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Innovation Newsletter from OVO
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Conversations about Innovation
June 2010 - Vol 4, Issue 5
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Greetings!
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It's June and the summer is upon us. That means sunny days, vacations and time away from work, but it also means that annual planning is just around the corner. How is your business incorporating innovation into its annual plan? We'll look at the importance of building in an innovation component to your annual plan.

Next we'll turn our attention to the people in your organization. We believe there are four key "personas" in any organization. Do you have the right proportion of people in each persona, especially where innovation is concerned?

Creating interesting new ideas quickly and with less risk seems to be the "holy grail" of innovation. We'll introduce a method to help you create and test radical ideas in a short timeframe.

We'll examine why the number of patents generated is really not a useful innovation metric. Then we'll suggest an alternative.

Finally, we'll review a couple of new books about innovation and creativity, including the Open Innovation Revolution, The Power of Positive Deviance and From Workplace to Playspace.

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.

Claude Rains in Casablanca
Welcome to Casablanca

There's an old, trite but true management philosophy which states: that which gets measured gets managed. Any initiative that is important to a management team has carefully defined goals, measures and metrics and is consistently monitored. Most management meetings are recitations of reports that describe progress against these goals. We constantly measure the things that are important to us.

You might think that based on this first paragraph, I'm going to extol the virtues of measuring innovation. Nope. Too much emphasis on measurement too early in an innovation cycle is a trap. Companies often try to set arbitrary measures far too early in the process, and inevitably fail to meet the goals. How can you set reasonable measures for an activity you rarely, if ever, undertake?

What we want to do first is encourage you to do something even more valuable and radical, and that is, plan your innovation efforts.

Shocked, Shocked!

It may seem a bit strange to suggest that your firm should plan its innovation efforts. After all I'm sure there are some basic innovation plans. Your product teams probably have some new product development goals, for instance, and marketing teams are investigating new market space and product opportunities. But what happens far too often in most firms is that they are surprised by unexpected competitive actions or regulatory changes and forced to respond to these events, while they also need to continue operations and create new products and services.

Most organizations, like Claude Rains in Casablanca, are shocked to discover that innovation requires investment and resources, and that the firm will need to commit these resources on a consistent basis. Rather than think of innovation as a discrete, periodic activity used to respond to a crisis, I encourage you to think of it as a regular business opportunity that requires planning, funds and resources.

Plan, Do, Check, Act

After all, the familiar management cycle is PLAN, do, check, act. Where innovation is concerned, we often start with the "Do" part, having neglected the "plan" part. If what get's measured gets managed, then what gets planned gets resourced.

The annual planning cycle governs the vast majority of the strategic initiatives and financial commitments a firm makes for the following year. If you don't have a specific budget for innovation, and specific growth targets that will be measured as an outcome at the end of the year, then innovation will by definition be reactive, underfunded and poorly resourced. What we are advocating here isn't radical - we aren't recommending a change to the annual planning cycle or its grip on the firm. That would be too large a change. What we are advocating is that an intentional innovation initiative is regularly planned in every business unit within your firm and at the corporate level, and that those business plans identify specific growth goals based on innovation, along with specific funding and resources. Why do we recommend this?

Plan your work, work your plan

There's a famous saying from IBM - plan your work, work your plan. In other words, the plan becomes the framework for your activities. In some cases the plan becomes a straitjacket and hampers your ability to react. A plan is at best an outline for what you hope to do, and inevitably changes based on market realities. If you have an innovation component in your plan, your team is likely to conduct innovation initiatives. If you don't have innovation in your plan, the only innovation you'll get is poorly funded, incremental and reactive. The plan dictates the goals, the strategies and the commitments of the team. What's left out of the annual plan speaks as loudly as what is included.

There's another reason for including innovation in your annual plan: it will send a loud and clear message about what's important. As the executive team asks for innovation plans and checks progress against those plans, it becomes clear that everyone in the organization is accountable for innovation. Additionally, if compensation or rewards are tied to achieving the components of a plan, teams are more likely to attempt innovation knowing that they have the "blessing" of the executive team and that success will contribute toward their compensation.

Planning for the unknown

The timing is right. We are heading into the summer months when many firms begin their annual planning cycle. The conditions are right. The economy and market conditions are unsettled. Many disruptions are yet to occur. Those firms that build into their plans an intentional innovation effort, even if they can't identify the actual products or markets at this point in time, will have the flexibility, resources and funding for proactive innovation. Those that don't will be shocked to discover that they don't have the ideas, the people or the resources they need to innovate and will be forced to react.
Skills
Personality Trait Disorder

I've been diagnosed as an ENTP by the Myers-Briggs folks, a "Driver-Driver" by the DISC methodology and a "Clarifier-Ideator" by the FourSight innovation model. As you may know, your Myers-Brigs score says something about your proclivity to innovate, as does your Foursight analysis. We believe there's yet another way to segment your employees, to help your team become better at innovation.

The pictures in the headline reflect a firefighter, Nostradamus and a potter, which stand in for three of the four profiles we believe need to exist in any firm.
In this article we'll address each of the four personas, the value that they add, the contributions they can make to innovation, and the proportions necessary if you intend to innovate.

The Fantastic Four

No, this isn't a list of superheroes. It is a comprehensive list of the kinds of people and perspectives you need to run any business. Instead of Mr. Fantastic, Torch, Thing and the Invisible Woman, what you need in your organization are:
  • Optimizers
  • Firefighters
  • Forecasters
  • Creators

Not only do you need these four skills and perspectives, you need them in the correct proportion in order to succeed, regardless of your strategy.

Optimizers

Thanks to Lean, Six Sigma, outsourcing, right sizing and all the other corporate strategies of the 90s and into this decade, we have teams of people who wake up every day with nothing more on their mind than to optimize the existing product, process, business line or organization. We've bred one, if not two, generations of managers and executives to believe that optimization of the existing processes and products is sufficient, and experimentation and innovation is risky and dangerous. Thanks, Jack Welch!

But before you close your email system or browser and stop reading, know this. Optimizers are absolutely essential, regardless of your business strategy. If your strategy is to stick to your guns and ignore the urge to innovate, you need Optimizers to continue to cut costs and improve efficiencies. If your strategy is to begin innovating, you need Optimizers to run the existing business processes efficiently and effectively to create cash for innovation efforts. In short, you can't exist without Optimizers, but you will find it difficult to innovate if your innovation team consists solely of Optimizers.

When building an innovation team you'll face several problems with Optimizers. First, there are far more of them than you'll need. Second, Optimizers usually seek to improve existing products and services, rather than "dream up" new products and services. Third, many Optimizers stick to the "rules" and have a difficult time diverging and then converging. These factors mean that Optimizers, while important, often don't contribute significantly to an innovation effort.

Firefighters

Turns out there are more similarities to the Fantastic Four than I previously imagined. In this paragraph we celebrate the reigning corporate hero, the Firefighter, whose superhero parallel is the Torch. Firefighters are the people who come to work every day to solve problems that probably could have been avoided or predicted, but the firm preferred to react to challenges rather than proactively avoid them.

In most corporations, nothing excuses a manager from an important meeting or deadline except a major firefighting exercise, and it seems like there are ever more fires to fight. As the pace of change increases and firms are constantly reacting to market conditions, regulatory changes and other disruptions, people who were comfortable Optimizers must now strap on the fire fighting gear. While it is important to react quickly to shifting conditions and problems, Firefighters don't help you innovate because they are so busy fighting fires. Many Firefighters actually are demonstrating a preference - they prefer to react rather than plan and act proactively, so in many cases fire fighting is a choice. Also, in the current environment, fire fighting is more highly valued than creating a new and uncertain product, so there are many reasons to become a Firefighter.

Firefighters often aren't strong innovators, since they rush to solve problems rather than anticipate them and propose solutions to avoid them. Firefighters often don't have the patience, the foresight and the ability to work in ambiguous settings that innovation demands. While valuable to the firm, Firefighters can be a significant distraction to an innovation effort.

Forecaster

Unfortunately the Fantastic Four didn't include a Nostradamus-like character, so here we definitely depart from the superhero model. Every business needs people who can look beyond the day to day activities and pressures of the business to understand what's likely to happen and how the firm can take advantage of new opportunities or fend off emerging threats. These people spot trends, develop scenarios and sort out the possible futures. Through this work they set the stage for new product, service and business model development. In a firm focused on cost cutting and efficiency, Forecasters typically aren't valued because they don't seem to add much near term value. In firms focused on reacting and fire fighting, Forecasters seem like casual bystanders when everyone else is rushing off to the fire.

Forecasters are necessary for innovation, but aren't often tolerated in reactive firms. A firm can innovate without Forecasters, but the products and services it creates will typically be incremental products and services barely distinguishable from competitors, since there is little appreciation for understanding the future market environment, needs and opportunities.

Forecasters represent a shift from reactive innovation to proactive and disruptive innovation. Unfortunately many firms don't have people with these skills internally, and often aren't certain if their predictions should be trusted even if they do exist within the firm. The standard approach is to outsource Forecasting to analyst firms, futurists and consulting firms. Outsourcing these skills isn't necessarily wrong, but the forecasting and analysis work is done haphazardly as problems or challenges arise, rather than as a consistent effort over time. These efforts result in "snapshots" of the future rather than a real glimpse of possible futures.

Creators

Creators should be the real "rock stars" of your firm - the people with the passion and foresight to see the opportunity for a new product or service and the determination to create it. We actually have a name for these people. We call them entrepreneurs. Unfortunately that title suggests that they must exist outside of larger organizations, otherwise we'd call them intrapreneurs. But we know that intrapreneurs, like the Fantastic Four, cold fusion and balanced federal budgets are more hypothetical than real.

Your firm can't be successful innovating without Creators because only Creators have the passion to overcome all of the cultural resistance and bureaucratic challenges that will be presented as they attempt to innovate internally. Their personality, perspective and vision drive them to succeed. You can run a successful business without Creators, but you'll be overtaken or disrupted in time by another Creator due to a lack of innovation.

Fortunately it is easy to spot Creators in your business. They are the people who are constantly irritating the rest of the organization suggesting interesting new products and services, and who sometimes manage to get those ideas funded and resourced. Rather than treat these folks as irritants, recognize them for what they are, the engine of your innovation efforts.

Creators represent a special opportunity and challenge. Many Creators don't work well within the rigid structures of a corporate environment, but they drive innovation like no one else. Their skills and passion become even more important as you seek to increase innovation, and their numbers in many organizations are fairly limited.

Achieving the right balance

Regardless of your strategy, all four roles are important. Your strategies dictate how many of these types of individuals exist in your organization and their social standing. Typically there are far more Optimizers and Firefighters in most organizations, because those skills have been the focus of management teams in the last decade. However, as the competitive environment shifts and innovation becomes more important, your organization needs to shift the proportion of people in each from from Optimizers and Firefighters to Forecasters and Creators. A firm with an innovation focus needs Forecasters and Creators and can't sustain innovation over any period of time without people with those skills. You may need to recruit individuals with these skills from outside your organization, since the perspectives and skills required for these roles is very different from the Optimizers and Firefighters you have on staff now. Additionally, we've trained our managers and executives in the Optimizer toolset and taught them that Firefighting is the way to advance. Your organization may need to rethink it's compensation, recruiting, training and evaluation schemes to emphasize new knowledge and skills.

You may be tempted to place a person who is an effective Firefighter or Optimizer into a Forecaster or Creator role. Don't. Everything about the roles of Forecaster and Creator will be anathema to an Optimizer or Firefighter. It may be possible to find volunteers who are willing to try to shift into those roles, but you can't assign people into those roles. In a firm heavily weighted toward Optimizers and Firefighters, you may need to recruit Forecasters and Creators, or perhaps simply outsource those roles.
Faster, more disruptive innovation

If these headlines don't get your attention, then nothing will. One of the biggest barriers to innovation is the uncertainty associated with an innovation project. Innovation is fraught with risk, costs and unfamiliar tools and techniques, and often takes a back seat to less valuable but more quantifiable projects.

We have the solution to your needs - a solution that addresses the uncertainty, the risk, the need for a real product or service rather than just an interesting idea. All this solution requires is some dedicated staff, an important and clearly defined opportunity or problem, a rapid innovation methodology and about one quarter. We call it the 90 day BHAG.

Innovation Trade offs

Innovation projects are often a series of dissatisfying tradeoffs. Most firms want really interesting, radical innovations that disrupt the competition. But those projects often take up a lot of time and effort and often aren't very successful. Their "batting average" is fairly low. Kind of like trotting out Dave Kingman as your designated hitter. If he connects, it's a home run. But he doesn't connect too frequently. On the other hand there is the safe incremental innovation project which will return a reasonable set of ideas in a reasonable timeframe, which will result in a "me too" product and attract ho-hum reviews. Not much risk, but not much reward. What if you could cut the time, cut the risk AND create a really compelling idea? That would be the best of both worlds.

Enter the 90 Day BHAG

First let's set the rationales and definitions. A BHAG is a big, hairy audacious goal - something that is radical or disruptive. It is the goal of a 90 day BHAG initiative to create not just an idea in 90 days, not just a disruption in 90 days but a fully realized prototype that solves an important problem or addresses a new opportunity. All of this happens in a short time frame. How do we do it?

There are four factors that dramatically improve success:
  1. A very clearly defined problem or opportunity - this keeps the team focused
  2. A dedicated team that is passionate about the problem
  3. Recognition that new tools and methods are required. Business as usual won't work
  4. A requirement that the team produce a workable prototype for executives to review


Of course we'd like to include the fact that OVO consultants add a lot of value in this engagement as well, since we created the technique!

What if you could...

Innovation is necessary for differentiation and top line growth. However, many firms simply don't have the tools, techniques or people to quickly ramp up to a disruptive project, and can't afford the investment and time to conduct a lengthy project. What if you could drive one really valuable idea through an innovation process - from recognition of the problem to fully realized prototype, in 90 days? You can.

But wait, as they used to say on TV, there's more. One of the fundamental tenets of the 90 day BHAG is that an executive team agrees to meet with the innovation team at the end of the 90 days to review the prototype and make a decision within a defined period of time, to advance the product or concept, or provide specific reasons for stopping the project. Including this meeting addresses another risk factor: the participants know that their work will be evaluated at the end of the project by their management team, and their efforts will receive a thumbs up or thumbs down. The idea won't enter a black box and never be seen again. This gives the team the confidence to work hard and believe that their efforts will be evaluated and rewarded with a quick decision.

We'd all like less risk and more reward in our lives. Now, using a 90 day BHAG approach your team can attempt radical or disruptive innovation in less time, with less risk and a far greater chance of success. Your competition is innovating - can you afford to wait?
Measures we wish were true

Business managers want to examine how well their work succeeds at achieving their plans and their goals. We've been taught to place significant emphasis on hard numbers, quantifiable information. These numerical goals and measures remove any uncertainty about accomplishment. The "quants" rule the measures and metrics game and rightfully so in most cases.

However, the striving for quantifiable goals can lead to some rather specious thinking. Some specious thinking we'd like to expose is using patents as a measure of innovation.

Patents as an innovation measure

Patents have been used as a measure of the innovation capability of a firm, and even of a region. Recently Forbes magazine ranked Raleigh, NC (my hometown) as a very innovative place using four metrics, one of which is patents generated. Given that we are blessed with three major research universities and a veritable patent generation machine known as IBM, there are a significant number of patents generated locally. But do patents represent a good measure of the innovativeness of a firm, or a region? I'd like to argue that patents aren't a good measure, for several important reasons, but we use them because they represent the result of innovative thinking. Yet we confuse a result or output, with a valuable outcome.

Four reasons patents don't work

Patents are poor measures of innovation success for at least four reasons:
  1. Universities are under pressure to "publish or perish" so many professors have no choice but to patent their ideas, regardless of their value
  2. Many patents have little if any market use or value
  3. Some patents are defensive in nature, meant to deflect or defer competition
  4. Patents by themselves don't deliver any new value to consumers


Many patents aren't meant to be commercialized, so they define some intellectual property or insights that while unique don't create new value. Many patents are defensive, meant to dissuade competition and actually act to dampen innovation. But most importantly, a patent only represents the potential of a new product or service. Unless some one or some firm decides to convert that intellectual property into something of value - a new product or service or business model - the patent hasn't added much to the business, community or region.

We use patents as a measure of innovation because we can accurately state that X number of patents were received in this calendar year by this research organization or professor. It is quantifiable in a time period. However, as a measure of innovation it is relatively useless and almost dangerous. Too much reliance on the number of patents generated with no measure or understanding of the conversion of that intellectual property into new products and services that people want leads to the accumulation of intellectual property, but few tangible benefits to the community.

Patents Granted vs Value Generated

If we are going to use patents as a measure for innovation, then by all means report the number of patents received, but then trace the value generated by the patent by looking at the number of startups created, amount of venture capital received or investment in the patent to create new products and services, the number of jobs created, the value delivered to consumers over the existing method or process. This would be a true measure of innovation. Yes it is more difficult to capture and quantify, but it measures the right things.

Using this metric, we place far too much emphasis on an output - number of patents generated per unit of time, as opposed to an outcome - the actual value those patents generate in terms of jobs created, wealth and income created and so forth. While the second metric is much more difficult to measure, it is far more meaningful than simply measuring patents granted.

Patents granted is the only specious innovation measure or metric. We often see "number of ideas generated" reported as a metric. From a counting point of view, more ideas generated is typically better, but the real metric should be "number of ideas converted into products and services" - again, reporting an outcome rather than an output.
Three New Books

One benefit to having a profile in the innovation space is the opportunity to read and review a lot of books on the subject of innovation. This month we'll look at three new books on topics related to open innovation, creativity and "deviance" and the concept of "play" in the corporate environment.

Open Innovation Solution

The web creates friendships and working relationships that are entirely virtual, so I am happy to review a book by my friend and colleague Stefan Lindegaard. Stefan and I haven't actually met in person, although it seems we have worked together for years. You may be familiar with his website if you are active in the blogosphere, and may know of his passion for open innovation. His new book - The Open Innovation Revolution - is an excellent overview of Open Innovation, the opportunities it provides, problems it solves. It is full of insights and case studies from major firms in Europe and North America. There are a number of insightful interviews with innovation executives in the book and some good key points or considerations at the end of each chapter.

This is a great book if your team is considering using open innovation as part of its innovation strategies. You'll know if you've followed our work we consider open innovation a vital piece of an innovation strategy, important for engagement and conversation with customers broadly, and partners more specifically. Open innovation isn't a cure-all, but can provide new insights and new relationships to further your innovation efforts.

Power of Positive Deviance

What I like about The Power of Positive Deviance is that it stipulates that unlikely people solve tough problems. I was reminded of this recently when we learned that one of the first winners of an Innocentive challenge was a person who worked out a solution in his garage. Often the best innovators are "deviants" who don't fit comfortably in the corporate world but their very nature, perspectives and insights are what is missing to solve important, intractable problems.

Another lesson and one of my favorite statements in the book is: "It's easier to act your way into a new way of thinking than to think your way into a new way of acting". From an innovation point of view, experimenting constantly and innovating regularly leads to new strategies and new processes, when "top down" strategic direction often fails.

From Workplace to Playspace

Pamela Meyer's new book, From Workplace to Playspace, is meant to think through how innovation happens in an organization and the need for creativity, improvisation and, yes, a playful attitude. Meyer is a creativity and innovation consultant and teaches at DePaul University.

I like her definitions of "Space" - there is "relational" space to help identify and develop networks, "generative" space, "safe" space to encourage new perspectives, "timeful" space to remind us that innovation takes time and commitment and "provocative" space for stretching the way we think.

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