Innovating To Win

Harnessing Knowledge for Innovation – What You Said

Knowledge is the raw material of innovation.  When an opportunity is recognized, when the underlying challenge is understood, we leverage our knowledge and experience to synthesize the new concepts that are the core essence of our innovations.  The knowledge we use in this process comes from a variety of sources, both internal to our community as well as external.  Many companies are facing a serious challenge to developing their innovation edge.  Some of the most valuable knowledge they have is inside the enterprise represented in inaccessible documents and undocumented worker knowhow.  As we continue to make our way through the greatest generational turnover businesses have ever experienced, it begs the question “What initiatives are your organizations using to manage the outflow of corporate knowledge cause by generational turnover?”

This was the subject of our last Innovating To Win poll question, and you can see the results to the left.  These results are interesting from a number of perspectives.  Let’s look at a few aspects of the results and consider what this means for innovation.

From our results, it appears that there is no clearly dominant strategy for dealing with the innovation knowledge crisis that many companies perceive.  No single option has crossed the 50% threshold of diffusion.  This supports the notion that there is a lot of confusion in companies as to the scope of the problem and how to best address the issue.  This lack of clarity represents a serious risk to companies.  I recently talked with one company that acknowledged that there are losing 100 subject matter experts per month to retirement.  This is not a small issue for any company.

Of the selections in the survey, access to external knowledge clearly was favored as a mechanism to enhance the corporate innovation intelligence. While in the general context of enriching the innovation intelligence ecosystem and improving your innovation capacity by redefining the box external knowledge access must be a vital part of the innovation knowledge strategy, it is not a substitute for leveraging your internal knowledge.  People who don’t learn the lessons of history are doomed to repeat them.  This is a truism for innovation practitioners.  External knowledge provides you with fresh perspectives and new thinking.  But, your internal knowledge contains highly targeted concepts which capture both the foundational knowledge of the organization, but also the lessons learned so that you don’t keep reinventing the wheel or repeating the same costly mistakes.

This point is further highlighted by the relatively low score of traditional internal information dissemination techniques.  Not one of experience harvesting, sharing lessons learned, and internal knowledge management scored over 30%.  This is horrible testimony to the failures companies have experienced with traditional knowledge management initiatives.  But if information access is so important to the innovation process, why have these traditional methods failed?  In short, knowledge management has been a data centric, IT led initiative.  As such, it is doomed to fail from the start.  A different perspective is needed to successfully unlock the value of internal knowledge assets—a strategy that is user and purpose centric.  The communities that make up the enterprise innovation constituencies must be mapped to their roles, innovation tasks, and relevant information assets in order to define the shape of the innovation intelligence infrastructure needed so support innovation.  The innovation infrastructure must then be deployed in a way that knowledge enables every innovation worker and allows them to have knowledge seamlessly integrated into their every day innovation work.  Removal of the barriers to access of tradition knowledge management is key to successful mobilizing corporate wisdom and converting the sea of data into actionable knowledge.

It is for this reason, that the lagging take up of next generation technology as represented by internal Web 2.0 collaboration and passive collaboration frameworks is disappointing.  The future of innovation knowledge enablement is in connecting innovation workers based on what they know.  When you can get the right people engaged without taking them out of the context of what they need to get done, you have succeeded in accelerating the time to value for the enterprise.

It looks like we all have a lot of work ahead of us if we are serious about getting ahead of the looming knowledge drain issue that is already upon us.  We must do a better job of understanding where the information exists, capturing it, and then mobilizing it in an effective and timely manner.  When I was young, my parents would tell me that knowledge is power.  They were right.  Knowledge is innovation power.  Innovation power coupled with crisp execution is the secret sauce of business success.

Don’t forget, a new poll is now open.  The headlines are filled with news about the latest steps government officials are taking to turn around the economic malaise.  But are these the right steps for innovation or missteps?  This is the question for our latest Innovating To Win poll.  How do you assess the long range impact of current intervention policies?  Let us know.  You can find the poll in the left hand sidebar. Please remember to vote.

Sustainable Innovation at Boston Scientific

Here’s a very interesting podcast with Dan Kussman, R&D Manager for Boston Scientific’s cardiovascular group.  In this podcast, Dan talks about the role of sustainable innovation and the importance of making innovation an ubiquitous activity for everyone, every day.

Dan discusses how innovation must be more than a mere buzz word if an organization is going to survive in today’s ever more competitive world.  He also touches on the push-pull dynamic of innovation and the need to strike a good balance.  He also discusses the need for cultural integration and investments in innovation.

Watch the podcast below and hear some terrific insights from Dan on Boston Scientific’s approach to building a sustainable innovation environment.

Reflections on My Spring European Innovation Trip

It was a whirlwind trip, covering six countries over eleven days.  During the trip, I had the chance to sit with fourteen companies, twelve of which are Global 2000 players.  I also squeezed in an interview with the senior editor of a French PLM publication.   All in all, it was a fascinating and exhilarating two weeks.

I posted some initial impressions from the first half of my trip a week ago.  Now after having a few days back in the office, here are my closing thoughts on my European innovation tour.

The pulse of innovation is clearly beating and strong across Europe.  I saw a deep commitment to building sustainable innovation competence at all the companies I met with, and the recognition that innovation is the best vehicle to build value, especially in these turbulent times, is universal.

Companies can’t afford to wait on innovation.  This theme emerged as a dominant current.  One case that really drives home this point was that of a company I met with in Germany.  This company has been particular hard hit in the current recession.  Much of their business has traditionally come from the automotive sector and other customers stockpiled inventory during better times.  So, now they find themselves in the incomprehensible position of managing through a 75% drop in year over year revenue.  It would not be surprising under such circumstances for a company to roll up the carpet and put a halt to all innovation activity.  However, this company is has taken a hard look at what they need to do in order to weather the storm and emerge stronger.  They are investing in innovation.

Innovation isn’t just for the big boys.  Two of the companies I met with fall in the classification of mid-side, not large, entities.  These companies have visions of creating value through innovation that are just as ambitious and forward looking as I have seen anywhere.  In truth, this comes as no surprise to me.  While most of the organizations I touch fall in the G2000, I have always had many touch points in the SMB space including start-ups and even the occasion lone-wolf practitioner.  Through these interactions, I have seen that no group has cornered the market on innovation.  Large companies do have certain assets they can leverage if they are committed to the innovation game.  But, small organizations also have advantages they can use to gain an edge and create game-changing value.

Services companies need to re-innovate their products too.  This would seem to be obvious, but I see many services companies that are lagging in innovation.  This is very dangerous for these companies.  Services companies can be very agile if they choose to be.  What they must never forget is that this is also true of their competition.  Services companies are very vulnerable to disruption and need to be thinking about how to create unique value which is difficult to replicate.  The last thing a service company can afford is to be competing solely on price.

Companies are still unable to leverage information intelligently.  Yet, the intelligent use of information is at the core of innovation.  This is a paradox that companies must resolve to drive their innovation engine on all cylinders.  Leading companies are investing in new technologies to knowledge enable their innovation workers so that they can produce more, higher value innovations, in a reliable, repeatable manner.

I am very encouraged by what I saw throughout Europe.  While it will take considerable time to work our way through the difficult times we are experiencing, it is clear that many companies are doing the right things to plan not merely to survive, but to thrive.  These companies are pursuing sustainable innovation practices to shape their future and to build the economy of tomorrow today.

Field Notes – June 2009

I am in the middle of a jaunt through Europe visiting with many Global 2000 companies to discuss the state of their innovation practices and how they can accelerate their pace of value creation.  In the past three days, I met with seven such companies in the United Kingdom and Norway.  Sitting on the flight from Oslo to Frankfurt provides a good opportunity to reflect on the themes that I see emerging across these companies.

The first observation that stands out is that all the companies I have met with are deeply committed to innovation and are not willing to let an uncertain economic climate slow down their efforts to build value through innovation.  While all of the companies have been watching the expense engines carefully, they are still investing in their future.  This is true even in those companies which may have gone through a recent merger, headcount reductions, or other restructuring.  This is an extremely encouraging sign and suggests that these companies will be well positioned to lead the recovery.

Many organizations are still struggling to leverage what they already know.  After many years of trying to implement traditional knowledge management solutions, they are finding that these information-centric strategies are not effective methods to disseminate corporate wisdom in a reliable way.  Instead, people-centric models of knowledge diffusion are needed to give workers the ability to effortlessly interact with relevant knowledge.

These companies are also finding that as their innovation networks expand and become decentralized operations, it is becoming critical to connect people more effectively though their knowledge.  In effect, innovation workers are not simply harvesting knowledge; rather, they are an integral element of the innovation ecosystem and are simultaneously information consumers, producers, and stores.

These enterprises recognize the role technology plays in innovation enablement.  They want to apply technology to help address some of the problems they see in achieving their innovation potential.

There is modest interest in idea management, but this is often viewed as a legacy strategy related to old idea-first thinking.  As these innovation leaders move toward needs-first innovation models, the focus is on fewer, higher quality ideas to drive value creation.  These companies recognized the inefficiency of the old 3000 to 1 idea to delivered product conversion ratio and are focused on using innovation best practices to build a narrower high-efficiency funnel for early stage concept development.

Related to the notion of better quality concept generation, is the principle of strategic alignment of innovation initiative with the company’s strategic intent.  Companies are doing a much better job of distinguishing between opportunity spaces, platforms, and solutions.  They are building cogent strategies for value creation around these components of the strategic innovation plan.

Many organizations are considering what open innovation should mean to them.  Some of them have tried with poor results, and most organizations are concerned about the challenges that must be met if open innovation is to be more than a glorified suggestion box.  Yet because they feel customers and other members of their value chain are important resources to leverage for strategic innovation, they continue to look at how to address the challenges of alignment, authority, and actualization that are critical success factors for open innovation.

More than anything else, the intensifying heat of innovation in these organizations stands out as a thread that runs through all of the conversations I have had in the past few days.  I am looking forward to the next set of innovation meetings in Germany.

Innovation Lesson From Ratatouille

The animated movie, “Ratatouille”, tells the tale of a most improbable hero who dreams of being a great chef.  This hero is a rat named Remy.

Inspired by the great chef, Gusteau, this unlikely protagonist wends his way to Paris, and with Gusteau’s words, “Anyone can cook!”, echoing in his mind, Remy find success and happiness as a chef.

As we come to learn in what is sure to be a Disney-Pixar classic, anyone can cook, but not everyone can.  This is true in many of life’s endeavors and we should all bear this in mind when it comes to innovation.

Anyone can innovate, but not everyone can.

Current trends of companies toward opening up the innovation process to customers and partners show broad acceptance of the concept that innovations can come from anyone.  More interestingly, these same trends suggest that not everyone will be the source of great innovation as many companies are feeling dissatisfied with the quality and relevance of recommendations coming from within their extended innovation ecosystem.  This leads to an interesting question.  If innovation can come from anyone, why is it that not everyone can innovate?

Letting stand the assertion that anyone can innovate, I’ll suggest that the innovation gene is something with requires environmental stimulus to be expressed.  Remember that at its core an innovation is a response to a situation, and not just any response, but a response that creates value by solving a problem inherent in the current situation.

In essence, to innovate someone must:

• Recognize a problem
• Understand the problem
• Have access to the information required to identify a solution

It’s these latter two points that are the hurdles which prevent many people from being substantial contributors in the innovation process.

Too often, in the rush to solution, the crucial steps of understanding the problem is bypassed.  This leads many would be innovators down the path to catastrophe as they end up with a creation that doesn’t actually address any ones needs.  The disciplines of sustainable innovation practice are useful to help keep people focused and ensure that the right questions are identified the first time.

Yet even when people do have a deep understanding of the problem, that doesn’t mean they will see the path forward to a high value innovative solution.  Contrary to popular belief, people don’t get stuck at this point because they know too much.  It is precisely because they don’t know enough that they are subject to mental inertia.  History teaches us that great innovation happens at the nexus of information.  It is this convergence of knowledge that leads to the insights that drive innovation.  However, access to relevant knowledge is difficult, and the problem is getting bigger every day.

So, what is an organization to do if they want to enable more of their workers and partners to be innovation value creation agents?  How can you equip more people to innovate?  Here are two things that you must do to properly prepare your innovation workers for success.

Provide training on innovation skills and best practice.  This is a key part of building a sustainable innovation culture.  (See this post for more on this.)

Enable them through knowledge.  The best way to find great innovation concepts isn’t thinking outside the box, it’s redefining the box.  Your employees need seamless access to information from both inside the enterprise and outside.  They need the information in a form that they can readily assimilate, in the context of their work, and when they need it.  Only in this way are you truly knowledge enabling them by helping them see through the impenetrable fog of data and recognize the actionable knowledge they need.

Give your knowledge workers these tools and you will be amazed at how much more productive your innovation efforts will be.  Not everyone can innovate, but you can certain put your employees in the position where they can by giving them the basic skills and access to information necessary.  You can increase your organization’s innovation capacity by enabling more people to express their innovation potential.

Twitter Take Two

As any CTO, I have to explore new technologies and market trends on a daily basis.  Operating in the worlds of software and innovation makes this imperative even more essential.  With the role of social networking and media still in its early stages of emergence, I have been watching (and using) the media darling, Twitter, for a while now.  In March, I posted The Trouble With Twitter.  Here are a few more comments on Twitter with two more months behind us.

Twitter is clearly undergoing some severe growing pains.  There are many times when the service is slow and choppy.  This undermines the user experience and cannot be good for the retention of users.  Could it be that in the absence of a revenue stream that Twitter has made a conscious decision to not grow infrastructure to meet demand?  Some recent changes in the service are suggestive as they seem to be targeted at reducing the traffic routing volume.  Given the instability of the user experience, it is no surprise that reports have surfaced showing Twitter has an abysmal user retention rate compared to other leading social platforms.

Twitter has not yet shown that it is going to take control of its destiny.  One gets the impression that they view themselves as an evolving bag of features.  If this is so, it is not good for Twitter.  They need to think of themselves as a platform for user experience and act accordingly.  It’s great to have a lot of interested parties building apps around your technology and extending the capability models for you.  But, this is no substitute for user experience design and truly understanding the needs and aspirations of your audience.  Twitter needs to drive its own innovation agenda.

Lastly, it seems incredible that Twitter has still not given any indications of a monetization model.  It’s not that hard.  I have thought of several great strategies to monetize the platform, and I know many of you have also identified some interesting ideas.  So, why is it that Twitter has not?  You would think that if they put half the effort into the business model that they have put into hyping Twitter, they would have launched a successful monetization strategy by now.  Meanwhile, the hype engine churns along.  Of course, that could be a monetization strategy.  While no one knows what Twitter’s business really is, anyone is free to imagine the potential as being as enormous as their own hubris.  Yet as any politician knows, the minute you take a position, you lose votes.  Could it be that Twitter finds itself in the awkward position of having a hype inflated value that is so high that any announcement of a specific business model will only reduce the current potential exit value?  Hmm…

So after two more months of Twitter watching, I don’t find the prognosis for Twitter has improved much.  What do you think?

The Price of Innovation

Recessions are always tough, and during a recession it’s hard to avoid talking about it.  I see a lot of innovation practitioners pondering the question of whether a down economic climate is good or bad for innovation.

The funny thing is that we have been through these boom-bust cycles before, and we will see them again.  What’s more is that history teaches us something very important about these cycles.  By their very nature, the boom-bust cycle is an engine of innovation. 

During a bust segment of the cycle, the constraints of the moment surface the very needs and challenges to which innovation is the response.  This is the core stimulus of innovation.  As the value of the innovation works its way through the system, it supports the advance toward the boom.  However, the boom creates anti-innovation forces as organizations begin to either prioritize not around new value creation but around value preservation, or become too cavalier in their risk tolerance.  This shift creates an instability which eventually leads to the next bust.  Completing the cycle, the new bust lays the foundation for the next wave of innovation.

Some might argue that the social impact and cost of boom-bust cycles is too great and that it is better to eliminate these cycles through tight economic regulation.  I would argue that the cost to society of foregoing the boom-bust cycle is too great as it would forever stifle innovation and the great advances that it brings.

Rather than go into this argument myself, I’d like to point out a great blog post on this topic written by Fred Frankel, Vice Chairman of The Beacon Trust Company.  Give it read and see if you don’t agree with Fred that “The cost of eliminating the cycles and government assuming the role of the allocator of capital is nothing less than the extermination of entrepreneurial spirit, innovation and yes, increasing standard of living for all citizens.”

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?

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.