Innovate on Purpose

The iPod of Potato Chips (or Razors or shoes)

2008-11-17T12:12:00.000-08:00

I was reviewing a webpage recently when an ad caught my eye. That's fairly difficult given the number of ads on most webpages. What stuck with me was the brand statement - the ad said that the razor in question was the "iPod of Razors". I am now waiting for the deluge of "iPod" products in every category. The iPod of ice cream, toilet paper and dish washing detergent. It's only a matter of time.

This is silly comparison on a number of levels, and perhaps the advertisers are making this comparison in a tongue in cheek way. The iPod is successful for many reasons - it has a cool design, it had a fan base (Mac users) waiting for options different from Microsoft and Sony based MP3 players, it is from Apple so it had some style points, and the designers of the iPod took the time to understand the customer experience. After all, the iPod is just a music player - if the music isn't easily (and legally) available, what's the point?

If a new product or service wants to claim to be the "iPod" of its market, then it needs more than good design. Most of the products that win design awards are quickly relegated to the back shelf, design alone doesn't win the customer. Cost, availability, style, integration with other existing standards and a host of other items determine what wins and loses in the market. To be the "iPod" in a market is to think carefully about all aspects of the purchase, consumption and use of the product or service, and to have a great answer to all of those attributes. For many consumer products and services, defining and controling the environment in which the product is used, and the secondary and tertiary actors in the market is difficult if not impossible. While Apple could eventually round up the licensing for the song downloads, can we control the environment and peripheral actors in other consumer markets?

When you claim to be the "iPod" of your market you are claiming to manage variability and risk in the "whole product" experience of the customer. Can your firm do that effectively?

Working with an innovation consultant part 2

2008-11-13T05:13:00.001-08:00

After working with a number of companies on innovation initiatives and projects, I've learned a lot about the needs for innovation and how to structure an innovation program or project. If your firm is contemplating a new innovation effort, consider these concepts and how they might shape your initiatives and goals.

The need for big, quick results versus the existing procedures and machinery. It's rare that we hear a firm say "We need a big new idea and we're willing to develop it and nurture it over a reasonable period of time". No, usually what most firms demand is a really big idea they can implement quickly - as if the "low hanging" fruit hasn't already been picked. The fallacy of this argument is two fold: unless the firm is in truly dire circumstances, any big idea will present risks to some part of the business and will face opposition, so it won't move quickly. And, even if the idea didn't face opposition, the number of "game changing" ideas is limited and may take some time to identify. You want quick ideas? No problem. You want big ideas? Ok, but it may take a little while. You want big ideas that can be implemented quickly? Much more difficult.
Innovation can't change your product development lifecycle unless you focus on that first. Let's assume we were lucky and created a big new idea that will have a lot of impact on the market. The idea has been evaluated and approved. We've only cleared the first hurdle. In most firms the product development lifecycle is just beginning, and can take anywhere from several months to several years. Unless you've streamlined your product development timeframe or can develop the idea outside your traditional product development process, there's still a "long pole" in the tent.
People have to actively participate. Ideas don't generate themselves, and they certainly can't evaluate or test themselves. When we reach the stage where computers can generate and evaluate the ideas for us, and then prototype them and test them as well, then we can all get back to doing our "real jobs". Until those dreams are realized, people need to be actively engaged in all facets of the innovation process. Currently, the expectation seems to be that we'll identify a few people to participate in a part-time effort for a month or two, unless something more important or pressing shows up. How can innovation ever be more pressing than an immediate customer requirement or sales issue? We've already demonstrated that ideas take time to nurture and grow, so very few ideas will have immediate impact. Innovation is always important but rarely urgent, so the staffing of an innovation effort always suffers.
Think like a farmer, act like a hunter. Farmers place the seeds in the ground and groom the soil, patiently waiting for the crop to bear fruit. They understand the cycles and the seasons. They realize a corn crop will take six months to grow, and in the off season they till the soil to prepare the next crop. Hunters are opportunists. They spot the game and shot what's in front of them, when it's available. Innovators need to groom their cultures and grow their ideas like farmers and implement those ideas when the opportunities are right like hunters. Without the farming, there's no ready stock of ideas in the pipeline. Without the hunter, there's no recognition of the opportunity.

When you embark on an innovation effort, consider these concepts when you are working with an innovation consultant. Set your expectations effectively and ensure that your management team understands the timeframes and commitments necessary to make innovation successful.

Inside Project Red Stripe book review

2008-11-06T04:53:00.000-08:00

I received a copy of the book Inside Project Red Stripe recently and I've really struggled with it, for a couple of reasons. First, it's a book about an innovation project, so of course that attracted my attention. Second, the innovation project was run by individuals within The Economist, my favorite magazine (or newspaper as they like to say). So, when someone writes a book about one of your favorite subjects (innovation) that's based on a real world example of innovation in one of your favorite news sources, that's compelling stuff.

What made this even more interesting/frustrating was the approach the author took to documenting the project. Right from the start you need to know that Inside Project Red Stripe is less a book than a blog, and certainly not a how to book but more a philosophical dissection of the innovation team, their plans and their efforts. The author is as interested in the coming together and falling apart of the team, and the definition of the expectations of the team, and the methods under which they work, as he is actual innovation.

The team is asked to create a big new innovation for The Economist, and throughout the book you can identify "Things they did well" and "Things they didn't do so well". Ultimately the team fell into a trap that meant their work was not strategically aligned to the mission and goals of The Economist. Toward the end of the book two of the team members are seen asking the steering team what they must present so the ideas they have aren't killed by the steering team. At that point, asking that question is simply a signal that you know you've failed.

The book can be confusing because the author chose to write about topics and people rather than functions and process, so the book does not necessarily progress chronologically, and the author makes a number of interesting but arcane references to authors and writings on a plethora of topics, some well known, some that probably require a PhD to understand. This book is also fascinating because it is written almost in real time in a Rashomon style - seeing the project unfold from five or six different perspectives all at the same time.

I think you'll benefit from reading this book, but in a contemplative, meditative fashion. Each chapter is really a meditation on a specific need or requirement for team building, creativity, innovation, communication and a host of other topics, as well as a dissection of what the team was thinking at the time. Probably some of the best insights come from what appear to be direct quotes from the team. Since the author was a live participant, he was also somewhat of a cultural anthropologist as well.

The Project Red Stripe team missed a couple of key factors for success. They did not have a clear brief and ended up with solution not aligned to The Economist core mission. They had internally conflicting goals - each person saw a very different outcome for the project and for themselves personally. They were all committed to the success of the project and of The Economist, but had very different perspectives about what that meant. Also, they were too focused on what the author calls "the whale" - the one big idea, and probably missed or ignored a lot of ideas that could have been valuable.

I'd highly recommend this book to any team embarking on an innovation initiative, but with a few clear caveats. To its credit, this book is not presented or written like the other "how to" books on innovation, nor is it one of those books that looks back at a successful project and champions a specific person or approach. Rather, it examines a lot of the issues and challenges of building an innovation team and doing the somewhat difficult, messy work of innovation and the day to day challenges that the team faces.

Working with an innovation consultant part 1

2008-11-04T11:32:00.001-08:00

I completed an initial sales call today with a prospective client. The client has some interesting challenges and opportunities and seems like they want to work with us. However, I've found myself reliving - almost like Groundhog Day - the same discussions and issues in this sales call that I find myself discussing in most innovation business development efforts. So, in the interest of saving us all time and money, here's a recommended approach to working with an innovation consultant. I've decided to break this into two parts - the "sales" process and the actual working relationship.

First, let's talk about sales.

Almost every firm I speak with will admit "we're not good at innovation" and will provide several reasons that they aren't innovative. The culture doesn't support innovation, there's not enough time and resources, there's no team associated with innovation, there's too much risk associated with innovation, the firm is doing too well to consider innovation, the firm is doing too poorly to consider innovation, etc. In the next breath they'll tell me that it is important that they demonstrate innovation within the next three or four months, generally because the CEO has decided that their business needs some of that innovation magic.

So, we will often start with the basics. What's your strategy and goal for the business over a 3 to five year period? How do you want to be positioned in the marketplace? What strategies, tactics, products and services can we improve or enable through innovation? I'm constantly surprised by the fact that most people consider innovation a strategy, rather than an enabler to the strategies and goals of the business. Usually it can take several weeks for folks to agree on what they want to "innovate" around. Then, they want to jump quickly to the "low hanging"fruit to show "quick wins". If there is "low hanging" fruit available in most organizations, it has either been 1) picked or 2) proven to be undigestible. Additionally, nothing will deflate your team more than to have other say that nothing the team did was "new" or difficult.

Another thing that constantly astonishes me is how little insight firms have about their customers. Innovation should be about creating products, services and business models that satisfy unmet, undermet or undiscovered needs. How can you innovate if you don't understand the trends in your industry and the met and unmet needs in your customer base? Go, do some research. Talk to your customers. Understand the trends that are occurring in your market. Since this is election day 2008, I have a brief note for those of you in heavily regulated industries. The Democrats are winning the house, senate and White House. What plans and initiatives have you put in place to act proactively to that and the implications that win has for your industry - for example, in the healthcare industry, which the Democrats have promised to change dramatically? Or perhaps you'd like to be in coal industry right now?

Understanding your strategy and how you can leverage innovation as an enabler to satisfy new customer needs or uncover new markets will go a long way to helping you work successfully with an innovation partner or consultant, or just on your own. Setting reasonable timeframes and not jumping to the "quick wins" will help you build a longer, sustainable innovation program. After all, you didn't get in the situation you are in overnight, and it will take at least as long to fix.

Once you have a reasonable understanding of your strategy and how innovation can be applied, have set reasonable expectations regarding timeframes and investments and have a good understanding of your markets, trends and customers, you are ready to work on innovation.

Gaining a different perspective

2008-10-28T05:09:00.000-07:00

It's said that Ginger Rogers was the best dancer in the world, since she danced with all the great male dancers and did everything they did, except she did it backwards and in high heels. This says a lot about her talent, and also a lot about her perspective. She expected to do things as well as the male lead, just with a very different approach and with a unique set of challenges.

What strikes me about corporate innovation is that everyone wants to play the male lead. They know the part, they know the steps, they know the music. It's a comfortable part already defined and it leads right back to the same place. The comfortable, well-known roles don't provide the perspectives that are necessary and don't introduce any new music or new moves, so eventually what started out as innovation becomes the standard issue waltz back to regular business as usual.

No, to innovate one must obtain a fresh perspective, a new insight. Imagine if you will taking Ginger Roger's role in those famous musicals. She had to trust her partner to lead her in directions she couldn't see, and match his moves while moving in an uncomfortable direction and gait in shoes that had to have been uncomfortable. That has a lot of parallels for innovators - moving into spaces we aren't quite sure about, being led by our customers and markets in uncomfortable directions using methods and techniques that perhaps we aren't expert in, to end up in a completely new place.

What is often interesting is how similar many innovation programs are to work that is underway in a business that is not innovation. The same project management tools are applied, the same staffing models are used, the same team facilitation, the same meeting spaces, the same data, the same perspectives. In the midst of all this sameness we are expecting something radically new and different? Who are we kidding? For innovation programs to succeed, we need to gain a new set of perspectives.

Start with your product perspective. Perhaps instead of examining your capabilities and determining what to create based on what you can build, what we like to call inside out innovation, perhaps you should consider what unmet or undiscovered needs customers have and determine how to deliver those products and services - innovating based on what customers want and need, not necessarily what you are expert in doing. If your starting point is always "what we know and are good at" then you can't create dramatic change.

What would happen if you innovation team was formed differently? Perhaps you invite customers as a regular part of your innovation team, from the outset. Or perhaps you meet differently, in a shopping mall or airport lounge rather than the office. Or perhaps you decide from the outset to cannabilize or eliminate one of your best products, to understand how to leapfrog to the next best thing. Any, or all, of these approaches would raise alarm bells with most management teams, and they should. But if your innovation team isn't pushing the envelope and radically reconsidering everything, then you are likely to end up right where you started.

OK, so perhaps you can't overturn years of corporate culture in one initiative. Could you meet outside the office ocassionally? Gain more direct customer insight by visiting customers rather than reading market research? Circle your desks and co-locate your team to encourage more brainstorming and innovation team development?

Let's start becoming Ginger and worry less about being Fred, then we'll be more open to innovation possibilities.

What do you do after the brainstorm?

2008-10-20T10:23:00.000-07:00

We get calls quite frequently from companies that want us to help them facilitate a brainstorm or idea campaign. Since we've run a number of them, we have consultants who are familiar with facilitating the brainstorm and we have a methodology that helps ensure a successfully defined and conducted event. One question we typically ask, however, often ends with a lot of silence on the other end of the phone. That question is - what will you do with the ideas after the brainstorm is complete?

You see, a brainstorm should be a beginning, not an end. Too many people see the event - the brainstorming meeting or the idea campaign - as the desired result, rather than just a beginning step in a process to build new products or services. Generating good ideas is not necessarily easy, but with the right preparation and facilitation you can generate hundreds of ideas, and rank or prioritize those ideas to identify the top 10, or top 20. What becomes more interesting, and adds more value, is the next step.

Once ideas are generated, you need to have a mechanism to consider them, evaluate them, and determine whether or not to create pilots or prototypes, and what the mechanisms are for commercialization. Without those subsequent steps, your ideation session is just creating ideas that for the most part will never be considered after the event. Probably one of the most important questions you can ask when you are invited to a brainstorming event is - can you describe for me how these ideas will be worked once the brainstorm is completed? In three months, what will be the result of these ideas? If you can't get a good answer to questions like these, then the session is either not well planned or the outcomes are uncertain, and both instances are problematic.

On the other hand, if you ask those questions and get confident, specific answers, then you should attend, because your ideas might be the catalyst for something even better. The important issue isn't the idea generation, but the work you do after the generation and how that work is managed and who is responsible for doing that work.

Innovation is not a bolt-on solution

2008-10-15T13:55:00.000-07:00

I had the opportunity to read and review Do You Matter by Brunner and Emery, a good book about the importance of design thinking and successful companies. In a nutshell, Brunner and Emery advocate for the importance of design thinking throughout the organization, top down, starting with incorporating design thinking in your strategic thinking and how your organization is structured, the products it creates and the services it offers. Only by permeating the culture and organization with design thinking will your team succeed, according to the book.

The authors use the example of Motorola to make this point. Motorola, they assert, has a powerful engineering culture that did create some interesting cell phone products, but was never really a design-centered firm. After success with the RAZR, the authors say "Motorola tried to apply the veneer of the product (RAZR) to other products" rather than approach each new product from a design perspective. I like the mention of veneer, which in the furniture industry is marketing speak for a thin slice of nice wood on top of some cheap hardwood or pressboard. Motorola could not succeed by applying a veneer of design, and ultimately design thinking can't be bolted on at the end of the product development cycle either.

Reading this, it struck me that the same things are true for innovation. A firm can't be consistently innovative by applying a thin veneer (a couple of brainstorming programs) on an existing product development process, or by bolting on an initiative or cross functional team to existing processes or capabilities. To innovate successfully, innovation needs to be part of the culture and the DNA of the organization, consistently deployed in the same manner, rewarded and measured, and considered a vital part of the strategy and outcomes of the firm. Otherwise, like design applied after the product is developed, all you are left with is lipstick on the pig.

In reality, we all know that bolt-on solutions or those attempted with a half-hearted approach will fail. Attempting to use these approaches with concepts like design and innovation will fail even more spectacularly since design and innovation are closely liked to culture and strategy. Without a strong, consistent commitment to these capabilities, design and innovation projects will fail to get traction and will never be taken seriously. Probably the worst thing that can happen to either of these concepts is to be labeled the "flavor of the month".

The innovation paradox

2008-10-13T11:38:00.000-07:00

I heard an executive recently in an organization we've been working with say that the more they try to fit innovation into the expectations and organizational issues of their organization, the more difficult it becomes to do any innovation. Whereas before, when innovation was treated as a pilot program with little oversight or bureaucratic attention, the innovations seemed to flow rather regularly. If you've ever worked in a large organization, this should not be a surprise to you, yet it is a constant source of frustration for many would-be innovators.

The innovation paradox is that the more your firm pays attention to innovation, the less likely it will be to be successful at innovation. That's because, like any other foreign organism, the culture and bureaucracy of your organization identifies an external intruder that has not aligned itself with the organization and function of the rest of the body, and tries to force the innovation program or capability to adopt the decision making processes, risk tolerances, timeframes, perspectives and "best practices" that are part and parcel of the rest of the organization. Your innovation process, after all, will surrender to these pressures or will die. That's really too bad, since most of these cultural and organizational structures inhibit the organization from innovating well in the first place, and were probably the reason that innovation was placed in a petri dish outside of the regular processes and culture.

The more you team focuses on innovation, the less likely your team is to be successful - unless you can either create an artificial environment for innovation - think a greenhouse or "bubble" where the regular rules don't apply - or you can change your management culture and bureaucracy to embrace the processes, decision methods and risk tolerances of innovative firms. At that point the bubble is not necessary. As a management team, kicking off an innovation project or program without the "bubble" in a traditional, conservative, risk averse organization is usually a recipe for failure. That's because as soon as the program or initiative seeks to work with others, it will have to align itself to the needs and expectations of the bureaucracy. What's the charge number? Who said you could work on this? What's the return on investment? Why should we attack that market, and if we do, what happens to our existing products? Can you define your product or service and give us a three year projection within +/- 10%? Soon these questions, and the funding process and the risk tolerances, will force your team to work in the same patterns and processes as every other business function, and your innovation team will fall apart because you can't deliver innovations in an incremental, risk averse environment.

Rather, perhaps like the character in the Douglas Adams book, innovation is like learning to fly. In one of his trilogy Arthur Dent learns that flying is learning to throw one's self at the ground and intentionally missing. It has to do with ignoring everything you know to be true and taking the risk. Innovation in many firms is so different from what people do everyday, how they plan, make decisions, fund projects, staff resources, that it is an antibody that will be conformed or killed. Your best hope in many cases is to create an environment where you can prove the value and change your culture, rather than hope to adopt the existing culture and innovate from within the existing mindset.

The problem with executive sponsorship is that often it only travels one level. Even though the executives are advocating innovation, people still need budgets and resources for innovation and the existing teams have specific targets to achieve. Unless the executive team gets involved and changes the way people work on a day to day basis, and encourages risk taking, all the executive sponsorship is just a communication strategy.

To innovate, you've got to do things differently. This includes how you generate ideas and how you manage the ideas, as well as the way your innovation team works within the existing corporate framework. If your innovation team is forced to work within a culture and process that is not innovative, then your innovation team will not be innovative either.

Innovating during a disruption

2008-10-07T05:14:00.000-07:00

Most organizations that have a strong capability for innovation will develop and nuture ideas that are incremental and disruptive. Incremental ideas are the ones that will create some modest change in an existing product or service, while disruptive ideas create dramatic change in existing products or services or create entirely new opportunities. Usually, the innovators are trying to disrupt an adjacent market rather than their own. Think Apple and the music distribution business or Swiffer and mops.

However, many innovators have been handed the reverse. After almost 80 years of banking stability, the banking and financial services sector has been completely disrupted. Yes, the subprime crisis has shaken the very foundation of our national and global financial systems, but cracks were already beginning to show. A number of non-financial actors, like Google and Paypal, and a number of adjacent firms, like ING, Orange, Prosper and Schwab, had already begun to peel away valuable customers from mainstream banks. Christensen notes that innovation often happens when a firm provides less functionality than is currently expected and the established players are willing to cede that business to someone else, so online banks have been growing in deposits while many banks have been happy to let that business go. Rather, they doubled down on leverage and would love to have those depositors now.

Some banks and financial institutions have been handed a golden opportunity. Rather than have to disrupt the financial industry, they can innovate in this current disruption to dictate what the eventual landscape of the financial markets will look like in the near future. Some firms, like credit unions and small community banks, will bet that consumers want safety and security for their money. Other firms, like Prosper and peer to peer lending firms may find their services in higher demand as traditional banks shy away from loaning money even to stable businesses. Who knows - perhaps the long down trodden angel firms and first round VC funds will find it profitable to make loans rather than investments.

The point is - whether you create the disruption or have it thrust upon you - now is the time to innovate. The banks that are impacted by their bad loans will be completely focused on cleaning up their messes and will not be anxious to create new products and services other than ones that provide complete safety. If there is any innovation possible, it must come from the remaining strong banks, regional banks, credit unions and adjacent financial services firms that have weathered the crisis, or it will come from non financial services firms who understand a once in a century opportunity.

Innovation Survey

2008-10-06T07:25:00.000-07:00

Chuck Frey at Innovation Tools is seeking input from innovation practitioners for a survey he is conducting, focused especially on innovation pipelines. If you have a moment, please click here to respond.

Why we can't generate new ideas

2008-10-02T05:55:00.000-07:00

In the recent (October 2008) issue of Fast Company is an article that you may be tempted to skip. It's title, Neuroscience sheds new light on creativity, may be a bit daunting. However, if you and your team ever want to justify those interesting brainstorming offsites, or if you ever want to generate some really new and interesting ideas, read the article.

The author notes that imagination (important for brainstorming) and perception (important for day to day living) rely on the same thinking patterns. Since we (and by extension our brains) are lazy, we rely on the same patterns and the interpretation of patterns. So, even when we are brainstorming we are often using the same perceptions and patterns that we are comfortable with, not really challenging our existing patterns and reaching beyond our comfort zone. So far, most of you are nodding your heads. A brainstorming session often devolves into a rehashing session - reviewing all the same old ideas.

What we need in order to brainstorm is to jolt the system, force the brain to think in patterns and perceptions that it has no experience or former guidelines to use. The experiment that the author starts his article using - Draw the sunset on Pluto - is a good example. If we are asked to draw the sunset on Earth - no problem. We know that scenario. However, drawing the sunset on Pluto requires us to think, since most of us have no knowledge of what the sunset might look like from that distance, much less whether or not Pluto has mountains or atmosphere that would impact the sunset.

To quote the article further:

Only when the brain is confronted with stimuli that it has not encountered before does it start to reorganize perception. The surest way to provoke the imagination, then, is to seek out environments you have no experience with. They may have nothing to do with your area of expertise. It doesn't matter. Because the same systems in the brain carry out both perception and imagination, there will be cross talk.

It's been my experience that the best idea generators and brainstormers are people who travel frequently, who encounter different approaches and methods, who interact with a wide array of different people. Yet most of our corporate brainstorming calls the usual suspects into a gray, dingy conference room full of the same cues as before. Typical corporate idea generation sessions don't invite outsiders, don't create pattern interrupts, don't change the scenery (even corporate offsites in exotic locations end up usually in a conference room).

If you want radical ideas that will change the way your business works, or introduce interesting new products or services, get your people out of their day to day patterns. Force them to consider the world from a customer's viewpoint. Have them interact with other cultures, other industries. Innovation often happens at the intersection anyway - and getting people out of their existing thinking patterns will generate new creativity. And at the next executive offsite, hold the brainstorming in the sand trap at the third hole, or some location that forces people out of their comfort zone and patterns.

Different ideas require different thinking. Different thinking requires a jolt to the day to day patterns and expectations that we all carry around with us like baggage.

An Innovation Work out

2008-09-26T14:16:00.000-07:00

If you are like me, you have kids who are active in sports. My daughter loves soccer more than anything, and is constantly practicing - at practice and at home. Just a few days ago I watched her juggle (keep the soccer ball moving in the air using her feet, knees, chest and head) for over 100 touches. That seems fairly miraculous to me, since I don't have that skill, but she considers it an ability grown out of constant practice. She has gained the skill through constant work and application.

I'd like to think that there's an analogy there to innovation and what our expectations are about the capability of individuals and teams to innovate. Most of the time, our teams are called on to "innovate" in a crisis, with little advanced warning and no practice time. Most of the people involved have rarely, if ever, innovated and are unfamiliar with the techniques, methods and thinking models that enable innovation. We ask them to innovate without any practice or warmup - and the results are about the same as when I try to juggle a soccer ball. To my credit I can get about ten touches, but there's little grace or beauty in what I do, and it usually results in a quick failure.

In no other business function do we ask people from a cold start with little to no experience or preparation to take on such an important function. It's little wonder that people are often concerned about being involved in an innovation project - they understand the challenges and often feel they are unprepared and don't have the luxury of a learning curve. So they press their way forward, learning on the job, making avoidable mistakes and achieving some modest level of success, all the while recognizing the potentials that exist if only they were familiar with the tools and techniques.

However, in most organizations the folks who've done this once rarely get to repeat the exercise, and a whole new crop of innovators takes on the next innovation initiative, with little preparation and modest results. You wouldn't pay to see the Yankees or the New England Patriots if they were staffed by people they recruited off the streets at the last moment to play - we pay professional athletes because they have the skills and knowledge to play well above our level. Why would we expect or tolerate anything less in what everyone says is a top three management priority in our businesses?

If your management team is serious about innovation, then it will train the individuals who are responsible for innovation and engage those individuals on a regular basis so their skills and knowledge improve and innovation tools and techniques become second nature. Without training and constant exercise to reinforce and improve innovation skills, it's exceptionally difficult to innovate well over any period of time.

The difference between corporate and business unit innovation

2008-09-24T12:21:00.000-07:00

In a famous children's book, Dr. Dolittle encounters the rare pushmi-pullyu, an antelope with two heads, one on the front of its body and one on the rear. The animal has a hard time getting anywhere because both heads want to go in different directions. What I've discovered in working with a lot of organizations is that the corporate team and business unit teams are a lot like a pushmi-pullyu - both want to innovate, for different reasons and purposes and have different motivations and concerns.

The corporate or staff team want to innovate because they understand how important innovation is to the CEO, and how necessary innovation is to the organization for growth and differentiation. They see themselves as the keepers of the strategy, and believe innovation can be important and disruptive. The challenge that the corporate innovation team has is that it is rarely if ever responsible for actually producing a product or service. This means that its great ideas often struggle to be considered or implemented by the business units. The corporate teams understand the need for innovation and how it should align to strategic goals and direction, but have a hard time institutionalizing innovation or doing the tactical, day to day tasks of innovation.

People in the lines of business understand that innovation is important. After all, they compete against other firms and their offerings, and are reminded constantly about the need for new products and services. However, the business lines aren't compensated on spending time thinking about products, services or business models that won't materialize for two or three years - they've got to make the quarter happen. So, while they have the means to conceive, build and deliver new products and services, they don't have the bandwidth, time or means to focus on those issues. And all the while, corporate is giving them great new ideas which are simply added to the long list of tasks on their plate.

There should be an easy answer to this - a corporate team focused on longer term disruptions that are suggested by the business units that simply don't have the time or bandwidth to focus on what's next, and a corporate team that provides trends and strategy insights to business unit teams to extend their visibility. A corporate team can provide resources and funding to assist the business units with their mid and longer term innovation needs and take on the creation of new markets or "blue oceans". What the business units often struggle with is the knowledge that they need to innovate, but simply don't have the people, time or resources to innovate consistently. That seems like an obvious answer - so why isn't this being engaged more effectively?

Most likely there are a couple of reasons. First, while CEOs and executives talk about innovation, they aren't measuring it. So everyone understands that as long as we appear interested in innovation, and achieve the quarterly numbers, that's acceptable. Once the senior executives get serious about measuring innovation - what ideas have been created? what new products or services conceived and developed? What impact on the bottom line once they are launched? Who is innovating and who isn't? - then the demand for innovation resources and dollars will exist within the business units. Where will that capability come from? Let's hope it comes from a team aligned with core strategy who has the bandwidth to look out three to five years, not 45 to 60 days. Let's hope that team has a method that can be applied across the organization as a relatively standard approach, so we aren't reinventing the wheel each time. In other words, let's build a small corporate team and outfit them with the processes necessary and the tools to enable innovation at corporate, and in the business units.

One Critical Innovation skill

2008-09-19T11:24:00.000-07:00

We frequently hear some people (and by extension some firms) say that "they aren't innovative". Yet innovators, and successful innovative companies, come in all shapes and sizes, are found in every industry and geography. When your firm decides to become more innovative, there's only one really important criteria for the innovation manager or leader - the willingness, if not the desire, to do things differently.

As Hamlet would say - there's the rub. For the last decade we've been taught to create standardized processes and follow them closely, eliminating any variability. Now, we're asked to innovate, which requires change and risk and uncertainty. This conflicts with all we've been taught and all that's been reinforced over the last few years. What are the alternatives?

Well, you can anoint an innovation lead who accepts and reinforces the Six Sigma way of thinking. New ideas are fine, as long as they adhere to certain important principles. No new or risky methods or approaches. Financial analysis of all ideas as quickly as possible. Little divergent thinking. No incorporation of outside perspectives. In other words, we'll manage innovation the way we manage everything else.

Or, you can find someone to manage your innovation process who encourages his or her team to think differently, to intentionally violate or break the accepted norms, to consider the "what-ifs" that the rest of the organization ignores or takes for granted. Yes, it is much more difficult to manage in this style in most organizations, but ultimately the success or failure of an innovation effort is based on how it is managed and framed.

I heard a CEO speak recently about how disappointed he was that all of the "big" ideas in his organization kept becoming "small" ideas. That happened when a big or really disruptive or interesting idea came into contact with the existing norms, perspectives and expectations, and gradually the idea was confined, constrained and chipped away at until it was "tamed" by the culture. What had been a great, transformative possibility became a safe, easily dismissed idea.

We all know that Einstein suggested that insanity was doing the same things over and over again and expecting different results. It seems that's what most organizations insist on when it comes to innovation - let's manage a very different process in the same way, using the same thinking and same people - to try to drive some very different outcomes. And then they wonder why all the ideas seem so trivial.

Innovation is not simply a matter of thinking differently - it's a matter of managing differently. In fact, the thinking part is the easy part. It's the change in how we manage that's difficult and ultimately divides successful firms from the rest.

Why Johnny can't innovate

2008-09-18T07:01:00.000-07:00

Do you remember the mantra from about a decade ago? Many of us were wondering why "Johnny can't read" or why "Johnny can't understand math". This approach was meant to expose the fact that many kids were graduating from school without the capability to do the basic functions that seemed necessary and prerequisites for graduating. Today, many CEOs ask the same things about their companies - Why can't we innovate?

There were a number of reasons that Johnny couldn't read - poor teachers, poor instruction, lack of preparation, no incentives to do well in school and so on. Perhaps as well there were social stigmas for doing well in school, or perhaps some of the kids had dyslexia or other undiagnosed problems that made it difficult for them to learn to read. In any complex problem there are usually more than one underlying challenges or root causes. The same is true with innovation.

First, let's just say that for many of us, we can innovate. It's not a failure of the individual that innovation isn't happening more consistently in most businesses. If anything, in our experience, most people are frustrated at the pace of innovation within their firms and feel trapped by the bureaucracy and decision making. So, Johnny can innovate. It's usually the company that can't.

So, if we accept that many people are interested and engaged in innovation at a personal level, where's the disconnect between that initiative and drive and the fact that innovation isn't more prevalent? Most companies, intentionally or not, erect barriers and inhibitors to innovation. Here are just a few:

Most people work within one business unit or function, but often innovative ideas combine capabilities from several functions or business units. While we are optimized to work within a business function or unit, many firms struggle to work well across business units or functions
Most people are compensated on a specific set of goals. Rarely does the compensation include any aspect of innovation. So, while we ask people to be innovative, we compensate them for their "regular" or "day" jobs
Innovation requires change and risk, two factors that most firms try to eliminate from day to day operations. Failure, change and risk are career killers in most firms, so few people have the strength of will to attempt them.
The pressure from Wall Street for quarterly earnings is so high that few organizations do a good job looking at evolving trends and new opportunities. Even the firms that do look further out rarely look more than 18 months into the future, often less than a full product cycle.
Most businesses have optimized their staffing and processes to the point where there is no slack in the system. It can be difficult to squeeze in a meeting with a senior manager, much less find the time to explore a new idea or concept in any detail.

In the face of all of these intentional and unintentional barriers, is it any wonder that many firms struggle to create interesting new products and services, much less innovative products and services? Johnny, and Suzy, and Mary, and a lot of the other folks in your organization can innovate, and many of them are ready and willing to do so. What does your organization do to either enable them to be successful, or place obstacles in their way?

Creating Innovation "pull"

2008-09-02T14:26:00.000-07:00

As I work with a number of senior executives, it's clear that they want their organizations to become more innovative. Some of them talk about the importance of innovation so much that I think it becomes a distraction, especially since innovation is usually poorly defined and abstract. Also, in some cases innovation becomes the strategy rather than an enabler to achieve other goals or strategies like organic growth or strategic differentiation.

So, in many companies, the strategy for encouraging innovation is what I'd call innovation "push" - the senior leadership will push innovation into the business. What I'd like to recommend, and what I think you'll find is common in most successful innovation firms, is what we call innovation "pull". Rather than talk about the importance of innovation, what I'd like to see more firms do is simply place a requirement for growth or differentiation in each line of business, business function, product team or other organizational unit. For example, we could tell each line of business that we expect it to grow X% next year, and that each line of business should indicate what innovative products, services, business models or tactics it will apply to drive that growth. Or, stealing a move from 3M or P&G, we could set an expectation that X% of all sales must come from products released in the last 18 months. The key is to move away from advocacy to real plans and measurements.

This creates pull - because now the businesses or product groups have to identify innovative products or services, and have to demonstrate the results of their innovation efforts. Building innovative programs or initiatives into the plan for the year, or for several years, and then demonstrating the actions and outcomes and being measured and rewarded for those efforts is what will create innovative thinking and efforts in the company.

When the teams are expected to innovate, and measured on innovation, and rewarded based on their work and efforts, then there's much less need to push innovation - you've created the incentives for innovation to take hold and succeed - now you'll need to provide the resources, processes and people to make innovation successful.

Committed to Innovation

2008-08-13T13:36:00.000-07:00

If you think about any of the individuals or firms that seem really successful at innovation, one thing should shine through clearly. They are all fully committed to innovation. Edison is famous for saying that genius is one percent inspiration and ninety-nine percent perspiration. He knew over 1000 ways not to make a lightbulb, because he kept trying. All of the firms we hold up as innovative are the same way - they commit to innovation and expect everyone to be innovative.

Since I'm writing at the time of the Olympics, let's use an athletic analogy. Do you suppose that Michael Phelps is "somewhat" committed to swimming, or "dabbles" or experiments with swimming? I think the evidence suggests that he is fully committed. On the flip side, we also know that you can't be a little bit pregnant or slightly dishonest. You either are pregnant or dishonest, or you aren't.

So, what's all that got to do with innovation? Basically, everything.

Most firms we work with are interested in starting very small, containing the risk and the cost. They want to experiment to demonstrate some results before committing to innovation. On the surface, that sounds about right. No one should plunge in, sight unseen, to a new strategy. However, given the magnitude of the change necessary to become more innovative, and the pressures just to get the regular day jobs done, what can happen is that a few people dabble in innovation, they experiment with innovation but aren't really committed to innovation. This usually then results in the examination of safe ideas and concepts that don't really require a lot of work or confronting existing norms and expectations. So, the ideas are incremental at best and don't really stretch the organization, and the results are ho-hum. Then everyone scratches their heads and wonders why innovation doesn't seem to create dramatic change.

Few people who have been assigned part-time and temporarily to an innovation program that the firm has yet to show any long term commitment to are going to stick their necks out and risk much. If you want those ideas and that commitment from them, then you'll need to demonstrate your commitment and ask for those ideas, demonstrate your firm is working for innovation in the long run and change they way those folks are compensated and evaluated.

Frankly, most good innovators aren't just committed, they probably should be committed. After all, who knowingly, constantly questions the status quo and creates products and services that create risk and can't be quickly and adequately costed? Who'd come up with products and services that cannibalize existing offerings? Who'd suggest disrupting another significant market?

What's your BHAG?

2008-08-07T08:12:00.000-07:00

Let's face it - everybody wants to innovate, but most people can't find the time, the urgency, the resources or the bandwidth. When they finally get all the people, dollars, resources and time, they then play it safe, choosing to innovate around small issues. Eventually everyone decides that innovation is just a new word for new product development.

Let me suggest instead the BHAG - Big Hairy Audacious Goal. When you set out to innovate, set up an outrageously audacious, aggressive, time consuming goal that needs to be met quickly. Then, figure out how to make it work. Why would you take this approach?

First, it focuses the minds of the people who are involved. Incremental innovation can be accomplished in a lot of ways, and people get tied up in the existing politics and procedures. A BHAG will force people to think differently and work differently.

Second, a BHAG, if supported by the executive team, will create a sense of excitement and urgency. A real BHAG will ripple through the organization - everyone will want to participate and see what happens. Who wants to be the roadblock for a BHAG?

Third, a BHAG demonstrates to the organization that change is important and will happen. If the BHAG is truly big and audacious, the individuals tasked to make it happen have to think differently, act differently, fund and staff the issue differently. They have no choice but to become innovative in how they think and react, staff the challenge and create results.

Fourth, a BHAG seems "worth it". Too often our innovation goals don't seem really all that valuable, because we are too safe and comfortable. Then, many people will shrug their shoulders and ask, is it really all that different or new? With a BHAG, it will be and the effort to get there will be worth it.

What would happen in your firm if the CEO demanded three big ideas to radically change the business, or three new product expanding or market opening ideas that had to be deployed in 3 months or less? During the second world war, when cargo ships were at a premium, Liberty ships required almost 250 days to build. As the demand increased, the builders were asked to create ships much faster. Eventually they innovated the design and building of the ship and got the average to 40 days, about 20% of the time it took when they started. This wasn't because of learning gains, it was because the US had a BHAG to build ships much faster. Setting the BHAG demanded that the shipbuilders think differently, organize differently and work differently. It also created a sense of urgency to know that their work was driving the war effort. If it can be done in shipbuilding (as in only one example) it can be done anywhere.

If your company is innovating, what's your BHAG? If you don't have one, do you believe that a clear definition of an urgent BHAG will make it easier to think differently and rally people to the idea or innovation?

How does innovation fit into your plan?

2008-08-04T07:31:00.000-07:00

We all know that CEOs want innovation. Every press release, every annual statement talks about the importance of innovation to just about every firm. Yet there is a disconnect that exists between the executive level demands and expectations for innovation and what happens six to nine months later. You see, most people within a business would love to be more innovative, but they've got the pressure to deliver on quarterly and annual goals and promises to Wall Street, investors and shareholders. So, while the advocacy of innovation from the senior suite is interesting, what gets done is what gets measured. And our current yardstick is stock price, profits and revenue growth.

To move beyond merely advocating innovation, the executive team needs to set a solid expectation about the delivery of innovation. The best way to do that is to require each line of business, each product group, each business function, to incorporate innovation into their annual plans and be able to demonstrate what achievements were accomplished. This might look like a 3M sort of goal, where you want to drive X% of your revenue from products created in the last few years, or the creation of Y new markets that did not exist for the firm a year before.

Requiring the product groups and business functions to incorporate innovation in their annual plans, and then reviewing the results and assessing how well the goals were achieved is a simple first step, and one that is not often taken. The next approach to incorporating and achieving innovation is to establish a pool of funds specifically for innovation, and have the lines of business or product groups request money from that pool, which is dedicated to innovation. Jeff Immelt at GE has taken this step - to challenge each line of business to create imagination breakthroughs with funding available from the office of the CEO. When the CEO asks for innovation and offers to fund it, and reviews the significant ideas, don't you think that conveys how important innovation is to GE?

What would happen in your organization if the CEO asked for an annual plan from a line of business, and also asked for a plan that included 30% of revenue generated from products that did not exist, or asked the line of business to create a plan that spent $5M in innovation funds to create new products and services? Would that change the way your firm thought about innovation and the urgency and importance it assigns to innovation? You bet it would.

CEOs who truly want innovation in their organizations need to invest not just their words, but their time and their funding to demonstrate how important innovation is to the business.

Why innovation is like (and unlike) electricity

2008-08-01T03:50:00.000-07:00

I was sitting in an innovation discussion with a client recently when it struck me - in some ways innovation is very much like electricity, and often we want it to behave exactly like electricity, even when it won't.

Innovation is unlike electricity in that you can't simply "flip a switch" and expect an immediate outcome. I can flip a switch to turn on the lights in my room, but I can't simply say "be innovative" and expect an immediate result. Nor can I flip the innovation switch off and on repeatedly, since the "flow" of ideas takes time to build.

However, that last concept - a "flow" of ideas explains why I think innovation can be compared to electricity. If you flip the switch on, and leave it on, electrons flow until you flip the switch. Likewise, in a well run innovation program, ideas literally flow constantly, because that's the only way to succeed. Starting and stopping when you have "enough" ideas is ineffective and inefficient. Want more? We can continue the analogy to a circuit board.

Just like in electrical circuits, innovation has its resistors and capacitors. Now, resistence is used for important effect in most electronic circuits, but it almost always creates waste, especially heat. In the same manner, innovation has it's resistors - they are the people who want to demonstrate why it can't be done, or are the doubting Thomases who say "we've never done anything like that before". Alternatively, most innovative teams have power sources where the ideas flow from, and capacitors, which store and manage the flow of ideas, just like an electrical circuit. When the ideas are flowing, they originate from one or multiple sources and are managed through a process with an effective governance.

We've become so accustomed to turning on the lights and getting results that many managers believe that programs like innovation should work in the same way. Inertia, change, risk, fear of the unknown block an innovation program and keep the ideas from flowing. Only through establishing a consistent, continuous circuit can an organization succeed at innovation. You can't just flip an innovation switch.

Note: My apologies to all the electrical and circuit folks among you who are probably cringing as you read this. My one and only class in electrical engineering proved to me that I belonged in marketing. Feel free to add your own analogies (even if they are a stretch) in the comments or tell me where I went wrong!

Idea Management Software Beta Trial

2008-07-23T11:22:00.000-07:00

I'm posting this hoping that some of you, faithful readers, might be interested in working with our Incubator software which we will release this week (July 21, 2008) as a beta trial. What that means is that we'll provide the software as a hosted instance and you can try it out and give us comments and feedback. Some of those comments and suggestions may make it into the final version.

If you are interested, please contact me at jphillips at ovoinnovation dot com. Sorry for the jumbled email address but you know the drill online. The beta will be available through at least August 15.

Sponsors are critical to innovation success

2008-07-21T10:28:00.000-07:00

The more work I do with customers and innovators, the more evident it becomes - the number one driver for innovation success is a clear sponsor for an idea. Your team can have lots of ideas, many great ideas, a robust system for selection and evaluation, a Stage-Gate process, a significant innovation portfolio, idea campaigns and a culture that sustains innovation. Yet, at the end of the day, any idea that is not sponsored and commercialized is really just pearls before swine.

Let's get down to a few basics - any firm can innovate occasionally, and most can accomplish some forms of incremental innovation. That is, a new idea to extend an existing product or service is accepted and swept into an upcoming product release. What's also clear is that any idea that is not on the product roadmap, or requires much more risk or investment, is much more likely to fall by the wayside in the transition from idea to new product. There is simply too much risk to adopting an idea that your team or organization wasn't requesting and wasn't a part of during the ideation process.

This is one area where open suggestion systems fall apart. Yes, it is easy for many people to submit ideas, and some of them may actually be beneficial. But if no one is willing to adopt and sponsor that idea as part of their new product or service roadmap, few open suggestion ideas will be adopted and commercialized. Open Suggestion models ultimately fall apart because of two big concerns: first, there's little strategic alignment between the ideas and the needs of the business and second, there are few line of business leaders who will adopt the ideas and convert them into commercial products or services.

So, what's needed and what's the "right model"? Well, using our two whipping boys - Google and Apple - we can see that there are several potentially successful models. Apple's model is top down strategic sponsorship - what Steve wants, Steve gets. Few firms can mimic this approach because few have the strategic vision and "guts" it takes to dictate these large bets. But every success (and a few failures) have had Steve's sponsorship and fingerprints. Conversely, Google places hundreds of small bets, and the individual or team that originated the idea must acquire sponsorship from product managers or others to mature the idea. There's no one clear sponsor, instead many different line of business leaders can be a sponsor.

When a firm uses idea campaigns to generate ideas, there's another potential sponsor. The business leader who initiates the campaign should be willing to become the sponsor for any idea that's generated within the idea campaign. After all, he or she was able to define a problem or opportunity that needed to be addressed and was presented with a range of ideas. If the person or team who originates an idea campaign is not willing to adopt or commercialize the ideas, then the process is just an exercise.

We have a concept called "strong sponsorship" or "weak sponsorship". What this means is that an idea may have a sponsor or likely adopter who is seeking more insight and maturity around an idea, and when the idea is "ready" he or she will bring that idea back into their business. Many successful ideas have strong sponsors who are willing to take a risk and implement an idea - often they just need some ownership and visibility to the idea. Conversely, an idea that is offered up but has no clear owner or sponsor will often lag in an idea database. Even very good ideas which don't clearly belong to a group or attract owners or sponsors won't be converted. When this happens, everyone understands the value of the ideas left behind in the idea database and becomes frustrated at the firm's inability to commercialize good ideas.

In the end it will all come down to which ideas gain sponsors, and who is willing to adopt and implement the ideas, converting them into new products and services.

2nd life becomes real world

2008-07-17T07:20:00.000-07:00

In an interesting example of life imitating art, the rock band Rush is planning to release a revised single of their song Working Man. What makes this release interesting is that the song was originally released as part of an album that didn't sell all that well, but the song was picked up by the video game "Rock Band" and the producers requested a slightly different rendition to place in the video game. Over time, the revised version has become so popular among the Rock Band players that Rush is considering releasing the revised version as a single over iTunes. Here's a case where products and services first conceived or derived in the virtual world become available in the "real world".

If you are interested in innovation, you've got to have a toe in the water in the social networking, video game, virtual reality space. There is a significant amount of creativity going on in these arenas. No one knows today where a lot of this work will end up, but I think I can say with all safety that these markets and movements will end up driving a lot of social change and innovation, and will ultimately impact the way we live and interact. For innovators, there's probably no better place, no more fertile ground, than social networking sites and especially virtual reality to try out concepts and ideas.

Yes, I know that most Fortune 500 firms probably have a director of social networking and social media, and are considering how to get involved with virtual reality. Many firms have established store fronts inside Second Life or other virtual reality environments. Yet to many of these firms these efforts are sandboxes. They know they need to be there but can't figure out what they are supposed to do. What I think should happen is that they should round up the people in their firms that understand and interact with virtual reality and use those folks as a focus group. What do they want/need in that space? What could our firm offer? Every firm has employees who are gamers or active in 2nd life or other virtual reality. Why not tap into those folks to gain more insights and start gathering the trends and intelligence that they can provide?

I can't tell you how these environments will ultimately shape our existence or what new products, services or opportunities will emerge, but I can tell you that it will happen. The question is whether you'll be blindsided by the innovation or out in front.

You should outsource innovation if...

2008-07-07T13:50:00.000-07:00

I didn't think I'd ever write this post, but I am rapidly coming to the conclusion that some firms are right - they can't innovate. This inability to innovate is not based on a lack of ideas, or a lack of intellectual curiosity, or inadequate skill sets. No, in many cases where firms want to innovate and can't, the barrier is time and focus.

Too many firms have the right people, good ideas and senior management commitment, but simply cannot find the time to innovate. Obviously this suggests a misalignment of the focus and engagement of the teams and the goals of management, but there it is. I've worked in several firms where there is clear commitment from the top - demonstrated in people resources and in dollar resources - but innovation gets shoved aside because people can't be pulled away from their day to day tasks.

So it's time to consider a completely different model - if you can outsource your payroll, outsource manufacturing and other key elements of your business, why not outsource innovation? In this regard I think the firm outsourcing innovation would suggest key areas of focus for a third party outsourcer to consider, and would provide some measure of resource availability for brainstorming and other activities. However, once the ideas are generated, the outsourced firm would run interference on the ideas, evaluate based on agreed criteria, research competitors and present the firm with what it considers the best ideas. An outsourcer could also spend more time looking at trends in an industry and synthesizing what's happening in the industry and key opportunities for innovation in terms of products, services or business models. I guess the question becomes - what's core competency and critical for success of your business, and what can be outsourced or managed by teams that are experts in innovation?

If your team is sold on innovation as an important key criteria for growth and differentiation, how much of the process should you run and manage in house, and how much should you outsource to innovation teams that have the depth, breadth and availability to innovate and are not locked down by your culture and bureaucracy?

The more I work with innovation, the more it becomes clear that some firms can innovate because it is simply part of their DNA, some firms can learn to be innovative, and some firms, while they want to be innovative, will have difficulty finding the time and the focus for innovation, even though they recognize it is important. Maybe the innovation industry should consider a new offering - not just a hosted software application, but a fully managed outsourced process and solution for innovation.

Understimulated

2008-07-01T05:39:00.000-07:00

I don't know of a good argument for failing to innovate. I suppose there may be one - perhaps a firm has a monopoly on a specific niche and therefore believes that no innovation is necessary. If your firm exists in a competitive space, competes for customers and market share, then innovation is a given. Otherwise your competitors or some new entrant will create a new product, service or business model that is so compelling that you'll be forced to respond, or leave the market.

So, if innovation is important, then we ought to examine what's necessary for good innovation practice. Today I'd like to focus on what I call stimulation - getting people out from behind their desks and interacting with customers, competitive products and services and the wants and needs of the market. Too often, many firms employ armchair quarterbacks - that is, people who want to be innovative but try to do it from their office or cube. These people are understimulated - they don't have a lot of contact with customers or prospects and don't have a good understanding of the market. That's not to say that they can't created a lot of ideas. The ideas these folks generate usually don't solve an important problem or identify a viable new market.

What you'll find is that most good innovators, and innovation firms, have connections to a large array of individuals and other firms, in their own industries and many other industries. Successful innovators are out in the mix, interacting with existing customers and business partners. They are sifting through societal and demographic trends and meeting their potential customers face to face in conferences and focus groups. They are seeing "how it's done" in other geographies or other countries. Here's an example. I was recently asked to speak to an innovation team at a large bank in the US. I asked them how many of them had been in the branch of a competitive bank recently. None had. I asked which firm they considered the most innovative in the banking space. Every answer was about other banks located in the US. I think probably HSBC has been one of the most innovative, yet few bankers in the US have exposure to HSBC. Next, we discussed other firms that might disrupt specific features of the banking industry (funds transfers, high interest rates) that are provided by non-banks such as Paypal and Schwab. Were any of the people in the room actively talking to Paypal or Schwab, to their customers? No.

So in an organization that considers itself fairly innovative, no one was out talking to customers, prospects and potential business partners. Everyone was innovating within their four walls, guessing at what the market wanted or needed, with blinders on about what is actually happening in the market. While a firm can be successful innovating from the "inside out", over time the best innovation happens from the "outside in". Your innovation teams need to get out from behind their desks and get out into the "real world" to understand what people want and need.