The Corporate Innovation Machine

The Corporate Innovation MachineA simple model for implementing an idea management based innovation strategy in your firm

The corporate innovation machine is a model for understanding how to implement an effective, idea management based innovation strategy in your firm. As with any machine, the corporate innovation machine comprises several components, all of which must work together for the machine to function properly. When the entire machine does work, it builds ideas, evaluates those ideas and implements the best ideas as new product, service and operational improvements which translate into increased revenues for your firm.

Powered by management
The corporate innovation machine is powered by management. Just as the most sophisticated machine will not run without a power source, likewise your corporate innovation strategy will go nowhere without top management taking the lead.

Management's main task is to create within the organisation a culture of innovation which will empower workers to think creatively, collaborate on ideas and contribute their ideas to the company. This is not an easy task, but done well it will make construction of the remainder of the innovation machine a relatively easy job.

Management must...

Ensure there is an environment of trust
Establish innovation goals
Designate responsibility and resources
Develop a communications plan
Demonstrate innovation
Reduce creative risk
Establish a rewards scheme


Idea Generator
If management is the power source of the innovation machine, then the idea generator – the tools and techniques for generating ideas – is the motor that drives the innovation process.

Principles

In order to understand how the tools and techniques function, it is important to understand a few key principles...

Creativity versus innovation
Individual creativity versus organisational creativity
Creative collaboration
- creative teams
- brainstorming groups
- networking
- open collaboration via Internet/intranet
Squelching (avoiding)
Tools & techniques

Organisations should have a small “toolbox” of tools and techniques for facilitating innovation. The central tool should be an idea management system capable of soliciting, capturing and evaluating ideas. Properly used, such a tool permits a steady stream of innovative ideas for implementation. Other tools, such as skunkworks, brainstorming, creative spaces and creative meetings further your organisation's innovation potential. Available tools include...

Suggestion scheme idea management: flawed
Campaign based idea management: best approach
- decentralised management
- total open collaboration
- open to entire workforce
- intuitive & easy to use
- semi-anonymous idea submission
Brainstorming
Skunkworks


Idea quality control: evaluation
The more successful an idea management programme is, the more ideas it will generate. As a result, you need an efficient quality control system. Some organisations have highly structured systems comprising multi-stepped systems for reviewing ideas. While this can be effective, it is also important to retain flexibility in the system. If an idea is clearly a winner, it is often wise to "run with it" immediately, before your competition learns of the idea.

Idea quality control has several components

Gut feeling
5x5 Evaluation matrix
Open analysis meeting
Pre-implementation


Output: implemented ideas
Once ideas pass all required quality control processes, they are ready to be implemented. Most companies already have effective implementation procedures for new products, services or operations. If you do not, you should run ideas campaigns on improving these procedures.
In addition, it is important to...

Monitor the results of the idea implementations
Communicate, via the communication plan (see above)
Reward the people who have submitted and implemented ideas


Maintaining the machine
It is important to monitor the results of your innovation strategy and tweak it over time in order to improve results. A major review after six months and annually thereafter allows you to evaluate the results, determine weak points and improve the functioning of your innovation strategy.

Beware the Cult of Ideas

Beware the Cult of IdeasThe Cult of Ideas is a dangerous cult lurking within the field of corporate innovation. It is a disturbing cult in which members worship massive numbers of ideas above all else. On the surface, this seems a good thing. After all, innovations are founded on ideas, are they not? So, if a company wants to innovate, the more ideas it creates the better. Sadly, however, the ugly truth is that the cult of ideas can actually stifle creativity and inhibit innovation.

What is the Cult of Ideas?
The Cult of Ideas is the worship of large numbers of ideas above all else in innovation. You see it when Starbucks proudly proclaims that they have received over 100,000 ideas from their on-line suggestion web site. You see it when IBM brags of Idea Jams that generate many tens of thousands of ideas. You see it whenever a company boasts of an innovation initiative solely based on the number of ideas collected.

It is easy to understand why the Cult of Ideas has grown so powerful in recent years. Most senior managers come from analytical backgrounds, often with MBAs from prestigious university. And that background has generally served them well as they manage operations in ever more complex businesses.

Unfortunately, finding meaningful numbers in the innovation process can be tricky. Technology and pharmaceutical companies can count their patents – and many do. But patents fail to measure operational efficiency and business model innovation, which are also important. Moreover, many innovative firms take out few if any patents. The number of new products launched every year, or the income generated by products introduced in the past five years is another approach for measuring product innovation – but it also fails to recognise other forms of innovation. Moreover, a visit to any supermarket suggests we must question whether the introduction of new products truly represents innovation. A look at all the variations of Nivea shampoo products, many of which claim to be “new”, for instance, is hardly indicative of product innovation.

So managers have latched on to the counting of ideas and the assumption that lots and lots of ideas must be a good thing. This has been enhanced by innovation service providers who also espouse the notion that more ideas are better than fewer. And from this situation has grown the Cult of Ideas.

Innovation Consultants Also to Blame
The Cult of Ideas is not inhabited only by analytical senior managers. Many innovation consultants, familiar with brainstorming methodology and creative problem solving, have learned to stress the importance of generating a lot of ideas in hopes of finding a few gems. Brainstorms, for instance, are often judged by the number of ideas generated. Likewise, idea management software vendors will boast about the number of ideas their software can generate, conveniently forgetting that it is employees and not the software that generates ideas.


Why Is This a Bad Thing?
Why is the Cult of Ideas a bad thing? Of course ideas in their own right are not bad at all. I should know, I have lots of them myself. So many, I sometimes want to switch them off. Indeed, it used to concern my girlfriend that I would always come up with ideas about new businesses to launch, new activities to do and new paths to follow. These ideas worried her. Surely, she thought, it could not be a good thing for me to do so many things or to throw away everything I have done professionally in order to follow some whim. But as she has come to know me, she has learned that I have even more ideas than she has shoes. She knows that I will talk about an idea today and forget about it tomorrow. So, today, she smiles knowingly whenever I announce a crazy idea and only begins to worry when I continue to talk about an idea for an extended period of time. Nevertheless, she reminds me from time to time, that my ideas can easily become a distraction from getting anything productive done.

She is right of course (but for goodness sakes, don’t tell her I said that!). Moreover, the same thing is true for companies. If they measure innovation by the number of ideas generated and focus too much on generating lots of ideas, rather than implementing ideas, they fail to get anything productive done. But, of course, innovation is not about ideas, it is about being productive with those ideas. It is about implementing them and generating value.

Real Innovators Demonstrate Innovation
Think about it for a moment. Companies – like Gore, Google, Apple and others – that we think of as true innovators never brag about how many ideas they generate in this initiative or that initiative. Rather they demonstrate innovation. Indeed, take a look at Fast Company’s list of most innovative companies (http://www.fastcompany.com/most-innovative-companies/2011/). Those on the top ten are recognised for their innovations and not for quantities of ideas.

What Can You Do?

The solution is simple. If you want to innovate, you need to innovate. This means your focus should not be on the number of ideas generated, but the value generated through implemented ideas. A million ideas will do you no good if you do not implement any of them!

In order to innovate, you need an end to end innovation plan that looks not only at idea generation, but also on focusing idea generation on strategy, evaluating ideas efficiently and developing processes to implement the more outlandish ideas that could be breakthrough innovations. You can learn more about how to develop an innovation plan in my book The Way of the Innovation Master (see below).

Instead of simply trying to wring as many ideas as you can out of each employee, allow employees time to develop ideas. Companies like Google and 3M are famous for allowing their employees to use 20% of their time to work on personal projects. Many great ideas have come from this personal time. Indeed, Google’s founders have recently “tracked the progress of ideas that they had backed versus ideas that had been executed in the ranks without support from above, and discovered a higher success rate in the latter category.”(1)

Moreover, think about what you would like employees to be doing during that 20% of their time: generating as many ideas as they can or developing a small number of ideas into experimental projects.

Likewise, your company should not be focusing on generating as many ideas as possible. Rather it should be focusing on developing a small number of interesting ideas into trial projects.

References
1) Teresa M. Amabile and Mukti Khaire (October 2008) “Creativity and the Role of the Leader”, Harvard Business Review, http://hbr.org/2008/10/creativity-and-the-role-of-the-leader/ar/1

Innovation Versus Vision

Innovation Versus VisionTake a look at the “Home” and “About” web pages of the world’s most innovative companies such as Google, Facebook, Twitter, Apple and Gore. There is a word you will seldom, if ever, see on their web pages: “innovation”. That is because these companies do not strive to be innovative. Now look at averagely innovative companies, the ones that come up with new products that aim to compete with products developed by leading innovators. Most likely you will see the word “innovate” and its derivatives, such as “innovative” and “innovation” all over the place. That’s because these companies are striving to be innovative.

So, what’s going on here? The truth is, truly innovative companies, those the come up with breakthrough products and services, those that are game-changers in their sectors or that create new sectors, do not aim to be innovative. Rather they relentlessly strive to follow a unique strategy. Facebook originally aimed to create the ideal social network. Now they are trying to become an alternative to the world wide web itself. Apple has relentlessly focused on making beautifully engineered and designed gadgets such as mobile telephones, computers and pads.

Visionary Leaders

Their leaders, such as the late Steve Jobs and Mark Zuckerberg, are not innovators. They are visionary leaders who so focused on their strategies that they are probably dreadfully boring at cocktail parties! But, by sharing their visions and their enthusiasm for their visions with their employees and business partners, they enable their companies to innovate. However, that innovation is focused on achieving unique strategic aims, rather than innovation for innovation’s sake.

In such environments, employees understand that top management is eager to implement ideas that help them in the pursuit of strategy. Indeed, the sole purpose of most teams is in one way or another to achieve strategic aims. Middle managers in visionary companies know that their jobs depend on working towards strategic goals. Innovation, on the other hand, is not important to them. That may seem ironic as they are following the best practices of innovation. But the key is that their aim is not to be innovative. It is to meet strategy based goals.

Unique Strategy

What do I mean by unique strategy? Many companies, especially large companies involved in varied business lines, tend to have bland strategies, such as to be the best in every sector in which they operate. Their strategic statements tend to be generic and could be used equally effectively by just about any company – even one in a completely different sector.

Visionary companies, on the other hand, tend to have much more specific strategic aims. For instance, Google’s original strategic aim was to produce the most relevant search results by using a special algorithm in their search engine. Gore aims to manufacture revolutionary products to solve specific industrial and medical problems.

Averagely Innovative Companies

Averagely innovative companies on the other hand tend to have blander strategic aims, such as to make high quality products. Their web sites are littered with the word “innovation”. Lenovo, for example, makes fine quality computers that can be found in households and businesses globally. It is an admirable, growing company. But it is not a particularly innovative company. As a result, the words “innovation” and “innovative” appears numerous times on their “About” page.

I have never worked with Lenovo, so I do not know what their situation is like internally. But I have worked with similar companies: quality, well run businesses that have recently decided to become more innovative. One of the first steps such companies take is ti use the word “innovation” more frequently in corporate documentation. This is followed by hiring people to be innovation managers and to launch programmes to promote innovation.

Idea management software, or at least suggestion scheme software, is installed to capture ideas. Very possibly innovation consultants and trainers are hired to help guide the innovation initiative.

As a result of these activities, the company does indeed become more innovative. However, the innovation efforts tend to be unfocused. The result is usually incremental and medium level improvements on products, services and processes. It is extremely rare that these initiatives result in breakthrough innovation.

This is not a bad thing. Often, averagely innovative companies produce products that are better in many respects than the innovators. Apple may have led the pack with their innovative smart phone. But now many averagely innovative companies have produced smart phones that better Apple’s iPhone in various ways – and often for a lower price. Moreover, not everyone wants an iPhone. Many people want simpler, cheaper or less stylish telephones.

Being Realistic

If your company is not an innovative leader, if it is not focused on relentlessly pursuing a unique strategy, you need to be realistic about where innovation can take you. In theory, you can transform your company into a visionary company that becomes a true innovator like those cited at the beginning of this article. This tranformation will probably mean replacing your CEO with a visionary leader who is willing to make drastic changes to every aspect of your company, starting with its strategy. She will probably need to sell off vast chunks of your business, transform the way you work and get rid of a lot of employees. Those who remain will need to learn to work in new ways. They will also need to legitimise their activities in line with strategy. Budgets, project management, approval methods and much more will need to be changed.

If you work in a medium to large company, you are probably smirking to yourself right now, thinking “Jeffrey is crazy. That’s never going to happen in my company!” And you are right. It is extremely rare that a company, except a very small one, will make such drastic changes. The board and shareholders are unlikely to authorise such actions. Even if an innovative leader is taken on as CEO, employees reluctant to change will do everything that they can to impede her changes and guarantee their jobs. After all, when things change in large companies, most people worry about their own stability and future rather than their employer’s innovation potential.

Not surprisingly, such change is extremely rare. The closest example that comes to my mind is Nokia, which started life as a rubber works and eventually became a Finnish industrial conglomerate involved in many industries. It was only in the 1990s that Nokia rid itself of many of its lines and focused on mobile telecommunications. And, during the 90s, Nokia was an innovative leader in GSM technology.

Innovate

Most likely, you are not going to transform your company into an innovative leader. But, as I have said, there is nothing wrong with that. Most companies are not innovative leaders. But, by focusing on incremental and medium level improvements to products, services and processes, you can nevertheless have an extremely successful company. In fact, in many industries, such as fast food, soft drinks and construction, there has been little breakthrough innovation in recent years.

Moreover, you can learn from innovative leaders. Most importantly, review your strategy. Is it unique to your firm or is it the kind of strategy that just about any firm could claim. If so, make it better.

Once you have done this, do not launch an unfocused innovation initiative. Rather, ensure that your innovation initiative is aligned with strategy. This can be done through brainstorming, ideas campaigns and other activities that generate ideas to solve specific strategic problems.
do not simply focus on being innovative. That tends to result in a lot of small ideas that improve bits and pieces of your operations, but do not make a big difference to your company. Rather focus on your strategy and use innovation as a tool that enables you to do that.

By Jeffrey Baumgartner

Innovation Quote

Larry Keeley, Doblin Group, 2007
“With the pace of innovation heating up, any enterprise that fails to replace 10 percent of its revenue stream annually is likely to be out of business within five years.”

What is the goal of innovation?

If you want to innovate, you need to innovate. This means your focus should not be on the number of ideas generated, but the value generated through implemented ideas.

The Innovation Process

The Innovation ProcessBy Jeffrey Baumgartner
The innovation process, in the business context, is a structured action that is remarkably easy to implement. It begins with a problem and ends with profit. As such, it is the ideal business process. So it is remarkable that so few businesses have actually implemented this structured innovation process. Fortunately, all you have to do is read this and implement it in your firm!

Step by Step
1. Begin with a problem

The innovation process starts with a problem or possibly a goal. However, the fact that the business has not already achieved the goal might be considered a problem. So, we can safely say the process begins with a problem. All businesses have problems. Sales could be better, products could be better, processes could be more efficient, costs could be reduced and so on.

2. Convert the problem into a challenge

Once a problem has been identified, it needs to be converted into a challenge. A challenge is a short, terse question that invites creative solutions. Example challenges include: "In what ways might we improve product X?" and "How might we reduce wastage in our manufacturing process?" A challenge may also be in the form of a call to action: "Sketch design ideas for product X" or "Use building blocks to demonstrate ways in which we might combine processes in manufacturing." Formulating a good challenge that addresses your problem is critical to the innovation process. If your challenge does not properly address the underlying problem, you may get a lot of ideas -- but they won't solve your problem and therefore are unlikely to become innovations!

3. Challenge colleagues to suggest creative solutions

Once you have a terrific innovation challenge, you need to communicate it to colleagues -- or others such as business partners, customers or even the public -- so that they can generate ideas. How you communicate depends on the method of idea generation you will use for each instance of the innovation process.

4. Collaborative idea generation

Idea generation might be in the form of a brainstorming activity, through the use of real idea management software (one like our Jenni, which uses ideas campaigns based around innovation challenges) or a team may be assigned to devise and develop ideas. You could even generate ideas yourself, but as a general rule, diverse teams generate more creative (both in terms of quantity and quality) than individuals -- at least in the right circumstances.

Whatever method of idea generation you use, it should ideally be in a collaborative environment in which people can work together to develop ideas. Ideally, there should be no criticism, censorship or destruction of ideas during this phase. You want to encourage people to think creatively and be unafraid to suggest ideas. Early criticism of any kind will only make people reluctant to share ideas, especially their most outlandishly creative ideas (in other words, the best ideas), for fear of also being criticised.

Note: lots of people think that idea generation is the most important element of the innovation process. It's not. A great idea, unimplemented, is worthless to business. Nevertheless, you do need ideas to keep the process going and creating an environment for generating creative ideas means that the resulting innovations will be more.. innovative!

5. Combine and evaluate ideas

With lots of ideas in the pot, the next step is to combine similar ideas into idea clusters or big ideas. Each idea cluster can be processed as a single idea, thus making the next steps of the process more efficient.

This done, you can then evaluate ideas with an evaluation matrix in which promising ideas are compared to relevant business criteria. The better the idea meets each criterion, the higher its score. In the end, those ideas with the highest evaluation scores are taken to the next step.

Note: evaluators tend to be overly critical of ideas. Hence it is important to ask them not only what does not work with an idea, but also to ask them how these problems might be dealt with in order to improve the idea.

6. Develop ideas

How you develop ideas depends on the innovation challenge and the kind of ideas generated. New product ideas might be developed into prototypes. Process efficiency ideas may be modeled. Marketing ideas may be evaluated in consumer surveys and so on. The purpose of developing ideas is to test them in the business environment and, if no insoluble problems are discovered, prepare them for implementation.

In the case of highly creative ideas, it is usually best to create a prototype if at all possible. A prototype makes it easier to sell a radical idea to managers, committees and other dingalings who will be tempted to kill it off.

7. Implement ideas

Finally, you are now ready to manufacture your new product, restructure your processes or do whatever is necessary to turn the evaluated and developed ideas into implementations that generate value for the organisation. It is at this step that creative ideas grow up and become innovations.

If ideas are radically different to business as usual or if they require substantial investment, it is wise to implement them with a series of milestones along the way. This enables you to review the implementation of the idea in order to ensure it is either delivering value or retains the potential to deliver value at a future milestone. Although many organisations today make it difficult to implement radical ideas, once those ideas are launched as projects, the responsible teams are often remarkably reluctant to stop the implementation for fear of reprisals, losses or other consequences. You need to minimise those consequences so under-performing ideas can be killed and resources can rapidly be reinvested in promising new ideas.

A Scalable, Repeatable and Effective Process
There are three terrific qualities of the innovation process. Firstly, it is scalable. An individual freelancer can use it to innovate in her business, small teams can use it for innovative projects, business units and even entire companies can use it. Although, with large groups, specialised idea management software is needed to capture and facilitate the processing of the ideas efficiently.

Secondly, the process is repeatable. A company can have numerous instances of the innovation process in action at all times. A team leader can launch new challenges once the ideas from old challenges have been implemented (or even sooner in some instances).

Thirdly, the process is effective. It is based on a combination of Creative Problem Solving (CPS) and standard business processes. It has been proven again and again. Indeed, it should be clear that the innovation process enables you to align innovation with strategy, focus creative thinking on current business needs and combine multiple ideas in order to develop comprehensive solutions to all kinds of business problems.

And, as we stated in the beginning, it is a simple process; one that can readily be implemented in most companies. Although, you will also need to have something of a culture of innovation in place in your firm in order for the process to work. If new ideas are routinely criticised from conception and committees are so risk adverse they are afraid to cross the street (as is typically the case without a culture of innovation), there is little hope for the innovation process.

On the other hand, if new ideas are always welcome, the CEO really believes in innovation (rather than just makes bland statements about it) and the company is willing to invest resources not only in innovation, but also the implementation of radical ideas, the innovation process will perform wonderfully!

The eight steps of Innovation Process Management

The eight steps of Innovation Process Management
Published on June 30, 2009 in Business innovation.

With the growing popularity of innovation initiatives, ever more companies are launching their own actions. However, many are going forward in a piecemeal fashion, running a brainstorming event here, trying out an ideas campaign there and promoting innovation in vague ways in marketing communications. Such an approach works, somewhat, but it is not ideal.

The best approach is to have a comprehensive innovation process management (IPM) structure that treats innovation as a series of cycles that run within a grand, enterprise innovation process cycle.

The Innovation Process Cycle

An innovation process cycle combines creative problem solving (CPS) with scientific peer review evaluation and some typical business tools.

1) The Challenge
The cycle starts with a problem or goal which needs to be formulated into an innovation challenge. Once this is done, the challenge is presented to the problem solving group. This may be done in the form of a brainstorming event, ideas campaign or other activity. The group problem solving group may be a team, all employees in the firm, the public or any other group of people.

2) Collaboration
In order to maximise the creative potential of the problem solving group, the idea generation activity should be collaborative in nature. This can be accomplished in many ways. Idea management and innovation process management software often provides on-line collaboration tools, while facilitators of brainstorming and other ideation events should promote collaborative idea development.

3) Combination
Because an innovation process cycle starts with a challenge, ideas tend to be interrelated and many are complementary. Hence, before going further, it is best to combine such complementary ideas into larger, more sophisticated ideas so that they can be handled as a single package. This makes the next steps in the cycle more efficient.

4) Scientific Peer Review Evaluation
Here is where a lot of innovation initiatives break down: choosing the best ideas. Many poorly thought out approaches use voting, which is a good way to identify the most popular idea, but an appallingly ineffective method for identifying the most potentially innovative idea. I have also seen organisations put a great deal of effort into idea generation, leaving the final decision to a manager who basically picks out her favourite idea. Assuming the manager has suitable business expertise, such an approach is better than voting – as it is based on expertise rather than popularity – but it is typically far from perfect.

The scientific approach of peer review by expert, on the other hand, is ideally suited for identifying the most promising ideas in a cycle. Instead of basing selection on popularity (can you imagine Einstein sending his special theory of relativity to the public for a vote in order to determine its validity?) or the whim of a manager, you apply a set of business criteria to the idea and rank how well the idea meets each criterion. If an idea achieves a sufficiently high ranking, either as is or through additional modification, it should be developed further.

5) Testing and Development
Ideas identified as being potential innovations are now ready to be tested and developed. Here is where typical business tools come in useful. A business case is a useful means of hypothetically implementing an innovative idea and projecting the potential results. Of course it is not perfect, but it indicates possible issues in the implementation of the idea, as well as benefits that may not have been obvious to the original idea developers.

Prototypes are an excellent means for testing ideas. Not only do they allow you, your colleagues, customers and others to see how an idea would actually look in implementation, but building and playing with a prototype is a good method of further improving upon the core idea. Prototypes are, of course, ideally suited towards material ideas such as new products. But more abstract ideas, such as new services, process improvements and other concepts can often be prototyped through role-play, building structural models and making diagrams.

6) Implementation
Ideas that make it through testing and development are ready to be implemented. Unless the idea is a radical change from your usual activities, you don’t need me to tell you how to do this!

7) Review
Once ideas have been implemented, they need to be reviewed, probably against an ongoing series of milestones. If an implementation does not achieve a milestone, it needs to modified or killed. Moreover, even the most spectacularly effective and profitable breakthrough innovations need to be improved on a regular basis.

8) New Needs and Inspiration
Hence, reviewing the implementation of new ideas should indicate new needs which can be transformed into challenges which, in turn, start a new innovation process cycle. Likewise, implementations can inspire new corporate goals. Again, these can be turned into new challenges and new cycles.
Integrated Innovation Process Management

An innovative company, however, should not have a single innovation process cycle in operation. Rather it should have many of them! Large cycles are suitable for enterprise-wide innovation. Meanwhile, business units can run somewhat smaller innovation process cycles in order to manage their own ideas (although it should be noted, collaborative groups need not be limited to employees of that business unit). Teams, departments and any other group can also run their own innovation process cycles.

Multiple innovation process cycles create the process

However, these innovation process cycles should not be in isolation. Rather they should inspire and feed other cycles elsewhere in the organisation. For instance, the implementation of a new product idea should inspire innovation cycles in the marketing, sales and customer service divisions as well as at the enterprise level.

Managers should watch their colleagues’ innovation process cycles and ruthlessly copy ideas as inspirations for their own cycles.

The Result: a Highly Innovative Organisation

By applying innovation process management across your entire organisation, you can transform it into one which is innovation driven. And that is a sure way to keep well ahead of the competition, survive this financial crisis and make your firm a great place to work. Is there anything more you could possibly want from work?

Silicon Valley may be too smart for its own good

Silicon Valley may be too smart for its own goodJanuary 7, 2012 | Rocky Agrawal

Silicon Valley’s greatest asset is the brilliant minds that roam the buildings and inhabit the coffee shops. Since moving back to Silicon Valley in June, I’ve met a lot of amazing people. On average, they are the smartest people I know. I have conversations on a regular basis that I just can’t have anywhere else. Yes, I’ve worked with smart people in other places, but the concentration here is unique.

But that brilliance comes with some blinders. Instead of figuring out how to adapt to real users, we too often expect them to adapt to us.

In a post last week about car-service Uber’s outlandish New Year’s Eve surcharges, I made the seemingly innocuous comment that the multiplier Uber used to explain the pricing was confusing to casual users; that it’d be better to display a rate in dollars or the minimum charge at a given time. A number of people responded that a user can do the math, so it’s not a big deal.

Yes, an Uber user who knows the regular rate could multiply it by the multiplier and figure out what the current rate is. But why should they have to? A computer can do it better and faster. One of my core design philosophies is that you shouldn’t make users do work that computers can easily do.

Although Uber claims to have tested price elasticity on New Year’s Eve, what they really tested was the ability of drunk people to comprehend a bad user interface. If they had truly tested price elasticity, there should have been no complaints about the surge pricing because the people who paid 6x the normal rate would have been satisfied with their decision.

I hear similar tone-deafness when it comes to things like screen size, compute power and connectivity. We Silicon Valley types are sitting at 24″ monitors with the latest hardware connected to 20 Mbps pipes designing products that are used by people with five-year-old computers at DSL speeds or worse. Not everyone has the desire (or the money) to upgrade their computer or phone every year. I see many products that while beautiful and elegant in the right environment, wouldn’t work well in many homes.

I recently met with EverFi, a company that provides online learning tools to high schools. EverFi actually ships discs with Flash files to some schools because their connectivity is so bad that an entirely online experience wouldn’t work well. That’s the kind of thinking I like to see, but more commonly, companies would take a “Let them buy iPads” approach.

Many in Silicon Valley often miss the fact that most of the population does not dramatically change behavior overnight. Behavior changes gradually over time.

I spend a lot of time talking with small businesses and entrepreneurs who are trying to sell into small businesses. Inevitably, entrepreneurs will tell me how they plan to wow small business owners with the reams of great demographic data they can generate, if only the business will switch its operations to a new platform. They’re shocked when I tell them most small businesses don’t give a shit about data. That’s not how they run their business. They will, some day. But not now.

I’ve met with business owners who run daily deals that don’t use computers on a regular basis. In some cases, they can’t even tell if a voucher was redeemed because tracking is done with pencil and paper. In Silicon Valley, we live and breathe data, so this is hard to fathom.

It’s not because they’re country bumpkins who live in flyover states. Anyone trying to sell in to small businesses should read what it takes to sell to a restaurant by Jonas Luster, who describes himself as an “uneducated Southern hick,” though he is anything but.

I worked at a startup that sold unified communications services. If you don’t know what that is, you’re not alone. The initial product was designed by a team of rockstar telecomm engineers who had left Lucent. It did everything you could ask for. But consumers weren’t asking. We dramatically simplified the product into services consumer could understand — fax, phone, voicemail. We nearly doubled our prices and got more people to buy.

Too many people in Silicon Valley are enamored of technology for the sake of technology. Two of my favorite companies — GrubHub and Savored — use decidedly low-tech ways to accomplish their goals. GrubHub sends orders to many restaurants via fax machine (gasp!). Savored creates the impression of dynamic pricing for restaurant reservations, even though in reality discounted tables are manually blocked off based on typical traffic patterns. Savored could have focused on developing the ideal yield management system, but their approach works today and provides at least 80% of the value.

Square, another great company, uses 1980s technology because that is the technology used on hundreds of millions of credit cards that are in consumers’ wallets. People who have never used a computer can pay a Square merchant by pulling out a piece of plastic. At the same time, Square innovates with products like Card Case, which allows more tech savvy consumers to pay just by saying their name. On the merchant side, Square is getting people hooked with an elegant solution that solves an immediate, easy-to-understand need (payments) and then slowly inching them into other more sophisticated products like point-of-sale systems.

People in Silicon Valley are passionate about their products — which is great. They should be. But you can’t assume that your users are. Most consumers aren’t going to read every email you send them, follow you on Twitter or read your blog. The product needs to stand alone. It needs to get people excited.

The competition for most startups is not the 10 other companies that are doing essentially the same thing, but NFL football, American Idol and the billion other things that people could be doing.

“The truth is, startups design stuff for people like themselves, not for the mass market,” wrote Cynthia Schames, a friend from outside the Valley. “And they expect everyone to put up with a half-baked, unreliable ‘product’ just because TechCrunch wrote about it.

“It’s almost like they’re too smart for their own good; like that guy at a cocktail party who refuses to speak in anything but hedge fund terminology … he’s not getting a date, because she can’t tell what the hell he’s talking about, and also because he’s an insufferable ass.”

When things go wrong, the reflexive action in Silicon Valley is to blame the consumer instead of taking at least partial responsibility. Uber’s blog post in response to the surge pricing is arrogant. The tone is “You just don’t get it. We’re really, really smart.” AllThingsD asked if New Year’s Eve was Uber’s “Netflix moment.”
I don’t think it is — yet.

Uber didn’t make a giant mistake. There isn’t a fundamental business model problem. The company provides a valuable service that some people are willing to pay a premium for. It has users and drivers who love the service.

It can get past this: Fix the UI, offer no-questions-asked refunds of the New Year’s Eve surcharge to customers who feel they were misled and move on.

Tech writers aren’t immune from Silicon Valley’s blinders. Too many blog posts repeat vanity milestone statistics released by companies instead of asking tough questions like “Do real people actually use this?” “Is there a business here?”

Instead of being critical and pushing companies to be better, we do glowing profiles of founders. We snicker at “idiots” who don’t understand pricing strategies that were deliberately designed to be confusing. They’re not idiots. They’re real people with real money to spend.

And as special a place as Silicon Valley is, we sometimes forget that not everything innovative happens here. After my piece on demand-based pricing and Uber, a friend from Minnesota called me out for using the San Francisco demand-based parking meter experiment as an example when other cities have been testing it, too. Such reporting helps foster the impression that there is nothing of value anywhere else and gives people in the Valley a bigger head, he said. Tech blogs should use more examples from outside the Valley.

He’s right. GrubHub is based in Chicago and EverFi is based in Washington, DC.

Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org and tweets at @rakeshlobster.

Leadership Quote

"The best leaders, almost without exception and at every level, are master users of stories and symbols."
-Tom Peters, management expert

Disruption and Innovation Presentation by Clayton Christensen

I just watched a great video of a presentation by Clayton Christensen about disruption and innovation. As business leaders and business development, I think you all should invest the hour to watch this and think about both sides of disruption and innovation. One side is the opportunity it could create for VeriFone, the other side is how we could be disrupted out. One thing that struck me is that Square is disruptive innovation on two fronts: starting at the lowest “ankle biter” end of the market and also expanding the market by making it affordable and easy for non-payment customers to start taking payments. I wonder if we should look at mPOS/Cloud computing as a way to slowly take out and dominate the POS business by starting with the least profitable sector (the small merchant) and sectors that don’t use POS, and eventually adding features and capabilities to solve the “jobs of retailing” and displace the traditional POS vendors.

Here is the link.

Innovation Metrics

Innovation Metrics – Part 1

Posted on August 31, 2010 by Boris Pluskowski

Metrics are one of the most important elements of an innovation program’s success – determining everything from a program’s future direction – to whether a program even gets funded the following year. Yet metrics are probably the least understood, and most misused activity in a corporate program agenda. Understanding what to measure, and how to benchmark your performance is paramount to achieving both recognition and validation at the senior executive level – so how do you get it done? I thought I’d paste in a step by step guide over the next few weeks to let you know!

Understanding the Innovation function

1. Start with Strategy – Key to understanding the metrics used to measure your innovation program is understanding what the real goal of that program is. Your whole program should be focused at trying to help the company achieve its strategic objectives (if it’s not – make sure it’s realigned to do so or you risk having a marginalized program that will be cut at the first opportunity!) – so it makes sense to start your journey into metrics by getting a better understanding of what it is exactly that the organization is trying to achieve – where does it want to go? What are the barriers stopping the company from achieving it? Where are the key competitive forces? These and other questions will lead you into a better understanding of how best to target the activities of your innovation efforts to best benefit the organization as a whole.

Don’t be fooled into believing that the answer will always be via the creation and development of the company’s product set either. Sometimes it could be a need to dramatically improve process efficiency that will drive a company forward. For other companies it could be a need to develop innovative business models to drive profitability in the forthcoming years – and yet others might be driven by a need to get out of a commoditized marketplace and develop an entirely new value proposition and new client base altogether (see my earlier White paper on Innovation Dimensions for more on the different dimensions an innovation program can and should be attacking). Even within the same industry – different players will typically be driven by different environmental and competitive factors that will lead the decision to pursue a particular business strategy. This strategy should then lead both the direction of your program and the metrics you use to measure the program’s effectiveness. In the same way that companies do not typically simply copy another’s business strategy blindly, neither should you simply copy their innovation metrics and benchmarks – as what’s appropriate for one company in a certain situation could be disastrous when applied to another. With metrics, the wrong metrics will give you misleading information on your ability to help meet the company goals

Innovation Metrics – Part 2

Posted on September 5, 2010 by Boris Pluskowski

2. Plan the Path – Now that you have a direction to point your innovation efforts at, it’s time to plan the path to get to that effort. In the same way that strategy documents are formulated with multiple time points to set milestones for where the company wants to be at 1,3, and 5 years – so should your innovation plan and strategy as to how you’re going to help the company achieve those aims and the contribution the innovation program will make to the company’s strategic aims.

Your innovation pipeline will be led and directed by the strategic context of the program (see step 1 from last week) below, which follows the general form of:

i) Find and Identify the problems or barriers to achieving the strategic objectives and define each tightly in terms of applicability, feasibility, and commitment to implementation of the solution. Then decide upon the order in which to tackle those problems.

ii) Collect ideas from internal/external sources on how to solve those problems/overcome the barriers, and begin the collaborative process to build those ideas into base concepts, selecting the most effective concepts/solutions for further development.

iii) Build out the selected concepts and begin testing for feasibility, cost constraints, market acceptance, etc – the various tests and building activities carried out in this stage(s) will vary depending on the company, industry, and target of the innovation process.

iv) Decide upon and begin developing that project through effective project management

v) Launch the developed solution in a limited manner – to one geography, one factory, one business unit, etc – and tightly monitor and control to look for effects and improvements

vi) Redevelop based on insights from the limited launch and Re-launch to a wider audience, usually in stages.

Underpinning the program are the dual disciplines of Portfolio Management (ensuring that the quality of the pipeline is sufficiently high and sufficiently robust in order to achieve the company goals) and Foundations (ensuring you have the culture, skill set, tools, processes, leadership, etc to fully enable the innovation process) .

The pipeline is meant to provide you with a guideline as to the general best practice of a robust innovation program – and you will find that most innovation programs will be able to be overlaid onto this model. You’ll need to spend time understanding how to translate your overall program strategy, into a comprehensive program that fits your company’s capacity, culture, and aspirations. Once you have your process set out, you’ll be ready to start sorting out what you’ll need to measure to ensure you’re achieving your aims.

Innovation Metrics – Part 3

Posted on September 12, 2010 by Boris Pluskowski

3) The Three F’s – When beginning to consider innovation metrics – there are three main “F”’s that you need to measure – Form, Flow, and Function.

1.Form – Form is your ability to perform each part of the innovation process.

2.Flow – Flow is your efficiency at both passing stuff through the individual elements of the process as well as the overall process itself.

3.Function – Function looks at the program as a whole and its ability to achieve organizational goals, and the organization’s innovation capacity as a whole.
Taking the innovation process you’ve developed in section 2 (see last week’s post) above, you then go through the process figuring out what metrics are most appropriate taking into account the 3 F’s. For most companies, the metrics will be broadly split into two sections – the form and flow of the pipeline itself – and the function of the program as a whole (Innovation Metrics Worksheet – Form and Flow):



Some good examples of Form and Flow metrics:

1.Problem Identification and Definition stage:
•Number of Problems submitted for consideration (form)
•Number of individual event sponsors recruited (form)
•Number of Event Charters defined (form)
•Number of Events accepted and set up (flow)
•Number of Events in each of the key corporate strategic areas (flow)

2.Idea Collection, Building and Management
•Number of ideas/builds collected (form)
•Number of Event Visitors / Contributors (form)
•Number of Idea/Build Authors (form)
•Number of ideas reviewed and concluded (flow)
•Number of Ideas passed through to concept development (flow)

3.Concept/Opportunity Development
•Number of Prototypes developed (form)
•Number of ideas going into Project Management (flow)
•Potential value of ideas going to Project Management (flow)
•Average time idea spends in Concept Development (flow)

4.Project Management
•Average time to project completion (form)
•Number of projects completed versus target (function)
•Number of projects currently in the pipeline versus target (function)
•Effective capacity versus capability (function)

5.Initial Launch
•Target sales/cost reduction/process improvement versus actual (form)
•Customer satisfaction (form)
•Customer uptake versus local competitor/alternative (form)
•Number of Launches proceeding to Expanded Launch (function)
•Number of Launches failed (function)

6.Revise, Expand, and Re-Launch
•Contribution to profit margin from innovations
And an Innovation Metrics Worksheet for Function:

Bridging the Gap Between Ideas and Products

Bridging the Gap Between Ideas and Products
Posted on December 12, 2011 by Jeffrey Phillips
http://www.innovationexcellence.com/blog/2011/12/12/bridging-the-gap-between-ideas-and-products/

It’s time to assess where things stand from an innovation perspective. Clearly it won’t be news to alert you to the fact that the vast majority of CEOs report that innovation is very important for the success of their businesses. Increasing competition, from a wide range of countries and geographies, increasing customer expectations, rapidly shifting business models, new entrants and a host of other governmental, financial and demographic shifts mean that innovation is no longer a “nice to have” but a must-have for ongoing success. Firms that have spent the last two decades right-sizing, outsourcing, cutting costs, getting “lean”, implementing Six Sigma and a host of other management tools are rapidly realizing that you simply can’t cut your way to growth and differentiation.

The economic conditions in the global market suggest that smart firms will hunker down, save their ammunition in order to fight another day once consumer demand returns. This approach seems reasonable from behind the confines of the ivory towers built in many large, complacent organizations. Meanwhile, emerging new entrants are developing interesting, valuable products and services and learning to compete in this environment while established players simply hunker down. Right now, as the first “green shoots” of economic growth are becoming visible, is the time to develop the skills and capabilities to improve innovation processes and disciplines within your firm and build innovation networks to spot and adopt great ideas that exist outside your firm. The real question becomes – what are the critical skills necessary to thrive in an environment where innovation becomes a critical success factor.

In many organizations, good ideas are a dime a dozen. In fact one could argue that there are too many ideas about too many different priorities. Executives must do a better job of defining important corporate goals that innovation should support. Once fewer but better ideas are generated, the real work begins: spotting ideas that have the best chance to become disruptive products and services and moving those ideas through the decision points and approvals to become a new product or service. This is the key innovation problem that all firms face. There is a yawning gap between idea generation and product commercialization.

This problem can be addressed in one of two methods. First, we can train innovation experts who understand innovation challenges and goals, and are very experienced in every phase of an innovation effort. These individuals will work above the existing business as usual processes and will have the opportunity to supersede existing products, services and processes. The challenge with this approach is that very few people possess the knowledge, skills, breath of insight, thick skin and simple desire to help ideas accelerate through the barriers that they must clear to become new products or services. In this model, the necessary skills to succeed include excellent vision, the ability to spot promising ideas, the strength to champion an idea over a long period of time against significant odds and the ability to attract funding to the ideas they favor. Few people possess all of these skills and can survive and thrive in existing corporate environments.

The other model is to develop an innovation process which defines how ideas should be recognized, developed, evaluated and converted into products and services. These roles are filled by many people throughout the organization rather than one “champion” trying to do all of the work. This innovation process ensures that more people are involved which brings more skills and insights into the process. The process should be funded on an annual basis, so searching for funds should be less of an issue than in the “champion” model. Since the process is dominant, rather than the ideas or champions, there’s less chance of exhaustion or frustration of any one individual. In this model it is important that a broad range of people gain skills in each of the critical steps and phases of the innovation process. In this regard many people can fill the roles necessary to improve ideas and move them through the innovation process.

So, if you choose to follow the “champion” model, you should be recruiting a few people with a very broad range of skills who can spot great ideas, develop the funding and approval models and move them rapidly to new products. You’ll need to constantly recruit these people, as they will burn out rather rapidly and will be hard to find and hard to replace. Most of the innovation effort will be centered on these individuals. They will be unlike your typical recruits.

If you choose to create a systematic model for innovation, then the skills you need have far more to do with defining and improving innovation processes. There may be a bias to simply apply your deep lean and Six Sigma skills to innovation efforts. They can help with defining a process and improving the process, but the vision and perspective for innovation is far different. Ensure you set big goals, including differentiation and organic growth as the targets for your innovation process, otherwise a bias toward process perfection may lead to incremental ideas.

The first model is about finding a few PEOPLE in whom your innovation potential rests. The second model is about defining an innovation PROCESS, which is less reliant on any small group of people. In the end it really doesn’t matter which model you choose. The real choice is in whether or not to consider innovation as a key capability or discipline. That choice, and the investments to bring the choice to reality, are what will matter.

Phases of Innovation and What Stalls Innovation

Posted on December 13, 2011 by Holly G Green


When I ask business leaders to identify which part of the innovation process their organizations struggle with the most, I typically get one of three answers:
1. We have a lot of ideas but most of them get judged as impossible or too hard to implement based on changing the way things currently are.
2. We have a hard time deciding which idea or opportunity to pursue.
3. We come up with a lot of good ideas but can’t seem to execute on them.
Interestingly, these align exactly with the phases of innovation: discovery, evaluation, and execution.
In business, innovation is the act of applying knowledge to the creation of new processes, products, and services that have value for at least one of your stakeholder groups. Obviously, this requires more than just generating a slew of creative ideas.
In order to produce true innovation, you have to actually do something different that has value. In other words, follow through on the good ideas. This requires a very different set of skills and resources than idea generation. If you’re not getting any traction with your innovation efforts, it may be that your organization lacks the skills and competencies to complete one or more of the following phases.
Phase I – Discovery
Phase I has two basic objectives: developing core innovation competencies and generating new and creative ideas, which often includes gathering customer insights and translating them into workable ideas.
Everyone has the ability to think creatively, but most people need some training and coaching in order to bring out those latent abilities. Key activities during this phase include providing learning sessions, workshops, collaboration fairs, ideation boot camps, and other tools that teach people how to think differently.
Innovation enablers during this phase include:
• Encouraging and rewarding idea generation
• Awareness of the brain’s processing and potential hurdles
• Defining winning/excellence
• Balancing big picture and details
• Challenging assumptions
• “What if?” thinking
• Changing perspectives
• Considering the right answer
• Influencing others effectively
Key players during this phase: individual contributors and managers who encourage and support them.
Phase II – Evaluation
This phase separates the wheat from the chaff, as potential ideas and opportunities undergo a rigorous screening process. New ideas are discussed, tested, evaluated, and compared for their potential to add value to customers, generate new revenue streams, or accomplish a specific innovation goal. The primary objective is to identify the highest-value opportunities and determine the feasibility of turning them into reality.
Innovation enablers during this phase include:
• Creating and supporting an idea evaluation framework
• Taking risks
• Balancing day-to-day versus longer term
• Accepting ideas (remain open)
• Looking for “and” versus “but” solutions
• Encouraging some failure (within boundaries)
• Thinking cross-functionally/organizationally
Key players during this phase: managers and leaders who have set clear strategic direction and guidance.
Phase III – Execution
This phase involves making sure that the high-value opportunities identified during the evaluation phase align with your organizational capabilities. Then senior management has to commit the time, money, and resources to make the innovation happen. This is followed by close tracking of the business performance of the new product or service, as well as measuring the process used to develop the innovation and looking for ways to improve it.
Innovation enablers during this phase include:
• Continually communicating the need for innovation as a business focus/strategic mandate
• Linking innovation to key strategies
• Sponsoring innovation projects
• Incorporating innovation reports into the business review processes
• Funding innovation
• Developing risk management strategies and approaches
• Capturing and sharing innovation learnings
• Learning from failures
Key players during this phase: senior management/leaders.
The added benefits of innovation
When innovation becomes a way of life in your organization, you get a lot more than just new products and services.
The organizational mindset shifts to one of relentless improvement, with an increased awareness of opportunities and possibilities for products and efficiencies. There is more listening, less knee-jerk defending of old ideas, and a greater understanding of, and interest in, unmet customer needs.
As individuals begin to understand their roles in the innovation process, you get more clarity on what success looks like and how to achieve it. Standards of performance increase, along with an increased willingness and ability to hold each other accountable for meeting them.
Most important, as you begin to develop a sustainable innovation approach, the emphasis tends to shift from maintaining old successes to considering new opportunities and products – a key element in staying ahead of changing customer needs rather than always trying to catch up.
If you struggle to get new products to market, ask yourself, “Where are we getting stuck? What skills and competencies do we need to develop to move forward?” When you have all the pieces in place to successfully complete all stages, innovation becomes your way of working, not a project or initiative that goes away when the next business buzzword gains prominence!

How to Build Business Metrics

How to Build Business Metrics


Share We’ve written a few posts criticising some of the more common innovation metrics in use, so I thought it would be smart to outline some ways that we can actually develop more effective metrics. Here’s a story that might help:

A while ago I was in charge of managing student recruitment for a tertiary education institution. One of the first things I looked into when I started the job was metrics – how did we measure how well my section was doing? The answer was one number: total number of enrolled students each year. The job that I was given was to increase that number by as much as possible (which begs all kinds of questions about quality, teaching and so on, but let’s set those aside for now…).

The problem was that managing that number as a standalone was hard. Well, impossible, actually. So I looked into what other numbers we had, and I found a that we had measures for total applications received, and total enrolments. I worked with my teams to figure out the path that people took to become students, and we then also figured out a way to measure enquiries. Once we had these numbers, here’s what we did:

We made three metrics: total number of enquiries, the ratio of applications/enquiries, and the ratio of enrolments/applications. Then I made the marketing team responsible for enquiries, the information team responsible for applications/enquiries, and the enrolments team responsible for enrolments/applications.

When my boss told me to increase enrolments as much as possible, he was hoping for a 5% increase. By breaking down the process, developing new metrics, and making people accountable for the measures, we were able to increase enrolments by 12%.

There are several lessons from improving innovation metrics in this:

•Innovation is a process not an event: many things that we often think of as an event are actually processes. Enrolments is a good example – previously my institution only considered the end point, enrolled students. By breaking down the process that we went through to actually get an enrolled student, we were able to improve our ability to get enrolled students.
I think of innovation as a process too – this is the diagram that I use to describe it:



To improve our innovation metrics, we need to first think of it as a process, then build metrics to measure the intermediate steps as well as the outcomes.

•Use multiple metrics: in the enrolments story, we used three metrics that led to the one that we were most interested in (total enrolments). We can do the same for innovation. Once we think of it as a process, then we need to develop metrics for each of the steps that lead to the outcomes that we are looking for from innovation. Innovation is a complex process, and to manage it we need to use multiple metrics.
•Link Your Innovation Metrics to Your Strategy: my tertiary education institution saw increasing enrolments as a central part of its strategy. At the time, the educational sector in New Zealand was fairly turbulent, and there was a strong message from government that it wanted to see the sector consolidated. Increasing enrolments was seen as a way to signal that we were a thriving institution, making it less likely that we’d get absorbed by a larger polytechnic.
We need to do the same thing with innovation – link it to our overall strategy so that it can help drive success. There are a number of broader strategic goals that can be supported by innovation – we just need to be clear about which ones we’re targeting.

•Improve the part of the process that is weakest: when we started tracking the enrolments process, we discovered that we were pretty good at generating enquiries, and very good at converting applications into enrolments. The weak link was converting enquiries into applications.
The information team had been given some sales training before I arrived, which they strongly resisted. They saw their role as helping people, not selling them. We implemented a lot of ideas, but the one that had the greatest impact was getting them to ask at the end of each enquiry that they handled “if you’re interested in the course, would you like to put in an application?”

When they started doing that, the applications/enquiries ratio shot up from about 12% to 18% in a couple of weeks. And we weren’t forcing people to apply for courses they didn’t really want to take – the enrolments/application ratio held steady. If the quality of applications had decreased, this metric would have gone down. It turned out that a lot of people really did want to start studying, but they just needed a small nudge to get started.

In looking at our innovation processes, we need to do the same thing: find the weak link, and figure out how to best improve it. As we’ve said many times before, usually the problem in organisations is not that they don’t have enough ideas, but rather that they need to get better at selecting ideas, or at getting them to spread. In any case, once we have identified the part of the process that is most in need of improvement, then we can figure out to best go about making it better.

Getting innovation metrics right is a challenging task. There is no single number that will tell us everything we need to know to manage innovation. I hope these ideas help you figure out how to measure it better in your organisation.

5 Principles of Innovation

5 Principles of Innovation
2011 December 11 http://www.digitaltonto.com/2011/5-principles-of-innovation/

Are innovators born or made? Surely, those who spawn ideas that change the world are special – different then the rest of us.
Take one look at an Einstein, a Henry Ford or a Steve Jobs and it seems that they were bequeathed with something unique. They have a flair and a surety about themselves that borders on the sublime.

Yet many others also have flair and surety and never accomplish anything of note. Moreover, as I’ve written before, stories of great innovators often contain struggle and privation. Given a deeper look, innovation seems more learned than innate and there is surprising consistency about what drives it. Here are 5 principles to guide you.
1. Think Small
Peter Drucker once wrote, “Effective innovations start small. They are not grandiose.” He’s right. A small idea pursued rigorously is worth infinitely more than the pompous navel-gazing gurus and pundits seem to take so much delight in.
Take a look at any really, really big thing and, inevitably, it modest origins. Microsoft became one of the world’s most valuable companies by focusing on software, an area so inconsequential at the time that IBM was willing to write it off. Apple made a splash with the Macintosh in large part by capitalizing on innovations that Xerox overlooked.
Yet, the great thing about thinking small is that you can risk failure, because failure is sustainable. You can falter, pick yourself up and try again. Eventually you’ll get it right and when you do, there are no limits. If you can suvive, you can thrive.
The absolutely worst thing you can do is pile on a bunch of up-front costs that push the break-even point far into the future. Most likely, that day will never come.
2. Disruptive Innovations are Crappy
Ever since Clayton Christensen published The Innovator’s Dilemma, the idea of disruptive innovation has become super sexy. And why not? What’s more exciting than a new idea coming out of nowhere to upend an entire industry?
What people tend to miss (surprisingly few who blather on about the subject actually have read Christensen’s work) is that disruptive innovation is crappy. It targets light or non-consumers who are over-served by an existing product or service. They’re more than happy to something inferior by conventional standards but superior in some other way.
Tim Kastelle, a professor who studies innovation gives a great example involving Canon and Ricoh, who almost put Xerox out of business by selling inferior copiers that were smaller and cheaper. However, they were “good enough” for most businesses and so size and price won out. From there, performance improved and Xerox was toast.
That’s why disruptive innovations like digital cameras and mini-mills were so easy for incumbents to overlook. The existing customer base wasn’t interested in them at first. However, the innovations won a following elsewhere, picked up steam and by the time the market leaders realized what was happening, it was too late.
3. Innovation is Combination
While we like to think of innovators being lonely men on the mountain, only coming down, like Nietzsche’s Zarathustra, to proclaim great revelations, the truth is that important breakthroughs usually come from synthesizing ideas from different domains.
One famous historical example is that of the discovery of genetics. In 1865, when Gregor Mendel published his groundbreaking study of inheritance of characteristics in pea plants, it went nowhere. It took nearly a half century before the concept was combined with Darwin’s natural selection to unleash a torrent of innovations in medicine and science.
In a similar way, Einstein merged physics with Humean skepticism to come up with relativity. Watson and Crick weren’t the most accomplished scientists searching for the structure of DNA, but they were the ones that knew enough about the separate domains of biology, chemistry and physics to put the pieces together.
A more recent example is the Apple ecosystem. There were plenty of digital music players around when Steve Jobs launched the i-Pod, but he combined his player with i-Tunes, which made content both more accessible and palatable to music companies. He then threw new products into the mix – the i-Phone, i-Pad and now Siri – creating more combinations and greater value.
4. Passion and Perseverance Are Key
The problem with combinations is that finding the right ones takes time. Larry Page and Sergei Brin combined the system of academic cites with computer technology to develop the world’s greatest search engine. However, it was years before they stumbled upon Overture’s business model and found the combination that actually made money.
Spending years in the wilderness before becoming a runaway success is not at all uncommon. As Jim Collins noted in Built to Last, Sony started out as a failed rice cooker manufacturer. Hewlett Packard began by making quirky gadgets like automatic toilet flushers and a machine shocked people to help them lose weight.
Jeff Bezos emphasized the importance of perseverance in Amazon’s success in a recent interview. He said that, “We are stubborn on vision. We are flexible on details. … We don’t give up on things easily.” A lot of times, what looks like brilliance is really just someone who has the balls to stick it out through years of failures.
As I’ve said before, we’re not just competing in an information economy, but a passion economy. Game changing breakthroughs are love children, not test tube babies.
5. The 70/20/10 Portfolio
Of course, beyond all the happy talk, businesses must do more than just innovate. They need to serve customers, pay employees (and sometimes congressmen) and earn money. So prattling on about embracing creativity and failure often gets thrown to the wayside when it’s time to make budget.
Nevertheless, professor Kastelle brings workable scheme to the table with his three horizons model.



Now, professor Kastelle is a learned sort and you can find his intelligent explanation on the link I provided above. However, I’m from Philadelphia, so I just like to think of it as:
- You want to put 70% of your innovation efforts toward taking your competitor’s money
- You want to put 20% of your innovation efforts toward taking somebody else’s money (often a customer or supplier)
- You want to put 10% of you innovation efforts toward creating something new and cool.
In any case, the point is that it’s the mundane stuff that makes breakthrough innovations possible. Without that, you just have a bunch of wild ideas that you’ll never be able to see through. If today’s problems aren’t solved there will never be any future to invent.
So there you have it, 5 principles of innovation. I’m sure I’ve left something important out, so feel free to remind me in the comments below.