Innovating To Win

Where Do You Look For Whitespace Opportunities?

Our most recent innovation poll suggests that there are big differences in how we approach the task of finding white spaces opportunities.  Four of the five selections attracted strong voting, but no one area garnered votes from a majority of the survey respondents.

One interesting observation is that less than 40% of respondents look for opportunities to create entirely new products.  This suggests there is a bias toward minimizing the risks of innovation by sticking to one’s knitting.  Companies leverage existing competency in a product or technology by finding new channels of opportunity or maintain market value through incremental innovation.

While some may criticize management for this tendency, it is important to consider that one reason for this bias is the effectiveness of the approach.  Many organizations have found that the waters of blue ocean opportunity can be very choppy, and after making massive investments in such opportunities they have found themselves wondering, “Who peed in my blue ocean?”

Another point of interest is the low response rate for complementary product creation.  This suggests a strong impression that innovation must be either very closely aligned with a current product or technology, or it must be off in totally uncharted territory.  Complementary product are often thought of as being betwixt and between and hence the poor cousin of more interesting innovation avenues.  However, this thinking may be a strategic mistake.  A complementary product that ties back to an unanswered aspect of the core opportunity space of an existing market represents a dual opportunity.  It can be a strong new product with a ready audience for a proven use model.  The complementary product can also be the thing that creates a bridge to new audiences because of an intersection in the objectives of opportunity spaces.

So, what should innovation practitioners extract from this survey?

With strategies for leveraging current product and technology being so heavily relied upon, it is essential that innovation workers have well defined best practices to drive these initiates quickly and effectively.

Companies that are looking for the next big thing should be developing the specific sustainable innovation approaches that mitigate the risks of innovation and thereby improve the return on innovation investment.  Best in class companies consistently enjoy higher innovation success rates than other companies.

Reconsider how to look at the red ocean opportunity spaces to expand your market footprint through complementary offerings.  This could be a great less travelled path to revenue growth.

Idea Generation or Selection

Drew Boyd has posted an interesting item on Innovation In Practice.  In Ideation vs. Prioritization, Drew suggests that too much is made of the question of how to select the right ideas to pursue rather than how to generate lots of great ideas.  In fact, he argues that prioritization of ideas doesn’t belong in the innovation discussion.  Drew is both right and wrong in this position.

Where he is right is the notion that too much focus is often placed on idea management and selection at the expense of quality idea generation.  This decision making angst is not surprising.  With the low success rate of innovation experienced by most organizations and the high cost of failure, it is natural for people to feel great pressure to make the right decisions.  But if the ideas in the pile of options being considered are all of marginal quality, one can hardly expect good selection discipline to make a silk purse out of a sow’s ear.  On the other hand, if every idea in the opportunity pipeline is high quality, well aligned with the company, and properly qualified, then almost any choice will lead to success.

This concept is a very simple, but often overlooked, aspect of innovation and business opportunity development.  Because people forget this principle, a lot of time, effort, and money is wasted on idea management solutions when the real issue to be addressed is the process of getting good ideas in the queue at the front end of the process.

This is where I think Drew’s view is off (at least if taken literally).  Selection should not be ignored in the innovation process; it is an integral part of innovation.  Innovation is not generating ideas; innovation is generating value.  Value is relative to the objectives of the company and metrics that map back those objectives.  Good, sustainable innovation practice incorporates the notion of objective targeting and alignment.

When innovation workers understand the metrics of concept validation and collect evaluation metrics along the way, implementing fast failure disciplines is easy, and ideas that survive to the program selection gate have a much higher value potential and probability of value realization.  Companies that have achieved a high performance innovation culture integrate these concepts in to their best practices and achieve these benefits naturally.

Market Whitespace Poll Closing Soon

Our informal poll on where people look for whitespace opportunities closes this Friday.  So if you haven’t cast your vote yet, you better hurry!  You can cast your vote using the Vizu poll widget in the side bar on the left.

A new poll will start on Monday, August 18th.

Internal Networks for Innovation

Continuing in the Five Pillars of Sustainable Innovation Culture discussion, let’s consider pillar number four: Network for Innovation Mentoring & Facilitation.  In this context, I am not referring to an open innovation network.  While open innovation has its role to play, the greater need is for internal organizational structure and process that creates a network within the enterprise to support the full scope of innovation activity.

There are many aspects to innovation best practices, and there are many types of innovation problems.   Innovation isn’t a point event that happens at a well defined place in the product lifecycle.  Innovation happens throughout the value creation chain.  Very early on, it is first seen as the identification of new opportunity space.  Subsequently, innovation may involve finding the concrete strategy to convert the nascent idea into a commercially deliverable offering.  Further on in the process, we may be faced with unforeseen technical or quality challenges that must be overcome if we are to meet customer satisfaction and profitability requirements.  Often, new products may require new thinking around production or logistics.  It doesn’t take much effort to understand that there are opportunities for innovation to create new and higher value at every point in the product delivery process.

Different problems yield more readily to different solution paradigms.  Some types of innovation tasks are performed frequently.  Other innovation tasks are only undertaken occasionally.  A designer may need to look at evolutionary changes to an existing offering regularly.  On the other hand, considering options to create an entirely new product line is something that is done much less frequently.  How can knowledge workers keep their head down in weeds of routine innovation and still have facility with the specialized skills that may be called for when they need to pursue a more esoteric project?

Innovation workers have different roles to play in the organization.   The intellectual property analyst performs a very different function than the quality planner.  The design engineer has a different job than the product marketing person.  How do these disparate functions come together harmoniously when a cross-functional team is assembled?

All this variability in the many aspects of innovation leads to the conclusion that organizational über-processes must recognize that innovation skills will not be uniformly distributed in the organization.  Thu, innovation leaders must be leveraged within the enterprise to help knowledge workers bridge the gap between personal innovation skill level and problem solving skill need.  An organizational structure to maintain and optimize the leverage of a mentoring and facilitation network is required.

This can be accomplished in many ways.  A common model is to build an innovation skills pyramid.  At the base of the pyramid, knowledge workers are trained in the fundamentals of innovation.  These include basic skills of problem analysis, solution identification, and concept validation.  At the top of the pyramid, innovation experts are cultivated as highly leveraged corporate resources.  These experts are tasked with leading others through the more intricate processes of innovation that are less frequently traveled as well as cultivating general innovation skills by working with other knowledge workers to help make the entire organization more effective.

Isolation of innovation expertise, the internal outsource group model, is usually not a good approach.  It works against the need to enfranchise all knowledge workers in the innovation agenda.  More effective is to disperse the innovation skills throughout the enterprise and cultivate innovation experts within groups.

Better still is to use a hybrid model.  Build wide spread general innovation competence that is complemented by a horizontal team of innovation experts.  This is a concept that I have seen work very successfully for organizations.  For more on this concept, see “The Case for an Innovation Center of Excellence”.

BCG Innovation 2008 Report

The Boston Consulting Group has released their latest report on innovation, “Innovation 2008: Is the Tide Turning?”� As always, the BCG report provides some great insights on the state of innovation in business.

Some highlights of the report are:

• Innovation remains at the top of corporate agendas.� Roughly 2/3 of respondents identify innovation among there top three priorities.
  
• However, executive satisfaction with return on innovation is on the decline with only 43% of respondents saying they are satisfied with the financial return on innovation.� Yet, there is a disconnect with the top of the executive hierarchy.� Chairpersons, CEOs, and president as a group expressed overall satisfaction.
  
• The three biggest impediments to innovation were reports as long development time, risk-averse cultural bias, and difficulty with selection of the right ideas to pursue.

There is a lot of good detail in the report that shed further light on some of the initial observations.� Of course, it comes as no surprise that innovation is still a top of mind urgency with companies.� With leading companies fending off the multiple challenges of aging products and intellectual property, loss of key expertise due to shifting workforce demographics, new and determined competitive threats from emerging participants in the global economy, and financial pressures of a difficult economic climate, innovation is a necessary element in the prescription for corporate health.

The trend of the past few years showing continued erosion in satisfaction levels with the return on innovation is of great concern.� Coupled with the corresponding decline in companies planning on increasing investment in innovation, it suggests that many companies are finding it difficult to establish sustainable innovation programs.� Too many companies are spinning their wheels as they find driving their companies out of the mud and muck of accidental innovation to be harder than they first thought.

One clue as to what is behind this can be found in the results of the survey’s question about how companies measure innovation success.� The top three responses were customer satisfaction, percentage of sales from new products, and overall revenue growth.� These are all very important measures of a company’s management execution, but they are not necessarily accurate measures of innovation success.� Innovation metrics must be both specific and verifiably incremental.� (That is to say if your innovation isn’t making a measurable difference, what’s the point?)� Even more to the point is that measures such as new product success ratios and time to market ranked near the bottom of the list.

A quick look at the top three impediments to innovation underscores the importance of good sustainable innovation practice.� Systematic innovation shortens development cycles.� Innovation best practices reduce and eliminate risks.� Sustainable innovation is built upon alignment of innovation with corporate objectives, customer aspirations, congruence with the opportunity space, and maximally leveraging available technology and knowledge—all making optimal idea selection a natural process.

There are plenty of other very interesting insights in the report.� It is a quick read and definitely worth it.� You can find the report here.