Monday, July 27, 2015

Innovation: We'll know it when we see it

I'm back on my definitional soapbox again, so if you've had enough of my diatribes on the importance of defining innovation, I'm sure there's an interesting international market melting down or a distracting political movement somewhere.  There.  Now that all the folks who aren't interested in defining innovation have skipped away to other destinations, we can get down to serious business.  Because trying to "do" innovation without defining it isn't just painful, it's insanity.

Those of you who can remember old U.S. Supreme Court rulings will recognize the title.  A Supreme Court justice, on ruling about pornography and when and where it could be published, recognized that in order to rule on its commercial availability, the court would have to define what pornography was.  The justice was rumored to have said that he couldn't define it, but he knew it when he saw it.  Unfortunately many corporations use the same approach to innovation.  They expect great results, but don't know how to define what they want.  In the absence of a destination, any road you take will get you where you are going.

The real truth about innovation and its definitions and outcomes is that we recognize innovation when the market shifts and provides outsized rewards to companies that address important, unmet customer needs.  Until that time good ideas often seem unusual or risky, not worth pursuing. Then, when a competitor capitalizes and creates a great new product, we slap our foreheads and wonder why we didn't recognize the need and fill it.  Most good innovators have a very well defined problem to solve and understand the underlying customer needs and expectations.  Further they have in mind potential solutions, but they allow those solutions to be shaped by customer needs.  They have a good, but flexible, definition of the size and scope of the innovation, as well as the potential outcome.

What we should be doing instead is creating a definitive scope for innovation using shared definitions and language.  And, we should be innovating across a portfolio that includes incremental (small changes to existing products) and disruptive (completely new to the world products), as well as thinking about new ideas as products, channels, services, business models and other potential outcomes.  All this does is establish the width and breadth of the "playing field", and then each innovation activity must determine for itself what the appropriate risk, investment and potential outcome should be. 

If, on the other hand, you continue to use a "we'll know it when we see it" mentality, you'll find that all of your innovations look very similar to your existing products, because people "know" what they do and produce each day, and will revert to those definitions and constructs in the absence of any new expanded scope.  If you ever wonder why so many innovations "fail" or simply mimic existing products and services, this is the reason.  In the absence of new scope and clear definitions, it's much easier to simply repeat what's tried and true, rather than create something interesting and new.

Recently I was contacted by a new client who wanted us to teach their teams how to innovate more effectively.  We responded with a proposal but asked about their innovation definitions, mostly to understand existing expectations.  What, we asked, where the company's definitions or expectations about innovation?  Their answer:  we hope you'll tell us.  Think about that for a minute.  Would you ask an external company to deliver a fully developed strategy for your business?  Would you delegate decision making about entering a new geography or product line to an external firm?  If not, why would you ask an external agency, even an expert, to dictate what your innovation scope and definitions should be?  Because you are working on the "we'll know it when we see it" model, and should be working on the premise:  we'll see it when we know it instead.
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posted by Jeffrey Phillips at 7:14 AM 0 comments

Friday, July 24, 2015

Three principles to help you generate better ideas

It's interesting to me how little we appreciate the depth of knowledge and discipline that has been developed over the years where innovation is concerned.  Recently a client asked me where we (OVO) based our methodologies.  I told her that like most innovation consulting firms our foundations are based on work done in the 1930s and thereabouts by Alex Osborn.  A lot of innovation and creativity is based on Osborn's work, supplemented by Parnes and others.  When current firms talk about their methodologies, I think they should acknowledge where those come from.  Many originate in the work Osborn, Parnes and others did in the past.

Recently I've stumbled upon another historical artifact that illuminates idea generation.  This is a really nice short booklet or pamphlet written by James Webb Young over 60 years ago.  The booklet is entitled A Technique for Producing Ideas, and it offers great philosophical insight into how to improve your skill at generating ideas.

There are two principles that Young introduces that I think are especially interesting.

First, he suggests that every new idea is simply a combination of existing elements.  This means that good innovators are able to create interesting combinations of existing technologies, solutions or capabilities.  Young probably wasn't the first to notice this concept, but was perhaps the first to detail the concept so definitively.

Second he suggests that the ability to make good combinations is based on the ability to see relationships and understand how concepts and ideas are interlinked. He was thinking about complex relationships back then in ways that we almost take for granted now.

These two principles should tell us a lot about our individual capability and capacity for generating ideas, and how to become better at generating ideas.

Combining

In the first case, if Young is correct and every new idea is an interesting and new combination of existing elements, then the ability to generate ideas scales with your ability to imagine combinations of many different types of elements.  The more elements, technologies or solutions you are familiar with, the more potential combinations.  This means that people who have more diverse experiences and familiarize themselves with more "elements", should be able to create more combinations, or in this parlance, ideas.  Conversely, people who are experts in a specific field and who do not "browse" widely in other fields may not have awareness or familiarity with a large number of different elements.  This may limit the number of possible combinations and worse, the individual may have already attempted many of the possible combinations previously based on his or her limited inventory.  A person with a limited inventory of elements and deep experience has attempted to combine those elements before and has discovered that those specific combinations don't work.  This is why expertise can be dangerous when generating ideas.

This first principle also suggests that introducing random information, objects or experiences as an individual or team starts to generate ideas may offer more potential combinations.

Relationships

The second principle Young introduces is the ability to see relationships within potential combinations.  His quote about advertising is especially apropos. "In advertising an idea results from a new combination of specific knowledge about products and people with general knowledge about life and events."  Young believed that idea generators needed specific information about a key topic and broad general information in order to innovate, and understanding the relationships that were possible within discrete combinations were what would produce a valuable idea.  From an innovation point of view, the specific information is based on the unmet need or "job to be done".  The more we understand that, the better.  The general information is the inventory of potential elements or solutions.  This is why generating ideas without conducting needs investigation or research often fails.  We typically lack both the specific knowledge and use very limited general knowledge, which restricts the ability to generate more and better ideas.

Note that Young's advertising concept - combining specific knowledge with broad general knowledge - is what we now describe as "T-Shaped".  Ideo and others have acknowledged that good innovators are often very deep in a specific skill set or knowledge base, but very networked with a broad range of people or experiences.

Do we have the patience and ability to find the important relationships?  Too often the relationships aren't obvious on the surface.  Young addressed this as well when he wrote "If we go deeply enough, or far enough, we nearly always find that between every product and some consumer there is an individuality of relationship".  That is, at the surface there may not appear to be an interesting or unique relationship, but if we look carefully and deeply we can find interesting and valuable relationships.  This is the essence of fully understanding customer wants and needs.  Taken at the surface level, all wants and needs are evident.  If we take the time to drill into a challenge or problem more deeply, we'll find unexplored and unexplained needs to solve.

Letting go and letting your unconscious take over

Young offers one other point about good idea generation.  Often the best ideas emerge once you've given up working on them with your conscious mind, and allowed your unconscious mind to take over.  That's why good ideas happen in strange places, like in the shower or while you are driving to work, when your mind isn't intently focused on forcing connections.

If this assertion is true, then many brainstorming and idea generation functions are poorly structured.  Trying to generate a lot of ideas in 30 minutes is fine, but unless you allow for time for the unconscious mind to work, you'll miss good ideas.  Our preferred idea generation method is to allow time to prepare, before the idea generation session, and then break up idea generation into two short sessions, ideally a session in the morning of the first day, followed by other activities and then gathering again the morning of the second day, to harvest ideas people had while driving home or watching their kids play sports, when the mind isn't preoccupied with finding an immediate answer.

Even if this is a "best practice", it's hard to convince busy business executives that their teams need time to explore other connections, or for their unconscious brain to take over.  It's like that ad that IBM ran about innovation, where an executive finds a bunch of people on the floor on mats in the dark.  That may not be a bad way to allow the unconscious to work, but few executives are going to understand it and allow it.

Many people have asked me over the years how to become a better idea generator.  They'd like to generate more and better ideas on their own, and in a group setting.  Young's short booklet is one of the best outlines I've seen to help you consider the inputs that are necessary, and the mental models that support good idea generation.  Check it out, and follow his advice to become a better idea generator.
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posted by Jeffrey Phillips at 8:39 AM 0 comments

Monday, July 13, 2015

What's really happening with innovation day to day?

I've seen a number of surveys from many of the leading suspects, all of which tell us a lot about what executives think about innovation.  Mostly, they are for it, and think there is much more work to be done.  My experience with most large organizations is that executives are so busy with so many different priorities that they often think that more is happening, on all of their priorities, than is actually happening.  I suspect this is no different when it comes to innovation.

So to you, dear readers, I ask for your help.  We are interested in what's actually happening in innovation, day to day, across corporations large and small.  What are you getting done?  What's blocking or enabling innovation?  Do you have a definition of innovation?  What are your main objectives or goals where innovation is concerned?  If you'll take about 10 minutes to respond to this survey, we'll compile the data and feed it back to you. 

What we are seeking is the actual state of innovation, both the positives and the not so positives.  What are you doing with innovation?  What do you hope to do?  Does it differ by size of company or by industry?  Please respond to this survey, which is only 25 questions, and we'll publish the results by mid-August.

Why would you want to respond?  Well, first to see how similar your experience is to others who are attempting to innovate.  Second, to understand the alignment between what executives say and what actually gets done.  Third, to understand how demands for innovation may increase in the near future and what that means for you.

Here's one more link to the survey.  I hope you will respond, and we promise to provide the results back to you.
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posted by Jeffrey Phillips at 6:45 AM 0 comments

Thursday, July 09, 2015

Innovation is a cultural phenomenon

There's really no easy way to say this, so I'll come right out with it.  It's your culture that's holding you back when you try to innovate, but no one wants to admit that.  Most consultants and executives want to focus on interesting innovation tools, or idea management software, or creative design concepts, because these are flashy and new, and distract attention from the real challenge at hand.  Which is your culture.  If culture "eats strategy for breakfast", what do you think it eats for lunch and dinner?  Crazy innovation activities mostly.

When we talk and write about innovation, we are constantly holding up the same companies as arbiters of innovation excellence.  Apple, Google, 3M and others who have demonstrated the ability to innovate in two interesting dimensions.  First, they've been really good at creating disruptive innovations that people want to acquire or use.  Second, they've been able to sustain innovation over a period of a decade or more.  Any company can innovate once, and some can even create a really interesting disruptive new product or service.  But only a few can both disrupt industries and sustain innovation over a long period of time. And those that do, inevitably, have a culture that engages and sustains discovery, experimentation, risk taking and innovation.

So why do we do it backwards?

The real conundrum, then, if innovation is a cultural phenomenon, is why most companies do everything backwards.  What I mean by this is that if innovation is a cultural issue, why do companies put off or delay cultural change, and instead focus on short term incremental projects, hoping to create interesting innovation?

Conceptually, the approach to building innovation competencies should be:
  1. Develop a cultural bias for innovation by increasing opportunities for risk taking, encouraging experimentation, fast failure.
  2. Build reward systems and compensation systems that encourage innovation
  3. Define innovation tools and processes and train people to build skills
  4. Conduct innovation projects
If culture is powerful (and we are constantly reminded that it is), why do we constantly ignore it or reverse the logical order of developing an innovation competence?  Instead, most attempts at building innovation competence by firms that aren't that innovative today look like this:

  1. Experiment with small, incremental innovation activities
  2. Train a small team on innovation skills
  3. Conduct an occasional periodic innovation project
  4. Communicate generally and sporadically about the importance of innovation
  5. Acknowledge that culture is important but never engage any change
Strange, isn't it, that what most of us acknowledge as one of, if not the most, important aspect of building innovation competencies and capabilities is virtually ignored and rarely feels any impact or change.  This would be similar to building a skyscraper but neglecting to focus on the foundation.  Would you be surprised if it toppled over or sunk into the ground if the foundations was imperfect?




Why is culture so challenging?

In fairness, changing a corporate culture is daunting, regardless of the driving need.  Whether the culture needs to shift because of changing market conditions, business model needs or innovation, changing a culture is never easy and always time consuming.  Many businesses are aware of the investment and are trying to pull a fast one - get innovation underway as a project before the culture becomes aware, because the culture will resist innovation.

But what I can't understand is the learned helplessness, the virtual surrender, when we talk to our customers about the need for cultural change.  Talk about the elephant in the room!  Everyone acknowledges that cultural change is important, but no one wants to own the responsibility and everyone hopes to get just enough innovation down without impacting the culture at all.  Keats, the famous English poet had a good analogy for this effort.  On his tombstone he asked for the following epitaph:  Here lies he whose name is writ in water. Doing innovation without changing or impacting the culture is like writing your name in water.  It appears momentarily, then the surface of the water returns to its original shape and form.  You've had no lasting impact.  The same is true when you "innovate" without attempting to educate, impact or change the culture.

Evolving an innovation culture
Let's first acknowledge that most cultures need to change, and at a minimum put in place a transition plan for that change.  Of course we must continue to conduct innovation activities and projects while we are changing the culture, but one should not be placed "on hold" for the other.

Start by developing the rationale for change.  Cultures, like people, need rationales.  They can be educated, they can be negotiated with, because after all a culture is collective wisdom and expectation of the employee base.  Next, introduce new rewards and encouragements for innovation - more opportunities for risk taking, for exploration, for discovery, and even for safe failure.  Build new innovation skills, not just in isolated teams, but broadly across the organization.  Let people see and understand that innovation isn't a strange, unusual process but a set of reliable tools and insights that can be applied in many different situations.  As the motivations and incentives increase, and the fear and risk decrease, a groundswell of interest will emerge, because after all, while cultures are strong, pent up ideas and opportunities will create a geyser of innovation if they are allowed to be released.

Let's stop doing innovation backwards.  Let's start with the changes that will accelerate innovation capability and lower innovation resistance, and that's by shifting and evolving an existing culture to innovation.  The alternative, which many companies practice today, is simply to conduct innovation against the resistance of the corporate culture, which only builds cynicism and makes subsequent attempts without changes to the culture even more fraught with difficulty.
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posted by Jeffrey Phillips at 7:29 AM 0 comments

Tuesday, July 07, 2015

What Douglas Adams knew about innovation

I'm a huge fan of Douglas Adams and his four part trilogy including the Hitchhiker's Guide to the Universe.  I was such a huge fan that I convinced my son to read the books, and now he and I both know that 42 is the answer and we never go anywhere without a towel.  If the previous sentence doesn't mean much to you, go read the books.  They are worth it, believe me, for their humor, their typical British stiff upper lip response to the word and the paradoxes like the Improbability Drive.  But to me, Adams understood something about people and how they think that matters a great deal to innovation.  This is illustrated in perhaps the best way when Ford Prefect (a leading character and noted raconteur in the novels) describes to Arthur Dent (the hapless average guy who is caught up in an intergalatic space adventure) how to fly.  Dent, who is a simple earthling just introduced to the mysteries of space and time, doesn't know how to fly, at least not without the assistance of an airplane or some other mechanical device.  Prefect explains that flying is easy.  It's simply a matter of "throwing yourself at the ground and missing".  Prefect goes on to explain that it's the act of missing the ground that presents the difficulties.

The Segue

So, one might reasonably ask, what does a comedic science fiction novel about the destruction of Earth for an inter-galatic bypass have to do with the very important and serious work of corporate innovation?  I believe that what Prefect was telling Dent has direct meaning to innovators, that is, to be willing to suspend disbelief for even just a few moments, and wait to observe what happens next.

To some extent, we can't fly because we KNOW we can't fly, and we all know how throwing ourselves at the ground will end.  Badly, with an abrupt and painful stop at the end.  Because we know the result and we've seen the play before, we know what the end is like and aren't willing to participate.  The same goes with innovation.  Because we've experienced poorly defined and poorly managed innovation, or because we've had one naysayer in the team who shut down idea generation or one manager who ruled out interesting ideas, we aren't willing to suspend disbelief for even one second, so all the ideas and all the discussion revolves around narrow incremental ideas which are easily demonstrated to reflect existing concepts.  The problem is that really good ideas are available, but mostly only for teams willing to suspend disbelief, and who are willing to take the risks to create something new.

The acceptance of the impossible

Prefect goes on to note that missing the ground is difficult but not impossible.  He tells Arthur that it's helpful to be distracted at the moment of impact so that you aren't thinking about the impact or the pain.  Prefect instructs Arthur that when by luck he does manage to find himself flying that he should ignore all the rational consideration of weight and gravity and just remain flying.  There is real value for innovators in this argument.  First, we innovators have to release the chains that bind us to reality.  We have to release ourselves from the tyranny of today, the boundaries of budgets, the constraints of cost.  If we allow these things to tie us to the Earth, we'll never reach the stage where good and interesting ideas are possible.  Once, and if, we allow ourselves to accept the impossible and we shed our thinking barriers, we can create some really interesting new connections and ideas, but only as long as we collectively accept the impossible.

I've had the good fortune to work with a few teams that were able to truly release the bonds that tied them to today's troubles, difficulties and barriers, and were able to gain new insights and create truly interesting ideas.  This experience is powerful, but can only be sustained if everyone is willing to accept the impossible, even temporarily.  Of course this is an artificial and temporary state, eventually burst by time constraints, a demanding call from an executive or an insistent email inbox.  But the power and insight that is available if the innovation team is willing to truly attempt to "fly", releasing the things they "know" and expect and instead focusing on the nearly impossible.

The Wisdom of Children

The reason children are so creative and we adults are so constricted in our thinking can be summed up in one word:  experience.  As adults we bring all of our lived experience to bear in any situation, quickly assessing what can go right or wrong, who is a "winner" or loser, what will and won't be allowed.  Kids don't do that.  They wonder why not?  While we adults expect any potential barrier to stop us.  Experts (and we adults are experts at a lot of life) bring all of their knowledge and experiences to bear.  We KNOW what to expect and aren't willing or able to ignore that knowledge to have a chance to experience something new or different.  To innovate we've got to be willing to put aside that knowledge and experience to discover something new and different.  We innovators have to be a lot more child-like in our approach to innovation, full of wonder and possibility rather than constrained by rules and experience.

In the end, Arthur Dent does learn to fly.  Not well, and his mind is constantly at war with itself over what's possible and impossible.  Just read about the Improbability Drive to understand this.  But perhaps because everything he experienced was so unusual, so improbable that it opened his mind up to at least being willing to accept things that were strange or unusual, while most of us work day in and day out to keep things exactly as they "should be", rather than what they could be.
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posted by Jeffrey Phillips at 7:10 AM 0 comments

Monday, July 06, 2015

Innovation is the one thing you can't delegate

Peter Drucker made the claim that the modern corporation has two real purposes:  marketing and innovation.  Everything else, he said, are costs.  If Drucker was right, what does that say about most executives, who are busy managing costs?  In effect Drucker is saying that they are ignoring the two most important functions of a business.

In a large corporation, it's difficult to obtain the attention and mindshare of any senior executive.  There are simply too many factors pulling them in too many directions.  There are competitive issues, regulatory issues, market issues, and of course the financial markets are a roller coaster right now.  There are demands for growth and for achieving predicted quarterly results.  What should be the primary focus of senior executives?  Where should they spend their time?  I'm going to argue that the vast majority of their time should be spent where Drucker said it should be spent:  on innovation.

There are a number of good reasons why this isn't the case today.  Over the last 30 years modern management thinking has been influenced by outsourcing and rightsizing, on lean and Six Sigma thinking and on the GE way (1st, 2nd or out of the market).  These management philosophies focused on making companies more effective and efficient, but didn't focus on differentiation or growth.  And the dogged pursuit of these concepts has led us to increasing sameness, commoditization and fierce competition, with few really new or interesting products or services, and little real innovation.  Sure, innovation is constantly in the news, and executives talk about the need for more innovation, but frankly there's really very little innovation happening other than incremental change.  For all the knowledge about innovation and the potential capabilities, we're barely scratching the surface.  For proof look no further than the space programs.  What was routine only a decade ago, putting a rocket into orbit, suddenly seems difficult, even with a profit motive.  Or, how about education?  With far more connectivity and far more people attending college, hopefully gaining far more skills and capabilities, we remain mired in stagnant or low growth, unable to lift an entire generation (in the US) and whole portions of continents out of poverty.  Whether you look at business or the public sector, innovation is lacking.

What's the job of the CEO, or leader of a state or government?  To manage resources effectively and improve the lot of the people.  Drucker said the most important function was innovation, creating new products, services, business models and outcomes that drive real value for employees, customers and populations.  If this outcome is so important, can you risk delegating it?

In most corporations the CEO is aware that innovation is important but is uncertain how to achieve it and most often delegates the responsibility to a senior executive or innovation team.  Once the responsibility is delegated, some the the purpose and rationale for innovation is lost or unclear.  Resources and funds that the CEO could easily direct become difficult to obtain for these executives and innovation teams.  I've spoken to several CIOs and innovation teams who would LOVE to have million or two to spend on innovation activities, in businesses that routinely churn billions in revenue.

Once delegated, responsibility is established and forgotten, underfunded and underutilized.  CIOs and innovation teams engage product groups to perform incremental innovation and declare success.  Little actual change is created and few real innovations occur, yet everyone is satisfied because the company has "done" innovation.  The size, scope and scale of the innovation is not questioned, and the company fiddles while the industry burns.  The most frustrating thing about these facts is that there are few firms that lack the brainpower and resources to innovate.  Most simply lack the willpower and commitment to see good innovation through from start to finish.  This is why the CEO must not delegate innovation, but must be actively involved.

Oh, you'll say, you've changed your tune.  And mea culpa I admit I was wrong.  We used to think that CEOs could not stay engaged enough to make an impact on innovation, and we certainly didn't want CEOs sitting in brainstorming exercises.  And frankly we still don't, unless they are as creative as Jobs was.  But in hind sight what we didn't want to admit is that the CEO is the final resource allocator, the final decision maker about growth, and risk, and the final person who can commit resources and even the whole company to a new direction.  And that's what it's going to take to be successful.  A complete commitment to innovation, not a random series of half-hearted incremental experiments scattered across the organization.  Yes, you'll still need your CIO or innovation team or whatever structure works for you, but they must be fully engaged with the CEO on a weekly basis, and the CEO must be communicating his or her vision about innovation, redirecting resources, resetting priorities.  If you cannot achieve this, innovation will be periodic and haphazard, meaning little to no innovation at all.

So here's the rub:  senior executives and CEOs need to sponsor innovation vigorously and aggressively, but few of them have any experience in innovation.  Most obtain their roles through careful management, cost control or other factors.  How do we fully engage the CEOs and explain their roles to them if they want innovation?  How do we "train" them in these new tools and behaviors?  How do we divorce them from some of their other activities to refocus their time and attention on innovation?  We make innovation what it is:  a matter of corporate life and death.  Innovation is not a nice to have, it must exist, and must exist beyond simple incremental product change.  The definition of innovation must grow to encompass incremental and disruptive innovation, and the outcomes must expand to include products, services, channels, experiences and most importantly, business models.  We need new definitions of innovation, ably communicated throughout organizations.  We need a change in mindset about what innovation is, what it is "supposed" to do.  And we need CEOs and senior executives who will lead that change, and all the subsequent change that this thinking creates.  Nobody else in a corporation has the credibility to spark that vision, communicate the need, and ensure resources are allocated and funds available.

So, no matter what role you play in an organization, you should act to innovate, and rather than delegate the responsibility down, push to incorporate the people in hierarchies above you to get more involved, provide more resources and set the stage for more innovation and change.  While there are many forms of excrement that roll downhill, and down the corporate structure, this is one responsibility that should roll uphill.
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posted by Jeffrey Phillips at 8:09 AM 0 comments

Tuesday, June 30, 2015

Innovation: Exploiting and Exploring

In every aspect of life we create simple dichotomies to simplify decision making.  Something is right or wrong, black or white.  We do this to simplify our lives, shorten decision making time and become more efficient.  Creating these false dichotomies means we often miss excellent opportunities for much deeper consideration.

Take innovation for example.  No matter where you turn companies and experts are creating all sorts of innovation dichotomies.  Products or services?  Incremental or disruptive?  Exploiting strengths or exploring new opportunities?  Constantly creating an either/or dichotomy, when the real opportunities are far richer and deeper.

Exploit or Explore?
I can say without fear of rejection that most innovation at the corporate level is incremental, extending existing products and services by adding new capabilities or features.  There's nothing wrong with incremental innovation.  It creates solutions that keep existing customers engaged and creates short term revenue.  It allows an organization to "exploit" its existing capabilities and portfolios.

On the other hand, very little innovation in corporate levels is focused on transformation or disruption.  There are several reasons for this fact.  First, transformative or disruptive innovation is unpredictable.  It's hard to determine the benefits or outcomes of something completely new.  Second, transformative or disruptive innovation can work against the existing business model, in effect leading to cannibalization of existing products and services.  When the overwhelming priority is to sustain the business model and make money with existing capabilities and resources, it can be very difficult to contemplate disrupting the business model.  Third, disruptive innovation can be expensive, and time-consuming.  For these reasons and others, too little focus and energy is expended on transformative or disruptive innovation.

It's not really either/or
But you see we've introduced a false dichotomy:  exploitive versus exploration, and are forcing leaders to make tradeoffs between these two alternatives, without fully understanding several important factors.

First, too often innovators ignore the breadth and depth of innovation possibilities.  Doblin has described, and many of us use their description, of ten different types or outcomes of innovation:  products, services, business models, channels, brands, value networks and so forth.  Yet many corporations artificially narrow this to simply creating new products, when in effect we should be focusing on innovating business models, channels and experiences.  Again, false narratives and thinking narrow options far too often and too early.

Simultaneous and broadly defined

Instead of narrow definitions, we need to open up innovation definitions to larger thinking.  Corporations need a balanced blend of innovation to exploit existing capabilities (incremental, cost-cutting, efficiency focused innovation) AND exploring new markets and opportunities (transformational, disruptive innovation).  Secondly, corporations need a much broader definition of desired innovation outputs or targets (products, services, business models, etc), rather than simply tinker with product innovation.

Implications

If you accept the idea that innovation must be more broadly defined and simultaneously working on both exploiting and exploring opportunities, then there are implications for your business.  First, you'll need to reallocate resources.  Far too many resources are focused on simply running the day to day business. Far too little resource is invested in innovation, of any type.  Second, you'll want to rethink how you assign people.  Your best people need to be working on your future, not your present or your past.  Assign your best people to innovation.

Third, focus on a balance between exploiting and exploration, based on the amount of competition and change in your industry.  The faster the change, the higher the competition, the more you should be focused on exploration, because significant change is going to happen.  You can cause it or you can react to it after the fact.

Fourth, work on creating a much more fluid organization, able to adapt to changing circumstances - changes you create and changes thrust on you by external forces.  Solid, rigid organizations create barriers to change and then crumble as new products and new business models emerge.

Fifth, focus on changing and adapting your business model.  Too much emphasis is placed on product innovation, and too little on adapting and shifting business models.  Ultimately it's not a product or service that drives success in the market, it's the business models, and increasingly we can see that business model longevity is shrinking in the same way that product cycle longevity is shrinking.  No longer do we hail the impact iTunes had on the music industry, now we look in wonder at how quickly streaming options have overtaken iTunes, forcing even Apple to react.

To remain competitive corporations must become far more aggressive innovators, constantly innovating existing products and capabilities (exploitation) and constantly evolving and identifying new markets, segments, technologies and opportunities (exploration).  As they do the latter, they must become far more nimble and agile, able to modify and shift business models.  Increasingly, business model innovation must be the focus of innovation efforts, with products and services viewed as by-products of a business model innovation.

A new change model

All of this means corporations need a new model of change, moving away from the unfreeze/refreeze models of the past, because in the future there is no time to refreeeze, only to repurpose, shift and adjust.  These concepts and demands call for greater fluidity in the organizational structure, nimbleness in the corporation culture and better strategy and implementation in the management ranks.  Innovation, business model adaptability and change management are not nice to haves, they are the competitive advantage of the emerging marketplace.  Paul Hobcraft and I proposed some ideas about a new change model and the concept of a "fluid" business structure in a series of articles published on Innovation Excellence.

Trying to accomplish both exploitation and exploration in a "frozen" organization won't work - all the constructs are focused on exploitation.  This is why ambidextrous organizations are important and why we need new change models.  You cannot afford to focus on exploitation alone, and few firms would even think of a solitary focus on exploration.  You need to be doing both, simultaneously, which will demand new flexibility, new agility, the ability to change at speed, and execute established processes efficiently while conducting exploration capably.  Innovators need to identify and adopt completely new models of change in order to thrive.
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posted by Jeffrey Phillips at 7:14 AM 0 comments