Tuesday, October 27, 2015

Eliminating innovation unknowns - definitions

Yesterday I wrote a post about the need for executives to eliminate the "unknowns" when they want their teams to innovate.  If we call on people to improve their day to day routines, there are few unknowns.  They simply need to work more efficiently on the activities and processes that are familiar to them.  But when we call on people to innovate, there are a host of unknowns and uncertainties.  For example:  how much should we invest?  How do we gain the skills?  How do we prioritize existing projects and new innovation work?  How much risk and uncertainty will be tolerated?  These and other unknowns will haunt the team, and unless they are resolved quickly and effectively by a manager or executive, the teams will resolve them by reverting to existing norms and past experiences.

Perhaps one of the simplest, and yet most important unknown to address is a definition of innovation.  We at OVO often demand that our clients develop a consistent definition of innovation that can be communicated to teams within the organization.  This may seem somewhat pedantic or even silly, but until there is a common understanding of the definition of innovation, trying to understand what is "meant" by innovation and trying to deliver on that uncertain request is difficult.  Clearing up this first and perhaps most important unknown is important.

Thanks to UNC

Thanks to UNC we can see just how loose and distributed the definition of innovation is for senior executives. One of their executive MBA programs has recently asked senior leaders from a range of different companies to provide their definition of innovation.  You can see those different definitions by clicking here.  I hope you'll read these definitions, because they are instructive in several ways.

Note that I don't believe it's appropriate for each executive to provide exactly the same definition of innovation.  Circumstances, budgets and competitive realities are different across firms and industries, so the definitions will vary.  But note the range of definitions.  Some speak of improving the status quo.  Some speak of greater efficiency.  Some address customer experience.  Some are impossibly subjective.  Imagine trying to convey some of these definitions to an internal team!

There's plenty of definition out there

Whether executives want to recognize it or not, there are plenty of examples of definition of innovation out there.  Our general definition of innovation is:  people putting ideas into valuable action.  But we don't think you should stop there, because this is only a general definition.  It needs to be enhanced and qualified.

We can thank a number of different experts and agencies for helping us continue to evolve and improve a definition and establish scope.  But for some reason this good thinking is typically missed by corporations.  For example, we believe that a good definition should include the acceptable range of outcomes.  Doblin has helpfully established their "ten types" of innovation:  product, service, business model, customer experience, channel and so forth.  Whether you like this taxonomy or not is unimportant.  What does matter is that in your communications and definition you provide some definition as to what outcomes are valuable, because in the absence of any definition, all innovation is product innovation, and product innovation may not be necessary or even valuable to consumers.  When no definition is provided, past experience guides decisions, and that may not be the best framework.

Other analysts have provided us with the "three horizons" to help determine the amount of change we hope to accomplish with innovation.  So, we can say for example that in this project we are seeking incremental change to existing products, or in that project we want disruptive change.  Again, in the absence of clarity and communication, all innovation becomes incremental.

Next, we can consider the anticipated constraints.  Since innovation is a new and unusual activity, most teams will make assumptions about the resource and time investment.  They'll believe that the project should be accomplished as quickly as possible, with the lowest possible investment.  In following that train of thought they are likely to miss unmet needs and rely too heavily on existing processes, tools and decision making criteria.  We need to define and communicate how much risk, uncertainty and change we are willing to bear, and corresponding to that request, how much discovery, time and investment we are willing to commit.  In the absence of this communication, it will be assumed that any innovation activity, like Hobbes's definition of human life, will be nasty, brutish and short.

Delegating scope and decision making

When an executive asks for innovation but fails to provide definitions and context, it is as if he or she is simply delegating all of the strategic thinking to the team.  While a handful of people are likely to welcome this outcome, the vast majority of corporate teams are left in a state of confusion.  They are experts at executing clearly defined plans that follow past models.  They are not comfortable or experienced working with a nebulous scope to uncertain outcomes.  When confronted with this possibility the most likely response is to complete a project based on existing rules, templates and tools, which results in outcomes that look very similar to existing products and services. 

In no other activity do senior leaders fail to provide clear goals, definitions and communication more readily or more often than in an innovation setting. The reason why this is true is relatively obvious - the vast majority of the time executives and senior leaders don't have to be very exacting with definitions and anticipated outcomes because the vast majority of the work is replicating existing products for existing customers in existing markets.  In other words, the team already knows what is expected.  It's gaining an understanding that innovation requires new definitions, new scope and better communication that will accelerate the pace of new products and services.  This is the first, and quite possibly, the most important unknown that innovators must address.
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posted by Jeffrey Phillips at 6:30 AM 0 comments

Monday, October 26, 2015

Innovation, the knowns and unknowns

I'm sure the formula existed long before Donald Rumsfeld pronounced it, but every business faces knowns and unknowns.  We face the things we know, or think we know, about our business, the environment, the economy and customers.  Worst, we face things we don't know, unknowns about the future, consumer demand, new competitors and so forth.  What executives need to understand is just how difficult these known and unknown "unknowns" are when we talk about innovation.

Innovation - A theme, a mantra or a capability

For example, I think it's important to understand how individual employees interpret what they hear when an executive talks about innovation.  I think most employees pay attention to they things they know and are comfortable with, and take a "wait and see" approach about things that are unknown or unfamiliar.  Thus, when an executive talks about innovation, for many it is an unknown, and the first judgement that many must make is whether or not it is simply a buzzword that is a throw-away phrase, not meant to be taken seriously, or the demands for innovation to become integral to what people do.  Unless and until an executive says innovation will be integral, it will be ignored, because it is an unknown.

Then, no matter how many times an executive may have talked about innovation, he or she actually demands that staff engage in an innovation activity, all heck breaks loose.  Executives are inevitably surprised by this, but we at OVO usually aren't.  That's because the executive has broken an implicit agreement - you pretend to expect innovation and we'll pretend to work on it.  As noted above, as long as executives talk about innovation but don't measure the outcomes or demand time and resources, people are completely comfortable letting the executive talk about innovation.  But, when resources are overtaxed and all the efficiency gains have been realized, when people realize that the executives are serious this time about an actual innovation activity, well, the excrement hits the rotary oscillator.  Because the first question that their teams will ask is: OK, what's the priority? And second, what initiatives I'm currently working on get demoted?  Management, if its about anything, is about three important and interlocking themes:
  • Setting clear objectives
  • Prioritizing activities
  • Providing appropriate resources
When executives move from simply talking about innovation to actually expecting it, they violate the first theme.  If for years your management has been talking about innovation but not implementing it, then it has established a clear objective:  innovation is a talking point, nothing more.  Therefore, the second and third themes are obvious:  no need to prioritize activities to include innovation and no need for more or different resources.  But when executives move from simply talking about innovation to actually expecting results, now the last two themes emerge.  Questions will inevitably arise about prioritization of other initiatives and the availability of resources.  Executives who demand innovation without thinking through these last two themes are simply kidding themselves and setting up a potential firefight within their own organizations.

Knowns and Unknowns

Why a firefight?  Because if we ask employees to do more with less, or improve efficiency, they understand what that means.  This request builds on a "known" - doing what you are already doing but doing it with less resources or with improved outcomes.  We simply exercise our "knowns" more effectively.  But when an executive or manager asks for innovation, we introduce not one but several unknowns:
  • An unknown about the process - "how" do we innovate
  • An unknown about the scope - "to what degree" do we innovate
  • An unknown about skill - "with what skills or knowledge" do we innovate
  • An unknown about time - "how long" do we innovate
  • An unknown about risk - "what discoveries or exploration or failure is permitted"
  • An unknown about the outcome - "what's an acceptable deliverable"

Talk about unknown unknowns!  Without all of this information, clearly and concisely communicated in advance and constantly reinforced, good people who are experts at conducting efficient existing processes are reduced to a circular firing squad, squabbling about potential goals, scope and intent.  Strangely, few are ever curious enough to simply ask the executive these questions; instead the team either debates them ad nauseam until the executive cancels the activity or makes their own, typically cramped interpretations that lead to delivery of look-alike results.

The first, most important innovation activity

The first, most important innovation activity that any organization can conduct is to get a clear understanding of the magnitude, scope and resource commitments for an innovation activity and the anticipated outcome and impact of the concepts.  While this seems simple in principle it almost never is, and without this communication and clarity teams can rarely do good innovation work.

Without this clarity, the innovation team faces far too many unknowns.  And when they face unknowns they resolve them in one of three ways:  choosing not to resolve them at all, waiting for someone else to resolve them and choosing to resolve them themselves.  Innovation teams will always choose certain over uncertainty, knowns over unknowns.  This means that eventually all innovation activity, in the absence of clear goals and strategy, will look exactly like an existing process, and will result in the development of products and services that closely resemble existing products and services, because these are "knowns". 

Executives and managers who want more innovation will spend time with their innovation teams, constantly quizzing them about the unknowns, and doing their best to remove or eliminate the unknowns, or at least providing guidance on how to resolve an unknown.  Never leave a team to resolve an unknown by itself, because it will simply resort to an existing "known" and you've lost a significant innovation opportunity and reinforced an existing process or tool.
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posted by Jeffrey Phillips at 12:05 PM 0 comments

Tuesday, October 20, 2015

Nothing new under the innovation sun

I rise today to praise Innovation Leader and Innosight on their publication of the 2015 Innovation Benchmarking Report.  I've only had the chance to read the synopsis, which is available on Slideshare, but it seems like an well-considered report, and I'm sure it's full of great analysis and observations.  The only real head scratcher, from my perspective, is what we are supposed to take away from the research.  After all, through all of the great graphs and parsing of the quotes and conversations, we are left with the conclusion that a) most corporations are at a relatively nascent state when it comes to innovation capability and b) a lot more work is needed to build these capabilities and sustain innovation as a competence.  Even corporations with long time commitments to innovation find it difficult to sustain an innovation team or capability.  The reporting is fantastic.  The real question is:  why is it still this way?  Will it always be this way - corporate innovators just on the cusp of a breakout, but never breaking out?

Survey Results

According to the synopsis available on Slideshare, the majority of firms responding to the survey described themselves as immature in the development of an innovation capability, and close to 60% of those surveyed have fewer than 10 people working on innovation activities.  This survey is based primarily on Fortune 500 companies, so a commitment of less than 10 people is, needless to say, a very small commitment. 

Perhaps one of the graphs that says more than you'd expect is the analysis of the question "why do projects get killed?".  The top four answers are:
  • No business unit buy-in (which begs the question, what was the innovation team pursuing if it had no sponsorship or buy-in?)  Demonstrates a lack of integration, and the sense that innovation is doing its own thing without regard for the needs of the business
  • Technically infeasible (which begs the question, does the innovation team understand what is technically feasible, what can get done, in the time frames allotted?) This also suggests that only immediately practical ideas, ideas that can be implemented very quickly, are considered viable
  • Limited upside (based on what criteria?  The analysis doesn't say) But this is a classic way to kill nascent ideas. Simply apply your existing ROI metrics to new ideas and they will almost always fail the analysis
  • Low priority (which is another way of saying little or no business unit buy-in)  Innovation teams should spend some time on ideas that aren't exactly within the confines of the existing business, otherwise the business doesn't grow or expand.  And shouldn't the priorities be established before the innovation activity, rather than once the results are presented?
Perhaps my favorite section in the synopsis is the slide on "key challenges" of which five are identified:
  1. Defining the mission and role
  2. Avoiding the idea avalanche
  3. Speed and buy-in
  4. Fly or Die
  5. Aligned metrics
 These are all perfectly correct, and are the same recommendations that innovation writers, consultants, analysts and experts have been making for years.  We've known for quite some time that for innovation to succeed inside an organization, executives must make choices and align key resources to important innovation challenges.  Rather than open the spigots for all ideas, initially the corporation needs to build a pipeline of good ideas and demonstrate it can deliver on them.  Doing so quickly and efficiently, and experimenting and failing rapidly, are critical to success.  Having the right metrics, and not relying on the metrics of the existing business to measure innovation activities, is critical.

From what I can see of this report it is an excellent synopsis of the state of play of innovation in 2015.  However, most of the conclusions and analysis could easily have been written in 2005.  In fact I'm sure many of these same points were made a decade ago.  What we need to be talking about is what leadership, process, skill, cultural and motivational changes must occur in order to achieve what we know corporations must do.  I wrote those focus areas with specific intent.


Far too many executives and CEOs are earnest about innovation, but what they want is the result - the new product or service - without any risk, cost or investment.  Times have changed, business models have morphed and competition has accelerated.  The only way to get innovation is to do it honestly, with deep internal investments of good people and funding, or to be honest and go find good ideas and intellectual property outside your organization.  But be clear and be quick about it.  We need leaders who are committed to innovation, not just the outcomes, but the required investments as well.


Most organizations claim to have an innovation process, but what they have is an R&D process at best bolted on to a product development process.  People don't understand where good ideas come from, and don't understand the discipline and methodology to move from identifying an interesting need to generating really viable new ideas.  The "front end" to a great extent DOES NOT EXIST in most corporations.  It doesn't now, and it hasn't, and this has been a constant theme for over a decade.  Until it does exist, you can expect incremental ideas from internal teams.  It's time to place as much focus on the "front end" as you do on execution.


Over the last 20 years corporations have taught their employees how to be efficient.  Now they want them to be efficient and innovative, but haven't taken the time to teach them to be innovative, or to deal with the cognitive dissonance of trying to conduct convergent, efficient day to day operations and divergent, discovery-oriented work that strays outside the traditional culture and expectations.  When confronted with these diverging realities, most employees recognize their lack of skills and experience and revert to their safe, known roles and processes.  Which limits innovation. If you truly want innovation, then find people who have the skills to create innovation, and build the skills of your employees so that they can innovate readily and regularly.

Culture and Motivation

A good friend likes to simplify the definition of culture as "the way we do things around here".  Culture reinforces the status quo and the traditional lines of thought.  Until culture is able to embrace innovative thinking, and is encouraged to do so by changes in motivation (intrinsic and extrinsic) we'll have the same results as we've had in the past.

But this too is old news

Now, everything I've written that needs to change is also old news.  There are plenty of us in the innovation space that have been writing about these particular needs for years.  What we need is action to change the existing cultures, to build skills and allow for a real commitment to innovation, day to day, every day, rather than under pressured situations when a new product is required because of a market downturn or a competitor's surprise introduction.  What we need to do is train, encourage and transform a new generation of managers and executives who will commit their own time and the time and resources of their organization to create a balance between important efficient operations and the need for constant innovation.  Until and unless we can train and empower executives and middle managers to focus more on innovation, large corporations simply won't find the time or energy to do do, and will continue on the slow path toward extinction.

I'm fairly confident in saying that some of the last words of the captain of the Titanic were "this ship is unsinkable", clinging to a belief that was in the process of being proven untrue.  Innovation Leader and Innosight have done a great job reminding us of the state of play in innovation.  Unfortunately it could have been written a decade ago.  When will we actually see the burning platform occur that requires more change than we've seen to date?
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posted by Jeffrey Phillips at 7:01 AM 0 comments

Friday, October 16, 2015

Why entrepreneurs should be the most logical innovation source for corporations

I've had this kind of Venn Diagram rattling around in my head for a while, because the question keeps coming up over and over. Why can't corporations innovate like entrepreneurs?  And, conversely, what do corporations have that sustain them and that entrepreneurs want to copy?  If we could document and understand both the overlapping characteristics and the differences, then perhaps we could illustrate what they can do for each other, and what that could mean for innovation.

This is admittedly inexact science.  I started out by asking myself what were the issues, characteristics or features that enabled or blocked innovation for entrepreneurs and corporations.
Here is my thinking - feel free to send me your comments or what I may have missed:


What "aren't barriers"
  • Not risk
  • Not commitment
  • Not passion
  • Not focus
  • Not ideas
  • Not existing infrastructure or business models
  • Not prioritization
What "are barriers"
  • Poor understanding of customer needs
  • Lack of market access
  • Lack of branding / awareness
  • Inability to scale
  • Legal barriers
  • Lack of resources
  • No/poor business experience
Let's look at the same analysis.  What "aren't barriers" to innovation:
  • Not ideas
  • Not market access
  • Not branding / awareness
  • Not scalability
  • Not legal barriers
  • Not money 
  • Not business experience
What "are barriers"
  • Passion
  • Commitment
  • Risk/Compliance
  • Poor/no understanding of customer needs
  • Few/no people with innovation skills
  • Priorities
  • Existing business models / existing infrastructure
What do the two share in common?
Ideas aren't an issue, customer insight or customer needs are consistently lacking or overlooked, and both lack good people with requisite innovation experience.

Now, think about this another way.  What capabilities, traits and features does each have that the other needs?  In fact it's almost a perfect match.
Entrepreneurs have passion, commitment, risk taking and the ability to prioritize and focus that many corporate innovators lack.  Corporations have market access, branding, easy access to money and legal resources that innovators and entrepreneurs lack.

So why aren't these two working more effectively together?

If corporations have what innovators and entrepreneurs need to scale an idea, and entrepreneurs have the risk taking and passion that corporations lack, why don't we see more relationships that allow corporations to reap more innovation and entrepreneurs to more quickly scale ideas?  I believe there are at least five reasons that keep these natural partners from coming together more frequently:
  • Entrepreneurs have outsized views of the value of their innovations
  • We lack good networks and meeting spaces for the two potential partners
  • We need better signalling by larger firms as to their needs so entrepreneurs know which ideas might have more market potential and financial viability
  • Everyone is worried about identifying, valuing and managing intellectual property.
  • Mutual suspicion and to some extent, contempt for the other
Let's take these one at a time to analyze and seek potential solutions.

Outsized view of the value of an idea

 One of the biggest complaints about university tech transfer offices by corporations is that the professors or tech transfer officers don't understand the market value of their ideas or intellectual property.  Even really good ideas require a lot of work to commercialize, and there can be hidden costs or traps with the intellectual property or the market.  Clearly both sides want to achieve the best financial outcome and have fiduciary responsibilities to shareholders, but I think many more innovations could come to market through larger firms if entrepreneurs were more realistic in their valuations.

Lack good marketplaces
And yes, I know all about NineSigma and Innocentive and a host of other markets, communities and meeting places.  The problem is that these simply aren't sufficient.  Client who have used these communities have been somewhat satisfied, but feel like there are too many hoops to jump through, too much overhead or infrastructure.  We need bazaars, not filtered communication.  These interactions should look more like buying spices in a middle Eastern souk than acquiring IP in a New York law office.

Few signalling mechanisms
If an entrepreneur wanted to create a new technology or grow a small business that could be scaled by a larger one, how would they know which technologies or businesses or products larger firms are interested in?  Larger firms have a difficult time communicating their strategy to their own employees, let alone outsiders, and strategy and direction frequently change.  Some companies do a good job of signalling where they are going and what they'll need, and thus are better at hinting to their potential partners about the technologies to develop or products to create.  Most, however, live in terror that other large competitors will receive the signals and parse the data.  What they don't know is that most large organizations couldn't interpret Morse Code sent in the clear with a guidebook, and wouldn't know what to do with the data even if they decoded it.

Identifying, validating, valuing and managing intellectual property

 As noted earlier, if professional tech transfer folks get the value proposition wrong, can we hope to improve the valuation, management and transfer of intellectual property?  Only as the number of transactions increase and experience grows.  Again, we lack a true marketplace, where scarcity and bidding will establish a closer valuation of the property.  And, that may be one of the complaints of the walled garden that open innovation communities create - there's little price signalling or learning and little learning curve experience, so every market encounter is almost a completely new experience.  The more we can make the exchange of intellectual property, ideas and emerging products into an open marketplace, the faster the exchange of ideas will occur.

Mutual suspicion or even contempt
Small companies and entrepreneurs sneer at larger companies, thinking of them as slow dinosaurs, unable to adapt to the new realities that are being created by nimble competitors.  They disdain the procedures and policies, the slow, careful consideration, the compliance and legalese of corporations.  But they'd love to lay their hands on the larger firm's access to capital, to markets and customer awareness.  Conversely, larger firms look down on small firms or entrepreneurs, thinking that they operate in a cloud, with few controls and high variability.  Entrepreneurs often make promises their companies and products can't keep, and many fail in just a few months.  Credibility and follow through are often lacking.  But what the larger firms wouldn't give for more passion, more disruptive thinking, more experimentation and the speed and agility of a smaller firm.

I cannot imagine why every corporation over $100M in revenue doesn't have a business development person actively looking to acquire intellectual property from entrepreneurs, or seeking to make capital investments in smaller firms in exchange for first rights to new products or technologies.  For a few hundred thousand dollars of investment (about the cost of two or three good middle managers) corporations could invest in a handful of nascent upstarts and claim some ownership and perhaps even signal key needs. 

Moving from contempt to mutual success

The time is right, and right now, for the distance and suspicion between entrepreneurs and corporations to diminish.  Both players have real needs that the other can fill.  Corporations need more innovation, newer and better products and more agility.  Entrepreneurs can provide those, and more.  Entrepreneurs need scalability, reach, market access and most importantly, capital.  Large corporations can provide these, and more. 

What we lack is a true marketplace - a virtual bazaar that allows open communication, price signalling and the other characteristics of a true market while ensuring the viability and value of every participant's intellectual property portfolio.  What few understand, however, is that intellectual property, ideas, patents and other factors are increasingly time based.  Good innovators will find another way to solve the problem, so simply sitting on patents and suing other firms isn't a winning strategy, and doesn't grow opportunity.  It's probably better to get into this market and exchange ideas and information more rapidly, and speed up your ability to commercialize good IP, than it is to build more protection around your intellectual property and slow your ability to negotiate and commercialize what you have or what you can acquire.

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posted by Jeffrey Phillips at 5:49 AM 0 comments

Tuesday, October 13, 2015

You need an experienced innovation guide

One of my favorite sort of snarky comments almost always arises when we are asked about our consulting fees and rates.  We pride ourselves on delivering great value for the price, and frankly we aren't necessarily cheap.  But then again, as the saying goes, very few people open up the Yellow Pages (showing my age here) and search for "Cheap Brain surgeon".  No, when it comes to important medical procedures, most people are looking for who has the best skills and experience, not who has the lowest prices.

But this isn't a post about innovation consulting pricing, rather it's a post about why you need innovation expertise to "do" innovation effectively.  And no, I'm not necessarily making a claim that you have to have innovation consultants helping you in order to succeed.  But what you do need is an experienced innovation guide.

A fishing guide as an analogy for innovation consultant
To place this in a context, let me use an analogy.  This summer I took my son (16) and my father (78) to Alaska for the salmon run.  This is a great trip - I'd highly recommend it.  We've done it three times together.  I'll post some photos at the bottom of this article.  But I digress.  Even though we've gone Salmon fishing three times, even though we've been in the Kenai river several times, even though we've been successful several times, we hire a guide.  Why?  Because the guide knows the best locations, how the salmon are running, where to place anglers for the greatest chance of success.  Would we have had some success on our own, without the guide?  Possibly, but we are familiar with fishing for trout, which avoid people and are very cautious about their food.  Trout fishing requires patience, camouflage and excellent bait placement.  Salmon fishing, especially during the run, requires none of these things.  Salmon are swimming upstream to spawn.  They are fighting the current and many aren't even interested in your bait or flies.  They often swim within a couple of feet of the anglers trying to catch them.  For salmon fishing, you need to be in the place where the salmon are swimming, and placing your line where they will strike, and you need to hold your rod sideways when you set the hook, instead of tugging it straight upwards the way you'd do for other fish.  It's the guide's job to help you be successful.  And because of the guide, we caught our limit each day.

Like a salmon guide, an experienced innovator knows the lay of the land.  He or she has deep experience with the tools, and can show you how to use the tools to best advantage.  He or she knows when to push in and when to hold back.  He or she will encourage the team to be more diverse and creative, to be more divergent than they would be on their own.  The same tools and techniques are available to "innovation" teams who don't use guides or experienced innovators as partners, but they often simply skim the surface, touching briefly on the tools but quickly falling back on familiar pathways, methods and decisions.

What an experienced guide offers
The difference between working with an experienced innovator, and working without one is very similar to our fishing expedition to Alaska.  The first time we went to Alaska we relied on our own rods and lures, our own experience of fishing for trout.  We managed to catch one or two fish while other, more experienced Salmon fishermen were catching them in abundance.  The next day we hired a guide, who provided different tools and introduced different methods.  He placed us in what for us were uncomfortable positions, using unusual or different casting methods.  But without that subtle push, we wouldn't have been fishing in the best spots.  We were relying on our understanding, which was right in some circumstances but no right in this one.  Similarly, innovation teams are far too prone to falling back on comfortable, existing processes, methods and tools, not wanting to stray too far from their relatively risk adverse cultures and decision making.  Without someone there to guide, correct, push and introduce new tools and new ways of thinking, innovation projects are an exercise in futility and frustration, because the prize is out of reach of the existing tools and thinking.

Do you need an innovation consultant in order to achieve innovation success?  Possibly, but the answer isn't definitive.  Innovation consultants have the experience to convey that our salmon fishing guides offered us.  They can give you the right tools, place you in the right spots, push you into uncomfortable setting and situations.  You could also receive a lot of that coaching from internal resources if they have the credibility and experience.  But regardless of where you get the coaching, the subtle push, the introduction of new tools and the discipline to stick with the uncomfortable and unusual, you need it.  Inertia, risk factors, cultural barriers and time constraints will all work to revert the innovation team to safe, known methods and tools that won't produce new, creative solutions.

You won't catch many salmon on the salmon run if you fish for them using the tools and techniques that are applicable for trout in the Blue Ridge.  They are simply different fish with different expectations, and they require different baits and different fishing techniques.  In the same way, you cannot hope to innovate with a team that isn't experienced unless you have an experienced innovation guide.  The inexperienced team will revert to known practices at the first hint of trouble or the first real barrier, and the result of the project will be a "me-too" outcome.

Going it alone
Many of our potential clients decide that they want to "go it alone".  They send people to innovation training or have them explore some innovation tools and techniques on their own.  After all, everyone knows how to brainstorm ideas, don't they?  We believe the capability and nascent skill for innovation rests in many of us, but it's often been beaten down and locked away, not easy to access or reclaim.  Asking an already overworked team to innovate while they also effectively conduct their regular day jobs is common, but also almost impossible for them to do both equally well.  And when push comes to shove, they'll ensure that their day job is done well, leaving innovation to suffer.  And that's true even when there is an experienced innovation guide.

Do you want an innovation guide that can provide the insight and who has the experience to make your innovation team more successful?  We at OVO do that for a living, and I hope we are as good at it as our guide in Alaska was when he helped us catch our limits.  Contact us if you have questions or want to learn more about innovation consulting or the coaching and guidance we can offer.

Fishing Photos

If you are interested in some of our fishing photos, see my Pinterest Page
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posted by Jeffrey Phillips at 8:05 AM 0 comments

Wednesday, October 07, 2015

Forget products, innovate your business model

What happens when the largest, most cataclysmic change forces known to business collide with embedded, rigid business structures and models?  Which side wins, the irresistible force or the immovable object?  In my post today, I'm going to answer this age-old philosophical question.  Innovation and change destroy complacent, unchanging business structures and models.  Every time.  Every where.  In every market.

It sounds a bit over the top to argue that everything we know is changing, and many models and structures will soon crumble from the onslaught of new emerging demands, capabilities and technologies, but in short that's what's going to happen, and is already happening.  Product life cycles are collapsing - I was recently in a conference where a camera manufacturer estimated the average shelf life for a new camera was between 3 and 6 months, or less than half the product development cycle time!  For years we've talked about the increasing pace of change, and much like the proverbial frog in the pot we're still sitting in the water as it's reaching the boiling point.  The telephone didn't reach a billion users until decades after its introduction - probably almost a century afterwards.  Facebook, Google and other internet applications reach a billion users in the matter of a few years, and newer, social media driven applications will do so even faster.  Unfortunately for them they'll also burn out and disappear even faster as well.

Do old business models make sense in this new, rapidly evolving environment? Can a business define and "lock in" its business model and hope to merely sustain its business model, thinking it will weather the storm and wait until "things return to normal"?  It's almost trite to say "the new normal is change".  That almost goes without saying.  The race goes to the nimble, the agile and the swift, not to the large and slow.  There is no return to normal, in fact what's normal is more change and a faster pace.  Can slow, rigid business models that were successful in the past, in a much more staid environment offer any solace to a business, or position those businesses for success in the future?  I'm going to argue the answer is:  probably not.

At worst you need a business model that evolves at the rate of change in the environment.  You simply cannot afford to fall behind and become locked into an older business model (hello Blockbuster), no matter how dominant you think the existing models are.  Netflix obliterated Blockbuster but continued to evolve its model into streaming and now content creation.  Why?  Because standing pat on a business model once people understand the value proposition is crazy.  There are simply too many avenues to attack a business model once the value proposition is understood.  Let's look at a couple of ways to attack an existing business model.

Chipping Away
There's what I like to call the "chipping away" model, which is what retail banks in the US are experiencing.  No newcomers want to face all the regulatory burden that the retail banks face in total.  Instead they offer single solutions or products that are equal to or better than what the banks offer, in areas that are more profitable.  These startups are "chipping away" at the bank's value proposition and are much more nimble and flexible.  They can get into and out of features or products in an exceptionally short timeframe, and can attract good customers quickly.  Mint, Betterment and other firms are not subverting the entire business model as much as chipping away at the most valuable parts, while banks are locked into older models more suitable for the 1970s and 80s.

Then there's the bypass model, which is what Netflix did to Blockbuster.  Same value proposition in terms of content, just a different channel.  Blockbuster had every valuable retail corner locked up, and Netflix decided (based on the availability and capability of the web (and the US mail!)) to completely dislocate Blockbuster and its presence model.  Netflix, Uber and Airbnb did what road builders do - they looked at the crowded mess of existing highways and simply "bypassed" the congestion, which freed up consumers and previously stagnant assets.

There's also the consolidation model, which is what I like to think Apple did to the music player, music management and music distribution industries.  Remember Tower Record?  Or how about your Rio MP-3 player?  Apple consolidated a number of valuable pieces and components into a much larger but simpler business model, and drove a number of companies and channels right out of business.  Or, to continue the Apple theme, consider how many devices the iPhone has replaced:  cell phone, digital camera, GPS, music player, calculator, watch, even a slide rule if you have the right app.  Creating platforms that consolidate capabilities that other business models kept apart is exceptionally valuable.

The list goes on and on.  Zara, H&M and others are disrupting the fashion industry through a focus on speed.  Tesla is trying to disrupt automotive sales and distribution, attempting to sell directly to consumers rather than through dealers.  Older structures, business models and channels don't necessarily have to carry forward into the future.  While they may be "carved in stone" these examples and others prove that stone can crumble, or smart companies can innovate their way around, under or through them.

What should we take away from this diatribe?
Product innovation is interesting, and every company should have active, on-going innovation to spawn new products and services.  However, product innovation is easy to do, easy to copy and will require constant updating.  So, we can argue that product innovation needs to become as commonplace and consistent as day to day operations.

It's business model change that is becoming the important focus.  If product life cycles have decreased, so too have business model life cycles.  When whole industries and channels can collapse in a matter of months (Tower Records, Blockbuster as examples) then every industry must examine and understand the sensitivity and viability of their business models.  No business model is inviolate; none will simply resist all of the change that's underway.  This means that corporations should be evolving their business models at a minimum.  Business model innovation is becoming far more important than product innovation, and yet far too many companies don't understand or do product innovation well.  How much more difficult it will be to innovate business models when the skills don't exist to innovate products.  Large corporations with rigid, complacent business models may end up like the dinosaurs, watching the small rodents run around and thinking how small and helpless they are.
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posted by Jeffrey Phillips at 6:28 AM 0 comments