1. Are we geared up for ‘sustaining innovation’?

Sustaining innovation describes any enhancement of your products or services that enables you to better serve existing or higher value customers?  If your company is being regularly out-paced by competitors, then you probably need to improve your sustaining innovation engine.

Key requirements for a strong sustaining innovation engine include:

• A clear structure for innovation to ensure everyone knows who’s job it is.  A common approach is making product managers responsible for innovation.   A more focussed approach is to have a skunk-works, a separate business unit charged with innovation.  Many of the better known innovative companies, such as 3M, Gore Associates and Google, explicitly make innovation everybody’s responsibility.  At the other end of the spectrum, a rare breed of company, notably Apple and Virgin, have an entrepreneurial leader with the licence and capability to drive innovation from the top.  Whatever your model, or combination of models, it must fit with your organisation’s strategic ambitions and the organisational and leadership culture, structure and capabilities.

• A close connection to your customers to understand what their needs are and how well they are being served.  This could take the form of a prominent customer feedback line such as the Banana phone that the Innocent juice company in the UK uses – a phone which moves around the office so that anybody may have to answer a query from a customer.  Alternatively, it may take a form similar to the “Adopt a Mum” program, used successfully by ASDA in the UK, whereby managers were responsible for staying connected with regular customers to understand how well the store was serving their needs.   A customer focussed culture is best driven from the top by example.  One senior leader at Unilever always spent the first day of his visit to a regional office visiting local stores to see how the product was placed and to speak to customers to understand how it was being received.  Naturally the local leaders would spend the day before his arrival doing exactly the same thing, and so the behaviour filtered down through the organisation.

• A clear process for innovation to ensure that ideas don’t get lost or underdeveloped.  It’s important to understand how ideas will be collected and generated from customer and staff insights, selected from the resulting pool ideas, built by the responsible team, validated through market surveys and analysis, and designed and refined through iterative releases.

• A climate for innovation within the innovation team or wider business to ensure that good ideas aren’t killed.  The analytical culture of many businesses can have a chilling effect on innovation.   Behaviours such as greenhousing can ensure that people collaborate more effectively to build ideas.  Also, successfully facilitating ideas sessions is a skill that is rarely taught in schools or universities.  Facilitation techniques such as small group idea jamming can ensure that strong, well thought-through ideas are generated from ideas sessions.  Lateral thinking techniques can ensure that your people don’t get boxed in by the way they have always done things.

2. Are we set up for ‘Disruptive innovation’?

Disruptive innovation, in contrast to sustaining innovation, often involves offering a product or service with more limited features for a lower price, with greater convenience or greater ease of use.  Some of the better known examples include discount retailers which disrupted department stores, discount airlines which disrupted established airlines, and online classified sites like ebay and craigslist which have disrupted newspaper classifieds.  A couple of key points are worth noting about disruptive innovation.

It’s hard to see disruption coming

It’s often hard to see disruption coming because disruptive businesses (“disruptors”) often start by selling to people who could not previously afford the product or service and then engage in sustaining innovation to move up-market over time.  This was the case when Sony launched its transistor radio which was originally sold to teenagers who couldn’t afford table top radios.  Over time Sony innovated to improve the quality of the radio and eventually disrupted the market for larger radios.  Sometimes, established companies are aware of the disruptor, but are happy to let them steal their least valuable customers.  By the time companies react to disruptors it is often too late.

Watch for early warning signs

An early warning sign of disruption is when a competitive product is regarded by experts and those in the established business as “poor quality”.  This is how most American car companies regarded their Japanese competitors when they arrived on their shores.  It is also how cardiac specialists regarded the home defibrillator when it was released.  There was outcry at the prospect of lay people administering shocks to victims of heart attacks.  But of course, a heart attack victim would prefer unprofessional treatment to no treatment at all in the minutes that count.

Key requirements for a strong disruptive innovation engine are:

• A commitment to regularly growing or acquiring disruptive businesses. History shows that companies that wait until growth has stalled may be too late.  At this point corporate values change, requiring fast low risk payback from investments.   Since successful disruptions usually involve entering unchartered waters, it is hard to make a compelling business case for them.  Furthermore, even if an investment is made early, growth is usually slow.  As a result, they rarely make it through the new product or service filters of most companies.  Energy drinks were reportedly rejected by Pepsi’s stage gate innovation process multiple times, before Red Bull launched its hugely successful product.  Similarly, IBM rejected the Xerox machine believing the market to small to pay back the investment.  Accordingly, it is important that businesses make a commitment to launching or acquiring potentially disruptive businesses on a regular basis.  Only with such a policy in place will the company have any prospect of identifying the next potential disruption opportunity by the time its existing growth engine stalls.

• Owner level responsibility for investment decisions. Due to the fact that they are usually creating the market, the success of disruptive innovations is rarely predicted from their early financials.  Rather, they can best be identified by pattern matching.  As a result many potentially disruptive businesses are starved of funds by ROI obsessed resource allocation processes.  To counter this, owners or at least CEO’s should take a keen interest and hand in determining which disruptive investments get support and which are abandoned.
• Emergent as well as deliberate planning processes. Few disruptive innovations hit the mark when first released.  Companies have wasted huge amounts of money gearing up to launch a product to market, only to find that the product, service or strategy was flawed.  Accordingly, while sustaining innovation requires a more deliberate planning process to achieve the first-mover advantage, disruptive innovation requires an emergent development process that is focussed on investing to learn rather than on speed to market.
• A strong sustaining innovation engine since once a disruptive innovation has been launched, it must be continually improved in order for it to ultimately disrupt.

Almost every industry faces the prospect of disruption.  Some major disruptive drivers at present include:

• Technological advances eg the Internet and now the iphone
• Demographic trends eg aging boomers and the growing influence of Gen Y
• Environmental trends eg renewable energy solutions and carbon trading
• Smart entrepreneurs that can identify cheaper, more convenient or more accessible ways to product or deliver your product or service

To have a conversation about how well your business is set up for innovation, or to have us conduct an innovation capability audit, contact Simon Cant at simon@cantt.com.au or on 0412 483 621.

• Vision-led
• Market-led
• Team-led
• Future-led
• Technology-led
• Necessity-led

Vision-led: creating the world you want

“I’m struggling to get my people enrolled and all pushing the same direction!”

Vision-led innovators drive innovation by creating a sense of possibility about the way the world might be. This is catalytic innovation that requires not just the vision of how the world might be, but the ability to inspire people to change they way they are in the world in order to achieve that vision.

The vision marked out by President Kennedy in his famous statement, “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth”,is a striking example of vision led innovation.

CANTT supports leaders to articulate their vision in inspiring and practical ways, energising their teams and providing them with a touch stone for making day to day decisions.

Market-led Innovation: giving people what they want

“I need my people to be more in touch with our customers, anticipating their needs and responding quickly.”

Market-led innovation is driven by a sense of customer need. It depends on a close relationship with customers and the ability to respond quickly to new needs as or before they arise. This is typically incremental rather than game changing innovation.

Many internet organisations, with their ready ability to communicate with their customers in real time on a mass scale, are perfecting the art of market led innovation.

CANTT supports organisations to be better market-led innovators with proven strategies for getting closer to customers, for looking beyond the customer’s expressed desires to identify their real, potentially unconscious needs.

Team-led Innovation: changing ourselves to change our world

“Most members of my team are really strong in their area, but they don’t seem to be able to work together to make things happen.”

Team-led innovators empower their people to develop and implement new ideas. The first step is to create what some describe as freedom within a guilded cage. That is, clear objectives and guidelines as to what is ‘out of bounds’ while at the same time offering a free reign on operational and implementation details.

The second critical need for team led innovators is a strong culture that enforces collaborative behaviours without killing the competitive instinct that provides the energy for growth. This must start at the top.

CANTT assists team-led innovators, both in establishing a clear team purpose and boundaries and in working with the team to develop collaborative and constructively competitive norms of behaviour.

Future-led Innovation: anticipating where the world is heading

“I want to make sure we maintain our market position and don’t get blind-sided by missing ‘the next big thing’”

Future-led innovators have a deep and broad knowledge of current trends across business, science, and culture. They also have an acute instinct for how these trends will play out in their field.

This type of innovation is what was referred to by Steve Jobs, CEO of Apple, when he was asked in 1998 how Apple could grow given the dominance of Windows. He responded “I am going to wait for the next big thing”. For him that was Pixar and then the iPod.

CANTT supports clients to develop a strong picture of key trends and draw together diverse threads of information in order to spot new opportunities.

Technology-led Innovation: adapting a new technology to open up a new world

“I want to use technology to get ahead of our competitors”

The pitfall for many would-be technology-led innovators is the assumption that they can simply apply the latest technology to their business, without understanding the real drivers of the technology’s use.

For example, while many companies have sought to add social networking functionality (like facebook) to their corporate website, the smarter companies have looked at the drivers of social networking to understand how they can best engage the social networking phenomenon.

With years of experience in technology, developing legal expert systems, leading finance and investment web sites and overseeing investing in technology companies, CANTT brings to technology-led innovators a deep understanding of the interaction of culture and technology, to be able to identify new ways that technology can be applied to achieve more effective outcomes.

Necessity-led Innovation: making something out of nothing

“Things are tight. If we are going to succeed I need all members of my team to step up and take responsibility for making it happen.”

Some of the most ingenious innovation occurs in times of scarcity. A famous example of necessity led innovation was during the Apollo 13 space mission when Gene Kranz, the now legendary flight controller, declared “failure is not an option”.

After an incident the command module was left with too little power to make it back to earth. The flight control team worked tirelessly to come up with a new plan that involved putting the module into a “barbeque roll” to keep it evenly heated by the sun, enabling the module to be powered down until re-entry.

As Kranz discovered, a unique form of team-work is required for necessity-led innovation, one that requires that team members see themselves as both collectively and individually responsible for anything they do, or fail to do.

CANTT supports teams in developing cultures of individual and collective responsibility. We also facilitate processes for systematically identifying implicit assumptions in work practices, products and services and asking “what can we do differently?”

Conclusion

Innovation is an umbrella term that captures the general desire to grow your organisation.  It’s worth looking at the nature of the innovation challenge or opportunity that you want to tackle to better understand how to approach it.

CANTT can assist you in understanding your challenge or opportunity and setting out the right process for addressing it.  Contact Simon Cant at simon@cantt.com.au