Innovating To Win

Obama & Innovation – First hundred days assessment

As President Obama reaches the first milestone of 100 days in office, many pundits are evaluating how he’s doing.  I don’t really care about most of these assessments which seem to be focused more on how Presidential he has been acting and not really looking at the substance of Obama’s actions and impact as President.  But since the President chose to deliver an address to the National Academy of the Sciences this week, it seems appropriate to ask how he’s doing when it comes to innovation.  With that in mind, here are my observations on two indicators: Obama’s speech to the NAS, and his actions in response to the economic situation (which have a direct impact on the National innovation climate).

In considering Obama’s speech, I am not going to critique his delivery or choice of words.  My concern is the content (did he cover the right issues given the audience), the substance (was there appropriate depth in the treatment), and the underlying policy (can we expect a positive outcome) of his remarks.

In the area of content, I have to give Obama an A-.  He really did hit on several key issues that impact innovation: funding for basic research, R&D credits for private enterprise, education, and data privacy.  There are other innovation related topics he could have address, but you can only hit so many topics in any one given speech and not all are appropriate for every audience.  (For a more complete list is innovation issues see this open letter post.)  I would say the only issue missing that I really wished he had touched on with this audience was revisiting the Bayh-Dole Act—a piece of legislation which was a bad deal for tax payers and a bad deal for innovation.

Looking at the substance of his remarks, I am a little less impressed.  On the plus side, Obama recognized that we can’t be complacent and investing in our future is important.  Yet while he glibly talked of the sins of letting scientific research be politicized, his words and actions suggest that he only views political influence as a bad thing when it is contrary to the political view he subscribes to.  He frequently referenced carbon pollution as a key focus of needed research—this is of course is one of the most politicized science issues in recent history.  Obama cited many specific investments in the form of doubling and in some cases tripling of budgets for programs.  However, money doesn’t always equate with impact.  I would have preferred to hear more about the allocation of those funds.   Does doubling the budget of the National Science Foundation mean that these new funds will flow through to actual research, or does it mean that the NSF will add a heap of bureaucracy?   (In the interest of full disclosure I should state that I am very pro-NSF funding and was the recipient of an NSF grant back when I was in school.)  For this reason, I can only give Obama a C+ on substance.

Considering the policy behind the remarks is a more difficult challenge.  Politicians are of course very skilled at minimizing the degree to which they disclose the actual intent of policy when they speak.  This is a necessary skill for politics because it is always true that any time a politician take a concrete position, more votes will be lost than gained.  So, we in the citizenry are forced to try and read the tea leaves.  Based on past performance of government initiatives, it is impossible to not have some healthy skepticism.  Thus, I am not very optimistic.  I do believe that the increase funding for certain agencies will have a positive impact, as will making the R&D tax credit permanent.  So, kudos go to Obama for these actions. 

However, I don’t hold much hope for Obama’s comments on education.  It has been shown time and time again that throwing more money at education does not produce results.  There is new thinking needed to fix what is broken in our educational system, and I suspect that the cure to what ails us may not require new money to implement as much as a simple realignment of priorities, focus, and the funding associated with current, well-meant-but-failed programs.  Not to be harsh, but we also need to recognize that equality of opportunity does not mean equality of outcome.  While we should invest in creating a level playing field, it is a misuse of public funds to go to extremes to try and force equal results.

I am also very worried when it becomes a matter of public policy to direct where we will focus our national investment in research.  Obama open his remarks stating that we can’t predict from where the great breakthroughs will come.  But, he went on to make it clear that he intends to focus funding in certain areas based on their political currency.  Furthermore, from the sound of it, the voices that contribute to the debate may be selectively chosen.  There are too many examples from the past which make it clear that suppressing broad discussion and dialogue around emerging science is never a good approach.  I sincerely hope that I am misreading the tea leaves in this area.

As a final factor in assessing Obama’s innovation policies, I will invoke the evidence of his actions on the economy.  Fortunately, the economy has its own life and rhythm and it is a reality that government action is less a factor than politicians would have us believe.  If not, we would be looking at a disaster based solely on the actions to date.  The so-called stimulus bill has very little in it that will actually stimulate the economy, and the burden created by the massive new debt load will be an economic drag for years to come.  The negative effects of this bill will needlessly divert funds from moving our nation forward into unproductive debt service.  This will not be good for innovation.

So from the visible evidence to date, I give Obama a D for policy.  Too harsh?  What say you?

Open Innovation – What You Said

As companies are looking for ways to fuel innovation without burning cash and other resources, one method of idea generation that has been garnering a lot of buzz is open innovation.  In pursuing open innovation, companies attempt to leverage members of their value network (customers and partners) to harvest more concepts around which innovation initiatives can be mounted.  But is open innovation effective?  That was the question behind our latest Innovating To Win Innovation poll.  You were asked to characterize the nature of the results you were achieving (or expected to achieve) from your open innovation programs.  The results are quite interesting.

Just under 43% of you expect get either breakthrough innovations or significant new market opportunities through open innovation.  Fully one third of respondents anticipate that the results of open innovation will be incremental in nature.

At one level, these results are not too surprising.  It is a well understood concept that customers are subject to the same forces of mental inertia that product designers must overcome.  The current use model of the product or service you are providing your customers creates a lens through which they see what is possible.  This is what makes listening to customers to indentify directions for breakthrough innovation especially difficult.

However, what is particularly surprising is the number of respondents that find their open innovation programs are not yielding valuable results.  Almost 24% feel the results of open innovation are not adequate.  This speaks to the challenges of successful open innovation.  Some companies make the mistake of believing if you build an open innovation portal, the high value concepts will come.  But, this is hardly the case.  Like any other strategic initiative, open innovation requires great attention and effort to drive its success.

Among the key challenges companies face in making open innovation initiatives work are alignment, authority, and actualization.

Alignment is an issue because your goals and the goals of your customers and partners are not the same.  Don’t fool yourself into thinking otherwise.  As a result, there is a need to create optimal alignment of participants in the open innovation process. Communication and goal sharing are key.  So too, is building affinity in the innovation team.  Customers and partners have limited loyalty.  I recently had the opportunity to talk about this issue with Michael Chui of McKinsey & Company.  The risks of investing in a partner relationship when the partner can realign with a competitor at any time are all too real.  This is an area often overlooked in the open innovation process design.  Consider how your open innovation program creates a bi-directional flow of value.

Once you establish a flow of concepts through your open innovation program, you must still validate the authority of the source and concept as it relates to your business and market objectives.  This often means considerable analysis and research to vet concepts.  The need for this type of secondary research should not be underestimated.  At Clorox, an early leader in the successful application of open innovation processes, high value is placed on the validation of concepts as they emerge from the open innovation partner network.  Make sure you have properly invested in the infrastructure to support deep concept validation and research to ensure the best quality of innovation platforms choices.

Actualization is another piece of the open innovation process that is frequently overlooked.  It’s not enough to find a high-value concept; you need to do something with it.  The challenge of moving from concept to revenue generating product is among the biggest challenges companies face according to a recent Boston Consulting Group report on the state of corporate innovation.  In many cases, great concepts are passed over because the company doesn’t see the path to monetization.  What a waste!  Make sure that you are ready to extract to the maximum value of your open innovation concept stream by equipping your innovation workers with the skills and tools for repeatable, high performance innovation.

The bottom line is that open innovation is not a panacea to anyone’s innovation problems.  It’s merely another available tool.  Like any tool, you need to understand how to use it to produce desirable results.  Understand the participants and dynamics of your value creation network; keep your eyes on the issues of alignment, authority, and actualization; and you will be starting off on the right path.

Don’t forget, a new poll is now open.  Many companies are identifying that the loss on institutional knowledge due to the mass exodus of more experienced workers is having a serious impact on the innovation capacity of the organization.  With that in mind, our new poll probes to see how you are coping with the issues of generational turnover.  You can find the poll in the left hand sidebar. Please remember to vote.

Gleaning Innovation Insights From The News

If you live in the world of innovation, you know that stay current on things is important and not just those things that are directly related to your work.  You need to look around at everything and ask yourself some key questions.  What does this mean?  How does this impact other things?  What is the opportunity that this reveals?

Here are some examples from today’s newspaper (I like the Wall Street Journal) to consider.

In Nevada, some people have found playing hard-rock music to be an effective way to repel Mormon crickets.  Hmm…  What is it that makes this so?   Is the underlying principle useful more broadly?  Is there an abstraction to be made here?

Ford is still losing money, but has slowed its cash burn.  It looks like Ford is showing it will be able to something that the other Big-3 automakers can’t—rebuild their company without taxpayer assistance.  Kudos for this!  What else does this tell us though?  What had allowed Ford to be different and how does this translate to other industries?

Microsoft is reporting its first ever decline in quarterly revenue.  What are the predictable impacts on the rest of the software industry?  How does this tie in to other high-tech sectors?  What about the relationship to the consumer space?

More entrepreneurs are taking a pass on paying themselves to keep their businesses going.  What does this tell us about the investment climate?  What pressures does this create on the costs of services and the costs of personnel?  Should larger companies consider similar measures?

Apple gets egg on its face over baby-shaking game.  Makes you wonder who’s minding the i-store.  What lesson does this misstep hold for us?  Was this simply a failure of management?  How could this have been prevented?

These are just a few of the headlines from today’s WSJ.  What news items are you seeing that can provide useful insight for future innovation?  Are you just reading the news, or are you analyzing it and extracting out useful innovation lessons?

Innovation Tips from Guy Kawasaki

In the Art of Innovation, Guy Kawasaki discusses 9 tips for innovation.  The post gives some good pointers to approaching innovation.  To summarize Guy’s points, innovation requires vision, tenacity, flexibility, customer orientation, and a splash of audacity.  Take a look at the post here.

Defining Innovation

It seems for many something as simple as defining innovation can be a challenge.  Of course, it’s not that surprising.  Innovation is one of those words that are plagued with a surfeit of meanings.  With a quick look at Merriam-Webster On-line, we find:

Innovation: \ˌi-nə-ˈvā-shən\ (noun ) 1 : the introduction of something new, 2 : a new idea, method, or device : Novelty

These are the common definitions, but in circles of innovation practice, these common definitions don’t capture the meaning of the concept very well.  For this reason, we choose to apply different, more refined definitions to the term in an attempt to capture the nuance of what innovation means in an organizational setting.  However, the echoes of the common vernacular continue to haunt our discussion as people trying to get their arms around the subject struggle with the distinctions between creativity, invention, and innovation.

Ask ten people to define innovation, and you are likely to get at least a dozen answers.  However, I’ll put forth a single answer to the question.

Innovation is the process through which value is created and delivered to a community of users in the form of a new solution.  Here we have chosen to frame the definition of innovation as a word describing a process.  It can also be used to describe a new product or service, which is the outcome of the innovation process, that delivers value to a community.  In either case, the key elements of the definition are newness and value delivery.

Creativity, by contrast, is the ability to imagine new concepts.  While we won’t discuss what it means to imagine new concepts here, it is important to note that creativity does not carry the burden of value creation that innovation does.  This is one of the reasons that in brainstorming sessions it is not recommended that concepts are screened for merit.  This allows the brainstorm practitioner the fanciful luxury of proclaiming success in generating many creative concepts even when the result is devoid of value.

Invention is also distinct from innovation.  The distinction here rests on a fine point.  If you think about the three attributes that an invention must possess to be patentable – novelty, non-obviousness, utility – there are two key distinctions between inventions and innovations.  One is that innovations are not required to be non-obvious.  As all innovations build on the past, it is possible for an innovation to be obvious.  (Though the value of an innovation is usual inversely proportional to its obviousness.)  More importantly, innovations and inventions have a potential distinction in the area of utility.  Inventions need only be useful to the inventor and have recognizable utility to the patent examiner.  Innovations must answer to a higher authority.  Innovations must be deemed useful by the intended audience of use.  That is to say, an invention is an invention by virtue of its existence.  However, an innovation must be adopted in practice by the intended user community to be considered a true innovation.

In general, the definitions given here have served me well and have been well received by other leading innovation practitioners.  Now, it may seem odd that while innovation in business is mostly where I focus and business is all about money, I have left mention of money out of the definition entirely.  There are two reasons for this.  First of all, for-profit business is not the sole domain of innovation.  Innovation is ubiquitous in its reach and can be used to serve a multitude of purposes.  More importantly while it is true that the end objective is generation of money in the realm of for-profit business, the primary value delivery of innovation is to the adopting users, not the business.  It is business of business to figure out how to convert value delivered via innovation to users into revenue and profits.  (Of course, a well developed high-performance innovation program understands this and integrates the business strategy with the innovation strategy from the start.)

One other point to remember is that innovations can be either outward facing or inward facing.  An outward facing innovation is one that targets an end-user audience.  An inward facing innovation may address in internal audience such as a manufacturing group where a new method of manufacturing may create a competitive edge.

The funny thing about definitions like this one is that while they are useful, they are not nearly important as the effect of innovation.  It is important to members of an organization that innovation is a tool to be used to create corporate value by delivering monetizable value to customers.  Companies that master this practice in a sustainable manner will outperform their peer group competitors.

But if you aren’t implementing high-performance innovation as an engine of sustainable growth already, it’s time to stop worrying about the precision of the definition and start worrying about who’s going to eat your lunch.  Innovation isn’t about talking, it’s about doing.  So, get cracking, and begin your journey from accidental innovator to high-performance innovation leader.

BCG Innovation 2009 Report

The Boston Consulting Group has released its annual report on the state of corporate innovation.  It’s rather interesting to note the press coverage that the report has spawned.  Strangely, the commentary seems to focus on a reported increase in the number of companies forecasting a decrease in R&D spending.  Even self-proclaimed innovation guru, Bruce Nussbaum, reported on his blog that “most corporations are cutting back on R&D and other innovation investments.”  It makes one wonder if anyone actually read the report.

I did, and I suggest you do too.  There are some very good insights in the report.  Until you get around to it, here are some of the highlights.

While the economic crisis has caused some companies to lower the priority of innovation, most companies (64%) still consider innovation a strategy priority.  This priority is quite justified.  The BCG report cites that there is a strong connection between innovation competence and corporate success.  Putting their money where their mouth is, fifty-eight percent of participating companies plan to increase their spending on R&D.  Many of these companies plan to shift the emphasis of their innovation to cost control.  Only 14% plan to reduce their innovation spend.

CEOs are considered the most visible champions of innovation, yet few CEOs see themselves this way.  This represents a serious gap in the expectations of management and innovation workers and may be a factor contributing to why only slightly more than half of the respondents are happy with the return on their company’s innovation spend.

The report also finds that there is a tendency to pull back on innovation investment in rapidly developing economies, with innovation taking on a more local flavor.  It will be interesting to see if this is an early indicator validating Nussbaum’s recent prediction of a slowdown in globalization.

Responding companies identify their biggest innovation challenge is move from an idea to a delivered product.  This isn’t very surprising.  All too many organizations confuse ideation with innovation.  The emphasis on collecting lots of ideas rather than the full cycle innovation best practices undermines the ability of organizations to achieve their innovation objectives.

The BCG report is full on other fascinating information.  You can find the full report here.

Open Innovation Poll Closing Soon

Our current informal innovation poll closes next Friday.  This time, the question is: “What benefit are you getting (or do you expect) from Open Innovation?”

Many companies have been looking at the concept of open innovation.  To reading some recent article, you might conclude that open innovation is the panacea to cure any organization’s innovation ills.  But is that truly the case?

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, April 27th.

Anatomy of an Innovation

I avoid writing about my job too often.  But, I have gotten a lot of questions recently on how the concept for Invention Machine Goldfire came about and its path to market innovation.  It’s an interesting case because not only is it about a technology and product innovation; it also takes us into the realm of innovating innovation.

Birth of a concept
In the winter of 2002, Trident Capital invested in a company called Invention Machine.  Trident tapped Mark Atkins and me to be the turnaround team.  (Mark and I had just been part of a successful exit for Trident in where he was CEO and I was CTO.)  We had helped with the investment due diligence for Trident, and we felt the company had some interesting technologies.  However, the existing products and positioning were not optimal but could be realigned to produce great value.

Sitting at the Au Bon Pain across the street from the office, Mark and I discussed the strategy for the company.  On a napkin, we mapped out a concept to create a new software platform for innovation that would bring together some of the company’s technology and knowhow assets.  This new product would combine innovation methodology with state of the art semantic technology to make is easier for knowledge workers to innovate.  Mark asked me if would be possible to do; I told him it would.  He asked how long it would take; I told him we would have a deliverable product in 10 months.  Of course, identifying a product concept is a far cry from delivering a product.  There were some important things that needed to be understood along the way.

Assessing resources; Understanding the job
Few things are entirely new.  All innovations build on the past.  New products evolve from the changing needs of customers as they interact with incumbent solutions to do today’s jobs.  For this reason, the first issue I tackled was to understand the resources we had to work with and the jobs that customers wanted to get done.

From the resource perspective, it begins with the people.  I interviewed every person on the product team to understand the scope of skills and the depth of the team.  Fortunately, we had very strong people on the team including a world class research group.  Another aspect of resource was the existing technology.  The company had a grab bag of componentry from the existing products.  Some of it would be reusable, but much was not going to contribute to the new product.  The third internal asset of the organization was its institutional learning about innovation best practices.  The company had been engaged in innovation consulting for over a decade with some of the leading innovation companies in the world and had helped these companies to successfully build repeatable innovation practices.

The other key asset was the customer base.  Most of my first 45 days at Invention Machine was spent on the phone interviewing clients around the globe, learning from them what they did.  Each interview recorded not just what the client did with our software, but also the nature of their work, what they did outside of our software, and what they wished they could do differently.  This interaction was the key to further developing the original concept into a strategic path to delivering value.

Moment of synthesis
There was no aha moment.  Innovation doesn’t really happen like that.  Rather, it was like a photographic image gradually appearing as you watch the paper sitting in the developer bath.  The pieces were fitting together.  Innovation is a full life cycle activity.  At each point in the lifecycle, knowledge workers have two main challenges: indentifying the right concept, and finding the optimal solution to the problems of realization of the concept.  These challenges occur across and at every level of the entire value creation chain.  Software tools provide problem analysis frameworks for thinking about and modeling innovation challenges.  The resulting models can be thought of as networks of requirements and problem statements.  These statements can be mapped into conceptual representations of solution templates and correlated with information captured in knowledge databases to identify precise solution concepts for the problems.  In short, we could imagine a system where as an engineer, designer, or scientist went about their work, the software would automatically source and deliver high relevance information and speed the time to solution.

Validating value
A concept not delivered in merely a concept.  If it does not deliver value and is not accepted by the customer, there is no innovation.  In the fall of 2003, we delivered the first version of Goldfire to customers.  A module called the solution manager provided a new capability where the software figured out what question the knowledge worker needed to ask based on the problems implied in their models and sourced high relevance concepts without the user needing to submit queries.  User feedback was strong; user liked the integration of best practices and knowledge access. The new platform delivered value for the innovation workers.

Endless innovation
Of course, innovation is a continuous process.  As new solutions are introduced, our vantage point and understanding evolve as do the goals and aspirations of our customers.  Through studying what innovation workers need to do, we have continued to evolve the product with a number of changes.  Some of these have been incremental enhancements, but others have been big leaps forward.  That is a familiar pattern for most products.  There is a broad spectrum of change that occurs in the innovation process.  It is important to swing for the fences if you are going to find the big innovation that sets you in a class by yourself, but the incremental innovations are important too.  Small innovations build value and more importantly, when pursued with the same innovation methods hone your innovation capabilities so that you are always ready to innovate on demand.

I hope you found this recounting of one path to innovation interesting.

Mass Innovation Nights

I am off for a few days playing in the annual Foxwoods chess tournament, so I haven’t had a chance yet to mention a great little innovation event for folks in the greater Boston area.  For the rest of 2009, every second Wednesday of the month will see a launch party at Charles River Museum of Industry & Innovation.  Each of these events, Mass Innovation Nights, features 10 companies showing off their new products & technologies.

I dropped in on the first Mass Innovation Nights event this week.  It was a lot of fun and very well attended.  Here are a couple pictures from the event (courtesy of Parna Sarkar).

Me with Renee Callahan of Innosight and Jim Belfiore of Invention Machine

Jeff Boehm of Invention Machine explaining the Siphon Flush to the Boston Globe

You can find more information on Mass Innovation Nights here.

Innovation Climate Survey

The results of a new Innovation Climate survey have just been made available.  The poll conducted by Chuck Frey reveals some very encouraging insights.  It seems that over 47% of respondents find the climate for innovation has improved in these times.  Most people I talk to agree that innovation is even more important in these times to fuel success and prepare for the future recovery.  It is good to see this point of confirmation.  You can find the survey results here.  They are well worth a look.