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Conversations about Innovation
May 2008 - Vol 2, Issue 10
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We're just back from the Front End of Innovation conference in Boston and we'll provide a short wrap-up of that event.

First up in this issue we look at an age old issue - how many people within an organization should be focused on growing the short-term money making products and services, and how many people should be hunting the next big thing? What's the appropriate mix between "farmers" and "hunters"? Most firms are over weighted towards farmers.

Next, we'll look at the factors that define successful innovation leaders. The criteria may not all be what you suspect.

Next we'll look at the differences between continuous improvement, incremental ideas and disruptive or radical ideas.

Finally, there's increasing focus on the effectiveness of "wisdom of crowds" and social networking tools for innovation. We'll weigh in on that topic below.
Farmer
The division of labor

Let's face it - no matter how innovative a firm may claim to be, any firm needs revenues and profits today to fund the great ideas it has for the future. No matter how innovative, there are a number of business processes, customers and existing products and services that must be served effectively to generate revenues and profits next week, next quarter. We all know that innovation is important, but it's the day to day operations for existing products and services that provide the cash flow necessary to do the big thinking.

Now that you are all nodding vigorously, here's the punchline: What's the appropriate division of labor between those individuals focused on sustaining existing products and services, and those focused on building new products and services?

In most firms there are very few roles that focus on "hunting" the new product or service. The overwhelming majority of people are focused on operational issues to generate near term revenue. So, do you still wonder why innovation can seem so challenging?

Farmers

We've written before about the analogies and similarities between innovation management and sales management. It turns out that the sales pipeline is a great metaphor for an innovation pipeline - many prospects enter the pipeline but a great number of those prospects fail to move through the pipeline because they are not qualified. Another analogy from sales is the concept of the new account sales person, we'll call her the hunter, and the account manager, we'll call him the farmer. The account manager has responsibility for existing accounts, and is tasked with finding all the opportunities for our products and services within that account. He or she is also responsible for keeping the existing customer happy and "not screwing up". The worst thing an account manager can do is mess up an existing, satisfied account.

The account manager in sales has a direct relationship to the people in any product group or business unit who sustain existing products and services. Their goal is to squeeze out all the potential revenue from existing products and existing customers. This is where the short term revenue comes from. Their job is to keep a consistent revenue stream and to "not rock the boat". In either case, this is a farming mentality - carefully nurturing existing assets to gain all the advantage possible, but remaining in very tightly defined markets and opportunities.

Hunters

In contrast, every sales team needs a few big game hunters. These are the folks who want to bag the elephant - who are interested in big, risky new sales to new customers. Often, these "hunters" don't have the patience to carefully grow existing accounts. They are more suited to the identification and acquisition of new customers and new markets. It's tough to draw a direct correlation outside of sales for the "hunter", but there should be definitive roles and responsibilities for individuals to identify new trends, new markets, new products and services across the organization.

Now, both types of sales people present risks and rewards and their mixture should be carefully balanced. A sales team with all "hunters" is likely to win a lot of new work but find itself struggling with managing and growing existing customers, so the revenue constantly ebbs and flows. A sales team with all "farmers" will never win new accounts, and will have to survive by stoutly defending its existing clients in the face of new entrants. Clearly, both types of sales people are necessary for the success of a sales team. The question is - in what mixture?

Long term vs short term

If the sales management analogy holds true for innovation, and we think it does, then what's the appropriate mixture of team members who are working to sustain existing products and services, and those chartered with innovation, new products and new market identification? Too often, these roles are out of balance, with a preponderance of the roles on the existing, sustaining "farming" side, and too little emphasis on the "hunting" skill set. This emphasis on operational excellence and near term revenue creates barriers to innovation. A lack of a defined responsibility and strategic intent means that new products and services are hard to envision or define.

Getting into balance

You want innovation? Then define a group of people who are responsible for innovation within your business and measure them accordingly. What's the mix of people, roles and resources that are focused on new products, services and business models? Has your management team actively considered the ratios of staffing and funding between existing products and services and innovation? Want to know how to evaluate your team?

Jack Welch is famous for saying - show me a sales person's timecard and I can tell you how they are compensated. We'll say - show me how a person is evaluated and we'll tell you what their true focus is. If your evaluation, rewards and recognition program is focused on near term, existing products and revenue and "not screwing up", then your teams will focus on "farming". On the other hand, if your evaluations are focused on new idea generation, new product and service development and tolerance for risk and failure, your teams will focus on innovation. What do you tell your teams based on the way they are evaluated and compensated?

Both/And

This is NOT an either/or proposition. In most businesses, especially large, established firms, there should be a preponderance of people focused on existing products and services. But there must be people who are actively "hunting" for the next good idea, next new business model. Just as a sales team is out of balance without "hunters" and "farmers", a product development and service development team is dysfunctional without a committed set of "hunters" in its midst.
Setting the stage

We are frequently asked - what's the most important criteria for an innovation leader? What skills, experience and knowledge do they need for success? Unlike a number of other roles, prior work experience and education may not prepare an innovation leader to assume the role and be immediately effective in the role.

There are a number of characteristics we have found in innovation leaders who have been successful. Conversely, at least one of these and characteristics has been lacking in less successful innovation team leaders. Let's examine five key criteria for successful innovation leadership and why we believe they are important.

Desire

Some people grow up wanting to be accountants. Some grow up wanting to be engineers. Everybody starts out in life wanting to create the next "new" thing, but somewhere along the lines many of us give up on that dream. Individuals who are successful at leading innovation teams have a desire and innate belief that they can not only envision new products and services, but they can implement those ideas successfully. They've never lost the dream or the desire to innovate.

Several individuals we've worked with who were "assigned" to the innovation lead were less than successful because they viewed the assignment as a job and did not have the desire to innovate.

Innovation leadership a job that requires volunteers who have a desire to innovate. Innovation leadership can't be easily assigned.

Vision

Successful innovation leaders have a vision of what they can accomplish. Often, that vision is shaped with senior executives who map out corporate strategy and the innovation leader uses that strategy to inform his or her innovation goals. Sometimes innovation simply bubbles up from a mid-level innovator with great vision that takes over, supersedes or reinforces strategic vision from the executive team. Innovation leaders need to be able to craft a vision of the future, identify opportunities and communicate this vision to the organization and innovation teams.

An innovation leader has a specific vision to drive innovation in his or her business, and aligns that vision with the strategic intent of the business.

Commitment

Innovation leaders must be fully committed to the success of the innovation initiative or program, and must have the time and resources necessary to engage the work effectively. Part-time innovation leaders eventually become full-time "day job" participants. Innovators with desire and vision will find the time and resources to get the job done, but will be hampered if they do not have the "blessing" of the leadership team. Good innovation leaders are fully committed to a task that has a significant amount of risk and will face organizational headwinds because it creates change and uncertainty.

The story of the chicken and the pig at breakfast comes to mind. At breakfast, the chicken is involved (eggs) but the pig is committed (bacon). Innovation leaders can't have "chicken" commitment.

We don't expect a CFO or CEO to be part time, so why would we expect an innovation leader to shoulder an important responsibility on a part time basis?

Fearlessness

Good innovations often fail, for many reasons. Yet that failure should not stop the firm from trying again. Innovation likewise can be fraught with risk or uncertainty. Innovations may require that a firm cannibalize its existing market or products, or disrupt a competitor. Good innovation leaders recognize the amount of change and risk inherent in innovation, and are willing to challenge the status quo and are willing to face the risks of change and uncertainty, with the knowledge that many of the new products and services will fail.

Good innovation leaders do not succeed by trying not to fail.

Communication

Good innovation leaders are constant communicators - finding the channels and messages that best relay the intent and message of innovation to the broader audience. Since innovation creates uncertainty and change, people throughout the organization must understand the goals of innovation and the rationale behind the activities of the innovation teams. A good innovation leader is constantly communicating what is happening and why. Without good communication, an innovation team may seem more like a "wild hare", unfocused and dangerous to the rest of the organization.

Innovation happens in firms where clear goals exist and people understand how innovation aligns to those goals.

What we didn't say

Notice, so far, we haven't talked about which group the innovation leader comes from, or how "senior" the person should be, or what education or experience the leader should have.

If an innovation leader has the skills we've identified above, he or she has a great chance over success. Rather than choose a person based on their experience or what function they represent, find a person who is sold out on innovation and understands how to make it happen.

Multi-Faceted

So, a successful innovation leader is a person who is part Gary Cooper, part Dr. Phil and part Richard Branson or Steve Jobs. He or she has the steel to create change and uncertainty, the communication skills to bring others on board and the vision to see the work through. Not bad work if you can get it.

Lacking one or more of these components will not necessarily doom an innovation program, but it will make it much harder to deploy.
Innovation Matrix
What's what

Quite frequently we are asked to help a management team understand the differences between "innovation" and a continuous improvement program. I'd like to think there are at least four levels of change in this regard:
  1. Continuous Improvement
  2. Incremental Innovation
  3. Breakthrough Innovation
  4. Game changing innovation

I didn't coin those words - a number of innovation consultants use these words. But I think they are an effective way to delineate the tasks, the risks and the change necessary for each level of new concept.

The graphic accompanying this section demonstrates an innovation matrix with two "axes" of value - business model and technology. We'll see in a minute how different types of innovation are demonstrated in this matrix. This matrix is adapted from Rob Shelton's book entitled Making Innovation Work.

Continuous Improvement

Many firms we work with already have a continuous improvement program and are concerned about the overlap between innovation and continuous improvement. My most flip response to this question is that continuous improvement is about making what exists just infinitesimally better, while innovation is often about making something that doesn't yet exist come to life. The distinction is that continuous improvement usually relies on small changes to existing products, processes or services, while innovation often creates an entirely new product, process or business model.

Incremental Innovation

Incremental innovation is usually regarded as a significant change to one or more factors of a product. So, Tide is a great example. Incremental innovation brings us Tide with Bleach, Tide with Pine Scent, and so forth. This process creates products that are somewhat new and different from the original product.

Incremental innovation ideas can come from a wide array of sources, using a broad array of innovation tools and techniques. Brainstorming is a tool that's often used, and is well-suited for the task, as is TRIZ and Systematic Innovative Thinking (SIT).

Breakthrough

Generally speaking, a breakthrough is a product that is significantly different from an existing product or service based on one axis of value. To carry on with the Tide example, a breakthrough innovation could be that Tide is delivered to your house, rather than purchased at the store, which would be a significant change in the business model. This change represents a significant departure from what was previously available along at least one axis of value.

Breakthrough ideas can result from a number of innovation tools and techniques. Usually they are found by questioning the status quo - "why do we purchase laundry soap at stores, rather than have it delivered?" Your team is seeking dramatic change along at least one axis of value. The other axes may remain the same, or may change as well.

Game Changing Innovation

Game changing innovation is a radical or significant change in two or more axes of value. Disposal Diapers is a great example. Originally a parent would use reusable cloth diapers that were delivered and returned by a delivery service or washed out at home. Disposable diapers changed the technology (cloth to pulp) and the distribution channel (relying on a diaper service to purchasing at a general retailer and throwing away). Game changing innovations create such havoc that they force other competitors or new entrants to change to meet or exceed the new model.

Radical, game changing ideas are best generated by small teams that can disassociate themselves from the organization and act as a disrupter. They require more trend analysis and understanding of unmet and undermet customer needs.

Right people, Right Tools

If the goal of your management team is to become more innovative, then you'll need to define your terms. There are different tools for different jobs, and you'll want to know the amount of risk the management team will bear and their expected outcomes.
The New Thing

Over the last few months the innovation space has been electrified by a confluence of innovation and social networking or social media tools. This intersection seems to have great promise for many firms - to help gather a tremendous number of ideas from a wide range of sources. Dell's IdeaStorm is constantly reviewed as a beacon for these types of solutions, and the "wisdom of crowds" approach to generating and evaluating ideas is gaining credence. After all, this approach seems fairly inexpensive, easy to deploy and full of potential.

Our take? Social networking tools and wisdom of the crowds are fine solutions for a very limited range of innovation needs, and will leave the firms that adopt these approaches searching for more robust solutions.

Challenges to the approach

It seems as if every social networking and collaboration portal is positioning itself as an innovation tool. While that's beneficial and evidence of the growing demand for innovation, there are at least four significant concerns you should address before committing too many resources in this direction:
  1. Innovation is sustained by defined processes - these tools don't introduce processes
  2. While the social networking tools gather ideas, they can't manage them effectively
  3. You have significant exposure to infringing on someone else's intellectual property
  4. Wisdom of crowds evaluation is great for incremental ideas but poorly aligned for disruptive ideas

Let's look at each of these issues in a subsequent section.

It's the Process, stupid

Generating ideas, whether you perform this work as a small internal team or open the generation phase up to a broad number of people, is the easy part of innovation. Social networking tools and collaboration sites allow your team to gather a significant amount of ideas, but without a defined process to manage the ideas and convert them into new products or services, there's little value in the ideas submitted. The real magic is the process you develop to consider, evaluate, prototype and transition ideas into new products or services. These solutions provide little in the way of process definition or process flow.

Up to your eyeballs in ideas

Allowing a large number of people to submit ideas can be a great accomplishment, if you have the resources to consider and evaluate all of the ideas submitted. What sort of bottleneck exists if thousands of people can submit ideas but only a few actually consider and implement the ideas? Dell's IdeaStorm is considered a shining example of the potential of social networking and innovation, yet their team has over 9000 ideas.

At just a few minutes of consideration and evaluation per idea, that represents an entire man-year of evaluation, with limited filters, evaluation metrics and tools. And of course ideas keep coming all the time.

Whose idea was this anyway

If you have a significant number of people submitting ideas, especially from outside the organization, you need to be able to identify the ideas that may already exist or may infringe on another firm's intellectual property. Additionally, you'll need disclaimers from the submitters that remove any rights they have to ideas, otherwise you may find yourself subjected to requests for royalties for ideas that were submitted. Obviously, these aren't insurmountable obstacles, but as the number of ideas increase, you'll need more and more oversight of the idea submission process.

Do you hear what I hear?

Basing your innovation program on listening to customers is a fine start, but should not be the only channel. Customers are great at telling you what's wrong with existing products and services, and may be able to provide insights into incremental products and services, but can't do a good job of identifying new products and services or business models.

Additionally, if you are in a competitive industry, your firm won't be the only one listening to customers, so unless you are actively working on disruptive innovations, you will be hard pressed to differentiate your offerings, since every firm in the industry has access to customers.

Finally, wisdom of crowds is a fine way to evaluate incremental changes to existing products, but is a poor method to identify and evaluation nascent trends and disruptive ideas, so using this process by itself is very dangerous and can lock you into a very careful, incremental innovation capability.

A piece of the puzzle

These tools and approaches can be one small part of an innovation capability, but clearly aren't the entire solution. Too many firms are buying the marketing that these social networking and collaboration tools can provide a quick, easy answer for innovation. While these tools can provide some insights, a firm places itself at great risk if this is the only innovation that they implement.
The Front End Conference

Each year the PDMA and Institute for International Research (IIR) hold a large show dedicated to the "Front End" of innovation. This year's show was May 19-21 in Boston, and OVO was a participant and exhibitor at the event.

The Front End of Innovation show has been running for seven years, which makes it one of the longest running shows about innovation, and one of the largest. Over 600 people attended the show this year.

What we learned

OVO has been a participant and exhibitor at the Front End for four years, so we've seen the interest in the Front End grow over the years. PDMA and IIR do a great job bringing in interesting speakers from academia and business to highlight interesting new innovations. This year Dean Kamen spoke, as well as A.G. Lafley from Proctor&Gamble.

From our interactions with the participants, there seems to be a significant focus on becoming more innovative in many companies, but many of these firms lack clear definitions about innovation and what benefits it could provide, or are trying to solve very small challenges in what is really a large business process.

Rather than view innovation as a consistent process, many firms are strengthening specific challenges or perceived problems, such as idea generation, trend analysis or voice of the customer. While these factors are all important, they only solve a portion of the overall challenge.

Challenges

Much of the material presented at the conference is too general and is probably hard to implement when the attendees return home. Also, a significant number of attendees are just getting started, and a lot of the participants, speakers and exhibitors have a lot of innovation experience. The event can be overwhelming to those just getting started on their innovation journey.

We also believe that there's not a clear definition of what innovation is, or means, so each speaker or exhibitor provides their own definition, which clouds the discussion and makes it hard to compare offerings and services.

Competition

As the interest in innovation grows, more and more innovation conferences are springing up, which means that each conference needs to do a better job identifying its value proposition. What can we learn from the Front End innovation event that is different from an Aberdeen Innovation event or a Frost&Sullivan innovation event, to name just two others? Perhaps these events need to define their target audience and potential learnings more specifically and design the event to meet those requirements rather than hold an event that touches on all aspects of innovation.