Innovating To Win

Finding Sense ( and Dollars) In The White Space

Spring is a time of change and transition, just right for reading a new book on innovation.  “Seizing The White Space” by Mark W. Johnson is the latest volume to come from Innosight, and seems to be right the right thing for spring reading.  It’s a highly readable and very quick to get through if your mind has already made the transition to summer; yet, it is has enough chewy content for those of us who are still want to curl up hearthside with an interesting book.

Johnson puts forth what he calls the four box business model to capture the dynamic tension between three key aspects of the value system underlying a business.  Yes, that’s right – four boxes to capture three key aspects.  These are:

Customer Value Proposition – What is it that customer derives value from when your offering is selected.  Of course, given the Christensen heritage of Innosight it comes as no surprise that Johnson returns to the job to be done jargon to talk about the value proposition.  Personally, I was just happy to see the value-prop called simply and directly what it is.  (Okay, I’m just weary of some authors who feel compelled to try and coin new jargon for what is already a well understood concept.)

Profit Formula – The strategy for monetization of the Customer Value Proposition.

Key Resources and Process – The things, people, and processes that are needed to deliver the Customer Value Proposition.  Johnson separates the concepts of resources and process in his representation.  Hence, the four boxes to represent three key aspects.

While these concepts may seem pretty basic, there are far too many companies that seem to forget that this system, and more importantly, the need to harmonize and balance these elements of the system exist.  Ignoring some of Clayton Christensen’s best advice (be patient on revenues, but impatient about profit) many companies attempting to claim a white space opportunity as their territory burn through loads of capital to try and drive the revenue engine only to dilute the share value so much that no one can hope to extract value from the venture.

Throughout “Seizing The White Space,”  Johnson uses many examples and comparisons of how these various elements interact in both successful and failed business models.  The examples help to bring to life what could otherwise be a very dry and boring domain of study.  You will need to filter some of the discussion through your analysis.  Some of the issues around the cases studies are open to interpretation.

After addressing the questions of when and how to look at business model innovation, Johnson reminds us of how existing demands and practice of a going concern can block the organizations ability to define and implement a new system to attack a white space opportunity.

I enjoyed “Seizing The White Space” and certainly recommend it as a worthwhile read for innovation practitioners or managers responsible for considering, planning for, or executing on new business platform opportunities.

This is the fifth stop on a virtual book tour for “Seizing The White Space.”  Earlier stops on the tour can be visited at:

Working Knowledge – Andrea Meyer’s excellent blog

Blogging Innovation – A multi-author innovation blog maintained by Braden Kelley

Innovate on Purpose – Jeffrey Phillips thoughtful blog on innovation strategy and practice

FastForward Blog – An Enterprise 2.0 blog where Jim McGee review the book 
 
Yet to come on the virtual book tour is Dan Keldsen’s interview with Mark Johnson which will appear on the  Information Architected blog.

Looking For The Innovation Silver Lining In 2010

As we begin 2010, I think it’s a great time to mention “The Silver Lining” by Scott D. Anthony.  The book which bills itself as “An Innovation Playbook for Uncertain Times,” touches on some very important themes that we should all keep in the forefront of our thinking if we are to maximize the potential of the innovation opportunity that are ahead.

This is a nicely written and very readable book in which Anthony reviews key innovation concepts that are always important, but especially so as companies find themselves challenged by a difficult environment.  Although some signs suggest improvements in the general business climate, we aren’t out of the woods yet, and the moves made by companies during transitional periods like this are particularly important.  So, the lessons of “The Silver Lining” are even more on point now than they were six or nine months ago.

Some of the key concepts addressed by Anthony include:

Focus – Or as Anthony puts it, pruning prudently.  He discussed how to identify what’s not going to be a winner and also how to identify where to invest in strategic experiments.

Using innovation to improve margin – This is a major area as companies need to continue to find ways to deliver bottom line performance in top line challenged times.  The techniques of simple tuning that yield incremental saving are no longer adequate.  For today’s needs, you need innovations that will drive new cost profiles.

Improving innovation productivity – Let’s face it.  Most organizations have a pretty bleak track record when it comes to innovation.  The generally poor state of innovation productivity is captured in the commonly cited statistic that it requires 3000 ideas to generate a single successful product launch.  Companies can and should do much better than this.  Anthony explores some strategies to begin moving down a path of higher innovation productivity.  He also makes a case for making innovation repeatable & sustainable in the enterprise.  This is essential for an organization to reach its potential.

Sharing the load – The need to open up the innovation process and integrate all of a company’s innovation constituencies into the process is presented.

Emerging markets – There is no arguing the dominance of emerging economies when we consider growth opportunities.  But, products developed for established primary economies don’t align with the new math of global economics.  Companies need must redefine products to fit a different economic paradigm.

My only complaint is Scott’s annoying attempt to coin the phrase “The Great Disruption” to describe the challenging business climate.  It really has no relevance in the discussion and has no real tie back to the terminology of disruptive innovation, so it just leaves an unpleasant taste in your mouth.

But, that is a minor discordant note in a book that otherwise keeps true to an important melody.  I highly recommend the “The Silver Lining.”

Reaction to Perpetuating Innovation Myths

Scott Berkun, author of “the myths of innovation”, has responded to my post last week commenting on his book.  In fairness to Scott, I am posting his reply here rather than leaving it buried in a blog comment.  I have also included some additional commentary.  First, here is Scott’s comment (paragraph breaks inserted for easy reading).

Hi James –

Thanks for mentioning the book. I took the risk of perpetuating myths quite seriously, and I don't think I did what you're suggesting here. Take this for example, from The Myths of Innovation, Chapter 3, pg. 44: "Steve Jobs, founder of Apple and Pixar, was asked 'how do you systematize innovation?' His answer was,

'You don't'(1). This was not what the readers of Business Week expected to hear, but foolish questions often receive disappointing answers. It's as absurd question as asking how to control the weather or herd cards, because those approximate the lack of control and number of variables inherent in innovation. Jobs, or any CEO, might have a system for trying to manage innovation, or a strategy for managing the risks of new ideas, but that's a far cry from systematizing something. I wouldn't call anything with a 50% failure rate a system, would you? The Boeing 777 has jet engines engineered for a guaranteed 99.99% reliability - now that's a system and a methodology. It's true that innovation is riskier than engineering, but that doesn't mean we should use words like system, control, or process so casually.'

Our disagreement might simply be about the words system, method or methodology. The failure rates for P&G, Google, or any poster child of an "innovation system" are extraordinarily high. They throw away many projects and ideas to obtain the handful that ever become products, much less successful ones. I think this is a a misuse of the word "system" or "method". At best what these folks do is expensive, risky and unpredictable. They experiment. And while there is significant work, planning and skill involved to manage experiments well, to call it a method you'd have to have much higher success rates.

You said: "Industry practice provides many very important examples of organizations that have successful implemented innovation programs—programs built on the assertion that innovation is a discipline that can be developed as a competency." Of course. But how many other companies that tried to do exactly the same thing failed? What is the ratio of successful implementations of these "methods" to failed ones? It's very high.

It's no surprise at this point that I find your suggestion I'm propagating a myth entirely unfair and unwarranted. There's little in my book that supports the status quo in any respect, most of my claims are support by research or at least industry anecdote, and I'm baffled at how one chapter, regardless of how awful it might have been, tanks your judgment of the other 9 :)

Best wishes, -Scott

Thanks for your response, Scott.  I do believe you took the risk of perpetuating innovation myths very seriously.  However, care and diligence do not guarantee the result.

First of all, it is a mistake to assert that any individual who has demonstrated some success in business (presumably via innovation) is thereby an expert on innovation.  The idea that organizations must accept low success rates from their innovation efforts is one based on a fundamental failure to understand the mechanisms available to drive high performance innovation.

Let’s consider for a moment one of the organizations you mention in your reply—P&G.  Here we see an organization that was plagued by an 84% failure rate in new product launches.  They realized that they needed to approach things differently and make innovation a core functional competence.  They have implemented many aspects of sustainable innovation practice, and the impact is undeniable.  P&G now enjoy the benefits of a 75% success rate—a stunning improvement by any measure.

While you might say that this is the exception that proves the rule, my observation and experience make it quite clear that this is not the case.  Where companies have made the innovation practice a true priority and not merely window dressing, the results have been predictably very strong.

As to the rest of your book, I have not said anything to suggest that my opinion of the rest of the content is negative.  Quite the contrary, I have said: “In all fairness, this book is a pleasant read.  It is well written, and Berkun’s style connects with the reader.”

However, the issue remains that there are many companies that are not sure what to do about innovation.  Should they embrace a path forward that integrates innovation thinking into their business and operating culture, or should they continue with the status quo and be content with the lack luster performance they see from their current innovation efforts.  It is clear that in the current global market climate, companies cannot afford to be complacent, but there is also a great pressure on these same companies to manage their risks well. 

This is why it is so important for these organizations to understand that there is a better way.  This is why I feel that this chapter of your book is so pivotal to the evolving innovation conversation, and why I have reacted as I have to your book.

Perpetuating Innovation Myths

Working my way through this summer’s reading list, I enjoyed some great books and a few not so great.  One book in particular stands out as a major disappointment.  Scott Berkun’s  “the myths of innovation,” is that book.  This book has received a lot of good commentary in the blogosphere.  So, you might ask why I found it so disappointing.

In all fairness, this book is a pleasant read.  It is well written, and Berkun’s style connects with the reader.  So, what’s wrong with it?

This book perpetuates the most destructive innovation of all.  In chapter 3, Berkun asserts that there is no method for innovation.  In this discussion of the way of innovation, the author reveals a fundamental failure to understand repeatable innovation methods.

The discussion presented jumps from the notion that many people have followed many paths to the ill founded conclusion that there are no maps to help the innovation practitioner to reliably find their way to high-value innovation.  While most organizations are stuck in the quagmire of accidental innovation, this does not establish dispositive proof that there is not a better way, nor does it mean today’s norm is the ideal for tomorrow.

Industry practice provides many very important examples of organizations that have successful implemented innovation programs—programs built on the assertion that innovation is a discipline that can be developed as a competency.  In another book on my summer reading list, “The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation” (A.G. Lafley and Ram Charan), the Proctor & Gamble program is described.  It is clear that P&G have pursued innovation with the intention of achieving demonstrable competence.  Their results give testimony to the success of their efforts.

There are many other cases which can be cited.  We are all aware of companies that have broken away from the accidental mode of innovation and which have instead pursued with alacrity the path of sustainable innovation practice.  However, for the company that is still hampered by poor innovation practices, it is too easy to feel that being part of the pack of accidental innovators is good enough.  Berkun’s book provides an easy refuge for those who want to justify their status quo.

No, I will not be recommending this book to anyone.  We need to shatter the myths that prop up the barriers to innovation.  All too often the no-innovation-methods myth is used to erect walls that prevent knowledge workers from fulfilling their innovation potential.  Equipped with knowledge of sustainable innovation best practices, these knowledge workers discover the walls around them are nothing more than a Potemkin village.

Summer Innovation Reading List

Well, we’ve had a pretty cool summer so far in Boston, but now with the 4th of July behind us, the summer weather has finally arrived.  That of course can only mean one thing.  It’s time to chill the Riesling and pull out the summer reading list.

This summer I am catching up on long list of titles, some new and some old, that have been on my need to read list.  Here’s my reading list for the summer:

• The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation (A.G. Lafley and Ram Charan)
• Grabbing Lightning: Building a Capability for Breakthrough Innovation (G. C. O'Connor)
• Made to Stick: Why Some Ideas Survive and Others Die (Chip Heath and Dan Heath)
• The Innovator's Guide to Growth (Scott Anthony, Mark Johnson, Joseph Sinfield, and Elizabeth Altman)
• Overcoming Inventoritis (Peter Paul Roosen and Tatsuya Nakagawa)
• The Ecology of Commerce (Paul Hawken)
• Biomimicry: Innovation Inspired by Nature (Janine M. Benyus)
• Nanotechnology: Science, Innovation, and Opportunity (Lynn E. Foster)
• Outside Innovation: How Your Customers Will Co-Design Your Company's Future (Patricia B. Seybold)
• Innovation and Entrepreneurship (Peter F. Drucker)
• The Ten Faces of Innovation: IDEO's Strategies for Defeating the Devil's Advocate and Driving Creativity Throughout Your Organization (Thomas Kelley and Jonathan Littman)

What’s on your reading list?

Jeffrey Phillips on Making Us More Innovative

Last week, I had a chat with Jeffrey while we were at the Front End of Innovation conference.  It was nice to finally meet Jeffery.  We have had many good exchanges via email and in the blogosphere.  The meeting also reminded me of the copy of Jeffrey’s recent book, “Make Us More Innovative”, sitting on my desk at home among a dozen other books on my reading list.  So this past weekend, I sat down and read Jeffrey’s book.

“Make Us More Innovative” is an accessible compendium of practical insights.  Drawing upon his years of experience in a variety of corporate and consulting positions, Jeffrey brings the basic themes of Innovate on Purpose to life as he provides advice on how to identify the key needs in an organization and fill the gaps to build a robust innovation environment.

The book begins by outlining twelve steps to building a corporate innovation program.  The subsequent chapters then unfold expanding on each of the steps in simple terms that make it easy to imagine the relevance to ones own situation.

All in all, “Make Us More Innovative” is a quick and easy read that helps organize many of the basic concepts one has to consider is tackling the problem of how to go about building a sustainable innovation practices.  I think one of Jeffery’s most important bits of advice is found in the chapter on Developing a culture of innovation.  Jeffrey writes, “Merely setting up an innovation team and establishing an innovation process is not enough.  If the management team does not fully support innovation initiatives through their communications, their priorities and their actions, no amount of cultural change will result in a successful innovation initiative.”

This is exactly the point my recent post, The Innovation Executive, and why executive leadership is the first of the Five Pillars of Sustainable Innovation Culture.

Beware The Accidental Innovation Trap

I stumbled across some comments about a new book on innovation.  The book, Strategic Intuition, purportedly argues that serendipitous innovation is best.

With all due respect to the author of the book, Columbia Business School Professor William Duggan, my immediate reaction to this was: “What a crock!”  In all fairness, I haven’t read Duggan’s book, but based on the review I have just read I’m not inclined to waste any time on it.  This is just another reason we see articles such as “Proof M.B.A.s Are Overrated, by 20 People Who Are Smarter and Richer than Your Professors” cropping up from time to time.

Perhaps, it is the allure that one doesn’t have to work at innovation, but rather one just needs to sit back and wait to win the idea lottery that makes this myth of innovation so appealing.  Perhaps, it is simply the idea that luck is what made those others guys so successful, and not that they were smarter, more driven, or worked harder at it which so many people find a comforting antidote to the mindless malaise of mediocrity.  What ever the reason, there is seems to always be someone advocating that innovation shouldn’t be approached purposefully.

Do people stumble across great ideas from time to time?  Yes.  Unfortunately, these stories of random success filter in to the general consciousness and thinking about innovation, and many people respond perfectly to the operant conditioning of irregular rewards.

But in the real world of business, leaving innovation to fate is a recipe for failure.  To maximize one’s ability to capitalize on opportunity, it is essential to make an integral part of the business execution engine the ability to understand the opportunities that exist, your capabilities to respond to those opportunities, and the methods to quickly transform opportunity into realized achievement.  This is no game of chance.  Success at innovation is a key element of today’s business success.  Take control of your business future by putting good innovation practices in place.

And don’t worry about missing that great serendipitous idea.  If you understand your business factors and have sustainable innovation practices integrated into your business infrastructure, that great idea won’t go unnoticed.

Patents for Business

While on vacation last week, my reading list included a new book titled Patents for Business by M. Henry Heines.  Mr. Heines, a patent attorney with over thirty years of experience, does a very good job of making accessible and engaging what can be a very dry and soporific subject.

This book is aimed at managers who need to have basic awareness in the arena of intellectual property to make assessments and decisions related to due diligence and other day to day issues that arise.  The book succeeds very well and provides a broad survey of the key topics that these managers need including: patentability, prior art search, novelty and non-obviousness, claims analysis, and freedom to operate.  Mr. Heines gives many specific examples to help the reader absorb the fine points of the topics discussed.

While aimed at managers, Patents for Business is also a useful primer for the innovation practitioner.  Patents are very important for innovators as they both define the landscape in which we can operate and serve as a valuable source of ideas for problem solving.  The chapters on novelty and non-obviousness, freedom to operate, and claims analysis are particularly useful to the innovation practitioner.  While Mr. Heines stops short of discussing systematic approaches for creating freedom to operate in the face of an intellectual property roadblock, many of the basic principles are touched upon.

It’s The Customer, Stupid!

What do Circuit City, Jan Carlzon, and Erich Joachimsthaler have in common?  Through their actions they have all made important statements about the role of the customer in business.

Langdon Morris, in his Permanent Innovation blog, bestows upon Circuit City the dubious honor of Mr. Morris’ Worst Practices In Innovation Award.  The award recognizes Circuit City’s recent decision to cut costs by eliminating 3400 of their more experienced workers.  Kudo’s to Langdon for this well deserved recognition of a hare-brained moved on Circuit City’s part.  In an extremely competitive market where the level of in-store service provided can be a key driver of the customer experience, Circuit City has chosen to curtail its ability to deliver an enhanced customer experience.  Perhaps, they might have considered how to better leverage their experienced resources to draw more customers to the store—maybe learning from the example of home improvement leaders with in-store workshops, etc.

Which brings me to Jan Carlzon…  By an uncanny coincidence, the same day I read about Langdon’s Worst Practices in Innovation Award, I noticed that Patty Seybold, in her Outside Innovation blog, wrote last Friday about “Focusing on Moments of Truth in Customer Experience.”  Here, Patty makes reference to Jan Carlzon’s book Moments of Truth.  In his book, Jan says about moments of truth, “Anytime a customer comes into contact with any aspect of a business, however remote, is an opportunity to form an impression.”  This is advice that would not only be useful for Circuit City to consider, but is also very important for all of us who are serious innovation practitioners.  At some level, every innovation is defined by and in response to a perceived need to reshape a moment of truth in the Carlzonian sense of the term.

This theme is also central to a new book by Erich Joachimsthaler, Hidden in Plain Sight.  By yet another uncanny coincidence, I happened to read this book Friday evening while traveling between Boston and Los Angeles.  In Hidden in Plain Sight, Joachimsthaler presents what he calls the Demand-first Innovation and Growth model (DIG).  This is described by the author as a structured and repeatable way of analyzing a company’s opportunity space to find winning strategic growth opportunities.  In brief, DIG comprises a three step approach to the problem:

1. Map out the demand landscape – This means considering the customers’ behaviors to understand their goals, activities, and priorities.  In doing so, Joachimsthaler prescribes considering this free from the confines of your current product, positioning, branding or anything else that can obstruct your ability to see things objectively.



2. Define the opportunity space – Once the demand landscape is known, you need to consider how the landscape relates to you.  Looking at the landscape from a series of perspectives defined by the method (eye of the customer, eye of the market, eye of the industry), you should identify your sweet spot in the demand landscape and the growth platforms that lead to a sustainable innovation program.



3. Create the strategic blueprint for action – Finally, the articulation of an action plan to attack the opportunity completes the methodology.

The key element of Jochamsthaler’s DIG methodology is the notion of demand-first thinking.  In truth, this is not new; it is very much at the heart of Christiansen’s mantra of identifying the job.  But, Jochamsthaler’s articulation of the point is admirably on point and highlighted by a very engaging case study about Frito Lay’s experience in learning about the demand landscape of their salty snacks and how it changed the way they think about their market.

Circuit City could have benefited greatly from examining DIG.  Had they looked at this model, they might have avoided their current act of self evisceration.  Had they developed an understanding of how to innovate around customer demand, they may have seen their opportunity differently and understood how to leverage their strengths to better respond to their customer’s needs, wants, frustrations, and passions.