Finding the Right Innovation Balance

3M is one of the most innovative companies in the world.  Each year, their target is to have more than 30% of their revenue come from products that are less than four years old.  To do this, they must constantly come up with new stuff.

To find this new stuff, they spend about 6.6% of their annual revenue on Research & Development.  The average large US corporation spends less than 2% of revenues on R&D, so 6.6% is a whole lot.

But think about this for a second – what is 3m spending the other %93.4 of their money on?

The rest of the money goes to executing ideas that they’ve already had.

One of the challenges of innovation management is finding the right balance between the old and the new.

innovation balance

 

Finding the balance between the old (the 93.4%) and the new (the 6.6%) is tricky.  You need the core business to work smoothly and efficiently in order to realise the value of your great new ideas. But this requires different skills and metrics than we need to use to come up with those great new ideas in the first place.

Bob Sutton looks at these issues in his excellent book Weird Ideas That Work: How to Build a Creative Company.  He says:

There is a lot of hype in the business press about the dangers of clinging to the past, and much of it is justified.  But all the excitement about building better products and companies can make us forget that most new ideas are bad and most old ideas are good. After all, that is what Darwin predicts.  The death rate of new products and companies is dramatically higher than old ones.  Dozens of new breakfast cereals fail every year, while Cheerios and Wheaties persist.

My aim is not to convince you to discard every routine your company uses and to devote all efforts to inventing new ways of thinking and acting.  On the contrary, doing routine work with proven methods is the right thing to do most of the time.

Does this mean that you should stop trying to innovate? Not at all.  The problem is that the world does change, new technologies are developed, competitors come up with superior products and services, and consumer preferences change.  These are the times and place when innovation is crucial. … Many companies have made a lot of money by creating new and better future. So, although it usually entails a high failure rate and a lot of resources, every company – or at least part of it – needs to keep trying to discard old ways and replace them with new and better ways.

This is a challenge.  If we devote ourselves only to the new, then we will fail to take advantage of the great ideas that we generate.  But if we only concentrate on optimising for the present, then we’ll get killed by the future.  And the pace of that problem has increased significantly since Sutton wrote the book in 2002.

Here is how Nilofer Merchant puts it in an excellent post on what she learned from working with Steve Jobs:

… our job as innovative business leaders is to manage the present while inventing the future. We must recognize that we are always a product of what we’ve done and who we aspire to be. It is not enough to lead our current businesses; we must also lead our future businesses. … To grow new markets means making yourself uncomfortable.

The part about feeling uncomfortable is also what Sutton is getting at – that is why the ideas in his book seem weird.  He recommends 11.5 ideas that you need to execute in at least part of your business in order to create the future:

His ideas are:

Here is the list (note I say 11.5, but there are really 12)

1. Hire slow learners (of the organizational code).

1 ½. Hire people who make you feel uncomfortable, even those you dislike.

2. Hire people you (probably) don’t need.

3. Use job interviews to get new ideas, not to screen candidates.

4. Encourage people to ignore and defy superiors and peers.

5. Find some happy people, and get them to fight.

6. Reward success and failure, punish inaction.

7. Decide to do something that will probably fail, then convince yourself and everyone else that success is certain.

8. Think of some ridiculous or impractical things to do, and then plan to do them.

9. Avoid, distract, and bore customers, critics, and anyone who just wants to talk about money.

10. Don’t try to learn anything from people who seem to have solve the problem you face.

11. Forget the past, especially your company’s successes.

Finally, as a summary, if you look at these, a reasonable conclusion is that, although creative places can be a lot of fun at times and being happy is linked to creativity (sort of, I’ll explain in a later post), note also that Creative companies and teams are inefficient (and often annoying) places to work.

Sutton wrote an excellent piece for HBR that summarises the ideas in the book – which includes this graphic:

weird ideas that work

 

This is another tension in managing innovation – finding the right balance between managing the present and creating the future.  And it again shows that to innovate, we must first understand the past.

This is hard.  If you look at Sutton’s ideas, you can see that implementing them will create tensions within an organisation.  It’s much easier to focus only optimising the present, or on building something completely new.  But those two extremes lead to failure.

As Paul Hobcraft correctly pointed out to me once in an email – “if innovation were easy, everyone would be doing it.”

Yep.  One of the challenges is finding the right innovation balance.  3M has done it, and so have others.  If we can too, then our odds of success go up.

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Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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