“Most innovation does not come from some disembodied laboratory,” said Stephen S. Cohen, co-director of the Berkeley Roundtable on the International Economy at the University of California, Berkeley. “In order to innovate in what you make, you have to be pretty good at making it — and we are losing that ability.”
The fools at Fast Company lent me the keys to their blog last week. Here’s what I scrawled in lipstick on their bathroom mirror…
Once in while I hear someone talk about innovation as leapfrogging the competition. I love this phrase because it’s so bold. It not only says we are going to innovate on the level of products or processes or management, but also that we’re going to do it in a way that jumps forward to a generation beyond the competition. A leapfrog is the most ambitious an organization can be, and few organizations are actually equipped to make such a massive change. But leapfrogging as a creative exercise to expand our thinking can be a powerful tool.
Let’s say you’re a supermarket getting your lunch eaten by Whole Foods and you want to find an innovative new positioning. You could start by reverse engineering Whole Foods to figure out what makes them so successful and then imagine what it would take to ‘leapfrog’ that success. One way Whole Foods succeeded was by combining the progressive-but-ugly health food store with the attractive interior design and high quality merchandise of newer supermarkets. Lately they’ve also combined their stores with a vitamin store called Whole Foods Body. To leapfrog them you could brainstorm around the question, “What haven’t they combined yet?” One answer is exercise, as in diet and exercise — the keys to a healthy lifestyle. We see this combination happening as gyms open health food cafes, but this is on a smaller scale. The opportunity space for you is a modern, attractive gym and food market that combines the two in a way customers love.
How will your organization leapfrog the competition?
I attended an interview last night with Michael Linton, CMO of Best Buy, sponsored by Fortune magazine. He expressed the same healthy attitude toward trials that I’ve heard from other successful executives, e.g. “We have the programs we do regularly, the ready-aim-fire activities. Then we have the ready-fire-aim activities, the new programs we’re trying out. It’s important you don’t try to measure those in the same way. Some won’t contribute to making your numbers but will teach you new things.”
And he offered less common advice, like “If you can be 70% successful in a new activity, that’s great. If you try to acheive the other 30%, the market will probably move on without you while you’re striving for perfection. We work hard to keep up with the market.“
Irving Wladawsky-Berger, VP of Technical Strategy and Innovation at IBM, on the need to move away from a purely hierarchical approach to strategy:
“…for technologies and markets, the hierarchical approach is too rigid and must be complemented with more dynamic, bottoms-up approaches that constantly probe and react to what is going on within the business and out in the marketplace. Achieving the proper balance between a top-down strategy — necessary for proper governance, and a bottoms-up strategy that reflects the realities of the marketplace may be one of the biggest competitive challenges facing a business.“
“A real innovation is sufficiently different to be dangerous. It is change just this side of being ludicrous. It skirts the edge of the disaster, without going over. Real innovation is scary. It is anything but harmonious.“
In my tangible futures presentation last week, I repeated a statement I’ve written here, that sometime during the second half of the 20th century, American companies forgot how to dream. I’m happy to contradict that statement with a clear example: GE.
In Growth as a Process, Jeffrey Immelt reveals the process that led to their Ecomagination initiative. Not only is it not greenwashing or a flimsy vision statement, it grew out of their strategic planning process and has metrics that benefit the company and the environment, while bravely looking several years into the future.
The whole article is full of valuable insights, but this section is worth quoting:
The very economics [of scarcity], by the way, that drove you to read the demand for organic growth. You’re trying to make tailwind out of the headwind.
Exactly right. So we plugged that input from S-1 [GE's strategic planning process] into the Commercial Council, which studied it for nine months. We met with people from NGOs, government offices, and other relevant organizations. We brought a lot of assets together, including our knowledge of public policy and how it gets influenced. Once we had done our homework, we launched ecomagination with 17 products we could point to. As always, we were metric driven. We said that our $10 billion of revenue from products tapping renewable energy sources like the sun and wind had to go to $20 billion in five years. The $750 million we were spending on R&D for clean technologies had to go to a billion and a half. Our own greenhouse gas emissions had to come down by 1% by 2012.
Has there been any push back from your customers, some of whom I can imagine would rather stick to their carbon-burning ways?
There were plenty of guys on our energy team who hated this in the beginning because half of their customers were saying they hated it. Never mind that half of the customers loved it. We just kept talking: “Here’s where we’re going. Here’s why we think it’s good for both of us. And it’s going to come someday anyhow, so let’s get ahead of it.” We hosted what we call a dreaming session in the summer of 2004 with the 30 biggest utilities. Some of the top players in the industry—CEOs like Jim Rogers and David Rutledge—came to Crotonville and heard Jeff Sachs from Columbia talk about global warming. There were other speakers who were pretty compelling on different topics, and breakout sessions. I floated the idea of doing something on public policy on greenhouse gases, and we had a good debate.
In part, ecomagination helped to show the organization that we can do these things. The company has been great in terms of management practice but more reluctant when it comes to what I would call business innovation. Ecomagination was one way to show the organization that it’s OK to stick your neck out and even to make customers a little bit uncomfortable.
Last year I went back to Jeanne Lietdke’s Strategy as Design article for a second, close reading. One thought I came away with was, “It’s not too surprising this has come from a woman. The creative embrace of conflict, the willingness to stay in the problem space, the lack of need to control a situation and instead turn it into a new situation… it intuitively feels right that a woman would write that piece.” My colleagues — male and female — thought I was nuts for saying so. I know these aren’t exclusively female qualities, but I see them more often in women than men.
I thought of this just now looking at IN’s 25 Masters of Innovation. 17 of the 25 are women. I don’t want to draw any conclusion from this, but it’s another interesting data point.
It’s telling that this BusinessWeek/BCG survey only lists executive titles in this answer, even as executive-focused publications like HBR are publishing articles telling us, “Because so much of the learning about customers and so much of the experimentation with different segmentations, value propositions, and delivery mechanisms involve the people who regularly deal with customers, it is essential for frontline employees to be at the center of the customer-centric innovation process.”
Which is it, top-down or bottom-up?
One of our axioms at MIG is that innovation needs to be top-down and bottom-up at the same time. Good ideas come from everywhere. An open and participatory process yields more and better ideas. Learning from any part of the organization should be proliferated throughout. And support from top officers is vital in setting the tone and commitment to qualities of innovation.
There’s an inherent problem in trying to market anything complex like innovation: we practioners are passionate and by necessity employ a rich set of ideas, while our clients who need it, by definition, have focused on another aspect of business and may not have the time nor the inclination to understand these rich ideas in order to engage in the practice. Clients need something simpler to hook into the practice, and if they are willing they will gradually learn more. The problem is, the practioners (like myself) feel it’s inauthentic to over-simplify our ideas.
Grant McCracken tells a story about this in Obituary for a Friend…
This is an obituary for a friend who has gone over to the method… Working with Danny was like fishing the Grand Banks before the Europeans came in earnest. So many ideas, so thickly packed, you could walk on them anywhere. …he now plays things by the book. He’s got this method through which everything must pass.
Grant sums up the situation well, and (not ironically) the responses to Grant’s post explore the subtlety of this situation, that it depends on what you mean by method, and to some extent we all have a method.
Regarding clients, I think their motivations go beyond mere lack of time and inclination. Mark Edmunson’s recent article, Freud and the Fundamentalist Urge, reviews Freud’s work on society and politics to find an explanation of why we follow some leaders and not others…
In his last days, Freud became increasingly concerned about our longing for inner peace — our longing, in particular, to replace our old, inconsistent and often inscrutable over-I with something clearer, simpler and ultimately more permissive. We want a strong man with a simple doctrine that accounts for our sufferings, identifies our enemies, focuses our energies and gives us, more enduringly than wine or even love, a sense of being whole.
The challenge before our discipline now is to increase the ways we can assist clients by reconciling our complex ideas with their desire for something simpler.
Since I’ve been thinking about tangible futures and why companies should envision the future (including car companies) I thought a visit to the Auto Show here in New York was worthwhile. The biggest surprise for me was the Toyota exhibit. While I love their process, I’m usually bored with their high quality but plain cars. But their concept cars wow’d me.
I’ve been thinking about concept cars for a few years now and how they’re a good way for companies to practice foresight. Given my advocacy of Toyota’s production system and their current success, it’s very convenient to point to their concept cars as a contributor. I can’t say how much these concepts have contributed to cause, but I certainly found their differentiated concepts a compelling correlation.
Most every concept at the show this year followed this formula:
- Include a selection of next generation technologies
- Wrap them up in a pretty styled interior and exterior
As a group they were fun to look at but failed to inspire. We know certain technology is coming, we expect it. And the styling is the same thing we’ve been seeing for years. But what Toyota did was different. They asked, “What if the car was just as much about transportation as about entertainment? Then let’s design the car with an NBA theme and fill it with five video displays all hooked up to a video game console…”
To me this represented the difference between merely combining engineering with styling and doing experience design. Rather than merely being safer or faster or better looking, you could feel how these cars would lead to a qualitatively different automotive experience, enhancing your life in a new way. That is the power of tangible futures.
Tangible Futures, Part 3: Principles
These are principles I’m using to develop tangible futures now…
Tangible Futures are
- Inspirational, touching us both intellectually and emotionally.
- Pragmatic, optimistic in a realistic way.
- Innovative, they are a vision of something that is a mystery now because, by definition, we haven’t invented it yet.
- Strategic, describing something happening years in the future.
- Custom, applied to a particular organization.
- Storytelling, encapsulating the people, places, things, and relationships of a situation in the accessible format of a story.
Tangible Futures are not
- Strategic plans
I’ve talked with several people who are heads of business units who have faced up to the what of the innovator’s dilemma but aren’t sure about the how. They have the determination to make difficult changes in how they serve their customers. They have P&L responsibility, but not necessarily a large scale budget that allows them to create whole new departments to do the new work. And although they’re willing to supplant their cash cows, they need that revenue until the new offerings bring in new revenue.
So the main obstacle — innovation being mostly about the great management of great people — is finding resources that enable people to work on new development projects. Since it’s a common and important issue, I’ve started a list of the approaches that I use in addressing the problem. They’re mostly common sense, but hopefully will facilitate conversations to find a workable approach…
Add Resources Set a business goal such as increased market share or revenue from new products. Express this goal in the context of what is important to the company, such as how the goal contributes to overall positioning, or a financial model that specifies what constitutes a desirable financial return. Use this goal+context to justify investing in additional resources.
Re-Allocate Company Resources Determine what existing products and services are undesirable (e.g. “dogs”) and make the executive decision to discontinue them, re-allocating resources to new development.
Re-Allocate R&D Resources Benchmark the effectiveness of current R&D spending. Then allocate a small portion of existing R&D funding to the new development activities. Measure the effectiveness of the new activities and compare that to the benchmark, re-allocating funds as appropriate.
Share Resources Share new development costs with a partner who is interested in sharing the results.
Divide Resources Use existing resources in a lean way, such as devoting a portion of time each week to new development. Google does this by allowing employees to work on new projects every Friday.
Add Activites If the new development involves novel activities and techniques, start integrating these into existing work. Try different approaches and find what works in small, low-risk ways. Establish a comfortable, gradual approach leading up to bigger changes; help everyone feel more comfortable devoting more resources down the line once they’ve achieved some small victories.
Tangible Futures, Part 2: The historical context
The Wilson Quarterly’s Winter 2006 issue focuses on future studies and includes this historical review, Has Futurism Failed? In it the authors cite several practitioners hailing the importance of our images of the future. To me this could include our science fiction, our movies, and our political rhetoric, as well as our vision for business. Here’s an excerpt:
…widely shared images of the future can sometimes open up large new realms of behavior possibilities, creating chain reactions of self-organizing change. This insight actually emerged in some of the early work in future studies. The economist Kenneth Boulding put the matter clearly: “The human condition can almost be summed up in the observation that, whereas all experiences are of the past, all decisions are about the future. The image of the future, therefore, is the key to all choice-oriented behavior. The character and quality of the images of the future which prevail in a society are therefore the most important clue to its overall dynamics.”
Sometime during the second half of the 20th century, American companies forgot how to dream. The social and political upheaval of the 1960′s and 1970′s may have squelched the raw optimism of previous decades, but this only made the need for inspiring visions even more important in the face of new, complex business environments.
In 1940 General Motors offered “Futurama” as their vision of the future. It went beyond automotive design, delineating plans for a new kind of city to accommodate increased auto usage, as with the elevated walkways below. In hindsight it’s easy to criticize this particular vision, but I’m sure it inspired employees and customers with an optimistic, realistic vision which the company could work towards.
Norman Bel Geddes, “Magic Motorways” from GM’s Futurama: Pedestrians and motorcars will continue on their way without interference.
Stewart Brand knew the power of this photograph before it was publicly released. In 1966, “…he sold buttons which read, ‘Why Haven’t We Seen A Photograph of the Whole Earth Yet?’ Legend has it that this accelerated NASA’s making good color photos of Earth from distant space during the Apollo program and that the ecology movement took shape in 1968-9 partially as a result of those photos.”
Of course, the photo represented the present state of earth. And technically — like any photograph — it represents the past. But by showing us a whole new perspective, it conjured new ideas about how we share one planet rather than inhabit separate nations. It’s a powerful, tangible representation that implies potential for the future.