Category Archives: Innovation

Innovation focus

Innovation is more than a process and tools

Watching all the developments in the innovation space you’d be forgiven for thinking that you can become an innovative company by simply having an innovation process and throwing in a few innovation tools and hey presto, Apple here we come! Wrong… sorry if it were that easy everyone would be doing it and we’d be overwhelmed with innovation. The reality is that innovating consistently and constantly is achieved by very few companies. What we hear less about is the companies who’ve tried some form of innovation activity and failed. I don’t mean a 70% or 80% failure rate but a 100% failure rate. Now failure is not a bad thing and is actually an essential part of the innovation process, but out of the failure you hope some gems will come forth offsetting all the failures.

There is a huge industry building around the whole innovation space and there are more public speakers on the subject than I can count. A lot of what I hear is quite simply common sense that doesn’t take a genius to figure out and lot of it is just high level stuff that gives no clues in how to execute innovation. We can all talk about common sense things and strategy at a high level but very few can talk about what it takes to execute an innovation strategy successfully. I do wonder if the industry is just perpetuating the innovation hype to continue the dollars rolling in for whatever innovation thing they happen to be touting around. This is bad news for people who are committed to innovation and want to see some real innovation happen because where the hype goes so does expectation. When innovation successes fail to materialise the hype is followed by disillusionment and this can result in a real disappointment and cynicism for innovation. The damage from this could really harm innovation to the point that companies just decide its not worth investing in again, or at least don’t try innovation again for many years.

So what does it really take to be an innovative company? Yes a process is important and yes tools are important but they’re actually some of the lesser important things. Many successfully innovative companies have these tools and processes, but these are a peripheral to what’s really enabling innovation in the company. The real enablers for innovation are hidden beneath the surface and are often not even apparent to those working in an innovative company. What’s important for innovation is:

  • The right culture and behaviours
  • Senior level management commitment
  • Having people who understand innovation
  • Having the right creative types in an integrated organisation
  • A route to market for testing concepts

The right culture and behaviours – this is probably one of the biggest barriers and enablers for innovation. The culture of the company is what will ultimately make innovation fail or succeed. Innovation requires a culture that is open to new ideas regardless of where they come from. Companies that have strong functions, particularly Marketing, that think it’s their job in the company to come up with new ideas or that their ideas should get higher priority than anyone else are simply wasting all that latent knowledge, talent and capability in the organisation. There are lots of studies about culture and a strong view that you can’t change your companies culture, at least not easily, so its therefore important to focus on the behaviours. Reinforce positive behaviours for innovation and eventually the culture will follow. As a company you need to identify the key behaviours that are important for innovation and then put in a plan for making those behaviours happen. Start small, start on a key group of influencers and let their influence permeate throughout the company. It’s like nurturing a small plant; keep watering it and watch it grow. Another important factor in the culture of an innovative company is freeing up people to work on innovation. So often the innovators in a company are people who have an important day job that their line managers will be reluctant to let them leave even temporarily. How are you going to free these people up without having a battle with line managers every time you need to do this?

Senior level management commitment is more than just unleashing a few junior managers to go innovate or that. Putting a CxO’s name on an initiative doesn’t means their sponsorship guarantees success. That’s not going to work in a lot of companies unless its a truly flat hierarchy with a really democratic culture. Board level members make key strategic decisions about the companies future and are often involved in the execution of projects that are deemed critical for the company. Innovation too should be firmly in that critical category with direct board level involvement. Senior people need to be running the innovation effort or at least be heavily involved in it. It’s their day to day involvement in innovation projects that’s showing the company they are leading by example. Marshalling important but finite resources will also often require senior management involvement to secure those resources whether it be money or people. If innovation is really the route to success then the most senior people in the company should be involved in it and not leaving it to someone else.

Having people who understand innovation. People who understand some of the deep cultural and organisational changes that are necessary to become an innovative company are a must. These aren’t people who just understand what an innovation process or funnel is, but can understand the often hidden or subtle signs that point to innovation blockers. These people are politically savy enough to know who needs influencing and who’s support they need to get the innovation effort to succeed. These people probably aren’t the innovators (but they can be) but rather focus on removing the roadblocks to a more innovative environment.

Having the right creative types in an integrated organisation. Innovation requires creative people because make no mistake innovation is born out of a creative process not a logical one. These are the people who think differently, people who constantly seeking new meanings in things, people who test new ideas on themselves as well as customers. These are people who are so passionate about what they do that they immerse themselves in it. These are the innovators and can they can be anywhere inside the company, the key is unleashing them and their talent. However having such people inside the organisation may not always be possible so in that case the organisation has to seek out partnerships with such people to collaborate on new ideas and concepts. Too many companies create bland offerings because the corporate environment is about safety and not creativity. Innovation is an art and has to be treated as such. But creative people won’t succeed on their own and this is where an integrated organisation is important. It doesn’t matter that you have the best innovators in the world in your company because if you can’t pull the various strands across the company to implement the ideas then you’ll hit a brick wall. When working on innovation there are many people involved in the chain from idea to conception. An integrated organisation brings together the people who are responsible for each component of the chain. In these companies people work in less formal hierarchical structures (at least some of the time) but more in a project based environment where people from across the company come together to achieve a common set of objectives. Question companies need to ask themselves is how do you create an integrated organisation to deliver? The one other thing that I’ll add is you need passionate people. People who care and love what they do. These are people who ooze enthusiasm about what they’re doing. Do you have such people in the company?

A route to market for testing concepts. Everyone knows that innovation can be a hit an miss affair. Various research studies for example conclude over 67% of new product launches fail within the first twelve months. Therefore anyone bringing new innovations to market needs to be able to test ideas and concepts directly with customers. It’s important that there is that direct relationship with customers so you can observe first hand what they think of your innovations.

In summary I hope this gives people some food for thought. Innovation isn’t just something companies can wake up and say “we’re going to be innovative now” and learn from a text book. Innovation is a capability that takes serious time and effort to nurture and there will be many failures along the way. Innovation is about getting underneath the surface and looking at the process start to finish and asking yourself what works and what doesn’t work and then having the power to change what doesn’t work and strengthen what does work. Innovation will be contending for finite resources with the BAU stuff which is never an easy debate to win. What works will be different for every company because every company has a unique character. The trick is working out what works for your company.

Big company bigger challenges

Intuitively one thinks that when moving into a new business venture it’s the new start up that has the greatest challenges to face. You’d think with the inordinate resources at the disposal of a large corporate that it’s going to crack any nut that it wants. Well actually you don’t have to look very far too realise that the reality is very different and the size of an organisation is a trivial element when it comes to determining success in a new venture. Many big companies have tried something only to fail where smaller ones have succeeded.

If the new business venture is something that’s very different to the core business for a larger organisation then I’d argue that they got bigger hurdles to overcome to be successful than smaller start ups. Sure a corporate in theory has infinitely more money and people to throw at a problem, but in this case size really doesn’t matter or rather it matters but not in the positive way you’d want it to. What’s a better determinate of success is a companies culture and approach to new business development.

Let’s list some of the challenges larger corporates and start ups face when trying a new business venture.

Start up challenges

Larger corporate challenges
Lack of money and collateral Lack of agility due to size
Not enough resources and hours in the day Inappropriate financial assessments or financial assessments more suited to core businesses
Access to the right sort of talent at a low price Constant compromise and consensus leading to a dilution of the original idea/vision
Lack of specialised skills in all areas of the business Trying to force the new business into the existing business model, culture and processes
Financial backers pushing their agenda rather than letting the original vision happen Assumptions and biases from the core business that are applied to the new business ventures
Reliance on individuals for key tasks and function Aversion to risk and moving into the unknown
Limited number of attempts to get it right before money and/or patience runs out Smaller return from new business venture as a percentage of the total revenue in the short-medium term making the business disinclined to invest
Less negotiating power with larger partners and suppliers Portfolio management and contention with the core business for resources and funding
Lack of trading history making partners and investors harder to find Setting the wrong KPI measures and targets

As you can see from this list, there are some really significant hurdles that can make it harder for a larger business to succeed. Let’s look at a few of these in more detail.

Lack of agility and slow decision making process

This is probably one of the most common challenges faced. Bigger organisations are like oil tankers. Everyone can agree that we want to move in a certain direction but it’ll still take a lot of time to turn the ship as you have realign many more people and get further approvals from departments and functions that weren’t directly involved in the original decision making process for the new business venture.

However, the first challenge isn’t getting the oil tanker to turn its to get everyone to agree that you have to turn! The more people that are involved in the decision making process the more likely there will be differing views on how it should be executed. The more democratic and consensual the culture of the organisation the worse it can be, which is ironic because you want to be part of a democratic and consensual organisation.

Constant compromise and consensus leading to a dilution of the original idea/vision

You’ll hear comments inside the company along the lines of:

  • Well it doesn’t quite fit with the brand so if you do X, Y and Z then it’ll be a better fit
  • The business case for this doesn’t really work so if we monetise it like this (because that’s what others/we do) then we’ll get a better deal
  • Why are we doing it like this?
  • We’ve tried this before and it didn’t work
  • Actually our experience with X says that you need to do Y and Z
  • Unless we do it this way I can’t support this

All the time you’re trying to get this new venture off the ground and you can’t because of the lack of consensus and in the end you compromise because you figure its better to compromise and get it launched rather than try and hold your ground at the risk off never getting it out there.

One of the things that I admire about Apple is that they come up with a vision and a product and then stick to their guns. There is no dilution (or very little) of the original idea and people strive to make it happen. So many times big companies start off with a grand vision and plan which really is a wow, but slowly and surely it gets watered down until you end up with standard family saloon rather than the Ferrari you wanted.

Inappropriate financial assessments or financial assessments more suited to core businesses

Lots of big companies manage large portfolios and each of the items on the portfolio goes through some form of  investment appraisal. These are usually in the form of discounted cash flow or net present value. In themselves these measures are not bad, but they are based on some fundamentally flawed thinking that can give the wrong impression. These measures compare the cash flows of the new business venture against the do nothing scenario. The do nothing scenario often assumes that the core business cash flows will continue in the future as they are today, which is a pretty big assumption to make particularly if the existing business is in decline or some major disruption comes along to cause a sudden drop in revenue or profitability. The second major problem with these measures is that if the new business venture is truly new in that there aren’t many companies currently doing it, then the future predictions of cash flow are just that – predictions – and they are predictions that can be very wrong if there is no historical data to go on.

Big businesses may also use a investment appraisal that’s suited to the core business. If the new business venture is very different to the existing core business then the models applied can at best be inappropriate and at worst lead to answer that shows a less favourable return than investing in the core business. In this case companies may shy away from investing.

Smaller return from new business venture as a percentage of the total revenue in the short-medium term making the business disinclined to invest

The larger the existing revenue stream for the core business the larger the challenge to invest in a new but smaller business venture that doesn’t make a huge impact on the top line immediately. Let’s say for example a company has a £1bn annual revenue stream and it seeks to improve the revenues by 5%. Well a 5% improvement on £1bn is still £50m. Growing a new business venture to this size could well take 2-4 years and that means once again there will be a tension on whether to invest in this new business venture or something else in the core business that might give a bigger, more certain return sooner.

This is also one of the reason that some companies are more inclined acquire larger established businesses with bigger revenues rather than growing their a new business from the ground up. The larger revenues register a higher percentage increase on the core business revenue almost immediately.

Portfolio management and contention with the core business for resources and funding

Lots of larger companies operate a portfolio for projects to ensure the maximum return on every pound spent. A new business venture may need resources and funding from the same portfolio used for the core business and that will create a tension as people are vying for resources from the same pot.  Justifying new business investments against bigger and more immediate returns from core business investments can be hard. Most modern companies almost never have enough people working on projects and if some of those available resources are diverted away into non-core activities then it can be hard sell.

The other challenge faced is that portfolio structure and mechanics maybe more suited for investments in the core business. New business ventures that are very different from the core may struggle to fit into the portfolio. However if the portfolio is structured to take account of new business ventures with the right investment criteria then this is easily overcome.

Setting the wrong KPI measures and targets

All companies like to have targets. It’s a good way of measuring how well you are doing and off course psychologically it gives comfort you’re doing the right things. Having the wrong measures for your new business ideas however can be fatal. Again this is where the core business thinking can creep in. I won’t dwell on this much more other than to say do your homework on the measures for new business ventures. An example of a good measure used by companies include looking at the % of revenue coming from new business ventures. Such measures will drive the company in the right direction because they encourage the right behaviours.

Summary

Hopefully some of the brief review of the key challenges demonstrates that just because you’re a big business doesn’t mean its easier to execute a new business venture. All of the challenges are surmountable, but you need to be aware of them up front so you can put in place a strategy for dealing with them.

The bigger you the harder it can be………

Where did the silos come from and who cares anyway?

Ever been in a large corporate organisation and wonder why there are silos between different departments and business units? Silos are barriers that restrict collaboration, the flow of information and worst of all they can destroy the company if left unchecked for too long. How many times have you heard of examples where one part of the company has absolutely no idea about what another part of the company is doing or someone complaining that a new product or service failed because department X didn’t get their act together?

Why does this happen? Most large companies are full of very clever people who have the right motivation and want to do right by the company. Most large companies grew out of smaller companies and when they were smaller the status quo couldn’t have existed so what changed?

There are lots of reasons for silos, some of them being:

  • Organisational culture and internal politics
  • Overloaded people just focusing on the smaller picture to get their immediate jobs done
  • Weak leadership
  • Inwardly looking departments and business units
  • The sheer size of the company – the bigger it is the more effort it requires to prevent silos
  • Different geographical locations and time-zones
  • Nature of the work doesn’t require lots of inter-departmental interaction

However, I’m going to pick on one cause of silos for this article, which isn’t in the list above and is not immediately obvious. It’s the one cause that I think is not spoken about that often but is actually one of the most important reasons for silos existing. So what is it……?

As a company grows from its scrappy roots it seeks to find a stable business model that is repeatable and profitable. The processes in the company are crafted to underpin the business model and when that happens the changes reduce in frequency until you reach a point of equilibrium. Sure tweaks happen here and there every once in a while, but the core of the business model and processes gets defined in the early phases of the company and they tend to stick. People then get very good at their jobs, understanding what needs to be done and the whole machinery starts to move to autopilot. It’s like driving a car, when you first start driving, remembering to do the right sequence of moves to get the car going seem very difficult and awkward. As you practise it all becomes second nature and soon enough you stop consciously thinking about how to drive a car, it just happens. Companies are no different, they learn a way to do things and that’s how it then happens henceforth with people rarely going back to take a wholesale view of the business model or processes that underpin it. The business model and processes embed themselves into the social fabric and DNA of the company. Is that a bad thing? It can be, in fact it can be a very bad thing.

When companies operate the same business model for a long enough time, people think that’s how you do business for everything. The company starts to view the world through the lens of their current business model and this is dangerous for companies in two cases. The first is that fundamental changes can occur in the industry that are extremely disruptive to your business model and the value chain. The world has changed but the company keeps approaching the problem the way its done before. This is probably one of the root causes of why many companies don’t last more than 40 to 50 years.

The second challenge for the company is when it tries to enter a new market or try a new business venture that requires a very different business model and processes, but guess what…..the company will apply the same rules it uses in its current business model to the new challenge or new market opportunity. That’s ok if the existing business model and processes can be applied to the new thing, but its a recipe for disaster if they can’t. Our dear friend Clayton Christensen has documented this in the three books he’s written on innovation so if you’ve not read then, I’d really suggest you do.

In the case that some people in the company do recognise the need to change the business model and processes, the silos make it extremely difficult to do so. There limited collaboration outside the BAU way of working and that’s when the silos are the companies worst enemy. When its time for a change, it requires multiple departments to club together and co-ordinate the changes.

Silos also prevent inter-department innovation. Any company has to serve and satisfy its customers and there are multiple departments that need work together. If silos exist those companies will find it harder to innovate across the entire customer life cycle.

So if one of the reasons for silos is because the business model has stabilised and the rules don’t change often then how do you get over this? Actually thinking about business models and processes as being static and not evolving is a very out-dated way of looking at things and harks back to a bygone pre-internet and communications era when things moved more slowly. In this world of instant communication things constantly evolve and change often very quickly. Changes that may have taken decades in the old world can happen in months and weeks today and only those adaptable and agile enough survive in today’s world. Companies have to take fundamentally different view to the way they manage and review their business models and associated processes. They have to view them as constantly evolving entities that if cultivated properly will provide the competitive edge over competitors and protect against threats. But whenever changes to the business model are required many people walk away from it because it requires large scale change across multiple departments and IT systems – the social and technical architecture make it a daunting task.

Avoiding silos across the organisation is achieved by fostering cross business working on a regular basis and not just for special projects that happen once in a blue moon. It should be ingrained in the companies culture that projects require people from all disciplines to be involved. This doesn’t happen naturally so there needs to be a concerted and concious effort to make it happen. People should be moved around between departments as a matter of course to extend their loyalties beyond their old departments. Regular communication channels across functions should be set up and this is where social media tools can help greatly so that people can see what’s going on in other parts of the company. I’m not a fan of the artificial corporate events where people from across the company meet – they do have limited impact and are fun but there needs to be common purpose and binding activity that allows people to work together across departments to deliver a common set of objectives.

Another important thing in my mind is that with today’s speed of evolution someone in the company needs to have responsibilities for monitoring and adapting the business model and processes. It can’t be left to individual departments. I personally see it as being the role of senior members of the organisation to break down the silos and ensure a free flow of people, knowledge and communication across the interfaces. These senior members are either board members or their direct reports. Junior people can’t make this happen.

Who in your company looks after the business models and processes? Who’s there making sure the company’s relevant in 20, 40 or 100 years time?

Simplicity – The art of good design

I was looking at the TV offerings from both Google and Apple (amongst others) the other day and it just struck me the difference in design philosophy of both companies and why I think Apple has a chance of success whereas Google doesn’t in this area.

Google has products made by engineers for engineers. Apple makes products for everyone else. Now I’m being a bit harsh on Google but if you want to see an example of difference in the design philosophy then look at the images below. In the image on the left is the Google TV remote control and on the right is the Apple TV remote control.

Which one do you think your mum and dad would find easier to use? No disrespect to Sony and Google, but did you guys think it was OK to launch with something akin to a laptop to control the telly? What was going through your heads?

By contrast, the Apple remote, in keeping the company’s design philosophy, only puts only the most essential things onto the remote. Apple focus on experiences and Google focuses on product and that’s the big difference. Apple understands the people who will use its product better than they understand themselves sometimes and it looks at the essence of what you are trying to achieve and it’ll keep removing features until there is literally nothing of value left to remove.

It’s the same design ethos that was applied to the iPod. MP3 players just before the iPod appeared were competing on features and functionality and they were getting increasingly complex. Apple came along and cut functionality back to the absolute basics of what it needed to be. The iPod itself wasn’t a great innovation in 2002 because others had already developed MP3 players, but what came along two years later completely transformed the music listening experience and accelerated iPod sales – what came along was iTunes. iTunes suddenly made it easy to find and download music to your device all at an affordable price. Apple changed the music listening experience, that until then was complex and fragmented, for the average consumer into an end to end customer experience. The graph below (from Wikipedia) shows the ramp up of iPod sales in 2005 when iTunes was launched.

Apple signed deals with all the major record labels and did what others had failed to do before, namely legally monetise music.

Another great example of innovation is the flip camcorder. Now most camcorders on the market require either a PHD in computing (or the mandatory 5 year old) to use them. They’re crammed with all sorts of features. Now I’m a photographer and consider myself pretty adept at using consumer electronics and photography stuff, but even I don’t use all the stuff they cram onto camcorders so what chance has the average person got?! So along comes Pure Digital Technologies, who release a flip cam that has just a couple of buttons on it. When Pure Digital were pitching the flip cam they used a slide with two images, one was a normal camcorder and another was the flip. The text underneath the normal camcorder said “Use this for special occasions”. Under the picture of the Flip the words were “Use this for everything else.” Brilliant! Simple and to the point.

Take note, innovation is more than just about more features and functionality, its about creating experiences and doing things simply. Think about your customers and give them what they want – no more!

Now for the record, I am NOT an Apple Fanboy……I am a fan of Google however, so I hope they learn the lessons of making things accessible and creating an experience for everyone and not just the engineers.

4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
2002
2009
2003
2004
2005

Making innovation successful – kill the barriers to innovation

I was speaking to a friend of mine Keith Edwards (founder of Spectrum Insight Ltd) about innovation in larger companies and he commented that the process you adopt for innovation is actually less important than removing the barriers to innovation. There is definitely something in that. A lot of the focus is put on getting the innovation process right, but actually what does undermine a lot of the innovation effort is the barriers within a company.

There are some really smart people in the company and everyone intellectually gets the need for innovation (in fact I’ve yet to find someone who thinks it’s not a good idea!), but as soon as you try and put an innovation process in place that’s when the hurdles come out. So what are the barriers to innovation that I’m talking about? Here are a few of them:

1. Headroom for people to innovate – Most companies in today’s competitive environment operate quite lean and efficient operations. The machinery is geared towards the core business activities and efficiency and longer term planning is critical. So when headroom is required to do some innovation people can be just too busy to engage. Lots of people would like to, but they’re concerned that they can’t do their day job or their manager might think less of them for it. Closely linked to this is point 5 below too.

2. Unsuitable processes – Whether you consciously think about it or not, businesses follows processes to getting things done. I use processes in this context in a very broad way and not just about the detailed flowcharts that people think about. The innovation may need a different way of doing things to be successful but the company will inadvertently try and force fit it into its existing processes because “that’s the way things are done around here”.

3. Death by a thousand cuts – This is sort of linked to point 2, but to emphasize the point I’ll deal with it separately here. In any corporate organisation there are many departments and functions that’ll want to have a say on how things should be done. Now each and every individual request to change the innovation in itself is probably a really good idea and seems like common sense, but the cumulative effect of all these reasonable requests is enough to compromise the whole innovation to the point that it is devalued or no longer feasible.

4. Funding – Innovation activities don’t always naturally fit into the annual planning cycle that most companies operate. This means that when it comes to an adhoc request for funds to implement an innovation idea, there isn’t the money or at the very least its not easily accessible.

5. Reward and incentives – Getting people to participate in innovation and make time for it  requires the right cultural framework to be in place to encourage innovative behaviours. This often means that people need to incentivised or rewarded. Look carefully at whether your organisations culture encourages the right behaviours for innovation through reward and incentive.

6. Senior level engagement – I’ve spoken about this in a previous blog, but its vital that senior managers in the organisation encourage innovation behaviours. This doesn’t mean just saying complimentary things but actually engaging in the process so that others see this and think “ok if he’s involved its got to be a good thing”.

So what’s the solution to overcoming these barriers? Well I’m afraid there is no single answer and it’ll depend on the company, the culture, the industry and what you are trying to do amongst other things. Being aware of the barriers is the first step to removing them. So when you are designing a new innovation process or trying to understand why the current one isn’t working then look at the barriers above and ask yourself if any of these are the reasons.

Remember most people genuinely are in favour of more innovation but there are some sound reasons why rational people seem to be hindering rather than helping. It’s not their fault!

The different approaches to innovation

I’ve been studying a lot of different approaches to innovation adopted by some of the leading brands for some time but something that strikes me as odd is that there appear to be two very distinct approaches to innovation that do things very differently but still churn out some amazing results.

There is what I’ll call for the purposes of this article the “standard” or well known approach to innovation where you have an innovation funnel of ideas, rely on internal and external crowd sourcing for ideation, use customer driven design techniques and perhaps engage with open innovation. This is the approach that is adopted by the likes of Adobe, IBM, 3M and Proctor and Gamble. This form of innovation has shown to yield some fantastic results for the participants.

However, I then look at companies like Apple and they don’t use the innovation methods used by the companies I’ve described above, but they still come up with some wow stuff! Apple is extremely secretive internally and employees often don’t often know what colleagues are up to. Apple doesn’t crowd source internally, it doesn’t go out to its customers to ask what they want and yet it consistently comes up with disruptive game changing innovation. How’s that work? Apple is not alone though, there are other companies, for example in Italy, who also adopt a similar approach to innovation as Apple. They offer things to the market that simply don’t seem to make sense at first and if you were to ask customers what they think about them you’d probably get very negative results. So how do these companies do innovation so effectively?

I was then recommended to read a book by Roberto Verganti called Design Driven Innovation and suddenly this alternative approach to innovation seemed to make sense. I’m not going to describe everything Verganti’s says but in essence some of the salient points he makes are:

  • Design driven innovation is the key to success and is very different from customer driven innovation techniques.
  • Asking customers what they want or watching what they do with your existing products is not going to necessarily lead to ground breaking innovation. Asking customers what they want will tend to lead to small incremental improvements.
  • Disruptive innovation comes from bringing new meaning to things. An example he cites is the Nintendo Wii which changed the meaning of game consoles by making the interaction more immersive involving your whole body where as to date Xbox360 and PS3 only required your thumbs to play. In addition to that the Wii opened up game consoles to many more people and it was much more social activity. The other interesting thing to note is that Wii was far cheaper to make than the Xbox360 and PS3 but outsold both of those consoles.
  • In order to give new meanings to things requires extensive research looking at the alternatives for how things might be used.
  • Real breakthroughs come when you can leverage a new innovative technology and provide new meanings to things at the same time.

Going back to Apple, they were the first laptop supplier to remove the optical drives from their MacBook Air. Steve Job’s said that “we do not think most users will miss the optical drive” and he was right, at least for many people, whereas up to that point everyone thought you just couldn’t make a laptop without an optical drive. He fundamentally changed the meaning of laptops. Apples then went further and did the same with the iPad. iPods is another good example of disruptive innovation. Apple didn’t invent MP3 players, nor were they first to market with this technology. But with a super slick design for the iPod combined with iTunes Apple created a new eco-system and changed the way music was consumed. He gave new new meaning to listening to music.

Another really convincing example that Verganti gives in his book is the Swatch Watch. Swatch and indeed most Swiss watch manufacturers were rapidly losing market share and revenue. Swatch came along and turned the watch into a fashion accessory at a very affordable price, which meant that people could own multiple Swatch watches and wear them to match an outfit. This gave a new meaning to wearing watches. No-one to date has been able to emulate Swatches success and indeed even though Swatches have been on the market for a while and easily copyable, it retains its market share and allure.

I have to be honest that even though Verganti thoroughly convinced me about merits of design driven innovation, his steps on how to achieve it left me feeling unconvinced or rather I felt something was missing. Over simplifying again what Verganti suggests is that companies need to build a network of people to collaborate with. This network could include designers, technology suppliers, the media, sociologists, anthropologists and so forth. These collaborates may come from many other industries. I think there is something in that, but the mechanics of how you go about doing it will probably require you to figure it for yourself. These networks of people could take many years to build and establish.

The challenge with what Verganti advocates is that it doesn’t follow a set process and its not easily reproducible. Well if was easy to do or copy then I guess everyone would be doing it! What distinguishes a very innovative company from others is mastering this process of innovation.

I’m not going to spoil the book for you other than recommend you read it, but what are the implications of what Verganti is saying? My take is that companies need to learn to master different approaches to innovation and don’t just rely on the methods that you commonly hear about. There are many ways to skin the cat.

So what do you think? Is there something in all of this or is Verganti barking up the wrong tree?

What’s this innovation stuff about?

So what is all that stuff you hear about innovation? It’s a word that seems to get thrown about all over the place and no universal agreement on what it means. To make matters worse companies often talk about innovation in all sorts of contexts because it happens to be the latest and greatest thing. In my personal experience few companies have actually understood the innovation process let alone actually implemented it. I’ve seen companies use the word innovation to describe:

  • Cost cutting
  • Standard roadmap projects
  • New products and services

Now none of these things are wrong and it is possible to be innovative in each of these things, but in my view this is just the tip of iceberg with respect to what real innovation is about. Borrowing from Wikipedia innovation is defined as:

Innovation is a change in the thought process for doing something, or the useful application of new inventions or discoveries.[1] It may refer to an incremental emergent or radical and revolutionary changes in thinking, products, processes, or organizations.

Innovation is not just about coming up with new ideas, it’s how those ideas are applied that makes innovation really different. Its important to point out that innovation can affect every aspect of a company. The innovation headlines are usually grabbed by new products and services, but actually some of the largest benefits of innovation come from anything but products and services. Innovation can be about how you finance projects, it can be about how you manufacture goods or it can be the business model you use to sell. In fact it can be about anything your company does.

Innovation is important to a company because it helps you stay ahead of your competitors. In today’s day and age standing still is not an option because someone will come along and eat your lunch. Here are some interesting stats:

  • The average life expectancy of a multinational corporation-Fortune 500 is between 40 and 50 years. This figure is based on most surveys of corporate births and deaths. A full one-third of the companies listed in the 1970 Fortune 500, for instance, had vanished by 1983-acquired, merged, or broken to pieces.
  • Of the 500 companies that appeared on the first list, in 1955, only 71 hold a place on the list today. (The 1955 list included industrial companies only, whereas today’s list also includes service companies.)
  • Nearly 2,000 companies have appeared on the list since its inception, and most are long gone from it.
  • Some of the most powerful companies on today’s list—businesses like Intel, Microsoft, Apple, Dell, and Google—grew from zero to great upon entirely new technologies, bumping venerable old companies off the list.
  • Some of the most celebrated companies in history no longer even appear on the 500, having fallen from great to good to gone from the list—companies like Scott Paper, Zenith, Rubbermaid, Chrysler, Teledyne, Warner Lambert, and Bethlehem Steel

But there are companies that continually buck the trend and they put innovation at the core of their organisations to stay ahead. Take for example Proctor and Gamble. It uses an innovation process called Connect and Develop to stay at the top of its game. Then there is Toyota which created Toyota University for innovation and has continued to grow while the rest of the car industry appears to be in severe decline like GM and Ford.

Putting in place a proper innovation process is something that makes innovation repeatable and systematic rather than relying on individuals or good luck to provide you with innovation. But that’s easier said that done right? How do you put in place a process that will yield regular and frequent innovation?

Both BCG and McKinsey’s have looked at innovation in large companies and their findings show that overwhelmingly senior executives are disappointed with the outcomes of the innovation efforts in their companies even though a majority place innovation high up the agenda. The reason is because execs don’t put in place the right process and tools for innovation to succeed. Innovation is about focusing on the details of your innovation process. The good news is that as a company you can indeed put in place a process for innovating but it requires many components to be in place for it to be successful, many of which will seem like common sense. Some key elements for making innovation successful include:

  • Dedicated resources to run the innovation process. Many companies make the mistake of thinking that people run an innovation process alongside their day jobs. While many contributors and participants in the innovation process can do this as part of their days jobs, the actual core innovation process must be run by people who eat, sleep and drink innovation.
  • Resources to implement the ideas. Collecting ideas from your people and then doing nothing with them is a sure fire way to disengage people. Make sure that the ideas go somewhere.
  • Senior level sponsorship is a definite key ingredient for success. Unless senior people get behind the innovation process and activities, it will always come a poor second to other priorities.
  • A robust process for innovation with key measures for success. The innovation pipeline from start to finish needs to be measured to ensure that every stage of the process is working. KPIs can be input and output KPIs, for examples the number ideas are entering into the ideation stage or the proportion of revenue coming from products and services launched in the past 3 years.
  • Communication, communication and communication! Telling people in the company about what is going on with the innovation effort is vital. This keeps the innovation profile high and will help to engage people. The communications should cover every aspect of your innovation effort.
  • Reward and recognition. If you get great ideas and they get implemented then make sure the people responsible for it are recognised and rewarded. Rewards don’t need to be large financial incentives, they can be the CEO or CxO recognising the achievements or small gifts. Lots of people are simply motivated by simply being seen to be innovators amongst their peers.

We’ll talk some more about innovation in later blogs, but I thought I’d at least get the subject on the table to start with!