The topic is the innovation culture.

We all talk about it. Some corporate innovation leaders claim to have the answers. Lots of consultants are sure they know. Most CEOs don’t really have a clue. It is just difficult developing a strong and sustainable innovation culture and one key reason is that a corporate culture in general is carved in stone during the first few years of the company’s existence.

After this, it becomes very difficult to change, and only two things can change things fast: a truly committed executive group (this is very rare), or a true burning platform in which everyone realizes that they need to change more or less everything in order to survive (not many companies are in such a condition, which is actually a good thing).

But we still need to create or improve strong and sustainable innovation cultures. What can be done? This is the outset for a session on innovation culture in which we dive into these topics:

• The current state of innovation and what the future will bring us
• Why open innovation matters and how this impacts the entire organization and the corporate innovation culture
• Killers and boosters for innovation culture
• Why middle managers hinder innovation just by doing their job
• An overview of the mindset and skills needed to succeed with (open) innovation today
• Why you need a common language and why you need to educate up and down
• Why it should be people first, processes next, and then ideas

This will be an interactive session with group and individual exercises as well as plenty of time for Q&A.

You can read further about the session here:

Innovation Culture – Silicon Valley, June 11

Innovation Culture – New York, June 14

One key element is that they must embrace and foster a culture of experimentation in which failure is acceptable as long as the intentions were relevant and if the learning of the failure was captured so that you don’t go on repeating the same failures over and over again.

This is the topic for the presentation I gave at TrendForum in Berlin earlier this year. The video is now ready and thus I have updated this blog post with it:

Click here to view the embedded video.

You can also download the presentation here.

Now, on with the blog post…

This is not the case today because most companies have a ”low tolerance for failure culture”. This leaves no room for experimentation and without much of a surprise the punching back for this is the top leadership.

Before I get into why top leadership takes the blame for this and what can be done about it, I want to share some thoughts on the definition of failure in the context of innovation. Like most words, it can mean different things to different people. It can also be defined differently from one organization to the next.

Paul Sloane, an internationally known author and speaker on innovation and leadership, points out, it’s important to “distinguish between the two types of failure – honorable failure is where an honest attempt at something new or different has been tried unsuccessfully and incompetent failure where people fail for lack of effort or competence in standard operations.”

Jamie Notter put it this way in a blog post: “A mistake is when you do something wrong, even though you knew the right way to do it. Failure is when you are trying something new, and you don’t know ahead of time how to make it successful.

Certainly, our topic here is not incompetent failure or mistakes. If your organization suffers from repeated bouts of incompetent failure and/or mistakes, your company almost certainly has bigger problems that I am prepared to address. But how else can we define failure?

Tim Kastelle, who co-writes the Innovation for Growth blog says, “Mistakes are things you do even though you know better. Experiments are tests designed to expand your knowledge. The big difference is that you learn from experiments (or at least you should).”

I completely agree; to innovate, we have to learn and we do that through experimentation, some of which are destined to fail. But it’s not the failure that drives innovation, but rather the learning. Hence, my term “smartfailing” as I have written about in previous posts.

Kastelle also offers up this hierarchy of failure:

• System failure (the collapse of communism)
• System component failure (stock market crashes)
• Major firm failure (Enron going out of business)
• Start-up failure (pets.com going out of business)
• Product failure (New Coke tanking)
• Idea failure (Apple Navigator prototyped but never launched)

For our purposes here, we are primarily talking about the last three categories on the hierarchy, although, certainly, if a company continuously experiences product and idea failure, they put themselves at risk of eventually moving up the hierarchy to suffer a major firm failure.

Business model failure is another level we might consider adding to the hierarchy because a lot of innovation revolves around finding a new way to do business and, certainly, lots of failure occurs there, too. This is different than start-up failure because often start-ups are following old business models that have succeeded elsewhere.

Another point to make about this Kastell’s suggested hierarchy is that the failure to stop ideas or projects early on can lead to bigger failures later in the process. To use one of Kastelle’s examples, the executives at Coca-Cola ignored warning signs that arose in focus groups as they tested New Coke that should have alerted them to the considerable backlash they would face if they messed with the formula for Coke.

Yet they went ahead with an expensive product launch that quickly resulted in a complete humiliation for the company when it had to pull the much hyped new product off the market in less than three months. Examples like this, where companies should have shut down a project far sooner than they did, litter the innovation landscape. There is little doubt that part of the problem here is an unwillingness by people at various levels and at various stages along the way to admit they might be on the wrong track, i.e., the track to failure.

Here is another way to look at failure. I believe failure in organizations most often happen on two levels: the failure to anticipate and the failure to execute. I would also argue that failure to anticipate happens on three levels:

• Organizations fail to anticipate changes in the market.

• Organizations fail to anticipate changes that impact the platforms needed to bring their products and services to market. This includes the failure to build proper ecosystems.

• Organizations fail to anticipate changes that will have an impact on their organizational setup and the culture.

My focus on this is very much about change; it is important to notice that the fast pace of change we experience today actually seems to happen much faster outside organizations than inside. It takes time for organizations to adapt to changes and this creates pockets of opportunities that can be lost or won.

At last, I can also mention that another key element of failure for organizations is related to execution. Not so much of a surprise.

Top Executives Are at Fault

Based on my recent survey on why corporate innovation fails, Paul Hobcraft identified the top ten causes of innovation failure and this points straight to the top of the of organization.

Here you get the top six causes as mentioned in Paul’s post:

1) unrealistic expectations from top management regarding resources and the time really required in achieving innovation

2) the lack of resources allocated in budget, people, infrastructure and

3) far too much focus on products and technology and ignoring the other options within innovation, such as service, business model, platform collaborations etc.

4) that people or teams operate in silo’s instead of broader collaborative approaches,

5) the wrong personnel are in place to make innovation happen and

6) that classic of classics, a poorly defined innovation strategy and the goals to achieve this.

I fully agree with Paul that each of these are top management failures and the key reason is that the executives simply do not understand innovation well enough to lead these efforts in the best possible way. This is unfortunate as this means that there are no quick fixes to this problem.

Nevertheless, here you get some of my suggestions on what we can do about this:

Better overview, new processes: Corporate innovation teams must identify the key reasons for failure in their organizations and then they must develop a learning process on how to address this. This process can be inspired by other failure/learning processes in the company (perhaps in production) or if the team already has a process in place in which they learn from their successes.

Be open about failures: There is not much surprise here. You need to talk more about failures and how to learn from them if you want to change an innovation culture for the better.

Reward learning behaviors: If you only reward outcomes (successes), then you do not improve your corporate innovation capabilities by much. You will also need to find ways to reward behaviors including the ability to detect early failure and deal with this (correct it or kill it). We need to remind ourselves that learning behaviors are the true drivers of a culture of innovation.

Educate up and down on innovation: It is the responsibility for corporate innovation teams to educate and train the organization on innovation. They also need to educate upwards (the executives) which is often neglected since it is difficult for many to point out to their executives that they have shortcomings that need to be addressed. But they need to ask themselves an important question here: Who else will do this?

As I said, there are no quick fixes to these issues, but I hope these thoughts will help organizations get started on improving their innovation processes and culture by becoming better at learning from failure.

Your input is much appreciated.

• Be Competitively Unpredictable: Make It Happen Through Innovation

• Innovation Culture: The Big Elephant in the Room

• Making Open Innovation Work

• Social Media for Innovation Efforts

I can offer you a free workshop (3 hours) or consulting session on the above topics if we can make this happen on June 10-14 or July 11-19. This only applies in the U.S.  You do not have to pay a fee for this, but I will ask you to help cover my travel costs (about USD 2,000).

Let me know if you would like to discuss this.

Best regards,

Stefan

If you wonder what the term, intrapreneur, means the American Heritage Dictionary in 1992 acknowledged this as “a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.

Entrepreneurs are driven by passion, an urge to execute on their ideas and the chance to strike gold. Intrapreneurs do not have quite the same personal reasons for what they do. Yet they still have to be in an environment where they can bring on innovation that makes a difference.

So what drives intrapreneurs? Here you get six bullet points from me:

• Freedom to operate
• Recognition
• Time to reflect, time for personal development
• Encouragement and opportunity to learn from failure
• Intellectual challenges
• Money

This is meant to be a discussion starter. I already got some great responses when I originally posted this. What would you add?

1. Google Glass – for taking an open approach for a disruptive offering

I take it as a clear sign of the changing game of innovation that Google early on recognized that they needed to be open on their efforts with the Glass. Now, they are building an ecosystem that can help develop the apps that will make people buy and use the Glass. Read more in this blog post: Google Glass versus Apple: Different Takes on Open Innovation

2. Microsoft and their Kinect Accelerator program – better late than never

As you will notice, a key element in my suggestions for the best open innovation companies right now is a strong focus towards start-ups.

The Microsoft Kinect Accelerator program is a nice example of how companies can organize this. It is also worth noticing how Microsoft is changing their course having in mind that they tried to keep the Kinect closed for others (especially hackers), when it first launched. Things are definitely changing.

3. Shell – now even their CEO talks about open innovation and business models

I have mentioned Shell before in my blog because of their GameChanger program and recently, I also took notice of their CEO and his perspectives on (open) innovation. Good things coming from a conservative industry! You can check these posts on Shell on 15inno.com.

4. Telefonica / Wayra – another focused approach towards start-ups

Back to the start-ups! The digital world has begun to embrace open innovation and Telefonica is leading the pack with Wayra, which is a platform in which they can interact with startup and co-create new business opportunties.

5. The last spot is up for grabs…

As usual, I keep this spot up for grabs. Who would you add to this list?

• Be Competitively Unpredictable: Make It Happen Through Innovation

• Innovation Culture: The Big Elephant in the Room

• Making Open Innovation Work

• Social Media for Innovation Efforts

I am looking for partners, who want to help organize and market the workshops. I will deliver the workshop using my content and help market the workshop through my social media platform. Your key role is to help identify and attract potential participants. I usually work with a fixed fee, but I am also open for discussing a revenue sharing model.

You can find an example of a workshop here: Be Competitively Unpredictable!

The workshop I have in mind for our potential partnership will be an hour longer and focus on content as listed above. The primary target group is corporate innovation teams so it helps if you have good contact to such people.

Let me know if you are interested!

Now, I would like to follow up with a survey in which I ask questions such as:

To which extent are universities and tech transfer units prepared to work with corporate innovation teams in the era of open innovation?

Open innovation offers more external opportunities to corporate innovation teams. To which extent will this be a positive thing for universities and tech transfer units?

To which extent do tech transfer people have the proper mindset and skills (including business understanding) for working with companies in the era of open innovation?

To which extent do universities and tech transfer units work PROACTIVELY to meet the needs and interests for corporate innovation teams?

If you have any experience on this topic as a corporate innovator, a tech transfer officer or as a consultant, then it would be great to get your perspectives. It only takes 5 minutes!

SURVEY: Universities, Tech Transfer Units and Corporate Innovation Teams in the Era of Open Innovation

Here you can read my older blog post on the topic:

Are Universities, Tech Transfer Units Open Innovation Losers?

I recently gave a talk at the Technical University of Denmark. Many of the attendees were university people and at one point we got into a discussion on the role of universities and their tech transfer units in the context of open innovation and innovation ecosystems.

As usual, I was quite frank and I said that universities are at risk of becoming less relevant in the future of innovation. Let me explain why I think so.

In the circles of open innovation, there is quite some focus on becoming the preferred partner of choice within a given ecosystem. Big companies fight each other to gain this position, but universities need to play this game as well as any ecosystem will have their mix of big companies, small companies, startups – and universities.

Many of the experienced open innovation companies even have a dedicated focus towards EACH of these groups and universities need to start realizing that they must not only look good, but also deliver if they want to get involved in the best projects.

I suspect that many universities are still stuck in an old-times mentality or structure making them believe that they can just make their assets publicly known, set the terms and wait for the big companies to come begging for their access to their assets. Oh, they are so wrong.

What we are seeing with open innovation is that big companies have more access than ever to the missing pieces that they need in order to bring better innovation to market faster. Granted, not all big companies do well on this, but they are learning and they are learning fast and I am just not so sure that universities are developing at the same pace.

In a couple of recent discussions with corporate innovation units on this topic, I sense that they are getting increasingly tired of universities and their tech transfer units. They are slow and bureaucratic to deal with and they price their assets much higher than the value seen by the companies thus requiring lots of effort to land reasonable deals.

A key reason for this growing frustration and changing perception is that corporate innovation units have more options today. If they need specific technologies, they have learned that the use of open innovation intermediaries (i.e. NineSigma and InnoCentive) and their broadening networks in general can deliver what was previously delivered by universities.

No, I don’t think that all universities and tech transfer units will be the losers in the future of innovation, BUT many will lose out. The few winners (yes, I think it will only be a few) will be those that are able to position their university and tech transfer unit as the preferred partner of choice within their chosen fields.

Let the games begin…

(P.S. This development is actually kind of sad as I think the general society can benefit greatly by having universities contribute as much as possible to the overall innovation efforts.)

I was a bit surprised by his position and claims. Even though, I spend several hours a day using social media tools such as LinkedIn and Twitter, I do not have a clear-cut answer on how to extract value out of social media. I have gained some good insights, but I still consider myself to be in an experimentation phase and I have even acknowledged that I might be stuck in this phase forever considering the constant change in the social media landscape.

The interaction with the above guy also led me to some other reflections:

Get your skin into the game: You can’t teach others – or even try to influence others – on the use of social media if you are not willing to get your hands dirty and play around with the tools and services yourself.

Watch out for your credibility: You can’t expect to be taken serious about innovation if you are not willing to develop your own skills. Innovation is changing fast today and as a new generation (one that is more adept at using social media) enters the work force, you could be at risk of becoming a dinosaur over time. Of course, this requires that you believe that social media will play an important role for innovation management. I definitely believe this…

It’s both personal and business: The person I spoke with did not want to mix his personal and professional identities in the virtual world. I can relate to this (Facebook is only for private matters for me), but I also believe that you get better results if you don’t separate too hard here.

One key reason is that you are at risk at running short of the time and/or mental capacity needed to build strong social media platforms. This kind of effort is time consuming and requires persistence. I also think being personal and genuine can make your platforms stronger. Rather than separating completely, you need to find a balance even though you work in a corproate setting with team members and corporate accounts / identities.

Just some reflections on an interesting talk…

• B2B companies are actually just as good as consumer goods companies on open innovation, but the latter are just more visible when it comes to open innovation initiatives. A reason for this could be that the products and brands of consumer goods companies are better known and thus we hear more about these companies.

• B2B companies have longer development cycles and thus it takes longer for them to adapt to open innovation.

• B2B companies have more engineers working on innovation relative to fast moving consumer goods companies that have a more holistic approach, which to a higher degree include other functions such as sales, marketing and supply-chain in their innovation efforts. This could lead to a stronger focus on traditional, internal focus for B2B companies.

Personally, I lean towards the view that many B2B companies are slower (compared to B2C) adaptors and that they have an untapped potential on open innovation. The good thing is that many B2B companies have realized the value in this potential and thus there are lots of interesting initiatives going on. We just don’t hear too much about this.

Not so long ago, I also wrote a blog post on the differences and similarities on open innovation between B2B and B2C companies. Here they are:

Differences:

Crowdsourcing works better for B2C companies.

This is pretty obvious, as B2B companies do not interact directly with consumers and end-users.

This also leads many people to believe that crowdsourcing is all you need to consider when it comes to open innovation for B2C companies. This is dangerous. The key is to being able to bring more external input into an innovation process and integrate this with internal resources. This needs to go further than input from just consumers and end-users.

B2C companies have a more open mindset.

You can argue that B2C companies have a different mindset. Having to work directly with consumers and end-users seems to foster a more experimenting and open mindset when it comes to bringing out new products and services.

In theory, this should make B2C companies more open when it comes to innovating how they innovate, but in reality they can get as stuck in their traditional ways of doing things as B2B companies.

Similarities:

The real work happens behind the scenes.

So what if B2B companies are better at crowdsourcing. The real work starts behind the scenes and this goes for both types of companies. Even though you have good access to external input, you still have to integrate this into your organization in order to bring out better innovation. This is hard work.

They share many of the same issues and challenges.

Corporate innovation units in both types of companies share many of the issues and challenges including:

• getting executives to buy into and commit to innovation
• developing an innovation strategy
• building a strong innovation culture
• making business units engage in innovation
• improving communication with regards to the corporate innovation capabilities
• merging external and internal resources to bring out better innovation
• moving beyond incremental innovation and bring out more disruptive innovation

The approaches to these issues and challenges are quite similar regardless of the type of company.

More and more innovation happens through communities.

The future innovation winners will be those that manage to bring together current and potential innovation partners (companies rather than individuals) in eco-systems and communities. The big challenge is how to make such communities work and this goes for both types of companies.

Challenge-driven innovation can help both types of companies.

Service providers such as NineSigma, InnoCentive and IdeaConnection focus on challenge-driven innovation in which they help companies (seekers) connect with individuals as well as other companies (solvers) in order to get their problems solved. Such an approach can be applied within many different kinds of business functions and thus it can bring value to both types of companies.

In an earlier discussion on this, Kevin McFarthing also added that B2B companies have a much smaller number of customers, each of whom buys a lot. He stated that it’s true that B2C companies go via retailers who certainly have an influence, but large customers are very important in the definition of the innovation portfolio for B2B companies. This is a valid observation by McFarthing.

What is your take on this topic of open innovation for B2B companies?

This spurred an interesting comment from Michael Fruhling, which went like this:

“It is a lot easier to take the Starbucks approach when you control the distribution channel, and therefore, they get to assume all of the risk. I assume that Microsoft can (or could) pull this off because they are (were) the only game in town for PC based operating systems. Other folks don’t typically have this kind of leverage.”

True. It is easier to be bolder in your innovation approaches when you own the distribution channel as you can better absorp and manage the potential failures that come with a higher risk profile.

However, I would argue that open innovation can bring a similar freedom to operate if – and yes, that is a big if – you can get your partners on board this mindset of experimentation as with the Starbucks case and as we often see in the IT industry. You do not necessarily have to own things like a distribution channel. Sometimes control or influence can be just as good.

This ties into some of my other thoughts on open innovation, eco-systems and education. It is not enough to just get your own organization ready for open innovation. You also need to bring your partners – and potential partners – up to speed.

I foresee that a big piece in future open innovation efforts will be programs that tackle this upfront. Companies will simply have procedures or programs in place that explain what open innovation means to the company, what they expect from partners, what they can deliver themselves as well as a training program to address needs and issues on this.

This will probably take 3-5 years before it will be common, but I am confident it will happen : – )