Innovate on Purpose

Innovation: Speed as an enabler, feature, benefit

2012-05-25T05:45:00.001-07:00

Over the last few days I've been writing about the relationship between speed, velocity and innovation. So far we've decided that velocity matters (velocity is speed in a specific direction) because the pace of the market is increasing, and as it increases product lifecycles become shorter, meaning new products and services must be introduced more rapidly and more frequently simply to maintain competitive position. Yesterday I made some suggestions about how "fast" you should innovate. The idea being that an intentional plan for innovation across a range of outcomes (incremental to disruptive) and product, service, experience and business model types is important. Without an intentional plan, without clear goals, innovation doesn't happen, and when it doesn't happen your organization is likely to find itself further and further behind the competition.

The problem with the concept of working "at speed" is that most organizations have a pace or rate at which they like to work and are comfortable working. In fact, as bureaucracy and organizational inertia sets in, speed and velocity take a back seat to meetings, discussions, committees and approval cycles. Most organizations aren't currently designed or built for speed or velocity. They are highly optimized to deliver a narrow set of products and services they understand very well, but have little ability to pivot and accelerate in new or different directions, and little capability to manage new ideas at speed. My book, Relentless Innovation, describes what I'll call the tyranny of "business as usual". Most organizations have reached the pinnacle of efficiency and effectiveness just as innovation, velocity and inventiveness become paramount.

The interesting opportunity that presents itself to any organization willing to increase its velocity through innovation is that speed is an enabler to business objectives, a feature to your clients and customers and provides benefits to your firm as well. While many organizations fear working at a higher speed or velocity, speed can actually improve your results and help your organization sustain its position in the market, if not radically improve it. I should note that I've made a distinction between speed and velocity, as velocity is speed in a specific direction, but for the purpose of this post I'll just stick with speed.

Speed as an enabler
Larger organizations recognize their "need for speed" but fear the transition and consequences. A large organization has a culture and bureaucracy with a mind (and a pace) of its own. Trying to tweak the process for a bit more speed here or there is a significant challenge. Any bureaucracy, firmly established, resists changes. Further, from a distance working at speed looks dangerous. There's not enough foresight, so firms worry about driving further than their "headlights" can illuminate. Working at speed is risky because we'll ask the organization to do things at a pace it is unfamiliar with, and that may have impacts on output and quality. On the whole, most organizations will revert to the existing pace. However, adopting a new pace can be an enabler to further opportunities and growth.

Maintaining your existing pace will mean working to a rate that existed as the business matured and as the bureaucracy dictates. However, your internal pace isn't valuable or interesting to the market, which is constantly speeding up. The market and competition dictate the pace, and firms must struggle to keep up. But speed is an enabler if your organization makes a commitment to speed, through improving internal capabilities, shortening product development cycles and building innovation capabilities to bring new products to market at an increased pace. Speeding up your internal pace doesn't have to lower quality or create more mistakes - but it will require more research, more insight and more planning. Working at increased speeds means your firm must become far more proactive in the market, rather than reactive to the market, and good innovators are constantly trying to understand and assess needs in the market to predict opportunities, rather than attempt to simply respond to them.

Speed as a feature
As you accelerate your internal capabilities and innovation processes, speed is no longer a risky venture but becomes a feature of your products and services. Your clients and customers grow accustomed to a new level of productivity and a pleasantly surprised by meaningful products and services delivered at an increased rate. You can then market your capability as a firm that delivers at a much higher velocity, which has meaning for your customers, who also understand the pace of change is accelerating.

Speed as a benefit
But we all know that you sell the sizzle, not the steak, and speed isn't just a feature, but a benefit. As your innovation capabilities and internal product development skills improve, you arrive first to the market, in the right markets, with the right products, at the right time. This means greater market share, more market awareness and more attention paid to what your firm does. Wouldn't your firm benefit from the free marketing that Apple or Google benefit from? Innovators define markets, and disrupt markets, and benefit from more than their fair share of market coverage and awareness. As your firm gets faster, it becomes a better competitor, with better margins not from excellent efficiencies (although that can't hurt) but from being able to command higher margins. And, once you can work at higher velocities you force your competitors to change and adapt.

Can innovation really drive these benefits? Yes. Look no further than P&G or 3M if you care not to look at Apple or Google. Innovation creates more market awareness, more visibility to relevant, important ideas that matter, and an improved ability to bring products to market more quickly and effectively. If you want speed, and frankly, who doesn't, implement a real innovation capability - innovate your product development process and create a viable "front end" innovation capability. The increased innovation capability will deliver greater speed, which will have enormous benefits.

How fast should you innovate?

2012-05-24T05:33:00.000-07:00

In my last two posts I've identified the need for speed, or velocity, as an outcome of innovation. What many firms fail to realize is that the game has changed. The rate of change in the environment has increased, and to remain "in the same place" as your firm is today - merely to hold serve - you must accelerate your product and service development capabilities. That means improving your ability to develop and launch good ideas, which will require tweaks to your product development process, and improving your ability to find, develop and rationalize good ideas, which will mean creating a consistent, persistent innovation capability if one doesn't exist, or improving an innovation workflow if it does exist.

If, as I suggested in my post about Velocity, the adoption rate of new products and services is increasing, then the obsolescence rate of products and services is also likely increasing. We as consumers become bored quickly, and demand new features. Not long ago the presence of a camera in a cell phone was an amazing thing. Then, nothing less than a 4 megapixel camera would do. Now, in many cell phones we have cameras that challenge many stand alone digital cameras for capability and performance. It's possible the small stand alone digital camera will become obsolete in just a few years, replaced by the cell phone. This increase in expectation and performance is jaw-dropping in its speed, and in its impact.

How fast/often should we innovate?
What it means to your organization is that innovation must accelerate to keep pace with the environment and with customer demands. When we work with customers we are often asked, "How often/How fast should we innovate"? My response is always based on the competitive landscape, the rate of change in the market, the position of the firm asking the question (leaders or laggards?). But inevitably the answer is: faster than you are doing so today. And in many cases, along a much broader front than you do so today.

I want to offer a suggestion about the rate of innovation that many firms should consider. Of course no one recommendation fits all, so take what follows as a baseline, from which you may apply your specific needs and market challenges. What's valuable is not that you follow the recommendations exactly, but that you have a strategy or intent for innovation activities and pace. Defining a strategy, and putting the capabilities in place to accomplish that accelerated innovation demand, will in and of itself create more awareness and more excitement for innovation.

Based on the range of outcomes
Think about the range of innovation outcomes, and your organization's goals and intent:

Incremental innovation - this should be happening almost constantly
Disruptive innovation - each business unit or product group should conduct at least one activity a year to determine the "next big thing"

A good yardstick for the range of innovation activities between incremental and disruptive is to consider the "Three Horizon" model, and plan innovation activities in each of three horizons - incremental, breakthrough, disruptive.

These three horizons are based on the knowledge of needs and products, certainty of the need and the impact of the product or service when it hits the market. Most firms focus only on Horizon 1, neglecting Horizon 2 and Horizon 3. Given the pace of change, Horizon 3 expectations rapidly find their way into Horizon 1 timeframes.

Based on the strategic goal
But the measures above are simply measures of degree. Other strategies or goals can be defined:

Product innovation - Innovation focused on improving or completely replacing existing products. Incremental innovation should be underway all the time. Your team should conduct disruptive innovation on a planned cycle, preferably at least once a year
Service/Experience innovation. This is innovation focused on improving customer service or customer experience, from the customer's perspective. Again, your teams should be incrementally innovating the service/experience models regularly, and considering disruptive innovation activities for service and experience at least once a year.
Business model innovation. Innovation focused on changing how the firm makes money or competes in its industry. Clearly a disruptive innovation, but should be considered at least once every three to five years, given the pace of change in the market space.

Conclusion
There's no one size fits all, but your organization should be pursuing both incremental and disruptive innovation, using the Three Horizon framework as a guide. This is a question of speed and intent. Additionally, your teams should be pursuing constant product innovation, and intermittent product, service and business model innovation. These activities are no longer occasional initiatives but must become carefully planned and executed strategies. Customer expectations, new competitors and falling barriers mean that the rate of change in the economy is increasing. Yes, here in 2012 we are in a bit of a recession, but as the economy improves the rate of change will only increase. Sitting still, treading water is not an option. Neither is occasional, random innovation activities initiated by reacting to competitors. Innovation is a persistent threat, which must be answered by persistent, high velocity capabilities.

Velocity is the only innovation outcome that matters

2012-05-22T05:57:00.001-07:00

Yesterday I wrote an introductory blog post about the importance of VELOCITY as an innovation outcome. Today I want to drill a little deeper, to examine why velocity is so important to many businesses, and why innovation should be the technique that many turn to to accelerate velocity.

Few people would quibble with the argument that the pace of change is accelerating, and continues to accelerate. If, for example, you could teleport yourself to the Roman empire and examine the living conditions of the average family, you'd find that conditions weren't overly improved for hundreds of years. New technologies were infrequent and scientific discovery was slow. Fast forward to the early Middle ages, as learning and communication improved, and we see an increasing pace of change. Comparing, say, the 1200s to the 1400s would demonstrate significant gains for the upper class in terms of products, services and technologies. But the pace of change for significant portions of the population was still slow. Consider even the 1950s and 1960s. Much of the world lacked basic infrastructure, communication systems, adequate food, while the "developed" world had all of these factors and more. Today, it's not unusual to find people in depressed circumstances with access to cell phones, the internet, bank accounts and many of the trappings of a fully modern society. The pace of change has delivered more goods, services and technologies, and distributed them more quickly in the last few decades, than many believed possible.

Factors Driving Pace of Change
What factors drive the increasing pace of change? I'm sure better minds than mine have pondered this question, but a few factors seem relatively obvious. First, better information systems and communication systems. When communication is difficult, it is hard to transfer knowledge and information. As communications systems have advanced, the ability to spread information more broadly has improved the pace of change in many areas. Second, the distribution of education. Today, many of the world's best universities are resident in the US, the UK, Germany and other "western" countries, but increasingly excellent universities are identified in India, China and other countries. Further, access to education, over the web, over the improved communication channels means that far more people can gain education and build skills. Third, the increasing demand for better living conditions, better lives for our children, more access to more things. Fatalism and the acceptance of a terrible life is a thing of the past. Everyone, everywhere demands a better standard of living, more access to more and better goods and services. These demands create the opportunity for a market, these demands are filled with new and better supply.

These are factors that I think are driving the increasing pace of change. But you don't have to accept my assertions, you can see the increasing pace of change for yourself in adoption curves of technology. The "S" curves of technology adoption over the last 100 years demonstrate that it took years for a radio or television to penetrate many households, while newer products like VCRs, cell phone and PCs penetrated very quickly. One reason this is true is that the infrastructure (electricity, communication standards, interactivity) was built, deployed and stabilized. As the infrastructure got better, it became easier and easier to deploy and to use new technologies. See the increasing acceleration of adoption in the "S" curve image below.

Diffusion of Technologies in Households

Implications of Accelerating Change
The implications of this acceleration should be obvious - the pace of change and rate of acceleration is ever increasing. Individuals who were once satisfied with only one model of product are now more likely to be clamoring for more variety, more choice. This is something that even Henry Ford missed. Simply solving a basic transportation need led to ever increasing demands to satisfy comfort, status and ego needs. For many products and services, life expectancy is decreasing at the same rate as the accelerating pace of change. Few firms can count on long product cycle times.

Why this matters to Innovation
If these assumptions are true, then VELOCITY, as defined as speed in a specific direction, becomes very important for a firm's ability to grow and compete. Relying on long product life cycles is not an option. Customers will demand new products, new features at an ever increasing rate. Firms can't simply "dump" older technologies and products into "developing" markets because those market too understand the product/feature acceleration and reject older products. This acceleration means that firms must address the most significant barriers to velocity within their businesses. There are three barriers they must address:

The ability to bring products to market very quickly. Most organizations have well-defined, stage-gate models that use waterfall approaches with many signoffs to reduce risk. These existing processes are long, drawn out affairs designed to prevent mistakes and perfect products rather than systems attuned to customer needs and expectations. One of the first activities many firms should undertake is to innovate their product development cycles.
Few firms have invested in true innovation capabilities. Yes they have some "innovation" teams and perhaps even some systems or processes meant to sustain innovation, but they don't consider innovation core to their business. Innovation - purposefully creating new, meaningful products and services that clients will want - will increase the organization's speed, and potentially its velocity. It can increase velocity if...
Executives create clear strategies based on the understanding of the importance of velocity. Innovation can result in more speed, based on improvements in the product development cycle time and in generating new ideas more effectively. But the difference between velocity and speed is intent. Velocity is speed in a specific direction. Executives must provide the demand for speed, combined with the insights that detail specific directions. Innovation needs far more attention from executives, in terms of greater importance and more clarity and focus.

Conclusion
So, hopefully you can see that perhaps the most important outcome innovation can deliver is velocity, that is, corporate speed with purpose. I've identified at least two areas where more internal speed is important, if a firm hopes to keep pace with its competitors and its market demands. Executives play an important role here as well. Our corporations become comfortable with our operating models and the internal pace of business. While our internal pace may be valuable, comfortable and well understood, our internal pace is irrelevant if the external pace of change is different. Far too many firms have too many structures that impede speed and velocity, and are too comfortable with a slow pace of change. Why they may believe they need innovation to create new products and services, these firms fail to realize how important it is to accelerate their operations and keep pace, at a minimum, with the market. And, not only is speed important, but velocity. Meaning that while we increase internal speed we do so in important, strategic directions.

In subsequent posts I'll address the concept of innovation as a catalyst for corporate velocity.

Velocity, speed and innovation

2012-05-21T11:15:00.001-07:00

I'm just returned from a long trip to the UK and South Africa, leading workshops in London and in Johannesburg on innovation topics. Flying for 12 hours at a stretch can give you a lot of time to think, in between in-flight meals, movies and other on-board entertainment.

The more I thought about the current state of innovation, the more I realized that many of us have it all wrong. We at OVO often talk about innovation as an enabler to strategy, not a strategy itself. But I think there's something much deeper going on than that. First, we know that many executives WANT more innovation. But they don't want innovation for its own sake. They want innovation that drives more revenue growth, more differentiation and more creation of compelling products and services than what would otherwise happen. This means that innovation must create solutions with more return than existing methods, with only incrementally greater risk.

Executives want to be Innovative, they don't want Innovation
In the final analysis, CEOs and senior executives don't want INNOVATION, they want the benefits and outcomes of well-pursued innovation activities, namely, growth, differentiation, market penetration, disruption of adjacent markets and so forth. If there are easier ways to achieve these outcomes, CEOs and organizations will gladly pursue the alternatives, and forgo the risks that surround innovation. What risks? Because of the investments in management tools, techniques and training to improve efficiency and effectiveness, many businesses have very efficient but very brittle and fragile operating models. Innovation introduces risk, uncertainty and change into organizations and business models honed to avoid these issue. Further, most work teams have been right-sized and down-sized to the point where incremental work is almost impossible to engage. No, what executives want is not innovation per se, but they would like to be viewed as INNOVATIVE and enjoy the benefits of meaningful, valuable new products and services.

Why Velocity is more important than Speed
Perhaps what I've come to realize is that what most organizations need more than anything is VELOCITY. Let me explain what I mean by Velocity. My daughter's physics class was working on the definition of motion and speed. Speed measures how fast an object is moving, so many feet or miles divided by the amount of time it takes to complete the distance. Physics and calculus distinguish SPEED from VELOCITY, by taking the stance that VELOCITY is Speed in a specific direction. Physicists and scientists would say that VELOCITY is a Scalar concept.

When we think about most businesses, VELOCITY is exactly what they need. They need speed to compete with a host of changes occurring in their markets, from increased competition to lowered trade barriers to a rapid increase in the abilities of individuals and firms in developing countries and markets. However, speed isn't all that valuable if it's in the wrong direction. VELOCITY is speed in a specific direction, and that's what many organizations need. They need to be faster, more effective, more innovative, and end up in a place that was intentional.

VELOCITY connotes the idea that the firm is going somewhere that matters. How a firm knows where to go is dependent to some extent on corporate strategy and how well that strategy is communicated. Further, how it knows where to go is dependent on the firm's ability to assess market trends, develop scenarios and understand customer needs. These final factors are innovation tools, which help describe a range of possible futures and help decipher which ones are relevant and important.

Speed kills, Velocity Wins
Over the next few days I will write about speed, velocity and their relationship to innovation. Because increasingly innovation is just a method to help a firm increase its speed in a particular direction. Speed will become the new competitive weapon in a highly competitive market, but speed in and of itself is useless without intentional direction and guidance. We'll look at why speed is ever more important, and how good innovation contributes to speed and velocity.

Another way to think of this is that innovation is a feature, and speed or velocity are the potential benefits. I'm increasingly convinced that velocity in a business sense - getting to the right markets and opportunities faster than others, and doing so intentionally - is the capability that will distinguish winners from losers in the coming years.

Innovators: stand on the shoulders of giants

2012-05-15T01:03:00.000-07:00

I had a nice meeting today in Johannesburg with an individual I met through Twitter. We talked about our shared interest in innovation. When I queried him about how he became interested in innovation, he told me that he started out in his company's process improvement team, and innovation just seemed like the next logical step. Innovation, in his eyes, built from incremental changes to ever increasing radical or disruptive ideas. This discussion led me to think about the advantages of starting innovation late.

Innovation, like any other science or capability, is evolving. In the example above, many organizations start innovation based on incremental changes, which spawn new ideas about bigger and riskier change. Further, many organizations start innovation activities by querying their employee base and asking for ideas. As the innovation activity matures, these firms realize that open suggestion systems often don't provide the insight and value desired, so they shift to what we call "directed" innovation - asking for ideas about a specific problem or need. So you can see evolution and learning at work in real time. The evolution involved in the shift from incremental ideas to radical or disruptive ideas, and the shift in focus from suggestion systems to directed innovation.

What's interesting is that many firms follow these paths, starting with incremental suggestion systems and slowing discovering that more formal directed systems are more practical. What I don't understand is why so many firms fail to understand the best practices and learning that exist. Why recreate the wheel when the evidence is available in the marketplace? Most firms starting innovation activities today should build from years of experience available in the marketplace, and should "leapfrog" generations of innovation activity, skipping over the less valuable suggestion systems about incremental ideas to a more formal innovation activity addressing specific company strategic needs. In the same way that we see many countries using advanced wireless telephony to overcome missing or outdated landline service, we should see new innovation entrants capitalizing on existing innovation knowledge and best practice. These firms should be leveraging the benefits of prior experience and scaling the learning curve much more quickly than the firms that preceded them. Yet in many cases this doesn't happen. Why this is the case is a head scratcher for me.

Plenty of best practice is documented for innovation. Hundreds if not thousands of innovation experts, consultants and practitioners exist. Thousands of books are written about innovation. Innovation conferences and training programs abound (cough, cough). It's not as though the best practice doesn't exist - its as if people willfully ignore it or don't seek it out. There are only a couple of plausible explanations for this behavior:

People don't believe there is such a thing as innovation "best practice"
People believe they must take every step in the evolutionary journey in order to be innovative
People don't want to take the time to learn the best practices and dive in at the shallow end of the pool
People don't believe innovation will have a long life in their organization, so understanding the best practices isn't worth the time
Innovation isn't expected to have a big impact - it is for "show" rather than having an impact, so any activity is valid

To paraphrase Dean Wormer in Animal House, cynical, uninformed and unmotivated is no way to go through innovation. Anyone in any firm can learn what works and what is valuable in innovation, and leapfrog the early inefficient activities to move onward to more effective innovation. The reasons I've listed above reflect a lack of investigation, a lack of emphasis and time, a cynical attempt to quickly deliver some "innovation" regardless of outcome. What other reasons could exist for a failure to fully understand what's successful, and what isn't, in innovation.

Here's an analogy to prove my point. I recently led a workshop on open innovation with several dozen people who claim to be active in innovation, who have a stated interest in open innovation. When we examined some of the different styles of open innovation, I recommended that they look at IdeaStorm, Dell's open innovation portal. When asked, only 2 of over 30 people were even aware of Dell's IdeaStorm, perhaps the most public open innovation activity, in a room full of people who want to do more open innovation. Why would a room full of self-selected innovators, many of whom use Dell products, be unaware of what is perhaps the most widely touted open innovation platform? Is it a lack of interest? Clearly not. Is it a lack of research? Perhaps. Is it a failure to understand that they can learn from what firms that are further ahead have done? I really don't know. Our thinking about open innovation is freely available on this Slideshare presentation.

But I do know that firms that understand that innovation is an evolutionary activity can learn from those that have gone before, and leapfrog to a more robust innovation platform. As Newton said, if I have seen further it is because I stood on the shoulders of giants. There are innovation giants on whose shoulders you can stand, if you care to find them.