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On Innovation

Results of our survey. July and August 2013.
by

Oscar Castillo

on 16 August 2013

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Transcript of On Innovation

This Survey
Motivations:
In our previous survey, innovation was the single item most voted by managers when asked about the important things they would like to do more often.
But, How do business people understand innovation? Is it only a prop or a buzzword?
Do they have what is needed to do the innovation work required these days?
Is it a matter of chance, a done-job or a pending-task?
The Sample:
200 people were invited.
Everyone answered a quick survey of 9 questions
But participation was open... and 627 came!
When thinking of a framework for innovation, the first idea that comes to mind is about the different stages we go through until achieving this purpose:
the ingenuity funnel
.
Ingenuity would be the mother of (at least) these four children: thinking, creativity, invention and innovation.
But innovation is not independent from its siblings. We start with deep observation of things (paying-attention), questioning and reasoning to make decisions and solve problems: thinking.
Then comes creativity, taking shape as ideas. Sometimes these ideas are not ripe and we put them aside to mature. Sometimes we, as Archimedes did, exclaim "eureka!"
From time to time, we produce something that never existed before: an invention. More frequently we produce something that takes other that already existed, but changed, to be more efficient, or versatile or empowering; but this will be an innovation only when it reaches a market and improves the net margin of our earnings.
Almost every participant (91%) selected one of the three academically correct definitions of innovation (efficiency, sustaining and empowerment), or a combination of them.
But these three kinds of innovation have important differences between them. Efficiency innovations could be produced as continuous improvement of processes to reduce complexity and costs of products.
Sustaining innovations are seasonal and focus on keeping attractiveness of products, stretching its life cycle, by means of adding new features thus increasing versatility.
Empowerment innovations are disruptive, discontinuities (step function), aimed to change the game and set new standards by combining existing technology in a very smart way to serve new and/or unsatisfied markets
Because they differ in nature and also in the impact they produce, these three innovation kinds should be measured each with their own set of indicators. ROI could work well for efficiency and sustaining innovations, but is unsuitable for making initial decisions to support empowerment innovations (just because market is not known)
A considerable smaller group of participants (only 12%) selected creativity. Lets set straight that creativity itself is not innovation, but a previous stage of it. But without creativity we will not have innovations. Remember George Land and his creativity test (NASA, 1968). To keep proficiency on thinking and creativity, there should be encouragement, practice and technique, just like an olympic athlete would have.
The second idea, almost natural one, that comes to mind when thinking of a framework for innovation, is a value chain:
the innovation value chain
.
When proposing a value chain we are picking in the concept described by Michael Porter. In order to deliver innovations (in a consistent manner), there would be needed the following activities: supporting, campaigning, managing ideas, monitoring and analyzing the market, funneling, experimenting, and measuring progress and achievements.
Support is the existence of formal and permanent sponsorship of the highest level in the organization, that facilitates access to the board and the C-suit for direction, consideration, decision making and approvals.
Campaign cover all those activities to promote participation with ideas, comments, suggestions, likes, and interactions; sharing with audiences that could be, when managed openly, in every sector of the business ecosystem.
In our survey, 72% of participants selected between 1 to 3 factors out of 7, as in place in their business. There is margin for growth when implementing the whole value chain.
9% of participants indicated that none of these factors have been adopted by their businesses. This seems to be the status-quo of businesses in one of the following extreme situations: or highly regulated markets (apparent limitations to innovate), or monopolistic markets with highly priced commodities (apparent lack of urge to innovate).
Only 2% of participants indicated that when campaigning they are open to other sources of ideas outside their businesses. Imagine the whole richness they still have to capture when opening to every source of ideas.
Only 12% of participants selected biz-lab as a factor in place in their businesses. Every idea should be put to test (experiment) before launching it as an entrepreneurial initiative. This affirmation should be mandatory for every kind of innovation but particularly for empowering ones.
Finally, other two ideas come to mind when trying to round-up this quest of framing the work of innovation:
business models
, and the set of
values of an organization
.
Business models are a representation of strategy, as a baseline and a network for creating, delivering and capturing any form of value. A lot has been done in this field of concepts and practice by Alex Osterwalder with BM Canvas and BM Innovation. If in any form or any way we are going to be innovative, it should be in designing and putting to work an outstanding business model. There is not any novelty idea that would survive in the current business jungle, to develop its potential as a product with its complete life cycle, without having a go-to-mkt strategy developed as a business model.
When talking about values, we are picking in Clayton Christensen's work. When studying disruptions, that led to failure and extinction of successful companies, he presented the concept of a framework of resources, processes and values (RPV): the capabilities of "what an organization can and cannot do". In that framework, values determine how people in businesses prioritize things and make decisions on them, thus affecting the way they relate with ideas, opportunities and innovations. Focusing both in short term results (stock market) and filtering everything exclusively with ROI criteria, seem to be the common characteristic of those businesses studied by Christensen.
56% of participants indicated that their businesses are more open-minded, and are going beyond short-term and ROI, when it comes to decide on and support innovative ideas. But this does not indicate a significant change of age or a new culture. Almost the same proportion keeps deciding as it has always been. Both ways of doing business could be explained as a response to current economy, but those fittest to survive will emerge from only one of these approaches.
67% of participants indicated that their businesses have adopted innovative business models. This seems to be an almost spread practice when we see that this group covers 75% of sampled industries. But here we have a warning. Remember that, in the value chain framework, only 12% indicated the use of entrepreneurship labs. In "lean mgmt" (Blank, Riese and others) we have learned that development of a go-to-mkt strategy, experimenting, and mkt building, go together. If strategies are not put to test before implementing them, that means that all learning is happening not in a "sandbox" but in live mode. What could be the consequences of doing this?
28% of participants indicated that their companies keep the classic business model of their industries. Half of them are at businesses in monopolistic markets. The other half: are they waiting-to-see?
Insights
Innovation does not come from a recipe. Nonetheless, these frameworks, that we have revised in this study, provide the needed structure and order to produce it.
Different kinds of innovations require different measurement instruments.
Without a framework, innovation is just a buzzword, a good intention, a desire, and a matter of chance.
In current times, if not innovating to win the game, it is just a matter of time to become extinct. Not as a direct result of ones shortsightedness, but because the courage and vision of others.
+AMDG+
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