December 2011 OVO Newsletter

Innovation Newsletter from OVO

OVO Views
Conversations about Innovation
January 2012- Vol 6, Issue 2

In This Issue
Sign Up
Quick Links

Greetings!

OVO logoIt’s time once again for our annual wrap-up of the year in innovation, and predictions for the year ahead. In this newsletter:

Recapping 2011 innovation

How to strike the right balance between short term profit motives and long term innovation needs.

Predictions for 2012

Trends point to emerging economies as the places to watch for innovation in 2012.

A new book – Relentless Innovation

The feedback on Relentless Innovation has been excellent. Read a brief synopsis of some of the reviews, and pick up a copy for your favorite innovator.

Top Innovation Blogger!

I’m pleased to let you know that for the second year in a row our innovation blog Innovate on Purpose has been ranked the 2nd best innovation blog on the web. Thanks for your votes and please keep reading!

As always, feel free to contact us to exchange ideas, ask for innovation help or suggest topics you’d like to see discussed in the next issue.

 

Recapping Innovation in 2011

Looking Back

In late 2010 in our December newsletter we made several predictions about the future and fate of innovation. Those predictions were:

  1. Ideas will come from “everywhere”
  2. Experiences become more important that products
  3. Demand speeds up as capability slows
  4. Creativity re-enters the workforce

We also made two strong suggestions. The first was to visit places at the intersections where countries, geographies and systems were meeting and new innovation is created. Locations suggested were Hong Kong, Singapore, Kuala Lumpur, Dubai. The second suggestion was to learn to use Twitter and other social media tools to become more aware of innovation that’s happening around you.

Let’s look at the predictions and see how we did.

Ideas from EverywhereOur prediction last year was that more companies would become far more aware of the opportunities that “open” innovation presents, and would begin to identify and source ideas from everywhere, internally and externally. As P&G has demonstrated with its goal of 50% of products based on ideas from outside the organization, open innovation is driving real revenues and profits.

In retrospect, however, it’s clear that many companies are interested in open innovation but have been very cautious about deploying it broadly. A number of firms have experimented with one or more “forms” of open innovation, such as partnering with Nine Sigma or Innocentive, or attempting a crowdsourcing exercise, or forming a proprietary partnership. What most firms fail to realize is that deploying just one of these techniques is not enough – it would be similar to running your car using only one or two cylinders in a four cylinder engine. Furthermore, there are still many companies who haven’t taken the first steps toward open innovation. The gap between the potential value and the realized value in open innovation is tremendous.

We believe open innovation is a long term trend, and early adopters will create real differentiation for themselves as they learn and master new techniques.

Experience over productsLast year we argued that a new trend would unfold, recognizing the value of innovation to change or build customer experiences would become more important than innovation solely to create a new product or service. As the economy remained flat, our expectation was that people would acquire fewer products and services, but would expect more from those products and services.

Again, in retrospect we believe the predictions were correct but many companies have avoided any additional costs, so we’ve seen less focus on innovation around customer experience than we expected. This prediction will take longer to play out, due to economic factors primarily. However, I suspect many of you at this time of year are like me. I’d far rather receive “experiences” as a gift rather than a new tie or a new sweater. As we slim down the “stuff” in our lives, it becomes more evident that experiences matter more.

Faster, FasterOur next prediction was that many internal innovation and product development processes would be forced to speed up. The increase in the pace and rate of change is inarguable. Product lifecycles are shorter due to increased competition, higher customer expectations and lower costs of entry in many markets. Yet, while the product lifecycles are shorter, innovation hasn’t sped up, and product development cycles are still as slow as they were years ago.

We went so far as to define an innovation methodology for Rapid, Disruptive innovation that has been beneficial for our clients that have implemented it, but many firms have innovation processes and product development lifecycles that are still too slow, too unresponsive to market demands.

Creativity re-enters the workplaceOur final prediction in late 2010 was that creativity would re-enter the workplace, to drive more insights and the generation of more ideas. We felt that organizations would encourage more creativity from existing staff through training and rewards or compensation. Further, they’d acquire more creative skills through partnering or by hiring people with creative skills.

I think we are seeing more creativity in the workplace, but much of that is being driven by consultants and third parties rather than by internal staff. The freeze on new hires has been sustained so few new creative types have been hired, so firms seeking creative ideas and insights have relied more on third parties.

RecommendationsThe recommendations we made last year were rock solid. There are a number of cities and geographies where innovation is percolating – in some places you can almost feel it in the air. Cities, especially trading locations and cross-roads are humming with ideas and energy. We’ve mentioned Dubai and Kuala Lumpur. The real point of this recommendation is that good innovators need vibrant experiences in places where new things are happening. You will never be as good an innovator as you can be if you simply remain at your desk. Innovation is the result of, and often results in, experiences. Go get some experiences in some new, vibrant locations.

And if you can’t get that, then get involved with the firehose of information, ideas and perspectives that are exchanged every minute on social media. I honestly believe you could earn an innovation PhD on Twitter by reading the assorted musings, ideas and perspectives from a wide range of innovation experts. Businesses that shut off their workers from Twitter and other social media face a severe lack of insight, trends and perspectives. Whether you do so at work, or do so at home, get engaged in social media, especially on innovation topics.

Predictions/Projections for 2012
Looking AheadBefore I make predictions about innovation, let’s take a quick look at the trends that will shape 2012.

  • Technological
  • Demographic
  • Societal
  • Economic
TechnologicalThree factors start to converge: ubiquitous telecommunications, “big data” and the ability to process it and really low cost processing power. These technologies mean that businesses can predict consumer behavior like never before, and conversely, consumers have access to information at their fingertips. These technologies suggest that marketers will have more power to influence consumers, but with a continued economic hangover consumers will use the power of their handheld devices to find the best prices and best information about the products and services they acquire and use.

What’s new here is the immense computing power being put into place to harness and assess all of the data we create through our cell phone use, shopping, online experiences and other data trails we create. And this isn’t simply true in western countries but in all countries. Google knows more about an average consumer than most governments know about their citizens, and with new “big data” systems any data aggregator can begin to predict and influence consumer behavior. As lives are lived in social networks and online, more and more data becomes available, which simply feeds the ability of big data systems to gather and assess that information. From these assessments will come new segmentation capabilities, new marketing offers much more targeted and much more subtle than ever before.

SocietalThe Arab Spring will continue into the winter and spring of 2012. That movement, along with a protest movement in the US and general dissatisfaction with political stalemate and other societal issues in countries like Russia and regions like Southern Europe will be sustained through much of 2012. Through the advancement of technology and ubiquitous availability, it is far easier for crowds to mobilize people and opinions, and far easier to protest against societies or governments. People in many regions are upset with the status quo and seek significant change. While that has been registered as protests primarily, increasingly it will force change in many countries. The EU will be forced to examine the differences in its members’ economies. Russia will examine its policies and interactions internally and externally. The UN will become more vocal but even less important as members focus on their internal issues rather than explore large scale solutions. The US continues to pull back from global affairs and no country steps into the gap left by the withdrawal of American leadership. Traditional European leaders face internal squabbles and unraveling of the EU and potentially NATO. China continues to invest overseas but doesn’t “interfere” in sovereign affairs.

EconomicThe major economies of the world all face significant challenges in 2012. In the US, government deficits, a housing market hangover and relatively high unemployment will contribute to continued slow growth, but some economic recovery and growth will occur in 2012. Consumer spending will remain tepid, as households are squeezed by the lack of jobs and by a continued process of foreclosure. Businesses wait to see what will happen in the elections of 2012 before making significant new investments, and increased regulation will slow hiring.

In Europe, the healthy northern economies will be sucked into a recession by the European Union’s inability to contain the financial crisis that is the Euro. This affects European countries as well as trading partners like the US. The Euro continues to experience weakness as governments within the EU continue stop-gap measures to address the structural differences within the economies. These distractions lead to slow growth, but with one benefit: as the Euro’s value falls, exports from the EU to countries outside the EU become far more favorable.

As the US grows slowly and European economies remain stagnant, China responds by trying to grow internal consumption and increasing trade to countries like Brazil and regions like Africa where growth is relatively strong. Africa could be a big winner in 2012 and in the rest of the decade, as many economies in Africa are growing, and emerging economies like Brazil and China will seek new trading partners.

DemographicDemographic trends unfold over more than one year, but several demographic trends will emerge in 2012. One significant trend will be the result of the one child policy in China. There are a number of eligible bachelors in China with relatively good jobs who won’t be able to find local Chinese spouses. China could witness an in-migration of ex-pats and people from Chinese communities in Indonesia, Malaysia and other areas where there are more Chinese women of eligible marrying age. As these people return to China, along with a large population of young people trained in the west but returning to start jobs and lives in China, they will have a big impact on the way China looks at the west, and on consumer trends in China. These changes won’t happen overnight, but the cohort of men who grew up under the one child policy are of marrying age and will expect to start a family.

Demographics play a part in the gradual decline in some previously powerful countries as well. Russia and Japan are rapidly growing older and their populations are growing smaller. Demographers estimate that Russia’s population could fall below 100 million in less than 50 years. Russia has significant out-migration, and neither country has traditionally encouraged in-migration. A lot of social upheaval in Asia is possible as traditional powers Russia and Japan become less important, China grapples with growing demands for internal improvements and countries like Vietnam, Indonesia and Malaysia begin to assert themselves.

Other PerspectivesAt this time of year there is no shortage of predictions about the future. I’ve listed a couple of sites that I think offer thought-provoking ideas about 2012.

What you should do now is gather the trends you believe are important and understand how they will unfold, and how that will impact your industry, market or customer base.

Ross Dawson – Futurist

Twelve themes for 2012

Trendwatching.com

Trends for 2012

Innovation Excellence

The folks who bring you Innovation Excellence have a number of projections for 2012.

Innovation ImpactsSo, what do these trends portend for innovation? There are at least three scenarios based on the economic development of the country or region.

Highly Developed

Exceptionally slow growth, economic turmoil, little consumer spending and other factors will drive even more demand for low cost innovation possibilities in the US and Western Europe. Look for even more opportunities for “open” innovation, which can reduce the cost of developing new products and shorten product cycle times. A continued focus on efficiency and cost cutting will continue to frustrate internal innovation efforts, in conjunction with limited budgets and very few available resources. Increasingly, trend spotting and scenario planning will become more important, as firms understand the value of a longer term view and the low cost of obtaining these insights.

Innovation becomes far more important in government and public programs, as tax revenues stay flat and more pressure is placed on governments to offer more services to constituents. Government agencies will place high demands on their internal systems to provide more services, which will mean an increased focus on internal and external innovation.

Emerging Economies

Emerging economies such as China and Brazil stand to gain a lot of opportunities in 2012. China will be forced to increase domestic investment, so innovation will focus on new services and new infrastructure in China, as well as new relationships and new trading partners overseas. Brazil and other emerging economies may see many new opportunities for trade and for growth outside of Europe and the US. Innovation knowledge and capability is very unevenly distributed in these countries, so good innovators will quickly accelerate away from their competitors. Training opportunities and partnering opportunities should abound in these economies as well as nascent economies.

Nascent Economies

Opportunities for innovation in the Middle East, in Africa and in some Asia countries are simply unbounded. Much of the economic growth over the next few years will occur in these countries. Governments and firms that capitalize on the growth opportunities and put innovation programs in place will reap enormous benefits. Innovation skills are in high demand in many of these countries, so partnering and innovation training and skill development will be in high demand. While more established firms in the West turn to open innovation, many governments and firms in nascent economies can develop robust innovation models that incorporate the best practices of open innovation as well as the methods and capabilities to innovate internally. A young, growing middle class will quickly seize these opportunities.

The TakeawayInnovation trends suggest that the US and Western Europe will encounter much of what they experienced in 2011 – sporadic innovation challenged by economic conditions and little investment. Much of the valuable innovation will be “open” innovation. The US Federal government and state/local governments will lead many innovation initiatives, forced to do more with far less.

New innovation opportunities exist in emerging economies where innovation skills are relatively inexperienced and innovation models poorly defined and described. Expect to see increasing demand in countries like Brazil and China for innovation capabilities, and in regions like the Middle East and Africa as well. In the US you can expect to see more defined and institutionalized innovation initiatives, especially based on “open” concepts. European innovation will be focused on reducing costs and improving exports.

Relentless Innovation Update
Book LaunchI’m pleased to let you know that Relentless Innovation is now available online and in book stores. The book has been received very well in innovation circles and has been positively reviewed by a number of innovation experts, including Jeneanne Rae, who wrote a review for InnovationManagement, Gregg Fraley, who wrote a review on his blog, Tim Kastelle, on his blog and Jorge Barba on his blog.

Please contact us at OVO if you’d like help putting the ideas into practice, or if you want to become a Relentless Innovator.

Beyond the bookBeyond the book, however, I’ve drafted a number of other materials to help you think through the key messages and to support companies that are trying to become Relentless Innovators.

You can find more information on the book website, and find PowerPoints and other supporting material on Slideshare.