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OVO Views
Conversations about Innovation
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December 2007
- Vol 2, Issue 6
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In This Issue
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Quick Links
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Greetings!
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Each year, at the end of the year, we follow
a grand publishing tradition and dedicate a
newsletter to the results of the current year
and forecast what we think will happen in the
upcoming year.
In this issue of the OVO Innovation
newsletter, we'll look at what happened in
2007 where innovation is concerned, and what
we think is going to happen in 2008.
And yes, we're honest enough to look at our
projections for 2007 and note where we were
right and were wrong.
Have a happy holiday season and a great New Year!
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Looking back
We'll start our review with a look back at
some of our key predictions for 2007 and what
we got right, and where our expectations have
not come to pass. Interested in the complete
2007 forecast? See this link
for the white paper on our website.
Senior Management
In our projections for 2007, we forecast that
management teams would become more involved
and more committed to innovation as an
organic growth opportunity. Over 2007, I
think we saw increasingly that management
teams understand that innovation is
important, but are having a hard time
balancing the demands of meeting quarterly
results versus the investment to become more
innovative.
The market, however, continues to reward
firms that demonstrate innovation
capabilities. Apple is a good example of a
firm that has gained tremendous market cap in
the last few years based on its innovative
new products. A market
basket of recognized innovators continues
to distance itself from the S&P 500 and other
market indices.
Until management teams demonstrate increased
focus and commitment to innovation as a
consistent capability, rather than an
experiment or a bolt on solution, innovation
will not take root in an organization. 2008
will be a decisive year for firms that have
been tinkering with innovation.
Governments
Looking forward into 2007, we thought that
local, state and national governments would
become more involved in innovation, acting as
sponsors and perhaps providing new funding
opportunities or tax incentives. In 2007,
most US government and state government
agencies are moving cautiously. Some states,
such as Rhode Island with its Business
Innovation Factory, have demonstrated
leadership. However, most government
agencies can't decide how to get involved and
are merely acting as cheerleaders.
European countries, especially the
Scandinavian countries, are focused on
improving innovation as a corporate skill.
Finland, for example, has conducted an audit
of the innovativeness of the people in
Finland and has developed training programs
to increase the innovation capabilities of
mid and senior level managers across
industries.
Most governments need to take their cue from
the private sector, and begin to innovate
their operating models, expectations,
processes and services. Even if a government
can't sponsor innovation, it can work to
become more innovative.
Models
In late 2006 we forecast that innovation
models would change. The older R&D centric
models are being replaced by innovation
approaches that span the organization, and in
many cases are being superseded by models
that incorporate third parties, business
partners and customers. Many firms are
recognizing that they simply cannot "control"
innovation within their four walls or manage
it effectively without incorporating other
firms and prospects and customers. There are
many models at work, and none yet are
well-proven. One of our new favorites is
"proprietary networks" - open innovation
between trusted partners. This means that
within a group of trusted partners, firms can
share ideas and request help with building
new products or services on an "open
innovation" model, but only with firms that
have been previously vetted and included in
the network.
Innovation as a process
Increasingly, this thinking is becoming
accepted in every sphere. Originally, many
firms believed that merely saying they wanted
more ideas would be enough to create new
products and services. What they discovered
was that while there were plenty of ideas
within the firm, there were no methods to
manage, evaluate and approve the ideas, so
the ideas that were generated went nowhere.
Now, innovation as a process has gained
acceptance, and many firms are defining their
processes, workflows and teams to support and
enable innovation.
Innovation Definitions
In our last forecast, we argued that
innovation definitions would broaden.
Traditionally, innovation had been thought of
as new physical products. Increasingly, we
believe that innovation will be defined as
new products, and new services, new
processes, new business models. Gary Hamel
published a book in 2007 entitled The
Future of Management, which is an
argument for business model innovation. His
book draws into question the fact that our
management styles and paradigms haven't
changed much while we expect tremendous
improvements in innovation in other areas of
our businesses.
However, these concepts did not impact
organizations as quickly as we believed they
would. Many innovation initiatives are still
tightly focused on new product innovation,
leaving many possible innovations on the table.
Conclusion
So, how did we do in our forecast for 2007?
Probably we were a bit too optimistic about
the speed of adoption for innovation, and how
broadly innovation would be applied.
However, there's no question that innovation
is rapidly becoming a core competency within
many firms, and tightly interwoven with
corporate strategy.
Like many ideas and technologies, innovation
is following an adoption curve. Right now,
we are in a transition from early adopters to
early majority, as innovation takes on more
"whole product" features and is proven out as
a process that any firm can follow.
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Experiments and false starts
In 2007 there were a number of firms that
began to experiment with innovation
initiatives and projects. Often these
efforts were undertaken to "experiment" or to
pilot an innovation process which would help
the management team decide the investment
necessary and the return on investment that
innovation can bring. The problem is that
these experiments, while often successful,
don't provide an insight into the true value
of innovation, since they are one-time,
bolt-on efforts that don't attract the top
billing and resources necessary for ultimate
success. Also, since they are not permanent
initiatives, there's little rationale to
change the culture or to compensate or
recognize people appropriately for
participation.
This is not to say that piloting and
experimenting aren't valuable, just to
indicate that culture, compensation,
commitment and a number of other
characteristics are important and can't be
implemented in a pilot or experimental project.
Management models
There are increasingly several models for
managing innovation within a firm. Many
larger firms with several lines of business (LOB)
or product lines will use a combination of a
central team, responsible for managing
innovation processes, methods and tools, and
"local" teams in each LOB or product group
responsible for innovation in their teams.
Another model is a distributed model, where
innovation is encouraged but each LOB or
product unit is largely left to its own
approaches and devices. Finally, some firms
centralize innovation in a central team, and
all innovations are managed within the
confines of the team and its processes. All
of these models have proven successful - the
defining factor is how the model fits with
the culture of the organization. Some firms,
Intel for example, have also used an
entrepreneurial model, where engineers can
suggest new products and write a business
plan to gain funding to allow the engineer to
prove his or her ideas as if Intel were a VC.
Staffing
After years of downsizing and outsourcing,
most firms have very little "slack" left in
their management teams. While innovation is
important, it's hard to find people who are
motivated to take on another responsibility.
Some firms are filling this gap by
leveraging consultants who can partner with
the firm to start developing new processes
and innovation approaches. Eventually, this
role needs to be a full time role within the
organization, but many firms are finding it
useful to kick start an innovation initiative
leveraging consultants to start idea
generation and process definition, for
several reasons: bandwidth, cultural
attitudes and experience.
Who's responsible
In previous years, it was often difficult to
find individuals who had an "innovation"
responsibility or title. Increasingly, it's
becoming much easier to find individuals who
are responsible for innovation within their
firms. Whether this is a Chief Innovation
Officer or a person with a formal innovation
title, there's an acceptance in many firms
that innovation must be managed - and
frequently this role is outside of
traditional R&D and reports to senior executives.
Return on Investment
Right now there is a significant concern
about return on investment where innovation
is concerned, and that focus risks placing a
lot of hard work in peril. There's simply
too much change underway to expect a return
very quickly with innovation. After all,
our goals should not be to cut costs or trim
around the edges, but create entire new
markets and new business models. These
efforts take time and will require a longer
runway to success than the efforts to improve
efficiency. Too much emphasis too soon on
return on investment will only lead to very
incremental innovation, if any at all.
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Elephants Dance
We've been encouraged to think of innovation
as a new consumer product (Tide, iPod, etc).
However, there's tremendous innovation
opportunity outside of the traditional
consumer product space. Andy Grove, who was
the CEO of Intel for many years, has a new article
in Portfolio magazine this month noting that
Wal-Mart and GE can play important roles in
innovation - Wal-Mart by disrupting the
health care industry in the US and GE by
disrupting the electronic vehicle market.
We believe that 2008 will be the year that
the elephants dance - in other words - firms
like GE and Wal-Mart will create some really
new and disruptive innovations. When these
larger firms, with their breadth of
capabilities decide to seriously engage
another market, there can be tremendous
change.
We also believe there will be more innovation
focus from the Department of Defense and from
Homeland Security - two very large
organizations that can command a lot of
attention and drive a significant amount of
change. Both of these organizations have
encountered significant external threats and
forces and have had time to consider their
responses. We believe in 2008 we'll see real
innovation from some of these larger
government bodies as well.
Beyond the product
In 2008, many firms will innovate new
products, but increasingly they'll understand
that innovation is more than just new
products. We expect to see more changes in
business models, services and marketing
channels. We noted that recently Dell has
decided to sell PCs in physical stores, and
Microsoft is contemplating opening stores as
well, as a counterpoint to the very
successful Apple stores. These are just a
few examples of changes driven by consumer
dictates and expectations.
Innovation is the strategy
Over the last few years, innovation has been
a buzzword, a way to gain some market
attention. Increasingly, firms are
recognizing that corporate strategy and
innovation must be tightly aligned for
innovation to drive value. In the US and
Western Europe, we continue to outsource
manual labor, manufacturing and even low
level white collar jobs. To remain vital, we
must use our innovative skills to continue to
drive value. Innovation is not a byproduct,
it is rapidly becoming the product, and so
must take center stage as part of the
corporate strategy.
IT is the driver
Innovation may have a big impact on your IT
team in 2008 as well. This is because IT is
one of the teams that is best positioned to
take on a central innovation role.
Yes, many IT teams are overworked and have
more on their plate than they can manage.
But, IT is very comfortable working across
the organization, is familiar with building
processes across organization stovepipes and
managing the workflow and the data flow
across a process. Additionally, it is a team
that exists outside of the lines of business
and functional stovepipes, so IT is familiar
working across organizational boundaries. Of
course, it already has experience developing
and managing data and computer systems, which
become a necessary part of a corporate focus
on innovation.
Visionary CIOs have already noticed this and
begun to stake out innovation as an area that
their teams should "own". Increasingly, the
Chief Information Officer will play an
important role in fostering and sponsoring
innovation across the organization.
Education
It will be interesting to watch executive
education programs, MBA programs and other
coursework to see how innovation begins to
impact the courses that are offered for
managers and leaders. In the MBA programs,
innovation is just beginning to become a
focus area. Given the time it takes to
change the academic approach to education, it
will be several more years before there's
widespread curriculum. The leading
indicators to watch will be executive
education programs, where curriculum can be
changed more quickly and instructors often
come from both academia and industry. Expect
to see many more new programs offering
training and education on innovation in the
near future, targeted at mid to senior level
executives.
The Tipping Point
As Malcolm Gladwell made famous, the tipping
point is upon us. In the next few years,
innovation will prove itself as a core
strategic competency, and all firms will move
rapidly to shore up their capabilities, or
innovation will prove to be a "nice to have"
a fad that seemed to offer great promise but
never really paid off. Our bet is that we'll
continue to see both results. Firms that
actively engage, from the top down, on the
important facets of innovation - changing
corporate culture, making innovation part of
the corporate strategy, becoming systematic
at innovation and challenging the sacred cows
and dogmas within the firm, will wonder why
they ever operated any other way. Firms that
continue with cost cutting and status quo
operations, while attempting to bolt on an
innovation project or process, will
ultimately be dissatisfied with the results
and will determine that innovation is an
overblown fad. Here's to the firms in the
first category who will recognize the power
that innovation can provide.
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Bruce Nussbaum - BusinessWeek
Nussbaum writes on the influence of design on
innovation, and has a great perspective on
what's happening in innovation at a macro
level. Here's a link
to
his predictions for 2008.
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2008 Innovation Resolutions
As innovators, we need to establish our
expectations and set resolutions for
ourselves and our teams. Here are a set of
resolutions we suggest for 2008. Note that
these are also listed on the Innovate
on Purpose blog.
Resolutions:
- Our innovation team will ensure our work
is aligned with and supported by the senior
management team.
- We resolve to take bigger risks and
disrupt at least one product or market this
year
- We'll incorporate innovation as a regular
component of our strategy and treat it as a
standard operating procedure, rather than
something we "bolt on" to existing
operations
- In 2008, we'll move from purely product
innovation to seek opportunities for
innovation in processes, services, business
models and other intangible solutions
- As our innovation capability improves,
we'll seek ideas and inputs from our business
partners and customers on a regular basis
- We will implement a more consistent,
sustainable innovation approach across our
organization
- Innovation will take on a customer focus.
We'll eliminate technology led innovation and
seek instead unmet or undermet customer wants
and needs
- We'll spend more time understanding
trends and looking over the horizon to
ascertain what's happening so we can respond
more effectively or alter the course of what
happens
- We'll provide the necessary resources for
innovation to flourish. After all, if
innovation is so important, then we should
provide the people and dollars necessary for
it to work effectively
- We'll stop worrying about making it
perfect and just do something radical.
Possibly you can't adopt all of these
resolutions, but pick the ones that will
impact your organization and start innovating
more effectively in 2008.
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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 enjoyed this innovation newsletter, please
pass it along to your friends. If you wish to
unsubscribe, please see the link below.
Sincerely,
Jeffrey Phillips
OVO
phone:
919-844-5644 x789
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Innovate On Purpose™
