Innovation Newsletter from OVO
In December 2009, following our usual practice, we made four predictions about innovation in 2010. Let’s recap those predictions and see how we did.
On the whole we got a lot right. The downturn proved to be deeper than any of us thought, so our focus on education was correct. Today, more than ever, we need innovation in our educational systems for K-12, secondary and university education and training for those workers who have lost their jobs due to shifts in the economy. Reforming the educational system should be a number one priority, in the states and at the Federal level. Innovation can, and should, lead the way.
We predicted that governments would grapple with innovation, and that has also proven true. The US Government has kicked off projects in many different agencies, and a number of states have new innovation task forces, including my home state of North Carolina. Facing budget shortfalls and increased demands for services, governments have no choice but to turn to innovation for new ideas.
Last year we postulated that innovation would become a “line item” in the annual plans of many firms – that innovation would become recognized as a key driver for success. This prediction happened in some firms, but not as broadly as we would have hoped, mostly due to the continued poor economy. Rather than innovate, many firms are still trimming. Finally, we predicted that idea factories would become a more persistent concept. The idea was picked up and included in the book Intangible Capital by Mary Adams. There is movement towards the concept of an idea factory, but this prediction was the one that was the most “off the mark”, probably slowed by the economy, but still a key need.
So, let’s turn our attention to predictions for 2011. Remember, this is for entertainment purposes only, so no wagering is permitted.
Our 2011 Predictions
We’ve got four predictions for 2011:
And two recommendations:
Ideas from everywhere
In 2011, many more firms will embrace open innovation in all of its different forms. The focus on open innovation is not based on the belief that employees aren’t smart enough, or that open innovation is the hot new thing, it’s simply that the scale and pace of innovation demands ideas from everywhere. When Jeffrey Immelt at GE and the executives at P&G admit their scientists and R&D staff can’t sustain the innovation pace necessary for growth, pay attention. These firms aren’t pursuing “open” innovation because it is an interesting fad, but because it helps them identify new and valuable ideas that drive corporate profits.
Social media and its adoption only exacerbates this trend. As more and more firms adopt the ability to create communities with their customers and partners, more ideas will be exchanged.
The implications are that your firm must explore the many different types of “open” innovation and choose the techniques that are right for your capability and culture. Don’t assume that open innovation is for other firms – it is for every firm.
After over two years of living in a recession, we’ve gotten the message. Conspicuous consumption is out. Frugality is in. People are spending less and carefully weighing their purchases. However, they want those purchases to matter, and they want an excellent, engaging experience in combination with those purchases. As consumers and businesses purchase less, they expect more from each purchase – not just in terms of more features on the product, but more engagement in the experience. Firms in 2011 must use innovation to rethink their customer experience and customer service. Until the recovery blooms in full, excellent service with good products will trump innovative products with poor service and experience.
We believe that we’ll see far more focus on innovation related to customer experience in 2011 and into the near future. The implications are obvious – your firm can use innovation to adapt its customer service and customer facing systems to improve customer experience – and that work will pay dividends and have less risk than new product innovation.
Even though there is an economic downturn, few competitors are standing still. Compound that fact with the knowledge that many people currently out of work are considering starting new businesses, some of which will compete with yours. Your existing competitors are moving fast, and the new entrants have nothing to lose. While customers aren’t buying as much, they are demanding new products and services and expect your firm to produce. Strangely, after several years of downsizing and rightsizing, the product development cycle in many firms is still exactly the same length. That means you’ll have to speed up both your idea generation process and find ways to reduce costs and time in the product development process.
2011 brings a double edged sword, and you are subject to both blades. Clearly customer demand for new products and services is increasing, and your innovation capability must speed up to keep up. On the other hand, the delay between good idea and new product launch isn’t getting shorter. In 2011 innovators will be forced to speed up the generation of ideas, and the commercialization of products and services.
Creativity Re-enters the Workplace
Time was, the single craftsman created products or services in his workshop. Those individuals were subsumed in the advent of mass production. Variances and creativity were eliminated to focus on throughput of consistent delivery. This focus has reached it’s zenith, and creativity will once again become a valued, recognized capability in many businesses, if for no other reason than to introduce badly needed new ideas and new perspectives.
The implication for 2011 is that firms must re-introduce creativity in their organizations through cultural shifts and training the existing workforce, or by hiring people with stronger creative skills.
On top of the predictions above we made two recommendations. The first is to get someone from your firm to Southeast Asia. The cities there have a palpable sense of being the “next” place, and they sit at a nexus of many forces – the rise of China and India, a cross-roads for trade and commerce, investment from the US and Western Europe and a young, increasingly educated population. This mixing bowl of cultures, markets and countries will be a spawning ground for many new trends and ideas.
Second, get connected. If you know how to find them, there are more good ideas on Twitter in an average half-hour than in most corporations in an entire year. Communities are conversations and you are missing out on the conversation if you aren’t participating in social networks, especially those networks where other innovators are engaged. The conversations are “out there” – are you on the outside, missing the discussion? Strangely, many firms have cut themselves off from the information and insights available on social media platforms. If you can’t get engaged at work, find some time to do so at home or after hours.
Continuing the Theme
In our previous article we gave you four predictions for 2011. Rob Shelton recently spoke about the three factors of an innovation culture, and well, we couldn’t help but write about that, given our appreciation of the importance of innovation culture.
In his talk Rob provided three attributes of an innovation culture: vision, motivation and metrics. We’ll add a fourth: communication, to round out his list.
I know what you are thinking. “We don’t do that “vision” thing.” Vision often seems so ephemeral, so inconsequential to the day to day activities of a business. And that’s perhaps true – vision is not necessarily important to day to day activities, but is vital to innovation, especially disruptive innovation or innovation that takes a long time to come to fruition.
Since most innovation other than very incremental innovation is about solving customer needs or creating new markets or new customers in the future, innovation demands clarity about where the firm is going and what it hopes to be far more than day to day operations. No innovator wants to pursue ideas that when realized aren’t aligned to the direction of the business. Without a clearly defined and communicated vision and corporate strategy, innovators have far too much horizon to scan. Every idea is equally viable and also may be equally untenable by the time it can be realized. Without a clear vision and strategy, innovation beyond the merely incremental is almost impossible, and very frustrating for the participants. As I wrote in my blog post about this issue: no vision, no innovation culture.
Beyond vision, what motivates people to innovate? In most firms, there are a handful of people who are motivated just for the opportunity to do something new and different. Beyond these self-starters, the majority of the workforce needs different motivations. They need to know their ideas will be heard, respected and acted on. They need to know that the time they spend away from their regular “day jobs” is recognized and that there are corresponding rewards for that work. They need to know that their evaluations, and ultimately their progression and advancement, are based somewhat on their engagement in the innovation process. If any of these factors are missing, the firms sends conflicting messages about innovation that are eventually interpreted as “keep doing what you are doing”. Ultimately this topic is about evaluation, compensation and recognition. Does your firm actively recognize and reward innovators? What happens to those whose ideas don’t achieve great success? Perhaps you are demotivating your teams without realizing it, but these factors drive a significant amount of engagement, and influence the culture of the organization.
Anything we intend to do well in an organization should be governed by a set of milestones, goals and metrics. In fact most people can recognize how serious an executive team is about an initiative based on the number and type of metrics they place on the effort. Innovation should be measured and managed just like any other initiative, but we’d prefer to see a different set of measures and metrics than are applied to most corporate initiatives. Trying to impose an “ROI” too quickly on an innovation effort will usually result in the termination of all disruptive activities and many incremental ideas as well. This is not an argument to eliminate measures and metrics, just a statement to recommend measures and metrics that are situationally appropriate for innovation efforts, rather than applying the same measures and metrics to new and different kinds of work.
Rob did not explicitly include communication as one of his attributes for an innovation culture. He may have simply assumed that good communication exists. Our experience indicates that excellent communication about innovation is an absolutely essential part of an innovation culture. Even if you have a great vision, excellent motivation and good metrics, if the executive team doesn’t communicate the vision, and the innovation team doesn’t communicate its goals and strategies, the work isn’t going to be successful.
Our emphasis on communicating about innovation is less about quantity or channel and more about quality and emphasis. A regular communication from the executive team, highlighting successes and valiant attempts at innovation, which directs the team to its innovation strategy and goals, reinforces the idea that innovation is important and the senior leaders are involved and engaged in its success. Silence on these matters indicates the direct opposite.
Innovation is ambiguous, uncertain and risky. Clear, consistently communication about the scope of the work, its goals and expected outcomes, can dramatically reduce the uncertainty and the risk. There’s no good reason not to actively communicate about innovation, yet many firms fail to communicate effectively about innovation.