation success.  When we start framing our goals in this way, HOW we achieve them becomes less important.


When we stop aggrandizing the tools and start highlighting the purpose we hope to achieve, the goals we hope to reach, we'll finally put to right the balance between talking about innovation and actually accomplishing important corporate objectives and goals.

Hmm.  I bet the post title got your attention, but of course in this modern age of digital content we bloggers need headlines that pop through all of the noise and gain attention.  It helps, of course, that I'm of the opinion that the headline is provocative, and has, as Kissenger once said, the added benefit of being true.  Innovation, as practiced today in most corporations, is far too "easy" and commercialization is far too difficult.  What if that statement were reversed?  What if innovation was challenging and difficult, and commercialization were easy?  Let's explore, shall we?

Innovation is easy, commercialization is difficult

Now, let's get our language straight.  When I write that "innovation is easy" what I mean is that innovation as practiced in many corporations is rapid, inexpert and quickly converges on a simple solution.  Corporations assign teams without skills or experience, rapidly conduct "brainstorming" exercises based primarily on current opinion or past experience and move as quickly as possible to present a small handful of ideas to a wary executive team.  Innovation rarely has the preparation, commitment or effort applied to it to really succeed.  To many people, innovation appears to be a couple of meetings where they apply some unusual creativity tools, write some crazy ideas on a flipchart and return as soon as possible to their regular work.  Innovation is a vacation from the day to day grind, but isn't really expected to create meaningful results.

Without training, without skill development, without meaningful facilitation and without a well-defined scope and expected outcome, innovation is easy.

But commercialization is hard in this setting, for several reasons.  First, since there's not a lot of compelling new ideas, the existing products must produce more revenue and profits than initially expected.  Without a good pipeline of new solutions, the old solutions become more important, so companies look for methods to extend product life and add a few new features to existing products. This crowds the product development process and eliminates room for new concepts to enter.  Second, since the few "ideas" that do make it to product development and commercialization are so poorly developed and defined, a tremendous amount of product definition that should have been done previously must be done in the product development and commercialization phases.  Third, as the product development and commercialization teams get burned by inadequate or poor concepts from the innovation activities, these teams downplay and "back burner" new concepts and focus on existing products.

As long as innovation is easy (and the results are poor) commercialization will focus its attention on existing products and commercialization will seem difficult for innovators.



Let's now consider the alternative, where innovation is "hard", and commercialization is easy.

When I write "hard" I mean that innovation activities require careful planning, deep commitment from innovation teams, building skills and doing the work necessary to really generate great, valuable ideas.  There is a sense of understanding market trends and competitive actions.  Innovation teams deeply consider customer needs and emerging opportunities.  Internal ideas and external intellectual property are evaluated.  Prototypes are built, minimum viable products are constructed and tested.  Consumers are quizzed about the solution and the value it provides.  Specific product recommendations are made based on consumer feedback, confident ideation and product requirements.

This is hard work, and requires a deep commitment, skilled and trained people, an understanding of the process and the rationale for committing to this work, as well as financial and human resources.  Innovation becomes more than a few sessions with a flip chart but an actual planned exercise to come up with game changing solutions, not just a few haphazard and interesting ideas.

If innovation is done effectively, can that make commercialization of the great ideas easier?  I'm certain the answer is "yes" because we've seen this in action with our clients.  Product development and innovation become simpler for several reasons.

First, a trust reason:  product development teams, marketers and others involved in commercialization have far more trust in a product or solution that's generated from a defined innovation process, which has established its seriousness and its capability.  Rather than carefully considering and then relegating ideas to the back burner, priorities are reworked to accelerate good ideas to market faster.

Second, a thoroughness reason.  If the hard work is done in the innovation phase, product development and commercialization can do what they are supposed to do in their phase, rather than spend time reconsidering and reworking the product definition and requirements and confirming consumer demand.

Third, a pipeline reason.  If there are really compelling ideas that customers are clamoring for in the innovation pipeline, that can lead to more growth, more revenue and more profit.  This means that executives will prioritize good, new ideas over older, tired existing products.  Every firm wants a fresh, compelling but profitable pipeline of new products and services.  As soon as the "hard work" of innovation demonstrates it can create a pipeline of these solutions, the emphasis will be on accelerating them to market, rather than cautiously testing a small handful.

Resetting Expectations

For too long we've humored ourselves that a bare commitment to innovation would produce extraordinary results.  You can witness this snide commitment in IBM commercials where entire "innovation" teams were lying on the floor in the dark, coming up with new ideas.  Innovation is the most valuable, and probably the most difficult work within an organization, yet corporations constantly undersell the effort, under-staff it and move far too quickly and far too inexpertly.    This is why Peter Drucker once said that marketing and innovation produce results, all the rest of business activity is costs.

We'll know when corporations are serious about innovation not based on their words, but on the emphasis they place on doing innovation right, doing it well and doing it effectively.  When innovation teams complain not about how difficult it is for ideas to be accepted, but how hard their executives work them to get the right ideas.

Over the last few weeks I've been working with a client that is struggling to fully implement a new strategy that introduces innovation as an important component of day to day operations.  The company has a strong executional culture and has been successful in the past, but recognizes the need to do more innovation and more consistently.  As you might think, I've been working with them on their rewards, motivations, language, communication and other factors that build or sustain culture, trying to shift corporate thinking to embrace more innovation.  What's become apparent for me, one of those "ah-ha" moments, is that culture has different incarnations, and each must be changed for innovation to be successfully grafted into an existing culture.

Cultural Incarnations

I saw incarnations but we could call the different aspects of culture almost anything - faces, personalities or other descriptors.  Let's examine a few and talk about what's valuable and important about each, and why they matter to innovation.

One incarnation of culture is about how we treat and interact with our fellow employees. In this regard, culture signals what we should respect and value about our fellow employees, how we interact with them, what information we share and what we withhold.  This aspect of culture is important for day to day operations, and for innovation as well.  People who are rewarded for withholding innovation, or creating cliques, are often seeking awards and achievement for themselves, and will rarely share ideas with others.  Conversely, when people recognize this behavior they will not communicate or share good ideas, for fear that their ideas will be co-opted and others will claim the benefits and rewards.  A culture that encourages the hoarding of ideas or information and restricts honest and clear communication may be able to achieve efficient operations but cannot achieve good innovation.

A second incarnation, and perhaps the one I've been having the biggest "ah-ha" about lately, is the aspect of culture that instructs and directs how work gets done.  Far too often we see corporations asking, requesting and even demanding innovation from their staff, but failing to provide new tools, new techniques and new skills to help the staff create the new deliverables.  When asked to produce something new and different, but without new tools or a description of the new deliverable, teams revert to what's known and trusted.  And what's known and trusted are existing tools, existing ways of thinking and existing culture.  We cannot simply demand innovation without a corresponding effort to provide new tools, new skills and describe new deliverables.

How culture, tools and skills are linked

When we roll out a new "innovation culture" it must of course provide opportunities for exploration and encourage risk taking.  Additionally, it must reward these activities and encourage open exchange of information and ideas. These factors all involve different aspects of culture that focus on the "what" and the "why" of innovation.  But we often neglect perhaps the most important aspect of culture - the "how" - how things get done, what tools should be implemented, what activities and skills must change in order to deliver new expectations.  Rolling out an innovation culture without a simultaneous introduction of new skills, new tools, new decision making and examples of new deliverables simply places strain on the existing culture and existing tools, and leads to heroic but ultimately doomed efforts to create new ideas in a stale, traditional environment with inadequate thinking and tools more suited for efficiency than innovation.

Innovation Failures

So, in the final analysis we can deconstruct what happens when executives demand innovation, yet fail to introduce new skills or tools or describe how an innovation imperative may change existing processes, decision making and skills.

1. Executives call for "more innovation" but don't describe how this new strategy becomes a reality in day to day operations.  What should change, what should be introduced, what should be eliminated?
2. Managers hear the call for innovation but don't find accompanying directions for new activities, don't gain more resources or skills.  Innovation is avoided if possible or conducted with less than full commitment within existing culture, processes and constraints.
3. Managers are careful to keep innovation within tightly controlled boundaries, never interfering or upsetting day to day operations or distracting teams from doing their day jobs.
4. Innovation teams are frustrated because they see the opportunities for larger, more disruptive ideas but they are hemmed in by tools, processes and deliverables that are suited for efficiency rather than innovation.
5. Innovation teams produce "innovations" that look remarkably similar to existing products and services.  The new solutions aren't differentiated and don't produce a lot of value, leading executives to think that their teams can't innovate or that innovation is a wasted exercise, rather than drawing the proper conclusion that the teams needed new culture and new methods to create new products.
6. Managers are rewarded for keeping the day to day operations efficient and effective.
7. Executives are happy their teams continue to execute on a quarterly basis but are frustrated by their inability to drive new growth and create new products
8. The cycle repeats

What's worse is that in many companies the different aspects of culture will adopt innovation at different rates.  Sometimes the language and intent of innovation will catch fire, and you'll find many people talking about innovation and trying to conduct it, but the portion of culture that deal with decision making, tools and day to day processes haven't been infected by innovation, so the passionate teams run into dispassionate, outdated and inadequate systems which don't understand what innovation is or how to manage it.




 You see, if your culture wasn't built with innovation as a vital component, then you face a significant challenge to fully introduce innovation as a factor in every aspect of your culture, from your decision making and language to your reward systems and so on.  Many companies are working on these aspects of culture.  But what will ultimately deliver success is infecting your operational culture with the capabilities, tools, methods and skills that make doing innovation more straightforward.  Talking about innovation, even sharing the same language is valuable, as is considering the rewards for innovators, but providing the tools, skills and desired outcomes is what will help teams actually deliver.

There's an old joke about perspective and laziness I love and have used before on this blog, because it illustrates many of the challenges (and opportunities) of corporate innovation.  The joke goes that a young man steps out of a bar, and spies another person, obviously drunk, peering intently at the sidewalk under a street lamp.  Curious, the guy just leaving the bar goes over to the drunk and asks "what are you doing?"  The drunk answers "I'm looking for my keys".  The first guy decides to help and scans the area around the light post, but can't find any keys.  "Are you sure you lost them here?" he says to the drunk. "No" says the drunk, pointing at a dark alley.  "I lost them over there I think".  The sober guy, frustrated, says "well, why are you looking over here?".  The drunk replies, "because the light is better".  This analogy aligns so well to what corporate America does when it comes to a focus on innovation - intent discovery on things that don't matter, while purposefully ignoring the factors that must change to make innovation successful.

Intent focus on the unimportant

In an effort to be seen doing something, when innovation is a priority most organizations will respond with alacrity, gathering teams to conduct idea generation.  There will be hack-a-thons, crowdsourcing, open innovation, encouragement of "wild ideas", pizza parties and a host of other short term activities leading to a small subset of interesting ideas.  These ideas will have been formed by people with little innovation experience, formed in a setting with information about customer needs, competitive actions or market trends, and managed by people whose overriding goal is to get to a solution, any solution, as quickly and cleanly as possible, so that everyone can go back to doing what they ought to be doing: efficient execution of day to day operations.

There is intent focus on getting to an answer as quickly as possible, no matter how incremental or absurd the answer is, because the focus is on completing an innovation activity and getting back to what you regularly do.  Generating and implementing interesting, disruptive ideas is not seen as especially important, because few people believe the ideas will see the light of day after the idea generation events.  Therefore, everyone focuses like crazy on the idea generation, safe in the knowledge that they won't be called on to actually attempt to implement them.  The focus is on successful completion of the idea generation activity, not on actual implementation of new ideas.

Thus corporations emphasize the unimportant and rush away just as the real work begins.

Ignoring the difficult but important

Like the drunk at the light post, focusing on the well-lit spot at the curb rather than where the keys actually are, most corporations are too busy to pay attention to what really matters, and what blocks innovation.  There's good reason for that willful blindness, because what holds back innovation is the overriding focus on execution and efficiency baked into corporate culture.  In order to get more engagement with innovation and to do innovation more effectively, you've got to infect the culture with new ways of thinking, new perspectives, new tools and new processes and reward systems.  Otherwise innovation is a slap-dash bolt-on activity that cannot, will not, result in anything valuable.

But this truism indicates that to do innovation well, and especially to do innovation consistently over time, we have to focus on the core components of the business and change or adapt them to a new operating reality.  Most innovation teams are content to focus on idea generation, prototyping or other short term, simple activities, all the while realizing that the corporate culture and ways of investing and decision making aren't going to approve or validate their ideas.  Until and unless we focus on the culture first and foremost, no firm or team will be successful at innovating.  In other words, we've got to go look for the keys in the dark alley, no matter how much harder or more challenging it will be to do so, because that's where the real value is.  In plain language, until corporations address their overriding focus on efficiency and the inertia and risk aversion built into corporate culture, it will be exceptionally difficult to innovate.

So why not start working on the biggest barrier to innovation - corporate culture?  Most CEOs will admit their cultures present barriers but they also know how difficult changing a culture is and how long it will take.  Which leads to another old saw:  you can eat an elephant one bite at a time, but you have to start sometime.  We can influence corporate culture in small, consistent ways that are constantly reinforced.  Unless a culture is under dire, immediate threat of extinction, slow, consistent change is the only way to influence a culture.

Creating culture change that influences innovation

I was asked recently by the COO of a large corporation how to impact the culture so his teams could get more innovation.  And I responded by asking how his product team leaders were compensated, what they thought their jobs were and what they were expected to deliver.  If the employees believe the purpose and goal of the company is efficient execution of day to day operations, and that's how they are compensated and rewarded, then that's what they will generate.  And if they understood that their jobs require a balance between efficient execution while constantly looking for improved ways to execute and disruptive solutions to improve their customer's business, and if they were compensated for customer delight and for solving problems customers recognize and don't know they have, then  companies will innovate.  Today, in the face of monolithic cultures, people follow what the culture dictates.  For innovators, the culture follows what employees and customers need. Far too often innovators are shackled to culture, rather than the other way round.

Right now, in most organizations, the people follow the culture because it has power.  Corporate culture has history, it has stories, it on-boards new employees, it dictates how things get done.  Employees have to be crazy to work against corporate culture, so people follow a culture, long after it has outlived its shelf life.  What we need are leaders and managers who create new solutions, and force the culture to follow the needs of customers and the intent of good leaders and managers.

 As business needs, competition and customer demands change, cultures must change and adapt with them, keeping what's good and beneficial but adjusting to new competitive realities. It's interesting that the factor we should place the most emphasis on to improve innovation is what we leave till last, if we focus on it at all, and the things we focus on first are the easiest to do but have the least impact on transitioning an idea from concept to product or service.

Exploiting and exploring are two terms my good friend Paul Hobcraft uses to delineate the activities most corporations SHOULD be conducting every day.  Exploiting existing models, processes, markets and frameworks to obtain all of the available revenue and profit possible.  This concept of exploiting existing models and existing reality is something that today's corporation is relatively good at doing, if not completely optimized to do.

Exploring is a completely different matter, because exploring requires looking outside or beyond existing markets, customers, needs and frameworks.  Exploring means ignoring or rejecting existing competencies and realities to discover some new opportunity, challenge or need, or introduce some completely new product, service or model.  This side of the equation is typically ignored, because it conflicts with optimal, efficient exploitation, when in fact it should simply precede it.

A brief history lesson

The idea of a marriage between exploration and exploitation is not new, in fact it is constantly repeated throughout history.  In the distant past people clamored to be explorers, to go where no one else had gone, to discover what no one else had discovered.  Of course most of those explorers where fascinated by discovering other lands, full of minerals (gold), people (slaves) or other quickly harvested and valuable goods.  In other words, most of the explorers weren't exploring merely for the sake of finding new lands.  They were intent on exploiting their discoveries.  They simply lived in a time when the connection between exploring and exploiting was more explicit, and in a time when the tools and capabilities to fully mine an existing model or reality weren't fully developed, or were limited by governments or religious institutions to only a select few.

Today, we live in an age where most of the "exploration" seems expensive and risky.  When we place exploration in the context of new lands or new worlds, we frequently talk about investigating harsh climates like Antarctica or off-world sites like the Moon or Mars.  A lot of the easily explored realms, at least where mineral rights or land rights are concerned, have been completed.  But what we haven't lost, but so often fail to use, is the exploration of the mind.  We can explore new opportunities, customer needs, technologies, markets and so much more without leaving home, and in those explorations discover completely new avenues to wealth and riches.  But the traditional exploration tools don't seem to translate, and increasingly we've become accustomed to improving exploitation capabilities instead of exploration capabilities.  That's because there's almost always a way to extract more cost from an existing process or model, and the risk is lower than attempting to discover a new solution.  We are experts at mining existing models, realities and frameworks for incremental gain, and that knowledge and experience has caused us to lose the desire and willingness to explore in even a marginal, half-hearted way.

NASA as an example

We used to be explorers.  Just over 50 years ago we entered the space race, fueled by the fear that the Soviets would beat us to the Moon.  We placed a man on the Moon and returned him safely, just 6 years after Kennedy made his demands.  We were moving into an exploration phase, discovering what was out there.  And suddenly it all came to a halt.  From a space perspective, the challenges to live on another planet, or even visit another planet, seemed too daunting, so we stopped exploring, and to some extent have even lost the capability to explore, relying on others to do it for us.  Space got too big, too expensive to explore, and instead we now simply seem to exploit the knowledge that we have, rather than dreaming big.

In the same way, thanks to cost cutting, outsourcing and financial engineering, we've managed to exploit existing business models, markets and customers for years, leaving the exploration to the companies on the fringe - the new, the discredited and the failing.  Increasingly, large firms like those in the pharmaceutical space will be marketing and commercialization engines, rather than exploration and discovery engines.  They cannot sustain the pipeline of blockbusters necessary to continue profits, so they'll acquire explorative firms and startup companies willing to explore.    This begs the question of whether size and inertia leads to less and less exploration, and more exploitation of existing models.  I'll leave that to other analysts, but I can say that larger firms struggle to innovate precisely because of their relationship, if not protection of, existing business models and markets.

These ideas of exploration and exploitation don't have to be mutually exclusive, and in fact for eons they were two sides of the same coin.  The Romans, the Huns, the Spaniards and many others explored and conquered new lands with the express intent of exploitation.  In those days the value was found in easily transferable wealth - gold, people, land - primarily tangible assets.  Today, exploration is about discovering opportunities, needs and ideas - primarily intangible assets - which conflicts with a vestigial history that values tangible assets over intangible assets that exists even today, when firms like Airbnb and Uber demonstrate that valuation is not necessarily based on physical, tangible assets but on ideas, networks and value propositions.


At a minimum, large corporations need to balance the investment, resources and funding for exploiting existing models and processes with the resources and focus on exploring new opportunities.  This will mean refocusing investments, building new skills, changing corporate culture and reward/compensation models, none of which will be easy to do.  But the alternative is a slow defensive death as other more explorative firms discover new opportunities that larger firms cannot match.  If efficiency is the best exploitation of an existing market or business model, then innovation is the best exploration of new models and realities, and both skills must be present in a vital competitive organization that hopes to grow.

For years people have debated the reasons why some companies innovate and others don't.  To some extent, the business models and corporate strategies dictate where and how much innovation is done.  For example, when I worked at Texas Instruments, the strategy was to drive costs out of products that other firms created.  No one knew better how to drive the costs out of the manufacturing process for DRAM than TI.  Yet, within the DRAM and microprocessor markets and some other product lines, there was very little product innovation.  We created very little that was new, preferring instead to drive out costs once someone else had established the market.  The folks in Houston who were working on DSPs changed that model, and arguably TI became a product innovator because of DSP.  But much of the strategy and business model that TI had in place limited innovation, on purpose.

Other factors have included the state of the industry, the amount of regulation, the maturity of the organization and a host of other factors.  I see from Twitter today a new report from HBR that argues that companies that treat their workers "well" are often innovators.  Hidden in this research is the assertion that unionized organizations tend to have less innovation.  The author contents this is because of worker-management contention, inherent in a unionized company.

What so many people get wrong about why people and organizations innovate is that they expect innovators to be quantifiable and measurable. They expect innovators to respond to external factors and influences, they expect innovators to be extrinsically motivated.  Therefore, we should see lots of pinball machines and free food (like a startup), lots of rewards and recognition.  Corporations should be able to create an environment where innovators want to work, and this theory is correct.  But what it misses is that the environment is an external factor that plays a part in attracting and sustaining an innovator.  But what you'll find true about most innovators, and innovative companies, is that they have something that is difficult to measure and difficult to create externally.  They have passion to solve a challenge or problem that others think is difficult or insurmountable.

And, yes, I've introduced a soft, qualitative and almost impossible to measure or define concept into the discussion as perhaps the most important aspect.  Sorry, but not everything about modern business and management can be passed through scientific filters.  People are still very important to modern business success, and they can be unpredictable and play against stereotype and all of Frederick Taylor's scientific principles.  And that's almost always the case when we talk about innovation.

Other consultants have rightly noted that you cannot "mandate" innovation.  I cannot force an uninspired, efficiency-oriented workforce to suddenly and consistently create disruptive ideas, and even if I could they probably wouldn't be able to implement them.  What I can do as an executive or manager is set the stage, create the conditions where innovation and innovators can thrive. These are the external factors that may establish appropriate conditions, but there's an internal motivating factor as well that must be addressed.  And it has to do with the core principles of your organization, what you stand for, what you believe must be fixed or changed.  Your corporate principles and passion should convey to innovators that you want to fix important challenges or problems.  Then, if you are lucky, the combination of preparedness and opportunity collide.  You'll find or attract people who have a deep passion for the challenge or problem you are trying to solve, and you'll get a lot of innovation.

You see, most people work at a company for the pay, or the benefits, or the prestige of working for a company, or a myriad of other reasons.  Innovators work to solve challenges, address key gaps, promote interesting ideas.  Passionate people are hard to manage and hard to please, which is why most organizations have so few of them.  But you need passion, which creates energy and enthusiasm, to overcome all the barriers and hurdles that will be placed in the way of an innovation activity.  Only passionate people will resist narrowing the scope, reducing the expectations and accepting the status quo.  Only passionate people will take the time to think through the range of options, do the necessary homework and research to create really interesting ideas.

Given the choice, I'd spend more time clarifying my corporate goals and directions, ensuring what Simon Sinek calls the "why" is very clear, and recruiting people who have deep passion to create new solutions and to change the status quo rather than building an innovative environment for uninspired people.  Of course the perfect world is the combination - a corporate environment that promotes innovation, establishes a welcoming environment for exploration and divergence, rewarding innovators, married with a team of people who have real passion for the challenge and the problem.  Then you'll get real innovation.  The problem is:  building the environment is difficult but achievable.  Identifying, recruiting, hiring and especially managing passionate people is really difficult, and requires a very clear set of strategies and purpose.  The management effort alone to encourage, sustain and direct passionate people is itself a distraction from the day to day operations.


In the end passion for a particular challenge, gap, opportunity, technology or need is far more important for innovation than culture or environmental factors or rewards.  Passionate people don't care if the management team treats them "well" as long as they get to work on the problems and have a chance to innovate to solve them.  They don't care about pinball tables or "Fed Ex" days or anything else, just the chance to change the world - "put a dent in the universe" as Jobs would have said.  And this is why major corporations will struggle with innovation, and why inventors and smaller organizations will always be more innovative - it's a management chore to deal with passionate people, and they tend to be very single-minded in their pursuits.

Lately I've worked with or encountered a number of corporate clients who are trying desperately to innovate.  Their executives and management teams recognize the importance of innovation, and even include innovation as top three priorities or as a component of the annual strategy.  What's worse, unlike in the past, executives are starting to demand action on innovation, rather than simply use it as a speaking point or throw-away line.  So, mid and senior level managers are starting to wonder, how, exactly, can we "do" innovation and keep the everyday activities and "business as usual" processes running effectively?  Especially in an organization where the vast majority of people are already working 50 hours a week, and spend the majority of that time in back to back meetings.

I've written before but it bears repeating, innovation, that is, thinking up, designing and creating something new and different that drives value for customers, isn't going to happen in your day to day business as usual environment.  The efficient, effective environment isn't a good development platform for new thinking and new ideas.  It isn't designed or constructed to conduct discovery of new ideas.  Your existing product or service development programs are likely overworked and will reject ideas or solutions that require new capabilities.  In short, your day to day business as usual processes aren't going to welcome innovation work.  But I digress, since in your gut you know this already anyway.  We just both had to acknowledge it before we can move on to the real ideas.

Three internal innovation options
Once you've accepted that your day to day business as usual process, culture, reward structure, etc isn't going to accommodate innovation, you have three options:  force innovation to work within the existing confines and hope for the best, or design and develop a parallel system of innovation activities that embraces the processes, tools and thinking that good innovation requires, or adapt your existing business as usual models and processes to welcome more disruptive ideas and activities.  Of course there are other ways to get ideas, primarily from third parties or by acquiring intellectual property, and those are right for some situations and conditions, but this option is relevant only part of the time.

Working within existing confines

Let's be honest - we know what happens in this case because this is what most organizations try to do.  They want to learn new innovation tools but want to manage innovation within the comfortable confines and predictable outcomes of existing business as usual processes.  What this leads to is "me too" innovation, where the innovations are indistinguishable from existing products.  We already know this doesn't work, we already know the outcomes because most of us have seen this play before.

Parallel Systems

Perhaps the fastest way for an organization to do more innovation is to design and implement a team or process that works in parallel with the existing business as usual processes but isn't hampered by the existing constraints.  However, this typically means adding new people, learning new processes and the uncomfortable reality of two teams aiming at the same markets, one incremental and sustaining in nature, another disruptive and creative in nature, almost always at conflict, with two different goals or purposes.  The first team wants to sustain existing products and profits and not ruffle feathers.  The second wants to disrupt the market and shift business models, growing share and profits without regard to existing customers or expectations.  This model, when tried, almost always results in a collapse of the innovation team, but it is rarely tried since it requires so many additional resources.

Adapting existing Models and Processes

If you are going to do "in house" innovation consistently, I'll continue to argue that the most effective way to do that is to create an ambidextrous process that is scalable enough to manage day to day efficient processes effectively and to manage larger, disruptive ideas simultaneously.  Your people have the ability to manage both efficiency and innovation, and you don't need two disparate teams with wildly different foci.  You need one really good and agile team able to do both incremental and disruptive work.  But this requires a shift in talent and thinking, introducing and bringing us back to the "T" time of the title.  Because to adequately manage two different methods or processes within one team, you'll need:

Time - time to do the "business as usual" stuff and time to do the innovation stuff. Right now, in the absence of any direction or balancing of duties, all of a person's time is given over to efficiency and current products and processes.  You simply cannot do good innovation without giving people time to think, discover, investigate ideas and develop the ideas.  Employee time is your company's most valuable asset.  How is it being used to help drive future revenues?

Talent - you'll want to consider who is part of the product concept, product development and product realization team, and consider it an end to end capability. Today the "front end" is artificially divorced from the "execution" engine, when they should be firmly fused if not iterative.  The talent for the team needs to embrace people who are discoverers and ideators as well as people who are execution oriented.

Traction - there is so much embedded inertia and intellectual and psychological barrier to innovation that without a lot of momentum and traction, innovation isn't going to get done.  We create traction by demonstrating how important innovation is, by demonstrating a definitive plan of action, by funding innovation, by measuring it and by rewarding results.  Without traction, it's much easier to simply revert to the frictionless world of efficiency.

Training - Developing an end to end process that incorporates divergent thinking, exploration and ideation with product management, development and execution is going to require developing new skills and introducing new tools.  There are a lot of product development and execution tools that can actually accelerate this, including ideas like Agile, Lean, MVP and so forth. But these need to be balanced with divergent thinking, exploration, discovery and insight to customer need.  Blending these skills isn't impossible, but will be difficult until you see them all as piece of one greater capability.

Transparency - Product development and product execution are transparent.  We have very specific ways of measuring the development cycle (Stage Gate/Agile) and the commercialization (revenue, profits).  The Front End of the product cycle however is exceptionally murky.  We need as much transparency, commitment, communication and clear strategy in the front end as exists in the "back end".

One other item to notice:  while blending innovation into your product concept to product commercialization process can be challenging, it doesn't have to be expensive.  Good innovation can be done inexpensively, and in many cases has an exceptional return on investment when done well.  And yes I've described it as product concept to product commercialization, but you are free to change the word "product" to "service" or "business model" and the same still holds true.


In the end there are three ways to innovate:  buy intellectual property from someone else, have a design firm or consulting firm generate and develop ideas for you, or develop the capacity for innovation in house.  It's reasonable to consider all three options, and sometimes one may be a better solution than another, given circumstances.  But all three are important and you need to consider how to build an in-house capability.  To do that successfully, think about innovation as simply another phase of product or service development, tightly linked to development and commercialization.  Then think about how to manage innovation and day to day operations within one framework, using the five "Ts" I've described here.

I've written before (and often) about challenges around clarity and communication introduce difficulty when corporations try to create new products and services.  Notice that for a blog about innovation, I didn't use the "i" word in the sentence above.  That's because I think corporations confuse the ends from the means, and in doing so create unnecessary barriers to creating valuable products and services.

First, let's get our thinking straight, because clarity and consistency matter.  In descending order of importance, executives want profitability, cost control, revenue growth and product differentiation. Many are very good at cost control and will accept profitability achieved by decreasing costs in the face of flat revenues.  A real win increases revenues while holding costs flat.  Revenue and corresponding profit growth typically come from gaining more business from existing and new customers from existing products, or introducing new products and services to new and existing customers.  It's in this latter case (new products and services to new and existing customers) where we typically think of "innovation".  But note what executives and shareholders "want" - growing revenues and profits.  They are willing to get more profit by holding revenue flat and decreasing costs, but the real rewards come from growing revenues and profits.

Now that we've established relatively obvious base principles, let's ask the next important question:   how do we discover and create new products and services that existing customers and unserved customers want?  And here's where innovation becomes important, once we accept that only through creating interesting and valuable new products and services can a corporation drive new revenue and profits from new and existing customers.  Innovation is a means to an end, not an end to itself.  And this is what so many corporations and executives fail to understand.

When these corporations and executives ask their teams for innovation, the executives assume that their people know what innovation is supposed to do for the company, and how to create interesting new products and services that customers want.  There are at least three false assumptions in the previous sentence:

1. Mistaken assumption:  Employees know what innovation is supposed to do or the benefits it is supposed to create
2. Mistaken assumption:  Employees know how to create interesting new products and services
3. Mistaken assumption:  Employees understand customers unmet and unspoken needs and understand how to fill them

These mistaken assumptions lead to poorly framed and poorly executed innovation activities, which are compounded by a fourth assumption:  that employees have the knowledge, time, experience, familiarity with innovation tools and cultural acceptance to conduct a good innovation activity.  In reality, most teams don't understand or appreciate the commitment, time, resources or scope necessary to generate and realize really interesting ideas.

Yesterday I wrote a post about the need for executives to eliminate the "unknowns" when they want their teams to innovate.  If we call on people to improve their day to day routines, there are few unknowns.  They simply need to work more efficiently on the activities and processes that are familiar to them.  But when we call on people to innovate, there are a host of unknowns and uncertainties.  For example:  how much should we invest?  How do we gain the skills?  How do we prioritize existing projects and new innovation work?  How much risk and uncertainty will be tolerated?  These and other unknowns will haunt the team, and unless they are resolved quickly and effectively by a manager or executive, the teams will resolve them by reverting to existing norms and past experiences.

Perhaps one of the simplest, and yet most important unknown to address is a definition of innovation.  We at OVO often demand that our clients develop a consistent definition of innovation that can be communicated to teams within the organization.  This may seem somewhat pedantic or even silly, but until there is a common understanding of the definition of innovation, trying to understand what is "meant" by innovation and trying to deliver on that uncertain request is difficult.  Clearing up this first and perhaps most important unknown is important.

Thanks to UNC

Thanks to UNC we can see just how loose and distributed the definition of innovation is for senior executives. One of their executive MBA programs has recently asked senior leaders from a range of different companies to provide their definition of innovation.  You can see those different definitions by clicking here.  I hope you'll read these definitions, because they are instructive in several ways.

Note that I don't believe it's appropriate for each executive to provide exactly the same definition of innovation.  Circumstances, budgets and competitive realities are different across firms and industries, so the definitions will vary.  But note the range of definitions.  Some speak of improving the status quo.  Some speak of greater efficiency.  Some address customer experience.  Some are impossibly subjective.  Imagine trying to convey some of these definitions to an internal team!

There's plenty of definition out there

Whether executives want to recognize it or not, there are plenty of examples of definition of innovation out there.  Our general definition of innovation is:  people putting ideas into valuable action.  But we don't think you should stop there, because this is only a general definition.  It needs to be enhanced and qualified.

We can thank a number of different experts and agencies for helping us continue to evolve and improve a definition and establish scope.  But for some reason this good thinking is typically missed by corporations.  For example, we believe that a good definition should include the acceptable range of outcomes.  Doblin has helpfully established their "ten types" of innovation:  product, service, business model, customer experience, channel and so forth.  Whether you like this taxonomy or not is unimportant.  What does matter is that in your communications and definition you provide some definition as to what outcomes are valuable, because in the absence of any definition, all innovation is product innovation, and product innovation may not be necessary or even valuable to consumers.  When no definition is provided, past experience guides decisions, and that may not be the best framework.

Other analysts have provided us with the "three horizons" to help determine the amount of change we hope to accomplish with innovation.  So, we can say for example that in this project we are seeking incremental change to existing products, or in that project we want disruptive change.  Again, in the absence of clarity and communication, all innovation becomes incremental.

Next, we can consider the anticipated constraints.  Since innovation is a new and unusual activity, most teams will make assumptions about the resource and time investment.  They'll believe that the project should be accomplished as quickly as possible, with the lowest possible investment.  In following that train of thought they are likely to miss unmet needs and rely too heavily on existing processes, tools and decision making criteria.  We need to define and communicate how much risk, uncertainty and change we are willing to bear, and corresponding to that request, how much discovery, time and investment we are willing to commit.  In the absence of this communication, it will be assumed that any innovation activity, like Hobbes's definition of human life, will be nasty, brutish and short.

Delegating scope and decision making

When an executive asks for innovation but fails to provide definitions and context, it is as if he or she is simply delegating all of the strategic thinking to the team.  While a handful of people are likely to welcome this outcome, the vast majority of corporate teams are left in a state of confusion.  They are experts at executing clearly defined plans that follow past models.  They are not comfortable or experienced working with a nebulous scope to uncertain outcomes.  When confronted with this possibility the most likely response is to complete a project based on existing rules, templates and tools, which results in outcomes that look very similar to existing products and services.


In no other activity do senior leaders fail to provide clear goals, definitions and communication more readily or more often than in an innovation setting. The reason why this is true is relatively obvious - the vast majority of the time executives and senior leaders don't have to be very exacting with definitions and anticipated outcomes because the vast majority of the work is replicating existing products for existing customers in existing markets.  In other words, the team already knows what is expected.  It's gaining an understanding that innovation requires new definitions, new scope and better communication that will accelerate the pace of new products and services.  This is the first, and quite possibly, the most important unknown that innovators must address.

I'm sure the formula existed long before Donald Rumsfeld pronounced it, but every business faces knowns and unknowns.  We face the things we know, or think we know, about our business, the environment, the economy and customers.  Worst, we face things we don't know, unknowns about the future, consumer demand, new competitors and so forth.  What executives need to understand is just how difficult these known and unknown "unknowns" are when we talk about innovation.

Innovation - A theme, a mantra or a capability

For example, I think it's important to understand how individual employees interpret what they hear when an executive talks about innovation.  I think most employees pay attention to they things they know and are comfortable with, and take a "wait and see" approach about things that are unknown or unfamiliar.  Thus, when an executive talks about innovation, for many it is an unknown, and the first judgement that many must make is whether or not it is simply a buzzword that is a throw-away phrase, not meant to be taken seriously, or the demands for innovation to become integral to what people do.  Unless and until an executive says innovation will be integral, it will be ignored, because it is an unknown.

Then, no matter how many times an executive may have talked about innovation, he or she actually demands that staff engage in an innovation activity, all heck breaks loose.  Executives are inevitably surprised by this, but we at OVO usually aren't.  That's because the executive has broken an implicit agreement - you pretend to expect innovation and we'll pretend to work on it.  As noted above, as long as executives talk about innovation but don't measure the outcomes or demand time and resources, people are completely comfortable letting the executive talk about innovation.  But, when resources are overtaxed and all the efficiency gains have been realized, when people realize that the executives are serious this time about an actual innovation activity, well, the excrement hits the rotary oscillator.  Because the first question that their teams will ask is: OK, what's the priority? And second, what initiatives I'm currently working on get demoted?  Management, if its about anything, is about three important and interlocking themes:

• Setting clear objectives
• Prioritizing activities
• Providing appropriate resources

When executives move from simply talking about innovation to actually expecting it, they violate the first theme.  If for years your management has been talking about innovation but not implementing it, then it has established a clear objective:  innovation is a talking point, nothing more.  Therefore, the second and third themes are obvious:  no need to prioritize activities to include innovation and no need for more or different resources.  But when executives move from simply talking about innovation to actually expecting results, now the last two themes emerge.  Questions will inevitably arise about prioritization of other initiatives and the availability of resources.  Executives who demand innovation without thinking through these last two themes are simply kidding themselves and setting up a potential firefight within their own organizations.

Knowns and Unknowns

Why a firefight?  Because if we ask employees to do more with less, or improve efficiency, they understand what that means.  This request builds on a "known" - doing what you are already doing but doing it with less resources or with improved outcomes.  We simply exercise our "knowns" more effectively.  But when an executive or manager asks for innovation, we introduce not one but several unknowns:

• An unknown about the process - "how" do we innovate
• An unknown about the scope - "to what degree" do we innovate
• An unknown about skill - "with what skills or knowledge" do we innovate
• An unknown about time - "how long" do we innovate
• An unknown about risk - "what discoveries or exploration or failure is permitted"
• An unknown about the outcome - "what's an acceptable deliverable"

Talk about unknown unknowns!  Without all of this information, clearly and concisely communicated in advance and constantly reinforced, good people who are experts at conducting efficient existing processes are reduced to a circular firing squad, squabbling about potential goals, scope and intent.  Strangely, few are ever curious enough to simply ask the executive these questions; instead the team either debates them ad nauseam until the executive cancels the activity or makes their own, typically cramped interpretations that lead to delivery of look-alike results.

The first, most important innovation activity

The first, most important innovation activity that any organization can conduct is to get a clear understanding of the magnitude, scope and resource commitments for an innovation activity and the anticipated outcome and impact of the concepts.  While this seems simple in principle it almost never is, and without this communication and clarity teams can rarely do good innovation work.

Without this clarity, the innovation team faces far too many unknowns.  And when they face unknowns they resolve them in one of three ways:  choosing not to resolve them at all, waiting for someone else to resolve them and choosing to resolve them themselves.  Innovation teams will always choose certain over uncertainty, knowns over unknowns.  This means that eventually all innovation activity, in the absence of clear goals and strategy, will look exactly like an existing process, and will result in the development of products and services that closely resemble existing products and services, because these are "knowns".


Executives and managers who want more innovation will spend time with their innovation teams, constantly quizzing them about the unknowns, and doing their best to remove or eliminate the unknowns, or at least providing guidance on how to resolve an unknown.  Never leave a team to resolve an unknown by itself, because it will simply resort to an existing "known" and you've lost a significant innovation opportunity and reinforced an existing process or tool.

I rise today to praise Innovation Leader and Innosight on their publication of the 2015 Innovation Benchmarking Report.  I've only had the chance to read the synopsis, which is available on Slideshare, but it seems like an well-considered report, and I'm sure it's full of great analysis and observations.  The only real head scratcher, from my perspective, is what we are supposed to take away from the research.  After all, through all of the great graphs and parsing of the quotes and conversations, we are left with the conclusion that a) most corporations are at a relatively nascent state when it comes to innovation capability and b) a lot more work is needed to build these capabilities and sustain innovation as a competence.  Even corporations with long time commitments to innovation find it difficult to sustain an innovation team or capability.  The reporting is fantastic.  The real question is:  why is it still this way?  Will it always be this way - corporate innovators just on the cusp of a breakout, but never breaking out?

Survey Results

According to the synopsis available on Slideshare, the majority of firms responding to the survey described themselves as immature in the development of an innovation capability, and close to 60% of those surveyed have fewer than 10 people working on innovation activities.  This survey is based primarily on Fortune 500 companies, so a commitment of less than 10 people is, needless to say, a very small commitment.

Perhaps one of the graphs that says more than you'd expect is the analysis of the question "why do projects get killed?".  The top four answers are:

• No business unit buy-in (which begs the question, what was the innovation team pursuing if it had no sponsorship or buy-in?)  Demonstrates a lack of integration, and the sense that innovation is doing its own thing without regard for the needs of the business
• Technically infeasible (which begs the question, does the innovation team understand what is technically feasible, what can get done, in the time frames allotted?) This also suggests that only immediately practical ideas, ideas that can be implemented very quickly, are considered viable
• Limited upside (based on what criteria?  The analysis doesn't say) But this is a classic way to kill nascent ideas. Simply apply your existing ROI metrics to new ideas and they will almost always fail the analysis
• Low priority (which is another way of saying little or no business unit buy-in)  Innovation teams should spend some time on ideas that aren't exactly within the confines of the existing business, otherwise the business doesn't grow or expand.  And shouldn't the priorities be established before the innovation activity, rather than once the results are presented?

Perhaps my favorite section in the synopsis is the slide on "key challenges" of which five are identified:

1. Defining the mission and role
2. Avoiding the idea avalanche
3. Speed and buy-in
4. Fly or Die
5. Aligned metrics

 These are all perfectly correct, and are the same recommendations that innovation writers, consultants, analysts and experts have been making for years.  We've known for quite some time that for innovation to succeed inside an organization, executives must make choices and align key resources to important innovation challenges.  Rather than open the spigots for all ideas, initially the corporation needs to build a pipeline of good ideas and demonstrate it can deliver on them.  Doing so quickly and efficiently, and experimenting and failing rapidly, are critical to success.  Having the right metrics, and not relying on the metrics of the existing business to measure innovation activities, is critical.



From what I can see of this report it is an excellent synopsis of the state of play of innovation in 2015.  However, most of the conclusions and analysis could easily have been written in 2005.  In fact I'm sure many of these same points were made a decade ago.  What we need to be talking about is what leadership, process, skill, cultural and motivational changes must occur in order to achieve what we know corporations must do.  I wrote those focus areas with specific intent.

Leadership

Far too many executives and CEOs are earnest about innovation, but what they want is the result - the new product or service - without any risk, cost or investment.  Times have changed, business models have morphed and competition has accelerated.  The only way to get innovation is to do it honestly, with deep internal investments of good people and funding, or to be honest and go find good ideas and intellectual property outside your organization.  But be clear and be quick about it.  We need leaders who are committed to innovation, not just the outcomes, but the required investments as well.

Process

Most organizations claim to have an innovation process, but what they have is an R&D process at best bolted on to a product development process.  People don't understand where good ideas come from, and don't understand the discipline and methodology to move from identifying an interesting need to generating really viable new ideas.  The "front end" to a great extent DOES NOT EXIST in most corporations.  It doesn't now, and it hasn't, and this has been a constant theme for over a decade.  Until it does exist, you can expect incremental ideas from internal teams.  It's time to place as much focus on the "front end" as you do on execution.

Skill

Over the last 20 years corporations have taught their employees how to be efficient.  Now they want them to be efficient and innovative, but haven't taken the time to teach them to be innovative, or to deal with the cognitive dissonance of trying to conduct convergent, efficient day to day operations and divergent, discovery-oriented work that strays outside the traditional culture and expectations.  When confronted with these diverging realities, most employees recognize their lack of skills and experience and revert to their safe, known roles and processes.  Which limits innovation. If you truly want innovation, then find people who have the skills to create innovation, and build the skills of your employees so that they can innovate readily and regularly.

Culture and Motivation

A good friend likes to simplify the definition of culture as "the way we do things around here".  Culture reinforces the status quo and the traditional lines of thought.  Until culture is able to embrace innovative thinking, and is encouraged to do so by changes in motivation (intrinsic and extrinsic) we'll have the same results as we've had in the past.

But this too is old news

Now, everything I've written that needs to change is also old news.  There are plenty of us in the innovation space that have been writing about these particular needs for years.  What we need is action to change the existing cultures, to build skills and allow for a real commitment to innovation, day to day, every day, rather than under pressured situations when a new product is required because of a market downturn or a competitor's surprise introduction.  What we need to do is train, encourage and transform a new generation of managers and executives who will commit their own time and the time and resources of their organization to create a balance between important efficient operations and the need for constant innovation.  Until and unless we can train and empower executives and middle managers to focus more on innovation, large corporations simply won't find the time or energy to do do, and will continue on the slow path toward extinction.


I'm fairly confident in saying that some of the last words of the captain of the Titanic were "this ship is unsinkable", clinging to a belief that was in the process of being proven untrue.  Innovation Leader and Innosight have done a great job reminding us of the state of play in innovation.  Unfortunately it could have been written a decade ago.  When will we actually see the burning platform occur that requires more change than we've seen to date?

I've had this kind of Venn Diagram rattling around in my head for a while, because the question keeps coming up over and over. Why can't corporations innovate like entrepreneurs?  And, conversely, what do corporations have that sustain them and that entrepreneurs want to copy?  If we could document and understand both the overlapping characteristics and the differences, then perhaps we could illustrate what they can do for each other, and what that could mean for innovation.

This is admittedly inexact science.  I started out by asking myself what were the issues, characteristics or features that enabled or blocked innovation for entrepreneurs and corporations.
Here is my thinking - feel free to send me your comments or what I may have missed:

Entrepreneurs

What "aren't barriers"

• Not risk
• Not commitment
• Not passion
• Not focus
• Not ideas
• Not existing infrastructure or business models
• Not prioritization

What "are barriers"

• Poor understanding of customer needs
• Lack of market access
• Lack of branding / awareness
• Inability to scale
• Legal barriers
• Lack of resources
• No/poor business experience

 Corporations
Let's look at the same analysis.  What "aren't barriers" to innovation:

• Not ideas
• Not market access
• Not branding / awareness
• Not scalability
• Not legal barriers
• Not money 
• Not business experience

What "are barriers"

• Passion
• Commitment
• Risk/Compliance
• Poor/no understanding of customer needs
• Few/no people with innovation skills
• Priorities
• Existing business models / existing infrastructure

What do the two share in common?
Ideas aren't an issue, customer insight or customer needs are consistently lacking or overlooked, and both lack good people with requisite innovation experience.

Now, think about this another way.  What capabilities, traits and features does each have that the other needs?  In fact it's almost a perfect match.
Entrepreneurs have passion, commitment, risk taking and the ability to prioritize and focus that many corporate innovators lack.  Corporations have market access, branding, easy access to money and legal resources that innovators and entrepreneurs lack.

So why aren't these two working more effectively together?

If corporations have what innovators and entrepreneurs need to scale an idea, and entrepreneurs have the risk taking and passion that corporations lack, why don't we see more relationships that allow corporations to reap more innovation and entrepreneurs to more quickly scale ideas?  I believe there are at least five reasons that keep these natural partners from coming together more frequently:

• Entrepreneurs have outsized views of the value of their innovations
• We lack good networks and meeting spaces for the two potential partners
• We need better signalling by larger firms as to their needs so entrepreneurs know which ideas might have more market potential and financial viability
• Everyone is worried about identifying, valuing and managing intellectual property.
• Mutual suspicion and to some extent, contempt for the other

Let's take these one at a time to analyze and seek potential solutions.

Outsized view of the value of an idea

 One of the biggest complaints about university tech transfer offices by corporations is that the professors or tech transfer officers don't understand the market value of their ideas or intellectual property.  Even really good ideas require a lot of work to commercialize, and there can be hidden costs or traps with the intellectual property or the market.  Clearly both sides want to achieve the best financial outcome and have fiduciary responsibilities to shareholders, but I think many more innovations could come to market through larger firms if entrepreneurs were more realistic in their valuations.

Lack good marketplaces
And yes, I know all about NineSigma and Innocentive and a host of other markets, communities and meeting places.  The problem is that these simply aren't sufficient.  Client who have used these communities have been somewhat satisfied, but feel like there are too many hoops to jump through, too much overhead or infrastructure.  We need bazaars, not filtered communication.  These interactions should look more like buying spices in a middle Eastern souk than acquiring IP in a New York law office.

Few signalling mechanisms
If an entrepreneur wanted to create a new technology or grow a small business that could be scaled by a larger one, how would they know which technologies or businesses or products larger firms are interested in?  Larger firms have a difficult time communicating their strategy to their own employees, let alone outsiders, and strategy and direction frequently change.  Some companies do a good job of signalling where they are going and what they'll need, and thus are better at hinting to their potential partners about the technologies to develop or products to create.  Most, however, live in terror that other large competitors will receive the signals and parse the data.  What they don't know is that most large organizations couldn't interpret Morse Code sent in the clear with a guidebook, and wouldn't know what to do with the data even if they decoded it.

Identifying, validating, valuing and managing intellectual property

 As noted earlier, if professional tech transfer folks get the value proposition wrong, can we hope to improve the valuation, management and transfer of intellectual property?  Only as the number of transactions increase and experience grows.  Again, we lack a true marketplace, where scarcity and bidding will establish a closer valuation of the property.  And, that may be one of the complaints of the walled garden that open innovation communities create - there's little price signalling or learning and little learning curve experience, so every market encounter is almost a completely new experience.  The more we can make the exchange of intellectual property, ideas and emerging products into an open marketplace, the faster the exchange of ideas will occur.

Mutual suspicion or even contempt
Small companies and entrepreneurs sneer at larger companies, thinking of them as slow dinosaurs, unable to adapt to the new realities that are being created by nimble competitors.  They disdain the procedures and policies, the slow, careful consideration, the compliance and legalese of corporations.  But they'd love to lay their hands on the larger firm's access to capital, to markets and customer awareness.  Conversely, larger firms look down on small firms or entrepreneurs, thinking that they operate in a cloud, with few controls and high variability.  Entrepreneurs often make promises their companies and products can't keep, and many fail in just a few months.  Credibility and follow through are often lacking.  But what the larger firms wouldn't give for more passion, more disruptive thinking, more experimentation and the speed and agility of a smaller firm.

I cannot imagine why every corporation over $100M in revenue doesn't have a business development person actively looking to acquire intellectual property from entrepreneurs, or seeking to make capital investments in smaller firms in exchange for first rights to new products or technologies.  For a few hundred thousand dollars of investment (about the cost of two or three good middle managers) corporations could invest in a handful of nascent upstarts and claim some ownership and perhaps even signal key needs.

Moving from contempt to mutual success

The time is right, and right now, for the distance and suspicion between entrepreneurs and corporations to diminish.  Both players have real needs that the other can fill.  Corporations need more innovation, newer and better products and more agility.  Entrepreneurs can provide those, and more.  Entrepreneurs need scalability, reach, market access and most importantly, capital.  Large corporations can provide these, and more.

What we lack is a true marketplace - a virtual bazaar that allows open communication, price signalling and the other characteristics of a true market while ensuring the viability and value of every participant's intellectual property portfolio.  What few understand, however, is that intellectual property, ideas, patents and other factors are increasingly time based.  Good innovators will find another way to solve the problem, so simply sitting on patents and suing other firms isn't a winning strategy, and doesn't grow opportunity.  It's probably better to get into this market and exchange ideas and information more rapidly, and speed up your ability to commercialize good IP, than it is to build more protection around your intellectual property and slow your ability to negotiate and commercialize what you have or what you can acquire.

One of my favorite sort of snarky comments almost always arises when we are asked about our consulting fees and rates.  We pride ourselves on delivering great value for the price, and frankly we aren't necessarily cheap.  But then again, as the saying goes, very few people open up the Yellow Pages (showing my age here) and search for "Cheap Brain surgeon".  No, when it comes to important medical procedures, most people are looking for who has the best skills and experience, not who has the lowest prices.

But this isn't a post about innovation consulting pricing, rather it's a post about why you need innovation expertise to "do" innovation effectively.  And no, I'm not necessarily making a claim that you have to have innovation consultants helping you in order to succeed.  But what you do need is an experienced innovation guide.

A fishing guide as an analogy for innovation consultant
To place this in a context, let me use an analogy.  This summer I took my son (16) and my father (78) to Alaska for the salmon run.  This is a great trip - I'd highly recommend it.  We've done it three times together.  I'll post some photos at the bottom of this article.  But I digress.  Even though we've gone Salmon fishing three times, even though we've been in the Kenai river several times, even though we've been successful several times, we hire a guide.  Why?  Because the guide knows the best locations, how the salmon are running, where to place anglers for the greatest chance of success.  Would we have had some success on our own, without the guide?  Possibly, but we are familiar with fishing for trout, which avoid people and are very cautious about their food.  Trout fishing requires patience, camouflage and excellent bait placement.  Salmon fishing, especially during the run, requires none of these things.  Salmon are swimming upstream to spawn.  They are fighting the current and many aren't even interested in your bait or flies.  They often swim within a couple of feet of the anglers trying to catch them.  For salmon fishing, you need to be in the place where the salmon are swimming, and placing your line where they will strike, and you need to hold your rod sideways when you set the hook, instead of tugging it straight upwards the way you'd do for other fish.  It's the guide's job to help you be successful.  And because of the guide, we caught our limit each day.

Like a salmon guide, an experienced innovator knows the lay of the land.  He or she has deep experience with the tools, and can show you how to use the tools to best advantage.  He or she knows when to push in and when to hold back.  He or she will encourage the team to be more diverse and creative, to be more divergent than they would be on their own.  The same tools and techniques are available to "innovation" teams who don't use guides or experienced innovators as partners, but they often simply skim the surface, touching briefly on the tools but quickly falling back on familiar pathways, methods and decisions.

What an experienced guide offers
The difference between working with an experienced innovator, and working without one is very similar to our fishing expedition to Alaska.  The first time we went to Alaska we relied on our own rods and lures, our own experience of fishing for trout.  We managed to catch one or two fish while other, more experienced Salmon fishermen were catching them in abundance.  The next day we hired a guide, who provided different tools and introduced different methods.  He placed us in what for us were uncomfortable positions, using unusual or different casting methods.  But without that subtle push, we wouldn't have been fishing in the best spots.  We were relying on our understanding, which was right in some circumstances but no right in this one.  Similarly, innovation teams are far too prone to falling back on comfortable, existing processes, methods and tools, not wanting to stray too far from their relatively risk adverse cultures and decision making.  Without someone there to guide, correct, push and introduce new tools and new ways of thinking, innovation projects are an exercise in futility and frustration, because the prize is out of reach of the existing tools and thinking.

Do you need an innovation consultant in order to achieve innovation success?  Possibly, but the answer isn't definitive.  Innovation consultants have the experience to convey that our salmon fishing guides offered us.  They can give you the right tools, place you in the right spots, push you into uncomfortable setting and situations.  You could also receive a lot of that coaching from internal resources if they have the credibility and experience.  But regardless of where you get the coaching, the subtle push, the introduction of new tools and the discipline to stick with the uncomfortable and unusual, you need it.  Inertia, risk factors, cultural barriers and time constraints will all work to revert the innovation team to safe, known methods and tools that won't produce new, creative solutions.

You won't catch many salmon on the salmon run if you fish for them using the tools and techniques that are applicable for trout in the Blue Ridge.  They are simply different fish with different expectations, and they require different baits and different fishing techniques.  In the same way, you cannot hope to innovate with a team that isn't experienced unless you have an experienced innovation guide.  The inexperienced team will revert to known practices at the first hint of trouble or the first real barrier, and the result of the project will be a "me-too" outcome.

Going it alone
Many of our potential clients decide that they want to "go it alone".  They send people to innovation training or have them explore some innovation tools and techniques on their own.  After all, everyone knows how to brainstorm ideas, don't they?  We believe the capability and nascent skill for innovation rests in many of us, but it's often been beaten down and locked away, not easy to access or reclaim.  Asking an already overworked team to innovate while they also effectively conduct their regular day jobs is common, but also almost impossible for them to do both equally well.  And when push comes to shove, they'll ensure that their day job is done well, leaving innovation to suffer.  And that's true even when there is an experienced innovation guide.

Do you want an innovation guide that can provide the insight and who has the experience to make your innovation team more successful?  We at OVO do that for a living, and I hope we are as good at it as our guide in Alaska was when he helped us catch our limits.  Contact us if you have questions or want to learn more about innovation consulting or the coaching and guidance we can offer.

Fishing Photos


If you are interested in some of our fishing photos, see my Pinterest Page

What happens when the largest, most cataclysmic change forces known to business collide with embedded, rigid business structures and models?  Which side wins, the irresistible force or the immovable object?  In my post today, I'm going to answer this age-old philosophical question.  Innovation and change destroy complacent, unchanging business structures and models.  Every time.  Every where.  In every market.

It sounds a bit over the top to argue that everything we know is changing, and many models and structures will soon crumble from the onslaught of new emerging demands, capabilities and technologies, but in short that's what's going to happen, and is already happening.  Product life cycles are collapsing - I was recently in a conference where a camera manufacturer estimated the average shelf life for a new camera was between 3 and 6 months, or less than half the product development cycle time!  For years we've talked about the increasing pace of change, and much like the proverbial frog in the pot we're still sitting in the water as it's reaching the boiling point.  The telephone didn't reach a billion users until decades after its introduction - probably almost a century afterwards.  Facebook, Google and other internet applications reach a billion users in the matter of a few years, and newer, social media driven applications will do so even faster.  Unfortunately for them they'll also burn out and disappear even faster as well.

Do old business models make sense in this new, rapidly evolving environment? Can a business define and "lock in" its business model and hope to merely sustain its business model, thinking it will weather the storm and wait until "things return to normal"?  It's almost trite to say "the new normal is change".  That almost goes without saying.  The race goes to the nimble, the agile and the swift, not to the large and slow.  There is no return to normal, in fact what's normal is more change and a faster pace.  Can slow, rigid business models that were successful in the past, in a much more staid environment offer any solace to a business, or position those businesses for success in the future?  I'm going to argue the answer is:  probably not.

At worst you need a business model that evolves at the rate of change in the environment.  You simply cannot afford to fall behind and become locked into an older business model (hello Blockbuster), no matter how dominant you think the existing models are.  Netflix obliterated Blockbuster but continued to evolve its model into streaming and now content creation.  Why?  Because standing pat on a business model once people understand the value proposition is crazy.  There are simply too many avenues to attack a business model once the value proposition is understood.  Let's look at a couple of ways to attack an existing business model.

Chipping Away
There's what I like to call the "chipping away" model, which is what retail banks in the US are experiencing.  No newcomers want to face all the regulatory burden that the retail banks face in total.  Instead they offer single solutions or products that are equal to or better than what the banks offer, in areas that are more profitable.  These startups are "chipping away" at the bank's value proposition and are much more nimble and flexible.  They can get into and out of features or products in an exceptionally short timeframe, and can attract good customers quickly.  Mint, Betterment and other firms are not subverting the entire business model as much as chipping away at the most valuable parts, while banks are locked into older models more suitable for the 1970s and 80s.

Bypass
Then there's the bypass model, which is what Netflix did to Blockbuster.  Same value proposition in terms of content, just a different channel.  Blockbuster had every valuable retail corner locked up, and Netflix decided (based on the availability and capability of the web (and the US mail!)) to completely dislocate Blockbuster and its presence model.  Netflix, Uber and Airbnb did what road builders do - they looked at the crowded mess of existing highways and simply "bypassed" the congestion, which freed up consumers and previously stagnant assets.

Consolidation
There's also the consolidation model, which is what I like to think Apple did to the music player, music management and music distribution industries.  Remember Tower Record?  Or how about your Rio MP-3 player?  Apple consolidated a number of valuable pieces and components into a much larger but simpler business model, and drove a number of companies and channels right out of business.  Or, to continue the Apple theme, consider how many devices the iPhone has replaced:  cell phone, digital camera, GPS, music player, calculator, watch, even a slide rule if you have the right app.  Creating platforms that consolidate capabilities that other business models kept apart is exceptionally valuable.

The list goes on and on.  Zara, H&M and others are disrupting the fashion industry through a focus on speed.  Tesla is trying to disrupt automotive sales and distribution, attempting to sell directly to consumers rather than through dealers.  Older structures, business models and channels don't necessarily have to carry forward into the future.  While they may be "carved in stone" these examples and others prove that stone can crumble, or smart companies can innovate their way around, under or through them.

What should we take away from this diatribe?
Product innovation is interesting, and every company should have active, on-going innovation to spawn new products and services.  However, product innovation is easy to do, easy to copy and will require constant updating.  So, we can argue that product innovation needs to become as commonplace and consistent as day to day operations.


It's business model change that is becoming the important focus.  If product life cycles have decreased, so too have business model life cycles.  When whole industries and channels can collapse in a matter of months (Tower Records, Blockbuster as examples) then every industry must examine and understand the sensitivity and viability of their business models.  No business model is inviolate; none will simply resist all of the change that's underway.  This means that corporations should be evolving their business models at a minimum.  Business model innovation is becoming far more important than product innovation, and yet far too many companies don't understand or do product innovation well.  How much more difficult it will be to innovate business models when the skills don't exist to innovate products.  Large corporations with rigid, complacent business models may end up like the dinosaurs, watching the small rodents run around and thinking how small and helpless they are.