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OVO Views
Conversations about Innovation
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September 2007
- Vol 2, Issue 3
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In This Issue
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Quick Links
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Greetings!
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It's late September and we're staring down
the end
of another month. Most of you are
probably closing the third quarter and
looking ahead to the fourth quarter. If you
are an
innovator I hope your outlook is a little
longer than 90 days.
In this issue we'll look at the concept of
innovation over the long term from two
different perspectives. First, we'll
consider whether innovation is a project or
a program. Next, we'll look at the length of
time it will take to make your firm truly
innovative, and identify a roadmap to get there.
We'll also review some of our thinking about
the best approaches for recognizing and
rewarding the teams and individuals who are
contributing to your innovation success.
We had the good fortune to participate in the
Frost&Sullivan Growth and Innovation
conference in mid-September. Read a brief
synopsis of the conference and our key
takeaways.
Also, be sure to see us at the PDMA
innovation event in Orlando Oct. 1 and 2,
and check out the Business Innovation
Factory's Innovation
event in Providence, Rhode Island October
10 and 11.
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Rewards and Recognition for Innovation
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Show me the money!
Innovation is an important component of
corporate strategy. Likewise, people will be
guided by their compensation when asked to
work on specific topics or projects, so
innovation must be 1) aligned to strategic
goals and 2) aligned to compensation.
Innovation calls for
new compensation methods, recognition and
rewards,
since innovation introduces change and risk
to an organization. What
we'll look at briefly are some of the
opportunities and challenges associated with
recognizing and rewarding individuals and
teams who actively participate in innovation.
Changing the Focus
Before focusing on compensation or
recognition, a firm attempting to become more
innovative first needs to demonstrate it can
tolerate risk and failure. Your firm needs
to help people understand that
while innovation is risky and uncertain, the
people who are
actively involved will be provided enough
flexibility to be successful, and will not be
punished for failing. Given the amount of
change and risk involved, many individuals
may not want to participate, or will not
participate whole-heartedly because of their
concerns for their livelihood or their "real"
jobs. Your management team needs to make it
clear that innovation is important - not just
the flavor of the month - and that people who
take the risk to create new products and
services will not be eliminated if their
ideas fail.
Which Behaviors?
As you begin your innovation focus, the main
factor you'll want to recognize and
reward is participation. Rather than
recognize individuals who submit ideas,
recognize people who participate in any part
of the innovation process. Too many
firms rush to recognize
individuals, when innovation is really a team
sport that requires good process and
discipline. Your goal after proving that
people won't be punished for innovation is to
create an innovation capability and process,
which requires a number of people with a
broad set of skills for success.
Recognizing individuals, or compensating
based on a specific idea can lead to
disincentives, such as hoarding of ideas or a
lack of collaboration, and become a barrier
to broader participation and commitment.
Early in the development of your innovation
initiative, recognize and reward people who
participate, collaborate and follow an
innovation process, rather than individuals
who attempt to create and manage ideas on
their own.
Methods
We believe intrinsic
recognition and rewards are more appropriate
than monetary rewards and
drive the correct behaviors. Too much
emphasis on cash too early in the
process can lead the team away from a
consistent process and back to an innovation
capability driven by individuals who seek
financial gain. If there's not broad
participation, recognition and rewarding,
innovation will become episodic, driven by
individuals who may not have the best goals
of the firm in mind. Other than a sales
commission, most firms generally don't
provide cash compensation for consistently
doing a job well.
Most evidence suggests that what really
drives innovators is publicity and the
respect of their peers, rather than financial
incentives, so you can create powerful
intrinsic rewards and recognitions that will
serve the firm and the team.
Celebrating Failure
Yes, you read that correctly. It is
important to recognize and learn from the
occasional failure. Obviously we don't want
to reward continuous failure, but your team
will need to overcome its fear of failure.
Any time there's innovation, some failure is
going to occur. The real "teachable moment"
will happen when the failure is greeted with
something other than a scowl, especially
early on in the development of your
innovation capability. The teams will watch
carefully how
your management team reacts to the failures.
If there's a measured response and
demonstrated learning from the failure and a
"get back on the horse" mentality, then
you'll have reinforced the notion that
innovation is important, and failure is
occasionally necessary. A very negative
response from the management team to an
innovation failure will have a chilling
effect, not only on the team but on the
organization as well.
Conclusion
While recognition and rewards are important,
it is exceptionally important that rewards
are aligned to the appropriate outcomes and
goals. The management team's reaction to
innovation success or failure cannot be
overstated, and needs to be considered early
in the process of rolling out an innovation
initiative.
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Becoming More Innovative
When I speak with executives who want to
create new innovation capabilities in their
organization, they frequently speak of
innovation "projects", as if innovation is
something that can be turned on, run for a
little while and then turned off. This,
frankly, is one of the real challenges that
many firms have - an expectation that
innovation can be "episodic" rather than
continuous. This mindset presents a real
problem for many innovators.
In most firms there's little consistency
around innovation, so the tools, methods and
techniques don't become ingrained. In fact,
there are few consistent tools, as every team
that is challenged to become more innovative
creates their own approaches and tools. In
this episodic approach, the teams are
constantly faced with climbing a learning
curve and rarely gain any efficiencies
related to innovation.
Begin the Begin
What we're left with is a hastily assembled
team trying to quickly come up a learning
curve on an innovation project with few
existing plans or approaches. The next
problem, besides lack of experience and
inadequate tools, is the timeframe associated
with a project. A project has defined
beginning and end dates, so the team must work
furiously to do something and achieve some
output before the end of the project. The team,
in violation of everything they know and hold
dear, jumps right in, creating ideas
without planning, structure or scope. Many
times people feel that there is simply no
time to plan or bring the team up to speed.
The time
pressures of a project and the expectations
create another problem - unsettled thinking.
People simply aren't as creative when they
are under pressure, and will quickly
eliminate good ideas that may seem unlikely
or will take too long. One of the biggest
barriers to innovation in most firms is the
90 day hurdle that has become our benchmark
for achievements. The constant refrain is:
What will you do this
quarter? From an innovation perspective,
it's exceptionally difficult to get anything
important done in 90 days.
A Process not a Project
Innovation should be thought of as a process,
not a project. This subtle difference can
mean a lot. A process is continuous and is
defined by a set of steps that are definable.
The roles and requirements around a
consistent process are easily defined and the
tasks are repeatable, so individuals can gain
knowledge about the process and add to their
expertise. A process has a specific
beginning and ending point, but is not
necessarily time bound. The outputs of a
process can be identified, and ideas
traveling through the process can be measured
and managed.
Get with the program
Rather than an innovation "project",
successful innovation firms have continuous
innovation processes bundled in a program or
initiative that seeks to achieve key
strategic goals. These programs do not have
start and end dates like a project, and
provide more leeway for the teams involved to
create and mature ideas as new products and
services.
It's true you may begin your innovation
initiative by starting an innovation project,
or that you may run innovation projects
within your innovation program or initiative,
but to create consistent, sustainable
innovation you need to move beyond discrete
projects to create an innovation program.
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If you've been a loyal reader of our
newsletter, you'll recognize a tongue
in cheek attitude every now and again.
Certainly, including Soviet era planning
techniques in a newsletter about innovation
seems a little paradoxical.
According to Wikipedia, the Soviets used five
year plans because they recognized they were
significantly behind the West in a number of
key industries and wanted to create a sense
of urgency to close the gap. Five years
seems like a
very long time -
especially in an environment where we've been
trained to think first in quarters, then in
years. Five years is 20 quarters, or a
lifetime for some executives. Yet, it is the
unscientific estimate we've concocted for the
length of time it will take an organization
to become innovative.
We are NOT saying that your firm can't create
an innovative product or service in less than
five years, but are recommending a longer
time horizon to install a culture of
innovation across your company.
Consistent Innovation
We're not talking about the
ability to execute a brainstorming session or
introduce an occasional new product or
service. No, what we mean is the
introduction of an entirely new expectation
or culture in the organization, focused on
sustainable, repeatable innovation. Becoming
recognized as an innovation leader in your
industry. Why should it take so long? What
can you do to shorten the adoption of
innovation? Why is this even an issue?
Changing the Culture
If your firm seeks to generate ideas and
convert those ideas to new products and
services on a consistent, sustainable basis,
you'll need to define processes, fill roles,
and change the compensation and culture of
the organization. These activities take
time, resources and most importantly,
consistent focus from the management team.
If any of these are missing, then you simply
won't be able to create the necessary
atmosphere and infrastructure for innovation.
Yes, you may achieve occasional innovation,
and your team may generate and implement some
ideas, but you'll lack the passion and
urgency of firms that have wholeheartedly
embraced this approach, and your teams will
struggle with inefficient processes and
barriers to change within the organization.
Low Hanging Fruit
Another approach is the so-called "low
hanging fruit" approach. That is, spend the
first year or so targeting the low hanging
fruit to build some credibility, then ask for
the longer commitment. This approach is
reasonable but carries a couple of distinct
concerns. First, low hanging fruit is
probably pretty obvious, so the argument will
be that the innovation team simply had more
resources and implemented ideas that were
evident, or that had been created by others.
Second, most of these ideas are probably
very incremental in nature, so while there's
little risk there's little reward. Finally,
once the "low hanging fruit" has been picked,
you've set an expectation that innovation is
simple and low cost, right at a time when you
need to ask for more significant investment
and patience.
The "low hanging fruit" approach is fine, as
long as you are setting the expectation that
early on you'll target some easy ideas to
gain credibility while building the
infrastructure and capability for more
sweeping innovation. While it's hard to ask
a management team for a long term commitment,
innovation will only be a bolt-on solution if
it is not given more time to become part of
the strategy and culture of the organization.
Year by Year Plan
OK, if innovation is going to take several
years to unfold, what should my strategy be
for implementing the capability and getting
the organization on board?
Year 1
- Gain clear executive sponsorship
- Identify some "quick wins"
- Build an innovation team
- Define a consistent innovation approach
- Start generating ideas and defining a
process
Year 2
- Start gathering trends and evaluating
future scenarios
- Launch several ideas as new products or
services
- Broaden the "footprint" of innovation in
the organization
- Introduce programs to change the
corporate culture
Year 3
- Define "white space" or disruptive ideas
- Launch new ideas as products or services
- Demonstrate a consistent idea process and
pipeline
- Measure the results of the first ideas
that were launched
- Provide Training to the organization on
innovation techniques
- Recognize and rewards individuals and
teams
Year 4
- Demonstrate progress against white space
or disruptive ideas
- Establish longer range strategic
innovation goals
- Demonstrate a successful capability to
sustain new product or service introductions
- Report a return on investment for
innovation efforts
Conclusion
Rome wasn't built in a day, as the saying
goes, and even if your team could rapidly
change your organization to become more
innovative, few firms could afford the
distraction, costs and risks
associated with such a change. Changing a
culture and implementing the techniques,
processes and methods associated with
sustainable innovation will take a
significant amount of time, since this
implementation will almost always be
conducted in parallel with the day to day
operations of the firm. Yet, innovation is
too important to exist as a "bolt-on" to your
organization or your strategy. Just as
innovation must become part of the way you
operate, it should also become a key driver
of your corporate strategy.
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Frost&Sullivan Innovation Conference Notes
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The Conference
As you may know, Frost&Sullivan held their
third Growth and Innovation conference in
mid-September, and I was fortunate enough to
be invited and to host a panel with a great
array of innovation executives from firms
like H-P, GE, MedRad, Sara Lee, Corning and
AIG. The presentations and discussion
were lively and I came away convinced that
innovation is rapidly taking its rightful
place at the center of corporate strategy.
Key Findings
Most of the attendees were executives -
directors and VPs of their respective
organizations. What's interesting is to see
the diverse array of titles and
responsibilities reflected in the group.
Some but clearly not a majority of the
attendees had an "innovation" title.
What's clear from this event is that many
firms are still struggling with what
"innovation" means. In fact in one breakout
I watched a well-known innovation consulting
firm ask this question, and get almost as
many answers as participants. Innovation is
a difficult topic to define, but I think
increasingly it is important for firms to
create a definition for their organization
and communicate that vision throughout the
organization. Every firm may have their own
definition of innovation, but that definition
needs to come from the senior executives and
align to the corporate strategy.
Tools
In another breakout session, I watched an
executive from a large automotive supplier
explain that innovation within their firm is
built on Six Sigma, and the goal of the
program is "killing problems". Now, perhaps
it is innovative to use some tools such as
Six Sigma to identify and eliminate
operational challenges to create savings in
this industry, but that's not what I consider
innovation. Improving operational excellence
to cut costs is a fine strategy, but at some
point you need to create new products, new
services, new business models to become more
compelling. To me, what was especially
telling about this firm is that the firm
continues to outsource manufacturing to
"third world" countries, and that of its five
design centers, only one is in the US. Once
the manufacturing is outsourced and the
design centers are moved offshore as well,
what value does the US operation provide? It
had better be focused on ways to create new
products and services, since that's basically
the only capability left on shore.
Tools like TRIZ, Six Sigma, Lean and other
approaches MAY support an innovation
competency or capability, but the use of
those tools doesn't mean a firm is innovative.
Green
There was an especially strong focus at the
Frost conference on becoming more "green".
In fact I think I heard the statement
"there's green in being green" three or four
times, and several breakouts were
dedicated to green technologies or to
sustainability.
There are clearly trends in the industry,
especially in Europe, toward a focus on
improving sustainability and environmental
protection. In the US, we are still in the
very early stages of a transition to a way of
thinking about sustainability. The focus on
examining your products and services to
emphasize the "greenness" of your
organization will become increasingly more
important. There are a number of indicators
or trends on the horizon that dictate that
firms that are not focusing on becoming more
green will have difficulty in the marketplace.
Different firms, similar struggles
What's reassuring about a conference like
this is that even though the attendees come
from a wide array of industries, the
challenges they face are fairly consistent.
Most of them recognize the need for
innovation, since few can compete in a "race
to the bottom" from a cost perspective.
Additionally, most recognize that the regions
where outsourcing is taking place are also
becoming much more adept at design or
creating original products. This just
compounds the need for increasing creativity
and innovation.
Most firms seem to encounter the same
barriers - too much quarterly focus, a risk
averse culture, a lack of defined processes
for innovation and unclear strategic
direction. Many will tell you there's
not a lack of ideas, just that the conditions
aren't right and the emphasis is not high
enough to convert those ideas into new
products or services.
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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™
