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Innovation Newsletter from OVO
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OVO Views
Conversations about Innovation
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November 2011
- Vol 6, Issue 1
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In This Issue
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Quick Links
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Greetings!
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Fall 2011 is a time for new beginnings, shaking off the lethargy and uncertainty of our economy and getting more engaged with innovation. In this newsletter:
A new book - Relentless Innovation
We're proud to announce the publication of a new book entitled Relentless Innovation by Jeffrey Phillips. Jeffrey examines the factors that enable firms to innovate consistently, and identifies two competencies that will limit innovation or accelerate your innovation success.
Is innovation your "day job"
How to strike the right balance between short term profit motives and long term innovation needs.
Speed versus secrets
Why innovation speed and corporate nimbleness may be as valuable as intellectual property
Monterrey, Dubai, Kuala Lumpur and Johannesburg
Our workshop / speaking schedule gets a lot more international. Where we'll be speaking/working, and what's interesting in innovation in each region of the world.
As always, feel free to contact us to exchange ideas, ask for innovation help or suggest topics you'd like to see discussed in the next issue.
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What drives consistent innovation?
For years I've wondered - what is it about firms like Google, 3M, Apple and P&G that enables them to innovate so consistently, while so many firms struggle to innovate sporadically, if at all? Apple, Google and 3M are all held up as great innovators, yet they share very few characteristics, other than their success at innovation. They compete with different business models, in different markets, in different geographies. They have different organizational structures, different leadership styles. On the surface, nothing suggests that these firms should consistently outperform other firms in regards to innovation. But they do. If we label these firms "Relentless Innovators", what can we learn from them that other firms can apply to become better innovators?
My book Relentless Innovation seeks to uncover the factors that drive sustained innovation success, and provide a roadmap that any firm can follow to achieve improved innovation outcomes.
The Secrets
A number of factors have been suggested as the "secret" to any firm's success. One constant refrain revolves around leadership. To some degree we have too much admiration for CEOs and their leadership capabilities, although I am sure Apple will suffer from the loss of Steve Jobs. But I doubt you can name the CEO of Gore or 3M, so while some firms may benefit temporarily from a charismatic leader, successful, sustained innovation isn't based on leadership alone.
Beyond leadership there are dozens of other reasons we ascribe as to why one firm is innovative and another one is not. While leadership, culture, rewards structure, the industry the firm competes in and a host of other factors contribute to innovation success, the two core enablers or inhibitors may surprise you.
Is sustained innovation important?
It's reasonable to ask whether or not sustained innovation is important. Can't we innovate periodically, and rest on the success of big new ideas, creating new ideas only as the cash cows begin to age? We provide evidence in the book for at least three reasons why this attitude, while prevalent, is exceptionally risky:
- Ever decreasing product life cycles
- Increasing customer demand and expectations
- Accelerating global competition
A recent IBM CEO survey indicates that 69% of the CEOs IBM interviewed felt that new economic conditions would create deeper, faster changes and lead to more volatile markets with more risk. In the same study 82% of CEOs indicated "better understanding of customer needs" as the most important change they can make.
Your firm can't assume that a new product will have a long life cycle, and must assume that many new competitors will enter any market at any time with compelling new products. Therefore, consistent, sustained innovation is a must.
What stands in the way
Perhaps the biggest surprise is what stands in the way of sustained innovation. In Relentless Innovation we argue that two key factors are the roadblocks to greater innovation success. But these two factors are also what drive short term profits and ensure the business runs efficiently. This creates a quandary: how to introduce vital innovation into an organization, sustain innovation and drive new revenues and profits while simultaneously sustaining efficiency and effectiveness. But you'll need to buy the book to read our prescriptions for success.
Praise for Relentless Innovation
A number of well-known innovators, analysts, consultants and clients were kind enough to read drafts and give me these quotes:
- The barriers to innovation are so woven into the fabric of "business as usual" that they're almost invisible. Jeffrey illuminates them and offers practical advice to drive sustainable innovation. Chuck Frey, InnovationTools
- This is a book likely to burst much of the bubble that presently surrounds the innovation agenda in large organizations. While this may be uncomfortable for innovation professionals, the insights herein will go far to help leaders create innovation efforts which actually work. A recommended text for any executive with innovation ambitions. -James Gardner, MD, International Spigit
- Jeffrey Phillips is one of the great mythbusters and truth tellers in the innovation space today. A respected voice with insights to share, Jeffrey does a great job in Relentless Innovation of examining many of the reasons that innovation does or does not take place within firms, and how corporate innovation efforts can get "stuck in the middle." If your organization is stuck and seeking to become a relentless innovator, this would be a great read. -Braden Kelley, cofounder of InnovationExcellence.com
- Even Steve Jobs would not have been able to turn around Dell on his own. But armed with Relentless Innovation, you might have the tools to make innovation repeatable by leveraging your middle management. If you want to create a culture of innovation, you need this book! -Stephen M. Shapiro, author, Best Practices Are Stupid and Personality Poker
Services and Offerings
OVO will unveil a set of services targeted to the two factors we believe are the biggest barriers to sustained innovation success. Keep an eye on the Relentless Innovation Book homepage and on OVO Innovation's home page as well.
Jeffrey is available for speaking engagements and workshops focused on the findings and suggestions in Relentless Innovation.
Availability
Relentless Innovation is available on Amazon now. You can see the book at Amazon now and register for pre-orders.
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Is innovation your "day job"
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Striking a balance
A few weeks ago we were leading an innovation workshop based on our rapid, disruptive innovation methodology. This methodology accelerates the development of a new, disruptive idea, shifting from initial concept to prototype in less than 90 days. With this methodology we achieve two valuable goals - generating and developing disruptive ideas while reducing risk, cost and uncertainty.
When we unveiled the working plans for the next 90 days, one of the participants sat back in his chair and muttered "don't they know we have day jobs?" Fortunately he was talking about his management team, not about us. This is why we included an image of a balance scale - innovation and short term financial achievement are two important goals which must be carefully balanced, but are often left to interpretation or nuance.
What are you trained to do?
Clearly, innovation isn't the first priority for a vast majority of people in any business. We pride ourselves on our work, and do what we know how to do and what we've been educated and trained to do. Most people receive little training or education in innovation, and have very little experience leading or working in an innovation context. So, clearly, innovation isn't most peoples' day job. But too much focus on "day jobs" and too little focus on the long term can become a barrier to innovation success.
Since innovation is unusual, uncertain and risky, and people participate in a part time basis to create ideas that may or may not be commercialized, it is difficult to get people to come on board with both feet. This isn't really a problem with training, or desire, but a problem of priorities. Right now, most organizations place so much focus on efficiency, effectiveness and quarterly outcomes, and are so thinly staffed, that people must make a choice - day jobs, or innovation?
What's the priority
In my experience, many executives leave this decision intentionally vague. Executives talk about the importance of innovation, but also demand that quarterly results meet expectations. Executives recruit people for innovation teams, but don't offer training in the tools or techniques appropriate for innovation success. Executives set innovation goals but often impose impossibly short deadlines to achieve stretch goals for innovation. And when unclear goals, unprepared people and unreasonable expectations meet, innovation teams do what is natural. They focus on the "day job" over innovation.
Compensation, Commitment, Communication
To ensure that innovation teams achieve their goals, executives must follow the three C's list above. They must:
- Align compensation to innovation work, not to the "day job"
- Demonstrate their personal commitment to the innovation work by staying involved.
- Communicate the importance of the work, internally and externally
Increasingly, the work performed within your "day job" will become less important than the value you can drive from innovation. Executives must set out a clear objective and follow up that vision with participation and modifications to evaluation and compensation. Otherwise, team members will work on their day jobs first and fit innovation in as they can, which relegates innovation to an ever decreasing commitment.
What's the right day job
Think back to the innovation team member who wanted to know whether or not the management team knew he had a "day job". In his mind, the priority and emphasis on where he should spend his time was clear - first priority to the work that achieves short term revenue and profitability, and fit innovation in where you can. Perhaps the real question for the innovation team, and the management team that created it, should be - what should your "day job" be? Where is it most important, most vital that you spend your time? If the question and assumptions were rephrased, perhaps the innovation team member would have said - my priorities are clear. Innovation is most important.
Conclusion
As the demand for new products and services increases, executives won't have the luxury of indeterminate statements demanding innovation without a rebalancing of priorities. Today, many executives and CEOs talk about innovation but reinforce short term goals and objectives, leaving many senior managers and innovators in a difficult pickle. They can only be successful if they create new, interesting products while achieving short term goals. Trying to do both is difficult. Trying to do both well is impossible. We innovators simply need to know - what's most important given the time and resource that we have? Like it or not, increasingly it's going to be innovation.
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The Power of Intellectual Property
It's been a matter of principle that intellectual property - patents, trade secrets, etc are the lifeblood of many innovative firms. To create concepts that can be protected and leveraged has historically been the ultimate innovation goal. As we look to history, we can see that inventors like Edison were in fact patent generation machines. Edison's Menlo Park facility was structured in a way to capture, to document and to patent any idea or invention created by anyone on the team. Further back in history, the founding fathers decided that the patent system would be a vital part of our new governance. Jefferson and other revolutionary leaders incorporated the patent system to protect the inventor of new products and ensure that the small entrepreneur had an opportunity to gain the returns on an invention.
While the patent system and other means of intellectual property protection have benefited our economy, increasingly the patent system and other forms of intellectual property protection are being used in ways never imagined by the founders. Patent "trolls" purchase patent portfolios and sue others for patent violation. Arguments break out about whether or not a patent is even valid, or if a patent should have been issued. When the legal system is choked with suits on patents and intellectual property, and when the Patent Office cannot process a patent application for years, what was once a powerful system for protecting an invention increasingly becomes a long, slow, expensive process that drags out the ability to capitalize on ideas and inventions.
The growing amount of litigation around patents has led Google to argue that the patent system is "gumming up" innovation.
Speed, nimbleness and agility
Increasingly, there are other factors at play in the global marketplace that firms must respond to. The patent system protects an invention for up to 17 years (more with appropriate extensions), so patents build up an immunity to the marketplace while firms have a monopoly. This can lead to dangerous "home run" thinking. If a firm can create and protect a really valuable idea, it has a monopoly for many years on an important product. It can charge what it deems appropriate for the product. In many ways this insulates the company from the marketplace and establishes a slower, more leisurely approach to competition and new intellectual property development. Witness the pharmaceutical industry, which is increasingly recognizing that reliance on blockbuster drugs, especially as they become more difficult to discover, has left them with little nimbleness or agility.
Further, in many industries, a patent is valuable only until a viable work-around is discovered. Patents in processes or in software are difficult to enforce and often easy to engineer around, so the long slog of patent protection and the costs involved may provide only a short term respite from competition.
Speed versus secrets
If secrets tend to make us more insular, and take a long time to capture and defend, one wonders if a strategy dependent on intellectual property will be successful in the long run, as competition and customer demands and expectation increases. Product lifecycles are shortening, customer demands and whims increasing, and competitors can enter any market at any time. Further, many growing economies, the so-called BRICs of Brazil, Russia, India, China, and a host of other emerging economies won't or can't pay premiums for expensive products that depend on intellectual property. They'll acquire products that meet many of the same needs that are less expensive, adapted to their needs, open source or co-created. Or they will simply do without.
Nokia has recognized the need to increase speed to market, and initially is doing so by reducing differentiation. While that's not a long term strategy, if Nokia can speed up product development and increase innovation simultaneously, they have a chance to regain the lead in cell phone design.
Historical Strategy, Historical Structure
I started off this article discussing the history of the patent and intellectual property protection. But there's another increasingly anachronistic issue that firms increasingly must address, and that is organizational hierarchy and structure. Most firms still rely on a top-down, command and control structure handed down to us from the railroads and the military. This top down hierarchical structure was useful when communication systems were poor and education thinly distributed, and product life cycles were long and predictable. Today, however, these structures are barriers or inhibitors to fast action, to nimbleness and agility.
Gary Hamel, in his book The Future of Management, looks at the lack of innovation in management styles and organizational structure. He was able to identify only a handful of firms that have innovated organizational structures and management paradigms. Yet in the face of ever increasing competition, speed, agility and nimbleness seem more important than ever, while most organizations cling to established structures, hierarchies and management styles that result in less speed, less aggressiveness and slower response and reaction to the market.
Even many fast growing entrepreneurial firms that have defied existing management structures are transitioning to corporate structures. Yahoo is a perfect example of a once nimble firm that has ossified into an old media hierarchy, and one wonders how long before Google and Facebook, two other fast and nimble firms, become locked into inflexible management hierarchies. If what is written on Google+ by internal Google staffers is true, Google may already be at the tipping point.
Are Patents Necessary?
Interestingly, fast growing firms like Google and Facebook are in the minor leagues where patent generation is concerned. As of January 2011, Google had a total of 500 patents to its name, about the number of patents Apple generates each year, according to this article. Google, even though it has been successful without a significant patent portfolio, is moving to try to acquire more intellectual property. It has bid on Nortel's IP portfolio and purchased intellectual property from Motorola. In this regard it's strategy looks a lot like the old line firms, sacrificing speed and nimbleness for intellectual property protection and defense. Facebook and Twitter, two other rapidly growing firms, have less than 50 published patents between them. Their strategy is to acquire as many users as possible, create a network effect and then lock in the gains, as opposed to many firms which developed a technology, protected the IP and then built a market presence. Clearly, speed, nimbleness and agility matter in some industries, especially where technology costs are low, duplication is easy and protection difficult to achieve.
Returning to the Question
So we return to the question - what's the appropriate balance between a focus on nimbleness and speed versus a focus on intellectual property development and protection? We think many models need to incorporate far more speed and agility and less focus on intellectual property. Does that mean that idea generation and protection are less valuable than before? No, it simply means that firms need to rethink their innovation methods and processes to bring new ideas to market more quickly, and need to reorder their structures to become more nimble and more agile. Large, rigid, inflexible structures that depend on long product cycles and the defense of intellectual property are increasingly at risk.
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Innovation Topics
The interest in innovation is increasing in every industry and every geographic sector. We are increasingly seeing more demand for innovation insights and innovation tools and techniques from locations around the globe.
As we outline here some of our recent speaking opportunities and planned engagements, it is interesting to consider what innovation insights or information is in demand in other countries, and what that tells us about innovation in general.
China
Our team had the opportunity to deliver innovation training in China to several groups. The focus was not quite what we expected. China has a very regimented education system, strong, but very focused on command and control. China's educational system reinforces rote learning, memorization and prompt response to a specific request. What China's system doesn't inculcate, and what many Chinese managers and executives are trying to learn, is how to introduce more creative thought, more risk taking and more design thinking into the educational system, so that new employees are more apt to assist with innovation, rather than simply follow instructions. This focus will be a "sea change" for the educational system in China, and could cause a lot of disruption in the cultures of large Chinese companies. Many older managers are comfortable with command and control, telling subordinates what to do and expecting immediate response. This model is excellent for efficiency and effectiveness, but stifles innovation. How will senior executives react when employees are expected to show initiative and creativity? This is one aspect of introducing innovation in China, shifting the educational system to create new employees with more creative skills, more design thinking and more familiarity with innovation.
Perhaps the biggest challenge China faces to transform its economy is to become an innovation leader rather than create low cost copies of the products and intellectual property generated elsewhere. To accomplish that, the Chinese educational system and the existing management hierarchies and cultures in many businesses will need to change radically.
Emerging Markets
In many emerging markets there are two competing threads. One is focused on innovation that's appropriate for the local market. I wrote about that phenomenon in my review of Nanovation. The Nano, or the People's car in India, is a great example of innovation focused on a large, local market.
The other thread in emerging markets is the attempt to catch-up and implement global best practices as quickly as possible. Our workshops in Southeast Asia and in the Middle East are focused on helping companies and governments in these regions adopt proven innovation models in their regions as quickly as possible. The challenges vary widely, from countries and regions overly dependent on extractive businesses which need new ideas and new businesses, to countries and regions that seek to skip an entire generation of technological advancement in just a generation. These emerging markets are hungry for innovation insights, and understand that they must be able to compete on a global basis, as well as serve their existing home markets.
Many emerging economies compete with growing economies like Brazil and China, and recognize that they must accelerate the creative and entrepreneurial spirit in their countries in order to stay abreast or ahead of China. To succeed, they must be more nimble, more open and more innovative than the Chinese economy, which will require a lot of work and investment.
Read about my experiences leading workshops in Kuala Lumpur and Dubai here.
Mexico
Mexico, and much of Latin and South America, is in transition. Mexico has relied heavily on trade with the US to sustain its economy, and as the US economy changes, Mexico's economy must change. Increasingly as well, Mexico and other countries in Latin America and South America are trading with each other, and with a new and growing business partner, China.
Trade with large economies demands that companies in Latin and South America dramatically increase their ability to innovate, as new products and services begin to filter in from trading partners. Local firms risk being left behind by a wave of imports. Mexico and other countries must step up their ability to spawn entrepreneurial firms and provide the environment for larger firms to innovate to compete with imports.
In Mexico we are proud to be a part of a new graduate program developed by CEDIM in Monterrey which is introducing the concept of a masters in innovation to accelerate entrepreneurial development and innovation in larger firms.
Mexico and other countries in the Western hemisphere must introduce more design thinking, and accelerate their ability to innovate products, services and business models more effectively.
Europe
Europe remains full of promise and full of economic danger at the same time. The Euro crisis has highlighted the differences in the economies within Europe. There is a growing split between Northern Europe (practical, innovative, financially stable) and Southern Europe (comfortable, stagnant, economically shaky). The innovation leaders in Europe, at least looking from this side of the pond, seem to be Scandinavia, Germany, Switzerland and the UK, while the laggards include Spain, Italy, Greece. France seems conflicted - not sure whether to embrace innovation and the future, or constantly look back to its storied past.
In Europe, our talks have been focused on recapturing and rekindling the innovative spirit. In many larger firms, organizational culture seems to weigh heavily on how people think and the creativity they bring to bear on problems at work. Governments at the regional, national and continental level expound innovation, yet innovation capability varies widely country to country.
United States
Our experience in the United States is markedly different over the last year. Increasingly, firms want to know how to innovate in the face of market uncertainty and tight financial constraints. That has led to three types of presentations.
The first is on reducing risk and uncertainty and increasing the likelihood of an excellent innovation result. Firms are willing to innovate, they simply must do so more effectively, with fewer resources and under greater restraints.
The second type of talk or presentation is focused on "open" innovation. Open innovation has come into vogue for several reasons. First, several large firms have been relatively successful and have attributed success to open innovation. Second, open innovation seems like a way to get more, and perhaps better ideas with less cost and less risk than trying to innovate alone. This attitude is worrisome, in that open innovation doesn't necessarily mean "less expensive" or "less risky". Open innovation can highlight ideas that weren't considered internally, and can provide some market validation of the ideas, but open innovation doesn't necessarily reduce the costs, the risks or the uncertainties about the ideas.
The third type of presentation focuses on introducing rapid, disruptive thinking into organizations. This concept aligns to the need for lower costs and risks, and introduces the concept of rapid, iterative prototyping. You can see a blog post about the results of rapid prototyping here.
Many countries, but consistent needs
While the focus and intent may change country to country, the needs are the same. Every firm and many governments are expounding innovation as a differentiator. We can look for more government incentives, potentially more funding for innovation education and training, an increased emphasis on the development and protection of intellectual property and an increased focus on innovation in the corporate sector as well, regardless of the region.
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OVO offers a range of consulting services, including:
- Trend Spotting and Scenario Planning
- Customer Insights
- Idea Generation/Facilitation
- White space / Disruptive Innovation
- Innovation Process Definition
- Innovation Training
- Open Innovation Consulting
- Custom Innovation Workshops
- Speaking Engagements
If you'd like to discuss how OVO can work
with you, 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.
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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