Innovation in Practice

Ideation vs. Prioritization

Ideation or prioritization?  Imagine you had a choice of being really good at one, but not the other.  You could be a master at creating ideas, or you could excel at selecting winning ideas, but not both.  Which would you choose? 

Two things intrigue me about this trade-off.  First, companies spend too much time and energy prioritizing ideas and not enough on creating ideas.  Second, the innovation space seems to demand a completely different set of tools and techniques for selecting ideas than the tools and techniques used for making other business decisions.  In reality, there is no difference.  The tools used to make everyday business decisions should be the same ones used to prioritize ideas. 

I face this issue a lot when speaking about innovation.  "How do you select the best idea to pursue?  How do you know which idea is going to be the next blockbuster?  What is the secret to spotting great ideas?"   I just spoke to an outstanding group of MBA candidates at the Columbia Business School.   One of the students wanted to know my views on this.  It is as though I have a special eye or an innovation Magic Eightball for picking winners.  If you can unlock my formula, you will find the path to riches.  Not even close.

 

In my view, prioritization of ideas is not an innovation issue, and it does not belong in the discussion at all.  The problem of which idea to pursue from among a list of choices is a subject well covered by the behavioral decision sciences.  An amazing body of research exists in this field.  Researchers have described highly effective methods of choice that circumvent the inherent weaknesses of humans in making decisions.  The choices we make in the innovation space are no different.  The choice of which innovation to pursue should be approached the same way one decides on what clothes to wear or what person to marry:  1. consider the criteria that are important, 2. weight those criteria, 3. score each candidate on those criteria, 4. add up the results, and 5. let the chips fall where they are. The highest rated idea is the one you should pursue.  It's that simple.

 

But innovation choices get special privileges over other choices.  We seem to require methods of choice that deserve royal treatment over other methods of choice.  A cottage industry within a cottage  industry has evolved to create a sense of uniqueness when in fact no uniqueness exists.  A wide variety of special tools have emerged to select and manage ideas.  The good news about many of these tools is that they have the right science built into them.  Here is a sample (from Innovation Tools - thanks, Chuck!)

•  Accolade Idea Management •  Ameli •  BrainBank •  BrightIdea.com •  Cognistreamer Innovation Manager •  EGIP Idea-Modul •  Engage ThoughtWare •  Idea Management System •  Idea Reservoir •  IdeaBox •  IdeaCenter (Akiva) •  IdeasTracker •  IdeaValue •  Imaginatik •  Ingenuity Bank •  Insight Results •  Jenni Enterprise Idea Management •  OVO Innovation •  Prism Idea Management •  Target Idea Management for mySAP

Executives obsess over  finding the right method to select ideas when they should be more focused on how to generate ideas.  The zeal over prioritization puts a drag on the core issues surrounding innovation such as how to innovate and how to make it routine and part of the culture.   Why do executives sweat more over selecting ideas than generating?  My sense is they feel more accountable when choosing an idea than when generating the idea.  Generating an idea doesn't carry with it any risk or obligation to spend.  Choosing an idea does both.  If companies want executives to put more priority on generating ideas, they will need to change this.

 

It is time to strip out this issue entirely from the innovation discussion.  Don't mix the two.  Put the emphasis on a method to generate many great ideas and not on the method to choose the right one. For that, use the well-established science.  Just as Fortune 100 companies use the well established methods to innovate, we should use well established methods to prioritize innovations.

M&A Innovation

Relying on mergers and acquisitions for growth sends a signal that you don't know how to innovate or how to manage it.  M&A has other problems, too.  Companies tend to overpay which actually destroys shareholder value.  At best, firms end up paying full value, neither better or worse off financially.  The firm grows in size, not value, and pays in the form of distraction.

What if you could use the tools and processes of innovation in mergers and acquisitions?  How could it help?  Would you select acquisition targets better?  Could it help understand the valuation better so you get a better deal?  Might it help you implement better?  I believe innovation techniques could be applied to all three. Here is one example: targeting - deciding who to buy.

Imagine you are the CEO of a bank, perhaps headquartered in Europe.  You and the other board members have decided its time to deliver more value to the shareholders by growing the business. You decide to 
acquire another bank with all the spare cash you have accumulated (rather than just give it to its rightful owners.) The question is: which bank?  Should we buy one in Europe to expand our share while eliminating a competitor?   Should we expand to the U.S. market and buy one there?  Should we buy a struggling bank, get it cheap, and restore it to profitability?

No, no, no. Too simple and obvious.  Nothing innovative here at all.  Let's instead apply the Subtraction Tool from Systematic Inventive Thinking and see how we can re-frame the question.  Start by listing the components of your bank.

1. Employees
2. Customers
3. Assets
4. Property plant and equipment
5. Brand
6. Systems
7. Management

Now, one at a time, let's remove a component, then ask ourselves which bank we should acquire.  Imagine you had no customers. You still have all the other components, just no customers.  What bank could you 
acquire that had the ideal customer base for YOUR bank given what it's all about?  Would you want customers who were more diverse, higher income, more profitable, lower cost to serve, more loyal, etc?  In other words, acquire a bank that delivers the perfect complement of customers.  Now remove employees.  You have all the other components, just no staff.  Now what bank would you buy?  Which has the ideal employee base for who you are?  Would you go after employees who are smarter, less costly, more diverse, younger, older, etc?

The same process, done for each component in succession, gives you a whole new innovative perspective on who to acquire.  It helps you understand why you are buying, what you are getting, and how you 
expect to create new value and competitiveness.  It helps you understand The Bet - what the deal is really all about.

M&A is an expensive way to grow.  By adding the gift of innovation to the process, shareholders stand a better chance of seeing more value.

Innovation Diagnostic

Professor Keith Sawyer makes a useful connection between innovation and learning when he writes, "What both innovation and learning have in common is adaptability and improvisationality."  He connects this idea with authors Joaquín Alegre and Ricardo Chiva from the Sloan Management Review.  They identified five core features of high organizational learning capability (OLC) companies: experimentation, risk taking, interaction with the external environment, dialogue, and participative decision making.  Keith has found that these five characteristics also hold true of organizations that use the power of collaboration to generate innovation.  He believes that organizations high in learning ability are more likely to be innovative organizations. 

I am inclined to agree.  The reality though for many organizations is that they may be missing one or more of these characteristics.  Yet they still must innovate to grow.  What would be truly useful is a rigorous innovation diagnostic based on these five characteristics.  This diagnostic could help a company identify where it is weak and where it needs to focus attention and resources.  Here is how it might work.

Experimentation:  The authors define this as the degree to which new ideas and suggestions are dealt with sympathetically by the organization.  Measure this in several ways: the budget dollars spent on designing and running experiements, the amount of new ideas generated, and the percentage of those ideas that challenge the established order as described by Alegre and Chiva.  My observation is that organizations see the value of experimenting more during the hard times than the good times.  Therefore, measuring this characteristic over time would be most useful.

Risk Taking:  Measure employees in terms of their tolerance for ambiguity using established testing methods.  Measure organizational risk-taking in terms of the internal rate of return of projects initiated and rejected.  My observation is that organizations take too little risk not because they cannot bear it from a portfolio point-of-view, but rather from an individual career risk point-of-view.  People, not organizations, are afraid to fail.  They play "not to lose."

Interaction with the External Environment:  The authors define this as the scope of relationships with factors that are beyond the direct control or influence of the organization and include competitors, the economic system, the social system, the monetary system and the political/legal system.  Measure this by the amount of money spent on direct contact with these entities.  Also measure the resources spent to collect information about them.  What is the net aggregage spend on issues external to the firm?  My observation is that firms tend to be very good at observing and monitoring the external world, but few are excellent at interacting with it.  That is the key to leveraging it for innovation.

Dialogue:  Dialogue is a way of spreading information and skills throughout an organization, and it helps create multiple viewpoints.  Measure both the speed, volume, and fidelity of information as it spreads through the firm.  Do this by taking a new issue as it emerges and systematically studying its diffusion.  Identify the information pathways, both formal and informal.  My observation is that firms are improving here.  They see the value in teaching employees how to 1. establish their internal network, then 2. use systematic persuasion principles to influence and change the firm.

Participative Decision Making:  This refers to the level of influence employees have in the decision- making process.  Measure employee satisfaction, motivation, and degree to which they feel involved and engaged.  The Q12 Assessment might be an effective measurement tool in this area.  My observation is that firms have gotten pretty good at this because it correlates to other success factors, not just innovation. 

Alegre and Chiva note that these five characteristics combine to create an excellent snapshot of an organization’s OLC. They suggest that an organization can use surveys and other internal metrics as a way of measuring its ability to learn and innovate. If an organization measures an improvement in its learning capability, it will very likely see a concurrent increase in innovation.

The Not-So-Fuzzy Front End

A best practice at Fortune 100 companies is to see the front end of the pipeline not as fuzzy, but as crystal clear.  A systematic approach to innovation using an effective process can take away the mystery of the front end and create a sustainable growth engine. 

What is the “fuzzy front end” and why has this notion become so popular?  Calling the front end “fuzzy” perpetuates the myths of innovation.  “Fuzziness” is the term coined to suggest that innovation has lots of risk, is not systematic, and is more of a “eureka” moment.  One can schedule work, but you cannot schedule invention.

This is simply not true. You can schedule innovation.  A company like GE, for example, that is seeking 8% growth on a base of $207billion in sales, needs $17 billion in new revenue a year from innovation to achieve that. GE will not tolerate fuzziness at its front end of innovation.

For some, fuziness is more about how to select projects from among the ideas generated at the front end.  There are many tools available to help managers select the most appropriate projects.  The best of those use some form of weighted linear model. 

My advice: Create an innovation schedule.  Hold people accountable for generating new business opportunities.  Sharpen the focus, and reward teams that bring forward an exciting portfolio of current and future growth opportunities.  Accepting fuzziness in the front end is accepting slow growth.

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.

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 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.

Tempting Innovation

Jeffrey Phillips makes a nice distinction between the various ways to adopt ideas of others outside your organization in his post, The sincerest form of flattery:

• If you are copying ideas in your industry, you're a follower
• If you adopt ideas from other industries and apply them in new ways in your industry, you're an innovator
• If you package your capabilities and dramatically change another market, your a disrupter

What about adoption of ideas of others inside your organization?  Innovators face a particularly challenging issue getting colleagues to accept their ideas.  Tanya Menon from the University of Chicago describes the paradox of an external idea being viewed as "tempting" while the exact same idea, coming from an internal source, is considered "tainted."

In a business era that celebrates anything creative, novel, or that demonstrates leadership, "borrowing" or "copying" knowledge from internal colleagues is often not a career-enhancing strategy. Employees may rightly fear that acknowledging the superiority of an internal rival's ideas would display deference and undermine their own status.

By contrast, the act of incorporating ideas from outside firms is not seen as merely copying, but rather as vigilance, benchmarking, and stealing the thunder of a competitor. An external threat inflames fears about group survival, but does not elicit direct and personal threats to one's competence or organizational status. As a result, learning from an outside competitor can be much less psychologically painful than learning from a colleague who is a direct rival for promotions and other rewards.

Companies such as Procter & Gamble have perfected getting ideas from outside the organization.  Their Connect + Develop program is considered a best practice in external collaboration.  What companies struggle with is how to overcome the internal acceptance of peer ideas.  One way to approach it is with Team Innovation.  Read: TeamInnovation.pdf.

When to Innovate

People often ask when is the best time to innovate: early in the pipeline process, middle, or late.  Teams tend to resist innovation late in the process when they are busy launching a new product.  Teams tend to resist innovating in the middle of the NPD process because they are too busy developing the next generation product.  Teams tend to resist innovating early in the process because they are too busy developing franchise strategy. 

So when is the best time to innovate?  Anytime. 

Early in the process, you need innovation to develop a large stock of potential novel product ideas.  Tie these early ideas to your franchise marketing strategy.  This makes your strategy more robust and believable.

Early in the process, you need innovation to trigger modifications or enhancements to the product now in development.  This gives you potential differentiating features that you can still build into the new product. 

Late in the process, you need new concepts just when launching a new product to show your company and your customers that you have a sustainable pipeline of ideas behind you.  This gives you credibility.

Innovating is like putting in golf.  Never leave yourself short.

Can you make me be more creative?

Katie Konrath has the right idea when she tackles this question, "Can you make me be more creative?"

Yesterday, I was talking with a couple friends when one asked two of my favorite questions. "What happens when someone can't think of any ideas? You can't force them to be more creative, right?"  I rubbed my hands together, thrilled at the challenge that was coming. Actually, I can.

Her approach is to combine ideas and concepts that seem pretty silly at first, but then she mentally forces these constructs to have some sort of value or purpose.  This, in essence, is a systematic approach to innovating that can be trained and repeated. 

The key to becoming extremely effective at innovation is to learn all the tools and templates that help create an initial, undefined construct, or what innovation researchers call "the pre-inventive form."  This ability to apply a template, then find a useful purpose for the for what comes out of that template is what allows one to innovate on demand.  Templates "make" people innovate.

Katie's also recognizes the value of involving many people in the use of innovation templates.  Innovation is a team sport.  Diverse, cross-functional teams using a facilitated process can overcome the inherent challenges people face when when innovating.