Innovation in Practice

Innovation through Co-opetition

How do you innovate a business model?   You can create new products and services within the current business model to drive growth.  Or you can create a new business model and open up a whole new world of possibilities for the firm.  Either innovate within the current game, or change the game.  But how?   

Several books address this, from Clayton Christensen's "The Innovator's Dilemma," to a more recent offering, "Innovation to the Core: A Blueprint for Transforming How Your Company Innovates"  by Peter Skarczynski and Rowan Gibson.  When Professor Christensen presented his disruptive innovation model to our company several years ago, I remarked that what is needed is NOT so much a disruptive product, but rather a disruptive business model.  His book is a good historical account of a few industries that suggest disrupting (innovating) the business model is what really counts.  While these books and others do a good job of exposing the issue, neither give a prescriptive "how to."  The most recent book suggests a holistic approach.  "To build a breakthrough business model that rivals cannot easily emulate, you'll need to integrate a whole series of complementary, value creating components so the effect is cumulative," the authors note.  Fine, but there are no step-by-step processes how to do it once you have unpacked the original business model.

My answer comes from combining two existing concepts (a Medici Effect as described by Frans Johansson).  Those two existing concepts are Systematic Inventive Thinking (S.I.T.) and Co-opetiton.  S.I.T. is a proven process for generating innovation on demand.  Co-opetition is an idea described by Barry Nalebuff and Adam Brandenburger in their book called, "Co-opetition."  It means cooperative competition, and it is a way to see your industry not as a zero sum game, but rather as a group of participants that can behave in a certain way that benefits all.  They coopetate rather than compete (legally, of course).  I met with Professor Nalebuff and had him "school" me on the concept.

The trick is to apply S.I.T. templates to the Value Net model of co-opetition.  Here's how.  List the activities of each Value Net participant (Company, Supplier, Customer, Complementors, Competitor).  Rotate each specific company in the Value Net model so that each takes a new role (competitors become suppliers, suppliers become complementors, etc).  Use each S.I.T. template on the new list of activities, starting with Task Unification.  Using Function Follows Form, envision how the new role and role player can benefit YOUR company.  Here is an example, using Nintendo as the company of focus:

Now imagine each player rotates clockwise one position.  Applying S.I.T. Task Unification, we ask what roles could Atari perform as a customer to Nintendo that would be beneficial to both.  (For example, could Atari and Nintendo cross license software code to each other, perhaps making some features of their games work on the other's game box?)  Apply all five templates systematically to each role and each player within the context of their new role.  This will generate many new, innovative business model components and themes.

Disruption doesn't have to be uncooperative.

The Dream Catalog

For many companies, the catalog of products is the strongest statement of brand positioning a company can make.  It is your arsenal of commercialization.  So imagine you could peek into the future and see a copy of your company's product catalog five years from now.  What would it look like?  What if you could design it now?  What would you put into it?  These are the questions that confront you when you use a clever innovation tool called the Dream Catalog.

The Dream Catalog is a hypothetical company catalog from the future...well into the future, beyond the next business cycle.  It is far into the future so that it captures the innovative thinking and imagination of today's managers.  It stretches a company's thinking about its future, and it provokes a healthy discussion about possible company direction.  A good Dream Catalog causes tension.

A Dream Catalog helps a company in several ways.  It sets direction.  It suggests how the company is going to add and remove products from the line over time.  It forces the marketing team to reconcile product line strategy.  It provides placeholders for new discoveries, inventions, and even acquisitions.  It provides a sense of prioritization of what should be developed and in what order.  It can even help forecast revenues.

Best of all - it rewards and encourages innovation.  The Dream Catalog serves as the focal point for company-wide innovation efforts.  Employees strive to come up with product and service ideas that "make it" into the Dream Catalog.  As the catalog takes shape, employees see how their future is taking shape.  It guides their innovation efforts even more.  Leaders can use the catalog as a motivational tool.  "Let's turn this dream into reality...for our customers and our future."  A good Dream Catalog creates excitement and a sense of purpose. 

I teach MBA students how to create a Dream Catalog in a full credit course called "Applied Marketing Innovation." Here is a quick snapshot of how to do it.  Create a slew of new product embodiments over your current product line as well as products in your industry you wish you had.  Do this using an efficient method such as Systematic Inventive Thinking.  Mix the ideas together with your current product line.  Put yourself five or ten years out and envision what product offering would make your company the most amazing market leader in your industry.  Using your "palette" of ideas, pull in those that, taken together, create that kind of company.  Strive for product line coherence.  Strive for differentiation.  Strive for a customer centric solution.  Then, make an actual catalog with product photos, prices, features, and benefits.  Make it seem real.

Here is a neat trick.  Take all of your company's catalogs as far back as you can and lay them side-by-side chronologically.  Study the product offerings each year and note the changes over time.  Note the new products, deleted products, and changed products.  Do you see an evolutionary theme?  Revolutionary?  Stagnant?  Now place your Dream Catalog five or ten spots ahead of the most recent catalog.  Where will your Dream Catalog take you?  How far, how fast, how cool?

Think about Fortune 100 companies that might have a Dream Catalog of sorts.  Think about former Fortune 100 companies that have since perished.  Did they have a Dream Catalog?  Would you buy stock in a company if it did not have a Dream Catalog?

Dream on.

People Innovation

Human Resource departments often find themselves tasked with creating a more innovative climate for their firms.  That can make sense given that innovation is a people activity.  It's a skill, not a gift, and it can be taught and learned like any other business skill.  And it is usually team-based.

My advice to HR leaders?  Experience innovation close to home first.  Use innovation tools on actual people or HR systems before venturing out to the broader organization.  This has the effect of making true believers out of the HR team, it gives them a handy reference point for other departments to benchmark, and it yields creative new approaches to traditional HR processes.  How?

Using the five templates of Systematic Inventive Thinking, here are examples of pre-inventive forms within the HR realm.  The key is to envision the pre-inventive form, then find a useful role or benefit for it. 

• SUBTRACTION: Your training programs have no faculty.  Why?  What would be beneficial about it?
• TASK UNIFICATION:  Offer letters to new hires have an important additional role during the first year of employment?  What is that role, and how could it help the organization?
• MULTIPLICATION:  Employees receive two paychecks each payday, but they are different in some way.  How are they different?  What would be the benefit?
• ATTRIBUTE DEPENDENCY:  Year-end bonuses do NOT change based on performance or other factors.  Why?  How could it motivate employees?
• DIVISION:  New employees are hired first, THEN recruited into the organization?  How would this work and why would it be useful?

The real trick in using this method correctly is to envision a pre-inventive form that doesn't seem to make sense at first.  Then, using a cross-functional team, you outline specific benefits that could be derived for the HR department, the company at large, or some other entity.  Ask yourself: is it feasible?  How could the idea be modified to make it even more beneficial or feasible? 

Another approach is to use innovation templates on specific employees - create ideas that innovate their life or career.  Here are five more examples of pre-inventive forms at the individual level:

• SUBTRACTION: The employee no longer has a budget but still has to accomplish their goals.  Why?  What would be beneficial about it?
• TASK UNIFICATION:  The employee's office space now performs an additional role.  What is that role, and how could it help the organization?
• MULTIPLICATION:  The employee has two bosses, but they are different in some way.  How are they different?  What would be the benefit?
• ATTRIBUTE DEPENDENCY:  The employee works fewer hours the more she produces?  How would this work?  What would be the benefit?
• DIVISION:  The employee no longer works from 8 to 5, but has to work at different times.  Why?   How could this be useful?

Re-invent others by re-inventing yourself first.

Divide and Conquer

"Divide and Conquer" is:  a. classic military strategy, b. a computer algorithm design paradigm, c. a collaborative problem solving approach, d. an innovation tool, or e. ALL THE ABOVE

The answer, of course, is all the above.  Division is one of the five templates of innovation in the Systematic Inventive Thinking method.  The others are Subtraction, Task Unification, Multiplication, and Attribute Dependency.  Templates were developed by recognizing the same consistent pattern over many products so that the pattern could be applied to create innovative new products.  The method works by taking a product, concept, situation, service, process, or other seed construct, and breaking it into its basic component parts or attributes. The templates manipulate the components, one at a time, to create new-to-the-world constructs for which the innovator finds a valuable use. The notion of taking the solution and finding a problem that it can solve is called "function follows form" and is at the heart of the systematic inventive thinking process.  It is innovation by working backwards.

The Division Template works by taking a product or a component of it and dividing it physically, functionally, or what is called preserving where each part preserves the characteristics of the whole.  Rearrange the parts, then work backwards to find a use or benefit for this new form.

Here is an example from my workshop last week at Duke's Fuqua School of Business.  The product is dryer sheets (gauze-like tissues about the size of a Kleenex, put into clothes dryers to eliminate static cling, soften clothes and add artificial fragrance.)  Now divide these into much smaller parts, perhaps after the whole sheet is thrown into the dryer.  Imagine these smaller parts get all over the clothes and cling to them.  Why would this be useful?  What could be the benefit?  Here's an idea.  Perhaps the smaller pieces stay on the clothes to continue softening, brightening, or adding a design element, waterproofing, smell-proofing, allergy free, anti-itch, etc.  Perhaps the clothes are pre-treated with something that interacts with the small dryer pieces to extend the performance of the clothes, reducing cleaning, wear and tear, or wrinkles.  Perhaps the small bits are transparent (thanks, Yoni!) so they are invisible on the clothing.  This simple Division takes a seemingly dull product and re-frames how we think of it to discover new innovative uses and benefits.

Division is also a collaboration approach.  One of the Duke MBA's, Tom Powell, emailed me about crowdspirit.com, kluster.com, and ideabahn.com.  These new sites form communities that take an idea and iteratively improve it with suggestions from members.  These sites are also examples of Division (preserving) - taking the larger problem and dividing it among many people.  Idea collaboration is an old idea, but what could be a more innovative approach is to divide a problem using the other two methods: physically or functionally...focus members on the problem in a different way.  As these beta sites evolve, we will watch to see how innovative they can become at dividing and conquering.

Measuring the Immeasurable

Innovation, like most other things in business, gets caught in the trap of "how do we measure results."  Innovation managers at Fortune 100 companies find themselves confronted with this question in their efforts to raise innovation capabilities.  In the end, measuring innovation doesn't matter.  Measuring innovation methods is where the focus needs to be.

The typical approach to measuring innovation is revenue from new products.  The usual question is: "Show me a product generated from an innovation workshop and its first year revenues.  My response to this might be: "And let's compare that to the revenue NOT produced from ideas NOT generated because of a lack of innovation."

Some aspects of innovation are immeasurable.  During an innovation workshop several years ago, an engineer in the group had a depressed look on his face.  It struck me as odd particularly because we had just completed a vibrant round of ideation with many new possibilities.  The entire group was energized except this one individual.  Out of concern, I asked him if he was feeling sick or in pain.  What he told me struck me hard.  He said, "No, I'm feeling fine.  It's just that I NOW realize, after this round of ideation, that an idea that I have been holding onto for a long time...won't work."

I remember thinking, "Wow!  What is the value of giving UP a failed idea so that you can now direct your full focus and energy to new pathways?"  This ideation session freed this individual's mind AND motivation to move in new directions.  He would no longer waste his productive time pursuing a pet idea in favor of better possibilities.  He would begin creating value not from an idea generated, but rather from an idea given up.

How do you measure THAT?

The question is not: "Let's measure innovation to decide whether we should do it."  Rather the question should be: "Which innovation method gives us the most results to improve our business?"  Companies should compare methods using simple metrics like: total ideas generated.  From this tally, break it down further to: new ideas versus ideas we already had; ideas actually pursued; ideas likely to be pursued; ideas never to be pursued.  The key is to compare apples to apples.  I once asked a colleague how she liked using a particular method by an innovation consultant in the local area.  She said that she loved it.  I asked, "Compared to what?"  No response.

The best practice from Fortune 100 companies is to build and measure innovation competency...the inputs of growth, not the outputs.

In Search of Bad Ideas

Mitch Ditkoff notes a common misperception regarding bad ideas:

"One of the inevitable things you will hear at a brainstorming session is something like "there are no bad ideas." Well, guess what? There are plenty of bad ideas....The key for aspiring innovators? To find the value in what seems to be a "bad idea" and then use that extracted value as a catalyst for further exploration."

I agree.  Good ideas usually start as bad ideas, an insight I learned originally from the folks at S.I.T.. But the question is: how do you extract the value from a bad idea to transform it?  I offer three approaches.

First, look carefully at the bad idea and try to characterize the single benefit that the idea delivers to the customer regardless of how whacky that benefit is delivered.  It is the benefit that you want to hold onto, not the whacky deliver system.  Ideate new ways to deliver that benefit.

Second, what criteria are being used to judge the idea as bad?  Try using the Reverse Assumption technique on those criteria.  Turn them around, challenge them, re-frame them.  Make the seemingly bad idea look good in a different context.

Third, look for what is old about the new idea.  Thomas B. Ward, is his chapter, "What's Old about New Ideas," says:

"Structured imagination refers to the fact that when people use their imagination to develop new ideas, those ideas are heavily structured in predictable ways by the properties of existing categories and concepts."

In other words, we do not ideate in a vaccuum, but rather in the context of what we already know.  My advice is to take the bad idea and look for the original concept that it was built upon.  Can that be taken in new directions using a structured process?

For corporate innovators, I see this as a best practice.  I often ask people what they do with their bad ideas.  If I see a curious look on their face, it usually means they are not taking advantage of this phenomena.

Bad ideas are better than no ideas.

Innovation vs. Leadership

Which is easier to learn: innovation or leadership?   That is one of my favorite questions to ask during  keynotes and workshops, especially to groups of accomplished leaders.  What amazes me is the answer I get back:  overwhelmingly, groups of executives say that leadership is easier to learn than innovation.

I could not disagree more.  I've experienced some of the best leadership training in the world starting with the U.S. Air Force Academy and all the way through to Johnson & Johnson's many leadership training programs.  These programs were complex, psychologically-based, and multi-dimensional.  Leadership training is big business.  The demand is high, and the task is tall.  Executives flood to these programs to learn new insights and nuances of this highly people-based activity.  It is tough to learn leadership.

I learned innovation in a matter of minutes.  The process is clear, rules-based, and rigorous.  Anyone can do it.  When facilitated appropriately, you cannot NOT innovate.  The process forces original, novel, and highly creative ideas to come out of your head. 

So why do executives feel that leadership is easier to learn than innovation?  My sense is that many have not been exposed to a bona fide innovation method.  These executives want organic innovation more than anything to drive growth.  Yet many are missing a simple insight what it takes...to invest themselves in learning innovation.  Once executives feel what it's like to innovate on demand, they get it.  They start thinking about execution, scalability, culture aspects, resources needs, measurement, accountability, strategy, alignment....all the traditional things leaders think about...to move an initiative forward. 

GE is perhaps the best example of a company that invests in innovation as much as it does leadership with its Imagination at Work program.  For GE, the question of which is easier to train...innovation or leadership...is moot.  They avoid the "leadership bias," and they invest appropriately in core innovation skills to drive growth.

Lessons from Improv

I've come full circle on the notion of improvisation as a source of innovation.  I just finished a three day improv training program at The Second City to try to find direct application to corporate growth.  I found it.

My pursuit of a method of innovation started with John Kao's book, "Jamming," which compared innovation to the process of musical improvisation.  Jamming is a group activity where one musician lays down the foundational tempo and key for the other musicians who, one at a time, add their own interpretation of it.  At the time, I thought this was innovation nirvana.  But I moved away from it.  Improv and "jamming" in the Kao mindset seemed too much like brainstorming which is usually LESS productive than simply thinking of ideas by yourself.  It seemed too unstructured.  Bottom line: it didn't work.

Now I've learned a more systematic approach to improv from a place that has launched the careers of more comedians than any other.  What I learned can be boiled down to: 1.  The Commitment Principle, 2. The "Yes, and..." Principle, and  3. The Relationship Principle.  When applied systematically, these yield very funny comedy sketches from anyone.  My belief is they can be used the same way in corporate innovation.

Commitment Principle means commit to both the role you are playing and the process.  The "Yes, and..." Principle means always take what line or idea your partner has given you and add value to it.  Match the energy and direction of your partner, but then add significant context or information to keep the dynamic going.  The Relationship Principle says to establish the connection and accountability to your partner above all else.  Without this, improvisation is impossible.

Comedic improvisation is a disciplined, structured, team activity.  My goal is NOT to become a comedian.  Rather, my goal now will be to merge these lessons from improv with Systematic Inventive Thinking to produce even better innovation, on demand.

Innovation for the Ages

I taught innovation to a group of 6th, 7th, and 8th graders as part of my son's middle school enrichment program several years ago.  I had never taught children in a formal setting, and it was terrifying at first.  The course was called, "How to Be an Inventor," and we met one hour a week for five weeks.

I had my doubts about this...whether someone could actually learn a systematic approach to innovation.  I had recently experienced the S.I.T. method as part of my company's efforts to create new medical products.  I wanted to experiment to see if a templated approach to innovation could be taught...and applied...in a setting outside of my company.  So I taught these children the five templates: subtraction, task unification, multiplication, division, and attribute dependency.  On the final day, each student had to take a product that I would give to them randomly, apply one of the five tools, and create a new-to-the-world product - all in thirty minutes. They had to draw the invention on the blackboard and explain why it was useful.

The first student was given a ordinary wire coat hanger.  Using the Attribute Dependency tool, she invented a coat hanger that would adjust to the size, weight, and shape of the garment.  Sixth grade!  I had never seen such a product before.  Truth is it had already been invented by Henry Needles in 1953 (United States Patent US2716512), so technically, she failed the exam.  But she created something new to HER world, for sure.  Each student similarly created amazing new products, some incremental, and some far out (moon beam flashlight).

If 6th graders can learn to innovate in real time, so can the business world.  That is why companies are embracing more productive, systematic methods of innovating and shunning traditional methods.

Teaching children to innovate was an epiphany for me.  My next innovation experiment...senior citizens.  I believe a group of senior citizens could be an ideal scenario for innovating in real time.  They have time on their hands, they want to be productive, they have lots of world knowledge and experience, and they think about ways to improve their situation. 

Innovation for the ages...stay tuned.

Innovation Roundtable

The Marketing Science Institute has formed a new Innovation Roundtable to explore common issues and challenges in the world of corporate innovation. The roundtable representatives are from Johnson & Johnson, GE, P&G, Diageo, Eastman Kodak, AT&T, Kraft, Merck, Thompson Healthcare, Praxair, Aetna, and General Mills. I had the pleasure of hosting the last meeting held at the Endo-Surgery Institute, J&J’s world class training facility for minimally invasive surgery. The group plans to meet twice a year.

Topics at this last meeting included:

• How and why is innovation an important issue for your company?
• When, how and by whom was this issue identified? Who currently “owns” it (and why)?
• What steps have been taken to address this issue, with what results? What steps are planned?
• What internal or external resources have you used (do you plan to use)?

For part of the agenda, the group practiced using the SIT innovation method on a product category from a member company (Kodak). We decided to make innovation a regular habit at our meetings so we can “walk the talk” not just “talk the talk." Our goal is to try out a new innovation method at each meeting.

We are fortunate to have Professor Don Lehmann from Columbia Business School as our academic advisor. Don is a prolific researcher in the innovation space (and many others).

Next meeting will be held in conjunction with MSI’s conference, “Innovation and Co-Creation,” in Seattle June 16-18, 2008.  Check out MSI’s great collection of working papers and publications on innovation.