Archive for category innovation strategy
Why Do Razors Have Five Blades Now?
Posted by Tim in innovation strategy on 8 February 2012
I remember that when Gillette came out with their double-bladed razor, I started joking about how it wouldn’t stop until razors had five blades. At the time, that seemed absurd, but sure enough, now we can buy razors with five blades.
Now, while this may seem ridiculous, it’s actually a pretty smart response to a potentially disruptive innovation.
The introduction of the double-bladed razor was actually how Gillette responded to the introduction of disposable razors. The value proposition of disposables was: the quality of the shave is almost as good as you get with real razors, but we’re a lot cheaper.
For Gillette, this is similar to the situation that Swiss watchmakers faced with the introduction of quartz watches. The main difference is that quartz watches were both cheaper and more accurate than mechanical watches. In the case of razors, disposables were cheaper, but not better.
Gillette faced a choice. They could embrace the new technology and start making disposables themselves. Or they could double down on their existing business model.
They chose the latter. They had a quality advantage, and they have continued to invest in stretching that advantage. Instead of trying to shore up their weakness (price), Gillette put all of their energy into building their advantage.
This is what Youngme Moon recommends doing in her excellent book Different: Escaping the Competitive Herd.
Doubling down on the current strategy doesn’t always work. There are at least two conditions that need to be met:
- You must have a clear advantage in at least one feature that customers care about.
- You must be have a value proposition that is built around this advantage.
The Swiss watchmakers had built their value propositions around accuracy. When quartz watches were introduced, this disappeared. A huge number of watchmakers that had been around for centuries went out of business. The ones that made it through built on the advantages that they still had: prestige and craftsmanship.
Gillette had a clear advantage in performance. And they’ve been able to build on that. The result has been that even in the face of a potentially disruptive innovation, they’ve managed to keep a better than 70% market share in razors.
That’s why we’re probably not too far away from razors with 8 blades. This time, I guess I’m not joking…
Replace Fear of the Unknown With Curiousity
Posted by Tim in book riffs, design, innovation strategy on 31 January 2012
The Shift Index 2011 is out now, and as with the previous two editions, it is a must-read.
I am always skeptical of “everything is different now” type arguments, but in this series of reports, John Hagel, John Seeley Brown and a number of other contributors have done a fantastic job of documenting exactly what is changing. It might not be everything, but it’s a fair bit.
Here are the four key points that they make in the summary of this year’s report:
- ROA (Return on Assets) performance continues its long-term decline due to deteriorating firm performance
- Layoffs and other short-term measures taken by firms are not a sustainable solution to improving long-term firm performance
- Connected individuals, not companies, are the ones harnessing flows and have more power because of it
- Firms have untapped opportunities to reverse their declining performance by embracing pull
Hagel and Seeley Brown have a number of recommendations about how to deal with this in their book The Power of Pull
(discussed here and here). It’s one of the best books of the past couple of years, and I recommend it.
Another book that deals with these issues is Futuretainment: Yesterday the World Changed, Now It’s Your Turn
The book is interesting. Here is one of the key points that Walsh makes in it:
Sometimes the best way to win a game is to question why you are even playing it. The rules that govern industries are rarely made in advance – they evolve in periods of rapid change until eventually they themselves become restraints on innovation. But there is one thing you can be sure of: when consumer behavior changes, sooner or later business behavior must follow. The future is already here, you just need to know where to look.
The book itself is a great example of trying to invent the future. Walsh has deliberately made a book that only works as a physical thing. It has a gorgeous set of photos taken by Walsh (including the one above) as the background on each page. Then it has series of insightful chapters discussing the implications of the big shift. Here is how he describes the approach:
The first question my publisher asked me was why a book and not a blog? Three years ago when I started working on Futuretainment, that was already a tough question to answer. With eBooks now on the crest of critical mass, it hasn’t got any easier. Last week, my book hit the shelves. Although you can buy it on Amazon, you can’t read it on a Kindle. In fact, with 300 pages of illustrations, original photographs and custom designed typography – it is about as Kindle friendly as a bathtub. That was a deliberate decision on my part, but it comes at a time when the very concept of a book is changing.
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There are two aspects to any book. First, there is the book as an informational construct. Put simply – an arrangement of words, sentences, paragraphs and chapters. However in our attention drained world of 140 characters, this construct increasingly boils down to a simple image – the long tail, the tipping point or the black swan. Despite fervent claims to the contrary, the vast majority of people don’t actually read books. They consume metaphors and debate in status updates.Fortunately, there is also a second aspect of books – ‘thingness’. Whether a Sumerian stone tablet, an Egyptian papyrus, an illuminated Medieval manuscript or just a pulp paperback – there is a physical side of books which has its own life.
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Because, as much as I love my Kindle, it is a marriage of convenience. My true mistress will always be books. The smell of print, and the sensual touch of high quality paper will never fail to seduce me. And I can only hope that my book might elicit the same response in you.
Unlike Jonathan Franzen, who recently discussed why books need to be physical without offering much more of a reason than “because I like them”, Walsh has made a book that demands to be instantiated physically.
eBooks are a great response to the informational side of books that Walsh discusses. Seth Godin wrote a great post yesterday about how to deal with this.
But to deal with the ‘thingness’ of books, you need a new business model. You need to create value not just in the words, but in the physical object as well. Walsh has succeeded in both aspects of his book.
What should the rest of us do? Maybe it’s time to heed Jorge Barba’s advice and get an MBA in curiousity.
Three Things You Can Do With a Business Model
Posted by Tim in business models, experiments, innovation strategy on 17 January 2012
Yesterday I looked at Eight Models of Business Models and Why They’re Important. However, in writing about how different people conceive of business models, I didn’t have enough space to address the really critical issue with them:
What can you actually do with a business model?
Once you’ve defined your business model, here are three ways that you can do with it:
- Test Your Organizational Design for Consistency: one of the key issues in looking at business models is that they must be internally consistent. If your value proposition is that you’re the cheapest, this has a direct impact on the choices you need to make about who to hire, how to train them, the relationships you’ll have with customers, who your customers need to be, etc.
In response to yesterday’s post, Graham Hill said on twitter:
None of the business model work passes muster. There are dozens, maybe hundreds of dependent variables. Not repeatable.
This is a valid point, if your objective is to try to replicate someone else’s business model. Bob Sutton makes a similar point in a great review of Inside Apple: How America’s Most Admired–and Secretive–Company Really Works
by Adam Lishinsky. It is one of those reviews that is just a nice piece of writing – worth reading whether or not you’re actually interested in the book.
Sutton raises an important point:
Apple is nearly the exact opposite of the kind of organization hyped by people like Gary Hamel and even Peter Drucker. It is centralized, secretive, fear-ridden, punitive, and not much fun for most people who work there. But it works because the pieces of the “organizational design” fit together, or at least did fit together when Jobs was there, in an elegant way. The secrecy is so severe that, when products are launched, even senior people are surprised by the final product because people are on a strictly “need to know” basis. But this is offset with a system of roles and responsibilities — and crucial to all of it– is what Apple calls the DRI, the directly responsible individual, a centerpiece of the organization. There is clear responsibility placed on individuals, not so much on groups and committees. Although groups and some committees do exist, the DRI can always be found and is where attention is focused. Which means that that it is clear where to go to provide guidance, to integrate their work with others, and who will be fired, blamed, and replaced — and celebrated too.
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My point here, and this follows an old conceptual perspective called “contingency theory,” is that other organizations that want to be like Apple –and that seems like so many now — need to be especially careful about copying individual pieces, because the reason it works is that the multiple elements fit together.The point here is to be wary of picking up one part of someone else’s business model and dropping it into yours. If the whole business model isn’t consistent, you’ve got problems. So unless you have Apple’s intuitive sense of what customers need, it’s very dangerous to say “Apple doesn’t do focus groups, so we won’t do focus groups.”
- Innovate the Business Model: Henry Chesbrough and Richard Rosenbloom tell two stories of business model innovation in the copier industry in their paper The Role of the Business Model in Capturing Value from Innovation. When Haloid Corporation tried to launch the first Xerox machine, they used the same business model as the mimeograph machines that they were competing against.
The initial launch of Xerox machines failed, because they cost six times the machines they were competing against. It took an innovation in the business model to succeed. Instead of trying to replace a mimeograph, Haloid decided to try to replace a secretary. This meant a new value proposition, a new market segment (only large firms), a new revenue model (leasing instead of purchasing), and so on. With the new business model, and with no change to the underlying technology, the Xerox machine took off.
Haloid Corporation changed their name to Xerox, and they dominated the market for nearly 30 years. Until another business model innovation started to seriously erode their market share.
Business model innovation is a powerful form of innovation. So once you’ve described your business model (or that of your industry), start thinking about how you can change it.
- Use it to Test Your Market and Your Assumptions: Steve Blank likes to say that a business model is just a set of hypotheses about the market. So you can use the business model to test your assumptions about what will work as you introduce new ideas.
Experimenting is a crucial part of innovation. You can use business model analysis to identify the assumptions that underlay your innovation – this tells what experiments you need to try.
Blank documents the process in his fantastic Lean Launchpad series, where he talks about nine teams in his entrepreneurship class at Stanford used the business model concepts to launch start-ups. Here is a description of one of the experiments:
The first team to present was D.C. Veritas, the team building a low cost, residential wind turbine. During the week they interviewed 7 more companies and consultants, developed case studies for 20 different cities in 5 states, and finalized the bill of materials for the wind turbine. But the big project for the week was testing and analyzing Customer Acquisition Costs. The team put together their sales funnel and started testing demand.
The results were disappointing. The most optimistic estimates showed that the residential wind turbine market was less than $20m in year 5 and the costs to acquire the customers made this a money-losing business.
After regrouping the team decided that a major pivot was in order. Perhaps residential customers were the wrong target? Maybe the wind turbine they were building was better suited to a different customer segment? They had gotten feedback from consultants and industry experts that cities and utilities might be a more receptive audience. What if they redesigned the wind turbine to be embedded into street and highway light poles? Then they could serve cities, lighting companies and utilities. Using the business model canvas, the changes to their business were obvious.The business model can be a great tool for guiding innovation experiments.
Yesterday we mainly talked about how business models can be described. Once you’ve described your business model, then what? These are three ideas – you can use it to: test your organisation design, innovate the business model itself, and define innovation experiments to test the assumptions of your firm.
Mimeograph photo from flickr/nicksarebi under a Creative Commons License.
Do Posts Asking if Something Kills Innovation Kill Innovation?
Posted by Tim in experiments, innovation strategy on 11 January 2012
One really good way to get traffic to your blog is to take a shot at a broad class of people, and do it with a catchy title. The latest version comes from FastCoDesign, which published the post “Do Innovation Consultants Kill Innovation?”
Gregg Fraley and Jeffrey Phillips wrote quick responses, both affirming the negative.
I tend to agree with Gregg and Jeffrey. But the authors of the original post, Jens Martin Skibsted and Rasmus Bech Hansen, do raise an important point – which is that big firms need to move from innovation-thinking to innovation-doing.
In their recommendations, Skibsted and Hansen make the same mistake that these ineffective big firms often make – they mistake creativity for innovation. All of the post makes this conflation:
People with strong, creative talents are essential to the development of innovations, and the difference between success and disaster is largely defined by the selection of a good team–not by its processes. Just as a company can hire an ad agency or designer to create an ad or a product, companies in all industries need to find ways to tap into a network of people, small companies, or institutions with real inventions and show them some faith.
Sometimes a company will have to breed and nurse the talent itself. Sometimes the talent are guns for hire. But companies should have the confidence to give them the freedom to explore the high-risk messiness and the fuzzy, nonlinear ways in which innovation grows.
Let’s say for a moment that creativity is purely the realm of creative genius – I don’t necessarily agree, but we’ll grant that for a minute. The innovation problem that big firms have isn’t a creativity problem – it’s an execution problem. Here is what Phillips says about this:
The authors have a point – some innovation can be risky, messy and non-linear. But that doesn’t mean the entire innovation capability should be left completely to chance! For anything to get done in a modern business, someone needs to be responsible and there needs to be some structure, some knowledge and some best practice. We can’t wait for the immaculate conception of innovation – we need to provide knowledge, tools, understanding and some people and process who understand how these things work.
The common issue here is that people always forget Sturgeon’s Law – 90% of everything is crud.
Do innovation professionals innovate poorly? Most of them probably do, maybe even 90% of them.
Do innovation consultants give people bad or useless advice? Most of them probably do, maybe even 90% of them.
My advice from the last time I talked about this still holds:
Nothing is always absolutely so.
Now, that’s a really bad point to try to build a blog post around. It’s always a lot harder to explain why there are exceptions to every rule. It’s easier to make big categorical statements. It’s more fun, it’s easier to make lists out of them, they get more tweets, and +1s, etc.
It’s a lot harder to figure out how to identify the 10% of something that isn’t crud. But if you’re looking for a management consultant, here are some of the questions you can ask that might help:
- Do they have experience with my type of problem?
- Do they use one-size-fits-all tools or do they really learn about what’s going on inside an organisation?
- Do they only focus on the easy part (pointing out what’s wrong), or do they have useful things to say about execution as well?
That’s just a start, and you can build a similar list of questions for everything.
The concern that I have about the original article is this: the authors are taking aim at the two groups that are most likely to care the most about improving innovation inside of firms. Demoralizing these groups may well kill innovation – and that’s not good.
Business Model Analysis & the Link to Strategy
Posted by Tim in business models, design, innovation strategy on 3 January 2012
What’s the best way to use business model analysis in larger organisations?
Steve Blank has done some outstanding work looking at how Alex Osterwalder’s Business Model Canvas can be used in entrepreneurial startups (see also this post and the ones that follow it). But there are still some questions about how to best use the concept in larger firms.
That is a problem on which I’m currently working.
I’m doing a project with a very large engineering firm. They provide an off-the-shelf product to the vast majority of their customers, however, there are an increasing number of customers that need bespoke solutions to problems. We are doing some work with the team that develops these solutions, and it Business Model Analysis has ended up being a very useful tool.
I’m working with Manny, whose team is in charge of developing futures analysis skills throughout the organisation. We are working with Moe, the manager of the Bespoke Solutions Team (BST), and the project is sponsored by Jack, who manages both Manny and Moe, along with several other teams.
When we spoke with Moe, he said that there were four different views within the firm of the role his teams should be filling:
- Change Agents: in this role the team identifies the problems that they should be working on, and develops solutions to these problems. They then turn the engineered solutions over to others within the firm who will manage delivery to customers.
- Service Provider: here the team has the problems specified for them by another group within the firm. They develop solutions (as they do in all four scenarios), and pass them on to the other group for execution.
- Service Delivery: in this role the team still works on problems specified by the second group, but after developing their solutions, they would be responsible for managing delivery as well.
- Profit Centre: is a full service role. The team would identify problems to work on, develop and deliver solutions. They may do this only for the parent firm, or they might be able to sell these solutions to others in the market as well.
There are a couple of dimensions along which these models vary. In a couple of them, the team is responsible for identifying the problems to address, while in two others the they are working to specification as the problems are defined for them. The other source of variation is project management: how much of the solutions development process should the team be responsible for?
Manny and I took these two dimensions and mapped out the four possible roles for the BST. Here is the map:
In each quadrant, there is an indication of the project management responsibilities: I1 = problem identification, I2 = solution development, I3 = solution delivery to customers.
In a lot of ways, these possibilities map onto the Four Roles for Your Innovation Team that I identified last year, with similar issues.
Manny and I have been working with Moe to map out Business Models for each of the four different roles. One thing that has become quickly apparent is that each role has a significantly different value proposition, which leads to differences throughout the business models, particularly in the areas of Key Activities and Key Resources, but also throughout the rest of the models.
The differences between the different business models are really important – since one of the critical issues is that a business model needs to be internally consistent. As we’ve continued to work on this, we have learned several important lessons:
- Two of the quadrants fail to provide stable solutions: all the way through the process, I’ve kept asking people “who owns the customer?” I think they’re sick of hearing this, but it’s a critical point. In the Change Agent role, the team is responsible for identifying problems, but they don’t handle solution delivery. Which means that two different teams need to know the customer very well. This never works. The same problem occurs in the Service Delivery role, but this time they are responsible for solution delivery, but not problem ID. Same issue – to work well, whichever team is delivering solutions needs to also be identifying problems. That way, they can get really close to the customers, and develop a deep understanding of what they need.
It makes a lot more sense to either be a Solutions Provider, with the other team responsible for both problem ID and solution delivery, or to be a Profit Centre, where the BST will be responsible for all of it. These are both more stable solutions, as ownership of the customer is clearly defined in both scenarios.
- You can’t pick a little bit of each business model: as we’ve started to map out the Key Activities and the Key Resources, it has become apparent that each business model requires a different set of skills within the BST. If we make a list of the skills that they currently have, they have some from each of the four possible models, but they don’t have all of the skills needed by any one o them. Using the Business Model Canvas should help us develop a skill development roadmap for the team so that they are able to work within one coherent business model.
- Why not use multiple business models? The BST currently has four distinct market segments in which they work. One question that has come up is why not use a different business model for each one? There are a few good reasons to avoid this. The main one is that it will be nearly impossible for Moe to manage four different business models within his team. Management attention is limited, and even though Moe is an excellent manager, every time I’ve seen someone trying to manage more than about two business models at the same time, trouble occurs.
The second reason is that if the team develops one business model, they will own several important skills that the firm needs. This will make it much easier to branch out into other market segments over time, or to develop into a genuine profit centre generating external revenue. Both of these will be much harder to achieve if they are running multiple business models.
- Which model is right is a strategic decision: this is the most critical point. There is no absolutely correct business model to use here. The best choice depends upon the firm’s strategy. This is where Jack is important – he has to decide on the direction that his teams are going go. Either the Solutions Provider or the Profit Centre model can work. Which one to pursue depends on how much of an external market there is for BST solutions, whether they have the skills and resources to pursue those opportunities, and, most importantly, where the firm wants to be going.
If growth and innovation aren’t that critical, then putting the team into the Solutions Provider role is fine. However, if the firm wants to drive growth through innovation, they will be better off with a dedicated innovation team, which is what they get with the Profit Centre business model.
This is just one way to use the Business Model Canvas in a larger firm. Paul Hobcraft’s post has many other suggestions.
But the bottom line is that it is an excellent tool, and every organisation should be thinking about their business model. And working on how to innovate it.
Innovation Obstacle: Most People Don’t Like New Ideas
Posted by Tim in innovation strategy, time on 20 December 2011
You have a new idea and it’s great! And yet, people are slow to adopt it. In fact, sometimes it seems like they hate it – it would actually be an improvement if they were only indifferent.
Why does this happen? It’s a common problem, and it doesn’t really matter what kind of idea it is – the same thing happens with new things, new ideas, new ways of doing things and new ways of organising a business model. This reluctance to adopt new ideas is a major obstacle to innovation.
Seth Godin talks about how strange it is, and how novel historically, for people to buy something for the first time:
If you are trying to grow your coaching practice or b2b saas business or widget shop, understand that you are almost certainly pushing against a significant barrier: most people hesitate before buying something for the first time. If you’re trying to develop trade in the underprivileged world, understand that teaching people to buy anything for the first time is a revolutionary concept.
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And most of what gets sold to us each day at work or at home are switching products. “Ours is just like the one you already use, but cheaper/better/faster/cooler.”The potent mix of fear of loss, desire for gain and curiousity fuel the appeal of buying for the first time. But it’s magic, it’s not science, and it doesn’t often happen on schedule.
What creates that barrier? Here’s what Simone de Beauvoir said about it (from a post by Justine Musk):
The writer of originality, unless dead, is always shocking, scandalous; novelty disturbs and repels.
Novelty disturbs and repels – no wonder it’s so hard to get our great new ideas across. No wonder ideas spread so slowly.
Another problem is that just the same, but cheaper/better/faster/cooler doesn’t really work either. It takes a lot of work to get people to switch.
So what do we do?
Here’s what Umair Haque says (in a post, and in his new book
The pursuit of more, bigger, faster, cheaper, nastier too often seems to demand putting what, why, and who we love at the end of the list, the underworld of the inbox, the bottom of the heap. That’s a recipe for stagnation, whether for people, communities, cities, countries, or the globe. But the converse might just hold, too: if nations and corporations want to punch past the glass ceiling of mere opulence, to what I call eudaimonic prosperity — lives that are meaningfully well lived — well, then people might just have to begin by making if not radically, then at least marginally more meaningful choices themselves.
People resist new ideas. The only way around this is to give them ideas that really matter.
Here’s some more from Seth Godin on that:
How to Build Business Metrics – revised
Posted by Tim in complex systems, innovation strategy on 14 December 2011
We’ve written a few posts criticising some of the more common innovation metrics in use, so I thought it would be smart to outline some ways that we can actually develop more effective metrics. Here’s a story that might help:
A while ago I was in charge of managing student recruitment for a tertiary education institution. One of the first things I looked into when I started the job was metrics – how did we measure how well my section was doing? The answer was one number: total number of enrolled students each year. The job that I was given was to increase that number by as much as possible (which begs all kinds of questions about quality, teaching and so on, but let’s set those aside for now…).
The problem was that managing that number as a standalone was hard. Well, impossible, actually. So I looked into what other numbers we had, and I found a that we had measures for total applications received, and total enrolments. I worked with my teams to figure out the path that people took to become students, and we then also figured out a way to measure enquiries. Once we had these numbers, here’s what we did:
We made three metrics: total number of enquiries, the ratio of applications/enquiries, and the ratio of enrolments/applications. Then I made the marketing team responsible for enquiries, the information team responsible for applications/enquiries, and the enrolments team responsible for enrolments/applications.
When my boss told me to increase enrolments as much as possible, he was hoping for a 5% increase. By breaking down the process, developing new metrics, and making people accountable for the measures, we were able to increase enrolments by 12%.
There are several lessons from improving innovation metrics in this:
- Innovation is a process not an event: many things that we often think of as an event are actually processes. Enrolments is a good example – previously my institution only considered the end point, enrolled students. By breaking down the process that we went through to actually get an enrolled student, we were able to improve our ability to get enrolled students.
I think of innovation as a process too – this is the diagram that I use to describe it:
To improve our innovation metrics, we need to first think of it as a process, then build metrics to measure the intermediate steps as well as the outcomes.
- Use multiple metrics: in the enrolments story, we used three metrics that led to the one that we were most interested in (total enrolments). We can do the same for innovation. Once we think of it as a process, then we need to develop metrics for each of the steps that lead to the outcomes that we are looking for from innovation. Innovation is a complex process, and to manage it we need to use multiple metrics.
- Link Your Innovation Metrics to Your Strategy: my tertiary education institution saw increasing enrolments as a central part of its strategy. At the time, the educational sector in New Zealand was fairly turbulent, and there was a strong message from government that it wanted to see the sector consolidated. Increasing enrolments was seen as a way to signal that we were a thriving institution, making it less likely that we’d get absorbed by a larger polytechnic.
We need to do the same thing with innovation – link it to our overall strategy so that it can help drive success. There are a number of broader strategic goals that can be supported by innovation – we just need to be clear about which ones we’re targeting.
- Improve the part of the process that is weakest: when we started tracking the enrolments process, we discovered that we were pretty good at generating enquiries, and very good at converting applications into enrolments. The weak link was converting enquiries into applications.
The information team had been given some sales training before I arrived, which they strongly resisted. They saw their role as helping people, not selling them. We implemented a lot of ideas, but the one that had the greatest impact was getting them to ask at the end of each enquiry that they handled “if you’re interested in the course, would you like to put in an application?”
When they started doing that, the applications/enquiries ratio shot up from about 12% to 18% in a couple of weeks. And we weren’t forcing people to apply for courses they didn’t really want to take – the enrolments/application ratio held steady. If the quality of applications had decreased, this metric would have gone down. It turned out that a lot of people really did want to start studying, but they just needed a small nudge to get started.
In looking at our innovation processes, we need to do the same thing: find the weak link, and figure out how to best improve it. As we’ve said many times before, usually the problem in organisations is not that they don’t have enough ideas, but rather that they need to get better at selecting ideas, or at getting them to spread. In any case, once we have identified the part of the process that is most in need of improvement, then we can figure out to best go about making it better.
Getting innovation metrics right is a challenging task. There is no single number that will tell us everything we need to know to manage innovation. I hope these ideas help you figure out how to measure it better in your organisation.
Note: There was also a good series on innovation metrics by Boris Plukowski on Innovation Excellence a while back: Part 1, Part 2 & Part 3.
Ten Tensions in Innovation – Revised
Posted by Tim in innovation strategy on 5 December 2011
The single most important management skill to develop is a tolerance for ambiguity. Why? Because we often must manage objectives that are contradictory. For example, Firms that are successful at innovation are able to simultaneously come up with ideas that allow them to take advantage of what they’re really good at (exploitation) while also being able to search for novel new ideas (exploration).
This is a hard balance to maintain – the two processes require quite different management skills, different processes, and different measures of success. Exploitation is usually about operational efficiency, while exploration is about experimentation and risk.
These seem almost like opposites – and that’s one of the challenges of trying to manage innovation. To be really good at it, you have to do these things that appear to be opposed to each other.
Here are ten tensions in innovation management:
- Exploration versus exploitation: we need to be more efficient while also being more experimental.
- Radical versus incremental: this is closely related – we need to have a relatively balanced innovation portfolio. It’s the incremental innovations that improve current operations, but it’s the more radical innovations that keep us in business over the long term.
- Now versus the future: our natural tendency is to focus on now. However, innovation is really about the future – we innovate to bridge gaps between where our performance is right now and where we want it to be.
- Core competency versus benchmarking: if we are above average at some things, and below average at some others, where do we invest to improve? Do we try to get the below average things up to a benchmark, or do we extend our advantage in our core area of strength?
- Analysis versus intuition: In The Design of Business, Roger Martin talks about how design-driven innovation is able to balance the tension between analysis and intuition. Organisations often have one dominant mode of decision-making.
- Open versus closed: do all of innovations come from inside of the firm, where we develop the new ideas internally and execute them ourselves? Or do we systems set up so that the ideas we execute can come from anywhere, and some of our own ideas end up being brought to market by someone else?
- Centralized versus decentralized: do we create an innovation team that is responsible for driving innovation, or make innovation part of everyone’s job?
- Planned versus accidental: is innovation a process that can be managed successfully, so that we are able to consistently perform well at it? Or is the uncertain nature of new ideas so strong that innovation success is mostly accidental?
- Structure versus emergence: to recreate innovative success we often need structure – processes, technologies and tools that support innovation. However, these are costly, and as the market shifts around us we this structure might prevent us from reacting to change as quickly as we need to.
- Out on your own versus deeply connected: is it easier to innovate when we’re out on our, with no constraints on what we can come up with? Or do we need to be part of the herd, so that we can really understand what people want and need?
These ideas are often presented as either/or choices. However, they are really all things that occur along a spectrum – and the key to managing these innovation tensions is to find some balance.
This is where one of Roger Martin’s ideas is useful – to manage these tensions we need to use integrative thinking:
Integrative Thinking is the ability to constructively face the tensions of opposing models, and instead of choosing one at the expense of the other, generating a creative solution of the tensions in the form of a new model that contains elements of the individual models, but is superior to each.
These aren’t either/or choices – they are both/and decisions. To be good at innovation, we have to integrate these seeming opposites within our organisations. This is both cognitively and managerially challenging. However, the better you are able to do this, the more successful you’ll be at innovation.
(tug of war photo from flickr/Lucy A. Little scale photo from flickr/cheesy42, both under Creative Common Licenses)
Get Your Process Right to Innovate Successfully
Posted by Tim in book riffs, innovation strategy on 18 November 2011
What wins in innovation, great ideas or great process?
Ideally, you’ll have both. But I suspect that if it’s either/or, process wins.
There is an interesting example from the world of chess in Michael Nielsen’s fantastic new book Reinventing Discovery: The New Era of Networked Science. The book discusses how our improved ability to network via the internet is changing the face of science. It’s an interesting book, and also an important one and I recommend it highly.
One of the stories that he tells is of a tournament sponsored by playchess.com in 2005. It allowed humans and computers to enter together as hybrid teams. The expectation going in was that the teams put together by the dominant chess-playing computer of the time, Hydra, would win because no one could beat their computers.
However, the Hydra teams didn’t even make the quarterfinals. The best machines didn’t win. Neither did the best human players – the grandmasters. Here is how Nielsen describes the tournament:
The grandmasters could beat the Hydras because they knew when to rely on their computers, and when to rely on their own judgment. Even more interesting, the winner of the tournament was a team called ZackS that consisted of two low-ranked amateur players, using three off-the-shelf computers, and standard chess-playing software. Not only did they outclass the Hydras, they outclassed the grandmasters with their strong chess-playing computers. The human operators of ZackS demonstrated exquisite skill in using the data-driven intelligence of their computer algorithms to amplify their chess-playing ability. As one of the observers of the tournament, Garry Kasparov, later remarked, “Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process.”
It’s an amazing story, and a counterintuitive one. We like to think that genius always wins, but it doesn’t. You need to execute as well.
It’s an important innovation lesson. Here is a quote from le Corbusier that makes the same point:
Genius is personal, decided by fate, but it expresses itself by means of system. There is no work of art without system.
(Photo from flickr/irodman under a Creative Commons License)
Mind the Gap
Posted by Tim in innovation strategy on 31 August 2011
I did a workshop last week with a group working on improving innovation within the Australian school system. I played my normal role of grenade-thrower, errr, thought-provoker on the topic of innovation, while working with eight other people that all have backgrounds in education. As the day went on, I noticed something interesting.
In sessions like this, people always pick up on different points that I make. This is one of the reasons that I try to make a wide variety of points – I never know for sure which ones will stick! On this day, one of the points that I made is that any time you have a gap between where you currently are and where you want to be, you have to innovate. You can’t bridge these gaps by simply doing more of what you’re currently doing.
This is a really important point when thinking about public sector innovation. In this context, all the justifications for innovating based on improving profit, market share, survival odds, and so on don’t really apply. And yet, innovation is still critical. Why? To bridge those gaps.
It was fascinating on this day to see how the teachers seized on this idea. The group included people that were passionate about trying to improve teaching, and it was clear that they have been looking for a way to support the case for innovation within their schools. For the rest of the day, as I eavesdropped on the breakout groups, everyone was talking about the gap – how do we identify the gap? What strategies can we use to bridge the gap?
The experience illustrates some important points:
- Organisations always have a gap to bridge, even if they’re not financially driven: I’ve found the idea of the gap to consistently work when I talk about innovation people from the public sector or non-profits. It seems to be a good way to motivate the case for innovation in these settings.
- We need different ways to talk about innovation: when we started the day, everyone in the room seemed to be wary of innovation. It wasn’t until we framed it in this way that they really started to respond – but once they did, they took off! There are many settings in which “innovation” might seem like a threatening concept. When we’re working in these settings, we need other ways to discuss the concept.
- Innovative teachers face many of the same problems that other innovators do: how can I get support for innovation? How can we make time in our organisation to innovate? How can I get other people to buy into new ideas? How can we make innovation a sustainable process? These are some of the questions that I was asked in the course of the day. They don’t sound that different from what we hear on other organisations, right? Innovators face many of the same problems, regardless of their context.
It was an intense but fun day. It’s always interesting to see which concepts resonate with people. In this case, the idea was a simple one:
Mind the gap!
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