Stop the Nonsense! Innovation is a Discipline.

This blog is the translation of a recent article of mine that appreared in Estrategia, a leading Strategy magazine in Chile. You can get the original article from:

http://www.estrategia.cl/detalle_noticia.php?cod=72739

Stop the Nonsense! Innovation is a Discipline.

A recent article in the Wall Street Journal highlighted the problem we have today with innovation. Indeed, this once worthy term is being degraded by CEOs, consultants, marketers, and journalists for whom it is the buzzword d’jour. The term “innovation” has been deeply devalued—to the point of being a slogan or aspiration. Also, for all the use of the term, it is clear that firms are having lots of problems managing innovation. They’re spending heavily and complaining about how little they are getting back. Abuse of the term “innovation” is leading to dismal outcomes, cynicism, and wasted money. Studies show that despite huge sums spent on ideation software, stage-gate systems and consultants a majority of executives are dissatisfied with the results. Dissatisfaction among employees is even higher. The reasons are many.

Firstly, most people today still associate innovation with R&D and invention. For example, in a lot of Spanish speaking countries, the governments, large enterprises and executives commonly use the expression I+D+i. In fact some governments also have special tax incentives on R&D spending; but no rewards for spending on innovations. If we really read the expression I+D+i carefully, it would mean “innovation” is less important than R&D. This is wrong.

Inventions and patents that are not commercialized have very little value. Since 2005, consulting firms—Booz Allen, McKinsey, BCG, CapGemini—have been publishing yearly data about innovation practices within large global firms. Data from Booz Allen shows us that there is no correlation between R&D spending and financial performance among the top 1000 global firms. Based on this they created two categories of firms – innovators and spenders. Innovators spend much less money in R&D as compared to their peers and have a better financial performance while the ‘spenders’ spend a lot of money in R&D but have poorer financial performance.

Innovation is more than R&D. Innovation encompasses R&D, products, processes, services, supply chain, marketing, business models and others. These are just opportunities for innovation activities. In fact, Innovation is a discipline. It is a discipline that can managed and mastered like other management disciplines.

Many disciplines operate in the world of business, and their evolutions provide insights into the development of innovation as a body of knowledge and field of practice. Marketing, for example, has a conceptual framework (the “4Ps”) and a unique vocabulary. It has developed practical methods (e.g., segmentation) and tools (e.g., conjoint analysis) that practitioners master through formal study. Subfields of marketing such as advertising and consumer behavior have broadened the discipline. Academic departments have formed to increase the body of marketing knowledge and to pass it on to others. Journals, professional associations, and conferences dedicated to marketing have emerged over the years.

We have witnessed a similar evolution with the quality movement. Corporations that took quality seriously made it part of their cultures—embedding the “discipline” in their thinking, planning, and behaving. Today, quality is no longer an empty buzzword or organizational aspiration, but a solid and respected discipline that produces measurable benefits for companies and their customers.

Like other disciplines, innovation can also be mastered. The good news is that the road to mastery in any discipline is the same:

 1.     Mastery is the result of leadership desire, choice and commitment.

 2.     Mastery requires years of effort.

 3.     Mastery requires a cadre of experts to lead the way.

 4.     Mastery requires a broad-based understanding of principles and methods of the discipline among employees.

Like marketing and quality, innovation has been following an evolutionary path. As a discipline, it is perhaps midway along its evolution path—where the quality movement was twenty or so years ago.

Disciplined corporate innovative efforts can be traced back to Thomas Edison’s first “invention factory” at Menlo Park, New Jersey. Bell Laboratory and the R&D centers of, DuPont, Etc were its offspring. By the 1980s other tools of the innovator’s craft were being adopted by new product developers. It wasn’t until the 1990s, however, that academics began publishing thoughtful and practical books that explained innovation as more than R&D or invention, but as a process, and told executives how to harness it in service of corporate strategy. The explosive emergence of eBay, Google, Facebook, and Amazon made it clear that innovation is not simply about physical products and technologies, but extends to services and business models. So, today the word innovation is sizzling hot and on every executive’s lips. Academics are studying and writing about it, and today’s employees have some useful principles, methods and tools to work with.

Despite the availability of principles, methods and tool, several obstacles impede progress in handling innovation as a discipline. The biggest obstacle of them all is the failure of most executives to recognize and support the “soft” side of innovation. Executives are investing substantial time, money and energy on resources, processes, and metrics but most ignore the values, behaviors and workplace climate—aspects of culture—that make those investments pay off. Several studies support the conclusion that enterprise culture is the primary driver of innovation. The fact that successful innovation is one part principles, methods and tools, and another part human creativity and insight is the greatest impediment to innovation in large companies. To capture the potential of innovation, leaders must bring these two very different parts together.

Below are some questions to think about:

Is Innovation mostly ad-hoc or is it treated as a business discipline within your firm? If innovation is not disciplined, how can you educate your executives about this? Does your firm’s culture support innovation? What are your specific challenges?

The Culture of Innovation

The Culture of Innovation

Hope you all had a great summer (in the northern hemisphere) and peaceful winter down below! Can’t believe that it is already October!

Before I took off for summer, I was hoping to finish off a task I had started in March – summarizing and giving you snippets from my recent book in Spanish. Unfortunately, that didn’t happen. Anyway, for first time readers, the book is titled (translated from Spanish), “Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.” Available from: (U.S. Amazon website, Spain Amazon website, Profit Editorial website, In e-book format from todoebook.com).

To help first time readers navigate and regular readers recall what we have covered thus far, I will quickly summarize my previous 5 blogs.

 March 2012 blog: My New Book

Amidst the last decade and a half of constant turmoil—dot-com boom and bust, fraud infested financial firms, and colluding corrupt governments—most executives are hoping that “innovation” will help their firms survive the tsunamis, navigate this uncertainty and prevail. In that quest, a lot of firms are overusing, misusing and abusing the “discipline of innovation.” In a sea of constant change, a firm’s culture has a much better ability to give the firm a somewhat sustainable advantage than just technologies, products, processes, markets etc. However, both terms—innovation and culture—are highly fuzzy and highly misunderstood concepts. So, this book was written to help executives start the journey to create a “culture of innovation” within their firms.

 April 2012 blog: The Nonsense Surrounding Innovation

 This blog highlighted the non-sense surrounding innovation – the rampant abuse, misuse, overuse and the misconception of innovation.

 May 2012 blog: Innovation is a Discipline

Here, I covered the fact that innovation is not a tool, it is not invention and it is not luck. “Innovation is a Discipline” – a body of knowledge; a field of study. Innovation, like all disciplines, can be: (1) taught, (2) learnt, (3) practiced and (4) mastered.

 June 2012 blog: Developing Innovation Capabilities: The Journey

Fortunately, the journey to master any discipline is the same: It starts with existing KNOWLEDGE, then putting that knowledge into PRACTICE and then through rigor and grit one masters a discipline. So, you master a DISCIPLINE (the field) through DISCIPLINE (desire and determination). Specifically, this blog talked about the Lingua Franca of the discipline.

July 2012 blog: The Practice of Innovation

In this blog, I covered several key concepts and tools of the practice of innovation. Specifically, the following were discussed: (1) incremental, platform, and radical innovation; (2) risk vs. uncertainty vs. ambiguity; (3) analytical vs. emergent strategies; and (4) predictive vs. creative logic.

In this August2012 blog, the focus is “The Culture of Innovation.”

In the June blog, I talked about all innovations as being an outcome of culture and that a firm’s true goal, if it so desires, should be to create a “culture of innovation.” I concluded the July blog by ascertaining that the “The PRACTICE OF INNOVATION is the deliberate, relentless, and unending pursuit of revealing the UNKNOWN, redefining the KNOWN and renewing the WORN.” In doing so, there is a lot of failure, experimentation and emergent strategies embedded in the practice of innovation. Unfortunately, most firms do not accommodate such practices. Hence, culture becomes a key goal for firms that wish to master innovation.

Like all disciplines, the field of innovation has evolved over decades. In the beginning of the last century, invention was synonymous with innovation. It meant R&D, science and technology. When pure inventions and patents stopped delivering results, it paved the way for new thinking – linking new product development (NPD) activities to commercialization. Later, the quality movement was central in making process innovation popular. As manufacturing activities got commoditized during the 1980s and 1990s, the focus shifted towards bundling products with services and hence service innovations. At the dawn of the new century and dot-com boom era, business model innovation became a focal point for enterprises. Again, recently, executives seem to be changing their attention once again.

A 2007 McKinsey innovation report, based on a survey of nearly 1400 executives from around the world showed that the executives unanimously agreed (94%) that people and corporate culture were the most important drivers of innovation. In another major study of 759 firms across 17 major economies, “Corporate Culture” was found to be the primary driver of radical innovation (Radical Innovation Across Nations: The Preeminence of Corporate Culture, Journal of Marketing, Jan. 2009). Booz Allen has been surveying the Global 1000 firms and reporting on them since 2005. In their latest report (The Global Innovation 1000, Why Culture is Key, Issue 65, Winter 2011), they concluded:  

“The elements that make up a truly innovative company are many: a focused innovation strategy, a winning overall business strategy, deep customer insight, great talent, and the right set of capabilities to achieve successful execution. More important than any of the individual elements, however, is the role played by corporate culture — the organization’s self-sustaining patterns of behaving, feeling, thinking, and believing — in tying them all together.” 

Unfortunately, enterprise culture is a slippery concept. Scholars define it as the bundle of attitudes, experiences, values, norms, assumptions and beliefs embraced by managers and employees; these, in turn, guide behavior. Regrettably, these elements of the definition of culture are equally slippery, with the result that any executive who wants to create a culture of innovation will have no way to measure the current culture; and without measurement, he or she will find it difficult, if not impossible, to identify a clear point at which to intervene and create positive change. 

Recognizing this problem, in this book, I offer a model for capturing an innovative culture. I scoured the fields of organizational dynamics, leadership, behavioral science, corporate entrepreneurship and innovation to find theoretical frameworks and models that described organizational culture and culture of innovation. Specifically, I looked for instruments and assessment tools that were actionable; a primary need for all executives hoping to bring about change. In doing so, I found extensive research and models from academia, consulting firms and enterprises themselves, spanning over 30 years.  

In the book I propose a culture of innovation model with the following six building blocks:

 

The basic framework was heavily influenced by the works of Harvard’s Clayton Christensen and Ed Schein (Professor Emeritus at MIT).

 Values —What do we stand for in terms of innovation? We are not talking about the CEOs here; CEOs come and go. What will we fight for? What does the firm fundamentally believe to be true? What are our addictions? They could range from openness, sharing, teamwork, risk-taking, adore mavericks, and rewarding failure. Values are also a firm’s moral compass. Finally, Values are not what we speak—in our speeches and annual reports, but Values are how a firm spends its money and how and where the executives spend their time. We can see examples of this at companies like J&J, Southwest Airlines, Wal-Mart, IDEO.

Resources —How we support our innovation efforts? Who are the champions of innovation? Who are the experts of innovation that can help the firm navigate the journey? Who is the talent: creators, inventors, scientists, ideators and transformers? Do we provide the talent the Time, Space and Money? Time is needed to learn, experiment and pursue wild things. Space is a place to work and play with the ideas and opportunities and Money is needed to dabble in opportunities—spend a little to learn a lot. E.g., GE, IBM, P&G, 3M.

Processes —How do we get innovations done? Creating a funnel to routinely capture ideas; routinely sift ideas from opportunities; and routinely separate the weak from strong opportunities. When opportunities are found, start several small experiments, prototype rapidly, fail fast and finally, move to scale-up quickly when a golden jewel is found. E.g., P&G, IBM, Toyota, IDEO.

Behaviors — How do we think, approach and act in order to foster innovation? Everyone’s—executives and employees. Innovation Behaviors include being opportunistic, flexible, adaptive, collaborative, resilient, taking courageous decisions under uncertainty and dealing with ambiguity. One can learn, practice and coach these behaviors and best of all – no budget needed and no permission required. E.g., IDEO, Google, 3M, Wal-Mart.

Success —How do we measure our innovation output? What does success mean inside our firm? How is success measured—process and outcome? How are we rewarded? Do we tolerate mistakes? Is learning, experimentation, failure and feedback rewarded? Measures of success determine our behaviors and processes. When we feel successful, our environment, values, processes and behaviors get reinforced. E.g., Southwest Airlines, P&G, Google, GE.

Climate —What is it like to work in this firm? Is the company climate favorable to innovation? It is vibrant, and one that cultivates passion, stimulates and challenges people to take chances, fosters learning and reflection and doesn’t squash independent thinking. E.g., Google, 3M, Southwest, J&J.

Repeated success leads to further reinforcement of the building blocks and over time all these blocks get ossified and that is CULTURE! Hence, Climate and Success are outcomes/outputs. Values, Behaviors, Resources and Processes are inputs. Values, Behaviors and Climate are more right-brain oriented and Resources, Processes and Success metrics are more left-brain oriented. Most firms tend to do well on the left-brain stuff that is more tangible and easy to buy and implement. Universally most firms struggle on the “soft” right-brain stuff.

This book concludes by giving the reader how to take some concrete steps to embark on “The Journey”: Think Big, Start Small, Start Several, Scale Slowly, focus on the “soft” side first, etc.

Enjoy the Journey!

Jay 

The Practice of Innovation

The Practice of Innovation

 Happy Summer to those in the Northern Hemisphere and Happy Winter on the other side! Oh well, it doesn’t change much in the tropics.

 This blog is the fifth in a series of snippets from my recent book in Spanish (that translates as): “Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.” Available from: (U.S. Amazon website, Spain Amazon website, Profit Editorial website, In e-book format from todoebook.com).

   

In the April 2012 blog, I talked about the non-sense surrounding innovation – the rampant abuse, misuse and overuse of the term. I explained several reasons for this ubiquitous problem in my May 2012 blog. In the same blog, I talked about the fact that innovation is not a tool, it is not invention and it is not luck. “Innovation is a Discipline” – a body of knowledge; a field of study. Innovation, like all disciplines, can be: (1) taught, (2) learnt, (3) practiced and (4) mastered. Fortunately, the journey to master any discipline is the same: It starts with existing KNOWLEDGE, then putting that knowledge into PRACTICE and then through rigor and grit one masters a discipline. So, you master a DISCIPLINE (the field) through DISCIPLINE (desire and determination). In the June 2012 blog, I argued that all innovations are an outcome of culture and that a firm’s true goal, if it so desires, should be to create a “culture of innovation.” All innovation happens in a community and the fundamental basis of all cultures / communities is “language.” So, the last blog was devoted to creating a community within the firm that was conversant with the KNOWLEDGE, i.e., Lingua Franca – concepts, methods and tools – of innovation.

In this blog, I will talk about the PRACTICE OF INNOVATION and its role in a firm’s journey to create a culture of innovation.

 There are essentially 2 ways for firms to grow – buy growth (inorganic) or create growth (organic). Organic growth can happen in two ways – copy or innovate. Hence, the practice of innovation is the relentless pursuit of identifying opportunities, shaping opportunities and capturing opportunities. Unfortunately, at the center of this process is a “funnel” full of failure. Therein lays the management challenge.

 Firstly, I need to clarify what innovation is not. If the opportunity does not change the competitive dynamics of the industry over a period of time, then it is not an innovation. If the opportunity is new to the firm but not new to the industry, then it is not an innovation. It is just copying to catch up.

 Firms tend to explore for opportunities in three spaces: incremental, platform and radical innovations. Examples of incremental innovations are: Intel going from 90 nanometer to 45 nanometer technology; car manufacturers improving the gas mileage using existing technologies; a new version of Microsoft Windows etc. In incremental innovations, firms are working to continuously improving upon existing technologies, existing markets, and existing ecosystems. Here, they are working with mostly “known” variables. Further, there is data from history as to how these variables might behave.

 It doesn’t mean that there are no unknown variables in incremental innovation. For instance, the Vista version of Windows and the “New Coke” were very poorly received by the existing customers and they were either quickly replaced with a better version or pulled from the market. Hence, all innovations—incremental, platform and radical—have some known variables and some unknown variables. Incremental innovations tend to have more of the known variables and fewer of the unknown variables.

 Platform Innovations: WLGore’s polymer expanded polytetrafluoroethylene (ePTFE) was the first used in insulating industrial electric cables. Later it was transformed into Gore-Tex, the waterproof and breathable fabric that made the company famous. Using their patents and deep knowledge of ePTFE Gore has created 5 platforms – films, fibers, tubes, tapes and sheets. Via these platforms, this polymer has found its way into fuel cells (films), Glide dental floss (fibers), medical vascular graft (tubes), cable assemblies (tapes) and medical patches (sheets). While there are several competing operating systems, few have the platform characteristics of the Darwin kernel of Apple’s OSX operating system. A kernel connects the application software to the hardware and is the main component of all operating systems. The Darwin kernel cuts across telecom (iOS for cell phones), internet (OSX for PCs), media (iPad for books) and entertainment (iTV for movies and videos) applications. Similarly, P&G’s focus on connecting sciences to create domain expertise has led to dozens of products. Candle making provided the base technology for soap making. Soap making led to expertise in fats and oils (Crisco vegetable oil) and surfactants. Crushing seeds to make oil led to expertise in plant fibers (diapers, feminine hygiene, paper towels). Surfactant technology led to expertise in hard water and calcium (tooth paste and osteoporosis).

 It is well known that platform innovations are no trivial matter. The technological unknowns alone pose tremendous challenges, notwithstanding market, financial, operational, regulatory and other uncertainties. Platform innovations do work off of and exploit existing capabilities, adjacencies, technologies, markets, products, services and ecosystems. However, the ratio of unknown to known variables increases as compared to incremental innovations.

 When it comes to introducing radical innovations, as one can expect, the number of unknown variables vastly outnumber the known variables. Radical innovation is primarily about the unknown: unknown markets, unproven technologies, and untested business models. Some examples of radical innovations include the Cordis stents, Raytheon’s microwave oven, Amazon’s selling books on the internet, Apple iPhone, Grameen Bank’s microfinance and Skype.

Let us look at an example to understand the nuances involved in innovation projects. Take the case of a large U.S. multi-site, nation-wide, retailer of groceries and home products. Let us call this disguised enterprise Big Retail Chain (BRC). Until recently, BRC’s point-of-sale (POS) system was nearly 20 years old. Meanwhile, some of its competitors had already successfully installed a good number of self-check-out kiosks and their ERP and CRM systems were tightly integrated to the POS with more sophisticated features for data analytics. In updating and upgrading its POS system, BRC’s executives had three main objectives: (1) retain and improve upon some of the capabilities that BRC had built around its unique and existing customer segments, (2) catch up with its main competitors by creating a half-dozen self-check-out kiosks at each retail outlet and also copy some of the competitors POS’ features and functionality and (3) finally, leap-frog its competitors and be a pioneer in introducing customer hand-held scanners for fast and easy self-check-out. For this major project, BRC hired a very reputable, global IT firm to help them design and deliver the new POS system. 2 years into the project and $50 million later the first version of the new POS system had failed to deliver upon all three objectives. Some of the existing capabilities had been lost, self-check-out kiosks and competitors’ features were not quite well replicated and the truly innovative hand-held scanner was full of bugs and the design totally unintuitive.

 This example has some form of incremental, platform and radical innovations. Also, it highlights the differences between Risk, Uncertainty & Ambiguity.

 Risk is about known variables and with historical data about their distributions. Enterprises minimize and manage risk in its innovation projects by doing analysis before taking action. The future is approached by performing an environmental scanning (SWOT, STEP, Value Chain Analysis) and followed by the setting of a project plant to execute strategy. Trend lines are predicted based on IRRs and WACC or projected cost benefits; KPIs and milestones are set and budgets are allocated. When project performance does not meet projections, money and energy is spent to get the project back on to the predicted trend line. Unfortunately, heads roll when the predicted future fails to materialize after a couple of tries.

 This approach to project management makes a bunch of assumptions: (1) all process and outcome variables are known and can be accounted for ex-ante, (2) existing data from past projects can be used to predict the process and outcome of this project, (3) some variation to projections can be accommodated along the way using managerial judgment, and (4) failure is not an option.

 This concept of going into the future is called “predictive logic” and the method is called “analytical strategies.”

 Unfortunately, all innovation projects have a bunch of unknowns. Specifically, there are two types of unknowns – known unknowns and unknown unknowns. Uncertainty is about known unknowns. In these situations, you know which variables may impact the process and outcome of the project but there is no data from the past to assign a probabilistic numbers. Ambiguity is a second order uncertainty. One cannot surmise as to what variables may be lurking in the background. They only appear once the project is underway. Unfortunately, analytical strategies do not account for these unknowns ex-ante.

 Entrepreneurs and innovators approach the future very differently when they know that there are many unknown variables in the environment. They believe that predictions and trends based on analyzing the wrong variables will turn out to be fallacious or misleading. So, when dealing with “known unknowns” and “unknown unknowns,” they do not rely on analysis and analytical models to take action. Rather, they first take action to create the data that does not exist. They tend to start small with the resources they have on hand. They may even start several projects simultaneously. They prototype rapidly to test what is real. They try to establish proof of concept via quick feedback loops between the voice of demand, voice of customer, voice of technology and voice of supply. They minimize losses by failing fast, failing cheap and learning quick. They uncover the unknown variables as the project proceeds. They rapidly change directions when reality does not match assumptions. They acquire resources and assets to scale only when some proof of concept is established and success materializes.

This concept is called “creative logic” and the method is called “emergent strategy.”

 Those in software development recognize these two very different approaches to managing projects as Waterfall (predictive) and Agile (emergent) strategies.

 Unfortunately, very few people are well versed in the creative logic concept and emergent strategies. Most enterprises overwhelmingly tend to adopt analytical strategies over emergent strategies when it comes to managing their innovation projects or for that matter any major change initiative.

 I am not suggesting that one approach is good and the other is bad. The right question to ask is: when do you use analytical strategies and when do you use emergent strategies. The analytical strategies work great when we know the variables in our environment and we have historical data that can guide us to take action. It is still a very valid approach when the projects are predominantly incremental innovations, e.g., version 2 or version 3 of any software. Incremental innovations in general follow the principles and methods from “Kaizen,” i.e., continuous improvement. So, a majority of the techniques of quality, lean, TQM and 6-sigma have been adopted into incremental innovation.

 However, using these methods and tools when there are a lot of unknowns (as in most platform or radical innovation projects) will result in these projects pursuing the wrong strategies for longer periods of time and wasted resources. The only way to uncover the “unknown” is through a different set of concepts and tools, i.e., continuous experimentation. Continuous experimentation is the core methodology of emergent strategies. Unfortunately, “failure” is also at the heart of experimentation.

 Continuous experimentation is eschewed in most firms, except in some very limited areas of the enterprise, i.e., R&D. What happens in most enterprises is closer to what I call the “Big Bang” approach to managing innovation projects and change management initiatives. BHAGs are announced with much fanfare. Lots of analysis is performed and outcomes are predicted. Leaders and team-members are assigned to these projects—most of them reluctantly—with specific KPIs. They are then asked to march off into the future to realize and deliver upon the predictions. Religion takes over when people are asked to “buy-in” to the predicted future or “get-out” of the way. When the predicted future does not materialize and the firm loses millions, a few underlings are scapegoated and all issues are “pushed under the rug.” It is because of such repeated offenses in the past—across several firms in their careers—that executives are very reluctant to embark on any innovation activities or for that matter start any major change initiatives.

 Where there is uncertainty and/or ambiguity, predictive “Big Bang” approaches don’t work. Emergent strategies fare much better: Think big. Start small. Start several projects. Prototype rapidly. Fail smart – cheap and quick. Spend a little to learn a lot. Uncover unknown variables. Change strategies quickly to respond to new data. Pour resources to scale when there is a positive proof of concept. Celebrate Success and Celebrate Failure.

 Unfortunately, emergent strategies are not accommodated in most enterprise cultures. It takes a special climate where one can fearlessly experiment and fail without repercussions. It takes a special culture that values curiosity to pursue the unknown, stimulates a hunger to create and cultivates the courage to fail and learn. Such cultures are few and far in-between. So, the real purpose of the deliberate practice of innovation is to ultimately create a culture of innovation that accommodates both predictive and emergent strategies for growth.

 In summary, the practice of innovation falls on a spectrum of “continuous improvement” at one end and “continuous experimentation” on the other end, i.e., incremental to radical. Over the last 25 years most firms around the world have learned the concepts of Kaizen and continuous improvement. However, very few firms have mastered the continuous experimentation philosophy.

 What type of innovation to practice – incremental or radical or both – is a choice. No one is forcing a firm to do both, especially its competitors. In almost all situations, incremental is necessary, but not sufficient.

 In my next blog, in August, I will talk about the culture of innovation. In the meantime, I would love to hear how your firms are approaching the practice of innovation and its innovation initiatives.

 Cheers!

 Jay

 “The PRACTICE OF INNOVATION is the deliberate, relentless, and unending pursuit of revealing the UNKNOWN, redefining the KNOWN and renewing the WORN.”

Developing Innovation Capabilities – The Journey

Developing Innovation Capabilities – The Journey

 Yipeeee, summer is almost here!

This blog is the fourth in a series of snippets from my recent book in Spanish (that translates as): “Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.” Available from: (U.S. Amazon website, Spain Amazon website, Profit Editorial website, In e-book format from todoebook.com).

In the April 2012 blog, I talked about the non-sense surrounding innovation – the rampant abuse, misuse and overuse of the term. It is gratifying to see that I am not wrong. The May 23^rd article from Wall Street Journal, “You call that innovation?” validates and reinforces this observation. Below are a few highlights from the article that is based on a CapGemini Study of 260 Global executives:

•    4 in 10 have a Chief Innovation Officer

•    Such titles may be mainly “for appearances”

•   Most of them conceded their companies still don’t have a clear innovation strategy to support the role.

Again, the reasons for this ubiquitous problem are explained in my May 2012 blog. There I talked about the fact that innovation is not a tool, it is not invention and it is not luck. “Innovation is a Discipline.” Specifically, I made the case that innovation, like all disciplines, can be: (1) taught, (2) learnt, (3) practiced and (4) mastered.

Fortunately, the journey to master any discipline is the same: It starts with existing KNOWLEDGE, then putting that knowledge into PRACTICE and then through rigor and grit one masters a discipline. So, you master a DISCIPLINE (the field) through DISCIPLINE (desire and determination). When you master any discipline, you create new knowledge and the cycle starts all over again. Hence, expertise and mastery in any discipline is a journey and not a destination.

In this blog, I will comment on the role of Knowledge in the innovation journey. Specifically, we don’t have to re-invent the wheel. There is sufficient existing knowledge that we should first capitalize on.

The Cro-Magnons were recent emigrants to northern and central Europe as compared to the Neanderthals. The Neanderthals’ were much bigger and their physiology was much better suited for the northern European cold. They had acclimatized there for centuries as compared to the recent and smaller in size Cro-Magnon émigrés. And yet, the Cro-Magnons outnumbered, outlasted and eventually wiped out the Neanderthals. How could that have happened?

The Cro-Magnons were better organized and had better hunting tools. Not only did they have better hunting tools, the Cro-Magnons had better art, better clothes and better shelter against the cold. All these innovations were cultural and at the core of the cultural stimulus was language. The Cro-Magnons had a much more evolved language as compared to the Neanderthals.

A common language creates a community. It helps in organizing them, develop and share skills, take care of each other, strengthen as a team, and enables members to defend themselves.

A community is a group of interacting organisms, not just humans, sharing an environment. In humans, this also refers to a group that is organized around common values and social cohesion. At the core of any community is a common language. It is the fundamental basis for the existence of a community. A lingua franca is a language systematically used to communicate between persons not sharing a mother tongue. All disciplines—management, medicine, law—have a lingua franca. So does Innovation. The first step to create a community of innovators is to teach them the lingua franca of innovation – its principles, its frameworks, its concepts and tools.

Once they learn the lingua franca, they will be able communicate on the same wavelength, act and work together and practice what they have learnt together in the realm of innovation and perform at a very different level of effectiveness. Then they will start having their own habits and traditions. This will eventually lead to a culture of innovation.

No lingua franca, no culture.

“When I say that I’m not going to witness or permit the change, I’m talking about the thing that’s most important in Apple—the culture of Apple. Am I going to change anything? Of course.” – Apple CEO, Tim Cook, at the D10 conference, 2012

Let me recap an example that I first wrote in my May 2009 blog.

For decades Whirlpool Corp., the No. 1 U.S. appliance maker was an engineering and manufacturing firm fixated on quality and cost. Its products were mostly commodities sold at all large retailers – Sears, Best Buy, etc. In 1999 Whirlpool embarked on a mission to be recognized as being No. 1 in innovation as well. They started by simply enlisting 75 employees from across the firm to brainstorm. The group came up with one hit product, but most ideas were too far-out or insignificant. Like many first-time innovators, people had a difficult time seeing how a more far-reaching idea could turn into an opportunity.

That’s when Whirlpool re-thought its approach. First, every salaried employee was enrolled in a business innovation course. Second, they trained people called I-mentors who were kind of like Six Sigma black belts. They had real jobs, but they also had special training in how to facilitate innovation projects and help people with their ideas. An Intranet portal offered everyone in the firm a common forum for learning principles of innovation, keeping abreast of recent research, and tracking the progress of ideas toward realization. Innovation teams comprised of employees from all levels screened and vetted new ideas. In 2008, Whirlpool had 61,000 employees and nearly 1,100 volunteer I-mentors worldwide who helped facilitate innovation throughout the firm.

Two years into the program Whirlpool had 100 business ideas, 40 concepts in experimentation and 25 products and business ideas in prototype stage. By early 2006, Whirlpool had 100s of ideas in the pipeline, 60 in the prototype stage and 190 being scaled for the market. In 2007 new products stemming from the innovation areas contributed nearly $2.5 billion in worldwide revenue and $4 billion of 2008 $19 billion in revenues.

So, if the senior leaders of the enterprise have the burning desire for the firm to be more innovative then, the goal is very clear. It is to create a “culture of innovation.” And the starting point on this journey is the lingua franca of innovation, i.e., Knowledge.

Unfortunately, I see leaders making several mistakes when it comes to starting this journey or the innovation initiatives that get started within the firm. A few of these mistakes are:

 1.     Firstly, they initiate innovation activities for the wrong reasons. Usually, leaders embark on such initiatives in response to either slow growth, intense competition, or a loss of market share. Hence, the expectation is that innovation is a panacea; it is a tool or a quick-fix. As you can see, this leads to all other types of problems – immediate pay back, no patience, wrong definitions of success etc. So, when it is not a “burning desire” to create an innovative culture, you are already starting out with the wrong foot.

2.     Secondly, there is still a rampant awareness problem. Most executives who are in top positions of large enterprises today probably got their MBAs 15 or 20 years ago. Unfortunately, at that time there were no courses in innovation. It is only lately that there are several innovation courses in business schools. Hence most leaders do not recognize innovation as a formal discipline. They have had very little training themselves and do not probably recognize the need for training.

3.     Thirdly, a good percentage of executives believe that innovation cannot be learned.

4.     Fourth is the exact opposite of reason three. Some leaders believe that we humans are all naturally creative and that we don’t need any formal innovation training. But, this group tends to be in the minority.

5.     Even those who do invest in formal innovation training tend to approach it as a formal science and not a social science. The focus here is on R&D, Technology, and NPD processes. The softer humanistic side, which tends to be the harder side, is usually ignored or downplayed.

 To summarize this discussion:

1.     If there is a desire to be innovative, then the goal is to create a “culture of innovation.”

2.     The road to mastery in any discipline (field) is time-tested: knowledge + practice + discipline (rigor)

3.     Knowledge: firms should broadly educate their employees about the discipline of innovation – why innovate, links with strategy and role of leadership and culture.

4.     Create a community of innovation experts (not everyone is going to be an expert).

In my next blog, in July, I will talk about the “PRACTICE” of innovation. In the meantime, I would love to hear how your firms are approaching innovation and its innovation initiatives.

Cheers!

Jay

Innovation is a Discipline!

Happy May!

 This blog is the third in a series of snippets from my recent book in Spanish (that translates as): “Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.”

 (http://www.amazon.es/Innovaci%C3%B3n-2-0-hablamos-innovaci%C3%B3n-olvidamos/dp/8415330693/ref=sr_1_1?ie=UTF8&qid=1336051243&sr=8-1 )

 In my last blog, I talked about the misuse and overuse of this colossal beast called “innovation.” This problem is quite systemic; among employees, managers, executives, academics, consultants and magazines. This universal abuse is leading to dismal outcomes for firms, wasted money and efforts, and disillusionment with innovation in general among executives and employees.

 One of the major reasons for all this pain is the wide spread illiteracy about “what is innovation?” Executives, consultants and academics are trying to define it. This is a futile endeavor. The reason for this is quite straight-forward and in my book I make the following case:

 “Innovation is a Discipline.” Period.

 In this blog I will re-visit this thesis that I have been making now for several years now (please see my blog from May 2009). This blog was quite exhaustive and that in fact became the basis for the book. I will recap the main points here.

Innovation is not a tool. Innovation is not invention. Innovation is not a panacea. Innovation is a discipline; a body of knowledge or a field of study. It is an academic discipline like marketing, leadership, psychology or sociology. However, unlike the other established disciplines in management (strategy, marketing, finance etc.), innovation is a new and emerging discipline. Viewed through the lens of a discipline, one can approach the management of innovation very differently.

Firstly, all academic disciplines have their own lingua franca – language, concepts, tools, principles, methodologies and frameworks.

Secondly, like all academic disciplines – physics, sociology, linguistics, accounting – innovation can be taught, it can be learned, it can be practiced and over time firms can master innovation.

Thirdly, all disciplines evolve. It is instructive to understand how management disciplines evolve. For instance, 30 years ago, quality was the new discipline that swept through management. The discipline started in the 60s in Japan as quality control. The focus there was to weed out of poor quality products. Then came quality assurance and designing in quality to eliminate errors rather than cull errors. This then evolved into TQM in the 1980s in the U.S. that included the entire enterprise as well as the supply chain. Six Sigma, the final version of the quality discipline had a few distinctive features that its predecessors lacked—(1) it integrated with existing strategy and initiatives of the firm, (2) it was driven and championed by top leaders in the firm, (3) it created a cadre of experts—master black-belts—in the concepts and tools of quality, (4) it trained an entire community—black and green belts—to become knowledgeable about its strategic implications, and (5) this community had the ability to use the principles of quality in specific situations by way of focused projects and apply proven change management skills. This practical, comprehensive approach helped the critical principles and practice of quality percolated into a majority of the firms world-wide.

Unfortunately, our understanding of the discipline of innovation is where our understanding of the discipline of quality was 20 years ago. Yet, we can learn several lessons from how other disciplines have evolved and how they have been approached and managed within enterprises:

1. To master a discipline is a choice. Not all firms are great at marketing. Not all firms choose to be great at operational excellence or for that matter at consistently developing great leaders. Hence, to excel at innovation is also a choice. Nobody is forcing firms to be great at innovation; especially not the competitors.
2. Firms cannot excel at any discipline unless there is a burning desire to do so from the leadership team. If there is the desire then the executives will spend time and money towards building capabilities within the enterprise to master that discipline.
3. Not everyone in the firm is a finance expert. Not everyone in the firm is a HR expert. Hence, not everyone in the firm will want to be an innovation expert. Yet, like how enterprises created six-sigma masters and experts internally, firms need to create a similar cadre of innovation experts. Very few firms have developed these internal experts in innovation. We need to remember that having a great R&D group does not automatically result in innovation.
4. While most inventions come from individuals or small groups of 2 or 3 people, a vast majority of innovations are a result of a community effort. Hence broad knowledge about the principles, frameworks, concepts and tools enterprise wide is imperative. Today, in most enterprises we expect all employees to have some rudimentary knowledge or skill in the concepts and tools of all major management disciplines – finance, marketing, operations etc. Innovation is no different. Unfortunately, this does not exist in most firms today.
5. It takes years to master any discipline. You master a discipline through discipline (rigor, patience and perseverance). Fortunately, the journey to master any discipline is the same: Knowledge à Practice à Discipline. There are no short cuts and no magic bullets. Yet, in reality I regularly encounter executives that expect employees to be magically innovative without any formal training and/or practice.
6. Mastering any discipline is like mastering a language. Most of us are quite happy to acquire conversational skills in a second language and rarely try to gain expertise. Similarly, most firms are quick to learn a few of the foundational skills of innovation. But it is not sufficient to set them apart in the competitive landscape. However, mastery and expertise in innovation is still a rarity among enterprises.

Finally, Innovation is a social science like marketing, leadership and psychology. While accounting, finance, and IT are formal sciences that are governed by logic and rules. Physical or life sciences obey the laws of nature. However, in social sciences there are no rules or laws. Social sciences have general principles, frameworks, tools, concepts etc. Unfortunately, thus far, several executives and firms have been approaching innovation as though it is a formal science like quality and/or physical science like biology or chemistry. More specifically, in several industries, innovation is narrowly defined as R&D and invention. This directly leads these firms to take very structured approaches towards innovation that eschews all the creative, artistic and humanistic elements that are central to innovation in general. Firms are still using the wrong tools, wrong techniques and wrong resources to manage innovation and that is leading to poor results and frustration.

In the next blog, I will talk about how an enterprise can start the journey to develop innovation capabilities systematically.

Cheers!

Jay

 

The Nonsense Surrounding Innovation

Happy April!

Last month, I gave you a brief introduction to my recent book (in Spanish) – “Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.”

 (http://www.profiteditorial.com/libros/profit-editorial/management/innovacion-20 )

As I said in my previous blog (March 2012), I will be giving several snippets / highlights from the book over the next few months. In this blog I will briefly introduce some of my own observations and some background research to support my thesis about what I call “the nonsense surrounding innovation.”

There is little doubt that the word “innovation” has become one of the biggest management fads in the last decade. The term has become overused to the point of tedium. In any given year, on average, I am in front of about 1000 or more executives and senior managers; this is in addition to the 250+ MBA students. For the last 5 or 6 years, at the very outset of all my discussions / meetings, I have consistently asked my audience the same question: “how many of you are sick and tired of hearing the word innovation within your firms?” And, consistently a good percentage of the audience’s hands go up. When asked why, the responses are also quite predictable:

·       There is a lot of talk and very little action

·       We are asked to be innovative, but never given the room and/or the resources

·       When quarterly results are missed, all innovative projects are shelved

·       Even if it is business as usual, it is labeled as innovation

·       Executives want us to be innovative but few explicitly lead and manage it

In the last 5 to 7 years, there are several surveys from reputed sources (Booz, McKinsey, IBM etc.) that support my own experiences: (1) CEOs and Executives are frustrated with their efforts to jumpstart innovation initiatives; (2) there is overall dissatisfaction with the dismal outcomes of their innovation efforts; (3) Mimicking best practices have been often ineffective; (4) resources and processes applied are either underutilized or not achieving scale to have a financial impact; (5) many firms manage innovation on an ad hoc basis; (6) even organizations that have seriously committed to innovation are only achieving partial results because of their over reliance on idea generation software and premature use of rigid processes and, (7) employee dissatisfaction around innovation is also very high; among others.

In my own experience, it is not just the large, global 1000 firms that are struggling with innovation. Innovation naiveté is rampant among executives, managers and employees in firms of all sizes. At the same time, a lot has been written and talked about Innovation. Experts and executives often talk about these in conferences and invited talks. Academics, practitioners and consultants write about them all the time. Yet myths and confusion persist. Typical myths include:

·       Innovation is invention

·       Innovation is just for the R&D folk

·       Innovation is about technology

·       Innovation is just about products

·       Innovation is new product development

·       Innovation does not work in my industry

·       Innovation is just for firms like Apple, Google & Facebook

·       Innovation does not work in my country

·       Innovation is luck

·       Innovation is expensive

·       Innovation is about giving everyone 10% time off to do their own thing

 Even well-meaning and thoughtful executives and managers make comments like:

·       “We are good at innovation but not good at commercializing.”

·       “We don’t need to have HR folk involved in innovation.”

·       “Our scientists talked to the customers and innovated.” [this was the first time their scientists had gotten out into the field]

·       “We are big champions of open-innovation” [the firm seeks customer input in their NPD processes]

·       “Our new product is a paradigm-shift.” [they were just catching up with the rest of the industry; what they meant was that the product was ‘new to the firm’, not ‘new to the industry.’]

What we are seeing here is the overuse, the misuse and the abuse that surrounds innovation. And, this is only compounded by blatant illiteracy among rank-and-file in managment.

Do you see your colleagues roll their eyes when the word “innovation” is mentioned at work? How much innovation nonsense do you see in your workplace? Why are firms struggling with innovation? Why is there still such rampant ignorance about innovation?

Please share your thoughts and experiences.

In my next blog, I will discuss “The Discipline of Innovation.”

Cheers!

Jay

Innovation 2.0 — my new book (in Spanish)

I am very happy to let you know that my first book has been published. This book was co-authored with Fran Chuan, Principle of Dicere in Barcelona. The book is in Spanish. The English version will be coming out at a later date. In the meantime, you can get this book from:

http://www.profiteditorial.com/libros/profit-editorial/management/innovacion-20

In this and up-coming blogs for the next several months, I will highlight various elements from this book.

The title of the book is:

Innovation 2.0: Why do we forget about the people when we talk about innovation? A practical way to create a culture of innovation.

As the title suggests, the superordinate goal for a firm that wishes to be innovative is to create a culture of innovation. But this begs the question, why should we bother with innovation? Why should a firm be innovative? Who cares?

The notion of sustainable competitive advantage in the marketplace has always been the Holy Grail for executives. But, as technology cycles come faster, as the amount of information explodes exponentially from month to month, and as competition appears from unexpected corners of the globe, that notion of sustained advantage seems to be a myth. Hence, firms are increasingly hoping that “Innovation” can keep them competitive and thriving. So, most executives are always asking “How do you innovate? How do you invest in R&D? What processes do you set up in the firm for innovation? How can we measure innovation?” However, these are the wrong questions to ask. Or, at the very least they are necessary questions; but, not sufficient.

In April 2010, Business Week and BCG released an annual list of World’s 50 Most Innovative Companies; a list that they initiated in 2006. This list contained some up-and-coming firms like Infosys, BYD, HTC, RIM, Facebook and Lenovo. Each year, there are a few firms that are regulars—Apple, Google, Toyota, Microsoft, IDEO, IBM, GE, P&G, Wal-Mart, 3M, Southwest, J&J and Disney. In the 2006 list only seven firms out of the top 50 were centenarians. In 2007, 2008, 2009 and 2010 that number was 12, 13, 15 and 14 respectively. They included firms like Nintendo, Tata, Nestle, Fiat, HSBC, Santander and Coca-Cola; in addition to the other well-known centenarians – 3M, IBM, P&G, and J&J. As the world economy faltered and spluttered, old and established firms seemed to have come back to vogue.

How have these “old masters” survived for more than a century when the average lifespan of a Fortune 500 firm is around 45 years? What do they know? What do they do? How do they do it? For business historians this is not surprising. These are firms that have withstood the test of time. These firms have been built to thrive independent of changes in technologies, markets, products, services and people etc.

Enterprises today are plagued by constant change. Most firms obsess over change, become paralyzed by change and even succumb to change. But the truly great firms, especially the centenarians, acknowledge that change is all around them. They flow with the change, but most importantly they know what not to change. They realize that when one is surrounded by a sea of constant change, you need a strong anchor that will not change; a core that will not change. That core anchor is the “culture of innovation.”

Technologies, products, process and markets usually do not give a firm a sustainable competitive advantage. Only a culture of innovation can give a firm sustainable competitive advantage. The “old masters” have demonstrated that this is possible.

Unfortunately Innovation is the new buzz word, and the new cool management fad. Everyone-from CEOs to politicians—are shaping their personas to identify with “it.” The clamor of business magazines, journals, consulting firms, academics and books are just adding to the clutter. To compound this problem, “culture” is also a fuzzy and soft concept. Firms, executives, consultants and academics have all struggled with “culture” for decades.

This book cuts through this clutter and confusion to bring some clarity on these two very poorly understood and poorly managed concepts – innovation and culture. This book lays out a simple, yet not simplistic, way to comprehend and manage them. You cannot make people creative and innovative. The only thing a firm can do is to create a climate where people can be naturally creative. So, this book addresses the question: How do you deeply imbed a culture of innovation within the enterprise?

In the next blog, I will discuss “The Sense and Non-Sense of Innovation.”