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From: Jeffrey Phillips <jphillips@ovoinnovation.com>
Subject: Innovation Newsletter from OVO
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Innovation Newsletter from OVO
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Conversations about Innovation
December 2008 - Vol 3, Issue 4
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As we wind down 2008, we'll take brief moment to review our projections for this year and look forward to 2009. What will the continuing financial crisis mean for innovation in most businesses?

A look back
First up, we'll look at the projections for 2008 and see what we got right, and what we got wrong.

Forecasting 2009
Never ones to shun a good challenge, we'll forecast what we believe will happen in 2009 from an innovation perspective. It's not as dark as you think.

2009 Resolutions
We update our 2008 resolutions for innovation efforts in 2009.

Taking a bow
Our team has been recognized by some important thought leaders, including Chuck Frey at Innovationtools.com. I'm happy to announce that he identified OVO as a leading voice in innovation.

Why innovation requires excellent communication
We'll examine the requirements for excellent communication for a successful innovation program, and why many innovation initiatives struggle or fail due to a lack of good communication.

We'd like to know your thoughts about the innovation space. What topics are of most importance to you? What information can we provide to help you accomplish your goals? Please feel free to contact us as we continue to bring you some of the best commentary on the innovation space.

The big switch

This year, 2008, has been a year of dramatic changes, from politics to finances. At the beginning of the year the market was still humming, the economy slowing but still growing, and a tough political battle between long term, known politicians seemed likely.

Then, the financial markets collapsed, the government started to bail out large corporations, and Obama won out over established politicians to win the White House. This has been a year of dramatic change, with leading banks and financial firms disappearing, the collapse of the housing and automotive markets and a sea change in the House, Senate and White House.

Our Projections

In late 2007, we made a number of projections about the innovation market for 2008. If you care to, you can read those projections in our December 2007 newsletter here.

In 2007, we had a couple of main themes. First, we thought that we'd see the Elephants Dance. That is, that larger firms would work more assiduously to become innovative. In retrospect, we did see a number of Fortune 500 firms become more serious about developing a consistent innovation capability. However, that intent was not as widespread as we had hoped, and the financial meltdown distracted a number of firms from further investments. Additionally, we did not see much innovation from the federal or state governments. I suspect in 2009 there will be no choice but to innovate in the governmental sector. While further investments are necessary to stabilize the economy, the role and involvement of the government in our economy needs to be reconsidered.

Service and Business model innovation

Our projection in late 2007 led us to believe we'd see more innovation around services, customer experiences and business models. Typically innovation is considered to be a new product, but innovation can take on many forms. Often, innovation around services, business models and customer experiences are more difficult to copy, thus these innovations offer more significant benefits. We thought that firms would increase their focus on service and business model innovation. Firms that had previous innovation experience did capitalize on their ability to innovate in these spaces, but the reach to business model innovation is probably too dramatic for firms just beginning to organize an innovation program.

IT as an innovation driver

We forecast that Information Technology executives would become drivers for innovation, in their technology spheres as well as across the business. This is due to their exposure to constant, rapid change and their need to fulfill a wide variety of needs within their organizations. In fact, we did see a number of CIOs taking on an innovation role, often because innovation is tightly integrated to idea management. The challenge that many CIOs face is the overwhelming pressure to keep the operational systems working - simply keeping the computer systems up and running. Many simply don't have the time to climb out of the day to day and think longer term. While CIOs and IT executives would like to innovate, and lead innovation efforts, they simply don't have the time or budgets to do so effectively.

Education

We felt there would be significant changes in the way educational institutions considered innovation - from the way they organize themselves to the way they teach, to the subject matter itself. Unfortunately, outside of a few institutions, there's been little advancement in innovation in secondary and high educational facilities. Change comes slowly in most of these organizations, and innovation requires significant change to existing processes and culture.

Conclusion

Perhaps we were a bit too optimistic about the prospects for innovation in 2008. In a slowing economy, firms will buckle down and trim costs rather than kicking off large initiatives. What will be interesting is how firms respond to the economic pressures of 2009. A slowing economy requires belt tightening - a recession or worst will require new methods and new ways of thinking.
Looking Ahead

Ever fearless, even in this constantly changing economy, we provide our predictions for innovation in 2009. If you have some you'd care to share, feel free to let us know by emailing us.

Innovating or Sticking to the knitting

Now more than ever the dichotomy will be clear. Some firms in this environment will continue to invest in innovation, understanding that change will create opportunities for innovation. Other firms will pull back the reins, sticking to their knitting in the hopes of moving through the downturn and coming out OK on the other side. I like to say that the "stick to your knitting" strategy works well as long as you assume that the eventual environment looks exactly like the environment before the dramatic change. However, given the size and shape of this downturn, I suspect it is safe to say that attitudes and behaviors will change, and your products and services will need to change as well. Sticking to your knitting through this kind of epochal change is dangerous, as moods, attitudes and behaviors will shift.

Disruptions create opportunities for innovation

The financial crisis is affecting all sectors of our economy. Just as innovations caused disruptions (eg the end of the buggy whip makers), so to can disruptions create opportunities for innovation. In this case the operative word may be "force" opportunities for innovation. Many institutions, such as financial services and universities have been immune from the market. Now, they will have to innovate to create products and services that people want and can afford. Federal, state and local governments will be forced to do more with less. A 10% budget change is incremental and can be reconciled by trimming. A 30-50% budget change requires a dramatically new way of thinking. Going into 2009, it is safe to project that the financial disruptions will force innovative responses from firms and organizations not used to innovation.

Read an article with Clayton Christensen that reflects the same thinking - this is the time for innovation.

Inside or Outside

There will be an increase in the "inside/outside" tension for innovation, in at least two aspects. First, many innovators will be making decisions about whether to realize their ideas inside a larger organization, or to spawn new businesses based on their ideas that they can't get recognized in the larger organization. Second, many firms will ponder the value of recruiting ideas from outside the business, rather than focus inwardly for good ideas. These challenges will become more starkly defined as businesses search for great new products and services to start their revenue growth, but remain fearful of internal change and external ideas. The firms that capitalize on the insights and knowledge of their internal staffs, and leverage ideas from outside the organization effectively will grow more rapidly and will be recognized as innovators.

Window Dressing

In 2009, budgets will be tight. There simply won't be money for small, experimental programs or programs that are meant to dress up projects as "innovation programs". Management teams will be forced to cut all spending for small, ineffectual innovation programs or will double down to extend productive innovation programs. There simply won't be any middle ground. That's actually a good thing, since many initiatives posing as innovation are merely marketing fluff and window dressing for investors and Wall Street. The only programs that will receive funding are those that can deliver innovation results.

Circling Disrupters

If your firm or market was ripe for disruption prior to the economic downturn, it won't be long before someone, anyone with deep pockets and an eye for your customers will implement some disruptive strategies. Look for a number of markets to be disrupted by new entrants or by existing firms from other markets. When many big firms are focusing inward, now is the time to take them by surprise.

Other voices

You might be interested in hearing what other experts on innovation have to say about innovating in a downturn. Chuck Frey and Renee Callahan at Innosight have put together a compilation of their interviews and discussions with a number of innovation experts as to what they think firms should do now. You can see that report here.
Resolutions

Since this is the time of year when we look back, as well as look forward, it is fitting that we create a set of resolutions for innovation in 2009. Most of these are simply carried forward from our 2008 resolutions (which, like my consistent resolution for weight loss rarely seems to occur), but some have been updated for 2009. I hope your teams will adopt these resolutions, or at least use them as a basis for discussion within your innovation teams.

The Top Ten List
  1. We'll align our innovation efforts to strategic goals and objectives
  2. We resolve to take more risks and disrupt at least one product or service this year, even if it means cannibalizing our own
  3. Innovation will become a consistent capability, not a an occasional project
  4. We'll innovate across products, services, processes and business models
  5. As our innovation capabilities mature, we'll seek more ideas from our customers and partners
  6. We'll work to understand the market from the customers' perspective, identifying unmet or undiscovered needs
  7. We'll spend more time examining trends and understanding what they mean for our business
  8. We'll communicate our innovation goals clearly and consistently
  9. The perfect won't be the enemy of the good
  10. We'll celebrate some successes, and some failures
Our recognitions
In 2008, we are proud to note that OVO launched its first book, entitled Make us more Innovative, which is targeted at the individuals who are tasked with the effort of building a sustainable innovation program. Make us more Innovative has been well-received in the innovation community and we're proud of its success.

One of our consultants, Jeffrey Phillips, was named as one of the most important voices in the innovation space by Chuck Frey, who runs the InnovationTools website. Chuck has identified a number of consultants, bloggers and other authorities on innovation, and I'm delighted to be included in this list.

Finally, we've just received word that the International Journal Innovation Science has accepted a paper from OVO on the structure and design of an innovation model. That paper and the journal should be published in the first quarter of 2009.

OVO has also been recognized as a leading innovation software and services provider by analysts at Forrester.
Uncharted waters

When Columbus proposed to reach the East by sailing to the west, he was ridiculed, since it was common knowledge that dragons and sea creatures lurked to the west. What we forget now is that many educated people knew the world was round even in Columbus' day, but they feared the consequences of change and did not know what lurked beyond the western horizon. Likewise, when we ask people to innovate, we are often asking them to move into areas beyond their comfort zone without clear goals, a definitive strategy and consistent outcomes.

Mitigating Risk and Change

One of the definitions of the management role is to provide strategic insight and direction to the workforce. I think we can all agree that many management teams don't do a good job of setting priorities and communicating strategy in the regular day to day business environment, so we know that in the case of innovation, where more clarity and communication are necessary, they are likely to fall short.

Why is communication even more important in innovation?

Innovation introduces new risks, new challenges and new uncertainties to a team that is working on new processes and with new goals. If clarity and direction is necessary in their "day jobs" then it is even more important when tackling a task like innovation. Without clarity of purpose, alignment to strategy and constant reinforcement from senior management, innovation work is exceptionally difficult to do on an ongoing basis. Additionally, since an innovation team will interact with other individuals in a business to gain information or insights, the rest of the team needs to understand the purpose and goals of the innovation team. That requires consistent communication to the rest of the organization about innovation.

Innovating without communication is like driving without headlights

Unless your innovation strategy is based on a skunkworks model, with a team segregated from the rest of the population working alone and with no input from the rest of the organization, communication is a must - for the team and for the rest of the organization. Otherwise the team will constantly have to justify itself and its actions to the rest of the organization, and constantly recalibrate its responsibilities and goals for itself.

If you'd like to discuss how OVO can work with you to improve your innovation strategies, ideation sessions, innovation processes or software, contact us today at our website or (919) 844-5644 x789.

If you have a topic you'd like to see us cover or a question you'd like to have us address, please let us know via the website above.

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Sincerely,
Jeffrey Phillips
OVO

phone: 919-844-5644 x789