Breakthrough Innovation

March 18, 2011

Ten Tips for Better Innovation

Filed under: Uncategorized — mosesma @ 7:51 am

With a name like Moses, it’s hard to resist the temptation to come up with Ten Commandments for stuff. However, innovation is so complex and multi-faceted, the best I can do are Ten Tips for Better Innovation. We’ll need four articles to cover all ten suggestions in sufficient detail, so come on back to check for additional tips over the next few weeks.

Here are the first three tips…

#1 – Innovation is Essential

In 1999, Arthur D. Little conducted a comprehensive study of 338 Fortune 500 firms and found that firms that were rated as “highly innovative” produced returns to shareholders that were nearly four times those produced by the least innovative firms over the period from 1987 to 1996. That bears repeating: highly innovative Fortune 500 companies return 4x value to their shareholders.

In fact, innovation is so important, that the management guru Peter Drucker once said, “Every organization needs one core competence – innovation.”

So the number one tip for innovation is that it pays to be virtually obsessed about it, because the development and refinement of twin innovation competencies – to create more innovative products and to design more innovative marketing – are the most important strategic priorities for any organization. When you are handed an excuse, like “maybe we should get back to innovation after the recession” or “let me be the devil’s advocate here”… you should have a clever retort prepared ahead of time. Something like “say, is Apple slowing down their iPhone product cycle… or are they redoubling their efforts even during a recession?” Cutting costs and increasing innovation are not necessarily mutually exclusive conditions.

And don’t worry about rocking the boat, because innovators are inevitably controversial.

#2 – The 31 Flavors of Innovation

Most companies commonly recite that there are four forms of innovation: incremental for process improvement, radical innovation to develop breakthrough products & technologies, development of new business models, and the formation of new ventures and spinoffs.

In reality, there are many more flavors and facets of innovation, which include creating radically new sales & marketing techniques, exploring new forms of compensation, inventing clever ways to manage risk in your supply chain, adapting to new methods for shareholder communications, and even using collaborative techniques for generating innovative cost reduction strategies. All forms of innovation are valuable. In fact, an optimal innovation initiative should reflect a diversified portfolio of ideas, pilots and ventures, which match your organization’s needs and goals. Every function of the organization needs to be continuously re-evaluated and tuned with a balance of continuous and radical innovation efforts.

The real goal is to create your own flavor of innovation that’s brandable.

#3 – Innovation is a Team Sport

Despite the enduring myth of the lone genius, truly productive invention requires a team effort. Ed Catmull, president of Pixar and Disney Animation Studios, describes what he calls “collective creativity” in a recent issue of Harvard Business Review. He writes, “Creativity involves a large number of people from different disciplines working together to solve a great many problem. Creativity needs to be present at every level of every artistic and technical part of the organization.”

But, like all team sports, some teams are simply better at playing the game than others. This is because human skill – like learning to play professional sports or play the piano – requires 5000 hours for the brain to master. Ideation – the skill of creating ideas that solve a central problem – is no different. Honestly, how many hours have your employees dedicated to perfecting their ideation skills? Or in practicing together, like a winning basketball team or a world class orchestra?

The key to forming effective innovation teams is simply to cover all the skill bases, just as you would do when building a professional basketball team. That is, by matching up the equivalent to forwards, guards and centers. In the game of innovation you are matching up empaths – people who see and listen more deeply than others, creatives –those who can build really neat stuff quickly, and conductors – like you, who can organize and coordinate those teams to deliver the best work of their lives.

And at the same time, you have to train fundamentals – just like passing, dribbling and shooting in basketball. The fundamentals of innovation and ideation are enhancing and expanding the core skills of listening, seeing, constructing, painting, storytelling and imagining. For an innovator, listening and seeing deeper opens into the skill of observing people interacting emotionally with your products and services. In a way that lets you to uncover tacit and unarticulated needs and requirements. Likewise, constructing and painting has to do with the skill of rapidly and skillfully creating visualizations and prototypes for your subjects to play with and imagine with. These are the skills of artists, except instead of painters using egg tempera or filmmakers using silver nitrate, these are the sculptors of ideas and architects of experience.

There is one other key skill, that is usually held by the conductor… this is the ability to ability to leverage and convince the organization to back a project that it is unable to see as valuable, but ultimately turns out saving the company. Think of him as your center.

And that’s what it takes to create and train a winning innovation team.

Again, these are the first three tips… send me an email if you’d like to read the other seven!

March 12, 2009

Extreme Innovation

Filed under: Uncategorized — mosesma @ 5:54 pm

snowboardleadWhen you delve into snowboarding or base-jumping, or any other extreme sport, you’ll find many parallels to the art of innovation. In essence, innovation and extreme sports are pursuits that require energy, skill and courage (in spades), along with a healthy dose of skeptical belief .

When you compare extreme sports to the strategies and execution philosophies of successful companies, you find that success in either domain requires knowing the environment, the strength and limitations of your equipment, your level of skill, your risk appetite, your guide’s knowledge and management skills,  the team’s ability to function as one, what you can and can’t control, and finally,  listening  to your gut instinct. In that final analysis, you’ll find that both activities rely heavily on  feel and expecting the unexpected.

I caught up recently with Steve Ellis, EVP of Wholesale Internet Services at Wells Fargo & Co, who manages the bank’s wholesale  banking technology and just happens to be… and an avid heli-boarder! I wanted to discuss these parallels, and learn a bit about what it takes to make innovation occur on a regular basis  at a behemoth financial services company.  Steve and his team have a proven track record of being first-to-market with new financial service products.

steve_ellis

Steve Ellis, EVP at Wells Fargo & Co

Steve is one of the most energetic guys I’ve ever met –  the kind of guy who  wants to live fully in the moment of every minute of every day, 365 days a year. When I asked him for the formula for Wells Fargo’s secret sauce for extreme innovation, he laughed and explained lucidly, “There’s no secret sauce… but there are three basic tenets that we operate from, when it comes to  developing new products and services. First, innovation takes belief, that there is ‘something’ in the idea that will add value for customers, even when a traditional ROI model would tell you  to  not pursue the idea. Second, innovation is more about hard work than thinking up an idea, it’s more about execution than inspiration.  And third, it is important to get active and rapid feedback during the process.

“So you’re right, innovating and snowboarding down a mountain of virgin powder deliver similar kinds of highs ; it’s  the thrill of the  being somewhere ‘new’. It’s about strategy and execution, and tapping into continual feedback loops. Once you hit the zone, once you feel you have ‘something’ – whether you’re snowboarding or innovating –  it is an incredible rush, to ride the breathtaking flow of peak performance and what I’d call instinctual execution.”

Steve’s team developed the Wells Fargo Commercial Electronic Office (aka the CEO)  in 2000 , which has won just about every award that a  commercial  banking site could win.  The initial small group was able to build from scratch a single sign on portal to a half dozen financial services in 6 months, that was immediately well-received by customers. Since that time in 2000, the group has delivered 34 new releases of the portal, continually feeding new ideas and customer feedback into the CEO experience.  The team has  also taken these learnings  to other endeavors, like an internal unified desktop for its employees, a holistic customer view  connecting 50+ systems of record,   and  re-engineering its “sneaker-ware” credit processes into a modernized electronic workflow.

Steve continues, “On the other hand, you have to pace yourself as you’re learning. It takes a while for people to get comfortable with new ways of doing things and it’s best to learn in incremental steps. Start with simple things, master them, and then build more complex structures off the original base leveraging user and other feedback as an integral part of the process. But always keep in mind, that like snowboarding, innovation is sometimes actually safer when you do it just a little faster than your comfort zone. You won’t fall off as much and you will learn something new.”

Steve does a jump

Steve does a jump

Steve continues, “When you snowboard down a mountain of virgin powder… this is the perfect opportunity to learn how to listen harder. On the snow, it’s about  the feel of the mountain and reacting to the texture of the snow. In business, it’s about listening  closely to the customer.  For example, at Wells Fargo, we perform ethnography studies at client sites. We send  a small group of  people to literally camp out at a customer site for several days to observe how employees do their jobs.  We look for ways to re-shape our services .”

“Real innovation is about getting past the hype of a new idea, to learn how to see how things really work. These principles for innovation are in fact are quite simple to follow.  Most are either innate, part of our natural make-up, or learned more at a subconscious level and are not acquired by going to business school or anything.  Once you have these basic principles down, they can become the prime bedrock for creating successful and lasting businesses.”

March 3, 2009

How “Open” Should Innovation Be?

Filed under: Uncategorized — mosesma @ 1:26 pm

The latest entry for corporate buzzword bingo is the term “open innovation”. So let’s ask the question… what the heck is open innovation, anyway? Also, is open innovation really an obviously good thing, like having an open heart, or maybe a more complicated thing, like asking your spouse for an open marriage?

Open innovation is a powerful term. Apparently, combining two buzzwords, sort of like cold fusion, produces more buzz than if you just used the terms separately. Its opposite – closed innovation – evokes images of silos, cowardly decision making, and not leveraging the power of open networks. How could anyone question the wisdom of opening up innovation?

But you have to admit, the intellectual property system has been pretty useful to companies for the last couple of hundred years… is it really time to retire the patent process and live the open source dream? Let’s start by looking at a couple of examples…

P&G co-creation partnersOne early example of open innovation is Procter & Gamble’s innovation platform C+D (ie, Connect and Develop), which allows customers and partners to co-create products at P&G. Their position is that not all the smart people work for P&G, so the quickest way to grow was to leverage outside talent and move from knowledge generation to knowledge brokering. Currently, they’ve increased their share of external innovation from 10% in 2000 to 35% today.

Another example is DVD rental powerhouse, Netflix, which recently invited outsiders to help them improve an important algorithm for their movie recommendation system. The kicker was offering a $1 million prize to whoever improves the accuracy of their current film recommendation system at least 10%, in a publicity move reminiscent of the Clay Institute’s million dollar prize for solving unsolved math problems like the Poincaré Conjecture and the Riemann Hypothesis.

But do these models really work, or are they possibly aiding and abetting your competitors to beat you to your own best ideas? The key to understanding open innovation is to dig beneath the buzzwords to truly understand the meaning of openness and to deconstruct the structure of the collaborative process.

medical tabletA terrific example of understanding openness can come by studying the goal of digitizing medical records, which is part of the Obama economic stimulus package.  At first, something like digitizing musty old boxes of yellowing health records doesn’t sound like a particularly exciting or innovative idea. But it’s exactly what’s needed to build out the “last mile” of an information highway for medicine.

Therefore, open health isn’t at all about making private health records more open, and hence less private. It’s about creating standards that allow medical systems used by doctors, hospitals, patients, and others to easily “talk” with one another. It’s about enabling the system to proactively search for drug interactions that cause hard to detect complications. It’s about eliminating the bureaucratic paperwork via automated claim submission. Finally, it’s about creating a more intelligent and secure system for health records.

Interconnected

Interconnected for innovation

Therefore, openness in innovation isn’t about opening the kimono to potential competitors or about irrevocably committing to the open source model… it’s really about three enabling factors that can transform the collaborative process at your company, especially around innovation. First, it’s about increasing the diffusion of innovation by making both internal and external corporate boundaries more porous. Second, it’s about developing more refined non-binary trust models that let you digitize the paperwork of innovation. And third, it’s about creating open standards for automating the innovation process just like Obama hopes to do with health records.

The diffusivity of innovation isn’t measured only in terms of letting external innovation in, but also in allowing innovation to move from the top down, from peer to peer, from the bottom up, and from the inside out. We call this 360˚ innovation, and if ideas aren’t flowing smoothly in any of these directions, your collaboration systems need an oil change.  Finally, the flow of IP from within the organization to outside should always be subject to great vigilance and strategic forethought.

Non-binary trust models really have to do with simplifying the management of intellectual property, in order to build a win-win culture where everyone benefits in equal measure – management, employees, partners, customers and shareholders. The key to digitizing innovation, is actually to design an electronic IP policy server and the key to enabling openness, is to deploy an enterprise social extranet. This is actually the most compelling part of the open innovation promise – to fundamentally change the nature of social networks to allow you to more reliably locate partners you can trust and who won’t let you down.

Open standards for automating the innovation process don’t mean anything unless you actually have one. A formal and automated process, that is. For example, has your company bought one of those fancy idea catching applications? If so, can you get your data back out of it? Was it off the shelf or custom fitted to your culture? Here’s a tough one – can it enable an enterprise social extranet that hot deploys new innovation applications via a Web 2.0 infrastructure? And are these capabilities even on your roadmap?

Open innovation holds great promise for re-invigorating the enterprise, but it requires great vision in its design, deployment and management. This is one of the areas I think about a lot these days, so please feel free to contact me if you’d like to create a dialogue around this fascinating arena!

February 17, 2009

Big and Bold Enough to Meet the Challenge

Filed under: Uncategorized — mosesma @ 8:34 pm
Not afraid of a little rain

Not afraid of a little rain

President Barack Obama, in selling his historic $787 billion economic stimulus bill, said that the budget had to be big enough and bold enough to meet the size of the economic challenge we face. It is among the most significant legislative accomplishments since FDR overhauled the U.S. government in his first 100 days, and spent an equivalent of $2 trillion in today’s dollars*, to stimulate the U.S. economy out of this new Great Depression.

In the middle of a recession, tax cuts alone will not create jobs, because business owners are simply going to save that cash for a rainy day. The only way to profoundly impact and maybe reverse this situation – according to Keynesian economy theory – is to do something big and bold enough to change the rules of the game and dramatically create millions of jobs. The only way to stop the cascade of layoffs is to shift businesses from fear into hope, and begin hiring again because there are an increasing number of newly employed people willing to buy their stuff. Economic stimulation worked for Bill Clinton, who was able to create 23 million jobs over his eight year term. By the way, no House Republicans voted for Bill Clinton’s 1993 economic stimulus bill either.

John Nash, whose theories are illustrated in the film "A Beautiful Mind"

John Nash, whose theories are illustrated in the film "A Beautiful Mind"

The reason bold action is required is because the economy is stuck what Nobel economist John Nash called a “non-cooperative equilibrium”, a term used in game theory. Basically, if the economy is healthy, everyone spends to keep up with the competition. But if the economy contracts, everyone battens down the hatches – and starts doing layoffs to prepare for the loss of revenues caused by everyone else doing layoffs. It’s like the prisoner’s dilemma game, in which anyone who acts altruistically gets shafted by everyone else who acts selfishly, in their own best interest.

Similarly for companies seeking a turnaround or turning around recession-think, management has to be courageous enough to do something big enough and bold enough to meet the size of the challenge they’re facing. The bigger the challenge, the bigger the action required. And like the larger economy, companies face an attitudinal shift once things go into a tailspin. Employees generally start becoming less loyal, or go into a period of non-productive shock after a wave of layoffs.

In game theory, it’s all about “executing a non-linear transition to a Pareto optimal state”. For the economy, it’s passing a stimulus package big and bold enough to create millions of jobs and possibly make naysaying House Republicans apoplectic. And for your company, it’s executing an innovation stimulus program big and bold enough to raise eyebrows as well as hopes.

What does an innovation stimulus package need to include to be effective? How big and bold does it need to be, to bring hope back to the equation? How much money do you need to spend to get your employees to start thinking “Yes, we can!” again?

Fortunately, it doesn’t have to cost a lot of money to make innovation happen in a storm. This is because it really doesn’t take that much to shift your employee’s survival instinct from flight to fight. What it takes is  showing them that you’re serious about controlling the direction and destiny of your company, instead of letting the storm decide for you. What it takes is finding “good men in a storm” and giving them what they need to move into action. What it takes is demonstrating courage and encouraging hope. What it takes is leadership!

cchangeWhat you need to do is implement the 8 C’s of Change, that enumerate the individual shifts that need to happen throughout the organization. Just doing lip service about innovation isn’t enough. You need to commit to a program of comprehensive change that span the entire enterprise, and reaches deep into the psychology and culture of the organization. Management needs to rise to the challenge of leadership.

For a company to fully rebound from a downturn, the following C’s are required…

You have to send out the message – with evocative executive Communications that express true vision and leadership – and hammers home the message that Change is Coming and that anything is possible if we only work together to make it happen.
You have to take the time to develop deeper Customer insight – helping you find unarticulated needs and desires to build more compelling products and services.
During a slowdown, it’s time to train and re-train for business Creativity, Collaboration and Continuous learning – to help your employees turn themselves into a 21st century labor force.
Also, you need to think about acquiring or building some Cool innovation tools, aka “revolutionary software applications for innovation management”.  It’s the latest Web 2.0 thing, and based on open source, it’s much cheaper than you’d imagine. [Note: full disclosure, my company develops and sells this kind of stuff.]

Another most important C is to re-invent Compensation for creativity. It’s not just about having the CEO work for a buck a year… it’s really about coming up with a way to truly reward deep creativity throughout the organization, by sharing the upside rewards of successful deployments, improvements and spinoffs. If you don’t have the cash, think about  profit-sharing bonuses based on the implementations of your  employee’s radical innovations.

The final C that wraps it all up is Constructive leadership. Just like we needed FDR to lead us out of the Great Depression, and Barack Obama to get us out of our current pickle… your company needs you to rise to the challenge, to spread the call to action, to encourage your employees to hold fast, to be brave, and to work harder. It doesn’t really help to hire lots of consultants and buy lots of tools… it’s really up to you to bring hope to your employees, and to show them that the only thing we have to fear… is fear itself.

Go ahead and give it a try… Yes we can! YES we can! YES WE CAN!



Note:

Franklin Delano Roosevelt at a Fireside Chat

Franklin Delano Roosevelt at a Fireside Chat

* It might be useful to see how I developed this $2 trillion figure for what FDR proposed as a stimulus. The US Public Works Administration, part of the National Industrial Recovery Act, was a $3.3 billion program that employed 2 million people. Now, most Republican economists will simply use the inflation multiplier from 1933 – eg, in the 1930’s, a dozen eggs cost around a quarter. However, I believe that you have to include a GDP deflator, as well as compensating for the increase in population, in order to measure the psychological impact of the FDR stimulus package. In 1933, the US population was 125.6 million, and it’s now over 300 million. Thus, we need to multiply the CPI index against a GDP deflator, and increase that by 2.4x to reflect the growth of the population, in terms of the impact of a stimulus. This works out to about $2.2 trillion, in today’s dollars. This is why some of Obama’s economists argue that even $800 billion is not big or bold enough, to counteract the $2 trillion that we’ll be losing in economic contraction over the next few years.

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