Innovation Newsletter from OVO
Passionate People Drive Innovation
St. Valentine’s Day Special
In February we set aside time to remember that special someone in our lives who brings us joy. They are our “Valentines” and they are close to our hearts. In an innovation setting, we also find that passion is also very important, so given the season we’ll focus on passion in innovation.
The “right” people
Innovation is a people-centered process or activity, perhaps moreso than any other activity or process in your business. While many activities have been automated, innovation requires people to spot needs, generate ideas, evaluate ideas, test ideas and eventually commercialize the product or service. People play a far greater role in innovation than they do in many other initiatives, especially since the innovation process is ad-hoc or poorly defined.
Innovation is important, so that means that the people assigned are identified and recruited by senior executives, who want to ensure that only the best, most experienced people work on an innovation effort, to improve the chances of success. So executives understand that people play an important and crucial role in the success of innovation, yet they often place exactly the wrong people on an innovation effort. Let’s examine why.
People without Passion
Talking about passion in a business setting sounds a bit ridiculous. After all, passionate people are usually completely “sold out” on a topic, or cause, or idea, and don’t always think logically or rationally. In a business setting, we prefer people who are reasonable and rational in their beliefs and goals. Yet in an innovation initiative, passion often spells the difference between success and failure, for these reasons:
Let’s review each of these in turn.
Everyone recognizes that innovation is difficult in most organizations. That means it is paramount to have a good leader for innovation. However, many innovation projects fail due to poor leadership, for at least two reasons. First, consider how we assess the power and prestige of people in an organization. Powerful people typically manage large teams. Innovation projects, on the other hand, have small teams. Thus, it can be very difficult to attract good leaders to innovation, since the position can be viewed as a “step down”. Next, consider the risk associated with innovation. In many organizations, failure or even poor achievement against a stated goal ensures that your train leaves the “fast track”. What good, successful manager will risk their advancement to work on a project that’s likely to “fail”?
These two facts – small teams and the high possibility of failure – mean that experienced leaders stay away from innovation efforts. Many innovation leaders are either junior executives who were willing to lead the project when no one else was, or people who were available. None of these leadership attributes will inspire trust, much less passion, in the innovation team.
In the previous section we identified poor leadership as one reason why passion and engagement are often lacking. Now we’ll look at two other reasons: Commitments and Hurdles.
Unless the innovation team is made up of people who have been relieved of all their regular duties, people on the innovation team will have their “day job” responsibilities on top of their innovation tasks. Even people who are exceptionally engaged in the innovation effort will find it difficult to keep up their enthusiasm and commitment as the work they will be evaluated on and compensated for – the day job – slips. Too many competing commitments, too many distractions mean that even the people who are passionate about the idea find it hard to keep the focus and commitment levels high.
In every initiative, there are unexpected issues, changes in plan and other hurdles to clear or barriers to remove. Where innovation is concerned, these issues or barriers seem far more onerous, often because they haven’t been encountered before and there’s little experience about how to eliminate them. Every project will encounter these distractions, but in an innovation effort the number of barriers and hurdles seems far larger, and the team typically has less experience overcoming these hurdles. As the barriers mount, it’s easy to lose heart. Those who don’t have deep passion for the idea are likely to abandon the effort given the number and complexity of the hurdles.
For these reasons, and many more, it is exceptionally difficult to establish and to maintain the passion necessary for an innovation to succeed.
In the John Wayne film about the events at the Alamo, there’s a scene where Colonel Travis recognizes his small forces are likely to be overrun. Everyone else in the fort recognizes it as well. Travis draws a line in the earth, and asks anyone who will stay with him to step over. In the movie version, everyone does – they have either given up hope for escape or believe the idea of freedom from Santa Ana was worth dying for. Of course this is probably apocryphal, but it is instructive for innovation teams.
Who on your team wants to be part of the innovation effort? Who on your team has unbridled passion for the idea? Conversely, who on your team was assigned to the innovation effort and doesn’t buy in or doesn’t want to be there?
Too often innovation teams are composed of people who were available or had the “right” skills, but aren’t passionate about the effort or the idea. When the project encounters the inevitable barriers, hurdles or setbacks, the team quickly folds, leaving the passionate people on the sidelines, angry that their ideas haven’t been effectively pursued and cynical about the efforts of the organization in general.
Stop looking for the people with the right qualifications or skills. Do what Travis did – find the people who are willing to put themselves on the line for an idea. Find the people who have passion for innovation and then support them with access to good processes and expertise as necessary. The right people for innovation are the ones who have the passion for it, and often aren’t the people you would have chosen otherwise. Stop assigning people who don’t want to participate and start recruiting volunteers who are excited to be a part of the effort, who won’t skip town when the inevitable hurdles and barriers present themselves.
Why Innovation Makes Executives Uncomfortable
This article expands on a blog post I wrote in early January entitled Why Innovation makes Executives uncomfortable. You can read the original blog post here. That blog post generated a significant amount of conversation and interaction, and I thought it would be helpful to continue the discussion here in a longer format.
The point of the original blog post was that innovation, while often propounded by senior executives, in reality makes many executives uncomfortable for a number of reasons. It’s instructive to understand why innovation makes executives uncomfortable so that you can more easily convince them that innovation is beneficial when you need to do it.
Qualitative not Quantitative
The first reason innovation makes executives uncomfortable is that innovation is more qualitative than quantitative. Most of us have become accustomed to managing our businesses based on hard facts, numbers and statistics. One good example is Six Sigma. Six Sigma is a pervasive management initiative and is based on the concept of statistics, standard deviations, and a reliance on “hard data”. Innovation, on the other hand, is not always quantifiable. It relies on insights and intuition, customer interactions and experiences. Needs and opportunities are defined by small changes and small data sets. Innovation relies on different tools that don’t created deep, rich and statistically significant data sets. Innovation requires drawing conclusions from qualitative data rather than identification of an answer from a statistical analysis. It’s this squishy nature of innovation that makes many executives uncomfortable, since most organizations want hard data to back decisions. To some extent, innovation is a return to “seat of the pants” management. Of course innovation tools provide some data to support conclusions, but not nearly as much as is available in other projects.
Nothing makes a manager who relies on data and statistics more uncomfortable than small sample sizes and qualitative data. Most will never be comfortable with qualitative results and will demand “hard data” and evidence to support the conclusions you draw from your innovation insights.
Beyond a reliance on quantitative facts, we’ve bred a generation of managers who appreciate and enjoy predictability. Every person reading this has been to a pre-meeting to discuss an eventual meeting, simply to eliminate any surprises in the final meeting. Managers like projects, products and initiatives that are predictable.
Unfortunately, innovation isn’t predictable. While we can typically identify market opportunities or customer needs, the exploration and discovery phase of an innovation project means that we often discover much more than we expected. In fact one could argue that if you aren’t surprised by what you find in an innovation project, you’ve set your sight too low and aren’t really innovating. If innovation only confirms what you already know, your firm is either exceptionally insightful or your scope is far too small. And it’s this unpredictability that makes executives uncomfortable because the lack of predictability may lead to our next topic, loss of control.
Loss of Control
Perhaps the worst thing that can happen to an executive or manager in a large organization is to suggest they don’t have “control” over the work that’s being done in their organization. That would be to suggest they aren’t “on top” of things, or that projects or initiatives have gotten out of scope or out of hand, or that the manager can’t predict what is going to happen or is surprised by the results.
If an executive exerts too much control, then innovation is difficult to achieve. On the other hand, an executive who exerts no control allows his or her team to explore any idea, any topic, and suddenly he or she has abdicated the strategic goals of the group to the innovators in the group, who now choose where to invest. Clearly there is a fine line between too much control and too little control, and we believe most organizations err on the side of too much control. This keeps the internal house in order and working to expected norms, but limits innovation.
For all the reasons described above, and many more, innovation is exceptionally inefficient. Teams don’t have deep experience innovating, or converting ideas to new products. They stray from standard patterns of work. They have new and different expectations. The more innovation in an organization, the less efficient the organization can be. Managers and executives, of course, want optimum efficiency and effectiveness. Innovation is viewed as a threat to their efficiency goals.
But wait, there’s more
The reasons stated above – inefficiency, loss of control, lack of predictability and the focus on qualitative rather than qualitative tools and outcomes – are all reasons why innovation makes executives uncomfortable. Knowing this, then, we as innovators must understand that executives are uncomfortable with innovation and also understand how to alleviate their concerns if we are to innovate successfully.
For example, when innovators use qualitative tools, we need to demonstrate to executives WHY the tools are valuable and useful and where they’ve been used successfully before. A good example is Bank of America and their Keep the Change program. Their teams used ethnography and noted that moms rounded up their checks when they recorded the checks they had written in their check registers. From this they created an offering to allow people to gain rewards for doing what they were already doing. We at OVO used this example to convince other firms that qualitative research tools like ethnography have been used effectively by other firms. For every reason that innovation makes executives uncomfortable, we need to be prepared to demonstrate that we understand those concerns and have thought through methods to alleviate concerns or at least reduce the concerns, so executives are more comfortable with innovation. Acknowledging that executives can be uncomfortable with innovation isn’t enough; good innovators understand the need to go further and provide information or examples to help reduce concerns.
In this article we discussed why innovation makes executives uncomfortable and what you can do to reduce that discomfort. This article and the previous one – how to find and use the passionate people in your organization – will do a lot to develop more commitment and buy-in when you start an innovation effort. More than anything else, the commitment to innovation and the work involved will assist an innovation effort or will perniciously chip away at the support for the effort until it is terminated.
Open Innovation Models
Open Innovation and Crowdsourcing
I’m pleased to have been part of a team that developed a new book that will be published in March 2011 called Open Innovation and Crowdsourcing. Paul Sloane was the editor and requested book chapters from a number of noted innovation specialists who focus on open innovation. You can find the book on Amazon here.
Open Innovation Models
My chapter considers open innovation as a “generic” term, which stands in for a number of tools, approaches and methods. Open Innovation is simply a catch phase for a number of methods to interact and engage with customers and business partners to generate, manage and develop ideas into new products. What’s interesting from my perspective is that the approach or “model” that you choose has implications on the kinds of ideas you’ll generate, who owns the intellectual property and the resources necessary to support open innovation.
The Open Innovation Typology
Look at the graphic at the top of this article. It represents an X-Y plane. The X axis represents the number of external entities that can participate in your innovation initiative, from zero to “everyone”. The Y axis represents how you indicate or direct what you want them to submit, from their own suggestion to answers to specific problems you want them to help you solve. With this framework in mind, we can identify four different open innovation models:
Each of these approaches or models is different, requires different strategy, different staffing and will result in different outcomes.
Some open innovation approaches allow virtually “anyone” to participate. Perhaps the best known of these are sites like IdeaStorm or MyStarbucksidea. Lately the federal government has entered the idea management space with Challenge.gov, which allows citizens to suggest ideas to government agencies. In these applications, anyone with a web-browser can submit ideas, and can typically rank the ideas that have been submitted and often can comment on the ideas as well.
In these models the customer or partner controls the input and decides what kind of idea to submit and the scope and impact of the idea as well. This means there is a wide range of ideas on a wide range of topics. Additionally, any idea management system exposed externally takes on many of the characteristics of a social media platform, so your innovation teams must engage and communicate with the idea submitters. If there’s no engagement, the idea management site will suffer, since customers have grown accustomed to interacting with each other, and with employees on social media sites.
Many companies favor the invitational model. In these models participants are selected for their relationship and knowledge. Proctor&Gamble’s Connect+Develop proprietary network is probably the best known example of this approach. In this model companies partner with a few customers or business partners to develop ideas and sometimes to co-develop products. Since the number of participants is small and controlled, there are few IP issues and the information exchanges have far greater depth.
In the invitational model the number of participants is far lower, and the focus is typically on one very specific need or opportunity as defined by the firms in the network. This means that the participants are well-prepared, understand the opportunities and challenges and can develop several ideas very quickly, rather than spend a significant amount of time generating ideas and evaluating ideas that don’t matter.
Probably the most important aspect to grasp about “open innovation” is that it is simply a label applied to a lot of different approaches and techniques. At the most basic level, open innovation is simply working with external firms, partners or customers to generate, manage and create new ideas and products. As we’ve attempted to demonstrate, however, there are a number of different tools, techniques and methods that a firm can use to pursue “open innovation” and these different approaches have radically different implications and outcomes.
A broadly participative innovation effort like IdeaStorm encourages many people to participate and results in an enormous amount of ideas. Additionally, these sites begin to take on many of the aspects of social media – customers see this as a way to “talk” to the company and expect the company to talk back. Invitational programs require a much more capable intellectual property management capability and business development and relationship management capability. These programs typically generate fewer ideas but take the ideas much further down the development path. They require a completely different set of skills than more participative open innovation models.
The point we are making is that open innovation is a very general term. If your executive team decides “open innovation” is something your firm should pursue, understand their goals, and commitment levels and investment options, then choose the approach that best aligns to your goals and strategies.
Three Innovation Outcomes
Why most innovation looks the same
There are three outcomes that innovation can create. Innovation can radically change an internal issue or product, which we’ll label “cannibalization”. Second, innovation can radically change an existing market, whether you participate in that market or not. We typically call this action “disrupting” another industry or market. Third, innovation can create a new market or customer segment, what the authors of “Blue Ocean Strategy” called a blue ocean. In this case you may create a product that serves the needs of a completely unserved market.
Whether your innovation is a product, a service or a business model, it will result in one of these three outcomes. What we’d like to do now is explain why so many innovations are “disruptive” and why so much innovation work seems so similar.
The reason so many innovations and so much innovation work seems so similar is that of the three outcomes, disruption is the choice over 80% of the time. Most organizations arrive at that decision through a process of selection. Let’s look at the innovation outcomes that confront an innovator and examine why disruption is often the course selected.
It’s easiest to cannibalize an existing product or service, since you are replacing an existing product or service and you know the market and customers. The challenge with cannibalizing existing products and services is that you are undercutting an existing revenue stream. Further, by undercutting an existing product or service, you are directly impacting some executive’s quarterly result. So while cannibalization is possibly the easiest innovation model, it is rarely used. Since it is rarely used, many firms are often “surprised” by disrupters who deliver products or services that disrupt their “sacred cows”, doing what internal innovators couldn’t.
Blue Ocean Strategy
The Blue Ocean strategy, defining a product that meets the needs of unserved or underserved customers, is probably the most compelling approach, but it is also the most uncertain. It combines two risky attributes: creating a new product or service and defining a set of customers whose needs aren’t well known, and who haven’t been well served previously. While every firm would like to create a “blue ocean” offering, few do so effectively because of the risks involved. Those risks include understanding customer needs, especially since we aren’t familiar with those customers, and creating a new product for these customers. These risks don’t exist in isolation; they compound each other, making the risk profile too high for most firms to tolerate.
After reviewing these two innovation outcomes, most firms turn to “disruptive” innovation as the last remaining option, given the risks and uncertainties of cannibalization or “blue oceans”.
We define disruptive innovation as introducing a distinctive new product or service in a market or industry controlled by some other firm. We seek to “disrupt” their market the way Apple disrupted music distribution, as an example. This outcome seems less threatening to executives because 1) it does not impact the firm’s own products or services that are currently generating revenue, unlike cannibalization and 2) the customers targeted are reasonably well understood and already exist as a market. This validates the market rather than having to create a new market following a Blue Ocean strategy approach.
When every firm follows the same innovation strategies and chooses the same innovation outcomes, then it is no wonder that many innovation outcomes, products and services seem very similar.
What you can do
Every innovation project should begin with a careful consideration of outcomes. Most projects immediately reject internal disruption and will toy with “blue ocean” but ultimately will settle for “disruption”. Too often these same firms are surprised when a competitor or new entrant disrupts the products and services they chose not to cannibalize. Rather than make quick decisions, think strategically about your needs and your competitors. New entrants to your market and new competitors will be quick to disrupt the products or services you are afraid to cannibalize, and in every market there are underserved or unserved populations waiting for the right product or service. Don’t decide too quickly about the outcome, and make sure you are intentionally deciding the outcome rather than settling for a disruptive approach.